Tag Archives: First to Invent

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

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Guest Post by Paul Morgan

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

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

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

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

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

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

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

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

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

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

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

* * * *

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

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

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

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

* * * * *

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

 

Amending 101?

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Some have been considering a statutory overruling of Mayo and Alice Corp. What would this amendment do?:

Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title. Patent eligibility extends to the full extent permitted by the Constitution.

Abstract Idea: I know it when I see it

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Eclipse IP v. McKinley Equipment (C.D. Cal. 2014) EclipseIP101

In a interesting and somewhat darkly-comic opinion, Judge Wu has dismissed EclipseIP’s infringement lawsuit on the pleadings – finding that the patentee has no case because the asserted claims lack eligible subject matter under 35 U.S.C. §101.  In the process of invalidating the claims, Judge Wu also offers some criticisms of the law.  Most pointedly, Judge Wu describes the Supreme Court’s test as offering pure unstructured judicial authority

First, describing the two-step process from Alice Corp, Judge Wu writes:

[T]he two-step test may be more like a one step test evocative of Justice Stewart’s most famous phrase. See Jacobellis v. State of Ohio, 378 U.S. 184, 197 (1964) (Stewart, J. concurring) (“I shall not today attempt further to define the kinds of material I understand to be embraced within that shorthand description; and perhaps I could never succeed in intelligibly doing so. But I know it when I see it . . . .); cf. Alice, 134 S.Ct. at 2357 (“In any event, we need not labor to delimit the precise contours of the ‘abstract ideas’ category in this case.”).

This sort of test is obviously problematic – and especially in the context of patent examination where the discretion is handed to patent examiners.  Judge Wu also goes on to caution against overzealous use of the preemption argument — presenting two reasons: First, the reality is that every patent provides some amount of preclusive impact — that is the point of the exclusive rights offered under the law and Constitution.  Second, we should recognize that the effort in working around patent rights is an important innovative process and patents should not be eliminated under Section 101 simply because it is a cheaper alternative than to invent around.

But the patent law does not privilege the leisure of an infringer over the labors of an inventor. Patents should not be casually discarded as failing § 101 just because the infringer would prefer to avoid the work required to develop non-infringing uses of the abstract idea.

Despite his caution, Judge Wu found that the law still supports invalidity here.

The patents at issue are the creation of inventor Scott Horstemeyer, who is also a patent attorney and founding partner of the Thomas|Horstemeyer firm.  Horstemeyer’s asserted patents claim priority back to a 2003 filing and are related to a method of sending & receiving messages. Patent Nos. 7,064,681, 7,113,110, and 7,119,716.

Asserted claim 1 of the ‘716 patent is here:

1. A method for communications in connection with a computer-based notification system, comprising the steps of: initiating a notification communication to a personal communications device associated with a party; receiving a response communication from the party’s personal communications device, indicating that the party has received the notification communication and is now occupied with a task associated with the notification communication; and refraining from sending any further notification communications to the party’s personal communications device, until detection of one or more events that indicate that the party is no longer occupied with the task and can perform another task associated with another notification communication.

The abstract idea categorized from this claim is as follows: “asking someone if they are available to perform a task and then either waiting for them to complete
it or contacting the next person.”  Further, folks will recognize that the steps can be performed by someone talking on the telephone.

Tying the case to Morse, Judge Wu sees the claims here as likewise not limited to any “specific machinery or parts of machinery described in the foregoing specification.” As a result, the claims cannot “overcome the abstractness problem” and are invalid under 35 U.S.C. 101.

101 Decision on the Pleadings: ECommerce Patent Ineligible

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by Dennis Crouch

In Tuxis Tech v. Amazon, Delaware District Court Judge Andrews has invalidated asserterted claim 1 of Tuxis Tech’s Patent No. 6,055,513 – finding that the claim lacks eligibility under 35 U.S.C. 101.  2014 WL 4382446 (D.Del September 2014) (TuxisDecisionOnPleadings). Like other decisions this week, this case was decided on the pleadings.

The patent claim is related to a computerized method for individualizing up-selling based both on the identity of the purchaser and the original product being purchased.  This generalized idea (the ‘gist’) is quite old in our market economy with sellers first obtaining a commitment for an initial purchase and then use that anchor to seek to add-on purchases based upon what the seller thinks might work for the buyer.  Amazon does this regularly and thus was an obvious target for infringement allegations.

Of course, the ‘gist’ as described above is not what was particularly claimed, rather the claim walks through a multi-step algorithm of electronic communication and data processing. Those steps are at a fairly high level of abstraction — using action verbs such as “obtaining … transaction data”, “generating an upsell offer”, “utilizing … transaction data”, etc.

Here, Tuxis agreed that the mere notion of “upselling” is an abstract idea and with that in-hand, the court moved forward with the question of whether the claims offer an inventive concept that goes beyond upselling — answering that in the negative.

None of the limitations recited by Tuxis, however, are “meaningful.” Although the claim elements have some narrowing effect on the scope of claim 1, the practical effect is insubstantial. . . .

Claim 1 requires nothing more than suggesting an additional good or service, in real time over an electronic communications device, based on certain information obtained about the customer and the initial purchase. Shrewd sales representatives have long made their living off of this basic practice.

A simple hypothetical is instructive: A man enters a clothing store to purchase a new pair of dress slacks (“a user initiated primary transaction for the purchase of a good or service”). The sales representative assists the man in finding a pair of pants, and in the process learns that the man is a banker (“a second data element relating to the [identity of the customer]”). Knowing that suspenders are fashionable in the banking profession, the sales representative offers the banker a pair of suspenders that match his pants (“utilizing at least in part the primary transaction data including the identity of the good or service of the primary transaction and the second data element [related to the customer] and determining at least one item for a prospective upsell”). The customer agrees with the sales representative and purchases the suspenders (“receiving an acceptance of the offer … in real time”). This type of marketing strategy is at the heart of claim 1 and has been practiced as long as markets have been in operation. Conduct this transaction on “an electronic communications device” instead of in a physical store and it would be an infringing sales practice if claim 1 were valid. This cannot be permitted, as it would “tend to impede innovation more than it would tend to promote it.” Mayo.

Claim invalid.

One thing is clear – the short-circuiting of the litigation process here is a powerful tool in the hands of defendants.

= = = =

Claim 1 is as follows:

1. A method for providing offers in real time of an item constituting a good or a service in the form of offers for purchase of the item to prospective customers as users of the system, utilizing an electronic communications device, comprising the steps of:

establishing a communication via the electronic communications device between the user and the system for purpose of a user initiated primary transaction for purchase of a specific good or service,

obtaining primary transaction data with respect to the primary transaction, including the identity of the prospective customer and of the good or service for purchase in the primary transaction,

generating an upsell offer as a result of the user initiated primary transaction by:
utilizing the identity of the prospective customer to obtain at least a second data element relating to the user,

utilizing at least in part the primary transaction data including the identity of the good or service of the primary transaction and the second data element and determining at least one item for a prospective upsell transaction with the prospective customer, and

offering the item to the prospective customer and receiving an acceptance of the offer from at least one user in real time during the course of the user initiated communication.

Federal Circuit Falls in Line: Supporting Strong Limits on Patent Eligibility

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By Dennis Crouch

In buySAFE v. Google (Fed. Cir. 2014), the Federal Circuit has found the patentee’s computer-based-transaction patent to be invalid as an abstract idea lacking subject matter eligibility. The decision by Judge Taranto and Joined by Judge Hughes is somewhat unremarkable and the holding falls easily within the framework created by Alice Corp and Mayo.  At the same time, the Federal Circuit offers several nuggets that may provide broader fodder for future eligibility challenges.

In its recent software patent decision of Alice Corp., the Supreme Court identified its underlying policy motivation for denying patent rights to abstract ideas, laws of nature, and natural phenomenon. The high court’s concern is “that patent law not inhibit further discovery by improperly tying up the future use of these building blocks of human ingenuity.” Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S.Ct. 2347 (2014), quoting Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S.Ct. 1289 (2012).

Bright Line Test as a Proxy for the Policy Goals: In Mayo, the Supreme Court explained that the exceptions to patentability (law of nature, abstract idea, product of nature) serve as proxies “for the underlying building-block concern.”  Although admittedly an inexact substitute for the particular policy concern, the named exceptions are “somewhat more easily administered” and also have the benefit of substantial tradition. By using a proxy for its underlying concern, the Supreme Court seems ready to admit that some excluded inventions will not have raised substantial building-block concerns, however, the court concludes that judges simply “are not institutionally well suited to making the kinds of judgments needed to distinguish between” them. Mayo.  Thus, the result is a “bright line” exclusion against abstract ideas, laws of nature, mathematical formulae, and natural phenomenon.

Narrowness of Idea Cannot be Judged: Of particular importance here, although the breadth of an abstract idea is relevant to its impact on future innovation, the court here is clear that the breadth or narrowness is not relevant to the application of the exclusionary rule itself.  Rather, the exclusionary rule applies “even if the particular . . . abstract idea at issue is narrow.”

The Process of Determining Eligibility: The process then for determining subject matter eligibility is: (1) determine whether the patent claim is “directed to subject matter in one of the three excluded categories;” and (2) if so, determine whether “the additional elements” of the claim supply an “inventive concept” that is “significantly more than” the ineligible matter itself.  In explaining this second step, the Federal Circuit expounded that the inventive concept must be “in the physical realm of things and acts – a ‘new and useful application’ of the ineligible matter in the physical realm.” Further, merely requiring a generic computer implementation of an ineligible idea does not move the invention “into section 101 eligibility territory.”

Physicality requirement?: You might query how the Federal Circuit’s physicality requirement comports with Bilski v. Kappos, 561 U.S. 593 (2010) (rejecting the machine-or-transformation test as determinative).  The Federal Circuit actually takes an odd interpretation of Bilski.  The court here suggests that the Supreme Court rule on business method patents is that they are certainly directed to abstract ideas (step 1 above), and that they are only patentable with additional inventive concepts tied to the physical realm.

What is an Abstract Idea?:  Up to now, the courts have avoided providing any solid definition for the abstract idea test.  And here, the Federal Circuit was also able to duck that issue because the particular claims at issue are somewhat parallel to those seen in Bilski and Alice. Namely, the claims focus on arrangement involving contractual relations between parties and involving “a fundamental economic practice long prevalent in our system of commerce.”

In the present case, the patented “transaction performance guarantee” is, according to the court here “beyond question of ancient lineage.” And, the patentee’s addition of the computer and computer program in generic terms were insufficient to meet the eligibility test outlined above.

Invalidity affirmed.

I should note that the court did not discuss the presumption of validity or the standard of evidence applied to the underlying elements of the Alice Corp eligibility test.

= = = =

Claim 1 of US Patent No. 7,644,019:

A method, comprising:

receiving, by at least one computer application program running on a computer of a safe transaction service provider, a request from a first party for obtaining a transaction performance guaranty service with respect to an online commercial transaction following closing of the online commercial transaction;

processing, by at least one computer application program running on the safe transaction service provider computer, the request by underwriting the first party in order to provide the transaction performance guaranty service to the first party,

wherein the computer of the safe transaction service provider offers, via a computer network, the transaction performance guaranty service that binds a transaction performance guaranty to the online commercial transaction involving the first party to guarantee the performance of the first party following closing of the online commercial transaction.

= = = = =

An interesting element of this particular decision is that Judge Rader was originally a member of the panel but lost his vote when he retired in June 2014.  Most certainly Judge Rader’s presence on the panel would have impacted the language used to reach these results.

Alice Corp. and Patent Claiming: A Simple Example

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By Howard Skaist[1]

In the wake of Alice Corp (“Alice”), many practitioners, including myself, are thinking about its implications, in particular, with respect to drafting patent claims. Of note, especially, is the Court’s statement, recited more than once in Alice, that “this Court has long “warn[ed] …. against” interpreting section 101 “in ways that make patent eligibility ‘depend simply on the draftsman’s art.’”  See 573 U.S. ____ (2014); slip opinion at 16. I would like to test that notion and, potentially, its general boundaries with a simple example.

Let’s consider, as an example, the early days of computers and the creation of VisiCalc.  If today’s law applied then, e.g., Alice, would a patent claim covering VisiCalc have been statutory? I would be inclined to say, even today, that it depends a lot on the particular claim, but we also have the Supreme Court’s position on the matter, mentioned above. So, to what extent does the answer depend on the particular claim?

Here is one possible claim to VisiCalc:

  1.  A method comprising:  implementing a spreadsheet on a computer.

One issue worthy of mention here is that cases getting to the Court are ones in which the claims do not appear on their face to appropriately flush out the subject matter considered innovative, at least if we can rely on the opinions without taking the trouble to look at other claims of the particular patents.   However, most skilled practitioners tend to make sure that a spectrum of claims are included, at least for considerations related to section 103.  As shall be seen, this may also be the best practice for addressing 101 issues.

The claim above, thus, is in line with claims previously adjudicated before the Court.  That is, the claim on its face does not appear to communicate details about the innovation itself. Rather, this claim would likely be held non-statutory under the approach in Alice.  Applying the analysis, spreadsheets constitute a way to organize human activity that is of longstanding use.  Thus, it would seem that, following Bilski and Alice, a spreadsheet may potentially be deemed an abstract idea or a fundamental concept.  Thus, it is, if anything, a building block for human ingenuity and, on policy grounds, section 101 exceptions to statutory subject matter are potentially implicated.

Again, then, following the approach in Alice, the aspect of the claim calling out implementation on a computer likewise does not constitute a sufficiently meaningful addition, whether analyzed element by element or as a whole.  It might be argued that computer implementation is faster than performing spreadsheet calculations on paper, but merely being faster is not sufficient, generally, to pass muster here.

It is important to realize, however, that when technology is implemented, rarely does it just result in being faster and nothing more.  Usually, the implementation provides other advantages.  Here, referring to this simple example as an illustration, VisiCalc made a type of functionality possible that had not existed before.  Therefore, if that aspect were particularly claimed, perhaps such a claim would be deemed statutory under the analysis in Alice.

For example, consider the following two claims, recognizing that this example is not intended to illustrate the best claims possible, but is just a simple example to test the Court’s recent pronouncement.

  1.  A method comprising:

generating and displaying a matrix of cells comprising an electronic spreadsheet on a computer, said electronic spreadsheet to implement on said computer one or more user-specified mathematical operations in which one or more operands for said one or more user-specified mathematical operations are to be entered in particular cells of said matrix and results of performing said one or more user-specified mathematical operations on said one or more operands are to be displayed in other particular cells of said matrix; and

displaying on said computer, in said particular cells and in said particular other cells, after said one or more operands are entered, said one or more operands and said results of performing said one or more user-specified mathematical operations on said one or more operands, respectively.

  1. The method of claim 1, wherein said results of performing said one or more user-specified mathematical operations on said one or more operands comprise one or more operands of one or more other user-specified mathematical operations either with or without displaying said one or more operands of said one or more other user-specified mathematical operations in cells of said matrix.

Several arguments are available that one, if not both, of these claims is statutory.  To turn the issue around, we should, perhaps, ask the following:  If we ignore the conventional hardware elements of the claim, is the implementation, as claimed, more than merely conventional?

This question, of course, as framed, clearly is not the same question presented under section 103. Thus, while the Court may be criticized for making considerations under 101 more similar to considerations under 103 than had previously been the case, the analysis is still different.

To be even more explicit, we may ask:  is an innovation being claimed (even if it may in light of prior art later be determined to be an obvious one)? 

Here, the answer is quite arguably, yes!

Most everyone is familiar with the functioning of VisiCalc and Excel.  Certainly, at the time Apple introduced VisiCalc, it was an innovation over what had been done previously with conventional spreadsheets of the time.

Perhaps I am overly optimistic and not everyone will agree that claim 2 at least is statutory.  However, these claims call out an improvement over existing processes involving spreadsheets. See 573 U.S. ____ (2014); slip opinion at 13 (discussing that the claims in Diehr improved on an existing process).  A user is able to link together in a spreadsheet format, complex calculations and display the results in a manner so that any change in “operands” is able to be rippled across the spreadsheet and displayed immediately.  This is an improvement over use of a paper spreadsheet and provides a new functionality that previously did not exist.  I am not arguing that this is necessarily patentable, since that is judged relative to particular prior art, only that it is at least statutory because it is not merely conventional.

If it were generally agreed that the first example is likely non-statutory under the Court’s recent pronouncement and the second example is likely statutory[2], then what does that tell us in terms of claim drafting? One thing it demonstrates is that including limitations directed to innovative aspects of particular implementations may provide a claim drafting safe harbor, so to speak, for this area. Where this is done correctly, it would seem that claims of value to a client should ultimately stand up as statutory.  As was mentioned, most practitioners tend to make sure that a spectrum of claims are included.  This is good practice, now, to address, not just 102 and 103, but also 101.

If we compare the two example claims above, what is the difference?  Why, from a policy perspective should one be statutory and the other not, since they are both directed to what is meant to be the same core subject matter?  It appears that section 101 imposes a statutory requirement of proper form.  That is, from a formal perspective, it is necessary that innovative aspects of the invention, as implemented or intended to be implemented, be on the face of the claim for the claim to be statutory.[3]

Recall that we started with the notion that “this Court has long “warn[ed] …. against” interpreting section 101 “in ways that make patent eligibility ‘depend simply on the draftsman’s art.’”  The ironic twist here seems to be that, if section 101 imposes a statutory requirement of proper form, then the prevailing situation would seem quite the opposite of the Court’s stated view.  That is, that patent eligibility indeed depends on the draftsman’s art and our example appears to confirm as much.

Several points are therefore addressed with this example.

  1. Take care when evaluating inventions for meeting statutory subject matter – rarely are things as simple as they look.
  2. Great care is needed in drafting claims in general but particularly in this area because otherwise there may have been a statutory invention inadvertently left unclaimed.
  3. The policy view that patent-eligibility should not turn on the draftsman’s art is not the full story.

[1] Howard Skaist founded Berkeley Law & Technology Group (BLTG) in 2003 after having been employed as the Director of Patents for Intel Corp.  BLTG has a total of twelve patent lawyers and handles all aspects of intellectual property law practice, including patent law.  Mr. Skaist has also been an adjunct professor at Boalt Hall Law School in Berkeley, CA, at Willamette School of Law in Salem, OR, at Lewis and Clark Law School in Portland, OR, and at Albany Law School.

[2] A separate twist is raised by Sotomayor’s concurrence (also expressly by Judge Mayer recently in I/P Engine v. AOL). Would the second example get over those hurdles?  I would say probably not.  It appears difficult here to argue that the problem solved is technical in nature rather than being directed to organizing human activity.  Thus, three justices would probably say that the second example is also non-statutory.

[3] Of course, one would expect that this would also be true to meet section 103.  However, perhaps a difference is that, for purposes of section 103, dissection is not permitted, at least not yet.  While Alice looks at the claim as a whole as well as the claim elements, it was clear as far back as Flook, that some amount of dissection was permissible.  Alice has made that even clearer, following Mayo, by permitting an element by element analysis.

Federal Circuit: Bingo Gaming Software Improperly Encompasses the “Basic Tools of Scientific and Technological Work”

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by Dennis Crouch

Planet Bingo v. VKGS (Fed. Cir. 2014)

In a non-precedential decision earlier this week, the Federal Circuit found Planet Bingo’s patents invalid as lacking eligible subject matter under 35 U.S.C. 101.  The court’s opinion self-identifies as a “straightforward application of the Supreme Court’s recent holding in Alice Corp. v. CLS Bank International.”

The patent claims a computerized method for managing a game of Bingo – yes, the multi-billion dollar industry of Bingo. The basic idea of the invention is that some folks want to play ‘their numbers’ each week.  The computerized system lets individuals pre-select their numbers and also helps the Bingo-hall to track sales, verify winners, and avoid tampering.  VKGS and Planet Bingo compete in the marketplace for bingo equipment.

Claim 1 of U.S. Patent No. 6,398,646 recites typical computer hardware including a computer with a CPU, memory device, a printer, input and output terminal, and also a computer program with particular features.  As is typical with software related inventions, the only novel features of the invention stem from software-related functionality. Here, the program is configured to allow input and storage of the pre-selected Bingo numbers in files associated with the players. A player with stored numbers can then retrieve them to play Bingo. At that point, a control number is also associated with the numbers that can later be used to verify winnings.  The patents also include method claims that basically step through the program steps outlined above.

Although I am no Bingo expert, nothing here appears amazingly inventive. Of course, the challenge to the patent is not on grounds of obviousness or anticipation. Rather, the challenge is on subject matter eligiblity grounds – that the patent unduly encompasses an “abstract idea” and therefore unduly limits “the basic tools of scientific and technological work.”

The Patent Act is broadly written so as to allow the patenting of “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.” 35 U.S.C. 101.  In addition to the text of the statute, the Supreme Court has further restricted the patenting of “laws of nature, natural phenomena, and abstract ideas.”  According to the court, these exceptions to patentability are necessary to protect “the basic tools of scientific and technological work.”  In Alice Corp, the Supreme Court explained:

“[M]onopolization of those tools through the grant of a patent might tend to impede innovation more than it would tend to promote it,” thereby thwarting the primary object of the patent laws. Mayo. We have “repeatedly emphasized this . . . concern that patent law not inhibit further discovery by improperly tying up the future use of ” these building blocks of human ingenuity. Mayo (citing Morse).

Here, the Federal Court found that – yes – those building blocks of scientific inquiry are being inhibited by Planet Bingo’s bingo software patent.  To reach this result, the court began by recognizing that the method and system claims are basically the same and thus should rise-and-fall with the same analysis.  The court then analyzed the case through the lens of the method claims as ineligiblity tends to be easier to show for method claims.

Following the process outlined in Alice Corp., the Federal Circuit first identified the abstract idea as the steps of selecting, storing, and retrieving the bingo numbers, assigning the control number, and checking to see whether the set of numbers is a winner. These steps are collectively an abstract because they are “mental steps which can be carried out by a human using pen and paper.”  Particularly, none of these steps require new technology but rather may be “carried out in existing computers long in use.” (quoting Benson).  Further, the Federal Circuit was unable to find an “inventive concept” in the rest of the claimed subject matter sufficient to transform these abstract ideas into a patent eligible invention. The court writes:

Apart from managing a game of bingo, the claims at issue also require “a computer with a central processing unit,” “a memory,” “an input and output terminal,” “a printer,” in some cases “a video screen,” and “a program
. . . enabling” the steps of managing a game of bingo. These elements, in turn, select, store, and retrieve two sets of numbers, assign a player identifier and a control number, and then
compare a winning set of bingo numbers with a selected set of bingo numbers.

Here, however, the claims recite merely a generic computer and instructions that simply implement the abstract idea discussed above.

Patent Invalid.

Areas of Disuniformity in US Inventorship

Patent,

By Dennis Crouch

The chart below uses the breakdown of patent documents into their various workgroups. As shown here, the workgroups are basically an intermediary classification that falls between the micro-art-units and the macro technology centers. Dividing into workgroups is especially useful for looking at Technology Center 3600 because that center examines perhaps the widest variety of technologies. For the chart below, I collected inventor information on all U.S. patents issued from January 2010 – August 2014 and simply displayed the percent of patents whose first-listed inventor claimed a U.S. residence in the application documents.

Today, just about half of newly issued patents are non-US originated. That datum is dramatically different from historical figures where U.S. inventors dominated the U.S. patent rolls. I have written before that this change likely signals a future shift in U.S. policy as the population is less likely to support foreign-owned patent rights blocking access or raising prices for goods and services. To the extent policymakers are relying upon this concern, the chart provides some additional insight because it points to areas of technology where U.S. inventors continue to dominate in the U.S. Patent market.

A ray of hope for embryonic stem cell patents in Europe; and the 4 things you need to know

Patent

Guest Post by Thomas Leonard of Kilburn & Strode LLP, London

The Advocate General of the Court of Justice of the European Union (CJEU) has issued his opinion in C-364/131, and in doing so has provided hope for the patentability of embryonic stem cells in Europe.

The Background

International Stem Cell Corporation (ISCC) is the applicant for two UK patent applications (GB0621068.6 and GB0621069.4) relating to stem cells derived from unfertilised human ova that have been parthenogenetically activated to stimulate cell division (“parthenotes”). The UK Intellectual Property Office (UK IPO) refused the applications on the basis that, given the CJEU’s earlier judgment in Brüstle2, the claimed subject matter related to the use of human embryos for industrial or commercial purposes and was therefore not patentable.

The Court in Brüstle was concerned with the definition of the term “human embryo” within the meaning of Article 6(2)(c) of Directive 98/44/EC (the “Biotech Directive”), which states that inventions shall be considered unpatentable where they relate to uses of human embryos for industrial or commercial purposes. The Court in Brüstle ruled that the term “human embryo” included unfertilised human ova whose division and further development have been stimulated by parthenogenesis (i.e. parthenotes).

Following the UK IPO’s decision to refuse the applications, the matter was appealed to the High Court. At request of the parties, a question was referred to the CJEU seeking clarification on whether parthenotes can correctly be considered “human embryos” considering they die at the blastoma stage, unable to undergo further division and development, and are thus not capable of developing into a human being. The question referred in this case was exactly the same as one asked in Brüstle but for the additional specification that parthenotes “in contrast to fertilised ova, contain only pluripotent cells and are incapable of developing into human beings”.

The Advocate General Opinion in C-364/13

The new Opinion includes a detailed analysis of the relevant law and background, as well as the submissions of the parties (not only those of the applicant and the UK, but also written observations by France, Poland, Portugal, Sweden and the European Commission).

Among the submissions included evidence suggesting it is possible to produce live-born parthenogenetic mice that have been genetically manipulated to surmount the “genetic imprinting” that usually prevents a parthenote from continuing development past the blastoma stage. ISCC had already amended their claims before the UK IPO to exclude the possibility of extensive genetic manipulation beyond parthenogenesis (by including the word “pluripotent” before “human stem cell line” and referring to a lack of “paternal imprinting”).

The Advocate General in principle agrees with ISCC and has come to the conclusion that unfertilised human ova whose division and further development have been stimulated by parthenogenesis are not included in the term ‘human embryos’ as long as they are not capable of developing into a human being and have not been genetically manipulated to acquire such a capacity.

The 4 things you need to know

1.    This is good news for applicants in the stem cell field. Any judgments that limit the impact of Brüstle will be a welcome development.

2.    The Opinion is not legally binding – yet. For the most part, subsequent CJEU judgments do come to the same result as the preceding Opinion (although perhaps for different reasons), but we need to wait for the final judgment of the CJEU before this will become law.

3.    The ray of hope only applies to stem cells derived from parthenotes that are explicitly not able to continue the developmental process to form a human being. When drafting applications in this field, practitioners should include language that supports an amendment to exclude the possibility of further genetic manipulation, bearing in mind of course the EPO’s strict rules with respect to amendments.

4.    Remember, in contrast to the US following the judgment in Myriad, it is enshrined in European law that elements isolated from the human body or otherwise produced by means of a technical process, including the sequence or partial sequence of a gene, may constitute a patentable invention, even if the structure of that element is identical to that of a natural element (Article 5(2) of the Biotech Directive).

Kilburn & Strode partner Nick Bassil is part of the team handling the UK patent applications on behalf of ISCC before the UK IPO. ISCC was represented before the UK High Court and CJEU by Piers Acland, QC on instructions from DLA Piper LLP.

= = = = =

1 Opinion of Advocate General Cruz Villalón in International Stem Cell Corporation, delivered on 17 July 2014, C-364/13, ECLI:EU:C:2014:2104 (here)

2 Judgment in Brüstle v Greenpeace eV, C-34/10, EU:C:2011:669 (here)

Data Structure Patent Ineligible

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By Dennis Crouch

Digitech Image v. Electronics for Imaging (Fed. Cir. 2014)

Digitech sued dozens of companies for infringing its U.S. Patent No. 6,128,415. As I wrote back in April 2014, basic idea behind the invention is to tag digital images with particular information about the camera and its color/spatial image qualities in a form that is device-independent. The patent includes claims directed to both a “device profile” and a “method of generating a device profile.” The profile is simply a set of data elements regarding the camera qualities discussed above and the method simply involves generating and combining those data elements. This sort of tagging of digital images has become ubiquitous and so the patent could be quite valuable – except that the Federal Circuit has held the patent invalid as lacking subject matter eligibility under 35 U.S.C. §101.

Claim 1 is drafted as follows:

1. A device profile for describing properties of a device in a digital image reproduction system to capture, transform or render an image, said device profile comprising:

first data for describing a device dependent transformation of color information content of the image to a device independent color space; and

second data for describing a device dependent transformation of spatial information content of the image in said device independent color space.

The District Court found the claims invalid and that decision has been affirmed by the Federal Circuit. Decision by Judge Reyna, joined by Judges Moore and Hughes. Because subject matter eligibility is a question of law, the Federal Circuit reviews that issue de novo without giving deference to the district court analysis.

Most subject matter eligibility cases rely upon the non-statutory limitations on eligibility (abstract idea, law of nature, natural phenomenon). However, the court here begins with the statute:

Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.

35 U.S.C. §101. The statute identifies four categories of patent eligible inventions: processes, machines, manufactures, and compositions of matter. In considering the “device profile” claim, the appellate panel concluded that the claim did not properly fit within any category and is therefore not eligible for patenting. The court writes:

Data in its ethereal, non-physical form is simply information that does not fall under any of the categories of eligible subject matter under section 101.

At the Federal Circuit, the patentee argued that one of skill in the art would understand that the claims required hardware or software within a digital image processing system. However, in an implicit claim construction, the appellate panel rejected that argument – finding that the claims are not so limited. “The claims encompass all embodiments of the information contained in the device profile, regardless of the process through which this information is obtained or the physical medium in which it is stored.” The underlying problem with this analysis is the reality that data is always stored in a physical form lest it disappear.

This first portion of the opinion has the important resulting holding that patent eligible subject matter must be in “a physical or tangible form.” Quoting Burr v. Duryee (1863) (“a concrete thing, consisting of parts, or of certain devices and combination of devices”). The court declined to discuss how it would hold if the claimed data structure had been linked to a physical item such as some sort of computer hardware. Of course, this physicality test as an absolute rule was seemingly rejected by the Supreme Court in Bilski.

In the second part of the short opinion, the Federal Circuit addressed the method claims. Those claims clearly passed the statutory category test as being drawn to processes. For the method claims then, the court turned to the abstract idea limitation recently discussed by the Supreme Court in Alice Corp. v. CLS Bank Int’l, 573 U.S. ___ (2014).

Alice Corp. offers a two-step process for determining patent eligibility of a claimed invention:

  • Building Block: First, determine whether the claim recites or is directed to a patent-ineligible concept such as an abstract idea, law of nature, or product of nature.
  • Something More: Second, determine whether the claim recites sufficient additional inventive features such that the claim does not solely capture the abstract idea.

As the Court wrote in Alice:

At some level, “all inventions . . . embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas.” Mayo. Thus, an invention is not rendered ineligible for patent simply because it involves an abstract concept. See Diamond v. Diehr, 450 U. S. 175, 187 (1981). “[A]pplication[s]” of such concepts “‘to a new and useful end,'” we have said, remain eligible for patent protection. Gottschalk v. Benson, 409 U. S. 63, 67 (1972).

Accordingly, in applying the §101 exception, we must distinguish between patents that claim the “‘buildin[g] block[s]'” of human ingenuity and those that integrate the building blocks into something more, Mayo, 566 U. S., at ___ (slip op., at 20), thereby “transform[ing]” them into a patent-eligible invention, id., at ___ (slip op., at 3). The former “would risk disproportionately tying up the use of the underlying” ideas, id., at ___ (slip op., at 4), and are therefore ineligible for patent protection. The latter pose no comparable risk of pre-emption, and therefore remain eligible for the monopoly granted under our patent laws.

Although the Supreme Court provided this two-step framework, it left some gaps for lower courts to discern, such as the meaning of “abstract idea” and “something more.”

The process claim at issue here is directed to a method of generating a device profile and includes three steps:

[Transform First Data] generating first data for describing a device dependent transformation of color information content of the image to a device independent color space through use of measured chromatic stimuli and device response characteristic functions;

[Transform Second Data] generating second data for describing a device dependent transformation of spatial information content of the image in said device independent color space through use of spatial stimuli and device response characteristic functions; and

[Combine Data] combining said first and second data into the device profile.

In reading these steps, the Federal Circuit identified what it sees as the abstract idea:

The two data sets are generated by taking existing information—i.e., measured chromatic stimuli, spatial stimuli, and device response characteristic functions—and organizing this information into a new form. The above claim thus recites an ineligible abstract process of gathering and combining data that does not require input from a physical device.

According to the court, the reason this result is abstract is that it is simply a “process that employs mathematical algorithms to manipulate existing information to generate additional information.” As the Supreme Court wrote in Flook,

If a claim is directed essentially to a method of calculating, using a mathematical formula, even if the solution is for a specific purpose, the claimed method is nonstatutory.

Parker v. Flook, 437 U.S. 584 (1978).

After identifying the abstract idea, the Court considered and rejected the notion that the patent provided “something more” that would be sufficient to transform the result into something patentable.

The Federal Circuit did not raise or discuss the presumption of validity afforded patents under 35 U.S.C. §282. In i4i, the Supreme Court ruled that invalidity for missing the §102(b) statutory-bar date must be proven with clear and convincing evidence. However, that defense is a question of fact. As discussed above, subject matter eligibility is a question of law and such questions are generally not controlled by the same evidentiary standards.

= = = = =

A major difficulty in abstract idea cases is defining the “abstract idea.” Here, the court’s description of the abstract idea at issue is somewhat confusing. Its clearest statement is that it is the “abstract process of gathering and combining data that does not require input from a physical device.” That statement has the qualities of (1) being well known and old; (2) being totally divorced from any physical device or technology; and (3) focused on information transformation rather than the transformation of anything in the physical realm. These clues here closely follow the machine-or-transformation test that the Federal Circuit implemented in its Bilski decision. Later, the Supreme Court rejected the reasoning that the MoT test was the absolute test, but agreed that it served as an important clue of subject matter eligibility.

Applicant’s IDS Submission of Litigation Documents Constituted Disclaimer

Patent,

By Dennis Crouch

Golden Bridge Tech v. Apple (Fed. Cir. 2014)

This case should be seen as a follow-on to Judge Moore’s recent decision in X2Y Attenuators v. US International Trade Commission (Fed. Cir. 2014). In both cases, Judge Moore applies the doctrine of prosecution disclaimer to limit claim scope.

Here, Golden Bridge asserted two patents, U.S. Patent Nos. 6,574,267 and 7,359,427, the first of which had been previously asserted in a different case. In the prior case, Golden Bridge stipulated to a particular definition of the claim term “preamble.” (Note – the word “preamble” is in the claim and its definition is in dispute). Golden Bridge then submitted the stipulated construction to the USPTO for the still-pending application as well as the prior patent that was also under reexamination. Although submitted in an IDS, the stipulated dismissal was never directly or otherwise referred to in the prosecution history.

In the new lawsuit against Apple, Golden Bridge argued that the prior stipulation was not binding and the IDS filing certainly should not be seen as a prosecution disclaimer. Both the district court and now the Federal Circuit have rejected Golden Bridge’s position:

We conclude that GBT’s submissions during prosecution of its stipulated construction for the term “preamble” constitute disclaimer. . . . Here, GBT clearly and unmistakably limited the term.

Rather than merely filing the IDS form, the applicant included a cover-sheet letter asking the USPTO to consider the references stating:

It is respectfully requested that the documents be expressly considered during prosecution of this application.

In the only off-kilter portion of the opinion, Judge Moore identified that statement as important for the disclaimer – finding that “[i]t would have been natural for both the PTO and the public to rely upon the stipulation in determining the scope of the claimed invention.” (In my view, any IDS Submission already includes at least an implicit request that the documents be expressly considered.)

Judge Moore takes care to limit the ruling here by expressly indicating that the ordinary submission of third-party prior art should not ordinarily create any disclaimer. The difference here is that the IDS submission included an admission by the patentee to a court of law that related directly to claim term scope. Judge Moore also indicated that the patentee could have overcome the disclaimer with an express statement in the prosecution history denying the applicability of the prior in-court statement.

I wonder if the case would have been decided differently by Judge Moore if the IDS submission had included a boiler-plate statement that “No aspect of these submissions constitute a disclaimer of claim scope.” Judge Moore is a particular stickler regarding admissions and statements by parties, even when made in boiler plate language. Thus, I suspect that such a disclaimer-of-disclaimers would have been effective here. On the flip side, I also wonder whether the submission of the stipulated claim construction as a public document in Federal Court (even without the IDS submission) should itself be seen as a prosecution disclaimer in itself. Anyone truly concerned with the patents in question would have reviewed the court filings and likely seen them as more important than the prosecution history files of continuation or foreign applications, for instance.

Federal Circuit Orders District Court to Stay Litigation to Await Conclusion of Later-Filed Post-Issuance Review (CBM) Proceeding

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By Dennis Crouch

VirtualAgility Inc., v. Salesforce.com, Dell, Dr. Pepper, et al. (Fed. Cir. 2014)

The America-Invents-Act (AIA) created set of new and powerful administrative proceedings that allow third parties to challenge issued patents. These include post-grant review (PGR), covered business method review (CBM), and inter partes review (IPR). Congress maintained the less-powerful but still important third-party requested ex parte reexamination. In the coming months, the Federal Circuit will be challenged with reviewing various aspects of the new proceedings. Perhaps most importantly, the court will be challenged with determining how much deference and leeway to give the USPTO in developing its own procedures and interpretation of the law.

Apart from the agency deference issue, a second major issue whose steam continues to build involves the rising number of conflicts between federal courts and the patent office. Traditionally, post-issuance challenges have been handled by the courts, but the new procedures have shifted the balance of power. It turns out that most patents involved in post-issuance administrative challenges are also involved in parallel challenges in federal district court. These parallel proceedings will often have somewhat different results, and many remain confused over the potential result of such a conflict. In the extreme, the issue raises constitutional questions of separation of powers between the executive (the PTO) and the courts.

One solution to the conflict is to have the decision-makers take turns and apply principles of estoppel, preclusion, and comity to resolve the delayed process in a way that avoids conflict with the first-decided case. The PTO has generally refused to stay its proceedings and many district court judges have difficulty ordering stays – especially in cases such as this where the review request is filed several months after the infringement lawsuit. It is important to recognize that post-issuance review requests are limited by law to only challenge issues that can also be challenged in court. Thus, for a judge, the post-issuance review request serves as a transparent statement that the defendant does not trust the judge or jury to make the call.

The Timeline Here: In January 2013, VA sued the defendants in the Eastern District of Texas, alleging infringement of its U.S. Patent No. 8,095,413. Five months later (May 2013) one of the defendants (Salesforce.Com) filed a covered business method review (CBM) petition alleging that that the claim of the patent were all invalid under Sections 101, 102, and 103 of the Patent Act. In November 2013, the PTAB partially granted the CBM petition and ordered review of the claims under Sections 101 and 102 (but not 103) and setting a July 2014 PTAB trial date with a final decision expected by November 2014. At that point, the district court was made-aware of the PTAB’s late-start but rapid progress. However, the district court refused to stay the litigation pending outcome of the PTAB case and continued moving forward with claim construction hearing set for April 2014 and trial also set for November 2014.

One aspect of the new CBM process is that the statute allows for interlocutory appeal of a district court’s decision to grant or deny a stay of litigation pending CBM review. Thus, after the district court refused to grant the stay, Salesforce appealed. The Federal Circuit quickly granted a stay of the district court litigation pending appeal and has now ordered that the district court to stay its proceedings pending the CBM review. The majority decision here is written by Judge Moore and joined by Judge Chen. Judge Newman wrote in dissent arguing that the decision here removes the discretion given to district courts.

The statute provides four factors that a district court must consider when determining whether or not to grant a stay of a late-filed CBM review.

[T]he court shall decide whether to enter a stay based on—

(A) whether a stay, or the denial thereof, will simplify the issues in question and streamline the trial;

(B) whether discovery is complete and whether a trial date has been set;

(C) whether a stay, or the denial thereof, would unduly prejudice the nonmoving party or present a clear tactical advantage for the moving party; and

(D) whether a stay, or the denial thereof, will reduce the burden of litigation on the parties and on the court.

AIA §18(b)(1). Regarding appeals, the statute indicates that the Federal Circuit’s “shall review the district court’s decision to ensure consistent application of established precedent, and such review may be de novo.” AIA §18(b)(2). Thus, Judge Newman’s call for deference is likely misplaced. For its part, the majority refused to determine whether any deference is required and instead held that reversal was warranted even under an abuse of discretion standard.

The result here provides a strong suggestion to district courts that they should stay litigation once the PTAB has indicated that it will review the identical claims being litigated in court.

Alice, Artifice, and Action – and Ultramercial

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Guest post by Emily Michiko Morris, Associate Professor, Indiana University Robert H. McKinney School of Law

Anyone familiar with recent Supreme Court patent jurisprudence was perhaps disappointed but certainly not surprised by the Court’s latest decision, Alice Corp. v. CLS Bank Int’l. The Court once again left many questions unanswered and failed to provide a clear rubric for identifying patentable subject matter. When viewed within the broader context, however, Alice fits nicely within what is actually a long-standing pattern in § 101 cases. IF Ultramercial v. Hulu follows this pattern after its now second GVR, the Federal Circuit may finally affirm that the internet-mediate advertising method at issue there is unpatentable subject matter.

In What Is “Technology”?, I explain that as unmethodical as patentable subject matter often seems, two surprisingly consistent concepts explain how courts identify patentable subject matter. The article dubs these concepts “artifice” and “action.”

Artifice refers to the well-recognized requirement that patentable subject matter be the product of human ingenuity, not nature. Less appreciated is the fact that artifice requires more than just changes in structural or other physical characteristics; to be patentable, a claimed invention must also function in some new, non-naturally occurring way. We can see this latter point illustrated in the purification line of cases as well as Myriad, Funk Brothers, and Chakrabarty.

Much more obscure but more relevant to Alice is the concept of action. Roughly defined, action is the requirement of active rather than passive utility through operating, behaving, performing, or otherwise actively doing something; that is to say, an invention must be “self-executing.” Inventions that display, transmit, or even store information may satisfy the action requirement, but works such as laws of nature, mathematical algorithms, and “abstract ideas” are (perceived as) merely informational or descriptive in value and therefore unpatentably inert. Moreover, as Alice explains, the abstract idea category is not “confined to ‘preexisting, fundamental truth[s].’” By definition any purely informational or descriptive content, whether naturally occurring laws of nature and mathematical algorithms or human-made financial and economic methods, fails the action requirement. As the Court in Diamond v. Diehr put it, such works simply do not “perform[ ] a function which the patent laws were designed to protect.”

To the extent different tests appear to govern natural products versus laws of nature and abstract ideas, then, artifice and action – and more importantly, the circumstances in which each are likely to be invoked – account for these differences. Artifice obviously plays its largest role in cases involving products or laws of nature, whereas action is most important in cases involving abstract ideas and laws of nature. Nonetheless, patentability under § 101 requires both artifice and action.

Both Alice and Bilski illustrate what role action plays under § 101. The methods in both Alice and Bilski involved hedging risk during business transactions by relying on intermediaries, but more importantly, both methods served solely to inform parties about when they can safely transact. The Alice and Bilski opinions describe this as the abstract concept of intermediated settlement, but really it is just information – information about risk. As such, both methods were unpatentably inactive under § 101.

And although Alice differs from Bilski in that Alice’s method was computer-implemented, the Court found both methods to be unpatentable. Like artifice, action is also a scalar characteristic. Just as artifice depends on an invention’s perceived degree of alteration from nature, action depends on an invention’s perceived degree of activity, and despite Alice’s computer-implementation, the method was still not active enough under § 101.

Indeed, both Alice and Mayo emphasize the scalar nature of patentability under § 101. Under Mayo’s two-step test, a court first determines whether a claim is directed to a law of nature, natural phenomenon, or abstract idea. As the Alice Court observed, however, all inventions are directed to one of the patent-ineligible concepts at some level. The second and pivotal step is therefore to determine whether the claim demonstrates an “inventive concept” – that is, does the claim add elements “sufficient” and “enough” to establish patentable subject matter.

And to see that a sufficient “inventive concept” requires sufficient action, one need only look at how the Court treats computer-mediated elements with regard to patentability under § 101. Computers are widely regarded as “technological,” but much computer technology is “information technology,” and computer use primarily to manipulate data or other information thus adds no patentable action. Computer implementation in Alice’s method followed exactly this pattern – as the Court noted, the computer served only to create and maintain “shadow” accounts, obtain data, adjust account balances, and issue automated instructions. Accordingly, whether Alice claimed its invention as a method, system, or medium, the invention failed to provide an adequate “inventive concept” because it did not demonstrate sufficient action.

Under an artifice-plus-action standard, then, Ultramercial’s internet-mediated advertising method fails § 101. Ultramercial claimed a method of distributing copyrighted content for free in return for viewing an advertisement. The method is purely an exchange of informational and expressive content and performs no action whatsoever, and the claim’s cursory reference to the internet does nothing to add a “sufficient inventive concept.”

This is not to say, of course, that computer-implemented methods are never patentable subject matter. The Alice Court pointed out the difference between computers used purely for information processing and computers used to effect improvements in “any other technology or technical field,” or improvements in the function of the computer itself. Diehr’s computer-assisted rubber-curing process, for example, was adequately “technological” and therefore patentable, whereas the computer-implemented methods in Benson and Flook yielded “simply a number” and were therefore unpatentable. Per the view of the patent system, information processing is simply not “technological.” Similarly, computer or storage media that are distinguishable only by their informational or expressive content alone been held unpatentable if the content has no “functional” relationship with the device. The variable role that computers and other tangible devices can thus play in an invention may be why the Supreme Court rejected the machine-or-transformation test as the sole test for methods under § 101.

And while the discussion here focuses mostly on business methods, note that the Mayo two-step test as stated in Alice covers all patent-ineligible abstract ideas, laws of nature, and even phenomena of nature – all are subject to the same requirement that a claimed invention add “enough” to constitute a patentable inventive concept. For claims directed to phenomena of nature, “enough” means artifice and meeting the age-old test of “markedly different characteristics from any found in nature.” For abstract ideas, laws of nature, mathematical algorithms, mental processes, and all other forms of information, “enough” means action and demonstrating function beyond merely informing.

As simple as artifice and action may sound, however, patentable subject matter clearly remains a difficult and ambiguous issue. The difficulty lies in the scalar quality of both artifice and action and deciding where along these spectra any given new invention falls. The requisite degree of artifice and action has also varied over time as the liberality of patentable subject matter has waxed and waned, creating yet further uncertainty. Most significantly, where the line between patentable and unpatentable lies along the spectrum is entirely unclear. There are no bright-line rules and no magical claim elements that can guarantee patentability under § 101.

The Court has often (but not always, as our host Jason Rantanen has pointed out) expressed a preference for a “functional” approach to patent law, however: that is, a preference for standards over hard and fast rules. As stated in Bilski’s rejection of the machine-or-transformation test, to do otherwise would “make patent eligibility ‘depend simply on the draftsman’s art.’” True, the artifice-plus-action standard requires courts to make many judgment calls about where along the spectrum of artifice and action any given invention must fall before it can be considered patentable technology, but standards are often vague. Besides, patent law frequently must address these kinds of line-drawing exercises. The non-obviousness, utility, enablement, and even written description requirements all force courts to make judgment calls.

Compounding the difficulty is the fact that § 101 determinations are in the end based on nothing more than intuition. As I and a number of others have noted, none of the pragmatic justifications commonly cited in support of § 101, such as preemption and disproportionality explain how patentable subject matter determinations are actually made or, more importantly, why. Thus, although artifice and action consistently appear in patentable subject matter, the combination does not necessarily reflect the most efficient or “correct” way to define patentable subject matter. Rather, the combination merely reflects an underlying intuition about what constitutes technology. (In Intuitive Patenting, a companion article to What Is “Technology”?, I argue that there simply are no more objective bases on which to make these determinations.) Unfortunately, patentable subject matter’s intuitive nature leaves courts effectively unable to specify how they reached their determinations. This often leads to language that sounds more like non-obviousness, novelty, or utility than to § 101, but in the end, artifice and action are better explanations for these otherwise perplexing references.

Alice v. CLS Bank: Claims Invalid Under Section 101

Patent, ,

By Jason Rantanen

Alice Corporation Pty. Ltd. v. CLS Bank International (2014)

Download opinion here: Alice v CLS

This morning the Supreme Court issued its opinion in Alice, unanimously affirming the Federal Circuit and finding all claims drawn to patent ineligible subject matter under Section 101.  Justice Thomas wrote for the opinion for the Court.  It begins:

The question presented is whether these claims are patent eligible under 35 U. S. C. §101, or are instead drawn to a patent-ineligible abstract idea. We hold that the claims at issue are drawn to the abstract idea of intermediated settlement, and that merely requiring generic computer implementation fails to transform that abstract idea into a patent-eligible invention.

The opinion includes both the actual language of representative claims (in a footnote) and the court’s interpretation of them (in the body of the opinion).  The latter is primarily what the court focuses on:

In sum, the patents in suit claim (1) the foregoing method for exchanging obligations (the method claims), (2) a computer system configured to carry out the method for exchanging obligations (the system claims), and (3) a computer-readable medium containing program code for performing the method of exchanging obligations (the media claims). All of the claims are implemented using a computer; the system and media claims expressly recite a computer, and the parties have stipulated that the method claims require a computer as well.

The Court next summarizes the long-standing nature of the law of nature, natural phenomena, and abstract ideas exception to patent eligibility, and reiterates that these exceptions are driven by a concern about pre-emption, balanced against caution in allowing the exceptions to swallow all of patent law:

Accordingly, in applying the §101 exception, we must distinguish between patents that claim the “‘buildin[g] block[s]’” of human ingenuity and those that integrate the building blocks into something more, Mayo, 566 U. S., at ___ (slip op., at 20), thereby “transform[ing]” them into a patent-eligible invention, id., at ___ (slip op., at 3).

Next comes the first key part: the Court reiterates the framework described in Mayo v. Prometheus, including the inventive concept language:

In Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U. S. ___ (2012), we set forth a framework for distinguishing patents that claim laws of nature, natural phenomena, and abstract ideas from those that claim patent-eligible applications of those concepts. First, we determine whether the claims at issue are directed to one of those patent-ineligible concepts. Id., at ___ (slip op., at 8). If so, we then ask, “[w]hat else is there in the claims before us?” Id., at ___ (slip op., at 9). To answer that question, we consider the elements of each claim both individually and “as an ordered combination” to determine whether the additional elements “transform the nature of the claim” into a patent-eligible application. Id., at ___ (slip op., at 10, 9). We have described step two of this analysis as a search for an “ ‘inventive concept’”—i.e., an element or combination of elements that is “sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself.” Id., at ___ (slip op., at 3).3

Applying this framework, the Court first found the claims directed to an abstract idea.:

On their face, the claims before us are drawn to the concept of intermediated settlement, i.e., the use of a third party to mitigate settlement risk. Like the risk hedging in Bilski, the concept of intermediated settlement is “ ‘a fundamental economic practice long prevalent in our system of commerce.’”

It then concluded that the claims also failed the second step: “the method claims, which merely require generic computer implementation, fail to transform that abstract idea into a patent eligible invention.”

Here’s the second piece of key language, which relates to the computer-implemented nature of the claims:

These cases [Mayo, Flook, Benson, and Diehr] demonstrate that the mere recitation of a generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention. Stating an abstract idea “while adding the words ‘apply it’” is not enough for patent eligibility. Mayo, supra, at ___ (slip op., at 3). Nor is limiting the use of an abstract idea “‘to a particular technological environment.’” Bilski, supra, at 610–611. Stating an abstract idea while adding the words“apply it with a computer” simply combines those two steps, with the same deficient result. Thus, if a patent’s recitation of a computer amounts to a mere instruction to“implemen[t]” an abstract idea “on . . . a computer,” Mayo, supra, at ___ (slip op., at 16), that addition cannot impart patent eligibility.

It is irrelevant that a computer is a physical object:

There is no dispute that a computer is a tangible system (in §101 terms, a “machine”), or that many computer-implemented claims are formally addressed to patent-eligible subject matter. But if that were the end of the §101 inquiry, an applicant could claim any principle of the physical or social sciences by reciting a computer system configured to implement the relevant concept. Such a result would make the determination of patent eligibility “depend simply on the draftsman’s art,” Flook, supra, at 593, thereby eviscerating the rule that “‘[l]aws of nature, natural phenomena, and abstract ideas are not patentable,’” Myriad, 569 U. S., at ___ (slip op., at 11).

Applying this standard, the Court concluded that the claims at issue here did nothing “more than simply instruct the practitioner to implement the abstract idea of intermediated settlement on a generic computer.”  Slip Op. at 14.

Note that the Court’s ruling applies to the method claims, the computer system claims, and the computer-readable medium claims.  Here’s the third bit of key language; I predict it’s going to tie folks in knots:

As to its system claims, petitioner emphasizes that those claims recite “specific hardware” configured to perform“specific computerized functions.” Brief for Petitioner 53.But what petitioner characterizes as specific hardware—a“data processing system” with a “communications controller” and “data storage unit,” for example, see App. 954,958, 1257—is purely functional and generic. Nearly every computer will include a “communications controller” and “data storage unit” capable of performing the basic calculation, storage, and transmission functions required by the method claims. See 717 F. 3d, at 1290 (Lourie, J., concurring). As a result, none of the hardware recited by the system claims “offers a meaningful limitation beyond generally linking ‘the use of the [method] to a particular technological environment,’ that is, implementation via computers.”

Put another way, the system claims are no different from the method claims in substance. The method claims recite the abstract idea implemented on a generic computer;the system claims recite a handful of generic computer components configured to implement the same idea. This Court has long “warn[ed] . . . against” interpreting §101“in ways that make patent eligibility ‘depend simply on the draftsman’s art.’”

Justice Sotomayor, joined by Justice Ginsburg and Breyer, agreed that the method claims here were drawn to an abstract idea, but concurred to express agreement with Justice Stevens’ view in Bilski that a “claim that merely describes a method of doing business does not qualify as a‘process’ under §101.”

 

 

A Risk of Moonlighting

Inventors, Ownership, Patent, Trade Secret, ,

by Dennis Crouch

Despite California’s policies limiting non-compete agreements, the law still lays an implicit powerful fiduciary duty on employees. The (proposed) Restatement (Third) of Employment Law indicates that competition by current managerial employees violates the duty of loyalty but that a manager has the right to “prepare to compete.”  One question that arises from the facts of the case below is whether an employee who obtains patents on-the-side in preparation to compete is somehow violating his fiduciary duty.

Robert Kulakowski v. Verimatrix, Inc. (Cal. Appellate Ct. 2014) Decision Text

Back in 2000, Kulakowski helped to found Verimatrix – acting as the company’s chief technology officer (CTO) and directing product development. The company makes video encryption security systems known as Conditional Access Systems or CAS.

In his last year with the company, Kulakowski began working on side projects. As part of that process, he was able to modify his IP and non-compete agreement with Verimatrix to clarify that he did not need to disclose to Verimatrix any inventions “conceived, reduced to practiced or developed by [Kulakowski] in [his] own time; without using the Company’s equipment, facilities, or trade secret information; and which is not the result of work performed by me for the Company.”  Meanwhile, Kulakowski founded a new company (Secure TV) in May 2010 also operating in the CAS market but then expressly denied to his Verimatrix boss that the new company was in the CAS market.  In September 2010 Kulakowski left Verimatrix and then filed a patent application known as Dynamic Obfuscation Processing.

This case arose when Kulakowski filed a declaratory judgment action in California state court asking for a ruling that Verimatrix held no right to title or interest in the new patents.

Following a bench trial, the lower court ruled in favor of Verimatrix — holding (1) that declaratory relief is not called for at this time because the patent applications are pending and may still be amended; and, alternatively, (2) that Kulakowski’s claim for equitable relief should fail because of his unclean hands based upon his breach of fiduciary and contractual duties owed to the company while he was still employed.

Seeing some of the logic of the lower court, Kulakowski accepted that the DJ action was not ripe appeal. However, he appealed the unclean portion of the opinion — arguing particularly that the lower court’s DJ decision was effectively jurisdictional with the consequence that the court lacked jurisdiction to then decide the unclean hands defense.  That conclusion follows from the notion that a court who lacks subject matter jurisdiction has no power to make any findings on the merits of a proceeding.

On appeal, the California appellate court rejected Kulakowski’s arguments and affirmed  the lower court ruling.  Here, the appellate court found that the lower court’s first ruling on the DJ action for practical reasons, not for jurisdictional reasons.

If a court decides for practical reasons it is not necessary or proper to grant declaratory relief, there is no jurisdictional prohibition to the court making alternate findings based on the evidence before it.

The case may be revived once the patents issue or a more concrete dispute arises at that point the court will need to address whether the unclean hands decision here has a preclusive effect.  The appellate court expressly refused to “offer any opinion on the extent to which the court’s alternative findings are binding on either party under res judicata or collateral estoppel doctrines.”

Court to Employer: No Paper, No Assignment

Patent, , ,

By Dennis Crouch

Peregrine Semiconductor v. RF Micro Devices (S.D. Cal. 2014) (peregrine decision)

Interesting decision here involving patent ownership. Peregrine sued RFMD for infringement of several of its patents. However, during the course of the lawsuit the parties figures out that a former Peregrine worker – Robert Benton – should have been a named inventor on the asserted patents. Rather than siding with his former bosses, Benton instead assigned his rights to the defendant RFMD. The question in the case then is whether that assignment is proper or did the patentee already hold equitable title due to Benton’s employment.

Ownership of patent rights generally begin with the notion that the inventor begins establishing patent rights at the moment of conception. “The general rule is that an individual owns the patent rights to the subject matter of which he is an inventor, even though he conceived it or reduced it to practice in the course of his employment.” Banks v. Unisys Corp., 228 F.3d 1357 (Fed.Cir.2000). At the point of conception, the right is inchoate since no patent application has been filed or patent issued. However, courts typically allow assignment of that inchoate right through a written document. That rule could be seen in contrast to the traditional rule regarding other inchoate rights, such as a possibility-of-reverter, that could not be transferred inter vivos. In the 2011 Stanford v. Roche decision, the Supreme Court reiterated the basic law of inventor’s rights and the proposition that – absent an express assignment – an employer might not own its employees inventions even if those were accomplished during the course of the employment. “In most circumstances, an inventor must expressly grant his rights in an invention to his employer if the employer is to obtain those rights.” Bd. of Trustees of Leland Stanford Junior Univ. v. Roche Molecular Sys., Inc., 131 S.Ct. 2188 (2011) (citing United States v. Dubilier Condenser Corp., 289 U.S. 178 (1933)).

Peregrine made two arguments as to why such a transfer occurred and that it held at least equitable title to Benton’s patent rights: (1) a contractual promise to assign; and (2) the hired to invent doctrine.

No Paper à No Express Assignment: Courts have long specifically enforced contracts to assign patent rights – requiring a contracting inventor to follow through with that promise as opposed to requiring only the ordinary contract remedy of expectation damages. Peregrine’s problem is that it has no written evidence of such a contract formation. Peregrine’s business practice is to require all employees to sign an “Employment and Assignment agreement,” but Benton testified that he had no recollection of executing any such written employment agreement or assignment during his time working at Peregrine. Here, the court seemed to be swayed as well by the Patent Act’s statute of frauds that require any assignment of patent rights to be in writing.

A patent owner who seeks to assign his interest in the patent must do so in writing. 35 U.S.C. § 261; Sky Techs. LLC v. SAP AG, 576 F.3d 1374 (Fed.Cir.2009) (citing Akazawa v. Link New Tech. Int’l, Inc., 520 F.3d 1354 (Fed.Cir.2008)). Peregrine admits that it does not have any documentation of an Employment and Assignment agreement or Policy Manual signed by Benton.

Although I suspect that the court made the right decision here, the statute-of-frauds theory has some failings. First, the statute requires that assignments be in writing, but does not expressly require that contracts-promising-assignment be in writing. Further, courts can still enforce a “lost grant” despite the statute of frauds so long as there is sufficient evidence to prove that the grant existed. Here, however, that evidence appeared to be lacking.

What Exactly Was he Hired to Invent?: Peregrine also argued that Benton had a duty to assign his patent rights based upon the (Federal?) common law “hired to invent” doctrine as well as the California Labor Code § 2860. In California, the statutory provisions of § 2860 are seen as coextensive with the common law doctrine and applies when an employee is “hired to invent something or solve a particular problem.” The doctrine focuses on the specificity of the task assigned to the employee. As Don Chisum writes, “[t]he primary factor in finding an employment-to-invent is the specificity of the task assigned to the employee.” Here, the court cited a 1960s California decision distinguishing between work “narrowly directed by the employer towards the resolution of a specific problem” and work that is “generalized within a field.” With only the former creating an obligation to assign. See Banner Metals, Inc. v. Lockwood, 178 Cal.App.2d 643 (Cal.Ct.App.1960).

In this case the court found that Benton’s work appeared to be wholly within the field of semiconductor development, but generalized within that field. Importantly, the court noted that Benton worked on a variety of products during his employment and also spent time on non-inventing activities such as marketing and customer support. As such, the court ruled that Benton is unlikely to be bound by the hired-to-invent doctrine.

Hired-to-invent cases will always be somewhat squirrely since they are ordinarily raised only as a backstop when the employer’s written agreement failed and, as such, there is not likely to be written evidence particularly defining the reason why an individual was hired. This case fits that description.

Preliminary Injunction: Now, this case is only at the preliminary injunction stage. Peregrine had motioned for a preliminary injunction and that injunction was denied based upon the likelihood that Peregrine will not be able to prove its ownership. The denial also offers Peregrine the opportunity to immediately appeal this case to the Federal Circuit.

Court Expands Doctrine of Obviousness Type Double Patenting

Obviousness, Patent,

By Dennis Crouch

Gilead Sciences v. Natco Pharma (Fed. Cir. 2014)

Gilead’s two virus inhibition patents at issue in this case are quite similar to one another, although there is no priority claim creating an official family relationship between the patents. Patent Nos. 5,763,483 and 5,952,375. In a not-uncommon fashion, the application resulting in the ‘375 patent was filed first, but, because of a variety of prosecution delays, was the last to issue. The ‘375 patent is also set to be the first-to-expire. Note, after the ‘483 patent issued, Gilead filed a one-way terminal disclaimer for the ‘375 patent – limiting that patent’s term so that it cannot extend beyond the term of the ‘483 patent. Of course, that limitation is meaningless since the ‘375 patent naturally expires first anyway. The following timeline may help illustrate the relevant dates:


Double Patenting: This setup raises the prospect of obvious-type double-patenting. That doctrine is not based upon any statute, but has been applied by courts as a mechanism to prevent patentees from prolonging their patent term by obtaining a second-patent with claims that are not patentably distinguishable from the claims in the first patent. The general rule is that a terminal disclaimer cures the obviousness-type double patenting. However, here, one of the patents (the ‘483) patent does not have a terminal disclaimer.

Later Issued but Earlier Expiring Patent: The district court ruled in favor of Gilead – holding that, as a matter of doctrine, a later-issued but earlier-expiring patent cannot serve as a double-patenting reference against an earlier issued but later-expiring patent. That rule cited here by Judge Wigenton (D.N.J.) follows two Delaware district court cases stating the same proposition. Abbott Labs. v. Lupin Ltd., 2011 WL 1897322 (D. Del. May 19, 2011) and Brigham & Women’s Hosp. Inc. v. Teva Pharm. USA, Inc., 761 F. Supp. 2d 210 (D. Del. 2011). Those cases are in conflict with a PTAB decision on the same topic: Ex Parte Pfizer, Inc., 2010 WL 532133 (Bd. Pat. App. & Interf. Feb. 12, 2010).

On appeal, the Federal Circuit focused on the particular legal question: “Can a patent that issues after but expires before another patent qualify as a double patenting reference for that other patent?” The answer: Yes it can. With the result here being that the district court’s decision is in error. The majority’s reasoning makes sense – the primary purpose of the double-patenting doctrine is to prevent a patentee from unduly extending its patent term and here, Gilead is attempting to do so by an additional 22-months.

The majority opinion was filed by Judge Chen and joined by Judge Prost. Chief Judge Rader filed a dissenting opinion arguing that the court should have acted more cautiously in extending the judge-made rule. Judge Rader writes:

Under the AIA’s new “first-inventor-to-file” framework, prospective patentees are under tremendous pressure to file their applications early. I am concerned that today’s opinion will have unforeseen consequences in this new race to the Patent Office.

I would suggest that – most likely – the doctrine of obviousness-type double patenting would have never been created if the current regime had been in place way back when. Most notably, calculating patent term as 20-years from filing eliminates most potential game playing and the publication rules would typically result in an earlier filed patent being seen as prior art – even if jointly owned.

Extension and Adjustment: Although this issue has been addressed somewhat in other cases, this decision does not offer any insight as to how double-patenting applies to cases where the difference in patent term is due to a patent term adjustment or extension.

= = = = =

The currently proposed legislative patent reforms would codify the double patenting exception in a somewhat narrower fashion. This would potentially limit any further judicially motivated alterations in its scope.

Curbing Trolls by Reforming the Patent Marking Statute

Patent, ,

Guest Post by François deVilliers, Chief IP Counsel, Plantronics, Inc.

35 U.S.C. 287(a) provides that constructive notice of a patent may be given by marking the patented article with the patent number, and that “In the event of failure so to mark, no damages shall be recovered by the patentee in any action for infringement, except on proof that the infringer was notified of the infringement and continued to infringe thereafter, in which event damages may be recovered only for infringement occurring after such notice.”

This section is badly structured – instead of affirmatively specifying the requirements for infringement damages to accrue, the drafters addressed this issue in the negative sense only after specifying first that an article may be marked. This of course begs the question, what if there is no article to mark?

There is no duty to mark or to give notice in lieu thereof “if there is no product to mark,” as held by the Supreme Court in Wine Railway Appliance Co. v. Enterprise Railway. Equipment Co. (1936)(interpreting the predecessor statute) and by the Federal Circuit in Texas Digital Systems., Inc. v. Telegenix, Inc. Damages accrue from the moment infringement of the issued patent commences, with a six year “statute of limitations” provided in 35 U.S.C. 286.

The logic is supposedly that “[t]wo kinds of notice are specified–one to the public by a visible mark, another by actual advice to the infringer. The second becomes necessary only when the first has not been given; and the first can only be given in connection with some fabricated article. Penalty for failure implies opportunity to perform.” (Wine Railway.)

This has led to the odd situation in which a company that is vigorously engaged in the rough and tumble of commerce with its patented product, benefiting consumers, creating jobs and increasing GDP, is in a less favorable position than an entity that does nothing. What was intended to be beneficial (notice is deemed to be given by marking) has advanced the interests of the patent troll over those of the operating company.

Trolls exploit this odd situation by waiting for industries or standards to become established, or for sales to accrue, before presenting their now-inflated licensing demands. Finding a previously ignored or forgotten asset, the clichéd “Rembrandt in the attic,” is similarly rewarded. “The patent might be expiring, but we’ve got ya going back six years, buddy!”

By the time this delayed claim is presented, the alleged infringer or standards-setting body has had no opportunity to mitigate the effect of the claim by adopting different technology or taking other steps. They’re stuck with the cost and disruption of trying to resolve a claim that might not have existed, or might have existed on a much smaller scale, had they received timely notification of the patent. Dubious claims are also more intimidating, merely because of the amount at issue. The alleged infringer is penalized by the delay, while the idle or covert or brand-new patent owner benefits.

Such exploitation also contravenes a fundamental goal of the marking statue, which is to protect against innocent infringement. Nike, Inc. v. Wal-Mart Stores, Inc. (Fed Cir 1998).

But, you may say, what of the inventor in the garage, who doesn’t have the needed capital or expertise to commercialize their patent? What if a company is exploiting the patented technology in a faraway city? Shouldn’t this inventor be entitled to fair compensation? Of course. But that is what the internet and its search engines are for. Times have changed – if someone is making money off a patented product, a patentee will be able to find it and send a notice letter. At a minimum, even if the patent is not directed to a findable product, it is easy enough to identify likely infringers or companies that might be interested in licensing the patent.

The onus should be on the patent owner to assert their rights – use it or lose it. A simple patent reform could affirmatively specify that damages only accrue after actual or constructive notice, and that constructive notice can be given by marking. If it is not possible to mark, then actual notice should be required. Patent numbers for method patents can be included on products produced by the method, on devices that practice the method, in documentation accompanying software that practices the method, or on websites or in apps that practice the method. If it is really impossible to avail yourself of the benefit of constructive notice by marking, then the onus is on you to police your rights.

It is amazing that nobody has addressed this issue in current patent reform efforts directed to curbing the patent troll problem. The marking statute should protect innocent infringers and it doesn’t. Marking should benefit those who practice the patent, but the current state of the law benefits those who don’t.

 

Claiming Priority to Provisional Applications

Patent, Provisional Patent Application, , ,

By Dennis Crouch

An ever increasing proportion of US-based patent applicants rely upon provisional patent applications. For many, a provisional application is seen as a low-cost mechanism for claiming a priority date and for delaying the eventual higher cost of drafting and filing a non-provisional application. More sophisticated parties also use a provisional application as a way to shift the patent term back by one year. One problem with the cost-savings approach is that provisional applications only serve their purpose if they include a sufficient disclosure to protect the eventual claims.

One question that I’ve had for a while is whether patentees ordinarily add new matter when filing a non-provisional application that follows a provisional priority document. New matter might be needed because the original provisional application was filed hastily without sufficient time to marshal and understand the important facts. Similarly, new matter might also be wanted if additional technological progress occurred during the interim. The question has been difficult to ascertain because the USPTO does not make its database of about 2,000,000 provisional applications publicly available other than the individual files in PAIR. This, despite the law that provisional applications count as prior art in many situations. Additionally, the USPTO does not ordinarily ask the applicant to identify whether any new matter (additional disclosure) has been added to the formalized non-provisional or, if so, what that new matter might be. Rather, applicants merely “claim priority” to the provisional without saying more. The AIA first-to-file transition offers an opportunity to shed some light on industry practice in this area.

As part of a project on the impact of the America Invents Act, I looked up a set of about 2,000 recently published patent applications that were each filed on or after the March 16, 2013 but that claim direct priority to a provisional patent application filed before that date. This cohort is interesting because the applications span the transition from the pre-AIA invention-date focus to the post-AIA filing-date focus. The cohort is particularly interesting for the provisional-priority question because applicants must declare whether the claims in the newly filed application are fully supported by the provisional.

Some Background: Under the new law, the filing-date focused (first-to-file) patent regime applies to patent applications filed on or after March 16, 2013 – with the caveat that these post-AIA application filings will be examined under the pre-AIA regime if each claim (ever) in the application has an “effective filing date” that is pre-AIA. In other words, a later-filed application will be judged under the first-to-invent rules if it properly claims priority to a pre-AIA application that sufficiently discloses the claimed invention. See AIA, Section 3(n). Under the plain language of the law, the regime used is done on a patent-by-patent basis rather than claim-by-claim or family-by-family.

Ask the Patentee Whether AIA Applies: Now, you might expect that the USPTO would be charged with examining the priority documents to ensure that the newly filed applications properly claim priority. That is not really done on a systematic basis. Rather, the Patent Office simply asks the applicant whether the new claims are fully supported by the priority document. For several reasons, I believe that the vast majority of applicants will be truthful in their response. People do lie, but attorneys strongly shy away from on-the-record lies that – if discovered – would lead to potential charges of inequitable conduct, violation of the rules of professional ethics, and malpractice. While attorney bars severely frown upon attorney dishonesty, patent prosecutors are held to an even higher standard that requires both “candor” and “good faith.”

Findings: Looking at post-AIA non-provisional applications that each claim priority to a pre-AIA provisional application: I find that the files of more than 80% of those applications assert that all claims in the non-provisional are fully supported by priority provisional application.

More on Methodology: For the study, I randomly selected a cohort of about 2000 recently published patent applications that were each filed on or after March 16, 2013 but that claim priority to a provisional application filed within 12-months before that changeover date. For each of those applications, I then used PAIR to determine whether the patent applicant indicated that all of the claims in the non-provisional application were effectively disclosed by the provisional filing. The result was that 1,743 out of 2,097 (83%) assert full disclosure by the provisional whereas 354 (17%) assert that the claims were not fully disclosed by the pre-AIA priority documents. Of some interest, large entities were much more likely to claim full priority than are small or micro entities. I also found nuance within firms that had multiple applications in my sample – i.e., some firms claimed full priority for certain applications but not for others.

Caveats and Conclusions: There are a few potential conclusions to draw from this result. My best guess: These results suggest that provisional applications are ordinarily being drafted with care and purpose to ensure sufficient disclosure. At the same time, I suspect that attorneys are also purposefully limiting invention scope so that full priority can still be claimed. As suggested above, I my guess is that few if any attorneys are improperly claiming full priority. Although not sufficient to claim statistical significance, my perusal of a handful of applications support these conclusions in that applications that claimed full priority were extremely similar to the associated provisional while the new matter was fairly quickly identifiable for those applications who admitted to new matter.

There are two important caveats to using this study to reflect more fully on the practice of provisional patent applications. First, the AIA changeover has likely impacted applicant behavior – making them potentially more careful than they would be in the ordinary situation. In particular, in the AIA changeover situation, adding new matter to the non-provisional claims does more than simply shift the effective filing date. Rather, it also alters the rules applied when judging novelty and obviousness. As I wrote in a prior post, depending upon their situation some applicants may prefer the old rule while others prefer the new. See Dennis Crouch, Should you Transform Your Pre-AIA Application to an AIA Application? (November 2013).

In addition, we also have a general data problem in that a substantial number of provisional patent applications expire without ever being claimed as a priority document. In a prior post, I wrote that: “48% of provisional applications filed in FY2011 were abandoned without being relied upon as a priority document.” Crouch, Abandoning Provisional Applications (January 2013). The point here is that we have no information regarding whether these abandoned provisionals applications are substantially more sloppy and poorly drafted – I suspect that they are.

Design patent nonobviousness jurisprudence — going to the dogs?

Obviousness, Patent, ,

Guest post by Sarah Burstein, Associate Professor of Law at the University of Oklahoma College of Law

MRC Innovations, Inc. v. Hunter Mfg., LLP (Fed. Cir. April 2, 2014) 13-1433.Opinion.3-31-2014.1

Panel:  Prost (author), Rader, Chen

MRC owns U.S. Patent Nos. D634,488 S (“the D’488 patent”) and D634,487 S (“the D’487 patent”). Both patents claim designs for sports jerseys for dogs—specifically, the D’488 patent claims a design for a football jersey (below left) and the D’487 patent claims a design for a baseball jersey (below right):

Design Patents

Mark Cohen is the principal shareholder of MRC and the named inventor on both patents. Hunter is a retailer of licensed sports products, including pet jerseys. In the past, Hunter purchased pet jerseys from companies affiliated with Cohen. The relationship broke down in 2010. Hunter subsequently contracted with another supplier (also a defendant-appellee in this case) to make jerseys similar to those designed by Cohen.

MRC sued Hunter and its new supplier for patent infringement. The district court granted summary judgment to the defendants, concluding that the patents-in-suit were invalid as obvious in light of the following pieces of prior art:

Prior Art ChartThe Federal Circuit uses a two-step test to determine whether a design is obvious. First, the court must identify a proper primary reference—i.e., a “something in existence” that has “basically the same” appearance as the claimed design. Second, other references can be used to modify the primary reference “to create a design that has the same overall visual appearance of the claimed design.” Any such secondary references must be “so related [to the primary reference] that the appearance of certain ornamental features in one would suggest the application of those features to the other.”

Step One – Primary References

On appeal, MRC argued that the district court erred in identifying the Eagles jersey as a primary reference for the D’488 patent. The Federal Circuit disagreed, stating that either the Eagles Jersey or the V2 jersey could serve as a proper primary reference for the D’488 patent.

MRC also argued that the Sporty K9 jersey could not serve as a proper primary reference for the D’487 patent. Again, the Federal Circuit disagreed, stating that the Sporty K9 jersey had “basically the same” appearance as the patented design.

Step Two – Secondary References

In its analysis, the district court used the V2 jersey and Sporty K9 jersey as secondary references for the D’488 patent and the Eagles jersey and V2 jersey as secondary references for the D’487 patent. On appeal, “MRC argue[d] that the district court erred by failing to explain why a skilled artisan would have chosen to incorporate” features found in the secondary references with those found in the primary references. The Federal Circuit did not agree, stating that:

It is true that “[i]n order for secondary references to be considered, . . . there must be some suggestion in the prior art to modify the basic design with features from the secondary references.” In re Borden, 90 F.3d at 1574. However, we have explained this requirement to mean that “the teachings of prior art designs may be combined only when the designs are ‘so related that the appearance of certain ornamental features in one would suggest the application of those features to the other.’” Id. at 1575 (quoting In re Glavas, 230 F.2d 447, 450 (CCPA 1956)). In other words, it is the mere similarity in appearance that itself provides the suggestion that one should apply certain features to another design.

The Federal Circuit noted that in Borden, it found that designs for dual-chambered containers could be proper secondary references where the claimed design was also directed to a dual-chambered container. And in this case, “the secondary references that the district court relied on were not furniture, or drapes, or dresses, or even human football jerseys; they were football jerseys designed to be worn by dogs.” Accordingly, the Federal Circuit concluded that they were proper secondary references.

Secondary Considerations

MRC also argued that the district court failed to properly consider its evidence of commercial success, copying and acceptance by others. The Federal Circuit disagreed, concluding that MRC had failed to meet its burden of proving a nexus between those secondary considerations and the claimed designs.

Comments

The Federal Circuit hasn’t actually reached the second step of this test in a while. That’s because it has been requiring a very high degree of similarity for primary references (see High Point & Apple I). For a while there, it looked like it was becoming practically impossible to invalidate any design patents under § 103. Now we at least know that it’s still possible.

But we don’t have much guidance as to when it’s possible. In particular, it’s difficult to reconcile the Federal Circuit’s decision on the primary reference issue with its decision in High Point. The Woolrich slipper designs that were used as primary references by the district court in High Point were, at least arguably, as similar to the patented slipper design as the Eagles and Sporty K9 jerseys are to MRC’s designs. But in High Point, the Federal Circuit suggested that there were genuine issues of fact as to whether the slippers were proper primary references.

And unfortunately, the Federal Circuit seems to have revived the ill-advised Borden standard. As I’ve argued before, the second step of the § 103 test has never made much sense. Even the judges of the C.C.P.A., the court that created the test, had trouble agreeing about how it should be applied. But the Borden gloss—that there is an “implicit suggestion to combine” where the two design features that were missing from the primary reference could be found in similar products—is particularly nonsensical. At best, this Borden-type evidence suggests that it would be possible to incorporate a given feature into a new design, from a mechanical perspective—not that it would be obvious to do so, from an aesthetic perspective.

All in all, this case provides an excellent illustration of the problems with the Federal Circuit’s current test for design patent nonobviousness. Perhaps now that litigants can see that § 103 challenges are not futile, the Federal Circuit will have opportunities to reconsider its approach.