Tag Archives: Inequitable Conduct

Expanded Disclosure Obligations for Inequitable Conduct Due to USPTO Rules?

This is interesting.  The new USPTO Rules permit (but do not require) a lawyer to disclose confidences to the PTO “to prevent, mitigate or rectify substantial injury to the financial interests or property of another that is reasonably certain to result or has resulted from the client’s commission of a crime, fraud, or inequitable conduct before the Office in furtherance of which the client has used the lawyer’s services.”  37 C.F.R. 11.106(b)(3).  (Subsection (c) of that rule imposes a mandatory obligation to disclose when needed to comply with inequitable conduct law.)

So, suppose after issuance Client tells you he had engaged in acts that, had the PTO known, would have barred the claim.  Result?

Off-the-Record Examination: Is Conventional Wisdom Wrong?

By Dennis Crouch

Interview summaries. In a recent post, Professor Chao discussed the common practice of examiner interviews where the patent attorney discusses outstanding issues with the patent examiner. No transcript or recording of the discussion is kept, although there is a requirement that a summary of the interview and its results be written and placed within the file history. Professor Chao argues that the summaries are insufficient because all-too-often, a seemingly valid rejection simply vanishes following an examiner interview. For evidence, Chao also cites discussions at a recent Stanford Law School conference “where two prominent professors separately complained about how opaque the interview process was.”

Although Chao’s proposal has significant practicality problems, I also had the same sense of the problem — that the interview summaries create opacity in a process where transparency should rule. However, since Chao’s essay was posted, I have followed up with two “reality checks” that have raised my optimism on interviews.

First the rule — MPEP §713.04 walks through a number of elements that are required as part of an interview summary. These requirements include a fairly detailed list:

The complete and proper recordation of the substance of any interview should include at least the following applicable items:

(A) a brief description of the nature of any exhibit shown or any demonstration conducted;

(B) identification of the claims discussed;

(C) identification of specific prior art discussed;

(D) identification of the principal proposed amendments of a substantive nature discussed, unless these are already described on the Interview Summary form completed by the examiner;

(E) the general thrust of the principal arguments of the applicant and the examiner should also be identified, even where the interview is initiated by the examiner. The identification of arguments need not be lengthy or elaborate. A verbatim or highly detailed description of the arguments is not required. The identification of the arguments is sufficient if the general nature or thrust of the principal arguments can be understood in the context of the application file. Of course, the applicant may desire to emphasize and fully describe those arguments which he or she feels were or might be persuasive to the examiner;

(F) a general indication of any other pertinent matters discussed;

(G) if appropriate, the general results or outcome of the interview; and

(H) in the case of an interview via electronic mail a paper copy of the contents exchanged over the internet MUST be made and placed in the patent application file as required by the Federal Records Act in the same manner as an Examiner Interview Summary Form, PTOL-413, is entered.

The requirement is detailed, and the point is that interviews are not “off the record” even if not audio-recorded or transcribed. One problem with these requirements is that they lack an enforcement mechanism other than the examiner’s “careful review.” There is no direct way to challenge a patent issued because of an inadequate interview summary other than inequitable conduct — a defense that requires substantial proof of intent to commit fraud. Still, patent attorneys are bound by the ethics requirements to comply with the law in good faith and act with candor in all dealings with the USPTO — the result is that we should largely expect compliance with the required standards. Helping this along, the interview summary form now particularly asks applicants to describe the issues discussed, claims discussed, prior art discussed, and the interview substance.

Looking at the Interview Summaries: After reading through the rule, I then thumbed through a handful of interview summaries and have been happy to see that, in fact, the invention summaries are generally detailed pointing to the particular issues discussed and the resolution of those discussions. Now, the summaries are not as detailed as you might see in an office action rejection or subsequent response, but they do provide substantial context, meaning, and understanding.

To find these, I first downloaded the PAIR files for a random set of recently issued patents and then sorted them to find file histories where issuance/notice of allowance occurred fairly quickly following the interview since that represents the complained-of situation. The four below are simply the first for interview summaries that I looked-at:

Application No. 13/308105:

Attorney had proposed more restrictive claim language in accord with examiner’s determination of un-obvious claims over the prior art and also proposed withdrawn subject matter directed to encapsulated forms. Examiner to enter the amendment over currently pending claims with consideration to be given to a divisional for the encapsulated invention when presented. See examiner’s amendment for allowed claims of current case.

Application No. 12/875,772:

The examiner indicated amending the claims to more clearly identify “the first processor,” “the second processor”, and the “processing components” as depicted in figure 2 would overcome the prior art rejection in Key in view of Fukushima.

Application No. 13/117,944:

Prior art discussed: Bednar

Applicant called to discuss the invention and potential differences between the prior art and the disclosed invention. Applicant discussed a couple of amendments to the independent claim to attempt to overcome the current prior art. It was suggested to the Applicant to add a limitation to further define the spacer to be vibration dampening or made of a vibration dampening material in addition to the spacer extending past or beyond the cable slot toward the riser so that it is not only present in the cable slot and so it may support also add support the barrel. These limitations appear to be fully supported by the figures and do not appear to be present in the prior art reference as Bednar only shows the spacer/dampeners to be present in the cable slot portion of the barrel. These limitations will also require an updated search and therefore no determination of patentability has been made. When these amendments are filed the examiner will update the prior art search and reconsider the currently applied rejection.

Application No. 13/685,368

The examiner and applicant’s representative discussed a set of proposed Examiner’s amendments to place the application in condition for allowance. The amendments set forth clarity, proper antecedent basis, and suitable claim structure to overcome any issues with respect to 35 U.S.C. 101 and 112. The specifics of agreements reached are incorporated in the replacement listing of the allowed claims as set forth in the examiner’s amendment section of the attached notice of allowability. Consequently, the discussion and agreements reached resulted in the allowance of the instant application.

To my eyes, these interview summaries do a very good job of providing information to the world regarding the issued discussed, the conclusion drawn, and the reasoning for those conclusions. Of course, more detail is possible and may be preferable, but this small sample has gone a significant way toward changing my view of the off-the-record nature of examiner interviews.

The PTO’s Role (none) in Defining the Elements of Unenforceability.

In a comment below, someone asserted that the PTO has tried to define the elements of inequitable conduct.  I wrote an article about this issue, with my (now fellow lawyer) Seth Trimble.  It is here (I hope already available).  Here’s the intro:


In 1992, the patent office amended a federal regulation known as Rule 1.56.[1] The amendment require less disclosure of patent applicants than had been required by the federal courts’ interpretation of the prior version of Rule 1.56, as well as less than had been required by courts in determining enforceability of a patent.  Thus, since 1992, the PTO has required less disclosure under Rule 1.56 than courts have long required to obtain an enforceable patent. This article addresses the tremendous and unnecessary confusion that has arisen from that amendment.

Although our analysis turns on principles of statutory construction and separation of powers, the impact of our conclusion is practical and important.  Those who prosecute applications need to disclose more broadly than is required by Rule 1.56 to best serve their clients. Those who litigate inequitable conduct claims should not rely on the narrow definition of materiality in Rule 1.56.  The two definitions of “materiality” are distinct: one applies during patent examination, and the other during litigation.   A change in the meaning of one does not mandate a change in the other and, most pertinent here, a regulatory change by the PTO cannot mandate a change in the substantive standard applied to determine enforceability.

[1]     37 C.F.R. 1.56.

Interesting Article Providing Data Analyzing Exergen/Therasense’s Impact

The article by Robert Swanson, published in the Stanford Law Review, is here.  The abstract:

This Comment empirically investigates the doctrine of inequitable conduct in patent law. Inequitable conduct is a defense to patent infringement that accuses the patent holder of committing fraud on the U.S. Patent and Trademark Office to secure the patent. Before the Federal Circuit’s recent Exergen and Therasense decisions, the defense was seen as chronically overused. As a result, patent applicants cited more prior art in their applications to avoid later being charged, during litigation with fraudulent omissions. The Federal Circuit responded with Exergen and Therasense, which heightened the pleading standard and raised the legal proof required for inequitable conduct, respectively.

Many commentators, and especially members of the patent defense bar, now feel that the Federal Circuit has gone too far in restricting the inequitable conduct defense, to the point that it is essentially a dead doctrine. This Comment informs the debate by adding comprehensive data. To better comprehend the effects of the Exergen and Therasense cases, this Comment calculates the rates at which accused infringers plead and prove inequitable conduct—for every patent case over the periods in question. The results show that the inequitable conduct defense is used significantly less often than many assume, contradicting assertions by the Federal Circuit’s Therasense majority. Moreover, the data indicate that Exergen and Therasense have both contributed to an even further decline in accused infringers’ use of the inequitable conduct defense. Based on a full exploration of the data, the Comment concludes that the Federal Circuit went too far in Therasense (but not in Exergen). A better formulation of inequitable conduct doctrine would be the test advocated by the dissent in Therasense, which embraced the U.S. Patent and Trademark Office’s lower standard of materiality.

Claiming Priority to Provisional Applications

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.

Should the Claim Construction Standard for PTAB Post-Grant Proceedings Be Changed?

Guest Post by Bernie Knight. Knight is a partner at McDermott Will & Emery LLP and was USPTO General Counsel from 2010-2013.

Now that the new post-grant proceedings of the America Invents Act (AIA) have been underway for over a year, some have questioned whether the claim construction standard used by the Patent Trial and Appeal Board (PTAB) is the correct one.  Currently, proposed legislation in Congress would change the claim construction standard for PTAB post-grant proceedings from the broadest reasonable interpretation to the same standard used by district courts, i.e., one having a goal of preserving validity in deference to 35 U.S.C. Sec. 282.   Of course, outside of such legislation, the USPTO has the ability to change the claim construction standard by amending the regulations and the practice guide.  The question arises, would changing the claim construction standard improve the patent system?

The answer is no. Yet, with that said, there is a certain tension between the claim construction standard and the patent owner’s ability to amend claims in the new post-grant proceedings. Recent decisions of the PTAB have made it difficult for patent owners to amend their claims. When we decided to adopt the broadest reasonable interpretation claim construction standard, we did so under the assumption that patent owners would be able to amend their claims without significant impediments. This was a sound decision for the patent system and follow-on innovation because the claims would be amended with more precise language. It would then be easier for other companies and inventors in the same technology space to design around the amended claims. Simply put, the broadest reasonable interpretation claim construction standard seems like a fair standard in light of the patent owner’s ability to amend claims. Such an approach also seems good for the patent system and follow-on innovation.

A tension arises with this trade off because of recent decisions of the PTAB requiring the patent owner to establish that the amended claims are patentable not only over the cited prior art, but also any art of which the patent owner has knowledge. See, e.g., IPR2012-00027, paper 66 (Final Written Decision). In addition, the PTAB sometimes requires that the patent owner submit an expert declaration to establish the understanding of a person of ordinary skill in the art to determine whether the new claim limitations are obvious. At the urging of many patent owners, Congress is responding by proposing legislation that would change the claim construction standard for USPTO proceedings to the same standard employed by the district courts.

The PTAB has done a terrific job handling the onslaught of petitions that have been filed since enactment of the AIA.  It is reported that the USPTO has the third busiest patent docket in the country, after the Eastern District of Texas and the District of Delaware.   I had the pleasure of working with the PTAB in getting the final AIA rules issued and the proceedings implemented within the one year period mandated by Congress. So, here comes the “but.” This is a good time for the USPTO to look at the requirements for a patent owner’s amendment to make certain that because the claims are broadly construed, the patent owner still has a reasonable opportunity to amend the claims.

The regulations that we implemented provide that amendments will be allowed if they are supported by the written description in the application, the amendments are narrowing amendments and the amendments relate to a claim and ground upon which the proceeding was instituted. See 37 C.F.R. 42.121, 42.221. The patent owner must make an initial showing that the amended claims are patentable. The question arises how much support should be required from the patent owner at the time of the motion to amend claims and how much of the burden should be placed on the petitioner to show that the amended claims are unpatentable.

The additional requirements placed on the patent owner by the PTAB make it more difficult for a proposed amendment to survive a PTAB proceeding. An alternative approach might be to only require the patent owner to show that the amended claims are patentable over the prior art cited by the petitioner and relied on by the PTAB in instituting the proceeding. If the patent owner fails to disclose prior art that the patent owner has knowledge of and that can affect the validity of the claims, there may be a future inequitable conduct defense if the patent owner brings an infringement action. In addition, there may be a basis for an Office of Enrollment and Discipline complaint if evidence that is contrary to a position being taken at the USPTO is intentionally withheld by the patent owner. With respect to the need for expert witnesses to support the amendments, a possible alternative approach would be to place the burden on the petitioner to produce the expert to support an obviousness challenge to the new amended claims. The current PTAB decisions place that burden on the patent owner up front to disprove such an argument even before it is raised. More of the burden might be placed on the petitioner to show that the amended claims are unpatentable.

If the requirements for a patent owner amendment were less onerous, then a much stronger case can be made that the broadest reasonable claim construction standard should be retained. Without the ability to reasonably amend the claims, the broadest reasonable interpretation claim construction standard seems a bit unfair to the patent owner because the claims are broadly construed with little opportunity to amend.

The views expressed here are solely those of the author and do not necessarily reflect the views of McDermott Will & Emery or its other partners.

The Downstream Effect of Owning an Invalid or Unenforceable Patent

I was reading some random things this morning and read about this case, In re Skelaxin (Metaxalone) Litigation.  I’d never much pondered the deeper downstream legal consequences to the owner of seeking to enforce an invalid/unenforceable (and, I suppose, non-infringed) patent (beyond 285, and the potential for Walker Process type claims), but this case illustrates some of the enormous ripple effects.

What I have thought about is the fact that the OED routinely opens investigations when a court finds that a patent is unenforceable.  (Some of the comments below about the OED’s jurisdiction relate to that issue.)  One thing that lawyers have told me is that often they’re deposed in a case where they prosecuted a patent, and then (if things go badly) the next thing they hear is that an order has been entered finding they acted with an intent to deceive and knowing of material information.

It has always struck me that a district court’s findings on those issues should not have any weight in the PTO because of the serious due process issues, and because normal rules of collateral estoppel shouldn’t permit it — the lawyer was not a party to the infringement suit, and he also wasn’t in privity with a party to it.

I only raise this because I’ve seen several times where this has happened, but the lawyer’s lawyer at the OED seemingly doesn’t raise this up.  Granted, the original finding of inequitable conduct will likely hurt the lawyer’s career, but OED disbarment will have even more.

Law Professors Opposed to Amendments to FRCP; Defense Counsel In Favor

I need to digest this further, but I think I agree with the law profs.  Among the change are, as you know, to eliminate the use of the simple forms (including patent infringement), to eliminate the discretion of a judge to allow discovery into matters that are relevant to the subject matter, but not to a claim or defense (which has huge repercussions given the CAFC’s holding (wrong, imho) that FRCP 9(b) applies to inequitable conduct claims, narrow the scope of discovery generally and with respect to specific forms, and more.

The law profs’ letter is here.

I’ve not been heavily involved in discovery in a long time, but apart from ESI issues, troll issues, and a few odd things, haven’t heard a whole lot of carping…

OED Director’s recent comments on customer number practice

I was speaking last month at the PTO, and the OED director gave a talk on several issues that surprised me. I’ll be posting about them in the coming days.

One was the suggestion that customer number practice can result in greater instances of inequitable conduct.  Although he mentioned imputation, I don’t think that’s what he meant:  if three lawyers are on a customer number, then each might be deemed, for that reason alone, to be substantively involved in prosecution and, so, their knowledge would “count.”  So, even though only one lawyer is actually doing any work on the file, if another lawyer on the customer number “withheld” information, that could be an omission.

I don’t know how you can possibly get, absent unusual facts, intent to deceive by the lawyer who didn’t know his information mattered, but I also think it elevates form over substance to say that everyone listed on the same CN is involved.

But, he suggested that firms rethink the structure of their customer number practice….

Lawyer fails to correct Rule 131 Dec; Patent held unenforceable; lawyer agrees to discipline

Thanks to a reader..

This OED decision from January 8, 2014 disciplinary order is interesting.  Briefly, a very senior patent attorney (with a low reg number) was suspended for filing a Rule 131 declaration antedating a prior art reference, and then failing to correct the prosecution record after the declarant admitted to the patent attorney, during prosecution, that the Rule 131 declaration was false.  The patent that issued from that application was subsequently litigated and held to be unenforceable due to inequitable conduct predicated in part on a finding that the Rule 131 declaration was false.  

 Two thoughts:  one, why would a reasonable practitioner continue to prosecute?  For the fees?  (If the client had given the practitioner an interest in the application, I can see the financial interest, but otherwise…?).  Second, think of the costs that, I bet, are coming downstream:  the accused infringer ought to move for fees under 285, and, if so, those fees ought (in my view under these allegations) be paid by the lawyer.  So, back to the first thought: why?

Ohio Willow Wood v. Alps South

By Jason Rantanen

The Ohio Willow Wood Company v. Alps South, LLC (Fed. Cir. 2013) Download 12-1642.Opinion.11-13-2013.1
Panel: Dyk, Bryson, and Reyna (author)

There are three main isues addressed in this opinion:

1) Collateral Estoppel based on similar claims in a different patent;

2) Obviousness involving the addition of numerical limitations in dependent claims; and

3) Inequitable conduct: reversal of SJ of no IC.

Background: The Ohio Willow Wood Company (OWW) asserted Patent No. 5,820,237 against Alps South.  The '237 patent relates to directed to cushioning devices that go over the residual stumps of amputated limbs to make the use of prosthetics more comfortable.  The district court granted summary judgment that OWW was collaterally estopped from challenging the invalidity of set of claims in the '237 patent, that the second set of asserted claims was invalid for obviousness, and that there was no inequitable conduct.  OWW appealed the collateral estoppel and obviousness issues while Alps cross-appealed the inequitable conduct issue. 
Collateral Estoppel: The collateral estoppel issue in this case is notable because it involves a separate (albeit related) patent.  OWW sued Thermo-Ply, Inc. for infringement of Patent No. 7,291,182, which issued from a continuation of the '237 patent, in a separate proceeding.  The court in that litigation held the claims of the '182 patent invalid for obviousness, a ruling that was affirmed on appeal.  Based on this previous disposition, the district court in the OWW v. Alps litigation ruled that a set of claims from the '237 were invalid due to collateral estoppel. 

The Federal Circuit affirmed, holding that collateral estoppel can apply across patents.  "Our precedent does not limit collateral estoppel to patent claims that are identical. Rather, it is the identity of the issues that were litigated that determines whether collateral estoppel should apply….If the differences between the unadjudicated patent claims and adjudicated patent claims do not materially alter the question of invalidity, collateral estoppel applies."  Slip Op. at 11.

Here, the differences between the patent claims did not materially alter the question of invalidity: 

As reflected in the claim language above, these patents use slightly different language to describe substantially the same invention. For example, where the ’237 patent recites a “tube sock-shaped covering,” an “amputation stump being a residual limb,” and “fabric in the shape of a tube sock,” the ’182 patent analogously recites the same claim scope in the form of a “cushion liner for enclosing an amputation stump, said liner comprising a fabric covering having an open end for introduction of said stump and a closed end opposite said open end.”  Thus, the mere use of different words in these portions of the claims does not create a new issue of invalidity. 

Id. at 12.

Obviousness – Exercise of Ordinary Skill: OWW also challenged the district court's summary determination that a second set of claims was invalid for obviousness. The crux of OWW's argument was based on the addition of numerical limits on certain characteristics of the "gel composition" and "fabric" elements in dependent claims.  The CAFC agreed with the district court that the addition of these numerical limits was nothing more than the exercise of ordinary skill in the art:

[N]othing in the record indicates that confining the otherwise obvious “gel composition” and “fabric” limitations to the recited numerical limits in the disputed dependent claims was anything other than the exercise of routine skill. Each of these features were well-known in the prior art and their use would have been predictable by one of ordinary skill in the art.

Slip Op. at 15.  Nor did the analysis fo secondary indicia of non-obviousness change the outcome.  OWW failed to show the requisite nexus between the secondary indicia and the patented invention (which in this case was specifically the claimed invention with the numerical limitations as distinguished from the invention minus the numerical limitations).  Furthermore, "where a claimed invention represents no more than the predictable use of prior art elements according to established functions, as here, evidence of secondary indicia are frequently deemed inadequate to establish non-obviousness."

Inequitable Conduct: While the litigation was pending, Alps initiated two ex parte reexaminations of the '237 patent.  Alps supported its second ex parte reexam request with the testimony of a Mr. Comtesse, who had been affiliated with the company that produced the prior art product that Alps relied upon.  The examiner accepted this testimony as evidence that the prior art possessed certain characteristics, resulting in the rejection of all of the claims of the '237 patent. 

In its appeal to the BPAI, OWW argued "that the examiner’s rejection was improper because it relied on the uncorroborated testimony of Mr. Comtesse, whom OWW characterized as a highly interested party." Slip Op. at 7.  OWW denied the existence of any other evidence that would support the relevant testimonty of Comtesse.  The BPAI subsequently reversed the examiner, finding that Comtesse was an interested third party and that his testimony was uncorroborated.

During the district court proceeding, Alps argued that there was contrary evidence that became known to OWW during the course of the litigation and should have disclosed to the PTO.  Applying Therasense, however, the district court granted summary judgment in favor of OWW. 

On appeal, the Federal Circuit reversed, finding that when viewing the evidence in a light most favorable to Alps, genuine issues of material fact remained.  Here, the allegedly material information went to the issue of whether disclosure would have led the BPAI to credit Comtesse's testimony.  The CAFC concluded that there was at least a genuine issue of fact.  Furthermore, the CAFC concluded that viewing the facts in a light most favorable to Alps, OWW's (allegedly false and unfounded) assertions regarding the interested nature of Mr. Comtesse "would be tantamount to the filing of an unmistakably false affidavit."  

Should you Transform Your Pre-AIA Application to an AIA Application?

By Dennis Crouch

In the lead-up to March 16, 2013 the patent office received an influx of tens-of-thousands of patent application filings. That date is important because new applications filed on or after March 16, 2013 are examined under the first-to-file rules of the America Invents Act (AIA). At first glance, that influx suggests that applicants overwhelmingly prefer the prior first-to-invent rules. That suggestion makes sense since the AIA generally expands the scope of prior art available to adjudge patentability. However, the reality is that early filing might me more properly seen as a hedge against the potential that the new rules are too harsh on patentees. As I discuss below, the AIA offers an easy mechanism for any pre-AIA patent application to be transformed into an AIA patent application and it turns out that there are several major reasons why a patentee might prefer its patents to be adjudged under the AIA rules.

Transforming to an AIA Patent: The basic rule is that the first-to-file rules of the AIA apply to any application with at least one claim whose priority date is on or after March 16, 2013. The mechanism then is to file a follow-on application, such as a continuation-in-part (CIP) application, that adds some new matter and a new claim. The result of that filing then is that the entire application and resulting patent will be judged under the AIA first-to-file rules. To be clear, the CIP transforms the entire application to an AIA application – even claims that are identical to those that were in the original pre-AIA application and that were fully supported by that original pre-AIA application. Although I use a CIP as an example here, any new filing that properly adds new matter and that results in a related new claim will qualify.

The procedure is easy – the larger question is why a patent applicant would prefer an AIA patent to a pre-AIA patent. Some reasons:

  • AIA patents are (likely) not subject to being invalidated based upon pre-filing secret sales; secret offers to sell; or secret uses.
  • AIA patents have expanded the scope of the Create Act so that would-be anticipating prior art is also negated. The basic idea is that non-public prior filings by a research partner will not negate patentability.
  • AIA patents that stem from a foreign-filing count as prior art as of their priority filing date. This change effectively overrules the Hilmer doctrine and essentially makes AIA patents (and their associated published applications) much more powerful as a form of prior art.
  • At the same time, claims that were fully supported by the original priority filing will still get that priority date even when being adjudged under the new law.

Depending upon your particular factual situation, these reasons may justify a transformation of a pre-AIA application to an AIA application. Directly on point, this opportunity suggests that attorneys revisit pending pre-AIA cases that involved some pre-filing commercial activity to nail down whether any pre-filing sales activity took place. This issue is especially important when you consider cases like Hamilton Beach Brands, Inc. v. Sunbeam Products, Inc., 726 F.3d 1370 (Fed. Cir. 2013). In that case the Federal Circuit found the patent-in-suit invalid based upon an offer from a foreign supplier to produce the product on behalf of the patentee. That is the sort of secret on-sale activity that will not serve as prior art for AIA patents. If that pre-filing on-sale activity was kept confidential then a transformation to an AIA application may make sense.

The transformation to an AIA application should probably be seen as a hedge rather than transformation because it does not require abandonment of the pre-AIA application. Thus, the same original priority filing that was filed before March 16, 2013 could result in a family of patents, some of which are adjudged under the pre-AIA rules and others that are adjudged under the AIA rules. The basic business question then for these pending pre-AIA questions is not whether the potential AIA patent is more likely to be valid than a pre-AIA patent. Rather, the hedging question is whether the addition of an AIA patent covering parallel subject matter adds enough value to be worth the costs.

There are a number of caveats to this procedure. Here are three. First, as I mentioned above, the transformation process requires the addition of new matter and a new claim that includes some of that new matter. I would expect some equitable risk for patent applicants in situations where it is clear that the new matter was only added as a formality in order to use this procedure. Defendants could potentially raise inequitable conduct or laches defenses based upon a patentee's claiming that some new matter was patentable when the only true purpose of the new matter was for the old claims to be interpreted under the new rule. In a similar vein, this approach raises double-patenting questions and it is somewhat unclear how double patenting issues will be resolved under the AIA. Finally, it is important to make clear that these transitional applications will not avoid 102(g) prior art based upon the transitional provisions found in the AIA.

= = = = =

Note, I had been thinking some about this issue but my post here was triggered by a recent presentation by Bryan Diner from Finnegan who, in turn, recognized Tom Irving and his related Jedi Master Mixer strategy.

Intellect Wireless v. HTC

By Jason Rantanen

Intellect Wireless, Inc. v. HTC Corp. (Fed. Cir. 2013) Download 12-1658.Opinion.10-7-2013.1
Panel: Prost, Moore (author), O'Malley

This opinion is notable because it involves one of the rare instances post-Therasense in which the Federal Circuit concludes that inequitable conduct occurred.

This appeal involves two related patents, Patent Nos. 7,266,186 and 7,310,416, which relate to wireless transmission of caller ID information.  During the prosecution of the '186/'416 patent family, Daniel Henderson, the inventor named on the patents, submitted a Rule 131 declaration to overcome a prior art reference.  A Rule 131 declaration is a document in which the inventor asserts that he or she invented the claimed invention prior to the date of a prior art reference cited by the examiner, a process colloquially referred to as "swearing behind."  (The mechanism does not allow applicants to bypass a statutory bar and was eliminated by the AIA.)  Mr. Henderson averred in the declaration that “the claimed invention was actually reduced to practice and was demonstrated at a meeting . . . in July of 1993.”  

When Mr. Henderson's company, Intellect Wireless, sued HTC for patent infringement, it came out that he had not actually reduced the invention to practice as of the date stated in the declaration.  The district court found that the false declaration constituted inequitable conduct under the Therasense framework.  Intellect appealed.

On appeal, the Federal Circuit affirmed, agreeing that both the requirements of materiality and intent were met. 

Materiality: One question left somewhat open after Therasense was the issue of what constituted egregious affirmative conduct.  Here, the court agreed that Mr. Henderson's conduct rose to that level. 

In one of its earliest opinions, the Federal Circuit held that when an applicant files a false declaration, the applicant must "expressly advise the PTO of [the misrepresentation’s] existence, stating specifically wherein it resides." Rohm & Haas Co. v. Crystal Chem. Co., 722 F.2d 1556, 1572 (Fed. Cir. 1983). In addition, "if the misrepresentation is of one or more facts, the PTO [must] be advised what the actual facts are." Id. 

Therasense, the Intellect Wireless panel held, did not modify this law.  "[T]he materiality prong of inequitable conduct is met when an applicant files a false affidavit and fails to cure the misconduct." Slip Op. at 7. 

Here, the original declaration was indisputably false; the only question was whether the subsequent actions by Mr. Henderson's attorney were sufficient to cure the falsity.  The court held that they were not.  While the attorney quickly submitted a revised declaration, that revised declaration failed to correct the falsehoods in the original declaration.  It did not expressly negate the false references to actual reduction in the original declaration, which included statements such as a reference to a "prototype now in the Smithsonian" that suggested a device embodying the claimed invention was actually built at the relevant time.  The panel agreed that "[n]owhere did the declaration openly advise the PTO of Mr. Henderson’s misrepresentations, as our precedent clearly requires," Slip Op. at 6., and "at best, the revised declaration obfuscated the truth."  Id.

Intent: The Federal Circuit also affirmed the district court's finding of intent to deceive.  In addition to the false statements made during prosecution of the '186 and '416 patents, Mr. Henderson also made false statements about actual reduction to practice during the prosecution of other patents in the family.  This pattern of false and misleading statements combined with the submission of a declaration containing fabricated examples of actual reduction to practice in order to overcome a prior art reference was sufficient to establish intent to deceive. 

Federal Circuit Unanimously Affirms Inequitable Conduct, Teaching that Curing False Statements Needs to be Done Clearly

In Intellect Wireless, Inc. v. HTC Corp., the court affirmed the district court's conclusion of inequitable conduct.  Boiled down, the applicant filed a Rule 131 affidavit stating that it had actually reduced the invention to practice when, in fact, it had not.  In a later affidavit, references to "actual reduction to practice" were removed, but the affidavit still contained references to a prototype–that had never been made, among other things.  The court held that the affidavits were material, relying upon Therasense's statement that false affidavits were so by their nature.  It held there was intent to deceive based upon the first affidavit alone, confirmed by the filing of the second without clearing matters up coupled with similar misconduct in other related cases.

The case does not appear to break new ground, but it does reinforce the fact that inequitable conduct is not a dead letter.

What is an Exceptional Case such that Court Should Award Attorney Fees?

By Dennis Crouch

Earlier this week, I commented on the two attorney-fees cases pending before the US Supreme Court:

  • Octane Fitness, LLC v. ICON Health & Fitness, Inc., Docket No. 12-1184; and
  • Highmark Inc. v. Allcare Health Management Sys., Docket No. 121163.

Both cases stem from the same perspective that the “exceptional case” requirement for attorney fees is too narrowly construed by the courts and especially by the Federal Circuit. See 35 U.S.C. § 285.

I noted in the prior post that the predecessor of Section 285 was first enacted in a 1946 Patent bill. The 1946 law was substantially similar to the current law (enacted in 1952) with the major difference that the 1946 act expressly gave the court “discretion” to award attorney fees to the prevailing party while the 1952 act removed that “discretion” term and instead indicated that the fee may be awarded “in exceptional cases.”

The Senate Report associated with the 1946 statute indicates that the statute is not intended to make fee awards an “ordinary thing in patent suits” but instead to reserve such awards for “gross injustice.”

It is not contemplated that the recovery of attorney’s fees will become an ordinary thing in patent suits, but the discretion given the court in this respect, in addition to the present discretion to award triple damages, will discourage infringement of a patent by anyone thinking that all he would be required to pay if he loses the suit would be a royalty. The provision is also made general so as to enable the court to prevent a gross injustice to an alleged infringer.

S. Rep. No. 1503, 79th Cong., 2d Sess. (1946), reprinted in 1946 U.S. Code Cong. Serv. 1386, 1387.

When the 1952 act was passed, the House Committee Report briefly mentioned the “exceptional case” amendment to the statute – indicating that the phrase “‘in exceptional cases’ has been added as expressing the intention of the present statute as shown by its legislative history and as interpreted by the courts.”

In several cases, the Federal Circuit has considered the standard and, after some debate, decided in Eltech Systems Corp. v. PPG Industries, Inc., 903 F.2d 805 (Fed. Cir. 1990), that the exceptional case standard should be the same for both prevailing plaintiffs and for prevailing defendants – writing: “we now reach the question and determine that there is and should be no difference in the standards applicable to patentees and infringers who engage in bad faith litigation.” The Eltech Systems case was then cited positively by the Supreme Court in Fogerty v. Fantasy, 510 U.S. 517 (1994) as justification for a party-neutral approach to fee shifting in copyright cases.

We note that the federal fee-shifting statutes in the patent and trademark fields, which are more closely related to that of copyright, support a party-neutral approach. Those statutes contain language similar to that of [17 U.S.C.] § 505, with the added proviso that fees are only to be awarded in “exceptional cases.” 35 U.S.C. § 285 (patent) (“The court in exceptional cases may award reasonable attorney fees to the prevailing party”); 15 U.S.C. § 1117 (trademark) (same). Consistent with the party-neutral language, courts have generally awarded attorney’s fees in an evenhanded manner based on the same criteria. For patent, see, e.g., Eltech Systems Corp. v. PPG Industries, Inc., 903 F.2d 805, 811 (Fed. Cir. 1990) (“[T]here is and should be no difference in the standards applicable to patentees and infringers who engage in bad faith litigation”). For trademark, see, e.g., Motown Productions, Inc. v. Cacomm, Inc., 849 F.2d 781, 786 (2nd Cir. 1988) (exceptional circumstances include cases in which losing party prosecuted or defended action in bad faith); but see Scotch Whisky Assn. v. Majestic Distilling Co., 958 F.2d 594 (4th Cir.) (finding in the legislative history that prevailing defendants are to be treated more favorably than prevailing plaintiffs), cert. denied, 506 U.S. 862 (1992).

Fogerty at note 12.

Of course, the problem with a party-neutral approach is that it can only be applied at a certain high level of granularity or abstractness. Since patentees and accused infringers make systematically different argument and have systematically different strategies, the particular causes of exceptional case findings tends to be different. Thus, losing infringers most often pay fees based upon ongoing willful and reckless infringement while losing patentees most often pay fees for suing on patent obtained through inequitable conduct or for bringing baseless lawsuits. At that low level of granularity, the differences are such that it is difficult to compare whether a party-neutral approach is being applied.


Thanks to John Pinkerton at Thompson & Knight for providing me with this legislative history from the 1946 Act.

Supreme Court’s New Patent Cases

By Dennis Crouch

The Supreme Court today granted writs of certiorari in two patent-related cases appealed from the Court of Appeals for the Federal Circuit and one copyright case out of the Ninth Circuit.

  • Octane Fitness, LLC v. ICON Health & Fitness, Inc., Docket No. 12-1184;
  • Highmark Inc. v. Allcare Health Management Sys., Docket No. 121163; and
  • Petrella v. MGM, Docket No. 12-1315.

The patent cases fit as a pair and both ask questions regarding the award of attorney fees to a prevailing party. In the US, each party to a litigation ordinarily pays its own attorney fees. Thus, although an accused infringer who successfully raises an invalidity defense will not pay damages to the patentee, that prevailing defendant will still need to pay its attorneys and experts for the thousands of hours spent defending the lawsuit. Likewise, a patentee who wins an infringement lawsuit generally takes a substantial portion of any award and turns it over to the attorneys and experts who turned the patent into cash.

Rule 11(c) of the Federal Rules of Civil Procedure offers sanctions for litigation abuses and indicates that reasonable attorney fees can serve as one form of sanctions. In addition, the section 285 of the Patent Act provides that a “court in exceptional cases may award reasonable attorney fees to the prevailing party.” 35 U.S.C. § 285. The language of Section 285 was first included in the 1946 statutory revision of damage calculations. However, that rather than limiting the award to “exceptional cases” the 1946 statute provided that “[t]he court may in its discretion award reasonable attorney’s fees to the prevailing party.” I have not researched the legislative history behind this particular

In general, accused infringers who win patent cases have three particular complaints regarding the “exceptional case” limitation: (1) that the court has too narrowly interpreted the statute so that attorney fees are rarely awarded; (2) The second complaint is that fees are more likely to be awarded to a prevailing patentee (typically based upon willful infringement) than to a prevailing defendant despite Supreme Court precedent that suggests “prevailing plaintiffs and prevailing defendants are to be treated alike.” (quoting the Supreme Court copyright case of Fogerty v. Fantasy). (3) Finally, the parties complain that the Federal Circuit is too quick to overturn fee-awards rather than providing substantial deference to the district court judgment. I should point out here that – at this point – these arguments do not have strong empirical support.

Over the years, there has been substantial academic debate on the policy potential of a more rigorous loser-pay rule. The primary idea is that the loser-pays rule reduces speculative litigation and would “limit the tactical leverage gained by a party with a weak case threatening a defendant with costly litigation.” At the same time, the created-risk may also over-deter by also discouraging valid claims. As Jay Kesan explains, in general, the outcome of a balanced fee shifting regime is difficult to predict since parties who believe they have a strong case are more likely to sue (with the belief they will both compensatory recover damages and recoup attorney fees). “If both parties are pessimistic, settlement will likely occur under either system. However, if the plaintiff is optimistic, he is more likely to litigate because he will get a judgment without incurring costs.” Jay P. Kesan, Carrots and Sticks to Create a Better Patent System, 17 Berkeley Tech. L.J. 763 (2002). By making more at-stake in the lawsuit, we also likely shift the rate of appeal upward for cases that do not settle.

= = =

In Octane Fitness, the petition challenges the “rigid and exclusive” test that the Federal Circuit uses to determine whether a case is “exceptional.” A common theme of recent Supreme Court patent cases is a holding that challenged Federal Circuit rule is too rigid and should instead be more flexible. The second theme in recent Supreme Court patent cases is a holding that, when appropriate, patent law should fall in step with all other areas of law. The petition latches onto these theme and essential says “the Federal Circuit has done it again…” The particular question raised by Octane Fitness is as follows:

Whether the Federal Circuit’s promulgation of a rigid and exclusive two-part test for determining whether a case is “exceptional” under 35 U.S.C. § 285 improperly appropriates a district court’s discretionary authority to award attorney fees to prevailing accused infringers in contravention of statutory intent and this Court’s precedent, thereby raising the standard for accused infringers (but not patentees) to recoup fees and encouraging patent plaintiffs to bring spurious patent cases to cause competitive harm or coerce unwarranted settlements from defendants.

Icon rephrased as follows:

Patent infringement claims between industry competitors, ICON Health & Fitness, Inc. and Octane Fitness, LLC, were decided below on summary judgment. Both lower courts held that this case was not an “exceptional” patent case that would warrant the award of attorney fees to the prevailing party. Should this Court reverse the lower courts through judicial expansion of the attorney fee-shifting statute found in 35 U.S.C. § 285?

In the particular case, the district court conducted a Markman hearing and, based upon its claim construction, held that Octane’s products did not infringe Icon’s patent covering its elliptical exercise machine.

For its part, Octane writes that the “most compelling reason[] to grant certiorari …. [is that] the Federal Circuit’s current exceptional case standard is squarely in conflict with this Court’s holding in Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994) … Fogerty mandates that plaintiffs and defendants be treated alike under an analogous fee-shifting provision in the Copyright Act.” Of course, one problem with the even-handed mandate is that plaintiffs and defendants lose cases for different reasons. Within this framework, a party’s status actually does make some difference for fee-shifting. Findings of willful infringement, for instance, favor only patentees, while findings of inequitable conduct during patent prosecution favor only accused infringers. Either party can be awarded attorney’s fees based on the bad faith assertion of objectively baseless claims or other litigation misconduct.

In the background are a variety statutory proposals that would accomplish much of what Octane seeks. However, a Supreme Court decision in the case is likely to arrive before any Congressional action. See Congressing.

In Highmark, former Acting Solicitor General Neal Katyal (now at Hogan Lovells) has asked the Supreme Court to focus on whether the Federal Circuit must give deference to a lower court award of attorney-fees to a prevailing party.

The petition asks:

The Patent Act provides that A case is “exceptional” if it is objectively baseless and brought in bad faith. After living with this case for more than six years, the District Court found that it was objectively baseless and brought in bad faith, and it awarded fees. Over a strong dissent, a Federal Circuit panel reversed, holding that a district court’s objective baselessness determination is reviewed “without deference.” The Federal Circuit denied rehearing en banc by a vote of six to five. One of the two pointed dissents from that denial accurately observed that the decision below “deviates from precedent *** and establishes a review standard for exceptional case findings in patent cases that is squarely at odds with the highly deferential review adopted by every regional circuit and the Supreme Court in other areas of law.”

The question presented is: Whether a district court’s exceptional-case finding under 35 U.S.C. § 285, based on its judgment that a suit is objectively baseless, is entitled to deference.

Undoubtedly, the Supreme Court will reverse in Highmark and the reasons are well understood by the Federal Circuit judges. In all likelihood, a GVR without opinion would provide sufficient instruction to the Federal Circuit in this case. However, I suspect that we will see these two cases argued and decided in parallel with a roughly identical timeline. One important aspect of the Highmark case is the question of whether attorney fees can be awarded as a deterrent against other parties’ bad behavior.

The copyright case is Petrella v. MGM and focuses on the doctrine of laches as it applies to copyright enforcement – with a particular focus on what might be termed “rolling infringement.” The copyright holder in the case is Paula Petrella whose father Peter Petrella wrote two 1970s screenplays (one titled The Raging Bull) and a book about the life of boxer Jake LaMotta. A few years later(1980), Raging Bull became an Oscar winning movie. In 2009, Petrella sued MGM for copyright infringement. Now, both MGM and Petrella claim ownership over the copyrights being asserted and MGM claims that the movie does not infringe the Petrella copyrights. However, the focus of the case at the Supreme Court is whether the doctrine of laches can block a copyright holder from suing for a new act of infringement (such as distributing another copy of the movie).

Petrella presents the question as follows:

The Copyright Act expressly prescribes a three-year statute of limitations for civil copyright claims. 17 U.S.C. § 507(b). The three-year period accrues separately for each act of infringement, even if it is one of a continuing series of acts of infringement.

The federal courts of appeals have divided 3-2-1 over whether the nonstatutory defense of laches can bar a civil copyright suit brought within the express three-year statute of limitations. Three circuits forbid any application of laches or restrict the remedies to which it can apply. Two other circuits strongly disfavor laches and restrict it to exceptional circumstances. The Ninth Circuit not only does not restrict laches or the remedies to which it can apply, but has also adopted a presumption in favor of applying laches to continuing copyright infringements.

The question presented is: Whether the nonstatutory defense of laches is available without restriction to bar all remedies for civil copyright claims filed within the three-year statute of limitations prescribed by Congress, 17 U.S.C. § 507(b).

The case has obvious implications for patent law since patent law doctrine includes a similar non-statutory laches doctrine and six-year statute of limitations. It is possible that the Supreme Court will essentially eliminate the laches doctrine (but leave a claim of equitable estoppel).

It should be an interesting year in patent law.

Federal Circuit: Intentional Abandonment Equals Unintentional Abandonment?

Network Signatures v. State Farm (Fed. Cir. 2013)

Section 282 of the Patent Act lists the defenses to allegations of patent infringement. In recent years, the Federal Circuit has applied that statute somewhat strictly in finding that the section defines the complete list of defenses. In one case, the court held that the patent office's improper revival of an abandoned patent application could not justify fit as defense. See Aristocrat Technologies Australia v. International Game Technologies (IGT) (Fed. Cir. 2008) (erroneous revival not a cognizable defense under §282).

The present case also involves revival of an abandoned application. Trying a different tact, the defendant here (State Farm) argued that the patent is unenforceable because the patentee lied to the PTO regarding the "unintentional" nature of the abandonment. (Generally, abandoned patents and patent applications can only be revived if the abandonment was unintentional). The charge is inequitable conduct.

The patent at issue is owned by the US Government but currently exclusively licensed to the private company – Network Signatures. U.S. Patent No. 5,511,122. The patent issued in April 1996 and the second maintenance fee was due in October 2003. (7 ½ years after issuance). The PTO then gives patentees another six-months grace period to pay the fee. However, the Navy decided not to pay the fee because of there was no known "commercial interest" in the patent at that time. As a result, the patent was deemed abandoned and thus unenforceable in April 1996. Two weeks later, the predecessor of Network Signatures contacted the Navy IP folks to see whether it could license the patent. At that point, the patent suddenly became valuable and the Navy immediately requested that the PTO revive the patent based upon the "unintentional" abandonment of the application. Without requiring the submission of any evidence or explanation, the PTO granted the petition and revived the patent. Since obtaining the license, Network Signatures has filed almost 100 infringement lawsuits against a wide variety defendants. Now, I should mention here that the predecessor to Network Solutions had actually tried to contact the Navy prior to final expiration to express interest in the patent, but was not routed to the IP department until after the patent had been abandoned.


Neither the patent statute nor the regulatory rules "unintentional," but the MPEP indicates that "[a] delay resulting from a deliberately chosen course of action on the part of the applicant is not an 'unintentional' delay within the meaning of [the code]." MPEP 711. Seemingly addressing the particular situation at issue here, the MPEP indicates that "a change in circumstances that occurred subsequent to the abandonment of an application does not render 'unintentional' the delay resulting from a previous deliberate decision to permit an application to be abandoned." Id. On the other hand, a "mistake of fact" appears to be a justified "unintentional" reason.

After reviewing this evidence, the district court sided with the defendant and held (on summary judgment) the patent unenforceable due to inequitable conduct based upon the patentee's statements that the abandonment was unintentional. On appeal, however, the Federal Circuit has reversed – finding that the patentee's action does not constitute "material misrepresentation with intent to deceive."

Mr. Karasek's compliance with the standard PTO procedure for delayed payment, using the PTO form for delayed payment, does not provide clear and convincing evidence of withholding of material information with the intent to deceive the Director. On matters unrelated to the substantive criteria of patentability, but within the authority of the Director, "it is almost surely preferable for a reviewing court not to involve itself in the minutiae of Patent Office proceedings and to second-guess the Patent Office on procedural issues at every turn." Laerdal Med. Corp. v. Ambu, Inc., 877 F. Supp. 255, 259 (D. Md. 1995) (citation and internal quotation marks omitted).

Judge Newman penned the opinion that was joined by Judge Wallach with the result of a reversal. With the complete reversal, it appears that the majority opinion result is a summary judgment of no inequitable conduct.

Writing in Dissent, Judge Clevenger argued that the unintentionality statement made by the patentee was clearly material but that the question of intent should go to trial. For Judge Clevenger, the issue of materiality is clear: "If the PTO had known the true facts, I have no doubt whatsoever that Karasek's revival petition would have been denied." However, from Judge Clevenger's perspective, the issue of intent is still up in the air. In particular, whether the Karasek knew that the circumstances of the revival were, and made a deliberate decision to withhold them.

Responding to Judge Clevenger's position in a footnote, Judge Newman explained that we could not expect further explanation from the attorney regarding the unavaoidability of the abandonment because PTO rules and the revival official form only require a statement that the abandonment was unavoidable. In essence, because the standard practice is to not explain the reasons for abandonment that we should not blame the filer for failing to provide reasons.

CAFC Splits on Reversing Summary Judgment of Inequitable Conduct

This one is interesting, but because it was pending while I was clerking, I don't want to see a lot about it.  Basically, the patentee was faced with deciding whether to pay the 7.5 year maintenance fee, and decided not to because there was no commercial interest in the patent.  Two weeks after the lapse, someone expressed interest in it, and the patentee filed a form that said the lapse was unintentional.  The district court found inequitable conduct on summary judgment; the panel reversed, with Judge Clevenger dissenting.  The case, authored by Judge Newman with Judge Wallach, Network Signatures v. State Farm, is here.

Patent Reform 2013 – A Discussion Draft

by Dennis Crouch

House Judiciary Chairman Bob Goodlatte has released a new version of a "discussion draft" of proposed legislation focusing attention on "abusive" litigation tactics. In a major way, the Bill is focused on making it more difficult for patentees to enforce their patents and is designed to put additional financial risk on patentees who lose in court. Members of both the House and Senate are looking for constituent input on this topic. Senator Leahy is also likely to distribute a draft bill within the next month or so.

[Download Goodlatte – Patent Discussion Draft]

1. Raising Pleading Requirements for Allegations of Patent Infringement

Under current Federal Circuit precedent, a patentee pleading patent infringement can file a bare-bones complaint that basically only indicates the patent at suit and the general activity by the defendant that leads to the infringement accusation. In Iqbal and Twombly, the Supreme Court generally raised the pleading standards and federal courts now require significantly more factual assertions in complaints than they did a few years ago. However, the Federal Circuit found that patent infringement complaints fall within an exception that allows less-informative pleadings so long as they comply with Form 18 of the FRCP. The court has applied the higher Iqbal standards to other pleadings such as defenses and counterclaims raised in an answer and especially focused on allegations of inequitable conduct.

The bare-bones approach of Form 18 leaves tremendous wiggle. And, patentees typically do not identify, for instance, (1) which claims of the patent are being asserted, or (2) what products or services of the defendant are allegedly infringing. The amendment would essentially tell patentees that patent infringement must be pled with particularity. And, at least the patentee must identify those two important elements listed above (if known). In addition, the proposal in its current form asks for a claim chart showing "where each element of each claim . . . is found within the accused instrumentality" and a description, "with detailed specificity, how the terms in each claim … correspond to the functionality of the accused instrumentality." The complaint would also be required to list all other cases where the patent has been asserted and identify whether the patents at issue are subject to any FRAND commitment.

One exemption that appears throughout the proposal is that these changes do not apply when an innovator drug company is suing a would-be generic manufacturer. Rather, throughout the proposal an exception is made for cases where the cause of action arises under 35 U.S.C. § 271(e)(2) (the typical statutory provision invoked in innovator-generic patent litigation).

Federal courts have been using a "notice pleading" system since the 1930's – requiring a "short and plain statement of the claim showing that the pleader is entitled to relief." FRCP 8. It would be interesting to see some pre-1938 complaints and consider whether the apocryphal tale that "fact pleading" was actually much more comprehensive. But the changes appear to move the patent world into the world of fact pleading. The idea behind notice pleading is to provide the accused with sufficient notice of the claim without unduly burdening the plaintiff or creating overly formalistic rules. However, for at least some cases, the current standard does not provide sufficient notice for an accused infringer to actually understand what the patentee is claiming. In addition to providing better notice, the proposed legislation would also significantly raise the burden of filing a patent infringement complaint.

The statute also requires that the Judicial Conference propose rules that would eliminate Form 18 as it stands and create a new form that complies with the new factual pleading described above.

How the courts will likely solve this problem before Congress takes action: The courts recognize that the current pleading standard is too low in patent cases (including a likely majority of Federal Circuit judges). To deal with this the court basically has two options: (1) amend Form 18 through the Judicial Conference procedures; or (2) decide that the court is not bound by Form 18.

2. Award Attorney Fees for Prevailing Parties – And Against All Interested Parties

The new bill creates a presumption in favor of attorney fees being awarded to the prevailing party. Unlike other proposals during the past couple of years, the discussion proposal here is not overtly biased against patent assertion. Rather, the attorney fee statute (§ 285) would require courts to award "reasonable fees and other expenses" to the prevailing party "unless the court finds that the position [of the losing party] was substantially justified or that special circumstances make an award unjust."

Now, in order to ensure that patent holding companies are able to pay as losing party, the provision allows for attorney fee recovery against "interested parties" that have been joined under new provision 299(d). Under 299(d), interested parties include assignees, anyone with a right to sue, anyone with a right to sublicense, and anyone with a direct financial interest in the patents. However, neither ordinary contingency fees attorneys nor equity owners of the patentee qualify for joinder despite their obvious financial interests.

3. Limit Discovery in Patent Cases.

For many reasons, patent lawsuits are hotly litigated and the discovery process is long+expensive. The discussion bill provides for particular limits on discovery prior to claim construction. Under the proposal, a court would be barred from allowing discovery prior to a claim construction decision (except for discovery necessary for claim construction).

In addition, the bill would require the judicial conference to propose a number of limits on discovery that have the potential of significantly changing the process of patent some litigation.

4. Additional Initial Disclosures for Public Release

Under current law, information on each patent lawsuit is sent to the USPTO and placed on public record there. The proposed legislation would extend that program by requiring the patentee in an infringement lawsuit to disclose (1) any assignees of the patent; (2) any entities with the right to enforce or sublicense the patent; (3) any entity with a financial interest in either the patent or the plaintiff; (4) the ultimate parent entity of any of the entities named.

In addition, the law would mandate updates of assignee information for all patents within 90-days of any change of assignee.

5. Exception for Customer Lawsuits that Allows for Stay of those Actions

Sometimes alleged infringement is simply based on the defendant's use of an infringing product. The proposed legislation would require a court to stay actions against such customers pending resolution of the case against the manufacturer. However, the grant of stay requires that the customer agrees that the court decisions in the manufacturer suit will become res judicata have preclusive affect against the customer.

6. Foreign Bankruptcy Effect on US Patent License

Business bankruptcy and reorganization is sometimes mind-bending. Bankruptcy trustees are generally authorized to choose whether to reject or enforce (assume) any of the contracts that were binding on the debtor at the time of bankruptcy filing. However, the Bankruptcy code significantly reduces that power when the contract involves the a license of the debtor's intellectual property rights. 35 U.S.C. §365(n). One issue that has arisen lately is the impact of foreign bankruptcy on the debtor's US intellectual property rights holdings. The proposed bill protect the creditor-licensees in those cases so that an IP owner's foreign bankruptcy cannot be used to unilaterally cancel one of its licensee's US IP rights. To be clear, 365(n) applies to US IP rights, but not Trademark rights or state-law rights other than trade secret rights.

AIA Changeover: Claiming Subject Matter Not Found in the Provisional Application

By Dennis Crouch

New patent applications are now being examined under the first-to-file rules codified in the America Invents Act of 2011. In my patent class, I talk about these as effectively rules of evidence that indicate what does and does-not count as evidence against patentability. Any change in the rule of law always has changeover difficulties where policymakers must figure out where to draw the line between the old and new rules. For the AIA, new patent applications filed on or after March 16, 2013 are examined under the new rules so long as the new application contains (or ever contained) at least one claim whose effective filing date is on or after March 16, 2013.

Under the new rules, the USPTO also requires that patent applicants help the PTO understand whether a new application should be examined under the AIA. In particular, the applicant must tell the PTO whenever it is pursuing a patent application that claims priority to a pre-AIA filing but that includes (or once included) at least one claim that had a post-AIA priority date. In the cut-out above, this statement is shown as a check-box as part of the application data sheet form.

The Risk: Over the next year, this issue will arise in thousands of cases – typically those will involve a pre-AIA provisional application followed by a post-AIA non-provisional application with some amount of new matter added in the claims. Under the rules, if any of the claims in that non-provisional lacked sufficient support in the provisional then the entire application is to be analyzed under the first-to-file regime of the AIA. Of course, the difficulty is that in US law the dividing line between supported and unsupported subject matter is not crisp and the determination is now being placed on patent applicants to make that determination at the risk of an inequitable conduct finding down-the-line.

Overturning the PTOs Approach?: It is possible that the USPTO’s interpretation of the new law is incorrect. The PTO rules require a patent-by-patent analysis of the effective filing date. Under the USPTO’s approach either a patent is an AIA patent or it is not. However, another reading of the AIA suggests that the proper approach is to go claim-by-claim rather than patent-by-patent. In particular, revised Section 102 focuses on the “effective filing date of the claimed invention” not the effective filing date of the patent application as a whole. 35 U.S.C. 102(a). In addition, the definitions Section 100(i) also focuses on individual claims – indicating that the effective filing date of a “claimed invention” is “(B) the filing date of the earliest application for which the patent or application is entitled, as to such invention, to a right of priority [or benefit].” It seems to me that the statutory guidance of Sections 102 and 100(i) collectively instruct us to consider the effective date of a claimed invention rather than for a patent application as a whole, and when thinking about prior provisional/parent/grandparent applications, the focus should be on whether those prior applications disclose the claimed invention in question.

But the PTO’s Approach is Probably Correct: Now, the PTO’s rule makes sense under the AIA, Section 3(n) that provides that the first-to-invent rules apply to

any application for patent, and to any patent issuing thereon, that contains or contained at any time— (A) a claim to a claimed invention that has an effective filing date as defined in [35 U.S.C. §] 100(i) … that is on or after the effective date described in this paragraph; or (B) a specific reference under [35 U.S.C. §§] 120, 121, or 365(c) … to any patent or application that contains or contained at any time such a claim.

The result here is really that whether-or-not a claim is adjudicated under the first-to-file regime is determined on a patent-by-patent basis but the priority date (i.e., effective filing date) associated with any particular claim may be prior to March 16, 2013, even when the patent is being adjudicated under first-to-file.