Tag Archives: IPR

Scan-to-Email Patent Finally Done; Claim Scope Broadened by Narrow Provisional Application

February 13, 2017PatentAffirmed Without Opinion, AIA Trials, anticipation, Claim Construction, IPR, obviousnessDennis Crouch

MPHJ Tech v. Ricoh (Fed. Cir. 2017)[16-1243-opinion-2-9-2017-11]

MPHJ’s patent enforcement campaign helped revive calls for further reform of the patent litigation system. The patentee apparently mailed out thousands of demand letters to both small and large businesses who it suspected of infringing its scan-to-email patents. The primary patent at issue is U.S. Patent No. 8,488,173.

Ricoh, Xerox, and Lexmark successfully petitioned for inter partes review (IPR), and the PTAB concluded that the challenged claims (1–8) are invalid as both anticipated and obvious.[1] On appeal, the Federal Circuit has affirmed.

Claim 1 is a fairly long sentence – 410 words, but basically requires a scanner with the ability to both store a local file and also email a file that can be operated with a “go button” followed by “seamless” transmission. The patent itself is based upon a complex family of 15+ prior US filings, most of which have been abandoned, with the earliest priority filing of October 1996.

Although more than 20 years ago, there was prior art even back then. However, the identified prior art process was apparently not entirely “seamless” in operation. On appeal, the patentee asked for a narrowing construction of the claim scope to require “a one-step operation without human intervention.” Unfortunately for MPHJ, the claims are not so clear.

Relying upon the Provisional to Interpret the Claims: Attempting to narrow the claim scope, MPHJ pointed to one of the referenced provisional applications that disclosed a “one step” process requiring the user to simply push “a single button” On appeal, the Federal Circuit agreed that the provisional is relevant, but not how MPHJ hoped. Rather, the court found that the fact MPHJ omitted those limiting statements when it drafted the non-provisional serves as a suggestion that the claims were not intended to be limited either.

We agree that a provisional application can contribute to understanding the claims.[2] . . . In this case, it is the deletion from the ’798 Provisional application that contributes understanding of the intended scope of the final application. . . . We conclude that a person of skill in this field would deem the removal of these limiting clauses to be significant. The [challenged] Patent in its final form contains no statement or suggestion of an intent to limit the claims to the deleted one-step operation. Neither the specification nor the claims state that this limited scope is the only intended scope. Instead, the ’173 Patent describes the single step operation as “optional.” . . . A person skilled in this field would reasonably conclude that the inventor intended that single-step operation would be optional, not obligatory.

MPHJ’s efforts really should be written up as a case-study. Unfortunate for patentees that this is the case members of the public will continue to hear about for years to come.

For patent prosecutors. Here we have another example of how a low-quality provisional filing failed the patentee. Now, you have to recognize that changes you make when filing the non-provisional will be used against you in the claim construction process. While there may be ways to use this strategically, I expect that more patentees will be trapped than benefited.

= = = = =

[1] Ricoh Ams. Corp. v. MPHJ Tech. Invs., No. IPR2014-00538, 2015 WL 4911675, (P.T.A.B. Aug. 12, 2015).

[2] See Trs. of Columbia Univ. in New York v. Symantec Corp., 811 F.3d 1359, 1365 (Fed. Cir. 2016) (looking to the provisional application for guidance as to claim construction); Vederi, LLC v. Google, Inc., 744 F.3d 1376, 1383 (Fed. Cir. 2014) (same).

Supreme Court Update: Are Secondary Indicia of Invention Relevant to Eligibility?

February 8, 2017PatentAbstract Idea, Affirmed Without Opinion, AIA Trials, anticipation, Claim Construction, Damages, IPR, Licenses, obviousness, Personal Jurisdiction, PGR, reasonable expectation of success, Subject Matter Eligibility, Supreme Court, Trade Secrets, USPTO Director, VenueDennis Crouch

by Dennis Crouch

The Supreme Court is on recess until Feb 17.

I don’t know if my end-of-April prediction will hold true, but I do expect Neil Gorsuch to become a Justice on the United States Supreme Court. As a 10th Circuit Judge, Gorsuch never decided a patent case, but does have a handful of interesting IP cases.

There are a few petitions filed that we have not discussed here:

In its newest petition, DataTreasury takes 101 for a new spin by taking the 101/103 analysis to its next logical level. If we are going to include a 103 analysis as part of the eligibility doctrine then lets go whole hog. Thus, DataTreasury asks: whether a court must consider secondary indicia of invention as evidence in its eligibility analysis? In the case, the Federal Circuit had affirmed the PTAB judgment without opinion under R.36. A second eligibility petition is found in TDE Petroleum Data Solutions, Inc. v. AKM Enterprise, Inc., dba Moblize, Inc. TDE asks the court to “please reconcile Diehr and Alice.” (I’m not literally quoting here). The patent at issue (No. 6,892,812) claims a four-step process of “determining the state of a well operation.” (a) store several potential “states”; (b) receive well operation data from a plurality of systems; (c) determine that the data is valid by comparing it to a threshold limit; and (d) set the state based upon the valid data.

In Wi-LAN v. Apple, the patentee revives both Cuozzo and Markman claim construction arguments – this time focusing on “whether claim terms used to define the metes and bounds of an invention are generally given their “plain and ordinary meaning,” or are redefined (limited) to match the scope of the exemplary embodiments provided in the specification.”

duPont v. Macdermid asks whether summary judgment of obviousness is proper because of the factual disputes at issue. Similarly, in Enplas v. Seoul Semiconductor, the petitioner argues that a finding of anticipation by the PTAB must be supported by findings each and every element of the subject patent claim is disclosed in the prior art. In Enplas, the Federal Circuit affirmed the PTAB on a R.36 Judgment Without Appeal — it difficult for the petitioner to point to the particular deficiencies.

=== THE LIST===

1. 2016-2016 Decisions:

Design Patent Damages: Samsung Electronics Co. v. Apple Inc., No 15-777 (Total profits may be based upon either the entire product sold to consumers or a component); GVR order in parallel case Systems, Inc. v. Nordock, Inc., No. 15-978. These cases are now back before the Federal Circuit for the job of explaining when a component

2. Petitions Granted:

Argued – Awaiting Decision: SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC, No. 15-927 (laches in patent cases)
Argued – Awaiting Decision: Life Technologies Corporation, et al. v. Promega Corporation, No. 14-1538 (infringement under 35 U.S.C. § 271(f)(1) for supplying single component)
Briefing: Impression Products, Inc. v. Lexmark International, Inc., No. 15-1189 (unreasonable restraints on downstream uses) Oral arguments set for March 21, 2017.
Briefing: Sandoz Inc. v. Amgen Inc., et al., No. 15-1039 (Does the notice requirement of the BPCIA create an effective six-month exclusivity post-FDA approval?)
Briefing: TC Heartland LLC v. Kraft Food Brands Group LLC, No 16-341 (Does the general and broad definition of “residence” found in 28 U.S.C. 1391(c) apply to the patent venue statute 1400(b)) Oral arguments set for March 27, 2017

3. Petitions with Invited Views of SG (CVSG):

4. Petitions for Writ of Certiorari Pending:

Claim Construction: Wi-LAN USA, Inc., et al. v. Apple Inc., No. 16-913 (“plain and ordinary meaning”)
Is it a Patent Case?: Boston Scientific Corporation, et al. v. Mirowski Family Ventures, LLC, No. 16-470 (how closely must a state court “hew” federal court patent law precedents?) (Appeal from MD State Court)
Anticipation/Obviousness: Google Inc., et al. v. Arendi S A.R.L., et al., No. 16-626 (can “common sense” invalidate a patent claim that includes novel elements?) (Supreme Court has requested a brief in response)
Anticipation/Obviousness: Enplas Corporation v. Seoul Semiconductor Co., Ltd., et al., No. 16-867 (“Whether a finding of anticipation under 35 U.S.C. § 102 must be supported by findings that each and every element of the subject patent claim is disclosed in the prior art?”)
Anticipation/Obviousness: E.I. du Pont de Nemours and Company v. MacDermid Printing Solutions, L.L.C., No. 16-905 (summary judgment of obviousness proper)
Jury Trial: Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, et al., No. 16-712 (“Whether inter partes review … violates the Constitution by extinguishing private property rights through a non-Article III forum without a jury.”) [oilstatespetition]
Jury Trial: Nanovapor Fuels Group, Inc., et al. v. Vapor Point, LLC, et al., No. 16-892 (Can a party forfeit a properly demanded trial by jury without an explicit, clear, and unequivocal waiver?)
Is it a Patent Case?: Big Baboon, Inc. v. Michelle K. Lee, No. 16-496 (Appeal of APA seeking overturning of evidentiary admission findings during reexamination – heard by Federal Circuit or Regional Circuit?)
Laches: Medinol Ltd. v. Cordis Corporation, et al., No. 15-998 (follow-on to SCA); Endotach LLC v. Cook Medical LLC, No. 16-127 (SCA Redux); Romag Fasteners, Inc. v. Fossil, Inc., et al, No. 16-202 (SCA Redux plus TM issue)
Eligibility: TDE Petroleum Data Solutions, Inc. v. AKM Enterprise, Inc., dba Moblize, Inc., No. 16-890 (Please reconcile Diehr and Alice)
Eligibility: DataTreasury Corporation v. Fidelity National Information Services, Inc., No. 16-883 (secondary indicia as part of eligibility analysis).
Eligibility: IPLearn-Focus, LLC v. Microsoft Corp., No. 16-859 (evidence necessary for finding an abstract idea)

5. Petitions for Writ of Certiorari Denied or Dismissed:

(more…)

Guest Post: Administrative Law Matters Even More following Cuozzo Speed Technologies v. Lee

February 6, 2017PatentAIA Trials, Claim Construction, Enablement, IPR, PGR, Trade Secrets, USPTO DirectorDennis Crouch

By David Boundy

David Boundy of Cambridge Technology Law LLC, a patent law firm in Cambridge, Massachusetts, practices at the intersection of patent and administrative law, and consults with other firms on PTAB trials and appeals. In 2007–09, David led the teams that successfully urged the Office of Management and Budget to quash the USPTO’s continuations, claims, information disclosure statements, and appeal regulations under the Paperwork Reduction Act.

This paper is a short version of an article in the current issue of ABA Landslide, vol. 9, no. 3, electronic edition. It’s a follow up to my earlier paper on the Cuozzo case, which ran in Patently-O in February 2015.

Cuozzo Speed Technologies v. Lee[1] illustrates an important lesson for the patent bar: federal courts are far more familiar with administrative law than with patent law. Almost every federal court hears several times as many administrative law cases as patent cases. Even the Federal Circuit sees at least as many administrative law issues (involving various federal employees and contracts) as patent law issues. We patent lawyers need better administrative law issue spotting skills, and when a case presents them, we must argue on administrative law grounds with administrative law expertise. Basic principles of good advocacy urge us to argue our cases on the courts’ choice of turf.

Cuozzo is a prime illustration. In Cuozzo, the Supreme Court narrowly decided that the PTO’s decision to institute an inter partes review (IPR) against Cuozzo’s patent was unreviewable. Notably, the Court’s reasoning clarifies that many decisions to institute are judicially reviewable, so long as the issues are cloaked in administrative law terms rather than patent law terms. Cuozzo’s loss stems from Cuozzo’s briefing that failed to mention a dead-on administrative law statute, and that was all but silent on the Supreme Court’s administrative law precedent. Cuozzo creates many future opportunities for informed administrative law advocacy.

The AIA, Its Preclusion Statutes, and Cuozzo’s Path to the Supreme Court

The 2011 America Invents Act (AIA) created new patent reviews within the United States Patent and Trademark Office (USPTO): inter partes review (IPR), post-grant review (PGR), and covered business method review (CBM). Congress included preclusion statutes that limit judicial review of USPTO decisions to institute such reviews.

The preclusion statutes for IPR and PGR decisions to institute, 35 U.S.C. § 314(d) and § 324(e) respectively, are essentially similar: “The determination by the Director whether to institute [a review] under this section shall be final and nonappealable.” Compared to other preclusion statutes (discussed in the full Landslide paper), this is decidedly on the weak end of the spectrum of preclusion statutes.

In February 2015, the Federal Circuit gave its first deep consideration to these statutes in In re Cuozzo Speed Technologies LLC.[2] The IPR petition against Cuozzo’s patent had applied reference A to claim 10, and references A, B, and C to claim 17 (which depended from claim 10). However, the Patent Trial and Appeal Board (PTAB) instituted on references A, B, and C against claim 10. The PTAB cited no statute or regulation, only its own naked claim of “discretion” to mix and match among the grounds in the petition.

The IPR ended in cancellation of claim 10, on references A, B, and C.

Cuozzo appealed the final decision to the Federal Circuit, and challenged the decision to institute. The Federal Circuit held that § 314(d) precluded all review of all issues embedded in a decision to institute: “On its face, the provision is not directed to precluding review only before a final decision. It is written to exclude all review of the decision whether to institute review.”[3]

In June 2016, the Supreme Court issued its further decision. Where all decisions leave open issues, Cuozzo introduces several internal contradictions. Let’s look at the background administrative law case law, and how Cuozzo fits—or misfits.

APA § 706: Government-Wide Grounds of Judicial Review

The Administrative Procedure Act (APA), in 5 U.S.C. § 706(2), confines judicial review of agency action to a specific list of errors—a court may set aside agency actions that are:

(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law; …
(C) in excess of statutory jurisdiction, authority, or limitations, or short of statutory right;
(D) without observance of procedure required by law; …

Section 706(2) is famously deferential to agencies, but it doesn’t insulate agencies totally. Courts set aside agency decisions that fail standards of “reasoned decisionmaking” by failing to explain an important point, giving an irrelevant explanation, omitting consideration of important factors or basing a decision on impermissible factors, deciding without evidence, deciding on legal error, acting beyond jurisdictional authority, and the like.

APA § 704: Preliminary Decisions Are Reviewable with Final Agency Action

Procedural lapses usually find review under 5 U.S.C. § 704: “A preliminary, procedural, or intermediate agency action or ruling not directly reviewable is subject to review on the review of the final agency action.” Thus, if an agency’s final decision is infected by error earlier in the process, the final decision can be attacked on the basis of that underlying error.

Supreme Court’s Presumption of Judicial Review

Since the days of Chief Justice John Marshall, the Supreme Court has relied on a strong presumption that judicial review is available for executive branch action.[4] Agency decisions are presumed to be reviewable, and preclusion statutes are construed narrowly. Even within the scope of preclusion, an agency decision that reflects “brazen disregard” of procedure, or “abuse,” or that has sufficiently grave consequences, often can be reviewed. Likewise, the Court has always held agencies to scrupulous observance of their own procedures. The presumption of review has always been extraordinarily high for procedure, and the “holes” in preclusion statutes for procedure and “abuse” have always been quite large. Cuozzo is an extraordinary outlier. Among the principles established in Supreme Court precedent:

Courts accept judicial review of underlying issues in agency decisions, even if the final decisions are unreviewable, especially where procedural fairness is at stake.[5]
Preclusion statutes are read narrowly—they preclude only what they say they preclude, and no more. Even where a statute precludes review of an end result decision, underlying issues are not precluded unless the preclusion statute speaks expressly to those underlying issues. “[R]eview is available to determine whether there has been a substantial departure from important procedural rights, a misconstruction of the governing legislation, or some like error going to the heart of the administrative determination.”[6]
Courts read statutes closely to split issues finely, and will review issues (especially underlying issues) that differ by a hair’s breadth from precluded issues. When a statute precludes benefit amounts for individual claimants, “challenges to the validity of the Secretary’s instructions and regulations[] are cognizable in courts of law.”[7]
When an agency statute, regulation, or guidance promises the public that an agency or agency employee “must” or “will,” the agency must follow those procedures “scrupulously.” Review of agency decisions under § 706(2)(D), “without observance of procedure required by law,” is “strict” and “without deference.”[8]

Review under § 704/§ 706 is a persistent substrate. To preclude review, especially of underlying issues, Congress must speak expressly.

Cuozzo’s Brief, the Majority Opinion, and the End Result: Cuozzo’s Specific Institution Is Nonreviewable

The Cuozzo majority opinion follows the basic contour of 50 years of precedent: preclusion statutes are to be read narrowly. However, on the facts, Cuozzo lost—the Court characterized Cuozzo’s complaint to be a “mine-run claim,” “an ordinary dispute about the application of certain relevant patent statutes,” and “little more than a challenge to the Patent Office’s conclusion, under § 314(a), that the ‘information presented in the petition’ warranted review.”[9] That is, the Supreme Court understood the case to be a good faith difference of opinion in application of validly promulgated law, not a case of an agency tribunal exercising naked “discretion” against a party, making up new rules on the fly with no grounding in any text, and asserting those new rules in a context with no opportunity for rejoinder. Because the Court was not informed of the procedural basis for the case, the Cuozzo opinion stands in striking contrast with the Court’s precedent that requires agencies’ “scrupulous” observance of procedure, and strict “no deference” judicial review for procedural issues.

The Supreme Court majority opinion embeds a number of internal contradictions that leave a great deal of unclear ground. The majority’s holding, if applied to the facts—at least the procedural facts as we patent lawyers understand them—leads to the opposite result.

Most of these contradictions in the majority opinion, and perhaps the final result itself, are invited error. Cuozzo’s brief treats the case as a patent law case, arguing page after page of Title 35 U.S.C. and Federal Circuit patent law cases.[10] Cuozzo’s opening brief cites Supreme Court “preclusion of review” cases only as a cursory afterthought—a single string cite, with no discussion of analogies to precedential cases. The brief compounds the error by citing a 1946 case that had been overruled by the Supreme Court in 2013. The table of authorities in Cuozzo’s opening brief has only a single cite to Title 5 U.S.C., and only one more in the reply brief.

But reviewability is an administrative law issue, and that’s where the Court decided it.

Even though Cuozzo’s briefs are all but irrelevant to the administrative law bases on which the Court decided the case, the reasoning comes so close to going Cuozzo’s way. Cuozzo demonstrates the importance of identifying the turf where a court is likely to decide an issue, and arguing it there. And that may well be administrative law, rather than patent law.

Cuozzo’s “Long Paragraph”

The heart of the majority opinion is a long paragraph toward the end of section II, beginning “Nonetheless.” The majority explains that most issues arising under patent law are precluded, but that issues arising under other bodies of law are not. Review remains available for constitutional questions, and most importantly, for issues slotted into one of the pigeonholes of APA § 706. The latter half of the “long paragraph” reads as follows:

[W]e do not categorically preclude review of a final decision where a petition fails to give “sufficient notice” such that there is a due process problem with the entire proceeding, nor does our interpretation enable the agency to act outside its statutory limits by, for example, canceling a patent claim for “indefiniteness under § 112” in inter partes review. Such “shenanigans” may be properly reviewable in the context of § 319 and under the Administrative Procedure Act, which enables reviewing courts to “set aside agency action” that is “contrary to constitutional right,” “in excess of statutory jurisdiction,” or “arbitrary [and] capricious.”[11]

The latter half of the long paragraph, especially the last sentence, opens a wide barn door. The Cuozzo majority’s long paragraph indicates that the full reach of § 706 applies to underlying issues in decisions to institute. Cuozzo tells us that issues that are losers when presented in patent law vocabulary become winners when wrapped in administrative law vocabulary.

Cuozzo Could Have Argued an Administrative Law Jurisdictional Issue

Cuozzo’s brief doesn’t squarely present the issue of the PTAB’s transgression of its own jurisdictional boundaries. Section 312(a) reads, “A petition . . . may be considered only if . . . the petition identifies, in writing and with particularity, each claim challenged, the grounds on which the challenge to each claim is based . . . .” Section 314(a) reads, “The Director may not authorize [institution of an IPR] unless the Director determines that the information presented in the petition . . . shows that there is a reasonable likelihood that the petitioner would prevail . . . .” These are plainly jurisdictional statutes, confining jurisdiction to the grounds in the petition. The APA, in § 706(2)(C), provides that a court shall set aside agency action “in excess of statutory jurisdiction.” Yet, Cuozzo’s brief argues only breaches of the AIA, not the administrative law jurisdictional issues that—the majority tells us—would be reviewable under administrative law principles.

The Supreme Court has been quite strict in enforcing agencies’ jurisdictional boundaries, no matter (in the Cuozzo majority’s words) how compelling “one important congressional objective” might be.[12]

Cuozzo’s brief fleetingly nibbles at the edges of the issue, and even cites one of the important cases in this line (for a different proposition), but never squarely frames the challenge as “in excess of [the agency’s] jurisdiction”—neither brief mentions § 706 at all. And thus Cuozzo lost the issue.

The latter half of Cuozzo’s “long paragraph” places jurisdictional issues within the scope of judicial review, so long as they are framed in an § 706(2)(C) administrative law context, not a patent law context. Subject matter jurisdiction is central to a court’s duty to prevent agencies from “act[ing] outside . . . statutory limits,” or in the language of § 706, “in excess of statutory jurisdiction.”

Had the issue been presented squarely as a challenge to PTAB action beyond its jurisdiction, with the patent law issues argued as underlying support for APA § 706(2)(C) “in excess of jurisdiction” grounds, Cuozzo likely would have obtained a favorable result, and the Court majority would not have been left grasping at inconsistent straws to reach its decision.

Several more omissions from Cuozzo’s brief, and internal contradictions in the majority opinion, are discussed in the full Landslide paper. The full paper shows that Cuozzo lost a very winnable case because the opening brief argued patent law principles to the near exclusion of administrative law principles. The patent bar is left with a resultant set of internal contradictions in the Cuozzo decison, with all the problems and opportunities they create. And the Federal Circuit is left with a difficult task of reconciling Cuozzo’s reasoning against its end result.

Conclusion

The full paper gives a number of other examples of questions that come out differently depending on whether they’re argued as patent law issues or administrative law issues. There are many differences between the powers of an Article III court and of an agency tribunal, differences between appellate review of an Article III court vs. judicial review of an agency, differences in the arguments that an appellant and appellee can raise, and differences in limits on raising new issues on appeal. Unfortunately, Cuozzo’s brief did not exploit those differences or cite the applicable administrative law.

The key take-away is that almost every PTAB proceeding and appeal presents a “target rich environment” of administrative law issues. Teams that include administrative law expertise will successfully exploit many opportunities that are invisible to teams without that expertise.

Because of internal tensions in the Cuozzo decision, many issues remain to be decided by the Federal Circuit, and will be decided differently depending on how well parties match their argument turf to courts’ choice of decision turf.

Endnotes

[1]. Cuozzo Speed Techs. v. Lee (Cuozzo III), 136 S. Ct. 2131 (2016).

[2]. In re Cuozzo Speed Techs. LLC (Cuozzo I), 778 F.3d 1271 (Fed. Cir. 2015), reissued without change to the reviewability discussion, Cuozzo II, 793 F.3d 1268 (Fed. Cir. 2015).

[3]. Cuozzo I, 778 F.3d at 1276.

[4]. 5 U.S.C. § 702 (“A person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action within the meaning of a relevant statute, is entitled to judicial review thereof.”); Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402 (1971).

[5]. Service v. Dulles, 354 U.S. 363 (1957); Vitarelli v. Seaton, 359 U.S. 535 (1959).

[6]. Lindahl v. Office of Personnel Management,470 U.S. 768, 791 (1985) (internal quotation marks omitted).

[7]. Bowen v. Michigan Academy of Family Physicians, 476 U.S. 667, 680 (1986).

[8]. Reuters Ltd. v. FCC, 781 F.2d 946, 950–51 (D.C. Cir. 1986); see also Berkovitz v. United States, 486 U.S. 531, 544 (1988) (“The agency has no discretion to deviate from [its procedural regulations].”).

[9]. Cuozzo III, 136 S. Ct. 2131, 2136, 2139, 2142 (2016).

[10]. See Brief for the Petitioner, Cuozzo III (No. 15-446), 2016 WL 737452 at xiv, 52-53, 54 (Feb. 22, 20142016); Reply Brief for the Petitioner at iii, Cuozzo III, 2016 WL 1554733 (Apr. 15, 2016).

[11]. Cuozzo III at 2141–42 (majority opinion).

[12]. FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 125 (2000)

Sovereign Immunity Excuses University of Florida from IPR Challenge

February 1, 2017PatentAIA Trials, IPR, LicensesDennis Crouch

by Dennis Crouch

As public universities continue to obtain more patents, issues of sovereign immunity continue to arise. In a recent decision, the Patent Trial and Appeal Board (PTAB) dismissed a trio of inter partes review proceedings against the University of Florida based upon its claim of sovereign immunity.[1]

The 11^th Amendment to the US Constitution limited the “Judicial power of the United States” so that it does not “extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.”[2] Although the text of the amendment appear to include several important limitations that might exclude an administrative action (“judicial power; “suit in law or equity”), the Supreme Court has broadly interpreted the statute precluding many adjudicative administrative proceedings. For anyone who is not an American lawyer, you may need to pause here to recognize that each of the 50 American states are treated as sovereign governments and, although the Federal Government sets the “supreme law of the land,” its powers are limited by the U.S. constitution and federalist structure.

The Supreme Court has interpreted this amendment to encompass a broad principle of sovereign immunity, whereby the Eleventh Amendment limits not only the judicial authority of the federal courts to subject a state to an unconsented suit, but also precludes certain adjudicative administrative proceedings, depending on the nature of those proceedings, from adjudicating complaints filed by a private party. Following Supreme Court precedent from other areas of law, the Federal Circuit held in Vas-Cath[3] that Missouri’s sovereign immunity allowed it to avoid an interference proceeding.

The petitioner Covidien argued that the PTAB should think of the IPR as an in rem action directed at the patent rather than at the patent owner. However, the PTAB rejected that argument – finding that the procedural elements of inter partes reviews and estoppel provisions make it look much like contested litigation – the very thing protected by the 11^th Amendment.

The Panel:

On the whole, considering the nature of inter partes review and civil litigation, we conclude that the considerable resemblance between the two is sufficient to implicate the immunity afforded to the States by the Eleventh Amendment. Although there are distinctions, such as in the scope of discovery, we observe that there is no requirement that the two types of proceedings be identical for sovereign immunity to apply to an administrative proceeding. Further, we note that there are several similarities between civil litigation and inter partes review that are not unlike those compared in Vas-Cath for interferences.

[sovereign-immunity-dismissals]

Outcome here – Dismissed before Institution based on Sovereign Immunity of the patentee. Moving forward it will be interesting to see whether the Federal Circuit is willing to hear an appeal or instead apply the standard law that institution decisions are not subject to appeal.

The dispute between the parties extends back to a license agreement between UFL and Medtronic/Covidien of the patent at issue. UFL exerted its right to audit the books, but was refused by Medtronic. UFL then sued in state court on the contract. Medtronic counterclaimed for DJ of invalidity/noninfringement and removed the case to federal court on the patent claims and on diversity grounds. The district court however remanded back to state court on sovereign immunity grounds. That remand is now on appeal at the Federal Circuit, although the court has just issued a show-cause – asking whether the case should be transferred to the 11^th Circuit. Under the AIA-revised statute, cases go to the Federal Circuit if either the civil action “arises under” US patent law or a “compulsory counterclaim” arises under patent law. Here, it is clear that the counterclaim is a patent claim, but the big question is whether it is “compulsory” – normally defined as one that “arises out of the transaction or occurrence that is the subject matter of the opposing party’s claim.”[4]

Of interest though, in the order to show cause, the court suggests that it might keep the case in the “interest of justice” rather than transfer it. [5][federalcircuitjurisdictionorder]

= = = =

[1] See Covidien LP v. University of Florida Research Foundation Inc., Case Nos. IPR 2016-01274; -01275, and -01276 (PTAB January 25, 2017).

[2] U.S. CONST. amend. XI.

[3] Vas-Cath, Inc. v. Curators of Univ. of Missouri, 473 F.3d 1376 (Fed. Cir. 2007).

[4] Fed. R. Civ. P. 13(a)(1)(A).

[5] 28 U.S.C. § 1631.

Guest Post: Challenging PTO Institution Policies (If Not Institution Decisions)

January 29, 2017PatentAIA Trials, Federal Circuit En Banc, IPR, PGR, USPTO DirectorDennis Crouch

The following is a guest post by Oliver Richards (Fish & Richardson). Mr. Richards is a NYU Law alum and a former clerk for Judge Dyk on the Federal Circuit.

After several rounds at the Federal Circuit and a trip to the Supreme Court, the law surrounding what aspects of the PTAB’s decision to institute on a petition for inter partes review are reviewable remains unclear. In light of the Federal Circuit’s decision to again revisit this issue in the grant of a petition for rehearing en banc in Wi-Fi One, LLC v. Broadcom Corporation (No. 2015-1944, -1945, -1946), I wanted to share a few thoughts on what, exactly, should be reviewable under 35 USC 314(d). I believe that the yes/no decision of the PTAB as applied to any particular petition should be unreviewable. However, in my view, review of PTAB regulations should be available either through appeal from the PTAB, or (preferably) through an APA challenge in district court. [1] The distinction between review of specific PTAB institution decisions and general review of PTAB regulations and policies, I believe, makes sense for at least three reasons:

First, this distinction comports with the language of the statute. 314(d) prohibits judicial review of “[t]he determination . . . whether to institute an inter partes review.” The statute should be read to mean what it says. A review of “the” decision to institute in any case is not allowed. General review of any agency regulation is not review of “the determination . . . whether to institute” even if the result of that review overturns the decision in any particular case.

In McNary v. Hatian Refugee Ctr. Inc., 498 US 479 (1991) the Supreme Court drew a similar distinction relating to reviewability of “special agricultural worker” (“SAW”) eligibility decisions of immigration officials under the provisions of the Immigration Reform and Control Act of 1986. In McNary, the Supreme Court was asked whether 8 U.S.C. § 1160(e)—which prohibits “administrative or judicial review of a determination respecting an application for adjustment of status”—deprived a district court of jurisdiction over a suit challenging agency policies and procedures.

The Supreme Court allowed the challenge. According to the Court, “[t]he critical words in § 210(e)(1) … describe the provision as referring only to review ‘of a determination respecting an application’ for SAW status. Significantly, the statutory reference to “a determination” describes a single act rather than a group of decisions or a practice or procedure employed in making decisions.” McNary, 498 U.S. at 491–92. Thus the language prohibiting review indeed prohibited “direct review of individual” determinations but did not prohibit “general collateral challenges to unconstitutional practices and policies used by the agency in processing applications.” “[H]ad Congress intended the limited review provisions of § 210(e) of the INA to encompass challenges to INS procedures and practices, it could easily have used broader statutory language” such as by prohibiting “all causes arising under any of the provisions” of the immigration program as it had done in other places. Id. at 494. [2]

In my view, the patent law’s statutory language – “The determination . . . whether to institute” similarly indicates that § 314(d) was intended to apply to only individual determinations, not to prohibit any and all review of PTO procedures and policies relating to institution.

Second, the distinction strikes a fair balance between making sure the PTAB is complying with its statutory mandate and maintaining the efficiency of the IPR system. Perhaps wary of a flood of appeals clogging the courts and the corresponding slow down in IPR determinations, Congress choose efficiency in section 314(d) by prohibiting an appeal relating to every single IPR institution decision. On the other hand, allowing parties to turn to courts to check potentially problematic regulations or practices by the PTAB is an important check on that body’s power. See, e.g., Unwired Planet, LLC v. Google Inc., 841 F.3d 1376, 1382 (Fed. Cir. 2016) (concluding that the PTAB’s definition of a “covered business method patent” exceeded the statute.”)[3] Prohibiting challenges to each and every institution decision but allowing general challenges provides for efficient review of PTAB regulations, policies, and procedures without slowing down the whole IPR system.

Third, the distinction is consistent with most Federal Circuit decisions on the topic. Although the distinction I suggest was not provided as the reasoning, the CAFC has notably found many PTAB regulations/policies relating to institution reviewable. See, e.g., Ethicon Endo-Surgery, Inc. v. Covidien LP, 812 F.3d 1023 (Fed. Cir. 2016) (hearing a challenge to 37 C.F.R. § 42.4 – “Institution of trial. The Board institutes the trial on behalf of the Director”); Synopsys, Inc. v. Mentor Graphics Corp., 814 F.3d 1309 (Fed. Cir. 2016) (hearing a challenge to 37 C.F.R. § 42.108, titled “Institution of inter partes review”). The cases where the Federal Circuit has found issues not to be reviewable are typically cast in case-specific ways. See, e.g., Achates Reference Publ’g, Inc. v. Apple Inc., 803 F.3d 652 (Fed. Cir. 2015) (reviewing “whether Apple’s petition was time barred”); Cuozzo, 793 F.3d at 1272 (“Cuozzo argues that the PTO improperly instituted IPR on claims 10 and 14 because the PTO relied on prior art that Garmin did not identify in its petition as grounds for IPR as to those two claims.”)

Any resolution of the reviewability issue must comply with the statute, must put teeth to Congress’s embrace of efficiency, and at the same time must make sure that the rights of patent holders are adequately protected. The approach I have outlined above, in my view, adequately balances efficiency with appropriate supervision of the PTAB. I’m curious to see what you all think, and I look forward to reading the comments.

Note: The views views expressed here are solely my own and do not necessarily reflect the views of my firm or any clients.

___________________

[1] The CAFC left open the question of whether the APA allowed for challenges to PTAB regulations in district court in Synopsys, Inc. v. Lee, 812 F.3d 1076 (Fed. Cir. 2016). From a practical standpoint, an APA challenge in a district court would seem to be a better option–the parties will have an opportunity to develop a fuller record removed from the facts of any particular IPR, and a district court may well provide a better first look than than the agency that promulgated the challenged regulation.

[2] NcNary follows other Supreme Court decisions distinguishing between specific challenges to a particular determination and general challenges to regulations. See Bowen v. Michigan Acad. of Family Physicians, 476 U.S. 667, 675 (1986).

[3] For individual determinations where the PTAB clearly exceeds its statutory authority, mandamus remains available. See, e.g., In re Cuozzo Speed Techs., LLC, 793 F.3d 1268, 1274 (Fed. Cir. 2015), aff’d sub nom. Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131 (2016).

Supreme Court 2017 – Patent Preview

January 16, 2017PatentAbstract Idea, Affirmed Without Opinion, AIA Trials, anticipation, Claim Construction, Damages, IPR, Licenses, obviousness, Personal Jurisdiction, PGR, reasonable expectation of success, Subject Matter Eligibility, Supreme Court, Trade Secrets, USPTO Director, VenueDennis Crouch

by Dennis Crouch

A new Supreme Court justice will likely be in place by the end of April, although the Trump edition is unlikely to substantially shake-up patent law doctrine in the short term.

The Supreme Court has decided one patent case this term. Samsung (design patent damages). Five more cases have been granted certiorari and are scheduled to be decided by mid June 2017. These include SCA Hygiene (whether laches applies in patent cases); Life Tech (infringement under 35 U.S.C. § 271(f)(1) for supplying single component); Impression Products (using patents as a personal property servitude); Sandoz (BPCIA patent dance); and last-but-not-least TC Heartland (Does the general definition of “residence” found in 28 U.S.C. 1391(c) apply to the patent venue statute 1400(b)).

Big news is that the Supreme Court granted writs of certiorari in the BPCIA dispute between Sandoz and Amgen. The BPCIA can be thought of as the ‘Hatch Waxman of biologics’ – enacted as part of ObamaCare. The provision offers automatic market exclusivity for twelve years for producers of pioneer biologics. Those years of exclusivity enforced by the FDA – who will not approve a competitor’s expedited biosimilar drug application during the exclusivity period. The statute then provides for a process of exchanging patent and manufacturing information between a potential biosimilar producer and the pioneer – known as the patent dance. The case here is the Court’s first chance to interpret the provisions of the law – the specific issue involves whether the pioneer (here Amgen) is required to ‘dance.’ [Andrew Williams has more @patentdocs]

A new eligibility petition by Matthew Powers in IPLearn-Focus v. Microsoft raises eligibility in a procedural form – Can a court properly find an abstract idea based only upon (1) the patent document and (2) attorney argument? (What if the only evidence presented supports eligibility?). After reading claim 1 and 24 (24 is at issue) of U.S. Patent No. 8,538,320, you may see why the lower court bounced this. Federal Circuit affirmed the district court’s ruling without opinion under Federal Circuit Rule 36 and then denied IPLF’s petition for rehearing (again without opinion).

1. A computing system comprising:

a display;

an imaging sensor to sense a first feature of a user regarding a first volitional behavior of the user to produce a first set of measurements, the imaging sensor being detached from the first feature to sense the first feature, the first feature relating to the head of the user, and the first set of measurements including an image of the first feature, wherein the system further to sense a second feature of the user regarding a second volitional behavior of the user to produce a second set of measurements, the second feature not relating to the head of the user; and

a processor coupled to the imaging sensor and the display, the processor to:

analyze at least the first set and the second set of measurements; and determine whether to change what is to be presented by the display in view of the analysis.

24. A computing system as recited in claim 1, wherein the system capable of providing an indication regarding whether the user is paying attention to content presented by the display.

=== THE LIST===

1. 2016-2016 Decisions:

Design Patent Damages: Samsung Electronics Co. v. Apple Inc., No 15-777 (Total profits may be based upon either the entire product sold to consumers or a component); GVR order in parallel case Systems, Inc. v. Nordock, Inc., No. 15-978. These cases are now back before the Federal Circuit for the job of explaining when a component

2. Petitions Granted:

Argued – Awaiting Decision: SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC, No. 15-927 (laches in patent cases)
Argued – Awaiting Decision: Life Technologies Corporation, et al. v. Promega Corporation, No. 14-1538 (infringement under 35 U.S.C. § 271(f)(1) for supplying single component)
Briefing: Impression Products, Inc. v. Lexmark International, Inc., No. 15-1189 (unreasonable restraints on downstream uses)
Briefing: Sandoz Inc. v. Amgen Inc., et al., No. 15-1039 (Does the notice requirement of the BPCIA create an effective six-month exclusivity post-FDA approval?)
Briefing: TC Heartland LLC v. Kraft Food Brands Group LLC, No 16-341 (Does the general and broad definition of “residence” found in 28 U.S.C. 1391(c) apply to the patent venue statute 1400(b))

3. Petitions with Invited Views of SG (CVSG):

4. Petitions for Writ of Certiorari Pending:

Is it a Patent Case?: Boston Scientific Corporation, et al. v. Mirowski Family Ventures, LLC, No. 16-470 (how closely must a state court “hew” federal court patent law precedents?) (Appeal from MD State Court)
Anticipation/Obviousness: Google Inc., et al. v. Arendi S A.R.L., et al., No. 16-626 (can “common sense” invalidate a patent claim that includes novel elements?) (Supreme Court has requested a brief in response)
Civil Procedure – Final Judgment: Johnson & Johnson Vision Care, Inc. v. Rembrandt Vision Technologies, L.P., No. 16-489 (Reopening final decision under R.60).
Anticipation/Obviousness: Enplas Corporation v. Seoul Semiconductor Co., Ltd., et al., No. 16-867 (“Whether a finding of anticipation under 35 U.S.C. § 102 must be supported by findings that each and every element of the subject patent claim is disclosed in the prior art?”)
Post Grant Admin: Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, et al., No. 16-712 (“Whether inter partes review … violates the Constitution by extinguishing private property rights through a non-Article III forum without a jury.”) [oilstatespetition]
Eligibility: IPLearn-Focus, LLC v. Microsoft Corp., No. 16-859 (evidence necessary for finding an abstract idea)
Post Grant Admin: SightSound Technologies, LLC v. Apple Inc., No. 16-483 (Can the Federal Circuit review USPTO decision to initiate an IPR on a ground never asserted by any party)
Is it a Patent Case?: Big Baboon, Inc. v. Michelle K. Lee, No. 16-496 (Appeal of APA seeking overturning of evidentiary admission findings during reexamination – heard by Federal Circuit or Regional Circuit?)
Laches: Medinol Ltd. v. Cordis Corporation, et al., No. 15-998 (follow-on to SCA); Endotach LLC v. Cook Medical LLC, No. 16-127 (SCA Redux); Romag Fasteners, Inc. v. Fossil, Inc., et al, No. 16-202 (SCA Redux plus TM issue)
Eligibility and CBM: DataTreasury Corporation v. Fidelity National Information Services, Inc., No. 16-883 (I have not seen the petition yet, but underlying case challenged whether (1) case was properly classified as CBM and (2) whether PTAB properly ruled claims ineligible as abstract ideas) (Patent Nos. 5,910,988 and 6,032,137).

5. Petitions for Writ of Certiorari Denied or Dismissed:
(more…)

Post-PTO Trials: Party must Prove Injury-in-Fact for Appellate Standing

January 11, 2017PatentAIA Trials, IPR, obviousness, USPTO DirectorDennis Crouch

Phigenix v. ImmunoGen (Fed. Cir. 2017)

In this case, the patentee ImmunoGen won its case before the Patent Trial & Appeal Board (PTAB) with a judgment that the challenged claims are not obvious. U.S. Patent No. 8,337,856. Phigenix appealed, but the appellate court has dismissed the case for lack of standing – holding that the challenger-appellant failed provide “sufficient proof establishing that it has suffered an injury in fact.”

Article III of the U.S. Constitution provides for federal judicial power over “cases [and] controversies.” Although not found in the text, the Supreme Court requires existence of an “actual” conflict between the parties — thus prohibiting the courts from issuing advisory opinions. The doctrine of standing requires that a plaintiff/appellant “have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the [defendant/appellee], (3) that is likely to be redressed by a favorable judicial decision.” (quoting Spokeo (2016)). As a Constitional limit on judicial power, standing must always exist during a lawsuit and may be raised sua sponte by a trial or appellate court.

The case here began with Phigenix’ filing its inter partes review (IPR) petition. Since the PTO/PTAB is an administrative agency empowered by statute and Article I of the Constitution, its power is not limited by Article III. Thus, for IPR petitions, the PTO Director need not concern herself with the question of whether the petitioner has standing in the Federal Courts sense. When the case is appealed, however, the appellant must provide the required proof of injury.

In this case, Phigenix is something of a competitor of the patentee ImmunoGen and, although Phigenix does not plan to use the patented invention itself (at this point the company is only a licensor), the appellant argues that the existence of the patent makes ImmunoGen a stronger market competitor – leading to actual economic injury. In the appeal, the Federal Circuit suggests that the injury might be sufficient – but that Phigenix failed to prove its existence.

The conclusory statements in the Gold Declaration and the [attorney] letter as to the hypothetical licensing injury therefore do not satisfy the requirements of Rule 56(c)(4).

Without providing the evidence of injury, the court could not hear the case. The court also reiterated its prior position that the right-to-appeal created by 35 U.S.C. 141(c) does not replace the standing requirement. See Lujan and Consumer Watchdog.

Wi-Fi One v. Broadcom: Mine-Runs and Shenanigans in Inter Partes Review

January 8, 2017PatentAIA Trials, Enablement, Federal Circuit En Banc, IPR, USPTO DirectorDennis Crouch

by Dennis Crouch

Wi-Fi One v. Broadcom (Fed. Cir. 2017)

First en banc order of the year: the Federal Circuit will review the following question:

Should this court overrule Achates Reference Publishing, Inc. v. Apple Inc., 803 F.3d 652 (Fed. Cir. 2015) and hold that judicial review is available for a patent owner to challenge the PTO’s determination that the petitioner satisfied the timeliness requirement of 35 U.S.C. § 315(b) governing the filing of petitions for inter partes review?

en banc order. Briefs of amicus curiae may be filed without consent.

One Year Filing Deadline: Section 315(b) creates a statute of limitations for inter partes review proceedings – indicating that the petition for IPR must be filed within one-year of “the date on which the petitioner, real party in interest, or privy of the petitioner is served with a complaint alleging infringement of the patent.” Here, Wi-Fi argues that Broadcom was in privity with entities involved in parallel district court litigation involving challenged patents — creating a time bar under 315(b).

The PTAB rejected Wi-Fi’s argument and call for discovery on the issue — holding that the “privy” requirement could only be met if Broadcom had the right to control the District Court litigation.

No Appeal: On appeal, the Federal Circuit affirmed – holding Section 314(d) prohibits appellate review of the institution issue. In particular Section 314(d) states that

The determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable.

In Achates, the court ruled that the one-year-deadline determination is an institution decision – “even if such assessment is reconsidered during the merits phase of proceedins and restated as part of the Board’s final written decision.”

In the background stands the 2016 Supreme Court decision in Cuozzo. In that case, the Supreme Court gave effect to the no-appeal provision of 314(d). However, the Supreme Court noted that unusual questions – such as constitutional questions – might still be appealable. The foundation for the en banc review decision will be its interpretation of the following Cuozzo excerpts:

We conclude that [314(d)], though it may not bar consideration of a constitutional question, for example, does bar judicial review of the kind of mine-run claim at issue here, involving the Patent Office’s decision to institute inter partes review. . . .

Nevertheless, in light of §314(d)’s own text and the presumption favoring review, we emphasize that our interpretation applies where the grounds for attacking the decision to institute inter partes review consist of questions that are closely tied to the application and interpretation of statutes related to the Patent Office’s decision to initiate inter partes review. See §314(d) (barring appeals of “determinations . . . to initiate an inter partes review under this section” (emphasis added)). This means that we need not, and do not, decide the precise effect of §314(d) on appeals that implicate constitutional questions, that depend on other less closely related statutes, or that present other questions of interpretation that reach, in terms of scope and impact, well beyond “this section.” . . . Thus, contrary to the dissent’s suggestion, we do not categorically preclude review of a final decision where a petition fails to give “sufficient notice” such that there is a due process problem with the entire proceeding, nor does our interpretation enable the agency to act outside its statutory limits by, for example, canceling a patent claim for “indefiniteness under §112” in inter partes review. Such “shenanigans” may be properly reviewable in the context of §319 and under the Administrative Procedure Act, which enables reviewing courts to “set aside agency action” that is “contrary to constitutional right,” “in excess of statutory jurisdiction,” or “arbitrary [and] capricious.”

The question then for court is whether we have a shenanigan here.

When is the PTO’s claim construction “reasonable”?

January 2, 2017PatentAIA Trials, anticipation, Broadest Reasonable Interpretation, Claim Construction, IPR, obviousnessDennis Crouch

D’Agostino v. Mastercard (Fed. Cir. 2016)

John D’Agostino’s patents cover processes for creating limited-use transaction codes to improve credit card security. U.S. Patent Nos. 7,840,486 and 8,036,988. The approach basically keeps the card number out of the hands of the merchant (where most scamming occurs). After being sued for infringement, MasterCard filed for inter partes review and successfully challenged many of the claims as obvious and anticipated by Cohen (U.S. Patent No. 6,422,462). On appeal, however, the Federal Circuit has vacated – holding that the PTAB’s claim interpretation was unreasonable.

Claim construction continues its reign as a messy hairball. Rather than looking to the “proper” claim construction as defined by Phillips v. AWH, the PTAB defines claims according to their Broadest Reasonable Construction (BRI). That approach largely follows Phillips, but allows the PTO to select the “broadest” construction for any given limitation from the potential set of reasonable constructions. The express intent here is to broaden the claims in order to make it easier to invalidate them during the IPR process. The idea then is that claims which survive the IPR-scope-puffery-gauntlet will be strong – giving confidence to judges and juries and fear into the hearts of infringers.

Reasonable is a Question of Law: In most areas of law ‘reasonableness‘ is considered a factual conclusion and conclusions regarding reasonableness are given deference on appeal. The Federal Circuit however has ruled that the reasonableness of claim construction in the BRI context is reviewed de novo on appeal. Unfortunately, the court has not provided much helpful guidance in terms of knowing when a given construction is reasonable. Their koan states that – although the BRI construction need not be the correct interpretation, the chosen BRI construction may not be “a legally incorrect interpretation.” (Quoting Skvorecz 2009).

Here, the question was whether the claims required a temporal separation between two communications. The PTAB said no – since it was not expressly required and broadened the claims. On appeal, the court looked at the claims and found that the express language did in fact require two separate communications: A first request that occurs “prior to” the merchant being identified and then a second communication that includes the merchant ID. According to the court, the PTAB’s interpretation (allowing for a single communication) was simply not reasonable.

On remand, the PTAB will decide whether the prior art the claim elements as they are more narrowly defined.

= = = = =

PTO Bound by its own Prior Construction?: Interesting issue ducked by the Federal Circuit involved the prior reexam of the patent where the PTO expressly narrowly construed the same claim scope. Court did not remark on the patentee’s suggestion here that PTO should be bound by its prior express constructions. Seems reasonable to me.

The “Right” to Challenge a Patent

December 22, 2016PatentAIA Trials, IPR, Licenses, obviousnessDennis Crouch

by Dennis Crouch

The Supreme Court in Lear, Inc. v. Adkins (1969) held that a licensee can challenge a patent’s validity — overruling the prior presumption of licensee estoppel found by Automatic Radio Mfg. v. Hazeltine Research (1950).

In his recent article, Antitrust Economist (and lawyer) Erik Hovenkamp argues that the “right to challenge a patent” should also be an important consideration in antitrust analysis. Hovenkamp defines these “challenge rights” as “the (statutory) rights of third parties to challenge patents as invalid or uninfringed.” Antitrust comes into play when a license or settlement agreement includes challenge restraints that would contractually prevent the exercise of the challenge rights.

There are obvious collateral problems with the way that Hovenkamp identifies the ability to challenge a patent as a “right” – especially if we call it a property right. However, for antitrust-contract consideration, forbearing the ability-to-challenge at least fits the definition of a legal detriment incurred by the promisee.

Although patent licenses are entitled to substantial safe harbor from antitrust regulations, Hovenkamp argues that challenge restraints should not be so entitled “but rather exist within antitrust’s domain” and barred when impermissible anticompetitive.

A problem with the argument is the way that Hovenkamp lumps-together validity and non-infringement challenges as roughly equivalent. However, I see the two as substantially distinct.

Read the Paper: Challenge Restraints and the Scope of the Patent

The contractual waiver of challenge rights has risen in importance since the Supreme Court’s decision in MedImmune (2007) (licensee retains right to challenge patent without breaching) and creation of the Inter Partes Review system following enactment of the AIA (2011). Prior to the availability of IPRs (and CBM/PRG), settlement of an infringement lawsuit would effectively preclude later validity challenges even without specific contractual terms. (Res Judicata). However, those estoppel principles do not apply the same way in AIA proceedings.

What it takes to Prove a Motivation to Combine

December 7, 2016PatentAIA Trials, IPR, motivation to combine, obviousnessDennis Crouch

by Dennis Crouch

In re NuVasive (Fed. Cir. 2016)

In an important obviousness decision, the Federal Circuit has reversed the PTAB IPR decision – holding that the PTAB failed to sufficiently explain its ruling that a person having ordinary skill in the art (PHOSITA) would have been motivated to combine the prior art teachings to create the patented invention. Although expressing its intent to follow KSR, the court here comes closer to trodding upon that (oft maligned) precedent.

The case involves an Inter Partes Review (IPR) challenge of NuVasive’s spinal fusion implant patent (U.S. Patent No. 8,361,156). The claims require that the implants include, inter alia, radiopaque markers on the medial plane. The PTAB found the claims invalid as obvious based upon a collection of prior art references related to spinal fusion.

Doctrine of Obviousness: A claim is invalid if the differences between the prior art and the claim (considered “as a whole”) would have been obvious to PHOSITA considering the issue at the time the invention was made. 35 U.S.C. § 103.

Motivation to Combine: In many US obviousness cases, each of the claim limitations are found in some form within the body of prior art imputed to PHOSITA and the obviousness question becomes whether it would have been obvious to combine those references to form the claimed invention. In KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398 (2007), the Supreme Court held that the motivation to combine references need not be found expressly in the prior art itself but may be explained by the fact finder using common sense. Still, the KSR Court wrote that it “can be important to identify a reason that would have prompted [PHOSITA] to combine the elements in the way the claimed new invention does.” Extending that decion, the Federal Circuit ruled that the PTAB must (1) “articulate a reason why a PHOSITA would combine the prior art references”; (2) have an adequate evidentiary basis for that finding; and (3) provide a “satisfactory explanation” for the motivation finding that includes an express and “rational” connection with the evidence presented. See, In re Lee (conclusory statements are insufficient); Cutsforth v. MotivePower (must positively explain motivation – not just reject arguments against motivation); and Arendi v. Apple (PTAB “cannot rely solely on common knowledge or common sense to support its findings” of motivation).

Here, the basic question is whether it would have been obvious to combine prior art teaching the spinal fusion implant with references showing the use and importance of radiopaque markers in implants. However, according to the appellate panel, “the PTAB failed to explain the reason why a PHOSITA would have been motivated to modify [the prior art], to place radiopaque markers ‘proximate to said medial plane'” as required by the challenged claims.

After discrediting the PTAB decision, the court also looked at the evidence presented by the challenger Medtronic. Medtronic’s expert had explained that the motivation for adding the additional markers would be to provide surgens with “additional information” and that it would have been common sense to add the additional markers.

Medtronic’s arguments amount to nothing more than conclusory statements that a PHOSITA would have been motivated to combine the prior art references to obtain additional information. According to the court, these “arguments amount to nothing more than conclusory statements” and thus should not be credited. One key reference did explain that the medial markers were beneficial during the alignment process. However, the Federal Circuit rejected that reference because it was published after the patent-in-question’s priority date and not cited in the prior art references. Because they came after the priority date, the court found that the motivation “could not have been obtained . . . at the time of the invention.”

The Federal Circuit and Appeals from the Patent Office

December 4, 2016PatentAIA Trials, IPRJason Rantanen

By Jason Rantanen

As expected, for the fiscal year ending on October 31, 2016, the Federal Circuit docketed more appeals arising from the U.S. Patent and Trademark Office than from the district courts. This result will almost certainly hold true for the calendar year as well: from January through October of this year, the Federal Circuit received 471 appeals arising from the district courts and 560 appeals arising from the PTO.

The below chart is an updated version of a chart I’ve posted before. It shows the annual number of appeals docketed at the Federal Circuit per fiscal year (which runs from the beginning of October to the end of September.

Changes over smaller periods of time: To get a sense of whether appeals from the PTO are continuing to rise, I created a chart of the number of appeals arising from the PTO on a monthly basis. Although there’s substantial month-to-month variation, the overall trend for the last year does not suggest to me that the appeals from this source are continuing to increase. However they remain at a much higher level as compared with the period before 2014.

Makeup of appeals arising from the PTO: Using data from the USPTO’s annual Performance and Accountability Report, I constructed the below pie charts to illustrate how the composition of appeals from the PTO has changed over the last several years. These graphs provide a vivid image of how dramatically that composition has changed in a short period of time.

Note that this data is not an exact reflection of the appeals that reach the Federal Circuit due to a few limitations in the underlying reported data. In particular, there are a handful of appeals (my understanding is <10) that might be counted in multiple years due to the way the data is reported for 2016. In addition, the data is reported for all appeals to federal appellate courts, not just appeals to the Federal Circuit. Due to variations in appeal pathway, a handful will end up in the regional circuits (especially trademark cases for which review is sought in the district court. Pro-Football v. Blackhorse is an example).

What will the future bring? Going forward, I’d expect the number of appeals arising from the PTO to decline to some—but not a great—extent. Data from the USPTO’s annual Performance and Accountability Report indicates that the number of newly filed inter partes review proceedings has remained roughly constant over since 2014, with 1310 cases filed in FY 2014, 1737 cases filed in FY 2015, and 1565 cases filed during FY 2016. (Source: USPTO Performance and Accountability Reports, Table 15). Since most of the appeals are from inter partes review proceedings (as there are relatively few of the other types of inter partes proceedings), a modest decline in the broader pool will likely result in a modest decline in the subset. In addition, as attorneys obtain greater information about the probability of outcomes at the Federal Circuit, it is likely that appeals will fall as parties choose not to incur the expense of an appeal, at least in cases at the extreme.

Microsoft v. Enfish: Turns Out the Claims Are Obvious

November 30, 2016PatentAffirmed Without Opinion, AIA Trials, anticipation, Claim Construction, Enablement, IPR, obviousness, Written DescriptionDennis Crouch

This is a discussion of the new Federal Circuit Decision Microsoft v. Enfish appealing a PTAB final decision.

In the prior parallel decision – Enfish v. Microsoft, 822 F.3d 1327 (Fed. Cir. 2016), the Federal Circuit reversed a district court ruling that Enfish’s asserted software claims were ineligible under § 101 and also vacated the lower court’s holding that some of the claims were invalid as anticipated. U.S. Patent Nos. 6,151,604 and 6,163,775 (inventions relating to a “self-referential” database).

Enfish sued Microsoft for infringement in 2012. In addition to its litigation defenses, Microsoft marshaled a collateral attack on the patents with five petitions with the US Patent Office for inter partes review of the ’604 and ’775 patents.

After instituting review, the Patent Trial and Appeal Board found some of the patent claims invalid as anticipated/obvious. On appeal, PTAB factual findings are generally given deference but legal conclusions are reviewed without deference. After reviewing the claim construction and rejections, the Federal Circuit affirmed in a non-precedential decision.

Collateral Attacks: These collateral attacks work well to cancel patent claims with obviousness arguments that would have been unlikely to be accepted by a trial court or jury. This is a pointed example here since the previously rejected district court’s judgment was based upon a more simplistic Section 101 analysis that is easier for the Federal Circuit to overturn.

Not Amenable to Construction: The most interesting aspect of the decision is hidden in a single sentence statement: “As to claims 1–26 and 30 of both patents—which are not at issue before us—the Board terminated proceedings after concluding that those claims were not amenable to construction.”

In its final judgment, the Board explained that those claims include a means-plus-function element (“means for configuring said memory according to a logical table“) but that no embodiments of the element were provided in the specification. And, although a person of skill in the art may know how to construct the element, our 112(f) jurisprudence requires embodiments in the specification and does not allow a patentee to “rely on the knowledge of one skilled in the art to address the deficiencies” See Function Media, LLC v. Google Inc., 708 F.3d 1310 (Fed. Cir. 2013). The statute states permits means-plus-function claims but also provides a guide for narrowly construing those claims.

35 U.S.C. 112(f) ELEMENT IN CLAIM FOR A COMBINATION.—An element in a claim for a combination may be expressed as a means or step for performing a specified function without the recital of structure, material, or acts in support thereof, and such claim shall be construed to cover the corresponding structure, material, or acts described in the specification and equivalents thereof.

In both patent prosecution and district court litigation, failure to properly disclose structural embodiments for a means-plus-function limitation results in the claim being held invalid as indefinite since the limitation’s scope cannot be properly construed. In the inter partes review situation, however, the Board’s power is limited to cancelling patents on novelty or obviousness grounds. As such, the Board simply terminated the IPR trial with respect to these non-construable claims. The Board writes:

In the circumstance when the specification of the challenged patent lacks sufficient disclosure of structure under 35 U.S.C. § 112, sixth paragraph, the scope of the claims cannot be determined without speculation and, consequently, the differences between the claimed invention and the prior art cannot be ascertained. For the reasons given, we determine that independent claims 1, 11, and 15 are not amenable to construction and, thus, we terminate this proceeding with respect to claims 1, 11, and 15 under 37 C.F.R. § 42.72.

[PTAB Final Decision].

No Appeal of Termination: Neither party appealed the termination, although the Federal Circuit previously held that its appellate jurisdiction over these cases is limited to appeals of “final written decision[s] with respect to the patentability of any patent claim challenged by the petitioner …” A termination decision was seen as essentially an extension of the institution decision that is not itself appealable.

Of course, the original Federal Enfish decision mentioned above also addressed this indefiniteness issue and held that the claims were not indefinite because sufficient structure was disclosed — holding that the scant description was adequate because “the sufficiency of the structure is viewed through the lens of a person of skill in the art and without need to ‘disclose structures well known in the art.’ I guess that this means that those claims are OK.

Federal Circuit Orders PTO to limit business method review trials (CBM) to “financial products or services” since that is the law

November 27, 2016PatentAIA Trials, anticipation, IPR, obviousness, Written DescriptionDennis Crouch

by Dennis Crouch

In Unwired Planet v. Google, the Federal Circuit has vacated a PTAB covered business method decision – holding that the PTO’s definition of a “covered business method” was unduly broad.

The America Invents Act created a powerful set of post-issuance administrative review procedures known generally as AIA trials, including the covered business method (CBM) review. CBM is designed as a transitional proceeding that will sunset in the year 2020 barring congressional action. The most popular form of AIA trial is inter partes review (IPR) that allows for review of any issued patent but is limited to only novelty and obviousness challenges based upon prior art. CBM review applies to a much narrower set of patents – only “covered business methods” – but those patents can be challenged on almost any patentability ground, including eligibility. Here, the Board found the challenged claims unpatentable subject matter under section 101.

The term covered business method is particularly defined to include any patent “that claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service, except that the term does not include patents for technological inventions.” AIA § 18(d)(1). In its implementing rules, the PTO did not further define or explain the CBM definition within its official rules – although the PTO did propose the “incidental” or “complementary” language in its official responses to comments on its proposed rules. On appeal, the Federal Circuit has rejected the more expansive definition as contrary to the statute.

Here Unwired’s Patent No. 7,203,752 claims a method of using privacy preferences to configure when various applications are permitted to access a wireless device’s location information. PTAB found CBM claims by noting that businesses may want “to know a wireless device is in its area so relevant advertising may be transmitted.” The PTAB’s finding here was not conjecture but instead came from the patent’s written description. On appeal, however, the Federal Circuit found the required “financial product or service” link too tenuous. The court explains:

The Board’s application of the “incidental to” and “complementary to” language from the PTO policy statement instead of the statutory definition renders superfluous the limits Congress placed on the definition of a CBM patent.

The court then provides a few analogies:

The patent for a novel lightbulb that is found to work particularly well in bank vaults does not become a CBM patent because of its incidental or complementary use in banks. Likewise, it cannot be the case that a patent covering a method and corresponding apparatuses becomes a CBM patent because its practice could involve a potential sale of a good or service. All patents, at some level, relate to potential sale of a good or service. Take, for example, a patent for an apparatus for digging ditches. Does the sale of the dirt that results from use of the ditch digger render the patent a CBM patent? No, because the claims of the ditch-digging method or apparatus are not directed to “performing data processing or other operations” or “used in the practice, administration, or management of a financial product or service,” as required by the statute. It is not enough that a sale has occurred or may occur, or even that the specification speculates such a potential sale might occur.

The decision here thus appears to eliminate any chance that the patent will be considered a CBM and thus the Section 101 decision by the PTAB goes away.

No Appeal? Like IPR proceedings, CBM proceedings begin with an initiation decision followed by a trial decision. And, like IPR proceedings, the decision to initiate a CBM is not appealable. In Versata, however, the Federal Circuit held that the initiation question of whether a patent is a CBM patent may be reviewed on appeal. Despite the statutory language and the intervening Supreme Court decision in Cuozzo, the court here held that it still has jurisdiction to review the CBM initiation question on appeal.

Deference: In reviewing the PTAB determination, the court gave no deference to the Board’s interpretation of the law. “We review the Board’s statutory interpretation de novo.” The Court also gave no deference to the PTO’s “policy statement” made in its notice of final rules. The court does implicitly suggest – as it did in Versata – that implementation of a more thorough definition in the CFR rules would be given deference. However, the PTO has not taken that approach.

I do not know yet whether Google will push this case to the Supreme Court. The strongest argument is that Cuozzo implicitly overruled Versata. That is the holding suggested by Alito’s dissenting interpretation of the Cuozzo majority.

Partial-Institution Decisions Blessed by En Banc Federal Circuit

November 7, 2016PatentAIA Trials, Federal Circuit En Banc, IPR, USPTO DirectorDennis Crouch

SAS v ComplementSoft (Fed. Cir. 2016)

Today, the Federal Circuit denied SAS’s en banc request challenging the USPTO’s approach to partial-institution of inter partes review petitions. In a substantial number of cases, the PTO only partially agrees with the IPR petition and thus grants a trial on only some of the challenged claims. In the present case, for instance, SAS’s IPR Petition challenged all of the claims (1-16) found in ComplementSoft’s Patent No. 7,110,936, but the Director (via the Board) instituted review only on claims 1 and 3-10.

The statute seems to side with SAS: The Board “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner” 35 U.S.C. § 318(a). However, the appellate panel in this case (following prior precedent) held that “Section 318(a) only requires the Board to address claims as to which review was granted.”

In its petition, SAS wrotes:

Because § 318(a) is clear and unambiguous in requiring a final written decision as to “any patent claim challenged by the petitioner,” the PTO had no authority to adopt a contrary rule authorizing IPRs “to proceed on all or some of the challenged claims,” 37 C.F.R. § 42.108(a). Regardless of efficiency or workload concerns, the PTO’s rulemaking authority “does not include a power to revise clear statutory terms.” Utility Air Regulatory Grp. v. Environmental Protection Agency, 134 S. Ct. 2427, 2446 (2014).

In what appears to be a 10-1 decision, the Federal Circuit has denied SAS’s petition for en banc review. Although the majority offered no opinion, Judge Newman did offer her dissent (as she did in the original panel decision).

SCA Hygiene Laches Oral Arguments: How Do we Interpret Congressional Silence?

November 1, 2016PatentAIA Trials, Damages, IPRDennis Crouch

Today the Supreme Court heard oral arguments in SCA Hygiene v. First Quality with the following question presented:

Whether and to what extent the defense of laches may bar a claim for patent infringement brought within the Patent Act’s six-year statutory limitations period, 35 U.S.C. § 286.

Sitting in the background is the Supreme Court’s parallel copyright decision in Petrella v. MGM (2014) holding that the doctrine of laches cannot bar a claim for legal damages brought within the three-year statutory limitations of copyright law. In its opinion, the Federal Circuit distinguished Petrella – finding that in this situation patents should be treated differently than copyrights.

Martin Black (Dechert) argued for petitioner-patentee SCA Hygiene and suggested that Petrella paves the way: “There is nothing in the Patent Act which compels the creation of a unique patent law rule, and if the Court were to create an exception here, that would invite litigation in the lower courts over a wide range of Federal statutes.”

According to Black, the focus should be on the statute – and the statute does not provide for laches. Further, section 286 is entitled “Time Limitation on Damages” — that is the section that should be applied when determining whether a patentee unduly delayed its enforcement.

Mr. Black: Laches has never been applied in the face of the Federal statute of limitations. The Court looked at that issue exhaustively in Petrella and could not find Respondents one single example.

Petrella was decided 6-3 and with Justice Scalia’s death the result would be 5-3. Justice Breyer dissented then and indicated in oral argument “Just to repeat, I’m still dissenting.”

Mr. Waxman, representing the accused infringer in this case (who won on laches) began by highlighting the background of the 1952 Patent Act — “This Court has repeatedly recognized that the 1952 Patent Act sought to retain and reflect patent law as it then existed.” And, at that time (1952), laches was thought to be an available defense.

Mr. Waxman: The question in this case is what Congress understood the patent law doctrine was in 1952. And we think that there is a literal mountain of cases. Every single case that was decided in any court at any level from 1897 when the six-year damages cap was put into place until today, with the exception of one district court decision in Massachusetts which demonstrably misapplied the two authorities that it cited, every single case has recognized that — that laches was a defense in an appropriate case to claims for damages. And no case has ever said or suggested to the contrary.

CHIEF JUSTICE ROBERTS: That mountain of cases were in equity, right? . . . that’s where your mountain becomes a mole hill, right? . . .

Mr. Waxman: But the point I’m trying to make — and if I make no other point, please let me not be misunderstood here — Congress in 1952 simply continued in haec verba the statute that had existed on the books since it was put in on the equity side in 1897. And there were — whether it is a mountain, a mole hill, or a mesa, all of the — okay. Never mind. I’ll just stick with mountain or mole hill. All of the — I mean, I — I don’t think — I hope I live long enough to have another case where I can come to Court and say, all of the case law that decide — that examine this question, all of which was adjudicating the applicability of laches to claims of damages alongside the six-year damages limitation provision, all of them recognize that laches existed comfortably alongside that provision. And there is nothing really anomalous about that.

The difference then, according to Waxman, between patents and copyright is not really found in the statutory text itself but instead emanates from the history and congressional sense at the times of enactment. For patents, the background law allowed laches and congress intended to implement that background law in 1952.

Mr. Black disagreed with the state-of-the-law:

So it was in front of Congress in 1952 with three things. This Court’s precedent that said that laches could not be used to bar legal relief. You had the merger of law and equity in 1938 which scrambled all the eggs. You had the 1946 Lanham Act, which also went through the committee on patents and copyrights where they specifically included the word “laches” in the statute. And you had the abolition of the remedy that parties had been seeking as the primary means of monetary relief in patent law for 60 years. There is no way that you can look at that, that fact, and get around it by pointing to a book, a treatise, which, by the way, does not have a section in it on unenforceability.

A practical problem with eliminating laches is the lying-in-wait scenario — do we allow a patentee to simply wait for years until the defendant is locked-in and then sue? Mr. Black argued that Congress offered a solution — concerned third parties can file a declaratory judgment action or else a petition for inter partes review. Black also argued that the lying-in-wait scenerio doesn’t happen in practice because the patent term ends too soon (unlike in copyright law). The discussion also entered into patent trolls and the FTC recent report. Mr. Black argued that “The companies that get hurt by [Laches] are operating companies who don’t like to sue and therefore wait until they have to [while] patent trolls . . . have to sue to monetize.”

In re Aqua: Ambiguity in the Statute Means Deference to the PTO

October 28, 2016PatentAIA Trials, Federal Circuit En Banc, IPR, PGR, USPTO DirectorDennis Crouch

In re Aqua (Fed. Cir. 2016)

In its newly filed brief in this pending en banc case, the USPTO sets forth the three statutory provisions of 35 U.S.C. § 316 that are related to amendment practice in an Inter Partes Review (IPR) proceedings: §§ 316(a)(9); (d)(1); and (e). [Aqua Products–PTO brief.] Taking them out of order: Section (d) allows for one motion to amend; Section (a)(9) gives the PTO broad regulatory authority to set the standards and procedures associated with the motion to amend; and finally Section (e) indicates that petitioner has the burden of proving unpatentability. The friction between these sections may not be inherent to the statute, but arose when the PTO created the rule that the patentee must prove patentability of any amended claim before the motion will be allowed. The patentee argues in Aqua that the PTO approach is contrary to § 316(e) while the PTO argues that its approach is allowed by the broad rule-making-authority granted by § 316(a)(9).

316(a) Regulations. —The Director shall prescribe regulations— (9) setting forth standards and procedures for allowing the patent owner to move to amend the patent under subsection (d).

316(d) Amendment of the Patent.— (1) In general.—During an [IPR], the patent owner may file 1 motion to amend the patent in 1 or more of the following ways:(A) Cancel any challenged patent claim; (B) For each challenged claim, propose a reasonable number of substitute claims.

316(e) Evidentiary Standards.— In an inter partes review instituted under this chapter, the petitioner shall have the burden of proving a proposition of unpatentability by a preponderance of the evidence.

In its brief, the PTO explains that assigning burdens associated with the motion to amend is a “standard” expressly falling within its rulemaking authority and thus must be granted deference by the Federal Circuit on appeal. That portion of the argument appears clearly correct. The difficulty for the PTO comes into play in distinguishing Section 316(e) — its best and first argument is that the provision does not expressly discuss amendments: “For one thing, § 316(e) never mentions amended claims.” The PTO goes on to argue that 316(e)’s implicit focus is on burden’s associated with claims-at-issue and not proposed claims. “§ 316(e) speaks only to the petitioner’s burden of proving the unpatentability of existing claims; it does not specify who has the burden of proving the patentability of new, never-before-examined substitute claims.”

The brief also takes the interesting tack of walking through the amici filings and pointing out that none of them fully agree on the meaning of the supposedly unambiguous Section 316(e). If the section is seen as ambiguous, then the PTO’s deference level kicks-in once again.

Any amicus brief supporting the USPTO petition will be due by November 2, 2016 with oral arguments set before the entire court on December 9, 2016.

====

In re Aqua: Amending Claims Post Grant in an IPR

October 25, 2016PatentAIA Trials, Federal Circuit En Banc, IPR, obviousness, PGRDennis Crouch

The only pending en banc patent case before the Federal Circuit is In re Aqua Products (Appeal No. 15-1177) involving claim amendments during inter partes review. The Patent Statute contemplates claim amendments as a possibility but not a right — notably, 35 U.S.C. 316(d) states that “the patent owner may file 1 motion to amend the patent” with additional motions to amend permitted in limited situations. The scope of amendment is also limited to (A) cancelling challenged claims and (B) proposing “a reasonable number of substitute claims” that do not “enlarge the scope of the claims of the patent or introduce new matter.”

In its implementation regulations, the USPTO interpreted the right to a motion as something much less than a right to amend and required, inter alia, that the patentee provide evidence that any proposed substitute claims be patentable over the known prior art. See Idle Free Sys., Inc. v. Bergstrom, Inc., IPR2012–00027, 2013 WL 5947697 (PTAB June 11, 2013).

The short panel opinion in Aqua the Federal Circuit reaffirmed the USPTO’s tightly restrictive approach – following its own prior holdings. See, for example, Microsoft Corp. v. Proxyconn, Inc., 789 F.3d 1292, 1307−08 (Fed. Cir. 2015).

The underlying case involves a self-propelled robotic swimming pool cleaner that uses an internal pump both as a vacuum cleaner and as the propulsion system. U.S. Patent No. 8,273,183. After the IPR was initiated, Aqua moved to amend three of the claims to include the limitations found in the claims that had not been challenged. In particular, the patentee asked to substitute claims 1, 8, and 20 with claims 22-24 respectively. The new claims included a set of new limitations, including a propulsion “vector limitation” that required a jet stream configured to create a downward vector force rear of the front wheels. This appeared to be a reasonable request that would move the case toward conclusion, and the PTAB agreed that these new claims satisfied the formal requirements of Section 316(d). However, the PTAB refused to allow the amendment – holding that the patentee had failed to show that the amended claims were sufficiently beyond the prior art.

In rejecting the amendment motion, the PTAB did not conduct a fully obviousness analysis, but instead focused on the new elements and considered whether the patentee had shown those elements to render the claim valid over the prior art. Defending that approach on appeal, the Agency has defiantly argued that its rules regarding amendments and its application of those rules are both reasonable and entitled to substantial deference from the Court of Appeals.

Thus, the pending en banc questions focus on this stance:

1) In an IPR, when the patent owner moves to amend claims under 35 U.S.C. § 316(d), may the USPTO require the patent owner to bear the burden of persuasion, or a burden of production, regarding patentability of the amended claims?

2) When the petitioner in an IPR does not challenge the patentability of proposed amended claims or the Board finds the challenge inadequate, may the Board raise a patentability challenge on its own, and if so, where would the burdens lie?

Although prior Federal Circuit cases have supported the PTAB approach, the September 2016 decision in Veritas Tech v. Veeam Software (Fed. Cir. 2016) reversed that trend. In that case, the court held that the PTAB had acted in an arbitrary and capricious manner by denying the patentee’s motion to amend its challenged claims after failing to discuss each added feature separately.

The top-side briefs have been filed in the case with Amicus support for petitioner:

[AquaRehearingBriefPatentee]
[AquaRehearingBriefPhRMA] [AquaRehearingBriefCWRU] [AquaRehearingBriefAmiciTop]
IPO (Section 316(e) applies here and places the burden of proving a proposition of unpatentability onto the petitioner, not the patentee.)
AIPLA (The current amendment practice “does not provide patent owners with the fair and meaningful opportunity to amend claims that Congress envisioned”.)
PhRMA (Amendments are very important to patentees)
BIO (PTO may not impose any burden of proving patentability in an IPR process. Rather, the focus is on unpatentability – and that burden is upon the petitioner.)
Case Western Law Clinic (Although the PTO has rulemaking authority in this area, it exceeds that authority by ceding authority to the administrative patent judges.)
Houston IP Law Ass’n (The very small number of successful motions to amend reveals a problem.)

The PTO Brief along with any amicus in support are due over the next two weeks.

Medtronic: On Rehearing the Court Restates that IPR Termination Decision is Not Appealable

October 21, 2016PatentAIA Trials, IPR, USPTO DirectorDennis Crouch

by Dennis Crouch

On rehearing in Medtronic v. Robert Bosch, the Federal Circuit panel has reaffirmed its earlier determining that the PTAB’s vacatur of an IPR institution decision is a decision as to “whether to institute an inter partes review” and therefore is “final and nonappealable.” The original Medtronic decision had been released prior to Cuozzo v. Lee (2016) and the rehearing decision now explains that “nothing in Cuozzo is to the contrary.”

Although I continue to cringe at the prospect of no appeal, the decision here makes logical sense based upon the statutory and procedural structure. Here, the termination decision was based upon the petitioner’s failure to identify all real parties at interest — a core requirement of a complete petition. Base upon that failure, the Board determined that the petitions were incomplete and therefore “cannot be considered.” With that conclusion, the Board terminated the petitions and vacated the prior institution decisions. In this framework, it makes sense for the termination/vacatur to be a decision on institution and thus not subject to appeal. I could imagine a different scenario where the PTAB terminates an IPR based upon some other ground that is not a petition requirement — such as failure to prosecute or improper post-institution attorney conduct. In that hypothetical situation, the termination would be substantially divorced from the institution and – in my view – would no longer fall under the no-appeal requirement.

An additional difficulty with all of this stems from the pending Ethicon petition and the difference between action by the Director and action by the PTAB. The statute separates the roles – indicating that the PTO Director’s role is in determining “whether to institute” an IPR. Under the statute, the PTAB then steps in to conduct the trial. Those separate roles were then combined by PTO regulation which states “The Board institutes the trial on behalf of the Director.” 37 CFR 42.4. A question – unanswered in this case – is whether the Director’s regulatory delegation above should be interpreted to also extend to vacating and terminating petitions. I’m not sure that it does.

TC Heartland Law Professor Amicus Brief

October 20, 2016PatentAIA Trials, Claim Construction, Damages, Enablement, IPR, Licenses, Personal Jurisdiction, VenueDennis Crouch

In TC Heartland, the accused infringer has asked the Supreme Court to reset the law of venue and give effect to the statutory statement that infringement actions be brought either (1) “in the judicial district where the defendant resides” or (2)” where the defendant has committed acts of infringement and has a regular and established place of business.” 28 U.S.C. § 1400(b). In its 1957 Fourco decision, the Supreme Court affirmatively answered this question. However, Fourco has been undermined by subsequent Federal Circuit decisions. Thus, the question presented again is the same as what was originally asked in Fourco: “Whether 28 U.S.C. § 1400(b) is the sole and exclusive provision governing venue in patent infringement actions and is not to be supplemented by 28 U.S.C. § 1391(c).”

From a policy perspective, the case is seen as a vehicle for defendants who do not like being sued in the Eastern District of Texas and into more venues perceived as more defendant friendly.

A group of 50+ law and economics professors led by Mark Lemley, Colleen Chien, Brian Love, and Arti Rai have filed an important brief in support of the TC Heartland petition that I have copied below. Their position is (1) the Federal Circuit has erred on interpreting the law; and (2) the permissive venue result has fueled many of the problems of our patent system.

= = = = =

INTEREST OF AMICI^[1]

Amici are 53 professors and researchers of law and economics at universities throughout the United States. We have no personal interest in the outcome of this case, but a professional interest in seeing patent law develop in a way that encourages innovation and creativity as efficiently as possible.

SUMMARY OF ARGUMENT

28 U.S.C. § 1400(b) provides that a defendant in a patent case may be sued where the defendant is incorporated or has a regular and established place of business and has infringed the patent. This Court made clear in Fourco Glass Co. v. Transmirra Prods. Corp., 353 U.S. 222, 223 (1957), that those were the only permissible venues for a patent case. But the Federal Circuit has rejected Fourco and the plain meaning of § 1400(b), instead permitting a patent plaintiff to file suit against a defendant anywhere there is personal jurisdiction over that defendant. The result has been rampant forum shopping, particularly by patent trolls. 44% of 2015 patent lawsuits were filed in a single district: the Eastern District of Texas, a forum with plaintiff-friendly rules and practices, and where few of the defendants are incorporated or have established places of business. And an estimated 86% of 2015 patent cases were filed somewhere other than the jurisdictions specified in the statute. Colleen V. Chien & Michael Risch, Recalibrating Patent Venue, Santa Clara Univ. Legal Studies Research Paper No. 10-1 (Sept. 1, 2016), Table 3. This Court should grant certiorari to review the meaning of 28 U.S.C. § 1400(b) because the Federal Circuit’s dubious interpretation of the statute plays an outsized and detrimental role, both legally and economically, in the patent system.

ARGUMENT

1. The Federal Circuit’s Expansive and Incorrect Interpretation of 28 U.S.C. § 1400(b) Allows Patentholders to Sue Anywhere in the Nation

Section 48 of the Judiciary Act of 1897 limited jurisdiction in patent cases to districts that the defendant inhabited or had a place of business and committed infringing acts. Act of March 3, 1897, c. 395, 29 Stat. 695. In 1942, this Court confirmed that “Congress did not intend the Act of 1897 to dovetail with the general provisions relating to the venue of civil suits, but rather that it alone should control venue in patent infringement proceedings.” Stonite Prods. Co. v. Melvin Lloyd Co., 315 U.S. 561, 563 (1942).

In 1948, Congress enacted 28 U.S.C. § 1400(b), specifying that “patent venue is proper in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.” In 1957, this Court confirmed that patent venue should not be interpreted with reference to the general jurisdiction statute, holding that “28 U.S.C. 1400(b) . . . is the sole and exclusive provision controlling venue in patent infringement actions, and that it is not to be supplemented by the provisions of 28 U.S.C. 1391(c).” Fourco Glass Co. v. Transmirra Prods. Corp., 353 U.S. 222, 223 (1957).

In 1990, the Federal Circuit declined to apply this Court’s longstanding precedent and decided that the general venue statute should define interpretation of the patent venue statute. It made this decision on the basis of a ministerial change Congress made in 1988 to 28 U.S.C. § 1391. VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574, 1583 (Fed. Cir. 1990). That statutory language changed the wording in 28 U.S.C. § 1391, from defining residence “for venue purposes” to defining residence “for purposes of venue under this chapter.” There was no indication that Congress intended this change to impact the patent venue statute.

The Federal Circuit’s conclusion that Congress’s ministerial change overruled this Court’s longstanding precedent is incorrect for at least two reasons. First, it violates fundamental rules of statutory construction. It is well-established that Congress “does not alter the fundamental details of a regulatory scheme in vague terms or ancillary provisions—it does not, one might say, hide elephants in mouseholes.” Whitman v. American Trucking Assns., Inc., 531 U.S. 457, 468 (2001) (citing MCI Telecomm. Corp. v. American Tel. & Tel. Co., 512 U.S. 218, 231 (1994); FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 159-60 (2000)).

Second, the Federal Circuit’s interpretation renders the second half of § 1400(b) largely superfluous. That section provides:

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

The term “resides” in § 1400(b) must mean something different than having “a regular and established place of business.” Otherwise, there would have been no reason to include both provisions in the venue statute, or to link them through the disjunctive term “or.” In Brunette, this Court, interpreting 28 U.S.C. § 1400(b) as well as 28 U.S.C. § 1391(d), confirmed that where a corporation “resides” is where it is incorporated. Brunette Mach. Works v. Kockum Indus., 406 U.S. 706, n.2 (1972).

Instead of parsing § 1400(b) carefully, the Federal Circuit has chosen to read the § 1391(c)(2) definition of corporate residence for general venue purposes into the specific patent venue provision. In relevant part, § 1391(c)(2) provides that corporate defendants:

shall be deemed to reside . . . in any judicial district in which such defendant is subject to the court’s personal jurisdiction with respect to the civil action in question . . . .

For patent infringement cases, the relevant aspect of personal jurisdiction is typically specific jurisdiction, which focuses on whether the defendant’s suit-related conduct establishes a “substantial connection” with the judicial forum in question. Walden v. Fiore, 134 S.Ct. 1115, 1121 (2014). But a corporation will have established a suit-related “substantial connection” with, and thus be subject to jurisdiction in, any district in which it “has committed acts of infringement and has a regular and established place of business.” So the Federal Circuit’s decision to read the § 1391(c) definition of “resid[ing]” into § 1400(b) renders the second half of the latter section superfluous as to corporations, a category which includes virtually all patent defendants. A judicial reading that renders half of a statutory provision superfluous is strongly disfavored. United States v. Jicarilla Apache Nation, 131 S.Ct. 2313, 2330 (2011) (“‘As our cases have noted in the past, we are hesitant to adopt an interpretation of a congressional enactment which renders superfluous another portion of that same law.’” (quoting Mackey v. Lanier Collection Agency & Serv., Inc., 486 U.S. 825, 837 (1988))); Babbitt v. Sweet Home Chapter of Communities for a Great Oregon, 515 U.S. 687, 698 (1995) (noting “[a] reluctance to treat statutory terms as surplusage”).

The Federal Circuit’s expansive, and we believe incorrect, interpretation of 28 U.S.C. § 1400(b) effectively allows patent owners to file suit in any federal district where an allegedly infringing product is sold. In re TC Heartland, LLC, No. 2016-105, at 10 (Fed. Cir. Apr. 29, 2016) (holding that jurisdiction is proper in a patent suit “where a nonresident defendant purposefully shipped accused products into the forum through an established distribution channel and the cause of action for patent infringement was alleged to arise out of those activities”). The widespread availability of products over the internet means, in effect, that patentholders can bring their suits in any district in any state in the country.

2. Permissive Venue has Fueled and Enabled Forum Shopping and Selling, Patent Trolls, and Case Concentration

The Federal Circuit’s expansive interpretation of 28 U.S.C. §1400(b) has harmed the patent system in three distinct ways. It has led to forum selling and forum shopping, it has contributed to the growth of opportunistic patent litigation by patent trolls, and it has led to undue case concentration.

Patent lawyers today spend a great deal of time figuring out the best districts in which to file patent cases, and for good reason. The district in which you file your patent case has consequences for how much your case will cost, how long it will last, and whether you will prevail in court. Mark A. Lemley, Where to File Your Patent Case, 38 AIPLA Q.J. 401 (2010); Brian J. Love & James C. Yoon, Predictably Expensive: A Critical Look at Patent Litigation in the Eastern District of Texas, Stan. Tech. L. Rev. ___ (forthcoming, 2016).

The choice of venue enabled by the Federal Circuit’s liberal interpretation of the statute has created an incentive for courts to differentiate themselves in order to compete for litigants and “sell” their forum to prospective plaintiffs. See J. Jonas Anderson, Court Competition for Patent Cases, 163 U. Pa. L. Rev. 631 (2015); Daniel M. Klerman & Greg Reilly, Forum Selling, 89 S. Cal. L. Rev. 241 (2016).

Among district courts, the Eastern District of Texas is the clear forum of choice for patent plaintiffs. It has been the most popular venue for patent cases in eight of the last ten years. Chien & Risch, supra at 3. Whether intentionally or not, judges in the Eastern District of Texas have adopted rules and practices relating to case assignment, joinder, discovery, transfer, and summary judgment that attract patent plaintiffs to their district. Klerman & Reilly, supra; Matthew Sag, IP Litigation in U.S. District Courts: 1994-2014, 101 Iowa L. Rev. 1065 (2016) (detailing evidence of “forum selling” and five advantages to plaintiffs of filing suit in the Eastern District of Texas).

A study of all patent cases filed from 2014 to June 2016 quantifies some of the advantages. Love & Yoon, supra. Compared to their colleagues across the nation, judges in the Eastern District of Texas take 150 additional days on average to rule on motions to transfer, id. at 15, and are 10 percentage points less likely to stay the case in favor of an expert adjudication on the validity of the patent by Patent and Trademark Office (PTO) in inter partes review, id. at 26., despite the fact that patents asserted in the Eastern District of Texas are challenged in inter partes review more often than patents asserted in any other district. Saurabh Vishnubhakat, Arti Rai, & Jay Kesan, Strategic Decision Making in Dual PTAB and District Court Proceedings, 31 Berkeley Tech. Law J. 45, 109 (2016). At the same time, judges in the Eastern District of Texas have adopted discovery rules that begin earlier, end sooner, and require broader disclosure than just about anywhere else in the country. Love and Yoon, supra at 19-22 (comparing discovery and other pretrial deadlines applicable in the Eastern District of Texas and District of Delaware). In combination, relatively early and broad discovery requirements and relatively late rulings on motions to transfer ensure that defendants sued in the Eastern District of Texas will be forced to incur large discovery costs, regardless of the case’s connection to the venue.

However, not all types of plaintiffs choose to take advantage of the leverage that these rules and procedures make possible. Patent assertion entities (PAEs), or patent “trolls” use patents primarily to gain licensing fees rather than to commercialize or transfer technology. Colleen V. Chien, From Arms Race to Marketplace: The Complex Patent Ecosystem and Its Implications for the Patent System, 62 Hastings L.J. 297 (2010) Trolls make particular use of the advantages provided by the Federal Circuit’s permissive approach to forum shopping. Since 2014, over 90 percent of patent suits brought in the Eastern District of Texas were filed by trolls established for the purpose of litigating patent suits. Love & Yoon, supra at 9. By contrast, operating companies, individuals, and universities are more likely to sue in other districts. Chien & Risch, supra at 3-4, 40.

The troll business model explains this difference in behavior. As the FTC’s recent report describes, “litigation PAEs” sign licenses that are “less than the lower bounds of early stage litigation costs,” a finding “consistent with nuisance litigation, in which defendant companies decide to settle based on the cost of litigation rather than the likelihood of their infringement.” Federal Trade Commission, Patent Assertion Entity Activity: An FTC Study, https://www.ftc.gov/reports/patent-assertion-entity-activity-ftc-study. Rather than a decision on the merits and damages commensurate with the value of patented technology, litigation PAEs instead seek to leverage the high cost of litigation to coerce nuisance-value settlements keyed not to the merits of the lawsuit, but the cost of litigation. Mark A. Lemley & A. Douglas Melamed, Missing the Forest for the Trolls, 113 Colum. L. Rev. 2117 (2013). Further, unlike operating companies that sell products, litigation PAEs generally lack customers and regular operations and therefore have the flexibility to incorporate and file suit based solely on litigation considerations, through shell companies or otherwise.

While forum shopping in general impairs the operation of law, disadvantages those who lack the resources to engage in forum shopping, and creates economic waste, Jeanne C. Fromer, Patentography, 85 N.Y.U. L. Rev. 1444, 1464-1465 (2010), the rise of the troll business model exacerbates these problems in patent litigation, creating a particularly urgent need for the Court to hear this case. This Court has previously warned against the problems of abusive patent litigation. More than a century ago, it worried about the rise of “a class of speculative schemers who make it their business to watch the advancing wave of improvement, and gather its foam in the form of patented monopolies, which enable them to lay a heavy tax upon the industry of the country, without contributing anything to the real advancement of the arts.” Atlantic Works v. Brady, 107 U.S. 192, 200 (1883). And in Commil v. Cisco, this Court said:

The Court is well aware that an “industry has developed in which firms use patents not as a basis for producing and selling goods but, instead, primarily for obtaining licensing fees.” eBay Inc. v. MercExchange, L. L. C., 547 U. S. 388, 396 (2006) (KENNEDY, J., concurring). Some companies may use patents as a sword to go after defendants for money, even when their claims are frivolous.

576 U.S. __, 135 S.Ct. 1920 (2015).

Because troll suits now dominate patent litigation nationwide, their filing patterns have led to an overall concentration of 44% of all patent cases in the Eastern District of Texas in 2015. Among cases initiated 2014 through 2016, one U.S. District Judge on the Eastern District of Texas—Judge Rodney Gilstrap of Marshall, Texas—was assigned almost one quarter of all patent case filings nationwide, more than the total number of patent cases assigned to all federal judges in California, New York, and Florida combined.^[2]

This level of concentration is a problem for the legal system whatever one thinks of the decisions of the Eastern District of Texas and regardless of how fair and capable the judges there are. Simply from a logistical standpoint, the current caseload in the Eastern District of Texas is problematic. If even 10 percent of the 1,686 patent cases assigned to Judge Gilstrap in 2015 go to trial, he will need to preside over three to four patent trials per week every week for an entire year to avoid creating a backlog.

Further, when Congress decided to consolidate patent appeals in the newly-created United States Court of Appeals for the Federal Circuit, it deliberately chose to include both appeals from the United States Patent and Trademark Office and the district courts, so the new court would not hear only appeals from patent owners. And it considered and rejected proposals to create a specialized district court to hear patent cases. But the Federal Circuit’s interpretation of § 1400(b) has in practice created just such a court.

The current distribution of patent litigation filings is the result of strategic behavior by a specific type of patent enforcer, not an artifact of proximity to the original locus of invention or alleged infringement. Forum-shopping plaintiffs will naturally gravitate towards whatever district seems to have the most favorable rules. The effect of the Federal Circuit’s decision to expand patent venue beyond the scope of the statute and this Court’s decisions has been to create a de-facto specialized patent trial court, one chosen by litigants on one side rather than by Congress.

CONCLUSION

The Federal Circuit’s permissive venue rule has fundamentally shaped the landscape of patent litigation in ways that harm the patent system, by enabling extensive forum shopping and forum selling, supporting opportunistic patent litigation by patent trolls, and creating undue case concentration. This Court should grant certiorari in order to curb abuse of venue based on its misinterpretation of § 1400(b).

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^[1] No person other than the amici and their counsel participated in the writing of this brief or made a financial contribution to the brief. Letters signifying the parties’ consent to the filing of this brief are on file with the Court.

^[2] According to Lex Machina, between January 1, 2014 and June 30, 2016 Judge Gilstrap was assigned 3,166 new patent suits, more than the combined total of all district courts in California, Florida, and New York: 2,656. Love & Yoon, supra, at 5 (collecting these statistics).

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Signed, Professor John R. Allison (Texas); Professor Margo Bagley (Emory); Professor James Bessen (BU); Professor Jeremy Bock (Memphis); Professor Daniel H. Brean (Akron); Professor Michael A. Carrier (Rutgers); Professor Michael W. Carroll (American); Professor Bernard Chao (Denver); Professor Tun-Jen Chiang (George Mason); Professor Colleen V. Chien (Santa Clara); Professor Andrew Chin (UNC); Professor Robert Cook-Deegan (ASU); Professor Rochelle Dreyfuss (NYU); Dr. Dieter Ernst (Honolulu); Professor Robin C. Feldman (Hastings); Professor Lee Fleming (Berkeley); Professor Brian Frye (Kentucky); Professor William Gallagher (Golden Gate); Professor Shubha Ghosh (Wisconsin); Professor Eric Goldman (Santa Clara); Professor Bronwyn H. Hall (Berkeley); Professor Yaniv Heled (Georgia State); Professor Christian Helmers (Santa Clara); Professor Joachim Henkel (Technische Universität München); Professor Susan Helper (CWRU); Professor Tim Holbrook (Emory); Professor Herbert Hovenkamp (Iowa); Professor William Hubbard (Baltimore); Dr. Xavier Jaravel (Stanford); Professor Dennis S. Karjala (ASU); Professor Peter Lee (UC Davis); Professor Mark A. Lemley (Stanford); Professor David K. Levine (WashU); Professor David S. Levine (Elon); Professor Doug Lichtman (UCLA); Professor Yvette Joy Liebesman (SLU); Professor Orly Lobel (USD); Professor Brian Love (Santa Clara); Professor Phil Malone (Stanford); Professor Michael J. Meurer (BU); Dr. Shawn Miller (Stanford); Professor Matthew Mitchell (Toronto); Professor Susan Barbieri Montgomery (Northeastern); Professor Sean Pager (Michigan State); Professor Arti K. Rai (Duke); Professor Jacob H. Rooksby (Duquesne); Professor Jorge R. Roig (Charleston); Professor Matthew Sag (Loyola Chicago); Professor Pamela Samuelson (Berkeley); Ana Santos Rutschman (DePaul); Professor Lea Bishop Shaver (Indiana); Professor John L. Turner (Georgia); Professor Jennifer Urban (Berkeley); Professor Eric von Hippel (MIT).