Tag Archives: obviousness

In my view, Obviousness is the most fundamental of patent law doctrines, and certainly much of the work of patent attorneys is to convince patent examiners that the claims are not obvious.

Supreme Court Patent Cases: Previewing the October Term 2016

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by Dennis Crouch

When the Supreme Court’s October 2016 Term begins in a few weeks, its first patent hearing will be the design patent damages case of Samsung v. Apple. In Samsung, the Court asks: Where a design patent is applied to only a component of a product, should an award of infringer’s profits be limited to those profits attributable to the component?  The statute at issue – 35 U.S.C. § 289 – indicates that, someone who (without license) “applies” the patented design (or colorable imitation thereof) to an article of manufacture, “shall be liable to the owner to the extent of his total profit.”  Up to now, courts have repeatedly held that the “profits” are profits associated with the product (i.e., the article of manufacture) being sold, but Samsung is asking that the profits be limited only to components of the product closely associated with the patented design.  Although Apple’s position is supported by both the text and history and is the approach easiest to calculate, I expect that many on the Court will be drawn to the potential unjust outcomes of that approach.  Apple wins in a 4-4 split.  Oral arguments are set for October 11, 2016.

The court has granted certiorari in two other cases for this October 2016 term with briefing ongoing. In Life Tech v. Promega, the court again takes up the issue of exporting components of a patented invention and the extraterritorial application of US law.  35 U.S.C. § 271(f)(2). The question here is whether export of one component can legally constitute the “substantial portion of the components” required by statute for liability to attach.  In the case, the component (Taq) is a commodity but is also an admitted critical aspect of the invention. In SCA Hygiene v. First Quality, the Court asks whether the equitable defense of laches applies in patent cases.  The case is a follow-on to the Supreme Court’s 2014 holding in Petrella v. MGM that laches does not apply in copyright cases.  In its decision, the Federal Circuit distinguished Petrella based both upon statutory and policy arguments. Oral arguments in SCA are set for November 1, 2016.

The three pending petitions most likely to be granted certiorari are Impression Products (exhaustion); Amgen (BPCIA); and GlaxoSmithKline (antitrust reverse payments)   However, these cases are awaiting views of the Solicitor General — which likely will not be filed until well after the presidential election.

A substantial number of cases are set for the Supreme Court’s September 26 conference.  These include the constitutional challenges to IPR coming in MCM and Carl Cooper as well as the interesting eligibility case of Genetic Tech v. Merial.

It looks to be an interesting term.

The big list:

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DuPont v. MacDermid Printing: The importance of a Patentee’s Pre-Filing Statements

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by Dennis Crouch

A skilled patent attorney working with a qualified searcher could cobble together a colorable obviousness argument against the vast majority of issued patent claims.  Part of the difficulty for patentees stem from the the billions of prior art references available via increasingly effective search tools. Even when an invention results from a ‘flash of genius,’ patent law typically back-fills extensive knowledge for the obviousness analysis – even when that knowledge was not actually available at the time of the invention.  The larger difficulty though is likely the large number of hard-to-pin-down facts such as the motivations, common sense, and level of creativity of a person having ordinary skill in the art.

The “expansive and flexible” approach to nonobviousness is frustrating to many, but it is seen as a feature of the system fully supported by the Supreme Court.  In KSR, the court wrote:

Throughout this Court’s engagement with the question of obviousness, our cases have set forth an expansive and flexible approach. . . . Rigid preventive rules that deny fact finders recourse to common sense… are neither necessary under our case law nor consistent with it.

KSR v. Teleflex (2007) [04-1350].  Conventional wisdom post-1980 has been that the factual inquiry makes summary judgment of obviousness difficult for a patent challenger.  Rather, obviousness goes to the jury.  Since KSR, that attitude has shifted somewhat.  (The even newer model is that obviousness goes to the PTO in an IPR proceeding – save that for a different essay).

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Summary Judgment of Obviousness: In DuPont v. MacDermid Printing (Fed. Cir. 2016) [15-1777], the NJ district court granted summary judgment of obviousness against the patentee DuPont – holding that the asserted claims of DuPont’s U.S. Patent 6,773,859 invalid under 35 U.S.C. 103.   The ‘859 patent relates to the manufacture of  a flexo plate for digital printing — a plate used to print digital images on flexible materials.   The claimed advance involves heating-up the plate to remove unpolymerized material (rather than using a harsh solvent).

The obviousness case combines two prior art references: “Martens [a 3M patent] teaches a process for developing an analog plate using heat” and “Fan [DuPont patent] teaches developing a digital plate using solvents.”   The inventor (Roxy Fan) is also the first named inventor of DuPont’s ‘859 patent being challenged in this case. The Fan prior-art patent, however, was filed a decade prior.  Reviewing these two references, the court found that the ‘859 patent uses “the same technology and processes pertaining to digital imaging” previously disclosed by Fan and the same thermal development process disclosed in Martens.  In finding a motivation-to-combine these references, the district court walked through several factors.

  • Limited set of potential combinations: The prior art only had two imaging styles (digital and analog) and four development techniques (thermal, etc.) – this makes the ‘859 combination more likely obvious to try.
  • Benefits of Moving to Digital: The prior art taught benefits of switching to digital (thus suggesting the substitution), including an article published by DuPont
  • Market Incentive: DuPont marketing material suggest a “strong incentive” to combine the thermal process with digital plates.

The district court also rejected DuPont’s evidence of commercial success, longfelt need, and industry praise – finding them insufficient to overcome the “strong showing of obviousness.”

On appeal of this summary judgment finding, DuPont focused on the standard-of-review – noting that the district court had failed to “draw reasonable inferences” in its favor.  In the process, DuPont pointed to a long list of factual disputes between the parties where it would be reasonable to draw different conclusions from the evidences.

The Federal Circuit affirmed – finding that the strong undisputed evidence of prior art and motivation to combine fully supported the summary judgment finding.

[T]he record contains strong evidence that a skilled artisan would have had a reason to combine two known technologies and would have had a reasonable expectation of success in doing so. Indeed, DuPont itself promoted the digital and thermal technologies as technological breakthroughs in prior art publications. Thus, in view of the record as a whole, even drawing all justifiable inferences in favor of DuPont, the objective evidence is insufficient to preclude summary judgment on the ultimate legal conclusion of obviousness.

Doomed by Its Own Prior Statements: The obviousness case against DuPont here is interesting because (1) one of the core prior art references was a DuPont reference and (2) DuPont’s own statements regarding its prior inventions led to the motivation-to-combine finding.  DuPont’s private case study will likely walk through and consider whether it should have taken a different pathway regarding the public disclosures.

Caveat: Although the patentee’s pre-filing disclosures are important – it is also important to remember that the question of obviousness is an objective analysis focusing on the hypothetical mind of a person having ordinary skill in the art.  What this means is that the patentee’s disclosures are should not be treated as “party admissions” and given special treatment in the obviousness analysis.  Rather, the disclosures are simply added to the body of knowledge available to the artisan.  Here, the Federal Circuit came dangerously close to crossing the line into giving information actually available to and created by DuPont special weight in the obviousness analysis.

 

Obviousness of the New Mixture

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Apotex v. Wyeth[1] is a relatively simple and straightforward nonobviousness decision in the pharma space (albeit non-precedential).  The Wyeth patent at issue here claims the compound that includes tigecycline mixed together with an acid as well as lactose.[2]  Although not claimed, the specification indicates that the mixture is beneficial because it helps tigecycline avoid degradation.  At the time of the invention (2005) tigecycline was a known tetracycline known to act as a broad spectrum antibiotic that degrades rapidly at a neutral PH.

The key prior art in the obviousness case was a Chinese patent publication that discloses minocycline mixed with both lactose and an acid in order to avoid degradation.[3]  Minocycline is a closely related tetracycline that is both structurally similar and operates by similar action.  (Tigecycline is a derivative of minocycline).

In both the Inter Partes Review proceedings and the appeal, the courts found insufficient motivation to combine the cited references by substituting the tigecycline into the minocycline compound.  Importantly here, the courts made this determination as a factual finding that “a skilled artisan would [not] have had a reason to combine the references.”[4]

Apotex (the challenger) argued that the similarity between the two forms of tetracycline and the fact that tigecycline was “known to work where other antibiotics have failed” both pushed toward a finding of a motivation to combine.  The courts however rejected this argument – finding that the structural similarities did not create “a potential motivating factor for a skilled artisan to substitute tigecycline for minocycline.”

[W]hile tigecycline is closely related to minocycline structurally and in terms of benefit, the Board did not err in concluding that there was insufficient basis in the record to show that it would have been obvious to a skilled artisan to substitute tigecycline in the prior art minocycline composition.

Although not mentioned by the courts, I would think it would also be important motivation to consider that – at the time of the invention here – tigecycline was not just some random minocycline derivative – rather tigecycline was being considered as an important last-resort MRSA treatment and under consideration for fast-track FDA approval.

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A first thought that comes to my head in this case is whether the outcome here stems from the fact that this is a pharmaceutical case rather than one focusing on electronics or mechanical engineering.  Perhaps not, the court does explain here the lack of assurances (pre-invention) that the claimed mixture would substantially reduce degredation.  That factual-setup can be distinguished from a case like KSR where a good engineer could give pre-assurances that they could get the combination to work.

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One aspect of the decision involves underlying distinctions between the ultimate question of obviousness (an issue of law) and the factual underpinnings (such as  motivation to combine references).  Here, of course, once the facts were determined, the question of law was instantly answered.

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Notes:

[1] Apotex Inc. v. Wyeth LLC, App. No. 15-1871 (Fed. Cir. August 16, 2016).

[2] U.S. Patent No. 7,879,828, claim 1 taken as typical.

[3] Chinese Patent Pub. No. 139055A.

[4] See In re Hyon, 679 F.3d 1363 (Fed. Cir. 2012).

En Banc Query: Must the PTO Allow Amendments in IPR Proceedings?

Patent,

AquaImageby Dennis Crouch

In its original Aqua Products decision, the Federal Circuit upheld the USPTO’s tight limits on amendment practice in IPR proceedings. Under the rules, a patentee has one opportunity to propose amendments or substitute claims. However, the proposal will only be granted if the patentee also demonstrates in the motion that the proposed amendments would make the claims patentable over the known prior art.

In a new order, the Federal Circuit has now granted the appellant’s en banc rehearing request – asking the parties to focus solely on the following questions regarding the burdens:

(a) When the patent owner moves to amend its claims under 35 U.S.C. § 316(d), may the PTO require the patent owner to bear the burden of persuasion, or a burden of production, regarding patentability of the amended claims as a condition of allowing them? Which burdens are permitted under 35 U.S.C. § 316(e)?

(b) When the petitioner does not challenge the patentability of a proposed amended claim, or the Board thinks the challenge is inadequate, may the Board sua sponte raise patentability challenges to such a claim? If so, where would the burden of persuasion, or a burden of production, lie?

En Banc Order.  The court has invited views of amici curiae.  Those briefs will be due October 5, 2016 (unless supporting the PTO’s position and then you get an extra month).  Appellant’s brief will be filed by September 26, 2016. Oral argument are already scheduled for Friday, December 9, 2016 at 10:00 a.m.

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The underlying case involves Aqua Products’ self-propelled robotic pool cleaner that uses an internal pump both as a vacuum cleaner to power the propulsion system.   U.S. Patent No. 8,273,183.  Competitor Zodiac Pool Systems filed for IPR which the PTO instituted as to some of the challenged claims and ultimately issued a final decision that the claims were invalid as obvious over a combination of two prior-art references.

Motion to Amend: In a timely motion, Aqua moved to amend three of the claims to include the limitations found in the non-instituted claims. (In particular, the patentee asked to substitute claims 1, 8, and 20 with claims 22-24 respectively.  The PTAB agreed that these new claims satisfied the formal requirements of Section 316(d), but refused to enter the amendment – finding that the patentee’s motion had failed to show that the substitute claims were distinguishable over the prior art.

The parties (Aqua & Zodiac) settled the underlying infringement case in April 2015 and so Zodiac did not participate in the appeal. However, the USPTO intervened in the case to defend Aqua’s appeal of the PTAB invalidity holding.

The PTO’s position in the case remains defiant.  The Agency argues that its rules regarding amendments and its application of those rules are both reasonable and entitled to substantial deference.

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Documents:

 

 

 

 

 

The Limited Role of Common Sense in the Obviousness Analysis

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by Dennis Crouch

Decisions by the Patent Trial & Appeal Board are rarely overturned on appeal.  I expect that result is largely due to the fact that the Patent Office has staffed the Board with highly trained and skilled patent law experts.  The other important factor though, is the standard of review.  Factual findings made by the Board are reviewed for “substantial evidence” — meaning that the findings need not be “correct” but rather rather merely supported by “more than a mere scintilla of evidence.”  Thus, patentees are hard-pressed to get a reversal based upon erroneous factual conclusions.  (For a counter-example, see In re Warsaw Ortho (Fed. Cir. 2016).

In the new decision captioned Arendi S.A.R.L. v. Apple Inc., Appeal No. 15-2073 (Fed. Cir. 2016) [ArendiApple], the court has reversed the Board – finding an erroneous application of the law.  This approach to an appeal tends to work better – because issues of law decided by the PTAB are ordinarily reviewed de novo on appeal (except where the agency’s interpretation is given deference).

The holding:

Because the Board misapplied our law on the permissible use of common sense in an obviousness analysis, we reverse.

The software patent at issue involves a identifying a key in a document (such as a person’s name) and then searching a separate data-source for further information on that key. U.S. Patent No. 7,917,843 (claiming 1998 priority).

Single Reference Plus Common Sense: In its obviousness decision, the Board identified a single prior art reference (Pandit) that teaches the recognition of text classes (such as phone numbers) and then providing additional suggestions based upon that recognition (such as dial, add to contacts, etc.).  However, Pandit did not expressly teach a search of the separate data-source.  In concluding that the invention was obvious, the Board found that it would have been “reasonable . . . common sense” that Pandit would search through the contact list for the phone number before actually adding a new contact number. The board wrote:

[I]t would have been obvious to the ordinary artisan to utilize a computerized search for duplicate telephone entries when entering a telephone number in an electronic address book database as taught by Pandit.

In making its determination, the Board held that common sense must be applied throughout the obviousness analysis, and not only when combining references that disclose all the required limitations.

On appeal, the Federal Circuit rejected the Board’s analysis – holding that Common Sense must be confined to its “proper place in the obviousness inquiry.” (I expect that this line from the opinion is one that will likely upset members of the Supreme Court because it is ridiculous.).

Caveats to Common Sense: In confining the use of common sense, the Federal Circuit identified three “caveats” to its use:

  1. “First, common sense is typically invoked to provide a known motivation to combine, not to supply a missing claim limitation.”
  2. Second, when common sense is used to supply a missing claim limitation, it should only apply where the missing limitations is “unusually simple and the technology particularly straightforward.”
  3. “Third . . . common sense . . . cannot be used as a wholesale substitute for reasoned analysis and evidentiary support, especially when dealing with a limitation missing from the prior art references specified.”

Although not listed specifically as a caveat, the court also discussed a fourth – that statements of common sense or general knowledge cannot overcome “important” claim limitations without supporting evidence.

Question of Substantial Evidence: Stepping back from these broad statements of law, the court partially reforms its opinion to the proper question –  “whether there was substantial evidence supporting the Board’s finding that common sense would lead one to search for the telephone number in Pandit.”  In the appeal, the Federal Circuit found that no evidence had been presented regarding the common sense conclusion but rather only attorney argument. “Specifically, Appellees have failed to show why it would be common sense for the ‘Add to address book’ function to operate by first ‘search[ing] for entries with the same telephone number.'”

To be clear – I am 100% on board here – that an obviousness finding must be supported by evidence.  Unfortunately, that is not what the Supreme Court appeared to rule in KSR v. Teleflex — where it suggested that “analysis” can do the trick.

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Arendi has infringement cases pending in Delaware against Blackberry, Motorola, Google, Apple, Sony, Nokia, HTC, Yahoo!, Samsung, and LG.  Arendi is a Luxembourg patent owner created by the ‘843’s Norwegian inventor Atle Hedløy.

Enhancing Damages in Halo v. Pulse

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The 2012 jury verdict form in Halo v. Pulse asks “Has Halo proven that it is highly probable that Pulse’s infringement was willful?”  The jury answered “YES.”

HaloVerdict

Judge Pro instructed the jury that:

Halo must prove willful infringement by clear and convincing evidence. This means Halo must persuade you that it is highly probable that prior to the filing date of the complaint, Pulse acted with reckless disregard of the claims of Halo’s patents. To demonstrate such reckless disregard, Halo must persuade you that Pulse actually knew or it was so obvious that Pulse should have known, that Pulse’s actions constituted infringement of a valid patent. In deciding whether Pulse acted with reckless disregard for Halo’s patents, you should consider all of the facts surrounding the alleged infringement including, but not limited to, whether Pulse acted in a manner consistent with the standard of commerce for its industry. You should base your decision on the issue of willful infringement on all of the evidence, regardless of which party presented it.

When it originally denied enhanced damages, the district court did not mention this verdict but rather focused on its conclusion that Pulse had a legitimate (but ultimately losing) obviousness defense sufficient to defeat the ‘objectively reckless’ portion of the Seagate willfulness analysis.

On remand the district court will be hard-pressed to find that the infringement was not willful – based upon the apparently unchallenged verdict.  Still, it will be within the district court’s discretion to decide whether the willfulness warrants enhanced damages under Section 284. If enhanced damages are warranted, the district court must then determine how much to award (with an upper limit of treble damages).

The setup thus-far appears to fairly neatly wrap up the case in Halo’s favor in terms of enhanced damages.  Perhaps the only abuse-of-discretion at this point would occur if the district court refused to award any enhancement at all.  In the four-years since the 2012 jury verdict, Judge Pro has retired and a new judge assigned to the case – it will be interesting to see his take on this decade-long litigation.

Federal Circuit: District Courts Must Exercise their Discretion and in Deciding Whether to Enhance Infringement Damages

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by Dennis Crouch

Halo Electronics v. Pulse Electronics (Fed. Cir. 2016)

On remand from the Supreme Court, the Federal Circuit has shifted its holding on enhanced damages (as required by the Supreme Court) and remanded for reconsideration:

Because the district court applied the Seagate test in declining to enhance damages . . . we vacate its unenhanced damages award with respect to products that were delivered in the United States, and remand for further proceedings consistent with the Supreme Court’s opinion on enhanced damages.

The only remaining in the case is that of enhanced damages under 35 U.S.C. § 284.  In its Halo decision, the Supreme Court held that the provision “gives district courts the discretion to award enhanced damages . . . in egregious cases of misconduct beyond typical infringement.”  The court rejected the Federal Circuit’s prior test under Seagate, noting that it was both “unduly rigid” and “impermissibly encumbers the statutory grant of discretion to district courts.” (quoting Octane Fitness).

According to the evidence previously presented,

“Pulse allegedly knew of the Halo patents as early as 1998. In 2002, Halo sent Pulse two letters offering licenses to its patents, but did not accuse Pulse of infringement in those letters. The president of Pulse contacted a Pulse engineer, who spent about two hours reviewing the Halo patents and concluded that they were invalid in view of prior Pulse products. Pulse did not seek an opinion of counsel on the validity of the Halo patents at that time and continued to sell its surface mount electronic package products. A Pulse witness later testified that she was “not aware of anyone in the company . . . that made a conscious decision” that “it was permissible to continue selling” those products.”

Hearing this evidence, the jury found that “it [was] highly probable that Pulse’s infringement was willful.”  However, the district court held that it could not find willfulness under Seagate because the obviousness defense was not objectively baseless.

On remand, the district court must now “exercise its discretion and to decide whether, taking into consideration the jury’s unchallenged subjective willfulness finding as one factor in its analysis, an enhancement of the damages award is warranted.”  The statement from the Federal Circuit here is interesting and important in its focus on the question of enhancement rather than willfulness. Notably, the court does not suggest that the district court first determine whether Pulse was a willful infringer and then determine whether to enhance damages.  Rather, the Federal Circuit indicates that the discretion for enhanced damages is a full bundle of discretion and willfulness only “one factor in [the] analysis.”  This approach matches with the statutory language of Section 284 that does not mention willfulness but rather simply indicates that “the court may increase the damages up to three times the amount found or assessed.”

florence-nightingale-1[1]At the Time of the Infringement: Of course, as the Supreme Court wrote, the discretion is not limited. In considering Pulse’s culpability, the Federal Circuit also noted the Supreme Court’s statement that “culpability is generally measured against the knowledge of the actor at the time of the challenged conduct.”   Thus, an important question on will be the level of culpability at the time of infringement. There will also be a question of who-knew-what and the extent that the court will follow Florence Nightengale’s opinion that the person ‘in charge’ must “not only to carry out the proper measures yourself but to see that every one else does so too; to see that no one either willfully or ignorantly thwarts or prevents such measures.”

Supreme Court Challenge to ITC’s Broad Authority

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by Dennis Crouch

DBN (formerly DeLorme) v. US International Trade Commission (Supreme Court 2016)

In addition to district court infringement litigation, U.S. law offers a second avenue for patent enforcement – the United States International Trade Commission (USITC).  In today’s free-trade environment, the USITC’s role is somewhat counter — protecting of U.S. industry.  A substantial portion of USITC work involves enforcement actions to prohibit importation into the U.S. of “articles that … infringe a valid and enforceable” patent. See 19 U.S.C. 1337.

Despite the statutory language “articles that . . . infringe”, in Suprema an en banc Federal Circuit held that the USITC has the power to block importation based upon an inducement theory of infringement — even if the imported products themselves are not infringing. (6 – 4 en banc decision)

In a well written petition, DBN has challenged the holding of Suprema – asking “Whether the International Trade Commission’s jurisdiction over the importation of ‘articles that … infringe a valid and enforceable’ patent extends to articles that do not infringe any patent.”

The case also involves an interesting separation of powers issue — although the USITC found the patent enforceable, a district court found the patent invalid.  DBN terms this a “zombie patent” penalty.  In the case, the ITC first issued the exclusion order and the patent was later found invalid.  In that interim, DBN violated the exclusion order and the ITC assessed a $6 million contempt penalty that is being challenged in the second question presented: “Whether the Federal Circuit erred in affirming the Commission’s assessment of civil penalties for the domestic infringement of a patent that has been finally adjudicated to be invalid.”

USITC Procedure sets up the USITC as the party prosecuting the case rather than the patentee. As such, the agency is the named respondent and will be represented by the Solicitor’s Office. I expect that the patentee BriarTek will also weigh-in.  The patent at issue is U.S. Patent No. 7,991,380 and covers an emergency satellite communication system.  The asserted claims were found invalid as anticipated and/or obvious.  That holding was then affirmed on appeal by the Federal Circuit.

Choice of Law Compared to Subject Matter Jurisdiction

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One thing I have to deal with a lot when advising lawyers — whether practitioners for prosecution matters or litigators in patent case (or other stuff) — is the difference between subject matter jurisdiction and choice of law.

First, I cannot tell you how important this issue can be. For example, under some state rules public information is confidential; it’s not under the USPTO rules.  If state rules apply, I may have to ask a client for permission before I disclose a prior art patent to the Office.  That sounds like a silly example, and it is, but you’d be surprised what “experts” I’ve testified against say sometimes…

So let me give a simple walk through.

Ordinarily, a state bar is going to be able to discipline a lawyer for conduct occurring in representing clients in a state even if the practice is entirely federal and even if the lawyer is not licensed in a state.  So, if Bob is a patent lawyer licensed only in Minnesota and is prosecuting an application for an Iowan, the Iowa authorities (whether it’s disciplinary counsel or the court, I don’t know) are going to be able to subject him to discipline.  Likewise, more obviously, the OED can discipline him.

What rules apply?  The goal of modern choice of law principles in legal ethics is to make it so that one set of rules applies and we can easily figure that out.  Where a matter is pending before a tribunal, the tribunal’s rules will generally apply.  So, if Bob files the application and misses a deadline, the USPTO’s rule about neglect, or competence, should be applied by both the Iowa bar and the OED.

Here is the USPTO Rule on subject matter jurisdiction, which is unique to the Office, but notice how it defines its reach — to practice before the office:

All practitioners engaged in practice before the Office… are subject to the disciplinary jurisdiction of the Office….. A person not registered or recognized to practice before the Office is also subject to the disciplinary authority of the Office if the person provides or offers to provide any legal services before the Office.

“Proceeding before the Office” is itself defined:  “Proceeding before the Office means an application for patent, an application for reissue, a reexamination, a protest, a public use matter, an inter partes patent matter, correction of a patent, correction of inventorship, an application to register a trademark, an inter partes trademark matter, an appeal, a petition, and any other matter that is pending before the Office.”

So, plainly Bob is involved in a proceeding before the Office and the OED could discipline him.  Can the OED apply Iowa’s Rules to his conduct?  Do they apply? Before we get there, let’s see if the OED could discipline Bob because Bob had violated an Iowa rule — without Iowa already having done so.

Another subsection of that same USPTO regulation in title 37 of the CFR identifies what is a basis for OED discipline:

The following, whether done individually by a practitioner or in concert with any other person or persons and whether or not done in the course of providing legal services to a client, or in a matter pending before the Office, constitute grounds for discipline or grounds for transfer to disability inactive status.

(1) Grounds for discipline include:

(i) Conviction of a serious crime;

(ii) Discipline on ethical grounds imposed in another jurisdiction or disciplinary disqualification from participating in or appearing before any Federal program or agency;

(iii) Failure to comply with any order of a Court disciplining a practitioner, or any final decision of the USPTO Director in a disciplinary matter;

(iv) Violation of any USPTO Rule of Professional Conduct; or

(v) Violation of the oath or declaration taken by the practitioner. See § 11.8.

So, unless some other agency or court has disciplined a practitioner, or one of the other specific acts has occurred, the OED has to find that a practitioner violated a USPTO Rule.  So, the OED has to find that Bob violated the USPTO Rules.

Now for Iowa.  (I used to speak there every year!  Why haven’t they invited me back in a couple years?).  Let’s do it in reverse order.  What rules would Iowa apply to Bob’s conduct?  Luckily, it’s the USPTO rules, as Iowa Rule 32:805(b) makes clear:

(b) Choice of Law. In any exercise of the disciplinary authority of Iowa, the rules of professional conduct to be applied shall be as follows:

(1) for conduct in connection with a matter pending before a tribunal, the rules of the jurisdiction in which the tribunal sits, unless the rules of the tribunal provide otherwise; and

(2) for any other conduct, the rules of the jurisdiction in which the lawyer’s conduct occurred or, if the predominant effect of the conduct is in a different jurisdiction, the rules of that jurisdiction shall be applied to the conduct. A lawyer shall not be subject to discipline if the lawyer’s conduct conforms to the rules of a jurisdiction in which the lawyer reasonably believes the predominant effect of the lawyer’s conduct will occur.

The USPTO is a “tribunal.”  It defines itself as one!  See 37 C.F.R. 11.1 (“Tribunal means the Office…”). So, the Iowa Rules won’t apply to Bob’s conduct; even if Iowa tried to discipline Bob, it would apply the USPTO Rules.

Warning:  not every state has the same version of Rule 8.5, and some have weird carve outs (e.g., D.C.).

Now, if Iowa wanted to discipline Bob, does it have subject matter jurisdiction to do so?  It does!  Here is the rest of Iowa’s rule 8.5:

(a) Disciplinary Authority. A lawyer admitted to practice in Iowa is subject to the disciplinary authority of Iowa, regardless of where the lawyer’s conduct occurs. A lawyer not admitted in Iowa is also subject to the disciplinary authority of Iowa if the lawyer provides or offers to provide any legal services in Iowa. A lawyer may be subject to the disciplinary authority of both Iowa and another jurisdiction for the same conduct.

(Remember, Bob’s licensed only in Minnesota.)  So, we end up with a nice good, predictable approach.  A recent case analyzing the subject matter jurisdiction issues, but not the choice of law issue, is York v. W. Va. Office of Disciplinary Counsel, 744 S.E.2d 293 (2013).  According to this opinion, (scroll down to top of page 26), in an unreported later decision, Mr. York was disciplined.

(By the way, Minnesota could also discipline Bob, and it would also apply the USPTO rules in doing so.  Whew!)

Here, unless the facts are weird, Bob’s conduct would violate both Iowa and the USPTO rules, and Minnesota’s for that matter, so who cares?

Like I said at the start, there are critical differences between the USPTO rules and many state rules and often those differences tell us whether Bob keeps his license, or not. More often, choice of law becomes an issue in disqualification motions and in legal malpractice cases.  Ethical rules like state bar rules and then USPTO rules are are applied in disqualification and malpractice cases.  If something is ethical under the USPTO rules, but unethical under state law, choice of law may provide the answer to what’s right — whether a client has a malpractice claim, or a lawyer is subject to disqualification.

Where it gets even more interesting is if the conduct occurs before the application is filed, and so there is no matter before a tribunal (yet).  Some choice of law rules state that that apply to matters that going to be before a tribunal, but many don’t.  Others say that the cover only the lawyer who appears before the tribunal, so what about a lawyer who does work in the office on an application but whose name doesn’t appear on the filing?  What rules apply?  What if it’s an assignment that’s incompetently drafted (probably won’t matter but you see my point)?  What if…

Finally, if state law somehow does apply to conduct before the office, then it may be that a preemption analysis is required, because the USPTO rules do narrowly preempt state law to the contrary.

Obviousness for Pharma/BIO

Patent,

The new petition for writ of certiorari in MacDermid v. DuPont focuses on the central question of U.S. patent law – obviousness. In the case, the patent challenger asks that the Supreme Court reinvigorate the doctrine with flexibility – especially with regard to the ‘unpredictable arts.’  The question presented:

Whether the Federal Circuit has erred in holding that there “must” be a proven “reasonable expectation of success” in a claimed combination invention in order for it to be held “obvious” under 35 U.S.C. § 103(a).

It is a well known secret that both the USPTO and the Federal Circuit treat pharmaceutical and biotechnology obviousness cases differently than they do electronics, software, and mechanical inventions.  This has to be kept a secret though, because both are applying the same law and the same Supreme Court precedent.  The case here looks to rejoin the two — in a way that makes it easier to invalidate the pharma/bio patents.

Read the petition: MacDermid

Prof. Radin’s Patent Notice and the Trouble with Plain Meaning

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By Jason Rantanen

Professor Margaret Radin, who recently retired from the University of Michigan Law School, is a leading scholar known for her work in property theory, contracts law, intellectual property, and internet commerce.  She’s best known to my students  for her articulation of a modern personhood theory of property in Property and Personhood, 34 Stan. L. Rev. 957 (1982).

In her essay Patent Notice and the Trouble with Plain Meaning forthcoming in the Boston University Law Review, Professor Radin offers her thoughts on a topic at the heart of contemporary debates in patent law: the extent to which the words of claims can operate as boundaries that provide the same degree of notice that we expect in the real property context. The abstract reads:

In their book, Patent Failure, James Bessen and Michael Meurer took the position that notice of the scope of a patentee’s property right is usefully analogous to notice conveyed by real property boundaries. In this essay I argue to the contrary that the idea that patent claim language could be rendered determinate enough to justify an analogy with physical fences or metes and bounds is illusory. Patent claims raise the question, in a way that fences do not, of how words “read on” objects in, or states of, or events in the world. I take a small detour through the language theory of Quine as backdrop to my argument that there is no such thing as plain meaning, at least not in situations involving innovative products and processes where there is money at stake. I draw on three landmark patent cases — Markman, Phillips, and Festo — to illustrate this basic point. In my concluding Postscript I bring the big picture into play. The costs of providing better notice, even if that were possible, might outweigh the gains. Plus, even if the analogy with physical boundaries and the commitment to plain meaning were not illusory, such rigidity in interpreting claims would undermine a significant feature of the patent system: the flexibility to reward breakthrough inventions proportionately to their importance.

Professor Radin’s discussion is worth a read for the eloquent way that she captures and synthesizes the raw strands floating around in current discussions about patent claims.

Viewed through the lens of my current projects, though, her essay raises deeper questions about the meaning of claim construction itself.  Over the last two decades, patent law has experienced the emergence of the perception that claim construction is simply the process of interpreting the meaning of the words in the claims.  From Markman to Cybor to Phillips, claim construction grew into a search for linguistic meaning.  Even Teva reinforces this perception, with its focus on the role of evidence in determining the meaning of key claim terms.

But patent law’s dirty secret is that claim construction isn’t just about divining the linguistic sense of words and phrases in the claims.  That’s a seemingly fine inquiry when analyzing questions such as infringement, or anticipation or even, perhaps, nonobviousness.  Yet when it comes to other issues in patent law–enablement, written description and especially § 101–defining the meaning of words is less central to the analysis.   To be sure, sometimes the formalized procedure of Phillips does matter in enablement.  Liebel-Flarsheim and Automotive Technologies offer two examples.  But for the most part, the formalized claim construction that we’re used to is absent from the Federal Circuit’s enablement, written description and § 101 determinations.

Nevertheless, claim construction of a sort is present.  The court articulates something that it uses in its analysis.  In the enablement and written description contexts, I’ve come to call this something a target that must be enabled or adequately described.  What it really is, though, is claim construction–just not in the sense that we’ve become comfortable with.

The Federal Circuit’s opinion on Monday in Bascom v. AT&T Mobility [Download Opinion] illustrates this point.  That case involved a motion to dismiss granted by the district court on the ground that the claims were invalid on § 101 grounds.  (I’ll summarize the facts and holding in more detail in a subsequent post.)  After assuming that the claims were directed to an abstract idea under Enfish‘s statement about “close calls” at step one of the Alice/Mayo framework, the court turned to step two: the search for an “inventive concept.”  Here, the court concluded that the “inventive concept described and claimed in the []patent is the installation of a filtering tool at a specific location, remote from the end-users, with customizable filtering features specific to each end user,” a concept that the court concluded was not (on the record before it) conventional or generic.  Slip Op. at 15-16.  This determination–of identifying an “inventive concept”–is as much claim construction as the linguistic machinations of Phillips.  Indeed, the court even refered to what it is doing as construing the claims: “Thus, construed in favor of the nonmovant–BASCOM–the claims are “more than a drafting effort designed to monopolize the [abstract idea].”  Slip Op. at 17.

Supreme Court Patent Report: End of 2015 Term

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by Dennis Crouch

The Supreme Court has completed its patent law business for the 2015 term and will re-open decision making in September 2016.  Briefing and new filings will, however, continue throughout the summer.

Two Decisions: The Supreme Court has decided its two major patent cases – Halo/Stryker and Cuozzo.  In Halo, the court re-opened the door to more treble-damage awards for willful patent infringement.  The decision rejects the objective-recklessness standard of Seagate (Fed. Cir. 2007)(en banc) and instead places substantial discretion in the hands of district court judges for determining the appropriate sactions “egregious infringement behavior.”  In Cuozzo, the court affirmed the Federal Circuit’s pro-PTO decision.  The decisions confirms the PTO’s authority construe claims according to their broadest-reasonable-construction (BRI) even during post-issuance review proceedings and also confirms the Federal Circuit ruling that the PTO’s initiation of an inter partes review (IPR) proceeding is not appealable (even after final decision).  A major caveat of this appealability issue is that the court limited its holding to run-of-the-mill IPR patent issues.  The court did not determine when other issues arising from institution, such as constitutional due process challenges, might be appealable.

Both decisions are important. Halo adds at least a gentle breeze to the would-be patent infringement armada.  I heard many discussions of pendulum’s swinging in the days following the case, although I would not go quite so far.  Cuozzo was a full affirmance of the PTO position and will operate to continue to raise the statute and importance of the agency.

Three Pending Cases Set the Stage for Next Term: With the certiorari writ grant in Life Tech v. Promega, we now have three patent cases set for review and judgment next term.  The issue in Life Tech is fairly narrow and involves export of of a component of a patented invention for combination in a would-be-infringing manner abroad.  The statute requires export of a “substantial portion of the components” and the question in the case is whether export of one component can legally constitute that “substantial portion.”  In the case, the component (Taq) is a commodity but is also an admitted critical aspect of the invention.  Life Tech may be most interesting for those generally interested in international U.S. law (i.e., extraterritorial application of U.S. law).  The other two pending cases are Samsung v. Apple (special damages in design patent cases) and SCA Hygiene (laches defense in patent cases).

None of these three pending cases are overwhelmingly important in the grand scheme of the patent system, although Samsung is fundamental to the sub-genre of design patents.  This week, the Supreme Court denied certiorari in Sequenom v. Ariosa – a case that some thought might serve to rationalize patent eligibility doctrine in a way that favors patentees.  For now, the Mayo, Alice, _____ trilogy remains open-ended. This leaves the Federal Circuit in its nadir.

Following Cuozzo, the only AIA post-issue review cases still ongoing are Cooper and MCM.  These cases raise US Constitutional issues that were expressly not decided in Cuozzo.  Briefing is ongoing in MCM and one scenario is that the court will sit on Cooper and then grant/deny the pair together.  A new petition was filed by Trading Technologies just before Cuozzo was released – the case focuses on a mandamus (rather than appeal) of a CBM institution decision for a patent covering a GUI tool. (Full disclosure – while in practice I represented TT and litigated the patent at issue).  Of minor interest, the court issued a GVR order (Grant-Vacate-Remand) in Click-to-Call Tech. v. Oracle Corp (15-1014) with instructions to the Federal Circuit to reconsider its prior decision in light of the recently decided Cuozzo Speed Technologies, LLC v. Lee, 579 U. S. ___ (2016).  It will be interesting to see whether the patentee can develop a new hook for the Federal Circuit.

The end-of-term clean sweep leaves only two-more briefed-cases with potential for certiorari: Impression Prod. v. Lexmark Int’l. (post-sale restrictions); and Sandoz v. Amgen (BPCIA patent dance).  In both cases the court called for the views of the Solicitor General (CVSG). DOJ briefs should be filed around the end of the year – although the election may shift some of the timing.  SG Donald Verrilli has stepped down with former deputy Ian Gershengorn now serving as Acting SG.

The big list:

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Halo, Civil Procedure, and Defending On-going Infringement Suits

Current Affairs, Ethics, ,

I was listening to conversation about Halo, the decision of the Supreme Court to make it easier to establish willful infringement.  If the case is “egregious” and not “typical” infringement, enhanced damages are now available.  Further, the key time period is the time of moving forward with what turned out to be infringement of a valid patent, not the time of trial.

Of course, the obvious lesson going forward is that it will be more likely for accused infringers to rely upon an opinion of counsel indicating lack of infringement or invalidity (or some other way to avoid liability, like 101 or unenforceability like inequitable conduct or prosecution laches).  No news flash there.  And, of course, the fact that the timing of the opinion — earlier the better — means that there are likely going to be more opinions generated.

So, looking forward:  there will be more opinions used more often, you would think.

What I think is interesting are pending cases where a decision has already been made not to rely upon an opinion of counsel.

There are, no doubt, many pending cases where it is too late because of a scheduling order to disclose an opinion of counsel previously obtained.  The battle there will be over whether there is good cause to modify the scheduling order.  Lawyers in the position of needing to make that modification should do so quickly. I can imagine arguments cutting both ways in a particular case.  But competent lawyers in need of buttressing a defense against willfulness would get on that analysis, and soon.

What if, in contrast, a lawyer had advised a client– based upon the pre-Halo standard — not to get a formal opinion, with the idea being that the defendant would rely upon litigation defenses that were basically expressed to the client somewhat informally at the time of infringement.  Can the defendant now get into evidence the fact that those litigation defenses were communicated originally informally?  Does this implicate the need to modify the scheduling order or comply with some other local rule about waiver of privilege for opinions?

Finally, lawyers should consider cases where clients may pre-Halo have not needed an opinion but now may want to have one.  That advice needs to be given soon!

There are probably other fact patterns, but those jumped out at me sitting and listening today.  Thoughts?

Finally, and on a related note:   The Supreme Court’s statement that it’s the time of infringement that matters and not later is really unworkable and flawed.  A defendant, for example, who finds another piece of prior art later, closer to trial, surely can rely upon that evidence (and/or opinion analyzing it) as (a) confirming the strength of an earlier opinion or  (b) providing evidence that, from that time forward, its infringement was not “egregious”?

Will the Walls Come Tumbling Down: Jericho v. Axiomatics at the Supreme Court

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In a new petition for writ of certiorari, Jericho Systems has asked the Supreme Court to review its abstract idea test:

Whether, under this Court’s precedent in Alice Corp. Party Ltd. v. CLS Bank International, 134 S. Ct. 2347 (2014), and Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289 (2012), a patent may be invalidated as an “abstract idea” under 35 U.S.C. § 101 when it claims a specific implementation and does not preempt other uses of the abstract idea.

Jericho Systems Corp v. Axiomatics – Petition for Certiorari.

The district court ended the case with a judgment on the pleadings – finding that the asserted claims of Jericho’s Patent No. 8,560,836 lacked eligibility under Alice and Mayo (focusing on claim 1 as axiomatic).

Using the ‘gist analysis’, the district court found that:

[T]he gist of the claim involves a user entering a request for access, looking up the rule for access, determining what information is needed to apply the rule, obtaining that information, and then applying the information to the rule to make a decision.

This is an abstract idea. The abstract idea being that people who meet certain requirements are allowed to do certain things. This is like Axiomatic’s example of making a determination if somebody is old enough to buy an R rated movie ticket.

Thus, finding that the claim encompasses an abstract idea, the district court moved to Step 2 of the Alice/Mayo analysis – and again sided with the defendant:

As al ready stated, [the claimed invention simply] uses standard computing processes to implement an idea unrelated to computer technology. It does not change [sic] way a computer functions or the way that the internet operates.

On appeal, the Federal Circuit affirmed in a R.36 judgment without opinion.  On this point, the petition cites Jason Rantanen’s recent post indicating that around 50% of Federal Circuit decisions are being resolved without opinion. Jason Rantanen, Data on Federal Circuit Appeals and Decisions, PATENTLY-O (June 2, 2016).

A grant of certiorari in this case would serve as a salutary reminder to the Federal Circuit about the appropriate use of one-word affirmances—which currently resolve over 50 percent of that court’s cases. Rantanen, supra (showing that the percentage of Rule 36 opinions in appeals from district courts has increased from 21 percent to 43 percent in less than a decade). If the Federal Circuit is content to allow district court opinions to effectively substitute for its own opinions at such a high rate, that practice should not be permitted to “cert proof ” issues that are otherwise cleanly presented and worthy of this Court’s review. Cf. Philip P. Mann, When the going gets tough . . . Rule 36!, IP Litigation Blog (Jan. 14, 2016) (arguing that the Federal Circuit relies on summary affirmance under Rule 36 to “sidestep difficult issues on appeal and simply affirm”).

One issue that the district court (and obviously the Federal Circuit) failed to address was that of preemption – what is the relevance of the fact that substantial, practical, an and non-infringing applications of the given abstract idea are available and not covered by the patent.  Petitioner argues that issue is critical to the analysis.  “[T]he lower courts regularly decline any discussion of preemption in favor of rote analysis of patent language at so high a level of generality that the claim language is rendered all but meaningless. This leads to the untenable result that patents—such as the one here—that do not preempt other uses of the alleged “abstract idea” at issue are nevertheless held to violate Alice.”

 

 

Digital Trademark and Design Patent Infringement

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Guest post by Lucas S. Osborn, Associate Professor of Law at Campbell University School of Law. He will be visiting at Denver University School of Law for 2016-17.

Digital technology continues its collision with intellectual property law, this time in BMW’s lawsuit against the online virtual modeling company TurboSquid. TurboSquid sells digital 3D models of various items for use by game developers, architects, visual effects studios, etc.

This case is paradigmatic of a project Mark McKenna and I are working on, which analyzes trademarks in the context of digital goods. BMW complains that TurboSquid’s “marketing of 3-D virtual models” of BMW vehicles infringes BMW’s trademarks, trade dress, and design patents. Specifically, it complains that TurboSquid “markets and tags BMW-trademarked 3-D virtual models of BMW vehicles as suitable for games.”

Interestingly, although some of BMW’s registrations cover “miniature toy vehicles,” “interactive game programs,” and “scale model vehicles,” none of the registrations covers virtual models of vehicles. BMW also alleges that it “licenses its trademarks and patented designs for use in 3-D virtual models for computer games.”

BMW’s claims of infringement raise conceptual difficulties. Does selling a virtual object directly infringe a trademark or design patent that contemplates, or is in fact limited to, a physical good?

In thinking about trademark infringement, the core analysis focuses on whether the digital file is a good about which there is confusion as to source, sponsorship, or the like.  Confusion might arise from at least three mechanisms. First, TurboSquid might create a website environment that looks as if it is a BMW-sanctioned website, such as by using a domain name like BMW.net or by designing the webpage to suggest that it is affiliated with BMW. The TurboSquid website does not do this.

Second, TurboSquid might cause confusion through the external labels attached to each file. If the file name/description read, “BMW authorized model of BMW X3,”  TurboSquid would falsely suggest an affiliation or source. But its external file labels read simply, “BMW X3” and the like. BMW will doubtless argue that this external file labeling provides an indication of source or affiliation, but is this so? Arguably the external description is nominative or descriptive because it merely describes what the file is, i.e., a model of a BMW car. Of course, TurboSquid could change all the external file descriptions to eliminate the potential confusion (i.e., “unauthorized model of BMW X3”), but courts should balance the burden on TurboSquid and the effects on user search costs against any evidence of the extent of actual or potential confusion.

Deciding whether the external file description creates confusion or instead is nominative bleeds into the third potential argument for confusion, which is that the content of the digital file itself causes the confusion. That is, BMW will argue that since the content of the digital file displays a BMW logo on the car, the purchaser will be confused as to source or sponsorship. The Supreme Court, however, seemingly foreclosed this argument in Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23 (2003). Dastar directs that a court should not use the content of the digital file to inform the confusion analysis.

Dastar copied footage from Fox’s Crusade in Europe television series and reused portions of that footage in its own videos without attribution to Fox. Id. at 26-27. Fox alleged Dastar committed reverse passing off in violation of § 43(a) of the Lanham Act by representing Fox’s content as its own. Id. at 27. The Supreme Court rejected Dastar’s claim, holding that “origin of goods” refers only to the “producer of the tangible goods that are offered for sale, and not to the author of any idea, concept, or communication embodied in those goods. Id. at 37.

The Court was concerned that allowing claims for reverse passing off in the context of copyrightable works “would create a species of mutant copyright law” that would conflict with the Federal copyright regime. Id. at 34. Dastar’s concern about conflicts between copyright and trademark law channels courts away from finding confusion based on the content of expressive works. See generally Mark P. McKenna, Dastar’s Next Stand, 19 J. Intell. Prop. L. 357 (2012). Thus, the content of TurboSquid’s files cannot form the basis of the confusion. The content of the files is protected, if at all, by some other form of intellectual property law, such as copyright.

Even assuming there is no point-of-sale confusion with the purchase of the digital file, TurboSquid cannot drive away freely just yet; it must contend with post-sale confusion. Post-sale confusion protects trademark owners when there is no point-of-sale confusion because the purchaser of the good knows it is fake. Courts have found that confusion can arise after a sale when the individual wears the infringing good in public, causing observers to see the branded item and become confused about whether it is genuine or not.

TurboSquid’s purchasers obviously will not wear the digital files in public. Nevertheless, they will use the files in downstream productions such as video games, and thus BMW also alleged there will be post-sale confusion. However, use of the models in expressive works like games and other video productions will not likely lead to an actionable trademark claim because the First Amendment protections provided to expressive works would likely trump any trademark claim.  See, e.g., Rogers v. Grimaldi, 875 F.2d 994 (2d Cir. 1989); E.S.S. Entm’t 2000, Inc. v. Rock Star Videos, Inc., 547 F.3d 1095 (9th Cir. 2008). Moreover, once again Dastar suggests that any potential confusion generated from the content of the video game or other expressive work is irrelevant under the Lanham Act.

Trademark law arose in a world of physical goods to protect manufacturers and prevent consumer confusion as to who manufactured the goods. In a digital world, manufacturing will increasingly be done, if at all, by individuals with 3D printers. Other digital models, such as TurboSquid’s BMW models, will never exist as physical objects.  Where consumers care about the quality of a digital file, trademark law can protect consumers from being deceived by indicia external to the file. But if purchasers are not confused about the source of the digital file based on external indicia, courts should channel any other potential claims (if any) to other areas of intellectual property law.

Supreme Court Patent Update: 271(e) Safe Harbor

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by Dennis Crouch

Look for opinions in Halo/Stryker and Cuozzo by the end June 2016.

Post Grant Admin: While we await Cuozzo, a set of follow-on cases continue to pile-up.  My speculation is that the Supreme Court will delay any decision in those cases until it finalizes the outcome of Cuozzo. With a host of new friend-of-the-court briefs and interesting constitutional questions, MCM v. HP is perhaps best positioned for certiorari.  Additional pending cases include Versata v. SAP (scope of CBM review); Cooper v. Lee (whether IPRs violate Separation of Powers); Click-to-Call Tech, LP v. Oracle Corp., (Same questions as Cuozzo and now-dismissed Achates v. Apple); GEA Process Engineering, Inc. v. Steuben Foods, Inc. (Flip-side of Cuozzo: Appeal when PTAB exceeds its authority by terminating an instituted IPR proceeding?); Interval Licensing LLC v. Lee (Same as Cuozzo); and Stephenson v. Game Show Network, LLC (Same as Cuozzo)

Design Patent Damages: Samsung has filed its opening merits briefs in the design patent damages case against Apple.  Design patent infringement leads to profit disgorgment, but the question is what profits? [More from Patently-O].

Versus Cisco: There are a couple of newly filed petitions. Interestingly, both filed by Michael Heim’s firm with Miranda Jones on both briefs representing plaintiff-petitioners.  In both cases Cisco is respondent.

  • CSIRO v. CISCO (fact-law divide in proving infringement damages under 35 U.S.C. § 284).
  • COMMIL v. CISCO (appellate disregard of factual evidence).

Of course, Commil was the subject to a 2015 Supreme Court decision that rejected the Federal Circuit’s original opinion favoring Cisco.  On remand, the Federal Circuit completely changed its decision but again sided with Cisco and rejected the jury verdict — holding “that substantial evidence does not support the jury’s finding that Cisco’s devices, when used, perform the “running” step of the asserted claims.”

Safe Harbor for Federal Submissions: In the newly filed Amphastar Pharma case, the Supreme Court has already requested a response from Momenta. The question presented focuses on the safe-harbor provision of 35 U.S.C. § 271(e)(1) and asks: Whether the safe harbor protects a generic drug manufacturer’s bioequivalence testing that is performed only as a condition of maintaining FDA approval and is documented in records that must be submitted to the FDA upon request.  The federal circuit held that Amphastar’s activity in this case was not protected by the safe harbor because it involved information “routinely reported” to the FDA post-approval. [Amphastar Petition]

The big list:

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Supreme Court denies Certiorari in Obviousness Case

Patent,

The Supreme Court has denied certiorari in Cubist Pharma v. Hospira.  In the case, the patentee had challenged the Federal Circuit’s increasingly strong limits on the use of secondary indicia of non-obviousness.  Bill Lee’s well written petition argued that the Federal Circuit’s approach conflicted with the flexible doctrine outlined in 35 U.S.C. 103 and explained by Deere and KSR.  [CubistPetition].

Question Presented:

In Graham v. John Deere Co. of Kansas City, 383 U.S. 1 (1966), this Court recognized the relevance of “objective indicia” of nonobviousness (also known as “secondary considerations”) – including the long-felt need for the patented invention, the failure of others to arrive at the invention, and the invention’s subsequent commercial success – in determining whether a patent’s claims were obvious to a person of ordinary skill in the art. In this case, the district court created, and the Federal Circuit affirmed, two categorical limitations on the consideration of objective indicia of nonobviousness that exist nowhere in the Patent Act or this Court’s jurisprudence. The questions presented are:

1. Whether a court may categorically disregard objective indicia of a patent’s nonobviousness merely because the considerations apply to one commercial embodiment of a patented invention, rather than all embodiments.

2. Whether a court may categorically disregard objective evidence of a long-felt need for a patented invention merely because the need is not expressly recited in the patent claims.

In its successful opposition, Hospira explained that both the district court weighed the secondary indicia of non-obviousness and found them “not sufficiently strong to overcome the showing of obviousness arising from an analysis of the prior art.”  To Hospira, the petition was basically a request that the Supreme Court conduct its own factual analysis.

I had previously written that “[a]part from the AIA Trial challenges, the most potential life changing case on the docket for patent attorneys is Cubist v. Hospira that focuses on the role of secondary indicia of non-obviousness. As with most Supreme Court patent cases over the past decade, Cubist argues that the Federal Circuit’s rules are too restrictive and should instead follow a looser factor-based analysis when considering the issue.”

In today’s action, the court also denied certiorari in the subject matter eligibility case of Vehicle Intelligence v. Mercedes-Benz.  Although scheduled for conference, the court took no action in the Cuozzo follow-on case of Stephenson v. Game Show Network, LLC, et al. — GVR is likely following release of the Cuozzo decision.

 

In re Aqua Products

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In re Aqua Products (Fed. Cir. 2016)

In a short opinion, the Federal Circuit has reaffirmed the USPTO’s tightly restrictive approach to amendment practice in Inter Partes Review (IPR) proceedings.  Under the rules, a patentee has one opportunity to propose amendments or substitute claims. However, the motion to amend will only be granted if the patentee also demonstrates in the motion that the proposed amendments would make the claims patentable over the known prior art. See Idle Free Sys., Inc. v. Bergstrom, Inc., IPR2012–00027, 2013 WL 5947697 (PTAB June 11, 2013).

That approach has been upheld in several Federal Circuit cases, including Microsoft Corp. v. Proxyconn, Inc., 789 F.3d 1292, 1307−08 (Fed. Cir. 2015).  As such, the panel here held that its power was restricted:

Given our precedent, this panel cannot revisit the question of whether the Board may require the patentee to demonstrate the patentability of substitute claims over the art of record.

As such, the Federal Circuit found no abuse of discretion in thte PTAB’s denial of amendment.

We conclude that the Board did not abuse its discretion by denying Aqua’s motion to amend. The Board rebutted Aqua’s sole argument that the vector limitation made the substitute claims patentable over the combination of Henkin and Myers. Because Aqua’s arguments with respect to that combination rested exclusively on the vector limitation, the Board had no obligation to address the other amendments or to consider the issue of objective indicia of non-obviousness, which Aqua did not raise in connection with the Henkin/Myers combination. We affirm.

The case is being handled by Finnegan’s top appellate lawyer James Barney and is now set-up for en banc review.

 

Pending Supreme Court Patent Cases 2016 (May 18 Update)

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by Dennis Crouch

It is now time to begin looking for an opinion in the Halo/Stryker regarding whether the Federal Circuit’s test for willful infringement is too rigid. Those cases were argued in February 2016.  We can also expect a decision in Cuozzo prior to the end June 2016.

Supplying Components Abroad: The Solicitor General has finally filed its brief in Life Tech v. Promega. The brief supports certiorari — but only for one of the two questions presented: namely,

whether a supplier can be held liable for providing ‘all or a substantial portion of the components of a patented invention’ from the United States when the supplier ships for combination abroad only a single commodity component of a multi-component invention

The patent in the case involves a DNA amplification kit used for personal identification.  And, although the allegedly infringing kids were made in the UK, one commodity-component (the Taq polymerase) was supplied from the U.S.  Focusing on the language of the statute, the Solicitor Generals argues that liability for export of a single component of a multi-component invention “is contrary to Section 271(f)’s text and structure, and it is inconsistent with the presumption against extraterritoriality.”  Separately, the brief argues that the Federal Circuit was correct in its holding that a party can actively induce itself – thus 271(f)(1) inducement does not require a third party to be induced. [USPromega CVSG Petition].

Post Grant Admin: I previously discussed GEA Process Engineering. That case involves the Flip-side of Cuozzo and asks whether an appeal can follow when the PTAB exceeds its authority by terminating an already instituted IPR proceeding?  The respondent (Steuben Foods) had previously waived its right to respond, but the Supreme Court has now requested a response.  That move makes certiorari more likely, but the result will depend upon the outcome in Cuozzo.

Attorney Fees: Newegg Inc. v. MacroSolve, Inc., No. 15-1369.  Professor Mark Lemley’s brief on behalf of Newegg asks that the attorney-fee framework of Octane Fitness actually be implemented. [NewEggPetition].  Although Octane Fitness gives district courts discretion in determining whether to award fees, Newegg argues that the E.D. Texas court improperly applied “a special, heightened burden of proof.”  The Supreme Court is currently considering the Kirtsaeng attorney fee case for copyright law. That decision may shed some light on the patent cases as well.

A new petition in Automotive Body Parts, No. 15-1314,  focuses on a question of civil procedure regarding a clerk’s transfer of a design patent case out of E.D.Tx in a manner that violated the local rules.  Here, the clerk transferred the case immediately after the judge ordered transfer even though the local rules call for a 21 day delay.  The case is rising through a petition for mandamus, but my view is that the petition fails to show why transfer is so harmful (except for the reality that patent plaintiffs are usually given more respect in E.D.Tx.).

The court was scheduled to discuss Cooper v. Lee at its May 12 conference. No action was taken following that conference – lightly suggesting to me that the court is holding judgment until it resolves Cuozzo.  Apart from the AIA Trial challenges, most potential life changing case on the docket for patent attorneys is Cubist v. Hospira that focuses on the role of secondary indicia of non-obviousness. As with most Supreme Court patent cases over the past decade, Cubist argues that the Federal Circuit’s rules are too restrictive and should instead follow a looser factor-based analysis when considering the issue.  In the next couple of weeks, the court will consider the Cubist petition as well as that of Dow v. NOVA  (appellate review standard); Vehicle Intelligence (abstract idea); and WesternGeco (damages calculation for 271(f) infringement by exporting components).

Secret Offers to Sell: The Federal Circuit is not slowing down its patent jurisprudence in any way – except for the rash of R.36 affirmances. An important case is Helsinn that focuses on whether the AIA abrogated the rule in Metallizing Engineering.

The big list: (more…)

A Comparison of the EU Trade Secrets Directive and the US Defend Trade Secrets Act

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Guest post by Mark Ridgway and Taly Dvorkis, Allen & Overy, LLP, London. 

It has been a busy year for law makers seeking better protection for trade secrets.  Much coverage has been given to the Defend Trade Secrets Act (DTSA), which provides a federal private right of action for trade secret protection.  President Obama signed the DTSA on May 11, and the law takes effect immediately.  Patently-O has covered the DTSA legislation and legislative process in several posts here.

On May 17 the European Council is expected to formally adopt the Trade Secrets Directive, requiring all Member States to provide certain minimum standards for trade secret protection.  Member States will have two years to implement the provisions of the Directive into their own national laws.

How do the US and EU positions on trade secrets compare?  Below are the key similarities and differences between the DTSA and the European Trade Secrets Directive.

What has led to these Legislative Changes?

The desire for harmonization of trade secret protection has spurred these movements both in the US and the EU.  According to the European Commission, the lack of a uniform European approach has resulted in a “fragmentation of the internal market” and “weakening of the overall deterrent effect of the relevant rules.”  The EU Directive seeks to harmonize the laws of the various member states by providing a consistent definition of what qualifies as a “trade secret.”  Additionally, the Directive addresses the remedies available to trade secret holders and the measures courts can use to prevent the disclosure of trade secrets in legal proceedings.

In the U.S., the DTSA arose from a desire to federalize trade secret protection, which had thus far been dominated by state law (although most states had previously adopted the Uniform Trade Secrets Act (UTSA), published by the Uniform Law Commission in 1979).  While certain federal protection previously existed in the form of the Economic Espionage Act of 1996, the DTSA provides an individual right sue in federal court, thus obviating the need to bring private actions in various state courts where procedures differ greatly.

How is “Trade Secret” Defined?

Under both the EU Trade Secrets Directive and the DTSA, to qualify as a trade secret the information at issue must be kept confidential and must derive economic value from being kept confidential.

Article 2 of the Trade Secrets Directive defines a trade secret as information which meets all of the following requirements:

  1. is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question;
  2. has commercial value because it is secret;
  3. has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.

This definition tracks the definition for “undisclosed information” provided in article 39(2) of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement), which requires all signatories to afford some level of protection for confidential information.

The DTSA definition of “trade secret”, meanwhile, consists of “all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if-

  1. the owner thereof has taken reasonable measures to keep such information secret; and
  2. the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, the another person who can obtain economic value from the disclosure or use of the information.”

As seen, whether in Europe or in the U.S., to be considered a trade secret the information must be kept confidential and derive an economic value from the fact that it is confidential.  Both the EU Directive and the DTSA are aimed at protecting commercial confidential information.  What is not required is that the information be entirely novel, a distinction from other forms of intellectual property.  Further, the EU Directive makes explicit that combinations of otherwise publicly available information can be protected provided they are not readily accessible or generally known.

Confidentiality in Litigation

The EU Directive and DTSA have similar provisions for the preservation of confidentiality during legal proceedings for trade secret misappropriation.  In the U.S. the ability to file confidential documents under seal to maintain secrecy has long been an option open to litigants.  The DTSA specifically sets out that a court may not authorize or direct the disclosure of information unless the owner is first given the opportunity to file a submission under seal describing the interest in keeping the information confidential.  The DTSA therefore extends the option of filing briefs under seal to include disclosure at trial and in court opinions, and also allows non-parties to request that certain information be kept confidential.

The EU Directive similarly addresses preserving confidentiality during legal proceedings.  The Directive sets out that an applicant must first supply a “duly reasoned” application as to why certain information should be kept confidential.  The maintenance of secrecy is therefore not the default position, and requires court approval.  It remains to be seen how the national laws of the Member States will implement the Directive and how courts will interpret what qualifies as a “duly reasoned” application.  In some countries this will require minimum changes (for instance, in the U.K. no change will be required), while in others it will be a more significant cultural and legal shift.

Protection for Whistle-blowers

The protections for whistle-blowers and press freedom have been a significant part of the public debate concerning the EU Directive.  Opponents of the Directive expressed concern that, as a result of the Directive, journalists and whistle-blowers could be criminalized for publishing information that companies consider secret.  However, the EU Directive specifically sets out that it should not prevent whistle-blowers and those publishing trade secrets to serve the public interest from doing so.  Moreover, there are no criminal provisions in the Directive.  The Directive states:

The measures, procedures and remedies provided for in this Directive should not restrict whistleblowing activity. Therefore, the protection of trade secrets should not extend to cases in which disclosure of a trade secret serves the public interest, insofar as directly relevant misconduct, wrongdoing or illegal activity is revealed. This should not be seen as preventing the competent judicial authorities from allowing an exception to the application of measures, procedures and remedies in a case where the respondent had every reason to believe in good faith that his or her conduct satisfied the appropriate criteria set out in this Directive.

This exception for whistle-blower activity is much broader than that provided by the DTSA.  The DTSA provides immunity from liability for disclosing a trade secret only when the disclosure is confidential and made to the government or in a court filing (under seal).  There is no specified exception for journalists or other public good-doers, although arguably the First Amendment provides protection.  The DTSA does include a provision by which employers must notify their employees of the protection available under the new law, a notice requirement which is not present in the EU Directive.  Employee is defined broadly by the DTSA to include those working as contractors or consultants.

Remedies

The most controversial part of the DTSA has been the introduction of an ex parte seizure order as a federal measure.  Under the DTSA, a court can issue an order for the seizure of property “necessary to prevent the propagation or dissemination of the trade secret that is the subject of the action.”  Additional remedies include injunctions and damages, where an injunction is deemed most appropriate for any continuing harm.  For previous harm, a court may award damages for actual loss or any unjust enrichment.  A court can also choose to award damages measured by a reasonable royalty for the unauthorized use of the trade secret.  As with other protection of intellectual property, violation of the DTSA done wilfully or maliciously may result in a court awarding enhanced damages as well as attorneys’ fees.

The EU Directive similarly allows for injunctions, damages measured as lost profits, account of profits, or a reasonable royalty for the trade secret use (paid as a lump sum).  The Directive also allows for provisional and precautionary measures, and says that Member States can provide for more far reaching protection, so long as the safeguards in the Directive are met.

The EU Directive does not call for enhanced damages for malicious activity, but rather approaches damages from the opposite viewpoint, specifying that Member States may limit the liability for damages of employees for misappropriating trade secrets if the employee acted without intent.

Employee Mobility and Non-Compete Agreements

In the sensitive area of employee mobility and competition, the Directive specifically states that it shall not offer any ground for restricting the mobility of employees.  However, the Directive does not include any requirement to harmonize the laws in relation to post-termination restrictions or non-compete clauses, meaning that national laws will continue to apply.

The DTSA addresses employee mobility in requiring that an injunction against a former employee be “based on evidence of threatened misappropriation” of trade secret information and not simply on the fact that the person may know certain information.  The DTSA also states that any injunction preventing or limiting future employment cannot conflict with applicable state laws protecting employee mobility.  Shortly before the DTSA took effect, the White House released a report that criticizes non-compete agreements and state laws that offer too much protection for such agreements.  While no immediate action is expected following the report, it is offered as a discussion point in considering what is necessary in non-compete agreements and how states should treat them.

Limitation Period

In the U.S., the limitation period for a company to bring an action under the DTSA is three years after the date on which the misappropriation is discovered or could have been discovered with reasonable diligence.  The EU Directive gives the Member States the freedom to set the limitation period for their respective national laws, but sets the maximum period at six years (albeit Member States have discretion as to when the clock starts to run).

Conclusion

It is obviously desirable that trade secret protection be consistent across borders, whether state or national, as protection is only as strong as its weakest link.  In the U.S., the DTSA specifically sets out a requirement that the Attorney General provide a report on the threats of trade secret theft outside the U.S. and the protection of trade secrets afforded by U.S. trading partners.  How the EU Directive and DTSA play out as Member States implement the Directive and courts interpret the laws will help shape trade secret protection around the globe.