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.
This post follows-up on my recent essay on Novartis v. Torrent Pharma. If you recall, that decision by Judge Chen affirmed an IPR trial decision cancelling the claims of the Novartis patent as obvious.
I did not previously discuss the portion of the case focusing on Novartis’ objective evidence of non-obviousness. Novartis argued that its drug (1) met a long-felt but unsolved need, (2) received substantial industry praise, and (3) enjoyed commercial success. The Supreme Court has accepted this type of evidence as relevant based upon the theory that an obvious invention (1) would have already been invented; (2) would not b praised by the industry as groundbreaking; and (3) would have its commercial success undermined by the similar prior art.
In recent years, however, the courts have also pushed a strong nexus doctrine — requiring a nexus or causal relationship between the objective evidence and the claimed invention. In other words, the patentee must show that it was the invention (as claimed) that led to the commercial success and not something else such as marketing. Because this evidence is used to rebut a prima facie case of obviousness, the burden shifts to the patentee to prove the nexus, although at times the court will presume a nexus.
Here, the court explains that the nexus requirement actually goes an important step further. The secondary indicia of nonobviousness must be tied to the inventive step itself – i.e., what was claimed an not known in the art.
For objective indicia evidence to be accorded substantial weight, we require that a nexus must exist “between the evidence and the merits of the claimed invention.” Wyers v. Master Lock Co., 616 F.3d 1231 (Fed. Cir. 2010). “Where the offered secondary consideration actually results from something other than what is both claimed and novel in the claim, there is no nexus to the merits of the claimed invention.” In re Kao, 639 F.3d 1057 (Fed. Cir. 2011). . . In evaluating whether the requisite nexus exists, the identified objective indicia must be directed to what was not known in the prior art—including patents and publications—which may well be the novel combination or arrangement of known individual elements.
FDA Approval: Moving back to the facts of Novartis, the patentee argued that its commercial success was based upon “Gilenya being the first commercially-available solid oral multiple sclerosis treatment.” Although that statement is true, the court found the commercial-availability focus misplaced for a non-obviousness argument. Rather than first-commercial-availability, the focus should be based upon first-invention or disclosure.
The fact that Gilenya was the first to receive FDA approval for commercial marketing does not overcome the fact that solid multiple sclerosis compositions were already known.
With that framework, the court held that the “proffered evidence is not probative of the nonobviousness inquiry.”
Novartis v. Torrent Pharma, Apotex, and Mylan (Fed. Cir. 2017)
At the conclusion of its Inter Partes Review (IPR) Trial, the Patent Trial & Appeal Board (PTAB) found all claims of Novartis U.S. Patent No. 8,324,283 invalid as obvious. The PTAB had allowed Novartis to include substitute claims as well, but found those also unpatentable as obvious. On appeal here, the Federal Circuit affirms.
The ‘283 patent covers a solid combination of a sphingosine-1 phosphate (S1P) receptor agonist (fingolimod) and a sugar alcohol (mannitol). Thedrug – sold under the trade name Gilenya – is used to treat multiple sclerosis. This is the first oral disease modifying MS drug approved by the FDA and is a big drug with billions in sales each year.
The particular ingredients were already known in the art, and the active ingredient – fingolimod – was already known as useful for treating autoimmune diseases such as MS. However, none of the references brought-together the entire combination in a “solid pharmaceutical composition” as required by the claims. However, the Board found that the combination of references would have led an ordinary skilled artisan to the invention claimed here.
On appeal, the Federal Circuit reviews the Board’s factual findings for substantial evidence – a liberal and forgiving standard that only requires “such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.” Conclusions of law, however, are reviewed de novo on appeal. In patent law, the ultimate question of obviousness is deemed a question of law. However, that ultimate conclusion must be based upon a set of predicate factual conclusions as outlined in Graham v. John Deere.
Perhaps of most relevance for many obviousness cases – the existence of a motivation-to-combine references is deemed a question of fact and thus deference is given to the PTO’s conclusion. Here, the court noted that the board considered the negative properties of using mannitol (teaching-away), but was not convinced, and sufficient evidence supported the Board’s decision. The patentee also focused on the fact that the Board’s written decision did not expressly consider all of the patentee’s teaching-away arguments. On appeal, the Federal Circuit rejected that argument – holding that “there is no requirement that the Board expressly discuss each and every negative and positive piece of evidence lurking in the record to evaluate a cursory argument.” On this point, the court recognized the tension with Medichem‘s holding that the disadvantages of a reference must be considered, but held that Medichem does not create a bright-line rule requiring express discussion of all disadvantages. Rather, the Board is “not require[d] . . . to address every argument raised by a party or explain every possible reason supporting its conclusion.” Synopsys, Inc. v. Mentor Graphics Corp., 814 F.3d 1309, 1322 (Fed. Cir. 2016).
Novartis also raised an APA challenge – arguing that the Board did not provide the required notice and an opportunity since the Board included a new reference (Sakai) in its final decision. Sakai was raised in the IPR petition, but institution was denied for the particular grounds raising Sakai. On appeal, the Federal Circuit sided with the PTAB holding that – although institution decision rejected Sakai as anticipatory or the primary obviousness reference – the Board did not exclude Sakai from consideration since it is clearly a relevant reference. “The Board’s discussion of Sakai in the Final Written Decision was not inconsistent with its review of Sakai in the Institution Decision.” With this explanation, the court was able to justify the PTAB approach and find that the agency did not “change theories in midstream without giving respondents reasonable notice of the change.” and ‘the opportunity to present argument under the new theory.” Rodale Press, Inc. v. FTC, 407 F.2d 1252, 1256–57 (D.C. Cir. 1968).
What next: I’ll note here that the ‘283 patent is only one of four patents listed in the Orange Book covering Gilenya, one of which is also currently being challenged at the PTAB.
This short opinion by Judge Wallach affirms the PTAB findings that the claims of two Novartis patents are invalid as obvious. See U.S. Patent Nos. 6,316,023 and 6,335,031. Several prior court decisions (including those involving the petitioner here) had upheld the patent’s validity against parallel obviousness challenges.
The most interesting aspects of the decision are found under the surprising heading: Prior Judicial Opinions Did Not Bind the PTAB. When taken out-of-context, we can all agree that the statement is silly and wrong. The PTAB is obviously bound by Supreme Court and other precedent. In my view, the statement is still silly and wrong even when applied in context.
The context: In Novartis Pharm. Corp. v. Noven Pharm., Inc., 125 F. Supp. 3d 474 (D. Del. 2015)), the district court considered Noven’s obviousness argument and fount it lacking merit. Same story in Novartis Pharm. Corp. v. Par Pharm., Inc., 48 F. Supp. 3d 733 (D. Del. June 18, 2014) and Novartis Pharm. Corp. v. Watson Labs., Inc., 611 F. App’x 988 (Fed. Cir. 2015), albeit with different parties.
In the Inter Partes Review, the USPTO concluded that those prior court decisions regarding obviousness need not be considered since the record was different at the PTAB – albeit admittedly ‘substantively the same.’ [edited] On appeal, the Federal Circuit rejected the PTAB’s reasoning as a triviallikely insufficient distinction, but instead found that the different evidentiary standard was what justified the result:
Nevertheless, even if the record were the same, Novartis’s argument would fail as a matter of law. The PTAB determined that a “petitioner in an inter partes review proves unpatentability by a preponderance of the evidence (see 35 U.S.C. § 316(e)) rather than by clear and convincing evidence[] as required in district court litigation,” meaning that the PTAB properly may reach a different conclusion based on the same evidence.
The idea here is that in litigation, invalidity must be proven with clear and convincing evidence while inter partes review requires only a preponderance of the evidence. As explained by the Supreme Court on Cuozzo, this may lead to different outcomes:
A district court may find a patent claim to be valid, and the [USPTO] may later cancel that claim in its own review. . . . This possibility, however, has long been present in our patent system, which provides different tracks—one in the [USPTO] and one in the courts—for the review and adjudication of patent claims. As we have explained . . . , inter partes review imposes a different burden of proof on the challenger. These different evidentiary burdens mean that the possibility of inconsistent results is inherent to Congress’[s] regulatory design.
Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131, 2146 (2016) (citation omitted).
My view: As suggested here, we have a failure of system design – a party who challenges a patent’s validity in court and loses should not later be allowed to re-challenge validity. [Cite the 100’s of cases and articles supporting finality of judgments.] In this situation, the PTAB / Federal Circuit should at least be required to distinguish its factual findings from those of the federal courts.
Obviousness Aside: A quirk of this case not addressed by the court is that it is an obviousness case – and obviousness is a question of law. The differences in invalidation standards for courts and the PTAB are evidentiary standards and do not apply to questions of law. Rather, questions of law should be decided identically in both fora.
Guest Post by Professor Tomás Gómez-Arostegui (Lewis & Clark Law School)
One of the questions in Impression Prods., Inc. v. Lexmark Int’l, Inc., on which the Supreme Court recently heard oral argument (March 21), is whether the authorized and foreign first sale of a patented item exhausts a U.S. patent holder’s use and distribution rights. The Patent Act of 1952 contains no pertinent provisions on the effect of the first sale of a patented article, and as a consequence many observers believe that the common law will be especially important in deciding the question. The Petitioner, Impression Products, has gone so far as to argue that the common-law backdrop is dispositive.[1] If the Court agrees and decides that the common law should control or influence the case, then assessing the content of that common law becomes paramount.
So what is the common-law rule? In Kirtsaeng v. John Wiley & Sons, Inc., a copyright case, the Court stated that the first-sale doctrine was a “common-law doctrine with an impeccable historic pedigree” that reached as far back as the 17th century and that made “no geographical distinctions.”[2] In reaching that conclusion, the Court relied in large part on English law, particularly Sir Edward Coke’s 1628 treatise in which he rejected post-sale restraints on the alienation of ordinary chattels. Although Coke was not speaking of chattels encumbered by copyrights or patents, let alone goods made and first sold in a different country, the Court nevertheless stated that this no-restraint principle applied to chattels embodying copyrighted works. Notably, the Court offered no other support for its historical account of the common law, apart from citing its 1908 decision in Bobbs-Merrill Co. v. Straus—which treated national (rather than international) copyright exhaustion.[3]
Not surprisingly, Impression Products refers to Coke repeatedly in its brief,[4] as do many amici who have submitted supporting briefs.[5] And at the oral argument last week, Impression Products began by stating that the “principle goes back, of course, to the 15th century.”[6] It also ended its argument by referring to Coke.[7] But more importantly, as Dennis notes in his recent post recapping the oral argument, Justice Breyer, who wrote the majority opinion in Kirtsaeng, seems very much inclined to continue relying on Coke’s account of English common law. Justice Breyer referred to Coke many times[8] and stated, for example, that a patent rule rejecting mandatory international exhaustion would be “very much contrary to what 300 years of restraints on alienation [doctrine] ha[d] in mind.”[9]
In an article posted on SSRN,[10] I examine and reject the Court’s historical account of English common law. Although Kirtsaeng gave the distinct impression that no early cases in England had ever ruled against gray-market importation in an intangible rights case, this is not so in fact. My article discusses two English cases and a few Scottish ones, decided in the long 18th century, and which have thus far escaped the attention of practitioners and scholars. Some of the cases are reported in print, but not all of them appear in traditional law reports, and some of the records only survive in manuscript. I have posted images of the most important manuscripts and less accessible print sources online. The cases demonstrate that the common law did not recognize international exhaustion. On the contrary, the common law observed foreign legal boundaries and permitted right owners and their licensees to stop gray-market goods that embodied intangible rights.
One of the English cases was decided in the Court of Chancery in 1716–1722, and the other in the Chancery and House of Lords in 1802–1804. Both involved patents for the exclusive right of printing, selling, and importing the Holy Bible, New Testament, and Book of Common Prayer. The King held prerogative copyrights in these works and had licensed them by letters patent separately in England and Scotland. At the request of the English licensees, the courts ruled against London booksellers who had imported books printed and sold by the Scottish licensees. Despite the union of the two countries in 1707, the Chancery and House of Lords viewed Scotland as a foreign country for the purpose of prerogative copyrights because the rights granted in the two countries were territorial, legally separate, and potentially distinct. Outside of English common law, a case decided in the Court of Session in Scotland and then in the House of Lords in 1828, extended the proposition to books traveling in the other direction—from England to Scotland.
Notably, these cases considered many of the same arguments that Lexmark and Kirtsaeng raise, such as the territoriality of patent rights; free trade among countries; the potential benefit to consumers of competition from imported gray-market goods; the potential harm to consumers who purchase goods in one country without any notice of their inability to bring those goods into another country; and the potential negative effect that gray-market imports could have on a domestic licensee.
So what do these cases mean for international patent and copyright exhaustion in the United States?
Two consequences follow. First, they call into question the Supreme Court’s decision in Kirtsaeng. Neither the parties nor the Court were aware of these cases and thus the decision issued on an incomplete record of the common law. Second, and most obviously, these newly revealed cases could have an even greater impact in Lexmark. If the Court or any of its members choose to rely on English common law once more—whether presented as controlling, persuasive, or simply historical narrative—that consultation must now occur with a different view of the common law in mind.
= = = = =
[1] Brief for Petitioner at 10–11, 44–47 (Jan. 17, 2017); Reply Brief for Petitioner at 2–3, 16–17 (Mar. 14, 2017).
[3]Id. at 1363 (citing Bobbs-Merrill Co. v. Straus, 210 U.S. 339 (1908)).
[4] Brief for Petitioner at 10, 13, 42, 45–46 (Jan. 17, 2017).
[5]E.g., Brief of Public Knowledge et al. at 5, 9, 13–14 (Jan. 23, 2017); Brief of Costco Wholesale Corp. et al. at 20–21, 33–34 (Jan. 24, 2017); Brief for HTC Corp. et al. at 12, 17 (Jan. 24, 2017); Brief of the Association of Medical Device Reprocessors at 36 (Jan. 24, 2017); Brief of Auto Car Association et al. at 21 (Jan. 24, 2017); Brief of Intellectual Property Professors et al. at 6, 26–27 (Jan. 24, 2017).
[6] Oral Argument Transcript at 3 (Mar. 21, 2017).
On March 21, 2017, the Supreme Court heard oral arguments in the patent exhaustion case captioned Impression Prods., Inc. v. Lexmark Int’l., Inc., Docket No. 15-1189. [Transcript: 15-1189_6468] The two questions presented focus on downstream reuse/resale of a patented product and challenge the Federal Circuit’s rulings that: (1) a US patent is not exhausted when the patented product is sold subject to a no reuse/resale provision but instead can be asserted against downstream users/resellers who violate those original provisions; and (2) a US patent is presumptively not exhausted by an authorized and otherwise unreserved foreign sale of the patented product. Petitioner Impression Prods., buys after-market ink cartridges, refills them and resells them and the patentee, Lexmark, is attempting to use patent rights to block that form of competition.
We can expect Justice Breyer to side with petitioners in this case:
JUSTICE BREYER: I think, that Lord Coke and his great principle of no alienation [restrictions] on chattels is being laughed at.
Truthfully, most of the oral arguments involve Justice Breyer explaining to other members of the court that Lexmark’s approach violate’s Lord Coke’s 300 year old maxims – “that’s been the kind of basic legal principle for an awfully long time.” Lexmark’s primary answer: “the common law changed a lot after Lord Coke.” In the two most recent IP Decisions by the Court – Star Athletica and SCA Hygiene – the majority ruled in favor of the IP rights-holder over Justice Breyer dissents in both cases.
Apart from Justice Breyer’s ‘heat’, the rest of the bench was clearly cold on this case – with few questions being asked of any of the parties.
In 2013, the Supreme Court decided the parallel copyright case of Kirtsaeng – siding with the accused infringers on the issue of international exhaustion. A major difference though, is that exhaustion is codified by the copyright statute – but not in the Patent Act.
JUSTICE KENNEDY: Why hasn’t this been codified? . . . Too buys or what? . . .
Arguing for the petitioner, Andrew Pincus avoided the question and instead focused on the long history of precedent.
MR. PINCUS: I think the Court’s enunciation of the rule in the cases prior to 1952 was very clear and specific. There’s really no doubt that when Congress enacted the law in 1952, it did so with the knowledge that there was the principle that I’ve recited, and the Bowman recitation is consistent with many, many decisions of this Court dating back to the 1800s that say the same thing, that when there is an authorized sale, the patent rights are exhausted. The Court said in some cases, the — the article falls out of the patent laws and all that applies is State law.
And most importantly, the Court’s sole decision upholding these sort of restrictions, A.B. Dick was expressly overruled a few years later in the motion picture patents case. So we not only have the Court’s consistent enunciation of the doctrine, we have the fact that there was this deviation and then an immediate correction.
Answering this same codification question for the Government, Mr. Stewart pointed to an implicit exception in 35 U.S.C. 154(a)(1). That provision provides “the right to exclude others from making, using, offering for sale, or selling the invention throughout the United States or importing the invention into the United States.”
MR. STEWART: The Court’s historic cases in the domestic exhaustion field have located the exhaustion principle in the language of the predecessors of what is now 35 U.S.C. 154(a)(1). That is the provision of the Patent Act that says the patent owner has the right to exclude others from making, using, selling, offering for sale, or importing the patented invention. And in addressing predecessor versions of that language, this Court said those exclusive rights in essence don’t encompass the right to control resale or use of a lawfully sold article.
Finally, upon his turn to argue Mr. Trela suggested the statute goes further – it “provides that infringement occurs when someone makes, sells, uses, offers to sell, or imports into this country a patented article without authority from the patent owner.”
The Lexmark oral arguments actually began with a realization that a loss here for the patentee is not a total loss because an enforceable contract may remain.
MR. PINCUS: The contract law, with its limitations, would allow the enforcement those restrictions if they were a valid contract. This is all about whether the patent law remedies apply.
[later] CHIEF JUSTICE ROBERTS: Why is normal contract law and normal State law inadequate, for your purposes?
MR. TRELA: If your only remedy is contract and you can’t enforce these limitations downstream . . . there’s going to be an arbitrage.
JUSTICE BREYER: Why can’t you enforce the contract downstream?
MR. TRELA: Well, because you — you don’t have privity, Justice Breyer.
JUSTICE BREYER: Then why don’t you require the person who sells it to just resell it with the requirement that they promise not to, you know, whatever it is? . . . one of the reasons that it’s hard to get away with that is the antitrust laws in the contract area. And another reason is because Lord Coke said 300 years ago, you know, you get into a lot of trouble when you start trying to restrict this buyer who’s got the widget and he would like to use it as he wishes. Now, that’s been the kind of basic legal principle for an awfully long time.
Justice Alito offered some perspective on the extraterritoriality aspects of the case – noting the preference of the court for interpreting US statutes to avoid extraterritorial application.
JUSTICE ALITO: And it’s somewhat surprising to me that none of the briefs in this case talk about our cases regarding extraterritoriality. In recent years, we have said that a statute does not apply outside the United States unless it says that it applies outside the United States. I don’t see why that shouldn’t be the same for a common-law rule like the rule here. And if what’s involved here is the application of U.S. patent law abroad, where is the clear statement that the exhaustion rule applies outside of the borders of the United States? I don’t see where that can be found.
MR. PINCUS: Your Honor, I don’t think this is a question of extraterritorial application anything — any more than the issue in Kirtsaeng was a question of extraterritorial application of the Copyright Act.
The question here is whether the patentee’s acts outside the United States have an impact on its ability to enforce its rights within the United States. No one is saying that the sales outside the United States are governed by the U.S. patent law, they’re obviously not, just as the sales outside the United States under the Copyright Act are not governed by the Copyright Act.
In thinking through the patent infringement claim, one question is that of notice. What notice is required to limit resale/reuse? Is notice only required at the point of first-sale, or must notice also be provided to subsequent purchasers.
JUSTICE KENNEDY: Can they put a sticker on the products — “Do not sell”? This would be a great boom to the sticker business, right?
Hard for me to predict an outcome at this point, but get your stickers ready.
If you look at the Alice case, for example, that obviously had tremendous implications for both the patentees and for people who had entered into license agreements and were paying money for patents that turned out to be invalid. But that was just a consequence of this Court getting the law right.
When the Supreme Court reverses the Federal Circuit’s venue ruling in the TC Heartland case, a reversal widely expected, it will return patent venue to the time prior to 1988, when the residence of a corporation for patent venue purpose was limited to (i) a district within the state of incorporation, or (ii) a district where the corporation has a regular and established place of business and has allegedly committed an act of infringement. Presently pending in the Eastern District of Texas are 1,000+ patent cases. The number may go up or down a little before the Court’s ruling, but it’s not likely to change much in that short time.[1] My inquiry is: What will happen to those cases? My analysis on this subject can be found at Paul M. Janicke, The Imminent Outpouring from the Eastern District of Texas, 2017 Patently-O Patent Law Journal 1..
The new venue statute upon which the Court will base its ruling became effective in January 2012. That means it applies to nearly all the cases now on the Eastern District’s docket, and the venue for hundreds of those cases was likely improper. Those defendants who are not Texas corporations and who lacked any regular and established place of business in Eastern Texas when suit was filed will be entitled to dismissal or transfer to a district that would have been proper under the new law, unless they have waived the improper venue defense. Let’s take a look at the groups of possibly affected defendants.
Local Merchants
Some defendants are local merchants in the Eastern District, accused of infringement only because they sell products made by others. Venue as to these merchants will be proper under either the old or new venue rules, so they are entitled to neither dismissal nor transfer. If the case against a merchant’s vendor is transferred, the merchant’s best bet is to seek a stay of the case against it. While stays are not particularly favored in the Eastern District, a situation like the present one has not likely been encountered before. It may work.
Active Players As Defendants
These are typically manufacturers of high-tech products or vendors of software. Computer-related technology is said to be the subject of over 90% of patent case filings in the district. Most of them lack any regular place of business in Eastern Texas, although we have found some 70 companies who employ 100 or more persons in the district and are defendants in pending patent cases there. Most of these businesses are in Plano, with a few in Beaumont. They too will have to stay put. It isn’t required that the place of business be related to the accused infringing activity.
The Many Other Defendants, And the Problem of Waiver
Those companies lacking a regular business location in the Eastern District will, for the most part, want to exit that district. Some may choose to stay there in order to effect a quick settlement or to show support for their beleaguered customers who have been sued in the district, but I estimate at least 800 will consider seeking a transfer. These break down into two roughly equal groups, those who have waived improper venue and those who have not. Waiver of this defense most typically occurs by failure to plead it in the answer or in an early motion under Rule 12. A sampling of pleadings in pending Eastern District patent cases reveals that in roughly 400 cases the main defendant did not plead improper venue or make a Rule 12 motion. (Note that this is a different subject from inconvenient venue, which is handled under a different statutory section and was sometimes pleaded in the answers.) It is understandable why the improper venue pleading was missing in so many cases: No one knew or even suspected until very recently that the venue rules had been changed by Congress in 2011, effective for all cases filed after January 2012. Good ethical lawyers know they shouldn’t plead a matter for which they have no legal or factual basis, and so they didn’t, and therein lies the waiver. Unfortunately, they cannot undo it by arguing “change in the law.” The change occurred in 2012.
The other group of defendants may have been insightful, but more likely were just following a form-book shotgun answer, and so they did plead improper venue in their answers. Answering this way is usually enough to preserve this defense, but not always. It has been held that taking discovery does not trigger a waiver, nor does proceeding to trial. It is thought that the corporate defendant who has pleaded the defense unsuccessfully has been forced to remain in the improper forum, so these litigation activities are not held against it. However, some courts have held that moving for summary judgment (unsuccessfully of course) is a different matter and does cause a waiver. You are not obliged to seek summary judgment, and you are invoking the court’s power. So some in the second group may find they too have waived.
For Those Exiting, Where Will They Be Sent?
This leaves about 400 non-waived cases. The case law on improper venue cases shows a distinct judicial preference for transfers rather than dismissals. To what districts will these non-waived defendants be transferred? Whatever districts are chosen, we should bear in mind that some of the NPE plaintiffs may not wish to follow, due to the expense involved, so those cases may effectively end. For more serious plaintiffs, we do not know where the cases will go. It depends on subjective factors applicable to each case, but here are some possible options: (1) Choose a district that one or both parties ask for. (2) Select a proper district that has a number of patent pilot judges, the three largest being Northern Illinois, Southern New York, and Central California. (3) Use history as a guide: In 1997, one year before the large influx to Eastern Texas began, the busiest patent districts were Northern California (172 filings), Central California (162 filings), and Northern Illinois (116 filings). In that year the number of patent cases filed in the Eastern District of Texas was: 10. We shall soon see.
= = = = =
┼ Professor of Law, University of Houston Law Center
[1] The case is set for argument March 27, with a decision very likely before the end of the Court’s term in June.
Mark A. Lemley, Erik Oliver, Kent Richardson, James Yoon, & Michael Costa, Patent Purchases and Litigation Outcomes, 2016 Patently-O Patent Law Journal 15 (Lemley.2016.PatentMarket)
Bernard Chao and Amy Mapes, An Early Look at Mayo’s Impact on Personalized Medicine, 2016 Patently-O Patent Law Journal 10 (Chao.2016.PersonalizedMedicine)
James E. Daily, An Empirical Analysis of Some Proponents and Opponents of Patent Reform, 2016 Patently-O Patent Law Journal 1. (Daily.2016.Professors)
Tristan Gray–Le Coz and Charles Duan, Apply It to the USPTO: Review of the Implementation of Alice v. CLS Bank in Patent Examination, 2014 Patently-O Patent Law Journal 1. (GrayLeCozDuan)
Robert L. Stoll, Maintaining Post-Grant Review Estoppel in the America Invents Act: A Call for Legislative Restraint, 2012 Patently-O Patent Law Journal 1 (Stoll.2012.estoppel.pdf)
Paul Morgan, The Ambiguity in Section 102(a)(1) of the Leahy-Smith America Invents Act, 2011 Patently-O Patent Law Journal 29. (Morgan.2011.AIAAmbiguities)
Joshua D. Sarnoff, Derivation and Prior Art Problems with the New Patent Act, 2011 Patently-O Patent Law Journal 12 (sarnoff.2011.derivation.pdf)
Bernard Chao, Not So Confidential: A Call for Restraint in Sealing Court Records, 2011 Patently-O Patent Patent Law Journal 6 (chao.sealedrecords.pdf)
Benjamin Levi and Rodney R. Sweetland, The Federal Trade Commission’s (FTC) Recommendations to the International Trade Commission (ITC): Unsound, Unmeasured, and Unauthoritative, 2011 Patently-O Patent Law Journal 1 (levi.ftcunsound.pdf)
Kevin Emerson Collins, An Initial Comment on King Pharmaceuticals: The Printed Matter Doctrine as a Structural Doctrine and Its Implications for Prometheus Laboratories, 2010 Patently-O Patent Law Journal 111 (Collins.KingPharma.pdf)
Robert A. Matthews, Jr., When Multiple Plaintiffs/Relators Sue for the Same Act of Patent False Marking, 2010 Patently-O Patent Law Journal 95 (matthews.falsemarking.pdf)
Kristen Osenga, The Patent Office’s Fast Track Will Not Take Us in the Right Direction, 2010 Patently-O Patent L.J. 89 (Osenga.pdf)
Michael Kasdan and Joseph Casino, Federal Courts Closely Scrutinizing and Slashing Patent Damage Awards, 2010 Patently-O Patent L.J. 24 (Kasdan.Casino.Damages)
Edward Reines and Nathan Greenblatt, Interlocutory Appeals of Claim Construction in the Patent Reform Act of 2009, Part II, 2010 Patently‐O Patent L.J. 7 (2010) (Reines.2010)
Gregory P. Landis & Loria B. Yeadon, Selecting the Next Nominee for the Federal Circuit: Patently Obvious to Consider Diversity, 2010 Patently-O Patent L.J. 1 (2010) (Nominee Diversity)
Paul Cole, Patentability of Computer Software As Such, 2008 Patently-O Patent L.J. 1. (Cole.pdf)
John F. Duffy, The Death of Google’s Patents, 2008 Patently O-Pat. L.J. ___ (googlepatents101.pdf)
Mark R. Patterson, Reestablishing the Doctrine of Patent Exhaustion, 2007 Patently-O Patent L.J. 38
Arti K. Rai, The GSK Case: An Administrative Perspective, 2007 Patently-O Patent L.J. 36
Joshua D. Sarnoff, BIO v. DC and the New Need to Eliminate Federal Patent Law Preemption of State and Local Price and Product Regulation, 2007 Patently-O Patent L.J. 30 (Download Sarnoff.BIO.pdf)
John F. Duffy, Are Administrative Patent Judges Unconstitutional?, 2007 Patently-O Patent L.J. 21. (Duffy.BPAI.pdf)
Joseph Casino and Michael Kasdan, In re Seagate Technology: Willfulness and Waiver, a Summary and a Proposal, 2007 Patently-O Patent L.J. 1 (Casino-Seagate)
Prism Tech v. Sprint Spectrum (Fed. Cir. 2017) [prismtech]
The Nebraska jury found Sprint liable for infringing Prism’s patents and awarded $30 million in reasonable-royalty damages. U.S. Patent Nos. 8,127,345 and 8,387,155. [verdict]
AT&T was also sued under the patents but ended up settling the case for [REDACTED LARGE SUM OF MONEY]. On appeal, Sprint argued (unsuccessfully) that the settlement should not have been shown to the jury under Federal Rule of Evidence 403.
FRE 403 permits exclusion of “relevant evidence” when its “probative value is substantially outweighed by a danger of one … unfair prejudice, confusing the issues, misleading the jury, undue delay, wasting time, or needlessly presenting cumulative evidence.”
Prior settlement agreements are obviously probative since they help to establish value of the patented technology in the industry. Traditionally, the settlement value is modeled as less than the value of the patent once its validity and infringement are established. However, the mixture of risk aversion and litigation costs lead to some settlements that appear greater than the expected value of patent rights.
Here, the Federal Circuit found found “adequate basis for admitting the AT&T Settlement Agreement.” The agreement covered the same patents and – at trial – Prism’s expert explained differences between usage of AT&T and Sprint to help the jury use the prior agreement as comparable.
That Agreement covered the patents at issue here, though not only the patents at issue here. In that common situation, evidence was needed that reasonably addressed what bearing the amounts in that Agreement had on the value of the particular patents at issue here.
For me, the larger potential issue is that the jury is more likely to find the patent valid and infringed if it know that AT&T already paid a [REDACTED LARGE SUM OF MONEY] to settle the case. This would suggest at least a bifurcated trial. However, Sprint did not appear to make that argument on appeal.
= = = =
A very interesting argument raised by Sprint on appeal was based upon Rude v. Wescott, 130 U.S. 152 (1889). In particular, Sprint argued that prior licenses can be used to prove an “established royalty” but not to prove a “reasonable royalty.” Of course, a single license would not be sufficient to prove the established royalty. See also Cornely v. Marckwald, 131 U.S. 159 (1889).
The Court held in Rude that there was insufficient evidence to prove what has been called an “established royalty” as a measure of damages at law for patent infringement—i.e., “such a number of sales by a patentee of licenses to make, use and sell his patents, as to establish a regular price for a license.” On appeal, the Federal Circuit rejected the argument as too-old: “The Court in Rude used both the language of patent damages law and the language of evidence law, and both have changed significantly since Rude.” In addition, the court likely cut-short certiorari on the issue by finding that Sprint had failed to properly preserve the arguments for appeal.
In a new pair of decisions, the Federal Circuit has again rejected the PTAB’s obviousness findings as inadequate and remanded for further proceedings. As she has done in the past, Judge Newman agreed with the merits dissented from the remand – arguing that the challenger should not be so freely given what amounts to a new trial.
Lilly filed several separate IPR petitions against LA BioMed’s U.S. Patent No. 8,133,903 which covers a method of treating penile fibrosis which often leads to erectile dysfunction. The IPR petitions were prompted by LA BioMed’s 2013 lawsuit alleging that Lilly’s popular Cialis drug led to infringement. The basic idea here is that repeated treatments with Cialis has a long-term positive impact on the fibrosis.
In the two initiated IPR’s, the PTAB determined (1) the asserted prior art reference did not anticipate the challenged ‘903 claims (14-693 IPR); and (2) the asserted prior art references did render the challenged claims invalid as obvious (14-752 IPR).
Here, the claims are directed to a dosing regimine of a known drug treating an issue that it was already known to treat. The particular claims require “a continuous long term regimen . . . at a dosage up to 1.5 mg/kg/day for not less than 45 days” for treating “an individual with … penile tunical fibrosis …”
On anticipation, the court drew a fine-line with its closest case being AstraZeneca LP v. Apotex, Inc. where the Federal Circuit affirmed that method claims for “once-daily dosing would likely survive an anticipation challenge by a prior advertisement that disclosed twice-daily dosing.” Here, the prior art suggested “chronic administration” of the drug while the patent particularly requires 45 days of dosage. A close reading of the prior art led the court to limit “chronic” to “daily administration for at least three days” and less than three-weeks (since the prior art’s study only lasted for three weeks). Affirmed as Not Anticipated.
On obviousness, the PTAB found the claims obvious. On appeal, however, the Federal Circuit rejected the PTAB’s claim construction of the requirement of treating “an individual with … penile tunical fibrosis.” In particular, the PTAB allowed-in prior art treating erectile dysfunction even if penile fibrosis had not been formally diagnosed. On appeal, the Federal Circuit held the PTAB’s approach “reads that limitation out of the claim” since ED may have other causes (such as psychological). Based upon this linguistic argument, the court made the leap that – therefore “it is unreasonable to use the symptom of erectile dysfunction as a proxy for penile fibrosis.” In the eyes of the court, this distinction eliminated the motivation-to-combine the references since they did not directly address the penile fibrosis issue.
As mentioned above, the majority ordered a remand to the PTAB to make new findings on the motivation to combine. Judge Newman dissented from that approach – arguing that the PTAB/Lilly had their chance and that the judgment should be final on appeal.
Provisional Priority: A final note on the case involves LAB’s claim for priority to its early-filed provisional patent application. As you might expect, the court ruled that it was not entitled to such priority because the provisional did not expressly disclose the claim limitation of 1.5 mg/kg/day.
Icon Health and Fitness v. Strava (Fed. Cir. 2017) (Reexamination of U.S. Patent No. 7,789,800)
Expert Testimony on the Conclusion of Obviousness: In the inter partes reexamination case here, the issue arose with the patent challenger (Strava) used an expert witness to testify to the legal conclusion that the claims at issue were obvious. This is problematic because in ordinary circumstances it is improper for an expert witness to testify as to a question of law. Rather, the ordinary use of expert testimony is solely to “help the trier of fact to understand the evidence or to determine a fact in issue.” FRE 702. Of course, the Federal Rules of Evidence do not apply to the Patent Trial & Appeal Board proceedings or patent reexaminations.
On appeal here, the Federal Circuit appears to agree with the challenger – that an expert can make conclusions of obviousness/non-obviousness and that the PTO can rely upon those statements.
[T]here is no per se prohibition against relying on an expert’s declaration … solely because the declaration states that something “would have been obvious.” Indeed, we frequently have affirmed PTAB determinations on obviousness that rely on expert declarations that include such statements, so long as other aspects of the declarations contain statements related to factual findings. See Veritas Techs. (Fed. Cir. 2016) (affirming the PTAB’s conclusion of obviousness that relied on, inter alia, an expert’s statements that “it would have been obvious”); MCM Portfolio (Fed. Cir. 2015) (affirming the PTAB’s conclusion of obviousness that was based, in part, upon an expert’s statement that “it would have been obvious”). To determine if an expert’s statement is directed to factual findings or the legal conclusion of obviousness, we look to the statement not in isolation, but in the context of the whole declaration.
The decision here appears to carry the same weight whether a PTAB case or district court litigation.
Spelling Out the Factual Findings: The decision goes on to find some errors in the PTAB merits decision. In particular, rather than spelling out its factual findings of where each claim element is found in the prior art, the Board issued a general catchall statement that “we agree with [Strava’s] rebuttal . . . as well as the Examiner’s response.” The statement appeared to incorporate-by-reference a prior examiner’s statement which itself had incorporated statements by Strava’s witness.
On appeal, the Federal Circuit found that such a multi-layered incorporation by reference can be sufficient. Here, however, none of the PTO created documents actually included the required factual findings. Although the incorporated documents from Strava’s attorneys did include purported factual findings, the Federal Circuit indicated that those unsworn statements cannot be treated as evidence or factual findings. [On this last point, I believe that the court incorrectly correlated evidence with factual findings].
Remand or End the Case: The decision splits at this point between the two judge majority (Judges Wallach and Reyna) and dissent-in-part (Judge O’Malley).
Since the error in failing to write-down sufficient factual findings was potentially a merely-technical-error, the majority remanded the case “for further poceedings consistent with this opinion.” Thus, on remand, the PTAB/Examiner may have another opportunity to explain its judgment as to the invalidity of the claims:
Because the PTAB failed to comport with what these [fact finding] principles demand, the PTAB’s rejection of these claims must be vacated and the case remanded for additional PTAB findings and explanation. See, e.g., In re Van Os, 844 F.3d 1359 (Fed. Cir. 2017) (explaining that the court vacates and remands when additional fact finding and explanation is warranted).
Judge O’Malley dissented from this approach – arguing that remand is not appropriate for cases such as these where the PTAB has failed to establish obviousness or unpatentability generally. In this regard, Judge O’Malley agrees with Judge Newman’s dissent in Van Os.
This case represents an important decision limiting the scope of Covered Business Method reviews. However, its short consideration of agency-deference leaves it open to further challenge.
Secure Axcess v. PNC (and other banks) (Fed. Cir. 2017) [secureaxcess]
The America Invents Act created a temporary mechanism (8-year) for challenging certain “covered” business method patents. The program will sunset for new petitions in the “Transitional Program for Covered Business Method Patents” (“CBM review”) sunsets on September 16, 2020. The program allows for CBM patents to be challenged on any ground of patentability (e.g., Sections 101, 102, 103, and 112) and is not limited to post-AIA patents.
Not all business method patents fit within the program, but only those covering non-technological inventions related to a financial product or service. In particular, the defintion states:
For purposes of this section, the term “covered business method patent” means a patent that claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service, except that the term does not include patents for technological inventions.
AIA Section 18(d)(1).
Here, Secure Axcess’s patent covers a computer security method that uses an authenticity key to “create formatted data” that is then sent to another computer to be used to locate an authenticity stamp from a preferences file. Patent No. 7,203,838. Although the the patent is not limited to financial services, the patentee has sued dozens of banks and financial service providers for patent infringement. In particular, it appears that the patentee has only sued financial service providers.
The PTAB determined that the patent here fits the CBM definition. On appeal, however, the Federal Circuit reversed holding that “the patent at issue is outside the definition of a CBM patent that Congress provided by statute.” This decision follows the court’s recent decision in Unwired Planet, LLC v. Google Inc., 841 F.3d 1376 (Fed. Cir. 2016).
Claiming Financial Services: In its decision, the court walked through the statute – noting that the focus is on the claimed invention rather than the asserted marketplace or potential uses of the invention. Thus, the relevant question is not how the invention is used, but rather whether the claims are directed to a financial service. According to the court, any other reading, would “give the CBM program a virtually unconstrained reach.”
Statutory Interpretation – A Question of Law: A very interesting aspect of the decision is the standard-of-review. Both parties suggested that the USPTO should be given some deference of its own interpretation of the statute. With only limited discussion, the Federal Circuit rejected that suggestion and instead held that statutory interpretation is simply a matter of law, reviewed de novo on appeal:
[T]he issue here is whether the Board properly understood the scope of the statutory definition. That is a question of law.
The court did not, however cite or refer to Chevron or other Supreme Court precedents requiring deference to certain agency interpretations of law.
= = = =
The majority opinion was penned by Judge Plager and joined by Judge Taranto. Judge Lourie wrote in dissent. The dissent would expand the scope of CBM to include patents directed to financial services even when claims themselves are not expressly limited to financial services. In this case, the exemplary embodiment of the invention uses the security mechanism for financial services. Further, the only example URL in the patent is “bigbank.com.” Judge Lourie also found the patentee’s “litigation pattern” relevant to the financial services use (having asserted the patent against dozens of banks, and nobody else).
Of interest for administrative law folks, Judge Lourie also failed to consider whether deference should be given to PTO interpretation of the statute.
= = = = =
In a parallel decision, the Federal Circuit today issued a R.36 judgment (improperly in my view) affirming the PTAB’s cancellation of the the claims of a family member patent as obvious. U.S. Patent No. 7,631,191.
PersonalWeb Tech v. Apple (Fed. Cir. 2017) [personalweb]
Following an administrative trial, the PTAB found the challenged claims of PersonalWeb’s Patent No. 7,802,310 obvious based upon a combination of two prior art references. On appeal, however, the Federal Circuit has vacated the judgment – holding that the Board’s factual findings were not supported by substantial evidence. In particular, the Federal Circuit could not find substantial evidence for the conclusions (1) that the prior art taught each element of the challenged claims or (2) that PHOSITA would have been motivated to combine the references to form the invention as claimed.
Substantial Evidence: For me, the substantial evidence rule is a misnomer because it suggests that a decision is based upon a substantial amount of evidence (and thus seems like a reasonable approach). I would rename it as the “scintilla rule” because, under the rule, factual conclusions made by the PTAB are affirmed on appeal so long as supported by “more than a mere scintilla” of evidence. I previously wrote:
[T]o be clear, the appellate court will affirm a factual determination even when that determination is likely wrong so long as some amount of evidence supports the determination. We have all heard the adage that ‘reasonable minds can differ.’ I think of the substantial evidence rule as a relaxed version that ‘somewhat reasonable minds can differ.‘ Or, in other words, the PTO’s factual determinations will be affirmed if somewhat reasonable.
Although the PTAB burden is not great, the Board must fully explain its conclusions and their bases. (This is a major difference when compared with the ‘black box’ of a jury trial). As part of its explanation, the Board must also specifically contend with evidence that “detracts from an agency’s decision.” The court explained in its 2002 Lee decision:
For judicial review to be meaningfully achieved within these strictures, the agency tribunal must present a full and reasoned explanation of its decision. The agency tribunal must set forth its findings and the grounds thereof, as supported by the agency record, and explain its application of the law to the found facts.
In re Lee, 277 F.3d 1338, 1343 (Fed. Cir. 2002). That is, the Board, “must articulate ‘logical and rational’ reasons for its decision.” (quoting Synopsys).
Here, the court explained that the rational in an obviousness case includes
Particularly identifying where each element of each claim is taught by the prior art references. Here, the Board failed to explain the particular location within Woodhill that taught the claim limitation of comparing a name with a “plurality of values.” (yes, that’s right.)
Explaining the motivation to combine.
Explaining motivation to combine is a big deal because it comes up in almost every patent case before the PTO. Here, the Board simply wrote that:
“a person of ordinary skill in the art reading Woodhill and Stefik would have understood that the combination of Woodhill and Stefik would have allowed for the selective access features of Stefik to be used with Woodhill’s content-dependent identifiers feature.”
On appeal, the Court found that justification inadequate.
Indeed, the Board nowhere clearly explained, or cited evidence showing, how the combination of the two references was supposed to work. At least in this case, such a clear, evidence-supported account of the contemplated workings of the combination is a prerequisite to
adequately explaining and supporting a conclusion that a relevant skilled artisan would have been motivated to make the combination and reasonably expect success in doing so. . . .
A brief explanation may do all that is needed if, for example, the technology is simple and familiar and the prior art is clear in its language and easily understood. See Ariosa, 805 F.3d at 1365–66. On the other hand, complexity or obscurity of the technology or prior-art descriptions may well make more detailed explanations necessary. Here, the Board’s explanation is wanting. Apple’s attempts in this court to explicate both the Board’s explanation and the underlying evidence do not persuade us otherwise.
On remand, the Board will give it another go – and we’ll see whether the exercise of actually explaining its reasoning causes the Board to change its mind as well.
= = = = =
My explanation of the case skipped over details of the patent at issue. Claim 1 is shown below and basically includes three steps: (a) sending a “content based name” for a data-item from one computer to another; (b) check to see if the name is on a list; and (c) grant or deny access to the data-item depending upon the result of (b).
1. A computer-implemented method … comprising the steps:
(a) at a first computer, obtaining a content-based name for a particular data item from a second computer …, the content-based name being based at least in part on a function of at least some of the data which comprise the contents of the particular data item, wherein the function comprises a message digest function or a hash function, and wherein two identical data items will have the same content-based name; and
(b) … a processor at said first computer ascertaining whether or not the content-based name for the particular data item corresponds to an entry in a database comprising a plurality of identifiers; and
(c) based at least in part on said ascertaining in (b), determining whether or not access to the particular data item is authorized.
The patentee claims that Apple’s iTunes and iCloud services infringe.
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).
Following IPO’s recent proposal to effectively eliminate 35 U.S.C. 101, a Patently-O reader (“MM”) proposed the following amendment to 35 U.S.C. 103 for the organization’s consideration:
35 U.S.C. 103: A patent for a claimed invention may not be obtained, notwithstanding that the claimed invention is not identically disclosed as set forth in section 102, if the differences between the claimed invention and the prior art are such that the claimed invention as a whole would have been obvious before the effective filing date of the claimed invention to a person having ordinary skill in the art to which the claimed invention pertains. Common sense shall not be used or references in any part of the analysis of the claim. Under no circumstances will any element in the claim be deemed to be non-limiting for any reason. Individual claim elements, whether or not disclosed by the prior art, shall never be discussed or analyzed separately from the other claim elements. The term ‘monopoly’ must never appear in the analysis.
(Added language underlined.) According to the anonymous Patently-O reader, this would make it the “Best. Patent. System. Ever.” Certainly, the provision would take care of KSR v. Teleflex that has been so frustrating for patentees and time consuming for the Court of Appeals. (Satire).
In its newly filed petition for rehearing, Leak Surveys has asked the Federal Circuit to withdraw its Judgment Without Opinion. Leak’s Counsel (Donald Puckett) argues:
It is hard to imagine an appeal more unsuitable for affirmance without opinion under Fed. Cir. R. 36 than this one.
The petition makes two primary arguments:
If the Federal Circuit’s judgment is based upon new or alternative grounds not stated by the PTAB, then it must write an opinion. Although the reason for a judgment without opinion are not directly discernible, the petitioner here suggests that it was likely based upon theories first espoused by the court and respondent at oral arguments — sufficient to form a prima facie conclusion that the judgment relied upon new or alternate grounds.
LSI urges the en banc Court to grant rehearing to decide whether this Court can ever affirm a PTAB IPR decision without opinion. See 35 U.S.C. § 141 (in USPTO appeal, Federal Circuit “shall issue to the Director its mandate and opinion . . .”) (emphasis added). See also Crouch, Wrongly Affirmed Without Opinion, Univ. of Missou. L. Stud. Research Paper No. 2017-02, Forthcoming 52 Wake Forest Law Review ___ (2017) (http://ssrn.com/abstract=2909007).
In offering the first weaker option, LSI gives the court an option in case it “may hesitate to open a floodgate of rehearing requests.” Of course, there are only about a dozen R.36 decisions that are still within the court’s 30-day deadline for requesting rehearing. (The Supreme Court has a 90-day deadline). The stronger approach that I argue for: “LSI presents this argument here to preserve it for further appeal to the U.S.
Supreme Court if necessary.” [Amicus support due within two weeks]
The underlying appeal center on the validity of Leak’s U.S. Patent No. 8,193,496 and 8,426,813 that cover gas-leak detection equipment and methods using a passive-IR camera and bandpass filter. The primary issues were claim construction (“leak” and “normal operating conditions”) and motivation to combine in the ultimate obviousness conclusion. The original brief began as follows:
The IPR proceedings below resulted in the creation of a dense factual record involving 24 declarations and 14 depositions. Almost all witnesses were scientists (many with Ph.D. degrees) having personal knowledge of the petroleum industry’s extensive efforts (and failures) to develop a commercially viable imaging system for detecting hydrocarbon gas leaks in the field. Most of these same witnesses also offered first-hand testimony of [the inventor] David Furry’s own efforts to solve the same technical problem. Several witnesses -top scientists from the largest petroleum companies – described the day in 2004 when Furry showed up at the industry’s “Scan Off” to demonstrate his “Hawk” camera against the industry’s then-best optical leak detection systems. These scientists, having dedicated years of work and countless resources to creating a commercially viable optical leak detection system, testified that they were completely surprised and astonished by the Hawk’s unexpected results. It was immediately apparent that Furry had solved an important technical problem that the petroleum industry had been unable to solve.
Following Bilski, Prof. Rob Merges and I published a paper titled “Operating Efficiently Post-Bilski by Ordering Patent Doctrine Decision-Making” arguing, inter alia, that eligibility decisions are largely out of the normal bailiwick of PTO examiners. As imagined by the Supreme Court, the eligibility doctrine really became too philosophical and policy based to be administrable. Alice and Mayo were subsequently released and did not help the situation. Under Dir. Lee, the USPTO did figure out a way to administer the test — by not following the test set-out by the Supreme Court. Rather than looking for abstract ideas and laws of nature as imagined by the Supreme Court, examiners are guided to look specifically only for concepts that the courts have already identified as problematic. Of course, as the number of court cases finding ineligible subject matter rises, the PTO’s approach has necessarily expanded as well.
The administration concern is one factor behind the IPO’s newly proposed legislative change to 35 U.S.C. 101. For the IPO, though, the larger issue though is “revers[ing] the recent Supreme Court rulings and restore the scope of subject matter eligibility to that intended by Congress in the passage of the Patent Act of 1952.”
Following an explanation rejected by the Supreme Court in its eligibility doctrine, IPO explains that the traditional subject matter exceptions including abstract ideas and laws of nature were part of the pre-1952 “invention” requirement. That requirement was eliminated in the 1952 Act in a way that, according to the IPO, should have opened the door to broad subject matter jurisprudence. As the organization sees it, the Supreme Court began to go off track in the 1970s – a path revived in recent years.
With this avenue of legal argument rejected by the courts, the IPO sees itself forced to appeal to Congress for a more direct statement of broad subject matter eligibility.
The IPO’s proposed amendment is as follows:
101 Inventions patentable.
101(a) ELIGIBLE SUBJECT MATTER: Whoever invents or discovers, and claims as an invention, any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereto, shall be entitled to thereof, may obtain a patent for a claimed invention thereof therefor, subject only to the exceptions, conditions, and requirements set forth in this Title of this title.
101(b) SOLE EXCEPTION TO SUBJECT MATTER ELIGIBILITY: A claimed invention is ineligible under subsection (a) if and only if the claimed invention as a whole, as understood by a person having ordinary skill in the art to which the claimed invention pertains, exists in nature independently of and prior to any human activity, or exists solely in the human mind.
101(c) SOLE ELIGIBILITY STANDARD: The eligibility of a claimed invention under subsections (a) and (b) shall be determined without regard as to the requirements or conditions of sections 102, 103, and 112 of this Title, the manner in which the claimed invention was made or discovered, or the claimed invention’s inventive concept.
In describing the 101(a) amendment, the IPO explains that, in the amended structure “utility [is] the sole basis of eligibility.” The requirement that the entitlement to a patent is “subject only to the exceptions and conditions set forth in this Title” is, according to the IPO, intended “to foreclose the development of any future ‘judicial exceptions” to section 101.” and to recognize that the “only exceptions to the entitlement to a patent … are those defined in the statute.” The IPO statement does not consider the impact of other already-existing non-statutory exceptions such as double-patenting, but presumably those will disappear unless a sufficient statutory hook is found.
Proposed 102(b) includes a very narrow exception to eligibility. I would suggest that there is almost nothing on earth that provably “exists in nature independently of and prior to any human activity” leaving the only actual exception that the invention “exists solely in the human mind.” On this second exception, IPO writes:
This ineligibility criterion … makes eligible any claim limitation that requires some external involvement with the physical world or any representation thereof (e.g., data in a computer).
. . . [However] ideas that do not have physical or tangible aspects . . . are not patentable.
The IPO does not indicate whether the exception would be triggered if a single embodiment of the invention could conceivably exist solely in a human mind. I expect that it would.
According to the IPO, 101(c) is designed to ensure that eligibility is not determined based upon the novelty, obviousness, or definiteness of a patent claim. I would suggest that the language does not quite achieve the purpose suggested. A more effective revision might state instead that “eligibility of a claimed invention. . . shall be determined without regard to its novelty, obviousness, or definiteness, or lack thereof.”
I compliment the IPO on taking this major step and beginning a conversation on legislative fixes to the eligibility doctrine.
I agree with the IPO members that the current situation is quite problematic both because the lines are so unclear and because they are ruling-out many inventions that should qualify in my conception. That said, I believe that the provision likely goes too far. I would suggest that the proposal take at least two further steps: (1) include a third exception to eligibility derived from the printed matter doctrine; and (2) include a new 102(d) that expressly defines the scope of the utility doctrine so that it becomes clear what work will be going on there. It should be clear from the statute that ordinary works of authorship, for instance, are not patent eligible.
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)
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:
In a non-precedential decision, the Federal Circuit has remanded this design patent damages dispute back to the district court reconsideration. The basic question is whether the patented “article of manufacture” (which serves as the basis for profit disgorgment) should be the entire article sold to consumers or some component of that whole. A patentee would obviously prefer the whole-article basis because it would result in a greater total-profit award. In Samsung Elecs. Co. v. Apple Inc., 137 S. Ct. 429 (2016), the Supreme Court held that the statute is broad enough to encompass either the entire-article or simply a component. However, the Court refused to provide any guidance as to how to determine the appropriate basis in any particular case (including this case involving Apple’s iPhone design patents).
On remand here, the Federal Circuit has also refused to particularly decide the case but instead has remanded to the District Court for her analysis. “[W]e remand this case to the district court for further proceedings, which may or may not include a new damages trial.”
The court did provide some commentary:
The Supreme Court clarified that a damages award under § 289 involves two steps: (1) “identify the ‘article of manufacture’ to which the infringed design has been applied;” and (2) “calculate the infringer’s total profit made on that article of manufacture.”
The parties here dispute whether the jury instructions were appropriate based upon this clarification of the law. Apparently, Judge Koh read the statute to the jury, and did not particularly indicate whether the “article of manufacture” was the phone as a whole or some component thereof. So, while the instructions are not wrong, they could be more detailed.
On remand, the District Court will need to review the trial record and determine whether a new damages trial is necessary based upon more detailed jury instructions.
= = = = =
I like what the court did here. When the Federal Circuit does decide this issue, its precedential approach is likely to stick for many years to come. It makes sense then for the court to seek the perspective of at least one other judge before jumping into the foray. Here, there is no question that the district court more fully understands the case and the particulars of the trial and so it is also right to remand for consideration of how the Supreme Court’s decision impacts what has already been decided. We can also recognize that the parties are fighting over past damages and both have sufficient cash-on-hand so that a delay in judgment does not create irreparable harm.
= = = = =
In a Footnote, the court looked to foreclose a separate argument on remand. The court writes:
Samsung also argued that § 289 “contains a causation requirement, which limits a § 289 damages award to the total profit the infringer made because of the infringement.” We rejected that argument, and Samsung abandoned this theory during oral argument to the Supreme Court.
Thus, although causation may still be an issue to be debated – it appears out for this case.
This is probably obvious, but while nonpayment of fees (or expenses) may under some circumstances permit a lawyer to withdraw from a case, it does not permit the lawyer to reveal confidential information. What does a lawyer do if (as sometimes happens) the client objects to withdrawal?
The ABA in ABA Formal Ethics Op. 476 (Dec. 19, 2016) (here), said that the lawyer should (a) in the initial motion say nothing more than “professional considerations” or the like; (b) if pressed by the court, point out that the court should rule without requiring disclosure; and (c) only if pressed or in the alternative, offer to provide the information for in camera review.
