In a significant ruling, the Merit Systems Protection Board (MSPB) granted corrective action to PTAB Administrative Patent Judge (APJ) Michael Fitzpatrick in his whistleblower retaliation case against the USPTO associated with his complaints about PTAB panel expansion (i.e., ‘panel stacking’). The decision issued back in 2023, but has only just now been published following a settlement between Fitzpatrick and the USPTO. This post will delve into the details of Fitzpatrick’s claims, the MSPB’s reasoning, and the implications of this decision for patent practitioners and the USPTO. (more…)
In 2018, the Supreme Court’s 7-2 decision in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, 584 U.S. 325 (2018) affirmed the constitutionality of inter partes review (IPR) proceedings. The Court held that patents are “public rights” and thus may be canceled through congressionally authorized administrative proceedings without violating Article III or the Seventh Amendment right to a jury trial. This decision was a significant win for proponents of the America Invents Act (AIA) and those seeking to use the Patent Trial and Appeal Board (PTAB) as an efficient mechanism to cancel issued patents.
Fast forward to 2024, and a number of us were watching the non-patent case of SEC v. Jarkesy, 144 S. Ct. 2117 (2024), wondering if it might destabilize Oil States. Jarkesy indeed narrowed the scope of what qualifies as a “public right,” potentially reopening the debate on the constitutionality of IPRs. (more…)
The Supreme Court recently decided Moore v. United States, — U.S. — (June 20, 2024), a case focusing on the constitutionality of the Mandatory Repatriation Tax (MRT). While the majority opinion, authored by Justice Kavanaugh, upheld the MRT, Justice Thomas published a strong dissent relying upon an invention metaphor in a decidedly negative light, something that he has done in several other recent opinions. For Thomas, judicial invention is a synonym to judicial activism and antithetical to his approach that looks primarily to historic preservation, especially when interpreting the U.S. Constitution.
In Moore, the majority held that the MRT, which attributes the realized and undistributed income of an American-controlled foreign corporation to the entity’s American shareholders and then taxes those shareholders, “falls squarely within Congress’s constitutional authority to tax.” The Court reached this holding by relying on its “longstanding precedents” that allow Congress to attribute the undistributed income of an entity to the entity’s shareholders or partners for tax purposes.
Justice Thomas, joined by Justice Gorsuch, dissented. He argued that the Sixteenth Amendment requires realization for income to be taxed without apportionment. His main complaint against the majority opinion is that it “invent[ed]” a new attribution doctrine to reach its conclusion.
Justice Thomas’ negative invocation of “invention” in Moore is part of a broader trend in his recent opinions. Just a week before Moore, in FDA v. Alliance for Hippocratic Medicine, 602 U.S. — (June 13, 2024), Justice Thomas refused to “invent a new doctrine of doctor standing,” concluding that “there would be no principled way to cabin such a sweeping doctrinal change to doctors or other healthcare providers.” Similarly, in a recent concurring opinion, Justice Thomas argued that “Federal courts have the power to grant only the equitable relief ‘traditionally accorded by courts of equity,’ not the flexible power to invent whatever new remedies may seem useful at the time.” Alexander v. S.C. State Conf. of the NAACP, 144 S. Ct. 1221 (2024) (Thomas, J., concurring). And in his dissent in US v. Rahimi, 602 U.S. — (June 21, 2024), Justice Thomas complained that “At argument, the Government invented yet another position.” (more…)
Two people cannot wear the same sock (at least at the same time) but they can think the same thought, sing the same song, or undergo the same medical procedure. As Thomas Jefferson famously put it, part of the ‘peculiar character’ of an idea is that ‘no one possesses the less, because every other possesses the whole of it.’
This quote from Professor James Stern’s new article introduces the conventional view that ideas and information are nonrivalrous, in contrast to the rivalrous nature of tangible goods. As an idea based creation, intellectual property’s nonrivalrous nature has always placed it on airy ground as a statutory creation rather than a natural law. The rivalrous nature of real and personal property has justified property regimes, but for IP we have always needed additional justification and additional limits because propertization creates artificial scarcity. But Stern’s new article bucks the conventional wisdom and instead argues that the nonrivalry of IP is a myth. James Y. Stern, Intellectual Property and the Myth of Nonrivalry, 99 Notre Dame L. Rev. 1163 (2024). Although many economists assume that more information is better, Stern makes clear that is not always true. He writes “it seems a safe bet that there are substantial numbers of people who would prefer the human race had never come up with such novelties as land mines, cigarettes, cargo shorts, Jet Skis, genetically modified foods, anabolic steroids, robocallers, date-rape drugs, subwoofers, Ponzi schemes, and crystal meth, to name just a few.”
Stern’s article challenges the widely held belief that information goods are inherently nonrivalrous, and that this characteristic distinguishes them from tangible property. He argues that the concept of rivalry, properly understood, encompasses not just conflicts between two active uses of a resource, but also conflicts where one person wants to use a resource and another simply wants that person to refrain from doing so. This broader conception of rivalry in terms of wants and desires, Stern contends, is relevant to many situations involving intellectual property. One Stern’s key insights is that preferences to control and restrict access to ideas and information are ubiquitous, extending well beyond the domain of intellectual property law. He points to examples such as privacy laws, testimonial privileges, classified information and state secrets laws, and the Federal Witness Protection Program as evidence that conflicts over controlling access to information are common and demonstrate the potential for rivalrousness when it comes to ideas and information. This insight serves to challenge the notion that the nonrivalrous nature of information goods necessarily means that granting exclusive rights over them is unjustified or socially harmful.
The article also examines how the characterization of intellectual property rights as “monopolies” has shaped legal doctrine, such as the Supreme Court’s reliance on the “public rights doctrine” to uphold adjudication of patent validity in administrative proceedings. Oil States Energy Servs., LLC v. Greene’s Energy Grp., LLC, 138 S. Ct. 1365 (2018). Stern suggests that this rhetoric traces partly to the view that information goods differ fundamentally from physical property due to their supposed nonrivalry.
Although the article is not patent focused, Stern’s arguments have significant implications for patent law by undermining a key justification for limiting the scope and strength of patent protection. If rivalrousness is possible for patented inventions, then the case for treating patents as a form of property is stronger. An example application here could be eBay and the role of damages and injunctions in patent cases. Similarly, with respect to patent term, Stern’s article raises questions about the appropriate duration of patent rights. If the justification for time-limited patent rights rests partly on the assumption that inventions are nonrivalrous and therefore do not require permanent exclusivity, then recognizing the potential for rivalrousness in the use of inventions may suggest a need to reconsider the optimal term length. At the same time, concerns about dynamic efficiency and the importance of promoting follow-on innovation may still counsel in favor of limiting the duration of patent rights, even if some degree of rivalrousness is present. Consider also double patenting, that is designed to ensure that the public should have access to the invention upon expiration of the patent. See In re Longi, 759 F.2d 887 (Fed. Cir. 1985).
Although I have not fully bought into his ideas, professor Stern has done a great job challenging us to rethink core aspects of intellectual property law. Many courts, especially members of the Supreme Court, have long seen intellectual property as inherently suspect without any inherent value other than the incentive to innovate. Stern’s article grapples with this argument that and highlights the need for a more nuanced understanding of the interests at stake.
The Federal Circuit’s new decision in Intellectual Tech LLC v. Zebra Techs. Corp., No. 2022-2207 (Fed. Cir. May 1, 2024) offers some interesting insight into leveraged patent transactions, and the effect of a lender’s ability to license or assign a patent on the patent owner’s standing to sue for infringement, especially after default.
This post walks through a new petition for writ of certiorari involving claims that Valeant Pharma defrauded the U.S. government by using fraudulently obtained patent rights prop up its drug prices. [Read the Petition]
The False Claims Act (FCA), originally enacted in 1863 to combat contractor fraud during the Civil War, imposes civil liability on anyone who “knowingly presents” a “fraudulent claim for payment” to the federal government. 31 U.S.C. § 3729(a)(1)(A). The Act allows private citizens, known as “relators,” to bring qui tam actions on the government’s behalf against those who have defrauded the government. If successful, relators can recover up to 30 percent of the damages. 31 U.S.C. §§ 3730(b)(4), (d)(2).
To prevent opportunistic lawsuits, however, Congress has sought to strike a “balance between encouraging private persons to root out fraud and stifling parasitic lawsuits” (more…)
The U.S. Supreme Court is weighing whether to grant certiorari in Vanda Pharmaceuticals v. Teva Pharmaceuticals. I have been closely watching this obviousness case that could have significant implications beyond the pharmaceutical industry. The following essay provides an overview of the key legal issues at stake and introduces Teva’s recent briefing.
The case centers on the proper legal standard for determining when an invention is “obvious” and therefore unpatentable under 35 U.S.C. § 103. In particular, Vanda argues that the Federal Circuit has unduly raised the non-obviousness hurdle — barring patents based upon a “mere reasonable expectation of success” or that certain experiments would have been obvious to try, even though the result was not known.
This recent decision from the Supreme Court case grapples with the issue of when a public official’s social media activity constitutes state action for purposes of a First Amendment claim under 42 U.S.C. §1983. I’ve been following the case as part of my work on internet and media law issues.
The case arose after James Freed, the city manager of Port Huron, Michigan, deleted comments and blocked a Port Huron citizen (Kevin Lindke) from commenting on Freed’s personal Facebook page after Lindke used the forum to criticize the city’s handling of the COVID-19 pandemic. Lindke sued Freed, arguing that Freed had violated his free speech rights by censoring him in a public forum.
In a unanimous opinion authored by Justice Barrett, the Supreme Court created a two step test, holding that that a public official’s social media conduct only qualifies as state action under §1983 if the official:
possessed actual authority to speak on the State’s behalf on the particular matter at issue, and
purported to exercise that authority when speaking in the relevant social media posts.
The Federal Circuit held oral arguments on March 4, 2024 in the important patent case of Celanese Int’l. v ITC, 22-1827 (Fed. Cir. 2024).
The question: Under the AIA, does sale of a product by the patent applicant prohibit the patentee from later patenting the process used to make the product?
The intersection between factual inquiries and legal conclusions in patent law is a complex and ever-evolving area, this is especially true in obviousness doctrine. A recent Federal Circuit decision highlights the tricky analysis required in assessing obviousness and damages in patent cases. In Cyntec Co. v. Chilisin Electronics Corp., the appellate court examined whether the lower court’s directed verdict (JMOL) of nonobviousness improperly removed factual questions from the jury. This case provides an important reminder of the care required in delineating the fact finding and legal determinations in patent trials. As is common, I think both the District Court and the Federal Circuit got it wrong.
Note, the court’s decision includes an interesting analysis of damages, finding that the plaintiff’s damages expert should have been excluded. It also includes a useful claim construction decision on when to give a term its plain and ordinary meaning.
A molded choke is a device used in electronic devices to filter undesirable signals. The device contains a coiled conducting wire encapsulated in a molded mixture of magnetic powder. The powder is heated to a sufficiently high temperature to allow it all to bond together. The patentee, Cyntec, had experienced some difficulties in creating the devices — with the high heat causing various problems such as melting the conducting wire or its insulative layer. The solution that they hit upon was using a mixture of magnetic powders with different hardness and particle sizes. This permitted a lowering of the required molding temperature and thus avoided wire damage during molding. See U.S. Patent Nos. 8,922,312 and 9,481,037.
Competitor Chilisin began selling its own molded chokes and Cyntec sued for infringement. At trial, Chilisin presented invalidity arguments that the claims were obvious based on two prior art references – Shafer and Nakamura. However, the district court granted JMOL of nonobviousness in favor of Cyntec before the case went to the jury (i.e., directed verdict). The jury subsequently found infringement and awarded full lost profits damages based on Cyntec’s expert calculations.
Although obviousness is ultimately a question of law, it depends upon upon substantial factual finding. The particular threshold of where factual findings end and legal conclusions begin is quite tricky in this area. In KSR, the Supreme Court appeared quick to determine as a matter of law that it PHOSITA would have been motivated to combine the references in a way rendering the claims obvious. In subsequent cases, however, the Federal Circuit took pains to tease out motivation to combine from the ultimate conclusion of obviousness.
“Before KSR, we had also consistently treated the question of motivation to combine prior art references as a question of fact… KSR did not change this rule ….” Wyers v. Master Lock Co., 616 F.3d 1231, 1238–39 (Fed. Cir. 2010) (as quoted in Apple Inc. v. Samsung Elecs. Co., Ltd., 839 F.3d 1034, 1051 (Fed. Cir. 2016) (en banc)).
But, the fact/law divide is a bit more complicated in Cyntec because it involves a Judgment as a Matter of Law (JMOL). We typically have two distinct types of legal questions at the JMOL stage:
Regular questions of law, such as the meaning of a statute or the ultimate conclusion of a patent claim’s obviousness; and
Lopsided questions of fact, where the evidence so favors one-side that no reasonable jury could find otherwise.
At JMOL, the district court is empowered to make these two types of legal conclusions, but cannot otherwise invade the jury’s factfinding role.
Adding to the difficulty is the reality that determination of the Graham factors rarely lead directly to the obviousness/nonobvious determination. In Graham, the Supreme Court indicated that courts should work through the following for step fact-finding process and then rely upon the results to make the ultimate legal conclusion of obviousness.
These factual questions include: “(1) the scope and content of the prior art, (2) differences between the prior art and the claims at issue, (3) the level of ordinary skill in the pertinent art, and (4) [if presented,] the presence of objective indicia of nonobviousness such as commercial success, long felt but unsolved needs, failure of others, and unexpected results.”
Cyntec Co. v. Chilisin Electronics Corp., No. 22-1873 (Fed. Cir. Oct. 16, 2023) (quoting Elbit Sys. of Am., LLC v. Thales Visionix, Inc., 881 F.3d 1354, 1357 (Fed. Cir. 2018)). The point here is that even after the fact-finder has made all the factual findings, there is still quite a bit of work for a the law-decider to do. That said, quite a bit of the work is occupied by the motivation-to-combine factual finding.
Here, the patentee presented prior art and testimony regarding a motivation to combine. The district court found the evidence insufficient and awarded JMOL for the patentee. On appeal, the Federal Circuit vacated that decision and instead concluded that “Chilisin presented the jury with evidence that would have allowed it to reasonably find the asserted claims obvious in view of Shafer and Nakamura. . . . Taken together and drawing all reasonable inferences in Chilisin’s favor, this evidence is enough for a reasonable jury to have found that the asserted claims would have been obvious.”
I have an important nitpick with the appellate court’s decision that goes back to the complexity of the law-fact divide in obviousness analysis. The court skipped an important step by simply concluding that a reasonable jury could have found the claims obvious. Recall that obviousness is a question of law, and at JMOL we are only concerned taking disputed facts away from the jury. The appellate court should have instead explained something like the following: “that the defendant presented evidence sufficient to put the factual question of motivation-to-combine into dispute in a way that, if taken as true, would lead to a legal conclusion of obviousness.”
The distinction here is important, the Federal Circuit’s rule here makes it harder to award summary judgment of non-infringement because it places an additional layer of reasonableness on the ultimate legal conclusion of obviousness. But that is a question of law, and with questions of law we don’t account for reasonable fact finders but instead ask only whether the question was decided rightly or wrongly. This distinction is why legal determinations are reviewed de novo on appeal and factual findings are given deference. This analysis also reveals the dirty secret that, although the law does not permit reasonable deference into legal questions, reasonable minds regularly do disagree upon the conclusion of obviousness even after making all the underlying factual findings.
On remand, the district court must ensure that the jury is tasked only with resolving the factual disputes, while reserving the ultimate legal question for itself. Carefully delineating the fact finding and legal conclusions will be critical to applying the proper review on any subsequent appeal.
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Regarding damages, the Federal Circuit found the district court abused its discretion in admitting Cyntec’s expert testimony on alleged lost profits. Cyntec’s expert used total revenue from customer SEC filings to estimate what percentage of products containing the accused chokes were imported into the U.S. However, the appellate court found his methodology “speculative” because the filings included revenue from products that did not contain accused chokes, without distinguishing between them. Citing precedent like Power Integrations, Inc. v. Fairchild Semiconductor Int’l, Inc., 711 F.3d 1348 (Fed. Cir. 2013), the Federal Circuit held the expert “assumed that (1) the sales revenue reported in the customers’ Form 10-K reflected sales of products with molded chokes; and (2) each third-party product shipped into the United States contained an infringing choke.” This “speculative” testimony should have been excluded under Daubert. The appellate panel thus vacated the lost profits award. On remand, the damages calculation will need to be reevaluated without the flawed expert testimony, likely with a new trial focusing on obviousness and damages.
I was reading through a recent trial transcript and enjoyed the following historical introduction to the jury system offered by Judge Gilstrap. He was talking to the potential jurors as voir dire was just about to begin. — Dennis
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We are engaged or about to be engaged this morning in the selection of a jury in the civil case involving allegations of patent infringement. If you’d indulge me, though, for just a minute, I’d like to briefly review with you at this juncture how we came to have our American civil jury trial system.
If you go back in ancient history, if you start with the first five books in the Old Testament, the Pentateuch, you will find that the ancient Hebrew nation impaneled juries to decide issues of property ownership and property value.
The Greeks, the ancient Greeks, began using a jury system about 1500 B C. The Romans, as with many other things, copied the jury system from the Greeks and implemented a jury system as a part of ancient Rome. And, in fact, it was the Romans that brought the jury system to Europe across the English Channel into what we now know as Great Britain when they conquered Great Britain in the fourth century A.D.
Now, by the 12th century A.D., the jury system had been in place in England, what we now know as England, for 800 years. But in the 12th century A.D., a rather tyrannical king came to the throne of England and his name was King John. And he became embroiled in various disputes with his nobles that nearly led to the verge of a civil war.
One of those disputes was the king’s efforts to do away with the right to trial by jury. Thankfully, the civil war did not take place at that time, and the king and his nobles resolved their many disputes, including this one, by entering into a written agreement that they signed at a place in England called Runnymede. And this agreement that settled all these disputes and laid out a structure for that country going forward, including guarantees of the right to trial by jury, is a document many of you may have heard of called the Magna Carta.
And so you can see, ladies and gentlemen, that our British forefathers who came to this continent as colonists brought the jury trial system with them. And the jury trial system flourished in colonial America for over a hundred years, until another tyrannical king came to the throne of Great Britain. This time his name was King George III. I’m sure you’ve have studied him in American history that led up to our American revolutionary war. And the king, prior to that, became embroiled in many disputes with his American colonists.
One of those disputes was King George III efforts was to do away with or to substantially curtail the right to trial by jury. In fact, ladies and gentlemen, when Thomas Jefferson sat down to write the Declaration of Independence which spells out — it really was a letter to the king telling the king all of the reasons why his subjects in America felt they had no other option but to revolt, declare their independence, and form their own independent nation, one of those reasons set forth by Thomas Jefferson in the Declaration of Independence for that separation between America and Britain was King George III’s efforts to do away with or curtail substantially the right to trial by jury.
And as you’re all aware, we did revolt against Great Britain, we did form our own independent nation, and shortly thereafter we adopted the governing document for our country, the supreme law of the land, the Constitution of the United States.
And immediately after the Constitution was ratified, there were ten additions or amendments added to the Constitution. Many of the states made it clear they would not vote to ratify the Constitution without a commitment to immediately add these ten amendments. And these ten amendments you’ve all studied about in school. They’re called the Bill of Rights. And in those first ten amendments to the Constitution, you will find the Seventh Amendment to the Constitution, which guarantees, ladies and gentlemen, the right to every American citizen to have their civil disputes resolved through a trial by jury. Those ten amendments, the Bill of Rights, were all ratified in 1791. So since 1791, well over 200 years ago, every American has had a constitutionally guaranteed right to have their civil disputes settled through a trial by jury.
So by being here this morning, with that brief background and overview of how we got to have the jury trial system that we’re implementing today, I want you to realize in the Court’s view every one of you here are doing a very important part to preserve, protect, and defend the right to trial by a jury as part of our constitutionally guaranteed rights. I always tell citizens who appear for jury duty as you have this morning that, in my personal view, the jury duty or jury service rendered by any citizen is the second highest form of public service any American can render for their country. In my personal view, the highest form of public service are those men and women that serve in our armed forces.
Now, later in the process this morning, the lawyers for both sides are going to address you. They’re going to ask you questions. I want you to understand none of them are seeking to inquire unduly into your personal affairs. Said another way, none of them are trying to be nosy and to ask you about things that are not relevant to this case. They will be asking you questions as a part of working with the Court to secure a fair and an impartial jury from among you to hear the evidence in this case. I want you to also understand when the lawyers ask you questions later as a part of this process, there are no wrong answers, as long as the answers you give are full, complete, and truthful. As long as they’re full, complete, and truthful, there are no wrong answers. . .
The pending petition in Nike v. Adidas asks the Supreme Court whether it is proper for the Patent Trial & Appeal Board (PTAB) to raise sua sponte new grounds of unpatentability against a substitute claim added during an inter partes review proceeding. The government, as a respondent in this case, argues that the PTAB can create its own reasons for rejecting newly-added claims so long as the patent owner is given sufficient notice and a chance to respond.
However, the case intrigue has recently heightened due to a somewhat chaotic saga involving the PTAB. Key figures involved include former PTAB Chief Judge Ruschke, current Chief Judge Boalick, and Judge Michael Fitzpatrick, who was recently justified as a wronged-whistleblower.
The Supreme Court petition was submitted amidst revelations of secretive maneuvers within the Board. These questionable practices include an abrupt panel expansions and judge replacement without notifying involved parties. Specifically, in the Nike v. Adidas IPR, the Board panel was first expanded to include Chief Judge Ruschke and then Deputy Chief Judge Boalick after all parties had finished their arguments and opinion writing had begun. The process also witnessed the replacement of Judge Fitzpatrick after he expressed discontent over the panel’s expansion, prompting his removal from all America Invents Act (AIA) cases.
Judge Fitzpatrick’s ousting ignited a legal battle against the USPTO, which recently concluded with a victory for Fitzpatrick at the Merit Systems Protection Board (MSPB). Fitzpatrick alleged that the USPTO had manipulated the inter partes review process in the Nike v. Adidas case, inappropriately expanding the PTAB review panel and delaying the final decision. Furthermore, Fitzpatrick’s whistleblowing disclosures extended beyond the PTAB, unearthing a misrepresentation by the Solicitor General to the Supreme Court regarding the frequency of expanded panels during the Oil States proceedings. In briefing in the case, the Solicitor General recently apologized to the Supreme Court, expressing regret for the unintended misinformation. The SG’s brief indicates that they only recently learned of the underlying drama.
In light of these troubling revelations, the Solicitor General suggests the Supreme Court grant, vacate, and remand Nike v. Adidas, offering the petitioner a chance to present arguments based on this new information to the Federal Circuit, and allowing the Federal Circuit to consider these points in the first instance.
Interestingly, this practice of unannounced judge replacements parallels the Federal Circuit’s tactics in the infamous Novartis case. Although the Adidas name is still on the case, the company has formally requested not to be involved in the appeal, citing a settlement reached with Nike.
As has been reported by Dennis on the main page, by Gene Quinn on IP Watchdog (here), and by various media I am seeing, Chief Judge Moore reportedly threatened Judge Newman with a petition to remove Judge Newman as incompetent to carry out her duties unless Judge Newman agreed to take senior status. Gene points out the incongruity of Chief Judge Moore’s reported position that Judge Newman may continue to serve as a judge, though Chief Judge Moore ostensibly believes she is incompetent to do so.
I’ve now seen several other articles about this, reporting more or less a consistent story. Hopefully, it’s not true. Beyond what has been reported, I would add the following two facts.
One, I saw Judge Newman (with Judge Lourie and former Judge O’Malley) speak at at the USPTO three weeks ago. (I was there speaking on patent ethics.) Judge Newman was eloquent, coherent, cogent, and spoke passionately about various topics, including section 101 (which requires a bit of mental agility, I would say). As others have pointed out, Judge Newman has, for a very long time, often taken more time in getting her opinions out than other judges, but I have seen nothing in those opinions that show incompetency, and if that delay were the basis that was a well known fact decades ago.
Second, this is the second time Chief Judge Moore has engaged in what is unprecedented conduct that has raised concerns about the integrity of the Federal Circuit. Boiled way down: A few months back, Judge Moore dissented in a case, 2-1, with Judge O’Malley writing the majority opinion. Once Judge O’Malley retired and without notice to the parties, Chief Judge Moore created a “new” panel and her dissent as a result became the 2-1 majority, with the original majority judge dissenting. That unprecedented flip of the result of a case is the subject of a petition for cert in which a group of retired circuit judges as amici wrote (here), in part: “Allowing judges to swap out under the pretense of panel rehearing to change already-published decisions undermines public confidence in the judiciary.” (Full disclosure: I’m on an amicus brief with a different group in that case, available here.)
Hopefully, the reports about Chief Judge Moore using the threat of judicial discipline to force Judge Newman to opt for senior status are wrong, and hopefully the Supreme Court will correct the other matter. At stake is public confidence in the judiciary.
Update: the Federal Circuit unsealed an order by Chief Judge Moore advocating for Judge Newman’s removal, which does indicate the stories discussed above seem basically to have been true. It is here.
In October 2022, Canada’s largest intellectual property firm became a publicly traded entity. Smart & Biggar, a firm that includes 100+ Canadian patent attorneys and agents (most of whom are also registered with the USPTO) was purchased by the Australian company IPH Limited. The holding company trades on the Australian stock exchange with a market valuation of $1.8 billion Australian dollars ($1.2 billion USD).
IPH already owns five Australian IP-focused law firms (consolidated from 10), including offices in New Zealand, Singapore, China, Malaysia, Indonesia, and Thailand. With one firm having 32% of the Australian national phase market, you might think that conflicts would get a bit tricky. A bit more on that below.
What is the benefit of selling for Smart & Biggar? Presumably money today. The purchase price was $350 million Canadian dollars ($250 million USD). That includes $241m cash to the old owners (i.e., the partners) along with $45m in IPH shares and another $66m in deferred IPH shares (presumably for partners who stay for two years). The old partners continue to have some management rolls at the firm but will be employees of IPH rather than owners. “Canada’s Intellectual Property Firm” is now owned by the Australians.
Like the U.S., Canadian law generally requires that law firms be owned by lawyers. To avoid this hiccup, Smart & Biggar divided its firm into two parts – an “IP Agency Practice” involving patent preparation and prosecution; and a “Law Practice” handling litigation and other legal issues. The IP Agency Practice apparently “does not practice law” and therefore is not controlled by the lawyer-ownership rule. As the deal was structured, IPH owns the IP Agency Practice without any problem because they are “not practicing law.” The Law Practice is partially owned by the IP Agency Practice which is somehow sufficiently owned by lawyers, even though IPH owns the IP Agency Practice. This clever approach apparently satisfies Canadian restrictions except for Alberta where Smart & Biggar’s law practice remains “wholly owned by individual lawyers.” Still, at least according to the website, the Smart & Biggar Alberta branch is operating as part of IPH.
Back in Australia we have had some interesting events that began a decade ago when the country began to permit patent attorneys to incorporate in public firms. Shelston IP was the first IP firm to list itself on the Australian Stock Exchange back in 2015. In 2019, IPH bought Shelston in a hostile takeover. Shelston has now been merged into Spruson & Ferguson as have Fisher Adams, and Cullens. Other IPH brands include Pizzeys; AJPark, & Griffith Hack. Collectively, this is about 1/3 of the Australian national-phase market. What this means to me is that there is a good chance that competitors are are hiring co-owned firms to do their Australian work.
Throughout this time, there has been lots of turmoil for attorneys themselves, with a substantial percentage moving firms. IPH has repeatedly sued its former employees who left to start their own firms — seemingly for “stealing” clients.
Australian patent attorney Mark Summerfield has been writing about these issues for the past several years on his excellent Patentology blog.
Could this happen in the US: The ABA model rules as well as USPTO rules prohibit law firms being owned by non-lawyers. But, some states are moving forward with experiments. So far, the USPTO has not suggested any changes.
The pending case of Jump Rope Systems v. Coulter Ventures is fascinating to me as someone who teaches both property and civil procedure. The basic questions: (1) As an inter partes review (IPR) proceeding draws to a close – toward cancellation – at what point are the claims no longer enforceable? (2) What is the effect of cancellation, in particular, is it like canceling a magazine subscription where the former subscriber isn’t off the hook for past-due bills; or, is it like an annulment – an Ab Initio Extinguishment? The case also (3) raises a straight-up due process challenge to the IPR system.
A typical IPR where the petitioner prevails includes the following three-step sequence:
Unpatentable Decision: PTAB issues a final written decision concluding that the challenged claim has been proven unpatentable with a preponderance of the evidence.
Affirmed on Appeal: On appeal, the Federal Circuit affirms that judgment.
Certificate of Cancellation: Once the appeal is complete, the USPTO Director then issues a certificate canceling the claim. 35 U.S.C. 316.
The first question — if the patentee is involved in concurrent district court infringement litigation, at what step is the patent no longer enforceable?
Clearly, the patent claim is canceled at Step-3 and by that point cannot be enforced going forward. The Federal Circuit though has held that the claim is already unenforceable at Step-2 based upon the court’s questionable application of collateral estoppel. I call it questionable because of the different standards of proof applied in the PTAB vs the District Court. The affirmed PTAB decision found the claim invalid with a preponderance of the evidence. But, in district court litigation invalidation requires clear and convincing evidence, a substantially higher standard. And, a conclusion of invalidity under a lower standard does not conclusively tell us that the same claim would have been proven invalid under a higher standard. Using a standard approach such as found in the Restatement (Second) of Judgments, collateral estoppel would not apply here because of the difference in standards. Here, we tend to use an exacting standard for res judicata principles because of their due process implications — the result bars a party from making their argument in court. The Federal Circuit’s fudging of the rule makes some practical sense – the statute appears to make the issuance of the cancellation certificate a ministerial process with its “Director shall” language. And yet, fudging the rules in a way that undermines due process is troubling. I’ll note here that courts appear to generally be waiting for the appeal decision before announcing preclusion, although it is unclear whether that approach is somehow required or simply prudential (since district courts generally see the Federal Circuit as unpredictable). I’ll also note that I previously called out the Federal Circuit for improper expansion of preclusion law with regard to the Kessler Doctrine – they did not listen to me there either.
The second question at issue in Jump Rope Systems involves the impact of cancellation — what about infringement that occurred (and lawsuits pending) prior to the cancellation?
The reissue system is a somewhat-close relative to inter partes review and has the benefit of 150 years of case law, including numerous Supreme Court decisions. With reissues, courts have clearly held that cancellation of claims during reissue render those claims entirely moot. See, for instance, Moffitt v. Garr, 66 U.S. 273, 283 (1861) and Meyer v. Pritchard, 23 L. Ed. 961 (1877). But, the reissue system has a significant difference — a reissue begins with a patentee surrendering its patent as required by statute. 35 U.S.C. 251. It is that surrendering that makes the cancellation of claims in a reissue so dramatic.
With inter partes review, the patentee does not surrender the patent and so we have a potentially different situation. Still, courts have regularly treated cancellation of claims as voiding the claims backward and forward through time. But, it is not so clear that approach is correct and there are many situations where the courts have given “cancel” to only prospective effect. In its briefing, Jump Rope cites a long string of cases in various areas of law as well as simple plain meaning of the word:
Plain English is in accord. “Canceling” a magazine subscription stops future deliveries, but past issues remain in hand.
Jump Rope Reply Brief. If Jump Rope wins on this, an IPR petition that cancels claims would only cut-off prospective damages and injunctive relief. The patentee could still recover pre-cancellation damages so long as the defendant failed to prove the claims invalid in district court at the higher standard.
= = =
The briefing also includes an important due process challenge — arguing that the use of IPRs to prevent infringement lawsuits violate due process. In Oil States, various the patentee raised various challenges to the system, but did not bring a due process challenge. Oil States Energy Servs., LLC v. Greene’s Energy Group, LLC, 138 S. Ct. 1365 (“We emphasize the narrowness of our holding. . . . Oil States [has not] raised a due process challenge.”).
Here, the patentee makes two arguments:
“First, front-line adjudicators are not sufficiently insulated from political forces. United States v. Arthrex, Inc., 141 S. Ct. 1970, 1993 (2021) (Gorsuch, J., concurring in part & dissenting in part) (‘The Court’s decision in Oil States allowing executive officials to assume an historic judicial function was always destined to invite familiar due process problems. . . . [P]owerful interests are capable of amassing armies of lobbyists and lawyers to influence (and even capture) politically accountable bureaucracies.’) (citations and internal quotation marks omitted).”
“Second, by not permitting traditional live cross-examination of witnesses
(instead, relying on written depositions), IPR procedures violate due process in view of the importance of the property right at issue. See Goldberg v. Kelly, 397 U.S. 254, 269 (1970) (‘In almost every setting where important decisions turn on questions of fact, due process requires an opportunity to confront and cross-examine adverse witnesses.’)”
Great questions from petitioner.
Robert Greenspoon (Dunlap Bennett) is counsel for the patentee Jump Rope Systems. Louis DiSanto (Banner Witcoff) is representing the accused infringer Coulter Ventures. Their offices are a few blocks apart in downtown Chicago.
In 2022, the Federal Circuit held that an invention is only eligible for a US patent if a human conceived of the invention. Thus, no patents for invention wholly conceived by artificial intelligence. Thaler v. Vidal, 43 F.4th 1207 (Fed. Cir. 2022). Thaler’s petition for writ of certiorari to the US Supreme Court would have been due last week, but Thaler was able to obtain an extension with the petition now being due March 19, 2023. Thaler’s main attorney throughout this process has been Professor Ryan Abbott. The team recently added appellate attorney and Supreme Court expert Mark Davies to the team, and so it should be a great filing when it comes. The motion for extension explains that the case presents a fundamental question of how the law of inventorship should apply “to new technological methods of invention.”
Specifically, this case arises from the Federal Circuit’s denial of a patent to an invention created by an artificial intelligence (AI) system, holding that an AI system is categorically unable to meet the definition of “inventor” under the Patent Act. The questions presented in Dr. Thaler’s petition will have a significant impact on Congress’s carefully balanced scheme for protecting the public interest in promoting innovation and ensuring the United States’ continued international leadership in the protection of intellectual property.
Extension Motion. Part of the justification for delay is that Dr. Thaler and his attorneys have a parallel copyright case pending. Thaler attempted to register a copyright for a computer-created work of art. But, the copyright office refused once Thaler expressly stated that there was no human author. Thaler then sued in DC District Court. Most recently, Thaler moved for summary judgment, presenting the following question for the district court to decide:
With the facts not in dispute, this case boils down to one novel legal question: Can someone register a copyright in a creative work made by an artificial intelligence? The plain language and purpose of the Copyright Act agree that such works should be copyrightable. In addition, standard property law principles of ownership, as well as the work-for-hire doctrine, apply to make Plaintiff Dr. Stephen Thaler the copyright’s owner.
THALER v. PERLMUTTER et al, Docket No. 1:22-cv-01564, Paper No. 16 (D.D.C. Jan 10, 2023). The image, reproduced below from the complaint is known as “A Recent Entrance to Paradise.” (Registration Application #1-7100387071).
In another recent example, the Copyright Office has also canceled copyright registration for Zarya of the Dawn, apparently because of its AI-created status.
For our patent law course today, the students read the Justice O’Connor unanimous opinion in Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141 (1989).
Bonito Boats centers on a Florida statute prohibiting copying of unpatented boat hulls via direct molding. The Florida courts had refused to enforce the law because it conflicted with Federal Patent Law. And the Supreme Court affirmed — holding that the “carefully crafted bargain” embodied by the US patent system occupies the entire space and thus preempts any further state action offering patent-like rights.
From their inception, the federal patent laws have embodied a careful balance between the need to promote innovation and the recognition that imitation and refinement through imitation are both necessary to invention itself and the very lifeblood of a competitive economy.
Id. The “balance” recognized by the Court is that some innovations are patentable, but only under the strict requirements found in sections 101-112 of the Patent Act. And, once a patent expires (or is refused or forfeited by public use), the balance allows “free access to copy whatever the federal patent and copyright laws leave in the public domain.” Compco Corp. v. Day–Brite Lighting, Inc., 376 U.S. 234 (1964). In its analysis, the court had to contend with its prior statements permitting state regulation of trade secrets covering innovations that could have been patented. See Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470 (1974). The key difference is that the Boat Hull statute offered rights to inventions available to the public, while trade secret rights only apply information outside of public awareness. And, in addition the court noted that trade secrets protect a “most fundamental human right, that of privacy.” Id. In other words, there is a substantial state interest in protecting trade secrets that fall outside of the realm of the patent balance. Kewanee also made an assertion that trade secrets are so weak that they are unlikely to shift innovator activities. That final assertion has become dubious in my mind as trade secrets have become more important within certain industries, alongside the expansion of patent eligibility exclusions.
One reason we read Bonito Boats early in the semester is because of the way that O’Connor walks through the various patentability doctrines, explaining how each serves an important role in the patent balance.
The novelty requirement [operates] to exclude from consideration for patent protection knowledge that is already available to the public. [The provisions] express a congressional determination that the creation of a monopoly in such information would not only serve no socially useful purpose, but would in fact injure the public by removing existing knowledge from public use. . . . As the holding of Pennock makes clear, the federal patent scheme creates a limited opportunity to obtain a property right in an idea. Once an inventor has decided to lift the veil of secrecy from his work, he must choose the protection of a federal patent or the dedication of his idea to the public at large. As Judge Learned Hand once put it: “[I]t is a condition upon the inventor’s right to a patent that he shall not exploit his discovery competitively after it is ready for patenting; he must content himself with either secrecy or legal monopoly.” Metallizing Engineering Co. v. Kenyon Bearing & Auto Parts Co., 153 F.2d 516 (2nd Cir. 1946).
In addition to the requirements of novelty and utility, the federal patent law has long required that an innovation not be anticipated by the prior art in the field. Even if a particular combination of elements is “novel” in the literal sense of the term, it will not qualify for federal patent protection if its contours are so traced by the existing technology in the field that the “improvement is the work of the skillful mechanic, not that of the inventor.” Hotchkiss v. Greenwood, 11 How. 248 (1851). In 1952, Congress codified this judicially developed requirement in 35 U.S.C. § 103, which refuses protection to new developments where “the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person of ordinary skill in the art to which said subject matter pertains.” The nonobviousness requirement extends the field of unpatentable material beyond that which is known to the public under § 102, to include that which could readily be deduced from publicly available material by a person of ordinary skill in the pertinent field of endeavor. Taken together, the novelty and nonobviousness requirements express a congressional determination that the purposes behind the Patent Clause are best served by free competition and exploitation of either that which is already available to the public or that which may be readily discerned from publicly available material.
The applicant whose invention satisfies the requirements of novelty, nonobviousness, and utility, and who is willing to reveal to the public the substance of his discovery and “the best mode … of carrying out his invention,” 35 U.S.C. § 112, is granted “the right to exclude others from making, using, or selling the invention throughout the United States,” for a period of 17 years. 35 U.S.C. § 154. The federal patent system thus embodies a carefully crafted bargain for encouraging the creation and disclosure of new, useful, and nonobvious advances in technology and design in return for the exclusive right to practice the invention for a period of years.
Bonito Boats. Of course one interesting bit of the story that the SUpreme Court admits is that Congress was not fully aware of what it was doing throughout all this careful crafting.
The Bonito Boats decision continues to have important influence on state activities. For instance, in its 2020 Jackson decision, the Second Circuit applied Bonito Boats in the copyright context to hold that copyright law impliedly preempted a particular right of publicity claim made by Curtis Jackson, aka “50 Cent.” In re Jackson, 972 F.3d 25 (2d Cir. 2020). Jackson had sold his copyrights to his record label, but was attempting to use rights of publicity to effectively control reproduction of his works.
Broadcom petitioned the ITC to halt imports by Renesas Electronics (and others) because they infringe two Broadcom patents:
US7512752, claims 1, 2, 5, 7, 8: memory access unit with improve access to shared memory.
US7437583, claims 17–18, 25–26: gating clock signals to reduce power consumption.
But, the ITC sided fully with Renesas:
For the ‘583 patent, the ITC found no “domestic industry” to protect – a prerequisite for USITC action. In particular, Broadcom was unable to show any licensed domestic use of the invention as claimed. In addition, the ITC found no infringement of claims 25-26.
For the ‘752 patent, the ITC found infringement of claim 5, but concluded that claim 5 was invalid as obvious. (In a parallel IPR proceeding, the PTAB also found claim 5 obvious).
On appeal, the Federal Circuit consolidated the ITC case with the IPR appeals and has affirmed in favor of Renesas.
Domestic Industry: The International Trade Commission (ITC) is a branch of the U.S. government whose role is the protection of domestic industry against foreign overreach. As part of its role, a patentee can complain to the ITC about infringing imports. A prerequisite for these Section 337 cases is the existence of a domestic industry to protect.
[ITC powers over infringing imports] apply only if an industry in the United States, relating to the articles protected by the patent, copyright, trademark, mask work, or design concerned, exists or is in the process of being established.
19 U.S.C. § 1337(a)(2). Thus, the statute requires “an industry in the United States, relating to the articles protected by the patent” being asserted. The patentee can prove that the domestic industry already exists by pointing to actual products in the US market that practice at least one claim of the asserted patent. Of course, minimal domestic sales do not equate to “an industry.” Rather, the law also requires a showing that the patentee has made significant/substantial investment in equipment, labor, engineering, research and development, and/or licensing. 19 U.S.C. § 1337(a)(3).
Here, Broadcom pointed to its system-on-a-chip (SoC) in serving the domestic industry for the ‘583. However, Broadcom’s chips do not include a “clock tree driver” required by all claims of the patent, and the ITC found no domestic industry. Broadcom generally argued that aspect of the patent was integrated by clients. However Broadcom did not point to any actual instances of such integration. But, generalities regarding the domestic industry are insufficient. The court explained:
As in Microsoft, Broadcom failed to identify any specific integration of the domestic industry SoC and the “clock tree driver” firmware, or a specific location where the firmware was stored. [And therfore] the Commission’s finding that Broadcom failed to satisfy the domestic industry requirement of Section 337 was supported by substantial evidence.
Slip Op. After losing before the ALJ, Broadcom added further evidence pointing to a particular system. However, the ITC and CAFed both concluded that new argument had been waived.
Broadcom was able to show a domestic industry for the ‘752 patent, but the court also affirmed the PTAB findings that the asserted claims were invalid. The court’s only real quibble was with regard to grammar. In a footnote, the court explained:
The Board and Commission decisions refer to what “is” obvious. Because § 103 addresses what “would have been” obvious, we recommend usage of the statutory language that looks back to the past in order to avoid the appearance of hindsight bias.
Slip Op. at Note 2. I read through the ITC decision and found the following line that appears to have raised Judge Lourie’s ire: “[T]he record evidence fully supports the FID’s finding that claim 8 is obvious over Foster alone.” [ITC Decision – 711340-1540697]. I also read through the PTAB decisions, but could not find any parallel offensive statements. Rather, the PTAB was careful to repeatedly recite the line “would have been obvious.” The PTAB did conclude that each problematic claim “is unpatentable under 35 U.S.C. § 103(a) as obvious.” However, that statement does not appear problematic to me.
As with most grammar, Judge Lourie’s opinion has some rational basis but will have the primary result of protecting self-satisfied insiders. The Supreme Court as a non-patent court doesn’t appear to care. Guess what the Court wrote in the biggest obviousness case of the past 50 years: “THE COMBINATION IS OBVIOUS.” KSR (2007)
Ikorongo Texas LLC, et al. v. Samsung Electronics Co., Ltd., et al. (Supreme Court 2022)
Ikorongo Texas LLC holds exclusive rights to a set of patents, but only with respect to use of the inventions in counties within the Western District of Texas. This includes McLennan County, home of Waco Texas and Judge Albright’s court. Ikorongo Tech LLC holds the remaining interest in the patents. This cutting-up of ownership rights is supported by old Supreme Court precedent as well as the Patent Act itself. See, Waterman v. Mackenzie, 138 U.S. 252 (1891) and 35 U.S.C. § 261 (patent rights may be conveyed “to the whole or any specified part of the United States”). Ikorongo Texas is also a Texas LLC (corporate registration in Texas), although its principles reside in North Carolina.
Ikorongo Texas then sued several companies, including Samsung & LG for patent infringement in WDTX. The defendants asked that the case be transferred to the more-convenient forum of NDCal under 28 U.S.C. § 1404. Although Judge Albright denied the motion, the Federal Circuit ordered transfer on mandamus. Now, Ikorongo Texas has petitioned the Supreme Court for writ of certiorari. To be clear Samsung and LG have previously litigated in Texas, they have lawyers in the state and lawyers willing to go to the state. The inconvenience of litigation is almost a total farce here. The problem these companies have is with Judge Albright, and the likelihood that the case will go to trial rather than being dismissed on summary judgment.
Section 1404 Transfer: Absent consent from “all parties,” § 1404 only allows transfer to districts where the case “might have been brought.” The key problem is that Ikorongo Texas could-not have brought the lawsuit in California court because venue would have been improper.
Might have been Brought: Section 1400(b) defines proper venue for patent cases. The statute provides two different ways for finding proper venue. First, state of incorporation. A patentee can sue in federal court housed in the state where the defendant is incorporated. In this case though, the defendants are incorporated in NY and Delaware. The Second approach asks whether “the defendant has committed acts of infringement and has a regular and established place of business” within the district. Here, the defendants each have a place of business in N.D.Cal., and arguably infringe the patents in the district as well. The catch, Ikorongo Texas argues that the infringing acts in California don’t impact Ikorongo Texas’s rights and therefore do not satisfy this second proper venue prong. Bottom line, Ikorongo Texas argues that it could not have sued in California, and therefore it is improper to transfer the case to California.
In its decision, the Federal Circuit did not play the game but instead effectively pierced the corporate veil between the patent owners and their affiliated companies — holding that “Ikorongo Texas is plainly recent, ephemeral, and artificial—just the sort of maneuver in anticipation of litigation that has been routinely rejected.”
In its petition to the Supreme Court Ikorongo asks this question as follows: “Can a district court transfer a matter to a statutorily proscribed district based on expressly disregarding undisputed facts creating the proscription.”
The petition also asks a second question: “Should Gulf Oil Corporation v. Gilbert, 330 U.S. 501 (1946), be overruled, particularly in light of stronger technological abilities shifting the reasonable focus for determining what is convenient for parties and witnesses?” Gulf Oil was decided in 1946 based upon the judicial doctrine of forum non conveniens. Two years later, Congress enacted Section 1404. Still, Gulf Oil has remained a guidepost for these issues of convenient forum.
The petition takes issue with how convenient forum is litigated today — arguing that it is not simply a search for the “least inconvenient forum” nor is a search for the most convenient forum for the defendant. Rather:
[T]here must be some base significant inconvenience to a party to warrant transfer. . . [I]t is a remedy for when the plaintiff vexatiously chooses a forum that would cause undue hardship to the defendants. Simply weighing one forum against another defeats the purpose of Section 1404 by allowing defendants to abusively move a case to a forum that is inconvenient for the plaintiff. This case presents a robust example.
Petition. The petition also highlights the fact that electronic communications have properly and dramatically changed how cases are litigated. And, “[a]lmost all of the private and public factors discussed by the Court in Gulf Oil are affected by the march of technology.”
Back in 1969, long before Bubba Gump, Louisiana Judge Alvin Rubin explained the virtues of shrimp: “Shrimp, whether boiled, broiled, barbecued or fried, are a gustatory delight.” Laitram Corp. v. Deepsouth Packing Co., 301 F. Supp. 1037 (E.D. La. 1969). The Deepsouth case was about patented equipment for deveining shrimp in order to render them “more pleasing to the fastidious as well as more palatable.” Id. Deepsouth litigated its case to the Supreme Court, and the Court eventually allowed the company to escape some portion of its adjudged liability based upon the territorial limits of U.S. patent law.
We know that U.S. patents are territorially limited. Although Deepsouth was barred from using Laitram’s patented inventions throughout the United States, Deepsouth began selling its deveining machine to folks outside of the US in a partially constructed form. The company explained the setup to one of its customers in Brazil:
We are handicapped by a decision against us in the United States. This was a very technical decision and we can manufacture the entire machine without any complication in the United States, with the exception that there are two parts that must not be assembled in the United States, but assembled after the machine arrives in Brazil.
The Fifth Circuit had sided with the patentee — holding that “Such a dependence on technicality would require us to countenance obvious schemes, perhaps as simple as omitting an important screw, designed to evade the mandate of § 271(a).” However on certiorari, the Supreme Court felt itself bound by the statute and precedent. The court particularly rejected the notion that “substantial manufacture” can constitute direct infringement ”
[W]e have so often held that a combination patent protects only against the operable assembly of the whole and not the manufacture of its parts.
Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518, 528 (1972). The decision was 5-4, with Justice Blackman writing in dissent and arguing that “The Court has opened the way to deny the holder of the United States combination patent the benefits of his invention with respect to sales to foreign purchasers.” Bills eliminating this loophole were quickly introduced into Congress, and eventually became law in 1984, creating 35 U.S.C. § 271(f). Patent Law Amendments Act of 1984, Pub. L. No. 98-622, 98 Stat. 3383. The new law creates two avenues for liability:
Supplying a “substantial portion” of the uncombined components of the patented invention from the US in a way that induces combination abroad. 271(f)(1).
Knowingly supplying a part from the US that is especially designed as a component of a patented invention and not a staple article or commodity with substantial non-infringing use. 271(f)(2).
Deepsouth has important implications beyond the component-export arena. The case is an important example of the Supreme Court refusing to fill a gap in statutory language. However, the court majority was also clear that the refusal to gap-fill was one-sided — the majority did not want to expand patent rights without Congressional input:
[W]e should not expand patent rights by overruling or modifying our prior cases construing the patent statutes, unless the argument for expansion of privilege is based on more than mere inference from ambiguous statutory language. We would require a clear and certain signal from Congress before approving the position of a litigant who, as respondent here, argues that the beachhead of privilege is wider, and the area of public use narrower, than courts had previously thought. No such signal legitimizes respondent’s position in this litigation.”
Deepsouth at 531. The dissent suggested that the precedent was not so clear and so the demand to overrule or modify was fairly slight.
The anti-patent-right-expansion policy of Deepsouth was repeated in Parker v. Flook, 437 U.S. 584, 596 (1978) (“we must proceed cautiously when we are asked to extend patent rights into areas wholly unforeseen by Congress”) and again in Justice Brennan’s dissent in Diamond v. Chakrabarty, 447 U.S. 303, 319 (1980) where he wrote:
[W]e must be careful to extend patent protection no further than Congress has provided. In particular, were there an absence of legislative direction, the courts should leave to Congress the decisions whether and how far to extend the patent privilege into areas where the common understanding has been that patents are not available.
Chakrabarty. See also, Asgrow Seed Co. v. Winterboer, 513 U.S. 179, 195 (1995) (“A statutory restraint on this basic freedom [of Farmers to have right to collect and replant seeds] should be expressed clearly and unambiguously.” Stevens, J. in dissent).
Deepsouth was decided before the PCT became available and well before TRIPs and the global expansion of patent rights. We might question whether there is still a need for the US to extend rights to overlap those available abroad, especially as it tends to injury U.S. manufacturing capability.
A molded choke is a device used in electronic devices to filter undesirable signals. The device contains a coiled conducting wire encapsulated in a molded mixture of magnetic powder. The powder is heated to a sufficiently high temperature to allow it all to bond together. The patentee, Cyntec, had experienced some difficulties in creating the devices — with the high heat causing various problems such as melting the conducting wire or its insulative layer. The solution that they hit upon was using a mixture of magnetic powders with different hardness and particle sizes. This permitted a lowering of the required molding temperature and thus avoided wire damage during molding. See U.S. Patent Nos. 8,922,312 and 9,481,037.
