PGR – Patently-O America's leading patent law blog Mon, 19 Mar 2018 15:18:00 +0000 en-US hourly 1 Guest Post: Where we Stand with Trade Secret Enforcement in Federal Courts Thu, 18 May 2017 16:09:29 +0000 Guest Post by Prof. David Opderbeck (Seton Hall), originally published on his blog The CyberSecurity Lawyer.


Trade secrets are important to cybersecurity because many data breaches involve trade secret theft.  The Defend Trade Secrets Act of 2016 (DTSA) amended the Espionage Act of 1996 to provide a federal private right of action for trade secret misappropriation.   Some commentators opposed the DTSA in part because it seems redundant in light of state trade secret law and could lead to unnecessary litigation and restrictions on innovation.  Now that the DTSA has been in effect for nearly a year, I conducted an empirical study of cases asserting DTSA claims (with the able help of my research assistant, Zach Hansen).  This post summarizes the results of that study.


We ran keyword searches in the Bloomberg Law federal docket database to identify cases asserting DTSA claims in federal courts.  It is not possible to search only on the Civil Cover Sheet because there is no discrete code for DTSA claims.  Our search ran from the effective date of the DTSA (May 26, 2016) through April 21, 2017 (just prior to our symposium on the DTSA at Seton Hall Law School).  After de-duping, we identified 280 unique Complaints, which we coded for a variety of descriptive information.  Our raw data is available online.


This chart shows the number of filings by district:

We were not surprised to see that the Northern and Central Districts of California, Southern District of New York, or District of Massachusetts were among the top five.  We were surprised, however, to see the Northern District of Illinois tied for first.  This could reflect the influence of the financial services industry in Chicago, but further research is required.

The next chart shows the number of filings by month:

It is interesting to note the decline in filings following the initial uptick after the May 26, 2016 effective date.  Perhaps this reflects a slight lull during the summer months.  Filings then remained relatively steady until March, 2017, when they increased significantly.  This could have something to do with the quarterly business cycle or bonus season, since many of the cases (as discussed below) involve employment issues.  Or, it could reflect a random variation given the relatively small sample size.

We next examined other claims filed along with the DTSA counts in these Complaints:

We excluded from this chart related state law trade secret claims.  Not surprisingly, nearly all the cases included claims for breach of contract.  As noted above, trade secret claims often arise in the employment context in connection with allegations of breach of a confidentiality agreement or covenant not to compete.  Another finding of note was that a fair number of cases assert Computer Fraud and Abuse Act claims, although the number is not as high as expected.  Most trade secret cases today involve exfiltration of electronic information, but perhaps many cases do not involve hacking or other access techniques that could run afoul of the CFAA.

We also noted a smaller but not insignificant number of cases asserting other intellectual property claims, including trademark, copyright and patent infringement.  Since many documents taken in alleged trade secret thefts are subject to other forms of intellectual property — particularly copyright — this may show that some lawyers are catching on to the benefit of asserting such claims along with DTSA claims.

Finally, our review of case status revealed the following:

  • 198 cases in various pre-trial stages
  • 61 cases dismissed
  • 5 preliminary injunctions
  • 4 final judgments, including 2 permanent injunctions
  • 3 default judgments
  • 1 case sent to compulsory arbitration
  • 8 undetermined / miscellaneous

At first blush, the number of cases dismissed seems high, given that none of the cases have been pending for more than a year.  We assume the vast majority of these cases settled, though further investigation is required.  In contrast, the number of preliminary injunctions granted seems very low.  Again, further investigation is required, but so far it does not seem that the DTSA is resulting in the kind of preliminary injunction practice we expected to see under a federal trade secret statute.

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Remarks By Director Michelle K. Lee at the George Washington University School of Law Tue, 16 May 2017 15:03:01 +0000 The following is an excerpt from PTO Director Michelle Lee’s keynote address today, at George Washington University Law School. Read the full remarks here.- DC

How do we continue to incentivize … incredible innovations? First, we must ensure that the USPTO issues the highest quality patents as quickly and efficiently as possible. This means, at a minimum, continuing to bring down our backlog and pendency so that good ideas can be patented quickly. Which is why I am proud to report that we’ve reduced our backlog of unexamined patent applications by almost 30 percent from its peak in January 2009, despite a 32 percent increase in applications over this time period. Our so-called first action pendencies – that measure the time from filing an application to the time of obtaining an initial decision from the examiner— are down by 43 percent—from 28 months in 2011 to 16 months today. Our total pendencies – the time from filing an application to the time of obtaining a final office action, such as an allowance—are down by 26 percent—from 35 months in 2010 to 26 months today. Our backlog of Ex Parte Appeals – that’s not AIA proceedings, but our internal appeal process to the Board after the examiner issues her decision – has also gone down. We have reduced our inventory of ex parte appeals by 45 percent from a high of about 26,000 in 2012 to about 15,000 today. And, we have reduced the average pendency for appeals by 30 percent from 28 months in 2016 to 19 months today. In short, our backlog and pendencies are now lower than they’ve been in more than a decade, and they will continue to go down. Simply stated, this means more inventors are obtaining more patents more quickly. . . .

We constantly welcome—in fact, we solicit—feedback and input. And we have shown that we are willing to refine and improve as many times as needed. For example, we’ve provided applicants with more access to examiner interviews more than doubling the number of interview hours in just eight years. We’ve had more RFC’s, Proposed Rules, and public roundtables than ever before – including on such topics as our Enhanced Patent Quality Initiative, our 101 guidance, and our Patent Trial and Appeal Board proceedings. We’ve also brought a broader range of services to support American innovators where and when needed, including through four regional offices across the country, and through over a dozen IP attaches across the globe. For those of you who may not know, our attaches in China, the EU, India, Brazil, and other locations help U.S. innovators obtain and enforce IP rights outside the US, and also help advocate for improved IP laws outside the U.S. . . .

Examining patents quickly and efficiently is only part of the job. The public relies on us to issue quality patents. Today, we have about a dozen programs underway that we believe will meaningfully improve patent quality. These include programs for making sure we’re getting the most relevant prior art before our examiners as early as possible by making prior art cited in our PTAB proceedings available to examiners handling related applications, and transitioning all our examiners from the decades old, antiquated U.S. Patent Classification System to the updated, increasingly global Cooperative Patent Classification System. Developing best practices such as for enhancing the clarity of the record. And developing new and better ways to measure our progress. For example, with our Master Review Form, we are now processing twice as many reviews, and capturing data not only about the correctness of our actions, but also about the clarity of our actions. This helps us identify trends, and helps us pinpoint very specific areas for training. Finally, and, importantly, for the first time in 40 years, we are doing a comprehensive review of the amount of time our examiners need to do their work in light of the many recent changes within the patent system. We are already seeing measurable and statistically significant results in our patent quality efforts even in the short amount of time since we began the Enhanced Patent Quality Initiative. And you can look forward to more improvements in the future. In sum, the USPTO is operating well, and is issuing more, higher quality patents than ever. …

What work lies ahead? Our top priority today is to make sure the Patent Trial and Appeal Board’s AIA proceedings are as effective and as fair as possible–within our Congressional mandate. Now is the right time to examine and make any needed reforms to these proceedings, because we have five years of data and experience to guide us. …

Let’s take a look at where we are with the AIA trials today. We have shared regular updates on the number of cases and the results of those cases, but we want to break down the numbers even further so that everyone has the facts, as there have been many numbers cited – some of which are accurate, some of which are not.

Slide 1 Revised

This waterfall slide is our attempt to present even more data in a more accessible and transparent format. According to waterfall slide data, which shows the status of every petition filed since beginning of AIA, of those petitions that have reached some sort of final disposition (i.e., are not pending), about one third of all petitions are denied institution and do not go to trial; about one third of all petitions settle either before or after the decision to institute; and only about one third of all petitions ever reach final written decision. It is only at that point of reaching final written decision is it relevant to talk about the patentability or unpatentability of the claims of a patent. And, at that point, it is true that 66 percent of petitions will find all instituted claims of the patent unpatentable, 17 percent of petitions will find all instituted claims of the patent patentable, and an additional 17 percent will have mixed results (some instituted claims will be found to be patentable and some will be found to be unpatentable). So statements that “all” or 95 percent or even 80 percent of patents are found unpatentable are not supported by the data and do not account for prior disposition by settlement or by denial of institution.

Slide 2 Revised

Drilling down further on the institution rate, here is some helpful data from the years the AIA trials have been in effect. As you can see, the institution rate in our proceedings has been steadily declining from a high of 87 percent in the beginning, to about two thirds today. These are the numbers, and these are the facts. Now, our stakeholders have understandably asked how the rates of unpatentability in AIA proceedings, reflect on the quality of all of the other patents we’ve issued. . . . [T]here are almost 2.8 million patents in force. Incredible. Of those 2.8 million about 4,000 patents have been challenged in AIA trials. This represents less than 0.2 percent of the patents currently in force. …

As I have said many times in the past, the USPTO is constantly looking for ways to make the AIA trials as effective and as fair as possible within our Congressional mandate.  And we welcome your suggestions and ideas, the more specific, the better. To this end, we’ve set up a mailbox where you can submit your ideas at This is an early opportunity to provide input. Your feedback here will help form the basis for our recommendations to the administration on next steps.

In fact, we have already heard from a number of you regarding a number of issues. As discussed:

  1. Multiple petitions, and how best to curb abusive practices.
  2. Whether to provide other opportunities to amend claims later in the proceedings when patent owners may have a better sense of where their claims stand,
  3. Whether to reevaluate our claim construction standards in view of new data and experiences, and
  4. How to best incorporate the findings and legal conclusions of prior proceedings at the USPTO, including examination and other post-grant proceedings, as well as, importantly, proceedings conducted in the federal courts.
  5. What considerations should go into a decision to institute, for example, how can we better take into account considerations such as the interests of justice, economic factors, and hardship.
  6. As to decisions to institute, whether there should be additional review of institution and termination decisions—and by whom.
  7.  When and how to permit parties to join proceedings.
  8. When and under what circumstances might it be appropriate to extend the length of the proceedings beyond 12 months and what impact would extensions have on litigations before, not only the Board, but district courts. . . .

[W]e are [also] streamlining the way the Board identifies and designates opinions as precedential, with the goal of designating more opinions precedential. Why? Because doing so 1). Improves the consistency across panels of the Board, and 2). Provides greater notice to the public to help you make better informed decisions on how to manage your Board proceedings. . . .

Fees: Finally, we are also proposing increases to our AIA trial fees. . . . We believe, as many of you do, that these proceedings should be self-funded. I commend our team for making thoughtful initial cost projections and for recommending revisions to ensure that these proceedings are fully self-funded. There is much to do on AIA proceedings, patent quality, and in many other areas, and I promise you that we are working diligently, with a sense of purpose, every day.

In closing, we all want what’s best for this country’s inventors, innovators and entrepreneurs. Because it is through their efforts that our country remains at the forefront – economically and globally. Simply stated—and I think President Trump and Secretary Ross would agree—we want the United States to out-innovate and out-perform our global competitors, producing new jobs and new technologies and new industries that benefit all Americans, including individual inventors and those in our small businesses and startups. Let’s not forget that the modest businesses and unknown inventors of today may become the largest and most well-known drivers of our economy tomorrow. To make that happen, Congress, the courts, the administration (especially the USPTO), and even all of you here today, must all work together to make sure the system envisioned by our Founding Fathers lives up to its purpose to promote innovation. You have the commitment of the entire USPTO team that we will play our part to ensure that we continue to incentivize the kind of innovations that make our lives better and safer And that put men and women—like Mr. Iver Anderson with his lead-free solder—in the National Inventors Hall of Fame. Our future depends upon it. Thank you.

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No real consensus yet on CBM Sunsetting Mon, 15 May 2017 15:09:29 +0000 Once initiated, CBMs are identical to post-grant reviews (PGR) – allowing for patents to be challenged on any patentability grounds.  As implemented, this includes 101 and 112 challenges in addition to the more traditional obviousness and novelty grounds.   PGRs, however, are limited to only AIA-patents and must be filed within a 9-month window from issuance.  Those caveats have severely limited the number of PGR petitions filed thus far.   For CBMs, the AIA-patent restriction and 9-month window are both eliminated.  However, the statute creates a subject-matter limitation that restricts CBMs to only non-technological financial-services business method patents.

Another feature of the CBM program is that it is “transitional” – i.e., it sunsets in 2020 and no petitions will be accepted after that date.

Last week, I hosted a quick anonymous survey on the transitional Covered Business Method Review program — asking whether the CBM program should be allowed to sunset or somehow extended.  240 Patently-O readers responded with results shown in the chart below.  About 44% of responses favored ending of the program outright — allowing it to sunset.  About 29% favored extending the program as-is, with the narrow financial-services scope.  The remaining favored extension and expansion: 17% would expand the scope to include all information processing patents, and the remaining 10% would extend the program to include all patents.  This final option would essentially mean ending the 9-month window for PGR filing.



The survey also offered (but did not require) an explanation of the answer.  A variety of themes emerge from that explanation. The following are a few examples.

For patent challengers, the key response is that “it works” as a mechanism for cancelling patents, and could be extended to other technology areas.  

  • CBM is a big success addressing one of the most abused categories of patents. Extend it to the very worst and most abused patents by including all of information processing and it can help clean up the system and make it stronger.
  • Business methods are not the only abstract processes being patented by the Office Patent. A majority of all information processing methods (even those outside of the Business arts) suffer from encompassing non-statutory abstract processes without reciting subject matter that amounts to anything significantly more than said abstract processes.

The historic problem associated with poor business method examination quality has now been fixed. 

  • It was intended to handle a temporary problem in a specific area.  State Street caused a flood of applications in an area that was new to the USPTO.  Now skills and databases have developed and the stats show that there is no particular need for either expanding or extending CBM.  Permanently singling out a particular subject matter for extra scrutiny could cause other countries to do the same in other areas.
  • If the goal was to clean up shoddy and overly broad patents and applications, then most all of the necessary work should be done by then.  There are existing mechanisms in place that should be forcing quality such that this becomes redundant and therefore unnecessary.
  • It was a political sop to begin with and should be allowed to expire per the legislation and the underlying political agreement.  It’s argument was to take care of “low-hanging fruit”, patents of old vintage, issued when the Office’s resources in this area were low.  8 years is more than enough time to pick that fruit.
  • CBM petitions are declining because most of the patents intended for consideration have already been undone.

Patents need to be strengthened, not weakened. 

  • The patent systems is already nearly dead.  Make patent owners in all areas feel the pain of having their patent rights trampled over by a kangaroo administrative court.
  • Broad restrictions on patentability are harming U.S. competitiveness in the areas of its greatest strength.  China and the EU are poised to eat our lunch, and we are serving it up to them.
  • A terrible idea from the outset.
  • It (CBM) deprives some of the best technological innovators the chance to protect their valuable property.  Abandon CBM, and instead seek recourse to the traditional approaches (102, 103 and 112) to rid the patent landscape of those patents that don’t rise to the level of technological innovation.

The PTAB process is either corrupt or incompetent. 

  • It has been abused by petitioners and PTAB has taken it too far.
  • Go back to district court litigation. The present scheme is a disaster.
  • The USPTO is turning into a mini-court system. That is not its competency. It needs to focus on technology, granting patents to those inventions that meet the basic statutory criteria, and leave the legal hair-splitting to courts.
  • This is a corrupt Review that benefits a specific class of infringers and is detrimental to the development of new technology.

The approach should be ended because it violates the constitutional rights of patent owners.

  • Unconstitutional.
  • AIA has overstepped its boundaries on constitutional grounds as patents are private rights.
  • All patent owners are entitled to due process, and that includes the right of access to a court of law before their patents are summarily cancelled by a political, the end-justifies-the means, so-called court.

Of course, there are other responses as well (perhaps more below in the comments).

The bottom line here, as you might expect, is that there is not yet any consensus on whether to extend the CBM program.  My own general framework begins with the recognition that CBM does no longer adds much value post Alice/Mayo and with district court eligibility determinations being done on the pleadings.  However, I would like to see the empirical evidence.   The point of creating legislation that sunsets is that it effectively places the burden of proof on anyone wanting to continue the program.  That work has not yet been done.


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CBM Review: Must the Claims Be Expressly Limited to Financial Services? Wed, 26 Apr 2017 07:26:00 +0000 Secure Axcess v. PNC (Fed. Cir. 2017) (en banc petition)

In an important February 2017 decision, the Federal Circuit limited the scope of Covered Business Method Review (CBM) — requiring that the claimed invention be focused on financial transactions.  In my original review, I wrote:

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. 

Crouch, For CBM Review: _Claims_ Must be Directed to Financial Service, Patently-O (Feb. 2017).  The case focuses on U.S. Patent No. 7,631,191.

U.S. Bank has now challenged the decision with an en banc request – raising the following question:

Whether a method patent whose claims are worded to avoid reference to financial activity, but whose specification makes plain that it is a patent “used in the practice, administration, or management of a financial product or service,” qualifies for post-grant review as a covered business method (CBM) patent under Section 18 of the Leahy-Smith America Invents Act (AIA), Pub. L. No. 112-29, § 18, 125 Stat. 284, 329-31 (2011).

The petition directly challenges the Federal Circuit’s anti-CBM Jurisprudence, writing:

This is not the first questionable decision by a panel of this Court concerning to scope of the CBM program. In Versata Dev. Grp. v. SAP Amer., Inc., 793 F.3d 1306 (Fed. Cir. 2015), another divided panel disagreed over whether this Court even has jurisdiction to review the Board’s CBM determinations. And a petition for rehearing en banc, with robust amici support, is currently pending in Unwired Planet, LLC v. Google Inc., 841 F.3d 1376 (Fed. Cir. 2016), which asks this Court to address the level of deference owed to Board determinations that a patent qualifies for CBM status and to reconsider the holding in Versata.

Two additional amicus briefs have also been filed supporting the petition.  EFF argues (1) that the panel decision contorts the statutory text; and (2) ignored the consideration of deference to an agency’s interpretation of its governing statute.  Clearing House Payments Company and Financial Services Roundtable joined together and argue (1) CBM institution rates are alredy down; and (2) the case allows artful claim drafting to effectively avoid CBM.  (The artful drafting issue is largely moot since CBM will sunset in September 2020).

The key here is interpretation of Section 18(d)(1) of the America Invents Act that limits the scope of Covered Business Method Reviews to patents “that claim[] 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.” Does the statute require that the claim include the financial product or service use?  Note here that the argument is not based upon a statute codified in the United States Code since it is only a temporary provision that will sunset after three more years.




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Unwired Planet v. Huawei: An English Perspective on FRAND Royalties Tue, 11 Apr 2017 00:15:43 +0000 FRONDGuest Post by Professor Jorge L. Contreras

In the latest decision by the UK High Court of Justice (Patents) in Unwired Planet v. Huawei ([2017] EWHC 711 (Pat), 5 Apr. 2017], Mister Justice Colin Birss has issued a detailed and illuminating opinion regarding the assessment of royalties on standards-essential patents (SEPs) that are subject to FRAND (fair, reasonable and non-discriminatory) licensing commitments.  Among the important and potentially controversial rulings in the case are:

  1. Single Royalty: there is but a single FRAND royalty rate applicable to any given set of SEPs and circumstances,
  2. Significance of Overstep: neither a breach of contract nor a competition claim for abuse of dominance will succeed unless a SEP holder’s offer is significantly above the true FRAND rate,
  3. Global License: FRAND licenses for global market players are necessarily global licenses and should not be limited to a single jurisdiction, and
  4. Soft-Edge: the “non-discrimination” (ND) prong of the FRAND commitment does not imply a “hard-edged” test in which a licensee may challenge the FRAND license that it has been granted on the basis that another similarly situated licensee has been granted a lower rate, so long as the difference does not distort competition between the two licensees.


This case began in 2014 when Unwired Planet, a U.S.-based patent assertion entity, sued Google, Samsung and Huawei for infringement under six UK patents (corresponding actions were filed in Germany).  Unwired Planet claimed that five of the asserted patents, which it acquired from Ericsson in 2013 as part of a portfolio comprising approximately 2000 patents, were essential to the 2G, 3G and 4G wireless telecommunications standards developed under the auspices of the European Telecommunications Standards Institute (ETSI).  Because Ericsson participated in development of the standards at ETSI, any patents shown to be SEPs would necessarily be encumbered by Ericsson’s FRAND commitment to ETSI.

The UK proceedings involved numerous stages, including five scheduled “technical trials” which would determine whether each of the asserted patents was valid, infringed and essential to the ETSI standards.  During these proceedings Google and Samsung settled with Unwired Planet and Ericsson (which receives a portion of the licensing and settlement revenue earned by Unwired Planet from the patents), leaving Huawei as the sole UK defendant.  By April 2016 three of the technical trials had been completed, resulting in findings that two of the asserted patents were invalid and that two were both valid and essential to the standards.  These findings are currently under appeal. The parties then agreed to suspend further technical trials.  In October 2016 a “non-technical” trial began regarding issues of competition law, FRAND, injunction and damages.  Hearings were concluded in December 2016, and the court’s opinion and judgment were issued on April 5, 2017.

A. The High Court’s Decision – Overview

The principal questions before the court were (1) the level of the FRAND royalty for Unwired Planet’s SEPs, (2) whether Unwired Planet abused a dominant position in violation of Section 102 of the Treaty for the Formation of the European Union (TFEU) by failing to adhere to the procedural requirements for FRAND negotiations outlined by the European Court of Justice (CJEU) in Huawei v. ZTE (2014), and (3) whether an injunction should issue in the case.  In the below discussion, Paragraph numbers (¶) correspond to the numbered paragraphs in the High Court’s April 2017 opinion.

B. FRAND Commitments – General Observations

Justice Birss begins his opinion with some general observations and background about the standard-setting process and FRAND commitments.  A few notable points emerge from this discussion.

B.1 ETSI and French law.  FRAND commitments in standard-setting arise from the voluntary commitments made by participants in the standards-development process.  These commitments are largely the result of written policies adopted by standards-development organizations (SDOs).  There is considerable academic debate regarding the legal treatment of these commitments, and whether they can and should be enforceable as contractual commitments: not by the SDO, but by third party implementers of the SDO’s standards (I discuss this question at some length here).  It is an inconvenient fact, at least to international commentators, that ETSI, one of the principal global SDOs, is chartered under French law, and that French legal principles govern its membership and policy documentation.  In recent cases involving ETSI standards, several non-French courts, particularly in the U.S., have studiously avoided any deep engagement with French law in considering these questions.  The most notable instance of such evasion occurred in Apple, Inc. v. Motorola Mobility, Inc., 886 F.Supp.2d 1061 (W.D. Wis. 2012), in which the trial judge concluded, on the basis of a single affidavit, that French law “requires the same general elements” as Wisconsin law, and made little effort to apply anything other than local law to the case (id. at 1083).

To his credit, Justice Birss undertakes a thorough analysis of French statutory law as applied to ETSI’s FRAND commitments, thoughtfully probing the arguments of both parties’ experts (¶¶ 103-146).  And while he concedes that, as a theoretical matter, “the enforceability of the FRAND undertaking in French law is not a clear cut question” (¶146), he adopts the pragmatic view that FRAND commitments should in any event be viewed as “public, irrevocable and enforceable” on grounds of public policy, if nothing else (id.).  (I discuss FRAND commitments as inherently public-facing obligations here and here.)

B.2 A Single FRAND Rate.  In the earlier case of Vringo v. ZTE ([2015] EWHC 214 (Pat.)), Justice Birss considered the possibility that a SEP holder and a standard implementer could each make the other a FRAND licensing offer, resulting in two competing FRAND offers or a range of possible royalty rates that could qualify as FRAND.  In Unwired Planet, Justice Birss reconsiders this possibility, reasoning that it is far better to maintain, as a matter of law, that there is but a single royalty rate that qualifies as FRAND for any given set of SEPs and products (¶804(4)).  From a practical standpoint, this approach solves several problems, including how to evaluate the conduct of the parties from a competition law standpoint.  In rejecting the parties’ objections to this approach, he makes two additional observations.  First, if there is but a single precise value for the FRAND royalty, it is likely that parties, in private bilateral negotiations over SEP licenses, will agree on some royalty rate that differs from this precise value.  This likelihood does not, however, open up every negotiated agreement to a FRAND-based challenge, as the parties are free to agree on any royalty they wish, absent competition law considerations (¶155) (see Part C below).

I am not wholly convinced by this reasoning.  In essence, the court holds that while the FRAND rate is precise, the conditions under which it may be enforced are fuzzy.  This conclusion results in a number of additional logical hurdles, discussed below, with respect to the SEP holder’s initial offer to the implementer and how to assess the SEP holder’s compliance with competition law. An alternative approach that avoids these problems is the one developed by Judge James Robart in Microsoft Corp. v. Motorola, Inc., 963 F. Supp. 2d 1176 (W.D. Wash. 2013). There, the court determined a FRAND range for the SEPs covering each standard at issue in order to assess the SEP holder’s compliance with its FRAND commitment.  Then, in setting a final royalty, the court picked a specific rate within the allowable range.  This approach seems more in keeping with the parties’ intent during standard-setting, and creates a more definite framework for assessing the parties’ compliance with their FRAND commitments.

B.3 FRAND means Worldwide. Unwired Planet offered Huawei a worldwide license under the asserted SEPs.  Huawei responded that it only wanted a license under Unwired Planet’s UK patents (¶524), and that Unwired Planet’s insistence on a worldwide license was unreasonable.  In evaluating the reasonableness of Unwired Planet’s worldwide license offer, Justice Birss first observed that “the vast majority” of SEP licenses in the industry, including all of the comparable licenses introduced at trial, were granted on a worldwide basis (¶534).  He then observed that Unwired Planet’s patents were issued in 42 countries, while Huawei’s operations extended to 51 countries  (¶538).  In effect, both are global companies.  Against this backdrop, he concluded that “a licensor and licensee acting reasonably and on a willing basis would agree on a worldwide licence” (¶543).  In contrast, he regards the possibility of country-by-country licensing as highly inefficient (¶544).   The prospect of two large multinational companies agreeing to country-by-country licensing, he concludes, would be “madness” (¶543), and that Huawei’s insistence on a UK-only license is not FRAND (¶572). He likewise dismisses Huawei’s arguments that including unwanted patents from certain countries in its portfolio amounts to illegal tying in violation of competition law (¶545-572).   Accordingly, he rules that, in this case, a FRAND license is necessarily a worldwide license.

B.4 FRAND Requires Granting a License, not Merely Offering FRAND Terms.  It has long been a point of debate whether a FRAND commitment requires a SEP holder to offer FRAND terms to a potential licensee, or actually to enter into a license on FRAND terms. Justice Birss answers this question in a novel manner.  Bearing in mind his earlier conclusion that there is only one FRAND rate under a given set of circumstances, if the SEP holder’s obligation were merely to make an offer at the FRAND rate, then the normal process of negotiation “would condemn patentees to always end up with negotiated rates below a FRAND rate”(¶159).  Under this reasoning, it would seem that the SEP holder would be justified in making an initial offer above the FRAND rate, so that the final negotiated rate ended up being FRAND.  This approach seems a dangerous one, as SEP holders may not always negotiate a rate downward, particularly when they use a standard set of rates (which is advisable given the non-discrimination commitment that also makes up part of a FRAND commitment). Thus, this leniency seems to support higher (and supra-FRAND) offers by SEP holders.  More sensible, I believe, is Judge Robart’s approach in Microsoft v. Motorola, in which FRAND represents a range of reasonable royalties into which the SEP holder’s initial offer must fall.

C. The FRAND Negotiation Process and Competition Law

C.1 SEP Holder’s Offer.  In Huawei v. ZTE (2014), the CJEU established a set of procedures that a SEP holder must comply with when negotiating a FRAND license in order to avoid a finding that it abused its dominant position under TFEU Section 102.  To do so, based on the rulings of the CJEU and lower courts in Germany and other EU countries, practitioners and commentators have assumed that in order to avoid a finding of abuse of dominance, a SEP holder must make an initial FRAND offer to a potential licensee.  However, under Justice Birss’s reasoning that there is only a single FRAND rate in a given transaction, requiring the SEP holder to offer this rate at the outset would not be reasonable.  Thus, Justice Birss concludes that it would not be an abuse of dominance under TFEU 102 or the CJEU’s holding in Huawei v. ZTE for a SEP holder to offer a rate that is different from the precise FRAND rate, so long as it is not excessively so (¶153).  That is, an abuse of dominance will not be found unless an offer “is so far above FRAND as to act to disrupt or prejudice the negotiations themselves” (¶765).

C.2 Hold-out. Justice Birss also addresses the behavior of the potential licensee in these negotiations.  If the licensee engages in deliberate delay tactics or other unreasonable behavior to avoid entering into a license (and thus paying royalties), this is referred to as hold-out or reverse hold-up. Justice Birss views the behavior of the potential licensee as relevant in determining whether, from a competition law standpoint, the SEP holder possesses a dominant position (¶806(12)).  Interestingly, however, Justice Birss reasons that evidence of implementer holdout is really only relevant before pricing discussions began.   “Once prices are discussed a delay may just be due to a licensor asking for too much money” (¶667).

D. Non-Discrimination.

The non-discrimination (ND) prong of the FRAND commitment is important, but has received far less attention from courts than other issues. Justice Birss devotes substantial space to the non-discrimination arguments made by the parties, and develops some novel theories in doing so.

D.1 Similarly-Situated Licensees.  There is general consensus (including among the experts in this case) that in order to comply with the non-discrimination prong of the FRAND commitment, a SEP holder must treat “similarly situated” licensees in a similar manner (¶485).  Several commentators have understood this constraint to allow a SEP holder to charge different royalty rates to implementers based on their size or market share (often with the understanding that larger players are likely to sell more licensed products and thus pay higher levels of royalties) (Gilbert (2011), Carlton and Shampine (2013)). Justice Birss, however, reasons that a FRAND royalty rate should be set based on the value of the licensed patents, not on the size of other characteristics of the licensee (¶175).  Thus, “all licensees who need the same kind of licence will be charged the same kind of rate” (id.) and “[s]mall new entrants are entitled to pay a royalty based on the same benchmark as established large entities” (¶806(8)).  This attempt to level the playing field for new market entrants is a positive development, as this issue is currently being debated in other FRAND cases around the world.

D.2 Hard-Edged Non-Discrimination.  But despite bolstering the non-discrimination commitment by eliminating size-based discrimination, Justice Birss then weakens it by holding that a licensee cannot challenge a license allegedly granted on FRAND terms if it later discovers that a similarly-situated implementer received a lower royalty rate unless the difference would “distort competition” between the two licensees (¶501).  In reaching this conclusion, he rejects the notion that the ND prong of FRAND implies a “hard-edged” obligation that establishes a ceiling on the rate that a SEP holder may charge. Justice Birss justifies this conclusion under a competition law rationale, noting that a competition law violation would not occur without a competitive distortion.  This reasoning, however, seems to conflate two issues: the competition law effects of violating a FRAND commitment, and the private “contractual” meaning of the FRAND commitment itself.  I am uncertain whether the participants in an SDO would interpret the non-discrimination prong of FRAND to allow discrimination between similarly situated licensees.  While a competition law violation might not arise absent some distortion to competition, I believe that the underlying contractual meaning of FRAND must impose a stricter definition of non-discrimination that would prevent all but the most inconsequential differences between similarly situated licensees.

E. FRAND Royalty Calculation Methodology

Perhaps the most significant aspect of Justice Birss’s opinion in Unwired Planet is his careful calculation of the FRAND royalty applicable to the parties’ transaction.  He offers two possible methods of calculating the FRAND royalty, one based on an analysis of comparable license rates, the other based on a top-down analysis of the total aggregate royalty that should be attributable to the standards and SEPs at issue.  Both of these methods are discussed in greater detail below.  What is most refreshing about Justice Birss’s opinion, however, is the absence of any attempted application of the 15-factor Georgia-Pacific framework for “reasonable royalty” patent damages, which U.S. courts feel compelled to apply despite the fact that a FRAND royalty calculation is not a remedial damages calculation.  Without the baggage of Georgia-Pacific to clutter the analytical exercise, Justice Birss can focus on the actual task at hand: computing the value of the patented technology as compared to the standard and product at issue.

E.1 No ex ante valuation.  In addition to disregarding the U.S. Georgia-Pacific framework, which clearly has no place in a UK decision, Justice Birss rejects another touchstone of U.S. FRAND analysis: the notion that a FRAND royalty should reflect the ex ante value of the patented technology, without considering any value attributable to the adoption of the technology in a standard. This theoretical construct, which has a solid basis in economic analysis, has been adopted by both scholars (see, e.g., Lemley and Shapiro (2007) and Farrell et al (2007)) and courts in the U.S. (Ericsson v. D-Link, 773 F.3d at 1232). It has, however, come under increasing criticism by commentators who advocate ceding at least part of the value of standardization to the SEP holder (see, e.g., Siebrasse and Cotter (2017) and Sidak (2016)). In rejecting the ex ante valuation approach Justice Birss acknowledges that he is departing from the decisions of U.S. courts in cases such as Innovatio and Ericsson v. D-Link (¶97).  In the end, however, he notes that the point is moot, as neither party pressed to use this approach.

E.2 Comparables Method.  Like many U.S. judges, Justice Birss relies heavily on comparable license agreements to determine a FRAND royalty.  While the use of comparable licenses has been criticized on the basis that most licenses are not really comparable to the desired FRAND license (see, e.g., Masur (2015)), the fact that Unwired Planet obtained each of the asserted patents from Ericsson was convincing proof that at least Ericsson’s licenses were comparable to whatever Unwired Planet would have negotiated with Huawei (¶180).  Indeed, Justice Birss found that most other licenses (i.e., not involving Ericsson) proffered by the parties were not suitable comparables.

After identifying a suitable set of comparable Ericsson licenses, Justice Birss reasoned that the appropriate FRAND royalty rate for Unwired Planet’s 2G/3G/4G SEP portfolio should be the rate charged by Ericsson for its 2G/3G/4G SEP portfolio, multiplied by a factor representing the relative strength of Unwired Planet’s portfolio to Ericsson’s (¶807(4), (7)).  Using these inputs, he calculates the FRAND rates for Unwired Planet’s portfolio as follows (¶807(8)):

a) 4G/LTE: 0.062% for handsets, and 0.072% for infrastructure;
b) 3G/UMTS: 0.032% for handsets, and 0.016% for infrastructure; and
c) 2G/GSM: 0.064% for handsets, and 0.064% for infrastructure.

While this calculation results (as shown below) in a FRAND rate that is validated through other methods, it is questionable whether this methodology (which is dependent on having a comparable license under which the asserted SEPs were previously licensed) has significant applicability to other cases.  That is, FRAND rates in cases such as Microsoft v. Motorola and Ericsson v. D-Link could not have been calculated as simply or reliably as the rate in Unwired Planet because there did not exist an original SEP owner that sold a subset of its SEPs to the licensor in the case.  Thus, the straightforward apportionment of a fraction of the overall Ericsson portfolio to Unwired Planet would not have worked when Motorola or Ericsson itself was the licensor.  As such, the court in Unwired Planet may simply have been the beneficiary of good luck in having at hand such a clear set of comparable licenses.  This being said, the individual circumstances of a case are always key to resolving it, and I have previously observed that similar good fortune (in the availability of patent pools covering the standards at issue) played a significant role in establishing patent pool values as comparables in Microsoft v. Motorola, another well-reasoned decision.

E.3 Top-Down Methodology.

In addition to the comparables method described above, Justice Birss uses a second FRAND calculation methodology as a “cross-check” of the result obtained using the comparables methodology (¶476).  This is a “top down” or “aggregate royalty burden” approach, in which the aggregate royalty attributable to a standard under all SEPs is computed and then allocated to the SEP holder in suit. This approach has been advocated by commentators (Bartlett and Contreras, 2017) and has been attempted in cases including Innovatio (2012), as well as the Japanese IP High Court’s decision in Samsung v Apple Japan.

Under the top down method defined by Justice Birss, the FRAND royalty equals T x S, where T is the total aggregate SEP royalty burden of a particular standard on a product (i.e., the percentage of a smartphone’s price that should be charged for all patents covering 4G), and S is the share of that aggregate royalty that is allocable to the SEP holder (Unwired Planet) (¶178).  To calculate “T”, Justice Birss considered public statements made by Ericsson and other holders of SEPs covering the relevant standards (¶¶264-272) (for a discussion of the usefulness and enforcement of such public patent “pledges”, see Contreras (2015)).  He then calculated “S”, Unwired Planet’s share of the relevant SEPs, using a variety of counting and filtering methodologies proposed by the parties’ experts, including a filter for the likely essentiality of the patents in the asserted portfolio (¶325 et seq.).  The resulting FRAND rates served as validating cross-checks for the rates obtained using the Comparables methodology.

F. Injunctive Relief

The court concludes with a brief discussion of the injunctive relief requested by Unwired Planet: “Since Unwired Planet have established that Huawei have infringed valid patents … and since Huawei have not been prepared to take a licence on the terms I have found to be FRAND, and since Unwired Planet are not in breach of competition law, a final injunction to restrain infringement of these two patents by Huawei should be granted” (¶807(18)).  Accordingly, Justice Birss ordered a hearing in “a few weeks’ time” to determine whether, by then, Huawei had entered into a license agreement with Unwired Planet at the rates he specified and, if not, to consider, and likely issue, the injunction.


In Unwired Planet v. Huawei, Justice Birss adopts a balanced and well-reasoned approach to determining FRAND royalties and assessing the parties’ contractual and competition law obligations in the face of FRAND commitments.  In doing so, he takes several important theoretical stands, which could have significant implications for the manner in which such cases are decided and how parties interact during FRAND negotiations.  Specifically, Justice Birss holds that there is but a single FRAND royalty rate applicable to any given set of SEPs and circumstances, but does not fault the parties for failing to pinpoint that rate in their initial offers or negotiations.  Abuse of dominance under Section 102 TFEU, he reasons, does not occur under Huawei v. ZTE unless a SEP holder’s offer is significantly above the true FRAND rate.  Likewise, he rejects the idea of “hard-edged” non-discrimination, concluding that even if a SEP holder has granted another licensee a lower royalty rate, an implementer may not challenge its own FRAND license so long as the difference does not distort competition between the two licensees. While I do not necessarily agree with all of his conclusions, I applaud Justice Birss’s careful and balanced reasoning in Unwired Planet v. Huawei.  I expect that it will become an important touchstone for courts around the world as they wrestle with the complex issues that arise in FRAND royalty cases.

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En banc denial in Challenge to Versata-Review of CBM Decisions Tue, 04 Apr 2017 15:15:53 +0000 by Dennis Crouch

Unwired Planet v. Google (Fed. Cir. 2017) (en banc denied)

The Federal Circuit has denied Google’s petition for rehearing en banc.  The patent challenger asked the Federal Circuit to overturn Versata in light of the Supreme Court’s decision in Cuozzo.  The issue is well known to attorneys involved in the post-grant review of covered-business-method (CBM) patents.

According to the statute, the CBM process begins with a petition and institution decision by the Director.  Once instituted, the PTAB holds trial and issues a final decision.  The statute indicates that CBM review may be instituted “only for” CBM patents but that the Director’s institution decision “shall be final and nonappealable.”

In Versata, a divided Federal Circuit panel held that the CBM question could be reviewed since – a non-CBM patent is “outside the PTAB’s invalidation authority.”  In its briefing, Google argued that Versata was wrong when it was decided, and was extra-wrong following the Supreme Court’s Cuozzo decision that gave substantial force to the non-appealable provision of the statute.  Of course, Cuozzo offered a number of ‘outs’ – suggesting generally that there will be times when appeals of initiation decisions may still be allowed.

Versata v. SAP: Federal Circuit Claims Broad Review of CBM Decisions

In what appears to be a unanimous denial, the Federal Circuit has rejected Google’s petition. Judge Hughes wrote a short concurring opinion in dissent – arguing (as he did in the original Versata case) that the statute no-appeal provision should be given more weight.

I continue to believe that Versata was incorrectly decided. I further believe that Cuozzo Speed Technologies, LLC v. Lee, 136 S. Ct. 2131 (2016) confirms that our review of the Patent Trial and Appeal Board’s decision should be limited to the ultimate merits of the patent validity determination and should not, with narrow exception, extend to any decisions related to institution. Those exceptions may include the rare circumstances where the agency acts unconstitutionally or in complete disregard of the limits on its statutory authority.

I expect that the Supreme Court would agree with the Federal Circuit on this particular issue based upon how the court sees eligibility as a threshold and almost jurisdictional issue and the close tie between the CBM definition and patent eligibility.  In the eyes of the Supreme Court, these issues are categorically different from the likelihood-of-invalidation question that is the substantive focus of initiation decisions.

Despite my prognostications here, Google is likely to petition for writ of certiorari.  Top Supreme Court Litigator Neal Katyal handled the failed petition here that particularly asked two questions: (1) Whether the Federal Circuit has jurisdiction to review a PTAB determination that a patent is a “covered business method” patent. (2) Whether the Federal Circuit should defer to the Patent and Trademark Office’s reasonable interpretation of the definition of a “covered business method” patent.

I have discussed the first question above. The second question is also an interesting issue of administrative law that may be mooted if Congress enacts the Separation of Powers Restoration Act of 2017.

Separation of Powers Restoration Act

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The Imminent Outpouring from the Eastern District of Texas Tue, 07 Mar 2017 11:16:37 +0000 The following guest post by Professor Paul Janicke ties-in with his new article published at: Paul M. Janicke, The Imminent Outpouring from the Eastern District of Texas, 2017 Patently-O Patent Law Journal 1. – DC

by Paul M. Janicke

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.

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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.

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Read the ArticleJanicke.2017.Venue

Prior Patently-O Patent L.J. Articles:

  • 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)
  • Peter S. Menell,  The International Trade Commission’s Section 337 Authority, 2010 Patently-O Patent L.J. 79
  • Donald S. Chisum, Written Description of the Invention: Ariad (2010) and the Overlooked Invention Priority Principle, 2010 Patently‐O Patent L.J. 72
  • Kevin Collins, An Initial Comment on Ariad: Written Description and the Baseline of Patent Protection for After-Arising Technology, 2010 Patently-O Patent L.J. 24
  • Etan Chatlynne, Investigating Patent Law’s Presumption of Validity—An Empirical Analysis, 2010 Patently-O Patent L.J. 37
  • Michael Kasdan and Joseph Casino, Federal Courts Closely Scrutinizing and Slashing Patent Damage Awards, 2010 Patently-O Patent L.J. 24 (Kasdan.Casino.Damages)
  • Dennis Crouch, Broadening Federal Circuit Jurisprudence: Moving Beyond Federal Circuit Patent Cases, 2010 Patently-O Patent L.J. 19 (2010)
  • 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)
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In Defense of the Federal Circuit: TC Heartland and Patent Venue Fri, 17 Feb 2017 05:26:11 +0000 Guest Post by Professors Megan M. La Belle & Paul R. Gugliuzza

Patent litigation is, as we all know, highly concentrated in a small number of districts.  Most notably—some might say, notoriously—the rural Eastern District of Texas hears about forty percent of all patent cases nationwide.  Many lawyers and scholars consider this case concentration to be a critical flaw in the patent system.

Against this background, TC Heartland doesn’t seem like a case the Supreme Court would hear simply to affirm.  As Dennis reported last week, nearly twenty amicus briefs have been filed urging reversal, including one signed by sixty-one law professors and economists.  Predictions of a unanimous ruling against the Federal Circuit are not hard to find.  Indeed, TC Heartland looks like other recent cases in which the Supreme Court has reversed the Federal Circuit without breaking a sweat:  It involves a procedural-type rule so favorable to patent owners that, one could easily assume, it must conflict with the rules in other areas of federal litigation.

The Federal Circuit, in the caselaw on review in TC Heartland, has interpreted the patent venue statute to allow patentees to sue corporations for patent infringement in any district where personal jurisdiction exists.  For companies that sell products nationwide, venue is proper almost anywhere, and that enables litigation to cluster in places like East Texas.  Surely, the conventional wisdom seems to be, the Supreme Court will not permit the Federal Circuit to make the venue statute a dead letter in most patent cases.

In our forthcoming article, we defend the Federal Circuit’s venue doctrine, and we challenge the notion that Federal Circuit venue law is outside the mainstream.  As we explain in detail, the expansive venue options available in patent cases are consistent with historical trends in venue law more generally.  For over a century, Congress has steadily expanded plaintiffs’ venue choices, particularly in cases against corporations.  In fact, the Wright and Miller treatise has gone so far as to say that Congress has “nearly eliminate[d] venue as a separate restriction in cases against corporations.”  Venue in patent cases, simply put, is just like venue in other federal cases.

In the article, we also explain why the Federal Circuit’s interpretation of the venue statute is doctrinally sound.  Though the relevant statutes are somewhat complicated and have been amended several times, our defense of the Federal Circuit’s venue law is simple.  It is based on the plain language of two sections of the Judicial Code:  28 U.S.C. §§ 1391(c) and 1400(b).  Section 1391(c)(2), a subsection of the general venue statute, says that, “[f]or all venue purposes,” corporate defendants “reside” in any district in which they are subject to personal jurisdiction.  Section 1400(b), a venue statute specifically for patent infringement cases, says that infringement suits may be brought, among other places, “where the defendant resides.”  Reading the two statutes together, a corporation can be sued for patent infringement in any district in which it is subject to personal jurisdiction—just like in all other types of federal cases.  That is precisely what the Federal Circuit held in its seminal 1990 decision, VE Holding Corp. v. Johnson Gas Appliance Co.

Of course, there’s more law on this issue than the statutes alone.  The petitioner in TC Heartland argues that the question presented is “precisely the same” as in Fourco Glass Co. v. Transmirra Products Corp., a 1957 decision in which the Supreme Court held that the general venue statute—as it read at the time—did not supplement the patent venue statute.  The Court in Fourco relied heavily on its 1942 decision, Stonite Products Co. v. Melvin Lloyd Co., in which the Court interpreted an even older version of the venue statute and held that, in patent infringement cases, a defendant “resided” only in the state in which it was incorporated.

The petitioner in TC Heartland, building on the theme of “patent exceptionalism” that has resonated with the Supreme Court in recent years, claims that the Federal Circuit has ignored this authoritative Supreme Court precedent.  As we explain in the article, however, even if the Supreme Court decided Fourco correctly (which is not beyond doubt), the general venue statute today is far different than it was at the time of Fourco.  Recent amendments to the statute make plain that the definition of corporate residence in the general venue statute does in fact apply to the patent venue statute.

To be sure, as a matter of policy, granting plaintiffs unbridled discretion over choice of forum in patent litigation may be problematic.  It has incentivized judges, particularly in East Texas, to adopt rules and practices favorable to patent holders in an effort to attract cases.  It has encouraged litigants to engage in unseemly tactics to influence prospective jurors. Ultimately, discretion in forum choice can threaten innovation by facilitating nuisance litigation.  But, contrary to the prevailing wisdom, these problems are emphatically not the result of a misinterpretation of the venue statute by the Federal Circuit, nor does Federal Circuit venue doctrine reflect any sort of patent exceptionalism.

There are better ways to reform the law of forum selection in patent cases.  Congress could amend the venue statute.  Or it could reduce the incentive for litigants to forum shop—and the ability of district judges to “forum sell”—by mandating increased procedural uniformity in patent cases.  Or the Supreme Court could alter personal jurisdiction doctrine, which, for corporate defendants, is tightly linked to venue.  Later this Term, the Court will decide a personal jurisdiction case that could have major consequences for patent litigation.

For a more detailed explanation of these points, read our draft article, which is forthcoming in a terrific symposium issue of the American University Law Review.

Megan La Belle is Associate Professor of Law at Catholic University of America.
Paul Gugliuzza is Associate Professor of Law at Boston University School of Law. 

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Supreme Court Update: Are Secondary Indicia of Invention Relevant to Eligibility? Wed, 08 Feb 2017 11:09:23 +0000 by Dennis Crouch

The Supreme Court is on recess until Feb 17.

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

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

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

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

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


=== THE LIST===

1. 2016-2016 Decisions:

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

2. Petitions Granted:

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?)
  • LachesMedinol 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:

  • Civil Procedure – Final Judgment: Johnson & Johnson Vision Care, Inc. v. Rembrandt Vision Technologies, L.P., No. 16-489 (Reopening final decision under R.60).
  • Post Grant Admin: SightSound Technologies, LLC v. Apple Inc., No. 16-483 (Can the Federal Circuit review USPTO decision to initiate an IPR on a ground never asserted by any party)
  • Licensing: DataTreasury Corp. v. JP Morgan, No. 16-359 (appeal from 5th Circuit) (Whether a most-favored licensee (“MFL”) clauses in an intellectual property license agreement applies retrospectively to require refund if better terms are later given to another licensee?) [DataTreasuryPetition]
  • ITC Jurisdiction: DBN Holding, Inc. v. International Trade Commission, No. 16-63 (Does the USITC have jurisdiction over articles imported in order to infringe, but that do not themselves practice the invention at import)
  • Patent Claim Construction: David Netzer Consulting Engineer LLC v. Shell Oil Company, et al., No. 16-713
  • BPCIA – Notice of Commercial Marketing: Apotex Inc., et al. v. Amgen Inc., et al., No. 16-332 (effectively extending exclusivity to 12 1/2 years; complement to the Sandoz petition)
  • Anticipation/ObviousnessMerck & Cie, et al. v. Watson Laboratories, Inc., No. 16-493 (pre-AIA, do secret sales count as prior art?)
  • Extraterritoriality – Trade Secrecy: Sino Legend (Zhangjiagang) Chemical Co. Ltd. et al. v. International Trade Commission, et al., No. 16-428 (Whether Section 337(a)(1)(A) permits the ITC to adjudicate claims regarding trade secret misappropriation alleged to have occurred outside the United States.)
  • Post Grant AdminEthicon Endo-Surgery, Inc. v. Covidien LP, et al., No. 16-366 (separation-of-function – can the PTO Director delegate IPR institution decisions to PTAB); Same question presented in LifeScan Scotland, Ltd. v. Pharmatech Solutions, Inc., No. 16-377
  • Claim Construction: Google, Inc. v. Alfonso Cioffi, No. 16-200 (holding prosecution history against the patentee)
  • Civil Procedure – Personal Jurisdiction: Mylan Pharmaceuticals, et al. v. Acorda Therapeutics, et al., No. 16-360 (does an ANDA filing create nationwide specific jurisdiction?)
  • Civil Procedure – Preserving Appeal: EON Corp. IP Holdings LLC v. Silver Spring Networks, Inc., No. 16-551 (Appeal of question of law without Fed. R. Civ. Pro. R. 50 JMOL motion)
  • Farstone Technology, Inc. v. Apple Inc., No. 16-651
  • Antitrust Reverse Payments: GlaxoSmithKline, et al. v. King Drug Company of Florence, Inc., et al., No. 15-1055 (antitrust reverse payment – appeal from the 3rd Cir.)
  • Anticipation: Grunenthal GmbH v. Teva Pharmaceuticals USA, Inc., et al., No. 16-296 (OxyContin patent – when is an element ‘inherently’ disclosed by the prior art for anticipation purposes)
  • Obviousness: Purdue Pharma L.P. v. Epic Pharma, LLC, 16-289 (whether the circumstances of invention can help prove non-obviousness) (The Purdue and Grunenthal cases stem from the same Federal Circuit decision but involve separate patents owned by the respective petitioners)
  • Claim Construction: CSP Technologies, Inc. v. Sud-Chemie AG, No. 16-238 (unduly narrow claim construction)
  • Eligibility: Trading Technologies International, Inc. v. Michelle K. Lee, No. 16-446 (Eligibility of new use of old manufacture – blackjack game)
  • Post Grant Admin: Automated Creel Systems, Inc. v. Shaw Industries Group, Inc., et al., No. 16-108 (Achates redux – review of statute-of-limitations for filing IPR requests)
  • Safe Harbor: Amphastar Pharmaceuticals, Inc., et al. v. Momenta Pharmaceuticals, Inc., et al., No. 15-1402 (scope of 271(e) safe harbor)
  • Post Grant Admin: MCM v. HP, No 15-1330 (separation of powers and right to jury trial)
  • Post Grant AdminCooper v. Lee, No. 15-955 (whether IPRs violate Separation of Powers; two amici now filed in support); same question presented by Cooper in Cooper v. Square, No. 16-76.
  • Post Grant Admin: Cooper v. Square, No. 16-76 (whether IPRs violate Separation of Powers; two amici now filed in support); same question presented by Cooper in Cooper v. Lee (denied)
  • Post Grant AdminTrading Technologies International, Inc. v. Lee, No. 15-1516 (mandamus challenging CBM initiation)
  • Post Grant AdminGEA Process Engineering, Inc. v. Steuben Foods, Inc., No. 15-1075 (Flip-side of Cuozzo: Can there be no appeal when the PTAB exceeds its authority by terminating an instituted IPR proceeding?)
  • Post Grant Admin: Merck & Cie, et al. v. Gnosis S.p.A., et al., No. 16-125 (standard of appellate review of PTAB fact-finding in IPR proceedings)
  • Eligibility: Genetic Technologies Limited v. Merial L.L.C., et al., No. 16-188 (Sequenom redux; also question whether ineligibility is a proper subject of a motion to dismiss on the pleadings)
  • Arbitration: Neev v. Alcon Lensx, Inc., No. 16-48 (limits on arbitrator autonomy in patent cases)
  • Interference: Edward Tobinick v. Kjell Olmarker, et al., No. 15-1544 (question of procedure in interference case involving allegations of fraud)
  • Post Grant Admin: Pactiv LLC v. Lee, No. 16-205 (Does the “substantial new question of patentability” identified in a reexamination order limit the scope of the ex parte reexamination)
  • Eligibility: Essociate, Inc. v., LLC, et al., No. 16-195 (please clarify the meaning of ‘abstract idea’ and ‘inventive process’)
  • Obviousness: MacDermid Printing Solutions, LLC v. E.I. DuPont de Nemours & Company, No. 15-1499 (is proof of a “reasonable expectation of success” necessary to combine references in an obviousness case against a claimed combination invention)
  • Jurisdiction: GeoTag, Inc. v. Google Inc., No. 16-268 (Whether a compulsory counterclaim can satisfy the case or controversy requirement under Article III of the Constitution if there was no case or controversy at the time the complaint was filed?)
  • Post Grant AdminJames L. Driessen, et ux. v. Sony Music Entertainment, et al., No. 15-1518 (Claim construction in IPRs – pro se case)
  • Appellate Review: Commil USA, LLC v. Cisco Systems, Inc., No. 15-1446 (appellate disregard of factual evidence)
  • Eligibility: Jericho Systems Corporation v. Axiomatics, Inc., et al., No. 15-1502 (Eligibility of Patent No. 8,560,836 under Section 101 – Abstract Idea)[Jericho]
  • Patent Attorney Malpractice: Encyclopaedia Britannica v. Dickstein Shapiro, No. 16-305 (Does the fact that the search-system is no longer patentable under Alice Corp excuse patent prosecutors from alleged prosecution errors made well prior to that decision – the patent).

6. Prior versions of this report:

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Guest Post: Administrative Law Matters Even More following Cuozzo Speed Technologies v. Lee Mon, 06 Feb 2017 17:41:52 +0000

By David Boundy

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

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

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

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

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

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

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

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

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

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

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

APA § 706: Government-Wide Grounds of Judicial Review

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

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

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

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

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

Supreme Court’s Presumption of Judicial Review

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

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

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

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

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

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

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

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

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

Cuozzo’s “Long Paragraph”

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

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

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

Cuozzo Could Have Argued an Administrative Law Jurisdictional Issue

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

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

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

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

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

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


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

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

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


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

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

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

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

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

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

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

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

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

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

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

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

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