Professor Mann provides insightful comments on the Akamai oral arguments here: http://www.scotusblog.com/2014/05/argument-review-justices-frustrated-with-posture-of-case-on-joint-infringement/. I will note that there was a good chance that the Supreme Court would significantly alter that case today by either granting the cross-petition to determine joint infringement issues under 271(a) or dismiss the case with instructions for the Federal Circuit to determine the case under Section 271(a). Neither of those happened, although they still may.
Tag Archives: PGR
Guest Post by Prof. Sichelman: Stop Bashing Academics: Why Mark Lemley, Peter Menell, and Rob Merges are Highly Qualified to Teach and Write about Patent Law
Guest Post by Prof. Ted Sichelman, University of San Diego, School of Law
Recently, Hal Wegner has been circulating and commenting upon the qualifications of patent law professors. For example, he lists whether patent law professors at the Top Ten IP programs as ranked by US News & World Report are licensed to practice at the USPTO, have an “understanding” of international/comparative patent law, or clerked at the Federal Circuit (see below). According to Wegner, these “credentials” are “particularly” and “uniquely” valuable (in some cases, “essential”) for professors to make “optimum” patent policy reform proposals, especially those concerning PTO practice and international harmonization.
(To provide some background, I provided Wegner a list of names of all professors in the U.S. who currently teach and write about patent law at US News ranked and unranked IP programs, with the understanding that he would circulate the list to his readers. After I sent Wegner my list, without my input, he annotated it (along with other names) with various credentials and provided commentary and alternative lists, such as the one reproduced below. Because I believe Wegner’s analysis is flawed—and given my initial participation—I feel personally obligated to respond.)
Notably absent on Wegner’s list above are any professors from Stanford, Berkeley, and George Washington (GW), the top ranked IP programs in the nation. (The same holds true for many other schools, both in and outside of the top 10. I focus on the top three schools to underscore the problems with Wegner’s approach.) Rather than effectively denigrate these programs, Wegner should have recognized the transformative role that these schools have played historically (for GW) and more recently (for all three schools) in elevating patent law to a prominent place in the academy and developing unparalleled educational opportunities for future patent professionals and scholars.
Importantly, an unintended implication of Wegner’s discussion is that patent law professors without the stated qualifications—particularly, a patent bar registration number—are unfit to teach and write about patent law more generally. For instance, on his e-mail blog, Greg Aharonian recently circulated the comments of an anonymous patent lawyer who referred to Stanford’s Mark Lemley as “one of a small army of law school academics that have built very successful . . . careers studying intellectual property law, especially patent law, albeit without ever actually having practiced before a patent office, done research, or even studied science or engineering.”
These sorts of criticisms are misguided. First, many patent law professors have extensive patent litigation experience, including on-going experience as “of counsel” lawyers, experts, and consultants. Although having patent prosecution experience is clearly beneficial for teaching and writing about patent law, patent litigation is as well and should not have been disregarded. For instance, Wegner and Aharonian presumably know well that Mark Lemley is a partner at a top-tier IP litigation boutique, Durie Tangri, and spends numerous hours on real-world matters. In fact, he has argued or is scheduled to argue three Federal Circuit patent cases so far this year, has argued before the Federal Circuit eleven times (in addition to four arguments in the regional circuits), and has represented another ten parties on briefs in the court. Additionally, he has been counsel for a party in the Supreme Court twice in patent cases (both patentees, incidentally). Lemley has been the lead author or co-author on 40 amicus briefs in the Supreme Court and the courts of appeals. And if that were not enough, his articles have been cited nine times in Supreme Court opinions and 145 times by courts overall. Finally, he’s conducted extensive empirical analyses of USPTO and judicial practice in many academic papers. (Ah, I forgot to mention that he’s represented parties in 85 cases in the district courts, too.)
So Lemley clearly is highly qualified (in fact, uniquely qualified) to write about and teach patent law. Nonetheless, Lemley often is maligned by practitioners because of a proposal he made (along with now Federal Circuit Judge Kimberly Moore) about a decade ago to restrict continuation practice. Yet, regardless of whether you agree with his views—and I often disagree with him—he’s clearly well-situated to write about and suggest reforms concerning PTO practice, the Federal Circuit, the Supreme Court, and the Patent Act more generally. In this regard, Lemley has written over 125 articles, many of them offering outstanding suggestions to reform the patent system, such as his idea for “gold-plated” patents. Lemley should not be unfairly singled out for one unpopular proposal or simplistic mischaracterizations of his views.
In a response to e-mails Wegner received asking why patent litigation was not listed in his chart, including one of my own, he responded that while patent litigation “may well be the best practice background for a patent academic . . . . no patent faculty seeking to make an optimum contribution to patent policy or harmonization can do so without someone on the faculty having expertise in international/comparative and Agency practice.” Wegner’s position is too sweeping. Although it is certainly useful to have faculty members who have prosecution experience—and Wegner’s criterion of simply having a patent bar number is in any event not too indicative of such experience—it isn’t necessary to have such experience to make outstanding policy proposals, even when it comes to PTO practice. Indeed, only a few judges at the Federal Circuit itself would meet such criteria. It seems hard to fathom that Wegner believes that the Federal Circuit cannot make an “optimum” contribution to patent policy, including practices at the PTO, given their lack of such credentials. The same should hold true for academics. And to go one step further—as does the anonymous lawyer’s blanket assertion on Aharonian’s e-mail blog that a professor cannot sucessfully “study,” write about, or presumably teach patent law without having worked as a patent prosecutor or an engineer—is simply preposterous.
Second, many patent law professors, such as UC Berkeley’s Peter Menell and Rob Merges (also absent on Wegner’s chart)—in addition to having extensive prior and on-going experience as experts and consultants in patent litigation matters—have spent numerous hours writing casebooks and patent law practice guides. Rob Merges and John Duffy’s Patent Law and Policy is the leading patent law casebook, and contains extensive commentary from its authors. Merges is also co-founder and Senior Policy Advisor of Ovidian LLC, a Berkeley-based consulting and informatics company specializing in assessing and valuing patent portfolios. That experience is invaluable for the next generation of patent law professionals working in the emerging patent “marketplace.” Finally, because Berkeley—like GW and Stanford—offers separate courses in patent prosecution and patent litigation taught by prominent practitioners, it is hard to see how its students are not getting broad, deep, and practical exposure to patent law.
After co-founding the Berkeley Center for Law & Technology (BCLT) in 1995, Peter Menell soon began working with a team of top patent and other IP litigators to provide an annual four-day intensive training program on IP law and case management for federal judges, as well as numerous other national and regional events. That work led to the development of the Patent Case Management Judicial Guide, a comprehensive treatise that has been referred to as “the bible” for judges and litigators. Menell has also worked with district courts on the development and revision of patent local rules and filed amicus briefs in important IP cases. He also served as one of the PTO’s inaugural Edison scholars. His empirical research on patent claim construction with Jonas Anderson, a former BCLT Fellow—in which they reviewed every claim construction order issued by the Federal Circuit since 2000—was cited numerous times in the Federal Circuit’s recent en banc Lighting Ballast decision. Any comprehensive evaluation of patent law programs would value these qualifications.
The same holds true for professors who write about specific topics in patent law, but do not teach it. For instance, Berkeley’s Pam Samuelson is a world-renowned copyright expert and a winner of the “genius” grant from the John D. & Catherine T. MacArthur Foundation. She occasionally writes about software patents, including for her column in the Communications for the Association for Computing Machinery (ACM) journal, which is mainly read by software and computer science professionals. As Professor Samuelson’s work shows, one need not be an expert on every nuance of the patent system, especially the nitty-gritty of prosecution, to make sound reform proposals.
Other academics are permanent and full-time but not on the “tenure-track.” For example, BCLT Executive Director Robert Barr—who directs the Berkeley IP program and organizes numerous IP events there—is former chief patent counsel at Cisco, is licensed to practice before the PTO, and has long been a leader in the Silicon Valley and national patent law community. Along with John Whealan—former Solicitor at the PTO and another highly-regarded national leader in patent law who directs GW’s IP program—Wegner left Barr off the list.
Finally, many patent law professors have significant industry experience. For example, blog commenters on a recent Patently-O post of mine referred to me as “ivory tower” and as having “a lack of ‘real world’ experience.” In fact, before becoming a law professor, in addition to practicing patent litigation for four years, I founded three tech companies, raising nearly $5 million in financing, including being CEO of Unified Dispatch, a software company that makes innovative speech recognition systems for ground transportation companies. At Unified Dispatch, I designed and oversaw most of the company’s software products, which included writing detailed specifications and managing programmers and other engineers, and was the lead inventor on several patent applications and one patent. As part of that process, I also managed our outside patent counsel for several years during prosecution. Before attending law school, I earned an M.S. in Physics. Since becoming a patent law professor, I’ve consulted and served as an expert on an-going basis in patent litigation matters and related projects. So not only is the “ivory tower” label is inaccurate, it also misapprehends the often close ties between academia and practice.
The same sorts of backgrounds and relevant experience hold true for many other academics who teach and write about patent law. For example, Donald Chisum—yes, the author of the leading patent law treatise—is not registered to practice before the USPTO (he majored in philosophy). Granted, practicing before the PTO is helpful to writing about PTO practice, but would anyone doubt that Chisum is sufficiently knowledgeable to do as much?
I commend Hal Wegner’s efforts in calling attention to the patent law programs and scholars (which is why I assisted him in the process). There are clearly limitations to the US News ranking system, and I agree it’s valuable to see the credentials of those teaching at patent law programs across the country. However, it was irresponsible for him to omit the founders and leaders of many of the most important IP programs on his list of academics with “practical experience” in “key areas” merely because they don’t have a patent bar reg #, don’t have a deep understanding of comparative patent law, didn’t clerk for the Federal Circuit, or aren’t technically “tenure-track.” Patent litigation, industry experience, and other credentials are just as relevant.
Even more troubling is Wegner’s assertion that having someone on the faculty with one of his criteria is “essential” for making “optimum” policy proposals. And most troubling is that Wegner provides fodder for commenters such as those on Aharonian’s e-mail blog that professors without such credentials cannot successfully write about or apparently teach patent law more generally, not to mention commenters on this blog calling professors like me “ivory tower,” when it is simply not the case. Wegner and the commenters should do their homework. Otherwise, their “analysis” remains at best misguided and at worst scapegoating.
Berkeley and Stanford serve—and, historically, GW has served (and soon again will serve)—as model programs for training patent practitioners, scholars, and judges. The same holds true for many law schools I have omitted in this short blog post. Rather than denigrate these schools, Wegner would have done better to highlight the tremendous value offered to students and the patent law community more generally from this talented and highly qualified group of scholars.
Software Patent Eligibility: Alice Corp v. CLS Bank on the Briefs
By Dennis Crouch
Alice Corporation Pty. Ltd. v. CLS Bank International, Supreme Court Docket No 13-298 (2014)
Later this term, the US Supreme Court will shift its focus toward the fundamental question of whether software and business methods are patentable. More particularly, because an outright ban is unlikely, the court’s more narrow focus will be on providing a further explanation of its non-statutory “abstract idea” test. The Supreme Court addressed this exclusionary test in its 2010 Bilski decision, although in unsatisfactory form. As Mark Lemley, et al., wrote in 2011: “the problem is that no one understands what makes an idea ‘abstract,’ and hence ineligible for patent protection.” Lemley, Risch, Sichelman, and Wagner, Life After Bilski, 63 Stan. L. Rev. 1315 (2011).
In this case, a fractured Federal Circuit found Alice Corp’s computer-related invention to be unpatentable as effectively claiming an abstract idea. See, U.S. Patent No. 7,725,375. In its petition for writ of certiorari, Alice presented the following question:
Whether claims to computer-implemented inventions – including claims to systems and machines, processes, and items of manufacture – are directed to patent-eligible subject matter within the meaning of 35 U.S.C. § 101 as interpreted by this Court.
Oral arguments are set for Mar 31, 2014 and a decision is expected by the end of June 2014. In addition to the parties, a host of amici has filed briefs in the case, including 11 briefs at the petition stage and 41 briefs on the merits. Although not a party to the lawsuit, the Solicitor General has filed a motion to participate in oral arguments and steal some of the accused-infringer’s time.
The invention: There are several patents at issue, but the ‘375 patent is an important starting point. Claim 1 is directed to a “data processing system” that includes a number of elements, including “a computer” configured to generate certain instructions, “electronically adjust” stored values, and send/receive data between both a “data storage unit” a “first party device.” The claims also include “computer program products” and computer implemented methods. The underlying purpose of the invention is to provide certain settlement risks during a time-extended transaction by creating a set of shadow credit and debit records that are monitored for sufficient potential funds and that – at a certain point in the transaction the shadow records are automatically and irrevocably shifted to the “real world.”
It is unclear to me what makes this invention novel or nonobvious and many believe that it would fail on those grounds. However, the sole legal hook for the appeal at this stage is subject matter eligibility. One thing that we do know is that CLS Bank is alleged to be using the patented invention to ensure settlement for more than a trillion dollars daily.
Important case: The claim structure here is quite similar to that seen in hundreds-of-thousands of already issued patents and pending patent applications where the advance in software engineering is a fairly straightforward, but is done in a way that has an important impact on the marketplace. One difference from many software patents is that the underlying functionality is to solve a business transaction problem. However, there is a likelihood that the decision will not turn (one way or the other) on that field-of-use limitation. In his brief, Tony Dutra argues that the key here is utility, and that an advance in contract-settlement is not useful in the patent law context.
[Brief of the US Government] The most important brief in a pile such as this is often that filed by the U.S. Government. Here, Solicitor General Donald Verrilli and USPTO Solicitor Nathan Kelley joined forces in filing their brief in support of CLS Bank and a broad reading of the abstract idea test. In particular, the U.S. Government argues that none of the claims discussed are subject matter eligible. The brief begins with an importance argument – that “the abstract idea exception is patent law’s sole mechanism for excluding claims directed to manipulation of non-technological concepts and relationships.” This notion – that the abstract idea is the final and ultimate bulwark – places a tremendous pressure on the Court to create a highly flexible test. In my view, the Government largely loses its credibility with that argument – somehow forgetting about the host of other overlapping patent law doctrines that each address this issue in their own way, including requirements that any patented invention be useful, enabled, described in definite claims, and nonobvious. The ultimate backstop is likely the US Constitutional statement regarding “Inventors” and their “Discoveries.”
The government brief goes on to endorse the approach of first identifying whether the claim would be abstract if the computer technology were removed from the method claims and, if so, move on to consider whether the computer technology limitations are sufficient to transform a non-patentable abstract idea into a sufficiently concrete innovation in technology, science, or the industrial arts. “The ultimate inquiry is whether the claims are directed to an innovation in computing or other technical fields.” The brief then reviews the precedent on this topic from Bilski, Mayo and Flook.
Addressing the computer system and software claims, the U.S. Government agrees that they are certainly directed toward “machines” and “manufactures.” However, according to the government, those claims to physical products are properly termed abstract ideas because the physical elements “do not add anything of substance.”
One interesting element from the brief is that the US Government notes that, although a question of law, invalidity for lack of subject matter eligibility requires clear and convincing evidence in order to overcome the presumption of validity. In its brief, CLS Bank argues otherwise as does Google, who actually takes time to cogently spell out the argument with citation to leading authorities.
[Brief of CLS Bank] In its merits brief, CLS Bank somewhat rewrote the question presented – focusing attention on the Supreme Court’s decisions in Mayo.
Question Re-framed: An abstract idea, including a fundamental economic concept, is not eligible for patenting under 35 U.S.C. §101. Bilski v. Kappos, 130 S. Ct. 3218 (2010). Adding conventional elements to an abstract idea does not render it patent-eligible. Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289 (2012). The asserted claim of the patents-in-suit recite the fundamental economic concept of intermediated settlement, implemented using conventional computer functions. The question presented is:
Whether the courts below correctly concluded that all of the asserted claims are not patent-eligible.
The basic setup of the CLS Bank is the argument that a newly discovered abstract idea coupled with conventional technology is not patent eligible. CLS Bank’s point is well taken that an outright win for Alice Corp. here would involve something of a disavowal rewriting of Mayo.
[Brief of Alice Corp.] Alice Corp’s brief obviously takes a different stance – and argues first that the non-statutory exceptions to patentability should be narrowly construed and focused on the purpose of granting patents on creations of human ingenuity and that the idea behind Alice’s invention is not the type of “preexisting, fundamental truth” that should be the subject of an abstract idea test. Alice also reiterated its position that the claimed invention should be examined as a whole rather than divided up as suggested by the Government brief.
[Brief of Trading Technologies, et al.] TT’s brief (joined by a group of 40 patent-holding software companies as well as Prof. Richard Epstein) argues that the “abstract idea” test is focused on scientific truths and scientific principles. In that construct, Alice Corp’s ideas regarding the settlement system would not be seen as ineligible. TT also challenges the court to think beyond the computer as “merely a calculator and that programming merely instructs the computer to perform basic mathematical calculations. “While this may have been true of many of the applications programmed on the earliest computers over 40 years ago, it is simply not the case today. . . . Viewing computers as merely calculators is completely disconnected from the reality of where innovation is occurring today and where most innovation will occur in the future.” In his brief, Dale Cook agrees and further makes the argument that a distinction between hardware and software is illusory – citing Aristotle to make his point. [Brief of Dale Cook]. Supporting that notion is the Microsoft brief that sees “software-enabled inventions” as the “modern-day heirs to mechanical inventions. [Brief of Microsoft HP]. Pushing back on this argument, Public Knowledge seemingly shows that the entire claimed method can be implemented in seven lines of software code. Thus, while some software is complex. PK makes the argument that the software at issue here is exceedingly simple.
TT also warns against the Government’s position that a strong eligibility guideline is needed in cases such as this. In particular, explains “inventions that do nothing more than use a computer to implement time-worn concepts in obvious and traditional ways will not receive patent protection notwithstanding the fact that they concern eligible subject matter. On that note, TT asks for clarification from the Supreme Court that “Mayo does not support importation of novelty, nonobviousness, and other patentability criteria into the ‘abstract idea’ analysis.”
[Brief of ABL] The final brief in support of petitioner was filed on behalf of Advanced Biological Labs by Robert Sachs. ABL argues that a claim should only be seen as problematic under the abstract idea test when there are no practical alternative non-infringing ways of practicing the abstract idea. On that point, ABL further pushes for the notion that the test should be considered from the framework of one skilled in the art rather than simply the-mind-of-the-judge and based upon clear and convincing evidence. Pushing back against this notion is the brief of the American Antitrust Institute (AAI) drafted by Professor Shubha Ghosh. The AAI argues that the purpose of the Abstract Idea exclusion is to prevent undue harm to competition and innovation. Seemingly, the AAI contends that a claim directed an abstract idea is per se anticompetitive and that even when coupled with technology it may still be unduly preemptive. Oddly however, later in the brief AAI argues for a test that is not based upon market competition or preemption.
[Shultz Love Brief] A leading brief on the side of ineligibility is that filed by Professors Jason Shultz and Bryan Love on behalf of about 22 other professors. The professors make the argument that the world would be a better place without software patents. For its conclusions, the brief largely relies on the work of Brian Love, Christina Mulligan, Colleen Chien, James Bessen, & Michael Meurer. The EFF brief from Professor Pamela Samuelson, Julie Samuels, and Michael Barclay make a parallel argument: “If anything, evidence shows that the U.S. software industry is harmed by the exponential growth of vague software patents.” Without denying the problems created by software patents, Professors Peter Menell and Jeff Lefstin argue that the solution is not to rely upon the “abstract idea” test to solve that problem. IBM offers the starkest contrast to the Shultz-Love brief – arguing that the failure to clearly offer patent rights for software inventions “endangers a critical part of our nation’s economy and threatens innovation.”
The ACLU has been more frequently involved with patent law issues and was a backer of the Myriad case. In its brief, the ACLU argues that the abstract idea exception is the patent law proxy for free speech and that monopolization of abstract ideas would be a violation of the First Amendment. That conclusion is supported by the Software Freedom Law Center & Eben Moglen. The First Amendment argument has the potential of twisting on the ACLU: if the justices fail to see that patents create any First Amendment concern then they may be more likely to support a narrowing of the abstract idea exception. Notably, in the most recent patent law oral arguments on fee-shifting, Justice Roberts arguably suggested that patents did not create any first amendment concerns.
I mentioned Microsoft’s brief earlier. Microsoft argues that software should be patentable – but not the software in this case. In particular, Microsoft agrees with the notion that simply adding “a computer” to an otherwise abstract idea does not fix the problem. Microsoft’s solution is to consider “whether the claim as a whole recites a specific, practical application of the idea rather than merely reciting steps inherent in the idea itself.” Microsoft goes on to admit that its test adds little predictability.
The Intellectual Property Owners Association and AIPLA similarly argue that software “if properly claimed” is patent eligible. On its face, that argument may not sit well with the Court who may see the “as claimed” notion designed to create loopholes for sly patent drafters whose noses are made of wax. A collective brief from Google, Facebook, Amazon, and others support this notion that patent eligibility should not turn on “clever drafting.” On an ancillary (but important) point Google argues that Section 101 defenses should be considered at the outset of most cases. cf. Crouch & Merges, Operating Efficiently Post-Bilski by Ordering Patent Doctrine Decision-Making.
- The ABA has collected the briefs: ABA Preview. (You’ll note that I didn’t have room to comment on all the briefs).
- Mike Borella reviews the briefs and pending case on Patent Docs: Post I; Post II.
- Gene Quinn reviews some of the briefs on IP Watchdog. (Note Gene’s discussion of Judge Michel’s brief that I did not discuss above).
- Timothy B. Lee from the WaPo asks “Will the Supreme Court save us from software patents?“
My exhaustive (and last, really I promise!) post about why 101 is not a defense, nor properly raised in CBM proceedings
This is from a declaration I filed in a patent case.
I. Because Section 101 is not “specified” as a “condition for patentability,” and, further, is not a condition for patentability, a “violation” of Section 101 may not be raised in a covered business method proceeding.
The starting point of my analysis is a consideration of the statutory limitation on grounds that can be raised in a CBM proceeding. As part of a limited transitional program, Congress expressly and plainly limited the grounds that can be asserted in a CBM proceeding to a small subset of those than those that can be raised in patent infringement suits. Specifically, although 35 U.S.C. § 282 lists defenses in patent suits, under the AIA in CBM proceedings only the defenses listed in subsections (b)(2) and (b)(3) can be raised. 37 C.F.R. § 42.304. It is clear that subsection (b)(3) does not cover Section 101, since it cites only to sections 112 and 251.
As a consequence, the only potential basis for Section 101 to be a defense – and therefore a proper basis for CBM Review – is if it is within subsection (b)(2), which states: “(2) Invalidity of the patent or any claim in suit on any ground specified in part II [of Title 35] as a condition for patentability.” 35 U.S.C. § 282(b)(2).
Unless Section 101 is “specified” in “part II” as a “condition for patentability,” it is not a proper basis for instituting a CBM proceeding. Sections 100 to 212 are in part II of the Patent Act. Thus, Section 101 is in part II. However, of those one hundred and twelve separate sections, two are “specified” as “conditions for patentability” – sections 102 and 103. Their titles state:
102. Conditions for patentability; novelty.
103. Conditions for patentability; non-obviousness subject matter.
Thus, plainly sections 102 and 103 each is “specified” as a “condition for patentability.” Just as plainly, Section 101 is not “specified” as a “condition for patentability:”
101. Inventions patentable.
In my opinion, the words “specified” as “a condition for patentability” in subsection 282(b)(2) point to only two sections of the one hundred and twelve sections in part two: sections 102 and 103. Congress knew how to specify a condition for patentability by putting the words “condition for patentability” in the title: Section 101 is not specified as a condition for patentability. Any other reading of subsection 282(b)(2) renders the word “specified” superfluous, and it also renders the phrase “conditions for patentability” superfluous. Either result violates a basic tenet of statutory interpretation. Just as it is improper to read “in part II” out, it is improper to read these other express limitations out of the statute.
Even putting aside the fact that only two statutes in part II are specified as “conditions for patentability,” and assuming courts are free to allow defenses to be raised under subsection 282(b)(2) even though they are not specified as “conditions for patentability,” it is clear that, in substance, Section 101 is not a “condition.”
First, reading the statute as a whole (which proper analysis requires), there is no doubt that Congress knew how to write a “condition for patentability.” In substance, sections 102 and 103 are express conditions for patentability. Section 102 begins, “A person shall be entitled to a patent unless . . . .” Section 103 states that “a patent for an invention may not be obtained . . . if the differences” would have been obvious at the time of the invention. Section 102 conditions patentability on novelty; section 103 conditions patentability on non-obviousness.
In stark contrast, Section 101 permissively states that “[w]hoever invents or discovers any new and useful process . . . or any new and useful improvement thereof, may obtain a patent therefor,” but doing so is “subject to the conditions and requirements of this title.” Thus, Section 101 grants permission to an inventor to apply for a patent, subjecting issuance to the conditions and requirements of the title. Further, Section 101 does not limit the person’s entitlement to a patent, unlike Section 102 and 103. It is in my opinion that Section 101 does not “condition” patentability on the invention falling within Section 101: if Congress had wanted to condition patentability on Section 101, it perhaps could have done so, but it plainly did not.
Further, the same legislation that codified the transitional CBM proceeding expressly describes Section 101, not as providing a condition for patentability, but as merely setting forth “categories of patent-eligible subject matter.” AIA § 18(e). Consistent with this, Congress authorized the PTO to rely on certain prior art to invalidate a claim under sections 102 and 103, AIA § 18(c), but the statute never mentions Section 101 as a basis for invalidity.
For these reasons, it is in my opinion clear that, although it is in part II of the Patent Act, Section 101 is not specified as a “condition for patentability” and it is in substance not a condition. Consequently, it is not a ground for review in the CBM proceeding sought by defendant herein.
In my opinion, the clarity of the text ends the inquiry. The text of the statute is not ambiguous. Nor is it absurd to conclude that Congress chose not to make “ineligible subject matter” a basis for CBM: indeed, given the Congressional purpose of speedy review of covered business method patents, a Section 101 inquiry would bog down the PTO in the myriad factual issues underlying the inquiry – many of which involve facts external to the PTO, such as whether the patent “preempts” other methods (i.e., whether there are non-infringing alternatives), what was “routine” or “conventional” in the art, and other facts not likely to be shown entirely by prior art. Omitting Section 101 is far from absurd but instead matches the purpose and intent of Congress to create a speedy, certain proceeding. See generally, Ultramercial, LLC v. Hulu, LLC, 772 F.3d 1335 (Fed. Cir. 2013) (identifying some of the factual inquiries inherent in the question of eligible subject matter).
Even assuming, nonetheless, that it is proper to look beyond the text, in my opinion it is proper to look to the purpose of the statute and legislative intent. Both confirm the plain meaning of the statute.
The purpose of the statute confirms that the CBM procedure was adopted to address shortcomings with the PTO’s ability in the late 1990’s to find prior art, and that was Congress’s intent. The House report makes clear that the purpose was to deal with the perception that in the late 1990’s, the PTO had not found the best prior art to apply under sections 102 and 103:
A number of patent observers believe the issuance of poor business-method patents during the late 1990’s through the early 2000’s led to the patent ‘‘troll’’ lawsuits that compelled the Committee to launch the patent reform project 6 years ago. At the time, the USPTO lacked a sufficient number of examiners with expertise in the relevant art area. Compounding this problem, there was a dearth of available prior art to assist examiners as they reviewed business method applications. Critics also note that most countries do not grant patents for business methods.
The Act responds to the problem by creating a transitional program 1 year after enactment of the bill to implement a provisional post-grant proceeding for review of the validity of any business method patent. In contrast to the era of the late 1990’s-early 2000’s, examiners will review the best prior art available….
H. Rep. 112-98, at p. 54 (June 1, 2011) (emphases added). Thus, the committee report[1] shows that the purpose of the amendments is consistent with the text: to allow those charged within infringement to show that the invention was not new or would have been obvious in light of “the best prior art available.” The report emphasized the lack of “a sufficient number of examiners with expertise in the relevant art area.” Nothing in the House report mentions the failure to recognize “abstract ideas” or the failure to properly apply Section 101. Further, it is absurd to suggest that in the late 1990s lack of access to prior art or lack of sufficient examiners with familiarity with prior art had any impact on the ability to determine what is a “law of nature,” or “abstract idea,” or the like. If anything, this shows that Congress enacted the CBM proceeding for the purpose of responding to the problem of difficulty in finding prior art and experts in the fields of business methods.
Beyond this, the legislative history of the AIA on this transitional program is, like almost all legislative histories, murky. I have reviewed the remarks made on the Floor of the Senate, and there is no doubt that a few members of Congress mentioned business method patents. A fair reading is that at least some members of Congress thought the source of the problem to be addressed was with “abstract” patents, while others believed the failure to consider the most pertinent prior art was the source of the problem. What controls is the language Congress enacted, not my speculation about the intent of a handful of elected representatives.
For the reasons shown above, in my view the text and committee report focus on prior art under sections 102 and 103. As enacted, in my opinion the AIA does not allow review of covered business methods for “eligible subject matter” in terms of Section 101.[2]
II. Arguments I Considered but Found Incorrect.
I understand the PTO’s position is that Section 101 can be a basis for instituting a CBM Review. E.g., SAP Am., Inc. v. Versata Dev. Group, Inc., CBM2012-00001 (Jan. 9, 2013). Director Kappos justified the PTO’s position, not by focusing on the text, but by stating: “This interpretation is consistent with both the relevant case law and the legislative history.”[3] The PTO in its decision in Versata relied upon the same grounds. For the following reasons, this interpretation is incorrect.
First, these authorities simply do not address the text of the statute. The statute is not ambiguous. It is not absurd. There is no reason whatsoever to move beyond the plain text.
Second, the Supreme Court case relied upon to support these views is Graham v. John Deere Co., 383 U.S. 1 (1966). That famous case about Section 103 had nothing to do with whether “eligible subject matter” was a condition for patentability, and did not decide that issue. Instead, in dicta analyzing the “condition for patentability” in Section 103, the court noted:
The Act sets out the conditions of patentability in three sections. An analysis of the structure of these three sections indicates that patentability is dependent upon three explicit conditions: novelty and utility as articulated and defined in § 101 and § 102, and nonobviousness, the new statutory formulation, as set out in § 103. The first two sections, which trace closely the 1874 codification, express the ‘new and useful’ tests which have always existed in the statutory scheme and, for our purposes here, need no clarification. The pivotal section around which the present controversy centers is § 103 . . . .
383 U.S. at 12-13. The statement actually undermines the argument that “eligible subject matter” is a condition for patentability. Graham explains that the Patent Act of 1793 had only two conditions for patentability: utility and novelty (both of which were once in the same statute, a precursor to sections 101 and 102). Id. at 10 (“Although the Patent Act was amended, revised or codified some 50 times between 1790 and 1950, Congress steered clear of a statutory set of requirements other than the bare novelty and utility tests reformulated in Jefferson’s draft of the 1793 Patent Act”). The Graham Court recognized that in 1952 Congress had added a third condition, non-obviousness. See id. at 14 (“Patentability is to depend, in addition to novelty and utility, upon the ‘non-obvious’ nature of the ‘subject matter sought to be patented’ to a person having ordinary skill in the art.’”) (quoting Section 103).
For these reasons, even if Graham is misapprehended as a definitive interpretation of Section 101, the Court’s opinion suggests that “eligible subject matter” is not a condition for patentability. If Graham stated that utility, novelty, and non-obviousness were conditions for patentability, then the Court’s statement that there are “three conditions”[4] means “eligible subject matter” is not one: if “eligible subject matter” were also a condition for patentability, then there would be four, not three, conditions.
I have also seen others avoid the text but instead cite to dicta in Dealertrack, Inc. v. Huber, 674 F.3d 1315 (Fed. Cir. 2012) and to dicta in a footnote in Aristrocrat Techs., Austl. PTY LTd. v. Int’l Game Tech., 543 F.3d 657, 661 (Fed. Cir. 2008). Neither case decided whether Section 101 was a condition for patentability. Although the merits of a Section 101 issue was decided in Dealertrack, the patentee did not contend that Section 101 was not a statutory defense, and the court did not decide that issue. Further, dicta in both cases traces directly back to the dicta from Graham. But loose language can be found in other cases saying exactly the opposite. For example, the Federal Circuit has stated: “The two sections of part II that Congress has denominated ‘conditions of patentability’ are § 102 . . . and § 103 . . . .” Myspace, Inc. v. GraphOn Corp., 672 F.3d 1250, 1260-61 (Fed. Cir. 2012). The Supreme Court made essentially the same observation in Diamond v. Diehr, 450 U.S. 175, 190-91 (1981).
The important fact to me is that none of these cases parse the statutory text, or just examine the purpose and legislative history of the AIA discussed here. Ignoring the actual text in favor of what courts have said a statute says is obviously incorrect. In that regard, the Supreme Court has overridden judicial interpretations of statutes that failed to adhere to the text, and has done so even after decades of having lower courts adhere to those incorrect constructions. See Central Bank of Denver v. First Interstate Bank of Denver, 511 U.S. 164, 177 & 191 (1994) (overruling six decades of case law implying a cause of action), superseded on other grounds by 15 U.S.C. § 78(t)(e). Whatever a court says a statute says, the Constitution makes paramount what the enacted text actually says.
I have also considered whether this analysis improperly relies upon titles to interpret the text. I agree it is generally improper to use the title to interpret text, at least where the title contradicts or is inconsistent with the substantive text. But that principle has no application here: Congress in the text of subsection 282(b)(2) limited the grounds upon which a CBM proceeding may be based to those “specified” in “part II” as “conditions for patentability.” Thus, the statutory text of Section 282 says to look for things “specified” in “part II” as “conditions for patentability.” Consequently, I am not using the title of any statute to interpret the meaning of Section 101: I am applying the plain text of subsection 282(b)(2). I am not using the title to interpret the text with respect to either “specified” as a “condition for patentability” just as I am not with respect to the statute’s use of “specified” in “part II.” Further, as shown above, I use only the text of the statutes to conclude that Sections 102 and 103 are conditions, but Section 101 is not. Reading those three statutes in pari materia (together), it is clear sections 102 and 103 are conditions, but Section 101 is not. The titles confirm the interpretation of the text, but they are not the source of it.
I have also considered other aspects of the legislative history. For example, then-Director Kappos observed: “a key House Committee Report states that ‘the post-grant review proceeding permits a challenge on any ground related to invalidity under section 282.’ H.R. Rep. No.112-98, at 47 (2011).”[5] Yet, it is undeniable that the text of the adopted statute points to only two subsections of Section 282, and so this sentence from that report flatly contradicts the enacted statute. A sentence in a committee report that directly contradicts the plain language does not control. As with most bills, the legislative history of the AIA contains many statements that are not the law, and a few that contradict the statute.
Others have pointed to this statement from a senator from Arizona, Senator Kyl: “section 101 invention issues” were among those “that can be raised in post-grant review.” 157 Cong. Rec. S1375 (daily ed. Mar. 8, 2011). Relying on this statement for the proposition that eligible subject matter is covered by the text is doubly problematic. Foremost, “section 101 invention issues” is not in the enacted text. Further, the Supreme Court has long and repeatedly rejected relying upon one legislator’s statement as having been presented to Congress and enacted into federal law. Doing so jeopardizes the Constitutional requirements of enactment and presentment. This is especially true where, as here, that statement contradicts the plain text as well as other more weighty evidence of legislative intent, coming in the form of Senate reports from the AIA, Congressional reports on the 1952 Act, and Federico’s commentary, discussed above. Those sources – which, if entitled to any weight, are entitled to more weight than one Senator’s floor statement – contradict Senator Kyl’s subjective interpretation of the statute. Again, however, I believe none of this matters here.
To sum up, in my opinion dicta in cases does not control. Dicta in cases that do not analyze the statutory text do not control. A committee report that flatly contradicts the enacted text does not control. And one Senator’s opinion is not enacted statutory text.
[1] The Supreme Court has cautioned against giving weight even to committee reports, admonishing courts that “judicial reliance on legislative materials like committee reports, which are not themselves subject to the requirements of Article I [of the U.S. Constitution], may give unrepresentative committee members – or, worse yet, unelected staffers and lobbyists – both the power and the incentive to attempt strategic manipulations of legislative history to secure results they were unable to achieve through the statutory text.” ExxonMobil Corp. v. Allapattah Serv., Inc., 545 U.S. 546, 568 (2005). Here, the committee report simply confirms the plain text; it is not being used to interpret the text.
[2] As explained above, courts view legislative history, particularly more modern legislative history such that accompanying the AIA, with skepticism. Thus, I only note that the Senate report from 1952 and persuasive commentary by P.J. Federico confirm the plain meaning. First, both reports from 1952 Act state: “Section 101 sets forth the subject matter that can be patented, ‘subject to the conditions and requirements of this title.’ The conditions under which a patent may be obtained follow, and section 102 covers the conditions relating to novelty.” H. Rep. 1923, S. Rep. 1979 (82d Cong. 2d Session) (emphasis added). It is a perversion of the English language to read “the conditions under which a patent may be obtained follow” Section 101, but nonetheless in Section 101. Second and consistent with the plain text and these reports, Federico wrote that Section 4886 – which Congress in 1952 split up into what became sections 101, 102, and (in a sense at least) 103 – had “specified the subject matter for which a patent could be obtained and recited conditions for patentability. In the new code, this section has been divided into two sections, section 101 relating to the subject matter for which a patent may be obtained, and section 102 which defines statutory novelty and states other conditions for patentability.” P.J. Federico, Commentary on the New Patent Act (emphasis added) (available at http://ipmall.info/hosted_resources/lipa/patents/federico-commentary.asp). Thus, as a principal architect of the act, Federico recognized that while Section 4886 had both “identified the subject matter for which a patent could be obtained,” and “recited conditions for patentability,” under the 1952 Act “section 101 relat[ed] to the subject matter for which a patent may be obtained” but “section 102 defines novelty and states other conditions for patentability [e.g., statutory bars to patentability].” Id. Further, Federico’s description is consistent with the reviser’s note to the 1952 act, which stated that the “existing statute is split into two sections, section 101 relating to the subject matter for which patents may be obtained, and section 102 defining statutory novelty and stating other conditions of patentability.”
[3] http://www.uspto.gov/blog/director/entry/ptab_and_patentability_challenges
[4] 383 U.S. at 17.
[5] http://www.uspto.gov/blog/director/entry/ptab_and_patentability_challenges
Industry Responds to White House Calls for Prior Art, Examiner Training
Guest Post by Professor Jorge L. Contreras
As previously reported, on February 20 the White House highlighted its progress on five patent-related policy initiatives introduced in June 2013, announced three new patent-related initiatives, and renewed its call for legislation to combat “patent trolling”. In all, ten different initiatives were discussed. Below is a quick guide to making sense of the most significant ones, as well as a summary of private sector responses to date.
Patent Assertion Entities (PAEs) – In this year’s State of the Union address, President Obama came out publicly against unfair litigation tactics deployed by “patent trolls” and has called on Congress to enact legislation to “curtail abusive patent litigation.” Two of the Administration’s June 2013 initiatives relate to PAE litigation: a proposed PTO rule that would require reporting of real party in interest (re-branded as “attributable ownership”) information in patents and patent applications, and an online toolkit providing links and other information for the recipients of patent demand letters. Among the most useful features of the toolkit are links to advanced demand letter and patent litigation analytics provided by Lex Machina and Docket Navigator. Although the toolkit is available to anyone, its intended beneficiaries are small businesses that have been targeted by some of the more notorious PAEs for using off-the-shelf office equipment like scanners and wireless routers. The Administration seems to realize that both of these initiatives are relatively modest, and it has again urged Congress to enact measures that will have a meaningful impact on reducing abusive patent litigation.
PTO Fixes – The Patent and Trademark Office (PTO) has, fairly or unfairly, come under increasing fire for procedural lapses and staffing inadequacies that allow the issuance of too many “bad” patents. Last week’s announcements contain some meaningful proposals that could help to address this situation.
- Claim Clarity – the PTO has implemented new training programs for examiners and judges relating to “functional claims“, which have been widely criticized as overly broad and unclear. The PTO also highlighted an upcoming pilot program involving the use of glossaries in patent specifications to clarify claim language. The details of this program remain to be seen, but anything that will bring greater consistency and rationality to claim interpretation can only help.
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Examiner Technology Training – One perceived problem with the patent examination system is the inability of examiners to keep up with rapidly changing technologies. Gaps in technical knowledge can result in examiners’ failure to identify relevant prior art, to appreciate the interaction of different system elements, and to make cogent assumptions and conclusions about inventiveness, anticipation and nonobviousness. To address this issue, the Administration has called for private sector volunteers to provide state-of-the-art technical training to patent examiners through a program coordinated by the PTO. This is clearly an area in which the private sector can help to solve a known weakness in the patent system. Several private sector entities have already committed to participate in this project. For example, The Clearing House, a financial services industry association, has pledged to develop educational materials and offer seminars to examiners in the area of financial infrastructure technology, and Verizon, which has already begun to train PTO examiners in the areas of network architecture and communications, will continue these efforts.
While commitments such as this are a welcome start, important details will likely need to be worked out as this program grows. Though examiners work in specific art units, they must still cover a wide range of products and technologies. In complex and fast-moving fields, one could easily see some examiners spending virtually all of their working hours being trained. Moreover, one can envision competition among businesses to “educate” examiners regarding their competitors’ product lines without providing a balanced or realistic survey of the field. Accordingly, the PTO will need to exercise some oversight regarding both the scope and content of this program, and to ensure that whatever training is provided is likely to enhance the patent examination system, rather than burden or bias it.
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Crowdsourcing Non-Patent Prior Art – Perhaps the most interesting and ambitious announcement made last week was the Administration’s call for the private sector to disclose and share prior art. The problem of non-patent prior art is a real but difficult one. It goes without saying that patent examiners examining an application should seek prior art relevant to the claimed invention from whatever sources are available. Traditionally, examiners have focused primarily on prior art contained in other patents and patent applications. While patents and patent applications are admittedly easy to search, this technique is sure to miss relevant art that has not been included in patent applications. In fast-moving industries such as software, it is likely that most of the relevant art is contained in “non-patent literature” (NPL). Yet NPL is notoriously difficult to search, particularly outside of the biosciences in which scientific publications are regularly reviewed and cited by examiners. In the software arts, NPL could include old product brochures, documentation manuals, technical drawings, and obsolete code. Even finding, let alone analyzing, prior art from this diffuse and heterogeneous mass of information presents a daunting challenge.
The problem of NPL has been understood for some time, and “crowdsourcing” of prior art searching has long been viewed as a potential solution. In 2007, the PTO announced its pilot “Peer to Patent” program, which was intended to recruit members of the public to submit prior art relevant to applications under review, initially in the areas of software and business methods. The program was funded by a number of large companies and received a reasonable amount of press coverage, both favorable and unfavorable. The initial pilot program ran from 2007-09, with a second pilot from 2010-11. Perhaps it was the enactment of the America Invents Act in 2011, with its battery of new pre-grant challenge mechanisms, or the difficulty in finding qualified volunteer peer reviewers in highly specific technology categories, but the Peer-to-Patent project has quietly faded into oblivion.
The Administration’s current “crowdsourcing” approach is different, in that it calls directly on companies, the repositories of most NPL, to help. It is encouraging that a number of private firms have already answered the Administration’s call and pledged to make large quantities of previously non-public technical material available to the PTO. To date, pledges to this effect have been made by:
- The Clearing House (to provide the PTO with access to documents describing the national financial infrastructure),
- Microsoft (to provide PTO with access to more than 10 million archived Microsoft technical documents),
- SAS (to provide 38 years of user documentation and technical papers to IP.com, working in conjunction with the PTO), and
- Yahoo (to continue to share prior art relevant to its business).
The amount of data contained within the private coffers of the world’s technology companies is mind-boggling; and collecting, formatting and presenting this data in a cost-effective manner that is useful to patent examiners could prove to be a monumental task. Nevertheless, the effort must be undertaken if patents will continue to be issued in fast-moving technology fields. Google, the world’s largest search engine, has started down this path with its Prior Art Finder, an outgrowth of the popular Google Patent Search launched in 2006. The Administration’s leadership in this area is to be commended, and one can only hope that many more companies will follow those who have already pledged to assist with this vital project.
- Patent Pledges? – It is notable that both the Examiner Technology Training and the Crowdsourcing Prior Art programs announced last week rely heavily on voluntary engagement by the private sector. The Administration has called upon industry to take a leading role in addressing some of the problems that have emerged in the patent system. This approach is sensible, as the technological expertise necessary to evaluate patents in complex and rapidly evolving technical areas resides within the companies that create those technologies, not in the PTO. However, such calls to action are also risky. What if they are ignored, or too few companies heed the call? Governmental calls to action have been around since the Crusades and have recently sought to address social issues from healthy eating and blood diamonds to financial reform and climate change. Over the past few years, spurred by the increase in PAE litigation, among other things, companies have begun to make voluntary pledges relating to patents. These have included pledges not to assert patents, or not to seek injunctions, against standardized technologies and common technology platforms, to charge royalties that are fair, reasonable and non-discriminatory (FRAND), to refrain from transferring patents to PAEs, and a variety of other activities. As I have written elsewhere, these pledges are intended to assure the market that the pledgor’s patents will not be used to disrupt valuable social activity. The recent pledges made in response to the Administration’s call are of a slightly different variety. Rather than impose “negative” encumbrances on the pledgor’s patents or its ability to enforce them, they create “positive” obligations on the pledgors to contribute knowledge, technology and (presumably) trade secrets to the PTO and/or the public. These new positive patent pledges are an intriguing and potentially game-changing development, and it will be interesting to see how many additional companies elect to commit themselves in this manner. I oversee a project at American University that catalogs patent-related pledges made outside formal standards-setting organizations, and look forward to adding many new commitments from the private sector in response to the Administration’s latest call.
Patent Pro Bono/Pro Se Assistance – Another of the new initiatives announced last week relates to the allocation of “dedicated educational and practical” PTO resources to help pro se (unrepresented by counsel) patent applicants navigate their way through the patent application process. Presumably this means that better documentation, explanatory screens and improved help resources will be made available on the PTO web site, all of which would be useful additions. The Administration also called for private sector volunteers to offer increased pro bono (free) legal assistance to small inventors. While these initiatives are welcome, the vast majority of U.S. patents are filed by businesses that can comfortably afford patent counsel, and the Edisonian conception of the sole inventor has been show largely to be a myth. Thus, while politically appealing, it is not clear that these initiatives will have a meaningful impact on the market or the patent system overall.
One wonders, in fact, why the PTO’s pro bono program is limited to patent prosecution, a relatively inexpensive legal task in the grand scheme of things. Perhaps this program would be more useful, and more aligned with the Administration’s other initiatives, if the pro bono program made lawyers available to advise retailers, small businesses and non-profit organizations about how to respond to PAE patent demand letters. While the analytics and information provided through the new PTO patent litigation toolkit are a gold mine for academics and patent litigators, it is not clear that members of the lay public will be able to make effective use of them without professional legal assistance. The PTO’s pro bono program could nicely fill this gap and make the most of the electronic tools that have already been developed and deployed by the Administration.
Conclusion – There are problems with the U.S. patent system. Rather than avoiding them, the Administration has taken positive and productive steps toward addressing them. While the long-term benefits of some of these initiatives are uncertain, programs such as the PTO’s solicitation of non-patent prior art and enhanced technical training for patent examiners could yield meaningful benefits for the system. The companies that have already pledged their support of these initiatives deserve to be commended. Let’s hope that both the Administration and the private sector follow-through on these promising first steps.
En Banc Federal Circuit Confirms Cybor: Claim Construction Reviewed De Novo on Appeal
By Dennis Crouch
Lighting Ballast Control LLC v. Philips Electronics N.A. Corp. (Fed. Cir. 2014) (En banc)
In a long awaited decision, an en banc Federal Circuit has reconfirmed the longstanding rule that claim construction is an issue of law reviewed de novo on appeal.
Writing for the majority, Judge Newman summarizes:
For the reasons we shall discuss, we apply the principles of stare decisis, and confirm the Cybor standard of de novo review of claim construction, whereby the scope of the patent grant is reviewed as a matter of law. After fifteen years of experience with Cybor, we conclude that the court should retain plenary review of claim construction, thereby providing national uniformity, consistency, and finality to the meaning and scope of patent claims. The totality of experience has confirmed that Cybor is an effective implementation of Markman II, and that the criteria for departure from stare decisis are not met.
Because of the importance of this issue and the divided court, Supreme Court review is fairly likely. The decision also guarantees that the Court will continue to be the central patent law authority.
The majority decision filed by Judge Newman was joined by five other judges (Judges Lourie, Dyk, Prost, Moore, and Taranto). Judge Lourie wrote a concurring opinion providing “additional reasons” for confirming Cybor. Judge O’Malley filed a dissenting opinion that was joined by Chief Judge Rader and Judges Reyna and Wallach. The six-member opinion carried the day as majority because Judges Hughes and Chen chose not to participate. Even then, a 6-6 tie would have confirmed Cybor but without any clear further precedent.
The majority opinion takes a Socratic approach of poking holes in every argument for changing the rule and in the end concluded that “deferential review does not promise either improved consistency or increased clarity.” And, without some clear reason to change, the default in law should be stare decisis – follow longstanding precedent that, in this case, involves hundreds of appellate claim construction decisions over the past 15 years creating a large body of precedent. The majority writes:
We have been offered no argument of public policy, or changed circumstances, or unworkability or intolerability, or any other justification for changing the Cybor methodology and abandoning de novo review of claim construction. The proponents of overruling Cybor have not met the demanding standards of the doctrine of stare decisis. They have not shown that Cybor is inconsistent with any law or precedent, or that greater deference will produce any greater public or private benefit. We conclude that there is neither “grave necessity” nor “special justification” for departing from Cybor.
The court also walked through post-Cybor policymaking by Congress as well as Supreme Court decisions and found nothing that would undermine Cybor.
[W]e have reviewed the arguments for changing the Cybor procedure of de novo review of claim construction. First, we have looked for post- Cybor developments, whether from the Supreme Court, from Congress, or from this court, that may have undermined the reasoning of Cybor. None has been found, or brought to our attention. There has been no legislative adjustment of the Cybor procedure, despite extensive patent-related legislative activity during the entire period of Cybor‘s existence.
In the end, the Court did not address the particular facts of the case – whether the “voltage source means” should be interpreted under §112p6. The district court said no but the original appellate panel said yes (on de novo review). That appellate panel will carry the day here and the plaintiff loses because the specification did not disclose sufficient structural embodiments of the claimed voltage source means.
White House Fact Sheet on Patent Reform
THE WHITE HOUSE
Office of the Press Secretary
FOR IMMEDIATE RELEASE
February 20, 2014
Year of Action: Making Progress Through Executive Action
In his State of the Union address, President Obama set an ambitious agenda to make 2014 a year of action. As part of that commitment, and recognizing that innovation is the lifeblood of our economy, the Administration today is announcing major progress on a series of initiatives designed to combat patent trolls and further strengthen our patent system and foster innovation; issuing new executive actions to build on these efforts; and renewing its call on Congress to finish the job by passing common-sense patent reform legislation.
Since last June, when the White House pledged to protect innovators from frivolous litigation, the Administration has been working to implement a series of executive actions to improve the U.S. patent system. Today the White House is announcing delivery on these commitments:
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Promoting Transparency — The United States Patent and Trademark Office (USPTO) recently published a draft rule to ensure patent owners accurately record and regularly update ownership information when they are involved in proceedings before the USPTO. This effort is aimed at improving the quality of patents issued, enhancing competition, facilitating technology transfer, and making it harder to hide abusive litigation tactics behind shell companies. After receiving input from the public, the USPTO aims to issue a final rule in the coming months.
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Making Patents Clear — The USPTO has developed and implemented a training program to help its examiners rigorously examine so-called “functional claims” to ensure claims are clear and can be consistently enforced. In the coming weeks, the USPTO will launch a pilot program that uses glossaries in patent specifications to promote patent clarity.
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Protecting Main Street from Abuse — To help ensure consumers and main-street retailers know their rights before entering into costly litigation or settlements, the USPTO is today launching an online toolkit aimed at empowering consumers with answers to common questions, information about patent suits, and details about specific patents. The toolkit will include information and links to services and websites that can help consumers understand the risks and benefits of litigation or settlement, and pick their best course of action.
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Expanding Outreach & Focused Study — Today, the USPTO is announcing the expansion of its Edison Scholars Program, which brings distinguished academic experts to the USPTO to develop and make available to the public more robust data and research on issues bearing on abusive litigation. USPTO will also continue to expand its engagement with stakeholders—including patent holders, researchers, advocates, and others—and build on the successful roundtables the agency hosted across the country over the past year on high-tech patent issues.
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Strengthening Exclusion Order Enforcement — To make the enforcement of exclusion orders issued by the International Trade Commission more transparent, effective, and efficient, the Office of the U.S. Intellectual Property Enforcement Coordinator launched an interagency review and will, in the coming months, deliver its recommendations on refining that process.
Innovation For Global Development — In addition, today, the Administration is committing to sustain, going forward, the Patents for Humanity Program, which creates business incentives for using patented technology to address global humanitarian needs.
Today, the White House is also announcing three new executive actions to encourage innovation and further strengthen the quality and accessibility of the patent system:
Crowdsourcing Prior Art — To help ensure that U.S. patents are of the highest quality, the USPTO is announcing a new initiative focused on expanding ways for companies, experts, and the general public to help patent examiners, holders, and applicants find relevant “prior art”—that is, the technical information patent examiners need to make a determination of whether an invention is truly novel.
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More Robust Technical Training — The USPTO is expanding its Patent Examiner Technical Training Program to help patent examiners keep up with fast-changing technological fields by making it easier for technologists, engineers, and other experts to provide relevant technical training and guidance to patent examiners. To make the most of these changes, the Administration is calling on innovators to volunteer their time and expertise to help ensure that USPTO training is robust and reflects the state of the art.
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Pro Bono and Pro Se Assistance — To increase the accessibility of the patent system, the USPTO will dedicate educational and practical resources to assist inventors who lack legal representation, appoint a full-time Pro Bono Coordinator, and help expand the existing America Invents Act pro bono program to cover all 50 states. The Administration is calling on members of the patent bar to participate in the program.
Renewing the Call for Meaningful Legislation to Combat Patent Trolls: In his State of the Union address President Obama renewed his call for Congress to pass patent reform legislation, which enjoys strong bipartisan support. The Administration looks forward to continuing to work with Congress to deliver focused and effective patent reform legislation to the American people in the coming months.
Year of Action: Making Progress Through Executive Action
Further Detail on Answering the President’s Call to
Improve our Patent System and Foster Innovation, not Litigation
A strong intellectual property system supports and enables the innovation that is the lifeblood of our economy. Our patent system is enshrined in our Constitution to encourage invention and to reward Americans for their hard work and risk-taking. But in recent years, that system has also seen the growth of abusive patent litigation designed not to reward innovation but to threaten inventors and companies based on questionable claims. That’s why President Obama has made it a priority to reform that system to ensure it encourages innovation and invention and provides the right incentives to drive investment, inspire and reward creativity, and spur job creation.
In 2011, the President signed the Leahy-Smith America Invents Act (AIA), a landmark piece of legislation designed to help make our patent system more efficient and responsive to innovators. The United States Patent and Trademark Office (USPTO) has now successfully implemented that law, enabling many reforms that are leading to higher patent quality, including post-grant patent review proceedings at the USPTO that offer faster and less expensive alternatives to litigation in Federal courts. Yet many innovators have continued to face challenges by patent-assertion entities or patent “trolls”– entities that have, over the past decade, increasingly used patents to extract settlements based on the high cost of defense.
Building upon the strong foundation of AIA reforms, on February 14, 2013, President Obama stated that “our efforts at patent reform only went about halfway to where we need to go. What we need to do is pull together additional stakeholders and see if we can build some additional consensus on smarter patent laws.”
On June 4, 2013, the White House set forth a series of executive actions and legislative recommendations designed to protect innovators from frivolous litigation and ensure high-quality patents.
During his State of the Union address in January 2014, the President renewed his called for passage of a patent reform bill that would allow businesses to stay focused on innovation, not litigation. To complement this legislative effort, today the White House is highlighting progress to date on the previously announced executive actions, and is announcing three new actions to further respond to the President’s call-to-action to level the playing field for all innovators and increase patent quality.
Progress on the June 2013 Executive Actions
1. Transparency in Patent Ownership. Patent trolls often set up shell companies to hide their activities. This tactic prevents those facing litigation from knowing the full extent of the patents that their adversaries hold when negotiating settlements; keeps innovators from being able to find each other; and undermines companies’ understanding of the competitive landscape. That’s why the USPTO recently proposed a new rule, informed by extensive stakeholder input, requiring the reporting of people or companies with ownership interests in a patent or application, called the “attributable owners.” Attributable owner information will provide the public with more complete information about the competitive landscape; facilitate more efficient technology transfer by making patent ownership information more readily available; and reduce abusive patent litigation by helping the public better defend itself against meritless assertions. The USPTO is currently soliciting and accepting written comments from the public here, and hosting stakeholder engagement events to solicit additional valuable feedback.
2. Enhancing Claim Clarity. The AIA reforms made important improvements to the patent examination process and overall patent quality, but stakeholders remained concerned about patents with overly broad claims in certain high-tech fields. In response, the USPTO has developed an extensive, multi-phased training program for all examiners and judges focused on evaluating functional claims and improving examination consistency and the clarity of the examination record. The agency has also conducted extensive stakeholder outreach and engagement to solicit ideas and collect feedback, experiences, and insights on improving patent quality. In the coming weeks the USPTO will launch a pilot program aimed at encouraging the use of clearer language within patent claims through the use of glossaries in patent specifications.
3. Empowering Consumers and Main Street Retailers. Unsuspecting retailers, consumers, small businesses, and other users of products containing patented technology have increasingly found themselves targeted by letters alleging patent infringement and demanding money—even in instances where a small business is using an off-the-shelf product. To help level the playing field and ensure individuals and businesses know their rights and are aware of available resources before entering into costly litigation or settlements, the USPTO is launching today a robust online toolkit of information, available at www.uspto.gov or www.uspto.gov/patentlitigation. This new portal brings together for the first time in one place a wide-ranging, powerful set of patent-relevant tools and information, including answers to commonly asked questions about patent-demand letters and a catalog of third-party sites that users can access to find out, for example, whether the patent has ever been asserted in litigation.
4. Expanding Outreach and Focused Study. Since last June’s announcement, the USPTO has significantly increased its already extensive public outreach efforts to more actively engage key stakeholders in the high-tech community, trade and bar associations, business and university groups, and advocacy organizations, resulting in a wealth of valuable input on patent clarity, transparency, and high-tech patents. The USPTO has also expanded its Thomas Alva Edison Visiting Scholars Program and has now selected three new scholars who will engage in focused study of various aspects of our patent system, to provide insights on how to further reduce unnecessary litigation and improve the quality of issued patents. This empirical research will help the Administration better understand our current patent system and better inform the development of new ideas and consensus around improvements to patent policies and laws.
5. Strengthening Exclusion Order Enforcement. When patent-infringing products are banned from importation to the United States, U.S. Customs and Border Protection and the U.S. International Trade Commission are responsible for the application of exclusion orders and determining whether imported products fall within the scope of an order. Implementing these orders presents unique challenges, particularly when a technologically sophisticated product has been redesigned to avoid the order. To address this growing challenge, the U.S. Intellectual Property Enforcement Coordinator has launched a review of the processes and standards used during exclusion order enforcement activities and, in the coming months, will issue recommendations and guidance to executive agencies to improve the efficacy, transparency, and efficiency of exclusion order enforcement activities.
In addition, the Administration is today committing to sustain the Patents for Humanity Program, which aims to increase the accessibility of the patent system for innovators who are delivering game-changing technologies to address global humanitarian needs. Past award recipients have used their patent portfolios to decrease the price of HIV and malaria drugs, develop more nutritious food sources, bring solar energy to off-grid villages, combat toxic counterfeit drugs, and purify billions of liters of water using inexpensive chemical packets.
New Executive Actions Announced Today
1. Crowdsourcing Prior Art. To determine whether an invention is novel, examiners in the USPTO must find and apply information about the state-of-the-art in the relevant technology. However, documents reflecting this state of knowledge can sometimes be difficult to find and incorporate into the patent-examination process. Today, the USPTO is announcing that it is exploring a series of measures to make it easier for the public to provide information about relevant prior art in patent applications, including by refining its third-party submission program, exploring other ways for the public to submit prior art to the agency, and updating its guidance and training to empower examiners to more effectively use crowd-sourced prior art. This effort will focus on driving valuable contributions to the patent process and to patent quality, strengthening a process that is vital to innovation and economic growth. The USPTO will seek public input on these efforts, as the Administration calls on the public and expert stakeholders to partner with us to encourage the disclosure and sharing of prior art, particularly hard-to-find references.
2. More Robust Technical Training and Expertise. Patent examiners must be skilled in determining whether a particular application should be granted based upon the state of the art. Building upon its existing “Patent Examiner Technical Training Program,” the USPTO will take steps to make it easier for technologists and engineers from industry and academia to provide relevant, technical training and expertise to patent examiners regarding the state of the art. The Administration is calling upon volunteers to assist in this training effort and ensure that training is systematic, robust, and covers all disciplines. In addition the USPTO is making permanent each of its four regional satellite offices, which will make it even easier for stakeholders to contribute in-person or virtually from these locations nationwide.
3. Patent Pro Bono and Pro Se Assistance. Due to a lack of resources, independent inventors and small businesses sometimes struggle with how to file and prosecute a patent application to protect their invention. The USPTO will be providing dedicated educational and practical resources to those who lack legal representation (i.e., pro se applicants) and will work with the AIA Pro Bono Advisory Council—and through a newly appointed full-time Pro Bono Coordinator—to expand the existing pro bono program established under the AIA to cover all 50 states. The Administration is calling on members of the patent bar to participate in the program.
Renewing the President’s State of the Union Call for Legislation to Combat Patent Trolling
The Administration stands ready to work with Congress on these issues, which are crucial to our economy, American jobs, and the Nation’s engine of innovation. Building upon the President’s State of the Union remarks, the Administration urges Congress to pass a bipartisan law designed to curtail abusive patent litigation and improve transparency in the patent system. We are encouraged by Congress’s strong, bipartisan attention to these issues and look forward to working with the Congress and stakeholders to bring this important bipartisan legislation to the President’s desk this year.
Federal Circuit to PTAB: New Factual Findings Required Following Amended Claim Construction
By Dennis Crouch
Tempo Lighting, Inc., v. Tivoli LLC (Fed. Cir. 2013)
The rules of patent trial proceedings continue to develop. One issue that is continually shocking for parties are the short and hard deadlines in the various post-issuance review proceedings and the strong pushback against parties who look to shift their position during the proceedings. Folks are learning that the first-punch in the post grant review proceedings should be at full power and fully thought through. Here, the Federal Circuit pulls the PTAB back somewhat from that approach and finds that the Board improperly found that Tempo had waived certain arguments during the proceedings.
The case itself stems from an inter partes reexamination but is relevant to the new post-issuance review proceedings. The case may also be relevant and important for patent applicants involved in ex parte appeals because of what appears to be an increase Board decisions that implicitly turn on new grounds of rejection offered by the Board.
Tivoli first sued Tempo for patent infringement in 2004 and Tempo responded with the inter partes reexamination request. The district court was then stayed (and has been stayed up to now). Tivoli’s patent at issue here covers a reflective strip that is configured to mount on the “nose” of a stair-step. U.S. Patent No. 6,554,446. Both parties compete in the industry selling lighting products.
As the reexamination plodded along, the Examiner received input from each party and closed prosecution in 2009. The Board then heard the appeal in 2010 and finally issued a decision in 2012. In that final decision, the Board rejected the Examiner’s construction of the claim term “inert to light” but then relied upon the Examiner’s determination that the primary prior art reference lacks the “inert to light” limitation. In the rehearing, Tempo argued that, under the new construction, that the primary references now teach the inert to light limitation. However, the Board procedurally rejected that argument – finding that it was an attempt to argue for an alternative ground for unpatentability being brought in the rehearing.
On appeal, the Federal Circuit found it improper for the Board to directly rely upon the examiner’s factual finding regarding whether the prior art taught the inert to light limitation after it had modified the claim construction. “On remand, the PTO will have the opportunity to make new factual findings under the proper construction.”
A major difference here from traditional ex parte examination is that the reexamination examiner here expressly determined the claim construction. In the ordinary patent application situation, examiners do not spell-out their construction. At times, it may be advantageous to push for an explicit claim construction in the process of setting-up appeal.
Power Grab?: USPTO Says No Appeal (CW v. WARF Part V)
By Dennis Crouch
Consumer Watchdog v. WARF, Reexam No. 95/000,154 (Fed. Cir. 2014)
Several years ago Consumer Watchdog (previously known as the Foundation for Taxpayer and Consumer Rights) filed an inter partes reexamination proceeding against a human-stem-cell patent owned by the Wisconsin quasi-government entity WARF. CW does not work with the technology, but filed the reexamination request as part of its public service mission.
In the reexamination, the USPTO confirmed that the patent was properly issued and CW subsequently asserted its statutory right to appeal. See 35 U.S.C. § 141.
Before delving into the appeal’s substance, the Federal Circuit halted progress on the case to particularly probe the question of whether the court has jurisdiction over the dispute – i.e., whether there exists a constitutionally sufficient “case or controversy” between the parties. At base, the question is whether any CW can claim the “injury in fact” that serves as a “hard floor of Article III jurisdiction.” See Summers v. Earth Island Institute, 555 U.S. 488, 497 (2009).
The Federal Circuit requested briefing from the parties as well as the USPTO and those have now been filed. Most importantly, the US Government (USPTO/DOJ joint brief) has sided with WARF with a conclusion that it would be unconstitutional for the Federal Circuit to fulfill the statutory promise (of a right to appeal) by hearing CWs appeal.
Potential Impact: Although the case is focused on CW as a non-profit, the potential outcome here is important for several reasons. Obviously, the ruling would disenfranchise public interest groups, not-for-profits, and industry organizations and instead provide full litigation rights primarily to parties with substantial likelihood of reaching collusive settlements that leaves would-be invalid patents intact. In an email to me, Dan Ravicher (CWs counsel) wrote:
Without a full and fair right to challenge patents at the PTO, including an equal right to appeal, the public interest community will have no avenue to rid the system of bogus patents, and we will be 100% reliant on commercial entities, which often do not have the same incentive to prove patents are invalid, as they, too, have bogus patents themselves.
Although somewhat hyperbolic, Ravicher’s comment raises real policy concerns.
At a more general level, the issue here represents an important shot in the battle for power and authority in the setting of patent law policy that is ongoing between the Patent Office and the Judiciary. The USPTO is newly emboldened with unreviewable authorities granted by the AIA; likely generous Chevron deference for those decisions that are reviewable; and has pushed for a statutory amendment that would eliminate the ability of a patent seeker to file a civil action to receive a patent. Adding to that list, this case appears to be headed in the direction of yet another non-appealable agency activity.
Mid-Level Injury: Although the US Government argues that CW lacks injury-in-fact, it also argues that the injury requirement in this situation is categorically less than what would be required for a declaratory judgment action in Federal Court. The US Government writes:
Organizations such as Consumer Watchdog, who cannot claim any concrete and particularized interest in the validity of the challenged patent, will normally lack standing to appeal. [H]owever, it does not necessarily follow that the same Article III inquiry that governs declaratory judgment relief in the district courts — under which judicial relief is normally available unless the declaratory plaintiff can show that the patentee has asserted infringement, threatened litigation, or otherwise affirmatively acted to impair the declaratory plaintiff’s freedom in the marketplace, see, e.g., Prasco LLC v. Medicis Pharmaceutical Corp., 537 F.3d 1329 (Fed. Cir. 2008) — will also govern appeals from PTO decisions in post-grant proceedings. . . .
Indeed, Congress enacted the AIA’s expanded procedures for post-grant patentability challenges partly in response to concerns that, under prior law, it was not reasonably possible for a company weighing whether to enter a particular market to test the validity of a potential competitor’s patent without first incurring the substantial costs and risks of developing a suitable — and potentially infringing — product.
. . . . Although such an interest would normally lack the immediacy required for declaratory judgment jurisdiction, the Supreme Court has explained that, in some circumstances, “[t]he person who has been accorded a procedural right to protect his concrete interests can assert that right without meeting all the normal standards for redressability and immediacy.” Lujan; Massachusetts v. EPA. Similarly, while a prospective interest in invalidating a competitor’s patent might normally implicate prudential considerations of fitness for judicial review, an explicit congressional authorization to appeal a particular category of legal determinations “eliminates any prudential standing limitations.” Raines. For these reasons, the Court could conclude in an appropriate case that the Article III inquiry governing direct appeals from the PTO differs from the inquiry that governs declaratory judgment actions in district court.
In the prior arguments, Dan Ravicher (for CW) raised an analogy to FOIA where the Supreme Court has allowed a seemingly noninterested third party to bring court challenges. The US Government brief argues that those cases as well as related fair housing cases are different and distinguishable because Congress created “substantive legal rights that entitle a party to receive concrete and individualized benefits — access to specific government records, for example, or freedom from racial discrimination in housing. A wrongful denial of those rights thus inflicts on the plaintiff a concrete and particularized injury-in-fact.”
In its responsive brief, CW argues that the statute creating the right of judicial review to requesters of agency action provides standing even if the requesters lack “statute-independent injury.” On that point, CW writes: “The government does not reference a single case in which a denied requester who cited a statute granting judicial review to such denied requesters needed to prove injury to show standing.” For its side, CW references FOIA cases as well as FEC and prior inter partes review cases that all fit this model.
Public interest groups such as PubPat, EFF, and others have shown their strength in the intellectual property law sphere and this is an important case from that regard. The importance is such that if the Federal Circuit sides against CW here to deny standing, I suspect that the Supreme Court will be ready to hear the case.
Briefs:
Utility Patents Granted in 2013: A New Record (For the Fourth Consecutive Year)
By Dennis Crouch
Despite being held-back by the Federal spending sequester and a focus on implementing the first-to-invent and post-issuance review procedures of the America Invents Act, the US Patent Office has also awarded more patents than ever. The preliminary figure for 2013 is 277,861 patents issued, which represents a 10% jump over last-year’s record. See USPTO Patent Grants: Another Record Year (3rd in a Row). The average pendency of utility applications (application filing to issuance or abandonment) has been slowly decreasing over the past several years, but has hovered around 37-months for the past six months.
Institut Pasteur: Federal Circuit Takes Hard Look at USPTO Board Factual Conclusions
By Dennis Crouch
Institut Pasteur v. Focarino and Precision BioSciences, Reexam No. 95,000,443 (Fed. Cir. 2013)
The French non-profit Institut Pasteur holds several patents covering site-directed insertion of genes into eukaryotic chromosomes. See U.S. Patent Nos. 7,309,605, 6,610,545, and 6,833,252. Basically, Pasteur discovered that a set of naturally occurring enzymes that could cleave chromosomal DNA at particular recognition sites and also discovered that cells will naturally repair the cleavage through homologous recombination even when an additional gene sequence is added, so long as a proper recombinatory DNA template is also added. It turns out that this sequence of events occurs in mitochondrial DNA but Pasteur was able to make it work on chromosomal DNA as well. The patents all relate to creating the enzymes and method of using those enzymes to insert DNA.
This is old stuff and all happened in the early 1990’s The three patents all expired in 2012 while the case was pending appeal to the Federal Circuit, but companies may still be on the hook for past damages for what has become a basic tool of genetic engineering.
In 2009, Precision BioSciences filed for inter partes reexamination of the three patents. The examiner found the claimed invention obvious and that decision was affirmed by the USPTO’s administrative patent appeal board. On appeal, the Federal Circuit has come-out with three interesting rulings:
Hard Deadline on Amendments: First, for the ‘605 patent, the claims were amended during the reexamination (and prior to the patent expiration date). For those claims, the court dismissed Pasteur’s appeal as moot because “[substantially] amended claims cannot be entered now that the patent has expired.” This result is obviously important for gamesmanship because it rewards delay tactics on the part of would-be infringers and also encourages patentees to work toward concluding any post-grant reviews.
No Substantial Evidence: Second, the Federal Circuit determined that the Board lacked Substantial Evidence for its factual conclusions that led to its obviousness decision of the challenged claims of the ‘545 patent. The question of obviousness is a matter of law predicated upon a set of factual conclusions. A factual conclusion must itself be based upon evidence presented to the Court. Here, after reviewing the two key prior art references (the evidence), the USPTO Board concluded that the prior art showed that the claimed enzyme “cleaved yeast chromosomal DNA when expressed in yeast cells.” On appeal, the Federal Circuit rejected that factual conclusion after failing to find such a disclosure in either reference. One factor making the Federal Circuit’s decision easier was that the Board based its conclusion upon the text of the prior art references rather than relying upon factual or expert testimony that could have offered stronger conclusory evidence.
Motivation to Combine: Finally, with regard to the ‘252 patent, the Federal Circuit found that the Board had failed to identify the “motivation, if any, a skilled artisan at the relevant time would have had to pursue the claimed invention.”
Opinion by Judge Taranto
Constitutional Challenge to Administrative Patent Review – Part IV
By Dennis Crouch
Although the parties are ostensibly focused on whether WARF’s “replicating in vitro cell culture of human embryonic stem cells” constitutes patentable subject matter, the Federal Circuit is instead directing its attention to the issue of whether the patent challenger – Consumer Watchdog – has standing to file its patent appeal.
Consumer Watchdog v. Wisconsin Alumni Research Foundation (WARF) (Fed. Cir. 2013)
- Independent Justification for Appellate Standing over Inter Partes Reviews – Part I
- Independent Justification for Appellate Standing over Administrative Patent Challenges – Part II
- Constitutional Challenge to Administrative Patent Challenges – Part III
The Patent Act allows any party to file a post-grant administrative challenge and, if “dissatisfied” the results of the change, to appeal an adverse PTO ruling. Despite the statutory promise of appeal-rights, in Part I, I raised a concern as to whether a third-party challenger who loses at the PTO would necessarily have Article III standing. Within days, of that posting, the Federal Circuit ordered that Consumer Watchdog and WARF brief the issue of whether Consumer Watchdog has standing under Article III.
In Monday’s oral arguments, the court focused entirely on the issue of standing and would hear no arguments regarding the substantive appeal. Dan Ravicher (for Consumer Watchdog) and Kara Stoll (for WARF) both handled themselves very well, but Ravicher noted that the PTO should be at the table since Consumer Watchdog’s complaint is with the PTO for wrongfully issuing the patent and then wrongfully confirming patentability in the reexamination. Chief Judge Rader, Judge Prost and newly enrobed Judge Hughes participated fully in the questioning, although each of indicated some difficulty buying into Ravicher’s argument that Congress created a potential injury-in-fact with its “dissatisfied” language and that the injury was realized when the PTO rejected Watchdog’s case.
However, following Ravicher’s suggestion, the Court has now requested that “the United States Patent and Trademark Office and the United States” provide briefs in the case and particularly brief “whether Consumer Watchdog has standing to pursue its appeal to this court.” Recognizing the recent tension in briefing between the USPTO and the DOJ, the court wrote that “The PTO and the United States may submit a joint brief, if they so choose.”
Although the court does not explicitly welcome other amicus briefs, I am confident that several will be forthcoming. Briefs are due January 6, 2014.
Constitutional Challenge to Administrative Patent Challenges – Part III
By Dennis Crouch
Consumer Watchdog v. Wisconsin Alumni Research Foundation (WARF) (Fed. Cir. 2013)
A major limitation on judicial power comes from the doctrine of standing. A U.S. court has no power to hear a dispute between parties unless the plaintiff has or imminently will suffer injury-in-fact caused by the challenged action of the defendant that is redressable by a favorable court decision. This limitation has been derived from Article III of the U.S. Constitution that states "The Judicial Power shall extend to all Cases . . .[and] to Controversies . . ." To be clear, this limitation on power is placed on Article III courts at the district, appellate, and supreme court level. However, the limitation has not been applied to adjudicative processes that take place within administrative agencies since the government's authority to perform those activities is not seated in Article III. The conflicting approach to standing between these two adjudicative regimes regularly comes into conflict when parties appeal adverse agency decisions to an Article III court. The general rule for resolving this conflict is Constitutional supremacy – i.e., an Article III court cannot hear a case unless the standing requirement is met.
In the patent world, this issue is most focused in the area of post-issuance administrative patent challenges, particularly including inter partes review, post-grant review, covered-business-method review, and inter partes reexamination. In those regimes, any third party can administratively challenge a patent. Under the statute, the third-party then has a right to appeal an adverse decision to the Court of Appeals for the Federal Circuit. One question on appeal in the Consumer Watchdog case is whether there is standing for the appeal. Here, Consumer Watchdog is a public interest group that has not claimed any direct impact due to the WARF stem-cell patent, but certainly had standing to file its inter partes reexamination. I discussed this issue in some detail here:
- Independent Justification for Appellate Standing over Inter Partes Reviews
- Independent Justification for Appellate Standing over Administrative Patent Challenges – Part II
The parties have now briefed the issue of standing and the court holds oral arguments on Monday, December 2.
Consumer Watchdog's brief does a nice job of drawing a parallel between the post-issuance challenges and Freedom-of-Information-Act (FOIA) requests. In each case, the relevant statute has no standing requirement but authorizes appeal to Federal Courts.
The Supreme Court has described FOIA as a "judicially enforceable public right" (EPA v. Mink, 410 U.S. 73, 80 (1973)) and made clear that no injury is required of a person who seeks to enforce that right. NLRB v. Robbins Tire & Rubber Co., 437 U.S. 214, 221 (1978).
The essential idea here that the statute goes a long way toward creating standing by (1) creating a right to petition and then (2) granting a right to appeal to unsuccessful petitioners. And then, the injury-in-fact or "concrete injury" is completed at least when the PTO finds against the petitioner. At that point, the only party with a right of appeal is the petitioner. This particularization before getting to court helps to distinguish the present case from the leading Supreme Court case of Lujan where a statute provided that "any person" could file suit in federal court.
Idea of a patent challenge as a "judicially enforceable public right" also has precedential support. See Lear v. Adkins, 395 U.S. 653 (1969)
Consumer Watchdog also makes an important point here, that the PTO should be a party to the appeal and that the Federal Circuit should at least invite briefing from the US Government on the issue of standing.
For its part WARF relies heavily on Lujan:
To satisfy Article III standing, Watchdog, a nonprofit taxpayer and consumer-rights organization, must establish an injury in fact—i.e., an actual and imminent, concrete and particularized invasion of a legally protected interest—caused by WARF. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). But Watchdog does not and has not claimed to make, use, or sell the patented invention; has not and could not be threatened with suit; and has not named another real party in interest, either in this appeal or before the PTO. Watchdog therefore cannot establish standing, and Watchdog's appeal should be dismissed.
The result then is that WARF here is inherently arguing that the statute providing for a right to appeal is unconstitutionally broad. The question then is the extent that this crumbles the regime even further. [Updated to clarify that WARF does not explicitly argue the statute is unconstitutional.]
Independent Justification for Appellate Standing over Inter Partes Reviews
By Dennis Crouch
The recent Supreme Court decision in Already v. Nike revolves around the question of when a trademark-challenger has declaratory judgment standing to challenge a mark's validity. That particular case revolved around the impact of a covenant-not-to-sue. However, at oral arguments, Justice Kennedy turned his attention to administrative challenges before the TTAB (the trademark-equivalent of the PTAB) and asked whether a challenger who loses an opposition through that administrative body would have standing to ask the Federal Circuit to review the decision. Now, the statute is clear that any party to an opposition has a right to appeal to the Federal Circuit. 15 U.S.C. §1071. Justice Kennedy's question, however, focused on whether the case and controversy requirements of the constitution allows an Article III court to hear the case absent a stronger showing of conflict between the parties. Nike's counsel (Tom Goldstein) surprisingly answered (seemingly against his interest in this case) that Article III standing for the appellate court would not be satisfied simply by virtue of being involved with the trademark opposition.
JUSTICE KENNEDY: Is the standing burden any less after there is a — an administrative adjudication and you go to court for judicial review?
MR. GOLDSTEIN: … We've looked at the cases. We think that it's a point in their favor, Justice Kennedy, that while you can go to the TTAB, they wouldn't be able to appeal to an Article III court. I think that's a point in their favor.
The point here is that, (1) an administrative agency (such as the PTO) can be empowered (under the Constitution) to decide cases between two parties without any showing of injury or standing by the petitioner. However, (2) if that administrative decision is appealed to an Article III court (such as the Federal Circuit), case must satisfy the ripe controversy requirements of the Constitution. At the Already oral arguments, the attorney for the US Government (Ms. Anders) attempted to cut-through some of this by arguing that, in some circumstances an adverse decision from the PTO would create the injury-in-fact that is sufficient to establish Article III standing for appeal. See Megan La Belle, Summary of Oral Argument in Already, LLC d/b/a Yums v. Nike, Inc. (November 8, 2012).
Although not an intellectual property case, the D.C. Circuit very recently decided a somewhat parallel issue in the case of Americans for Safe Access v. DEA, 706 F.3d 438 (D.C. Cir. 2013). The appellants in that case include Safe Access, is a marijuana legalization advocacy group, and several individuals who petitioned the US Drug Enforcement Administration (DEA) to reschedule marijuana as a Schedule III, IV, or V drug rather than a Schedule I drug. In the subsequent appeal to the D.C. Circuit, the DEA argued that the appellants had no Article III standing. Although the D.C. Circuit found standing, it agreed with the DEA that Article III standing continues to be a requirement and that participating an administrative hearing is not sufficient to create standing. Here, standing was based upon the fact that one of the appellants (Michael Krawitz) was a disabled veteran eligible for medical care through the Department of Veterans Affairs but was denied marijuana treatment and instead had to purchase his own through the Oregon Medical Marijuana Program.
Similarly, in Sierra Club v. EPA, 292 F.3d 895, 899 (D.C. Cir. 2002), the D.C. Circuit wrote:
An administrative agency is not subject to Article III of the Constitution of the United States [and] so the petitioner would have had no need to establish its standing to participate in the proceedings before the agency. When the petitioner later seeks judicial review, the constitutional requirement that it have standing kicks in, and that requirement is the same, of course, as it would be if such review were conduct in the first instance by the district court.
The point here is simply, that standing is a requirement at the appellate level and an adversarial administrative process itself does not necessarily create standing.
Post-Grant and Inter Partes Review: All of this is relevant to the USPTO's new administrative review procedures that allow third-parties to initiate an administrative patentability review without any showing of standing or interest in the outcome of the review. Under the statute, the third-party requester also has a right to appeal an adverse PTO decision directly to the Court of Appeals for the Federal Circuit.
Manufacturing Appellate Standing through Administrative Review: Although the statute provides for a right-to-appeal, the balance of the law (as exemplified above) requires that the parties will also need to satisfy the Constitutional standing requirement. One basic legal question then will focus on whether the government's suggestion in Already is correct – that a case and controversy can be manufactured by the administrative review itself. Of course, following Already, a covenant-not-to-sue given by the patentee to the review requestor would eliminate any possibility of injury-in-fact. And, if the requestor is a public-interest organization (such as PubPat) such a covenant would be essentially cost-free for the patentee.
Manufacturing Declaratory Judgment Standing through Administrative Review: An important twist on this then is that – if the administrative review serves as a bootstrapping mechanism for generating Article III standing for challenging patentability on appeal, then it should also serve to generate Article III standing for challenging patent validity in a district court declaratory judgment action.
Now, the reality is that this issue will only arise in limited circumstances because the high-cost of post-grant reviews serves as a major filter to post grant and inter partes review filings. We can expect that it will be primarily parties with genuine controversies that request the reviews and only a much smaller percentage will be folks without a genuine controversy.
Thanks to James Dabney, Megan Labelle, Michael Burstein, and Erin Hawley for helping me to think through this issue. Of course, as you might expect, these folks don't entirely agree with my perspective.
Patent Reform 2013: Pending Bills
By Dennis Crouch
I wrote earlier about the pending Innovation Act (H.R. 3309) as proposed by a bipartisan set of Congressional leaders led by Rep. Bob Goodlatte. A host of other patent related bills are also pending in the House and Senate. The following is a rundown of some:
Manufacturing Innovation in America Act of 2013 (H.R. 2605)
Tax deduction carryover for patent development expenditures where profit is made years later.
Patent Abuse Reduction Act of 2013 (S. 1013) (Senators Cornyn and Grassley)
Smaller version of Goodlatte's Innovation Act that would focus on (1) raising pleading requirements (2) limiting discovery costs (especially pre-claim-construction); and (3) awarding attorney fees for the prevailing party.
End Anonymous Patents Act (H.R. 2024)
Requirement that the patent owner regularly update ownership information in the public record, including the "ultimate parent entity."
Patent Litigation and Innovation Act of 2013 (H.R. 2639)
Includes many provisions in parallel to the Goodlatte Innovation Act, but also includes a "sanction for abusive litigation" with mandatory review of each case by the court to ensure that no Rule 11(b) violations occurred.
MODDERN Cures Act of 2013 (H.R. 3091)
Extension of patent term for four to seven years for diagnostic medical tests. The program would be run through the FDA.
PATENT Jobs Act (H.R. 2582)
Proposed elimination of the PTO from the sequestration rules.
STOP Act (H.R. 2766)
Expanding the covered-business-method post-grant-review to also cover non-financial business methods and removal of the sunset provision. This is roughly parallel to the Patent Quality Improvement Act of 2013 (S. 866)
PACES Act (S. 1478) (Senator Cardin)
The Bill would remove certain patent infringement actions from Federal District Courts to the Court of Federal Claims. In particular, the bill focuses on causes of action against the unlicensed use patented inventions in the provision of 9-1-1, enhanced 9-1-1, or other emergency services. The CFC tends to favor the accused infringer both in terms of procedure and remedies available.
PARTS Act (S.780)
Act would prevent design patent owners from using those patents to prevent the use unauthorized spare-parts in the auto industry.
Medical Innovation Prize Fund Act (S. 627) (S. Sanders)
The bill would seemingly end drug patents with the text "no person shall have the right to exclusively manufacture, distribute, sell, or use a drug, a biological product, or a manufacturing process for a drug or biological product in interstate commerce."
Challenging the PTO’s NonAppealable Decisions to Grant or Deny Petitions for Inter Partes Review
By Dennis Crouch
In re MCM Portfolios LLC (Fed. Cir. 2013) (pending on petition for writ of mandamus)
In a recent post, I wrote briefly about statutory bar against appealing PTO decisions to grant or deny a request for inter partes review. In particular, 35 U.S.C. § 314(d) reads as follows: No Appeal.— The determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable. MCM has now filed a somewhat direct challenge to the substance of that provision with a writ of mandamus to the Federal Circuit. Of course, a petition for writ of mandamus is not an appeal but instead a request for a particular order. By filing a writ (rather than an "appeal"), MCM avoids the statutory bar against appeals and also avoids the parallel problem arising from the lack of statutory support for a direct appeal. As I explain below, MCM would also argue that the statutory bar on appeals would not apply in its context because its petition challenges a PTO decision under § 315(b), not § 314.
MCM's Patent No. 7,162,549 covers a mechanism for controlling Flash storage devices that uses firmware error correction. According to the patentee, many Digital Picture Frames make use of the invention in their mode-of-operation. On September 21, 2011, MCM served PanDigital with a complaint for infringing the patent. Later, on March 28, 2012, MCM also sued HP for infringement. Now, the two lawsuits are largely the same because HP picture frames are actually made by PanDigital. MCM has provided expert testimony that HP DPFs are actually the PanDigital frames that have simply been re-branded with HPs name (with PanDigital's permission). Furthering the connection, HP publicly identifies PanDigital as its supplier; directs its customers to PanDigital for customer support; and sells its HP products on Amazon with an indication that they are also PanDigital products. Later, on March 28, 2013 HP filed its request for inter partes review. The date is important because it is just shy of one year after the March 28, 2012 date when HP was sued for infringement. It is, however, well over a year after PanDigital was sued.
35 U.S.C. § 315(b) creates a one-year statute of limitations for filing a request for inter partes review. The deadline is triggered when "the petitioner, real party in interest, or privy of the petitioner is served with a complaint alleging infringement of the patent." Here, HP is the petitioners and filed within one-year of being served a complaint. However, as foreshadowed above, MCM argues that, for this action, PanDigital should also be considered a "privy of the petitioner."
In its decision, the PTAB sided with HP – writing that "[MCM] provides no persuasive evidence that HP could have exercised control over Pandigital's participation in the Texas Action. Thus, § 315(b) does not bar institution of inter partes review based on HP's Petition."
In the mandamus action, MCM argues that statute-of-limitations here is essentially a time-delayed res judicata action and, as such, it makes sense to interpret "privy" in the same manner as is done by the Supreme Court in those preclusion cases. In particular, MCM relies heavily on Taylor v. Sturgell, 553 U.S. 890 (2008) to argue that the grounds for binding related parties is much broader than the "control" grounds suggested by the USPTO. The PTO's approach consequently "systematically misconstrue[es] Taylor to allow late IPRs." Of note here, the PTO seemingly agrees that Taylor controls, but reads Taylor differently than MCM.
Because Mandamus is an extraordinary writ, the petitioner must do more than simply indicate that the Board was wrong in its decision. Rather, the petitioner must also convince that this is a case that needs to be heard immediately. MCM offers three key reasons:
- The Board's interpretation of §315(b) privity is incorrect as a matter of law.
- The systematic denial of Taylor's second ground for establishing privity justifies this Court's exercising its supervisory role to resolve important issues of first impression that involve alleged usurpation of power. Schlagenhauf v. Holder, 379 U.S. 104 (1964).
- The order of institution of an IPR cannot be remedied by a reversal on appeal.
Edward P. Heller is representing MCM in this appeal.
New Patent Legislation: Innovation Act of 2013
By Dennis Crouch
Representative Bob Goodlatte (R-VA) with the bipartisan support of ten other members of the House has introduced a new set of proposed patent reforms currently tiled the “Innovation Act.” (H.R. 3309) The proposed bill includes a number of provisions disparate provisions that would have a substantial impact on patent enforcement, procurement, and ownership. Some of the changes include severe increases in the requirements associated with filing a patent infringement complaint; Major statutory limitations on discovery; Elimination of the patent applicant option of filing a civil action to obtain a patent under Section 145; Forcing the USPTO to use standard claim construction (rather than BRI) in post-grant proceedings; Introduction of a new Double-Patenting rule; etc. the 50+ page bill is somewhat complex and, as Hal Wegner wrote, “[e]very organization impacted by patents must carefully study the Goodlatte bill for hidden features or suffer the consequences.” [Text][Sectional-Analysis]
Major Proposed Changes include the Following:
- A heightened pleading requirement for filing patent infringement claims, including a particularized statement “with detailed specificity” as to “how the terms in each [asserted] claim … correspond to the functionality of [each] accused instrumentality.” A brand-generic infringement action under § 271(e)(2) need not comply with the heightened pleading requirements. In addition, the Judicial Conference would be ordered to modify the form complaint for patent infringement to reflect the heightened pleading.
- An assumption that attorney-fees will be awarded to a prevailing party. The new provision would require an award of fees “unless the court finds that the position of the nonprevailing party . . . was substantially justified or that special circumstances make an award unjust.” On its face the provision is largely party-neutral with two caveats. First, the provision allows prevailing-accused-infringers to collect fees from non-plaintiffs who have a substantial interest in the patent-at-issue in the case. Second, the provision indicates that a patentee who extends a covenant-not-to-sue to the other party will be deemed a non-prevailing party and thus subject to attorney fees.
- Discovery will be limited until after a ruling on claim construction. In addition, the US Judicial Conference would be ordered to develop rules “to address the asymmetries in discovery burdens and costs in any civil action [relating to patents].”
- Transparency of Ownership. As a new required disclosure, the patentee in an infringement litigation must disclose anyone with a financial interest in either the patents at issue or the patentee and must additionally disclose the “ultimate parent entity” of the patentee. In the appropriate Federal Regulations, an ultimate parent entity is ethereally defined as “entity which is not controlled by any other entity.”
- Stay for Customer Suits. When both a manufacturer and its customer are sued for infringing the same patent, customer suit would be stayed so long as the customer agrees to be bound by the results of that case.
- IP in Bankruptcy. Under the new law, when a foreign company goes bankrupt, its trustee would no longer have the power to cancel licenses associated with US patent rights.
- No Civil Action to Challenge PTO. The new law would eliminated the civil action option found in 35 U.S.C. § 145. Patent applicants refused by the patentee would rather only have the option of appealing directly to the Federal Circuit.
- Shrinking Post-Grant-Review Estoppel. Under the current law, a post-grant review proceeding creates an estoppel against the petitioner later arguing in other forums “any ground that the petitioner raised or reasonably could have raised during that post-grant review.” 35 U.S.C. § 325(e). The new law would narrow that estoppel only to grounds actually raised.
- Patent Office Claim Construction. During Post-Grant Reviews and Inter Partes Reviews, the new law would require the patent office to use the ordinary “district court claim construction” law, that is, “construing each claim of the patent in accordance with the ordinary and customary meaning of such claim as understood by one of ordinary skill in the art and the prosecution history pertaining to the patent.”
- Double Patenting. There is some potential that the judicially created obviousness-type double patenting doctrine was eliminated by the recently implemented first-to-file regime. The new law would codify that doctrine.
- Covered Business Method Patent Review. The AIA creates an option for third parties to attack patents covering non-technological “covered business method” innovations through the use of a new post-grant review proceeding. The new law would somewhat restrict the scope of CBM review to only cover first-to-invent patents (rather than pre-AIA patents) as defined in Section 3(n)(1) of the AIA. The new law would also, inter alia, codify the USPTO’s somewhat broad definition of “financial product or service” described in the Versata case.
- Patent Term Adjustment. The new law would eliminate any patent term adjustment for “B delay” occurring after an applicant files a request for continued examination. This change would have a significant impact on the patent term of a large number of issued patents. The amendment proposes to be effective with regards to any “patent application or patent” pending on the Act’s date of enactment. (Note – it is unclear what it means for a “patent” to be “pending” in this context.)
- Federal Jurisdiction over Patent Cases. Although not a statutory change, the new law would make the “clarifying” statement that: “The Federal interest in preventing inconsistent final judicial determinations as to the legal force or effect of the claims in a patent presents a substantial Federal issue that is important to the Federal system as a whole.”
Interpreting the IPR Deadline; Conflicting PTAB Decisions; and Appealing Nonappealable Decisions
By Dennis Crouch
St. Jude Medical v. Volcano Corp. (PTAB 2013)
This PTAB decision is important for a number of reasons. First, as a rule of substantive law, the decision announces a new interpretation of the statute-of-limitations for filing an IPR under 35 U.S.C. § 315(b). Second, the decision highlights (without directly addressing) the need for a better understanding of the role of precedent within PTAB decisions for cases such as this where a second PTAB panel rejects the legal analysis of a first PTAB panel. Finally, the case is important because it highlights problems with the statutory rule that the PTAB's determination "whether to institute an inter partes review [is] final and nonappealable." 35 U.S.C. § 314(d).
The Patent Trial and Appeal Board (PTAB) continues to see a growing docket of inter partes reviews (IPR) and post-grant reviews of covered-business-method patents (PGR-CBM). Of importance, the PTAB appears to be scrutinizing review requests and has denied several – finding that the requester had failed to meet the "reasonable likelihood" standard of 35 U.S.C. § 315 or the "more likely than not" standard of 35 U.S.C. § 324.
Here, however, an expanded panel of five administrative patent judges has denied St. Jude's IPR petition based upon the one-year statute of limitations triggered by service of "a complaint alleging infringement" under 35 U.S.C. § 315(b). That statute provides:
An inter partes review may not be instituted if the petition requesting the proceeding is filed more than 1 year after the date on which the petitioner, real party in interest, or privy of the petitioner is served with a complaint alleging infringement of the patent.
This is seemingly a pretty straightforward and easy to adjudicate rule. However, St. Jude raised an interesting question of law because it was never served with a complaint per se. Rather, St. Jude sued Volcano for infringement and Volcano served an answer and counterclaim of infringement. The counterclaim was served more than one-year before the IPR request. Leaving the legal question of whether the filing of an answer with a counterclaim alleging infringement counts under the statute as a "complaint alleging infringement." There does not appear to be any direct legislative history from the AIA on point other than the general conception that the deadline is intended to prevent repeated "repeated litigation and administrative attacks." H.R. Rep. No. 112-98 at 48 (2011). As is often true of the Congressional record, that statement is general enough to be read in support of either side. And, certainly a counterclaim is often thought of as more of a defensive tact rather than being offensive harassment.
St. Jude's legal argument stems from Rule 7 of the Federal Rules of Civil Procedure that define pleadings in civil cases as follows:
Only these pleadings are allowed:
(1) a complaint;
(2) an answer to a complaint;
(3) an answer to a counterclaim designated as a counterclaim;
(4) an answer to a crossclaim;
(5) a third-party complaint;
(6) an answer to a third-party complaint; and
(7) if the court orders one, a reply to an answer.
You'll notice from the allowed pleadings that a counterclaim (No. 3) is separately defined from a complaint (No. 1). That listing coupled with the statement indicating that these are the "only" pleadings allowed suggests that the differentiation in the list is also important. Similarly, St. Jude points to FRCP R. 3 that states "A civil action is commenced by filing a complaint with the court." Finally, St. Jude highlights that the statute in question (§315) particularly mentions counterclaims in a different section of the provision and that linguistic distinction suggests that Congress thought that a counterclaim was different from a complaint.
The Board rejected St. Jude's argument – finding instead that a counterclaim is the functional and legal equivalent of a complaint and consequently that the request for IPR was untimely. The Board writes:
The Federal Rules of Civil Procedure neither define the term "complaint" in Rule 3 nor use it to refer only to the filing that commences a civil action. Rule 3 states, as amended in 2007: "A civil action is commenced by filing a complaint with the court." The rule specifies merely which filing commences a civil action—a complaint—but does not limit a "complaint" to be that filing and nothing else. Moreover, the term is used elsewhere in the Rules to refer to a pleading that does not commence a civil action. For example, Rule 14(a)(1) states, in pertinent part: "A defending party may, as third-party plaintiff, serve a summons and complaint on a nonparty who is or may be liable to it for all or part of the claim against it." A complaint against a third party does not commence a civil action; rather, it joins the third party to an existing civil action. The Rules, therefore, do not define or use the term "complaint" in the exclusive manner St. Jude argues.
We disagree also with St. Jude's contention that Rule 7 distinguishes a counterclaim from a complaint in a way that is meaningful for our determination. Rule 7 lists pleadings allowed in a civil action. The mere listing of items separately, however, does not, by itself, draw distinctions among the items in the list insofar as their legal equivalence. We discern in Rule 7 no such comparison or distinction between a complaint and a counterclaim.
A complaint and a counterclaim instead bear marked similarities. A counterclaim imposes the same burdens on the parties as does a complaint. A counterclaim alleges a cause of action, just like a complaint; confirming that equivalence, Wright and Miller explains that a counterclaim "basically is a defendant's complaint." 5 FED. PRAC. & PROC. CIV. § 1184 (3d ed.). …
St. Jude argues next that a counterclaim should be distinguished from a complaint in § 315(b) because that distinction is made in § 315(a). Pet. 3. St. Jude observes that 35 U.S.C. § 315(a)(3) excludes a counterclaim challenging validity from constituting a complaint challenging validity in § 315(a)(1). This argument is unpersuasive. Section 315(a)(3) states specifically that the exclusion applies to, and is made for purposes of, subsection § 315(a) only. The inapplicability of such an exclusion to § 315(b) indicates, to the contrary of St. Jude's position, that no similar exclusion exists, or was intended, with regard to a complaint and a counterclaim for infringement in respect of § 315(b). . . .
One interesting element of the decision here is that it differs with a prior decision made by the PTAB in Macauto USA v. Bos GmbH, IPR2012-00004. There, a three-member PTAB board found that the statute-of-limitations was tolled in cases where the complainant then voluntarily dismissed its case with prejudice. Citing Wright, Miller, Kane, and Marcus, 9 Federal Prac. & Proc. Civ. § 2367 (3d. ed.) ("[A]s numerous federal courts have made clear, a voluntary dismissal without prejudice under Rule 41(a) leaves the situation as if the action never had been filed.") It is not surprising that there are no overlapping judges between the St. Jude decision and Macauto.
The general standard operating procedure at the PTAB is that a Board decision is binding precedent "only if the opinion has been made Precedential" under the PTAB's operating procedure. See http://www.uspto.gov/ip/boards/bpai/procedures/sop2.pdf. Thus, at this point, neither opinion is precedential and so the next panel is also open to re-decide the case as it sees fit according to the law.
Certainly, the Federal Circuit would ordinarily be ready-willing-and-able to quickly resolve the split of opinion on the meaning of the law here. However, the statute indicates that this particular decision is both final and nonappealable. 35 U.S.C. § 314(d). Of course, the statute does not indicate that the decision cannot be attacked through a mandamus action or through a separate collateral attack on the final judgment, neither of which are ordinarily considered an appeal.
PTO Post-Issuance Filings
By Jason Rantanen
This afternoon my frequent collaborator Lee Petherbridge will be presenting Unenforceability (which we wrote with Polk Wagner) at the Houston Intellectual Property Law Association's annual IP Institute. As we were talking about the presentation, our conversation turned to the subject of the AIA's impact on post-grant proceedings at the PTO (particularly supplemental examination). I was able to assemble the following charts based on data from the PTO's website (specifically, from this page and this page).
Note that the inter partes review data points are my estimates based on graphical data from the PTO; practically speaking, however, any deviations from the "true" values are going to barely show up here due the scale of this graph.
Unsurprisingly, there was a large jump in both ex parte and inter partes filings in Q4 of 2012. These spikes corresponded with the approximately 5-fold fee increase for filing an ex parte reexamination request, and the transition to inter partes review coupled with a similarly high fee structure on September 16, 2012. Since then, ex parte reexamination requests have remained low while inter partes review filings have been on the rise, eclipsing even pre-September 16 inter partes reexamination levels (for just the first two months of Q4 of FY 2013, there have already been more than 130, which constitutes more inter partes filings than any previous 3-month quarter except for Q4 2012).
What about supplemental examination requests? In the past I've expressed skepticism that supplemental examination will be a widely used mechanism. To date, the actual filing data appears to have born that skepticism out: the PTO's supplemental examination final rules predicted about 1,430 requests anually; as of August 30, 2013 there were 40.
Source: http://www.uspto.gov/aia_implementation/statistics.jsp
What surprised me the most about this data is that supplemental examination was widely believed to be the new path to ex parte reexamination for patent owners (i.e.: rather than file an ex parte reexamination request, just file a supplemental examination request), including by the PTO itself. See 77 Fed. Reg. 48828, 48847 (Aug. 14, 2012) ("In view of the benefits to patent owners afforded by supplemental examination under 35 U.S.C. 257(c), the Office is estimating that all 110 requests for ex parte reexamination that would have been filed annually by patent owners will instead be filed as requests for supplemental examination."). So far, however, traditional ex parte reexamination requests are an order of magnitude greater than supplemental examination filings. Of course, this can all change with time – inter partes post grant proceedings started off slow but now have eclipsed ex parte reexamination.
One last chart, again from the PTO's website: pre-issuance submissions are becoming a relatively common, although by no means ubiquitous, type of filing.
Source: http://www.uspto.gov/aia_implementation/statistics.jsp
Amending the America Invents Act 2013
By Dennis Crouch
One aspect of the Goodlatte discussion draft legislation is a series of “Improvements and Technical Corrections to the Leahy-Smith America Invents Act.” The AIA was passed in September 2011 and is gradually being fully implemented across the US patent system. The further changes here are fairly substantial, although buried within the proposed bill itself. The following post offers some explanation of the provisions with only a few comments on the policy implications.
1. REPEAL OF CIVIL ACTION TO OBTAIN A PATENT
For several years, the PTO has been pushing to weaken or eliminate the “civil action” option that is currently available to patent applicants who are refused a patent. The current system allows a patent applicant to file a federal lawsuit that asks a district court to order the PTO to issue a patent covering the claimed invention. The civil action approach allows for extensive presentation of evidence, live witness testimony, and an ultimate decision by a district court judge. And, since the civil action is not an “appeal” per se, substantial deference is not given to prior factual findings by the PTO (as long as the applicant presents its own evidence on point). The civil action approach is not widely used because of the expense of pursuing a district court claim. However, it has been a very successful approach for a number of patent applicants. Under the new provision, the only avenue for challenge an adverse PTO decision on the merits of an application would be through appeal to the Court of Appeals for the Federal Circuit.
2. POST GRANT REVIEW ESTOPPEL SUBSTANTIALLY NARROWED
The current estoppel rules of post-grant review indicate that a petitioner will be estopped from latter asserting in-court that the challenged patent “invalid on any ground that the petitioner raised or reasonably could have raised during that post-grant review.” The amendment would substantially narrow the estoppel to cover only grounds that the petitioner actually raised.
This change would result in Post-Grant review being much more of a parallel option rather than an alternative option to challenging patent validity.
3. CONSTRUING CLAIMS DURING POST-GRANT and INTER-PARTES REVIEW
The proposal would require that the claims under review be construed in the same way that they would be construed by a district court rather than using a “broadest reasonable construction.” The statute as written requires that the PTAB construe “each claim of the patent in accordance with the ordinary and customary meaning of such claim as understood by one of ordinary skill in the art and the prosecution history pertaining to the patent.” However, that method is somewhat different than what has been ruled as the law by the Federal Circuit.
4. CODIFICATION OF DOUBLE PATENTING DOCTRINE
The statute would create a new statutory provision that is intended to codify the obviousness-type double patenting doctrine. This ensures that the doctrine is carried through into the AIA. I have not parsed through the new provision to see if it does what they say it does:
35 U.S.C. §106 that reads as follows:
A claimed invention of a patent issued under section 151 (referred to as the ‘first patent’) that is not prior art to a claimed invention of another patent (referred to as the ‘second patent’) shall be considered prior art to the claimed invention of the second patent for the purpose of determining the non-obviousness of the claimed invention of the second patent under section 103 if—
(1) the claimed invention of the first patent was effectively filed under section 102(d) on or before the effective filing date of the claimed invention of the second patent;
(2) either—
(A) the first patent and second patent name the same inventor; or
(B) the claimed invention of the first patent would constitute prior art to the claimed invention of the second patent under section 102(a)(2) if an exception under section 102(b)(2) did not apply and, if applicable, if the claimed invention of the first patent had not been effectively filed under section 102(d) on (but was effectively filed before) the effective filing date of the claimed invention of the second patent; and
(3) the patentee of the second patent has not disclaimed the rights to enforce the second patent independently from, and beyond the statutory term of, the first patent.
5. EXPANDING THE SCOPE OF COVERED_BUSINESS_METHOD REVIEWS
The AIA creates an option for third parties to attack patents on non-technological “covered business method” innovations through the use of a new post-grant review proceeding. Through the review program, third parties can raise any ground of invalidity and can use this approach to pre-AIA patents. The amended provision would appear to sweep-in virtually all software-type patent claims.
Under the changes, the 7-year sunset provision would be removed; the expansive definition of business methods found in SAP America, Inc. v. Versata Dev. Group, Inc., CBM2012-00001, 12 Paper 36 (January 9, 2013), would be codified; and the “non-technological” requirement would be clarified/expanded to make clear that a claim’s recitation of technological features does not make the claim technological “if it is readily apparent that the recited [technological] feature is anticipated by or obvious in light of the prior art.”
6. SHRINKING PATENT TERM ADJUSTMENT
The bill proposes a clear rule that no PTA can be awarded for any delays that occur following the filing of a Request for Continued Examination (RCE). This would reduce the patent term for a substantial portion of patents and the bill indicates that the recalculation would be retroactive against any patent application still pending at the time of enactment.
7. OVERTURNING OF GUNN V. MINTON
Although not a statutory change, the bill would make the “clarifying” statement that:
CLARIFICATION OF JURISDICTION.—Congress finds that the Federal interest in preventing inconsistent final judicial determinations as to the legal force or effect of the claims in a patent presents a substantial Federal issue that is important to the Federal system as a whole.
This provision has the potential of bringing patent malpractice claims back under Federal Court jurisprudence. And, to the extent that patent licenses depend upon the scope of a patent claim, licensee disputes would also be heard in Federal Courts.