Tag Archives: Subject Matter Eligibility

Guest Post: TC Heartland and Statutory Interpretation

By: Michael Risch, Professor of Law, Villanova University Charles Widger School of Law

After the certiorari grant in TC Heartland, Dennis solicited a blog post from anyone who thought the case was not a slam dunk. Always the contrarian, I took him up on the offer. In a prior blog post at my own blog, Written Description, I detail some of the history of the statute and highlight why I think that Fourco does not necessarily answer the question. Colleen Chien and I flesh out the history and interpretation a bit more in our article, which we’ve blogged about here in the past.

I should note that the outset that I favor TC Heartland’s position from a policy point of view. I’ve long said in a variety of venues (including comment threads on this very blog) that there are significant problems with any system in which so much rides on where the case is filed. And I think that’s true whether you think they are doing a great or terrible job in the Eastern District of Texas.

Now, on to the interpretive issues. In general, I favor the application of longstanding original norms of statutory interpretation unless there’s good reason to depart from them (see, e.g., my new paper on reasonable royalties). I think this is doubly true where no one ever challenged the original interpretation (see, e.g. the ridiculous claims that common law copyright grants a performance right to sound recordings, despite the fact that no one ever thought so in the history of common law copyright). But in this case, I don’t think one can simply rely on the fact that no one challenged VE Holdings for 25 years. After all, the Supreme Court just overturned our understanding of design patent damages despite a tacit understanding that was more than 100 years old. As I noted here, this bothered me a bit given my general views, but I also think it was the correct statutory interpretation.

But, as I noted in my prior blog post, I don’t think one can just say “Fourco controls.” As I noted there: “Stonite and Fourco were statutory interpretation problems…. [T]his is a statutory interpretation problem. But the statute in Fourco is different from the statute today and has been amended twice since. We cannot rely on a supposed ‘rule’ about a statute that no longer exists.”

Instead, we have to return to first principles. In Stonite, the court clearly held that the patent venue statute was a special statute, to be specially applied differently than the general venue statute.  After Stonite, the general venue statute was amended. But let’s look at the statutes of the time. Right out of Fourco:

Section 1400 is titled “Patents and copyrights,” and subsection (b) reads:

“(b) Any civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.”

Section 1391 is titled “Venue generally,” and subsection (c) reads:

“(c) A corporation may be sued in any judicial district in which it is incorporated or licensed to do business or is doing business, and such judicial district shall be regarded as the residence of such corporation for venue purposes.”

The court ruled that not enough changed since Stonite: we still had two separate venue tracks, and the patent statute was separate. The question now: is there a way for Congress to have changed this? could it have done so unintentionally? Let’s look at the 1988 change to 1391(c):

“For purposes of venue under this chapter, a defendant that is a corporation shall be deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced.”

There is a key change here: 1391(c) no longer talks about a “separate” track where corporations can be sued “for venue purposes.” Instead, it says that “for purposes of venue under this chapter…” the definition of resides has now been set (emphasis added). The question is whether the Fourco precedent means that Congress had to do more than this to change the meaning of 1400(b) (which is in the same chapter). In VE Holdings, the Federal Circuit said no, it didn’t – that the plain language modified 1400, and, essentially, that Congress had said there were no more tracks here.

And that, I think, is the core question here. This is not a Supreme Court policy. This is the Court interpreting the statute. What did Congress do? In Stonite and Fourco, the Court said that Congress intended two separate tracks. The Federal Circuit says that in 1988, Congress merged those tracks by changing the definition of “venue” “under this chapter.”

The only other information we have is that in 2011, more than 20 years after VE Holdings, Congress expanded 1391 again. Section 1391(a) says the section applies to all civil actions “except as otherwise provided by law” (and as we detail in our article, the legislative history is clear that this referred to a list of statutes compiled by the ALI, and 1400 is not among them.) Further, 1391(c) expanded from “under this chapter” to “all venue purposes.” In other words, knowing that the Federal Circuit had interpreted 1391(c) and 1400 to be in a single track, Congress further expanded 1391 even more broadly and did nothing to clarify that no, really, “resides” in 1400(b) was really intended to continue to have the narrow definition. We know from many other contexts, in patent law and otherwise, that Congress is fully capable of correcting erroneous court interpretations, and the agglomeration of cases in Texas was known in 2011. Indeed, the AIA was passed in close proximity, and it included special provisions to deal with filings in Texas, but never once attempted to clarify that VE Holdings interpretation was wrong. For Congress to have expanded the venue statute and pass the AIA without addressing this point is particularly salient.

I, frankly, have no idea how this statutory interpretation issue will or even should come out. I don’t think this is a statutory slam dunk either way. TC Heartland is represented by outstanding lawyers who make outstanding arguments to the contrary. And the Court even granting cert. says something. You could dismiss all I’ve written with a wave of the hand: Fourco stands for the proposition that 1400(b) is separate and the current 1391(c) is no different in structure than the 1391(c) that faced the court then. I am troubled by this argument, but I can see how others might reasonably embrace it.

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Supreme Court Patent Cases: Post Sale Exhaustion

by Dennis Crouch

Substantive Patent Law: Newly filed petition in Merck & Cie v. Watson Labs raises a core substantive patent issue – does the on sale bar apply to secret sales? The defendant asks:

Whether the “on sale” bar found in § 102(b) applies only to sales or offers of sale made available to the public, as Congress, this Court, and the United States have all made clear, or whether it also applies to non-public sales or offers of sale, as the Federal Circuit has held.

The Merck petition is focused on pre-AIA patents.  The PTO (and patentees) are arguing more forcefully that the AIA certainly intended to exclude secret sales from the scope of prior art in cases now pending before the Federal Circuit.

The second new substantive patent law case is Google v. Arendi that challenge’s the Federal Circuit’s limitations on the use of common sense in the obviousness analysis.  In its decision, the Federal Circuit limited KSR to combination patents and held that “common sense” cannot be used to supply missing limitations.  Google argues that the Federal Circuit’s approach is contrary to the broad and flexible obviousness analysis required by KSR.  Patentees bristle term “common sense” – they see an overly flexible analysis as providing opportunities to invalidate patents without evidence.  The question: “Did the Federal Circuit err in restricting the Board’s ability to rely on the common sense and common knowledge of skilled artisans to establish the obviousness of patent claims?”

As these new petitions were being filed, the Supreme Court has also denied the pending obviousness, anticipation, and eligibility petitions.  In addition, Cooper v. Square has also been denied.

Civil Procedure: In J&J v. Rembrandt, the defendant J&J won at trial. However, Rembrandt later learned that J&J’s expert had testified falsely and the Federal Circuit ordered the case re-opened under R.60(b)(3) that empowers district courts to revisit final judgments after a showing of “fraud …, misrepresentation, or misconduct by the opposing party.”  The various circuits follow different standards and procedures for analyzing process and J&J has asked the Supreme Court to reconcile these (in its favor).  Another CivPro petition was also filed by Eon Corp that questions whether an appellee needed to file a R.50 JMOL motion to overturn a jury verdict that was based upon a faulty legal conclusion by the district court (here claim construction).  The Question Presented is:

Whether the Federal Circuit erred in ordering entry of judgment as a matter of law on a ground not presented in a Rule 50 motion in the district court, even though the ground presented a purely legal question.

Both J&J and Eon are only marginally patent cases, the core procedure case now pending is TC Heartland that would substantially upset the status quo of patent lawsuit concentration in E.D. Texas. Briefing continues in TC Heartland. In recent weeks a set of seven amici briefs were filed on the top side.

Next week Supreme Court conference includes review of the most likely-to-be-granted petition of Impression Products, Inc. v. Lexmark International, Inc. that focuses on important questions of post-sale exhaustion of patent rights.  The setup – If I buy a used product that was made and sold by the patentee, do I still need to worry that I might get sued for patent infringement?  The Federal Circuit says yes. The Supreme Court is likely to add some caveats to that.  The US Government (Obama Administration via DOJ) has argued that the case should be reviewed and that the Federal Circuit’s position should be rejected. Both parties then filed supplemental responsive briefs.  Lexmark’s best argument here is that these principles are well settled and that Congress can take on the role of tweaking them if needed.

Upcoming Supreme Court Oral Argument: Life Tech (export of components) set for December 6, 2016.


Federal Circuit’s Internal Debate of Eligibility Continues

Amdocs v. Openet (Fed. Cir. 2016)

In the end, I don’t know how important Amdocs will be, but it offers an interesting split decision on the eligibility of software patent claims.  Senior Judge Plager and Judge Newman were in the majority — finding the claims eligible — with Judge Reyna in dissent.  One takeaway is that the Federal Circuit continues to be divided on the issues.  By luck-of-the-panel in this case, the minority on the court as a whole were the majority on the panel (pushing against Alice & Mayo).  Going forward, the split can be reconciled by another Supreme Court opinion, a forceful Federal Circuit en banc decision, or perhaps by future judicial appointments by President Trump.  I expect 2-3 vacancies on the court during Trump’s first term.

In a 2014 post I described the Amdocs district court decision invalidating the claims.  The four patents at issue all stem from the same original application relating to a software and network structure for computing the bill for network communications usage.   One benefit imparted by the invention is associated with its physically distributed architecture that “minimizes the impact on network and system resources” by allowing “data to reside close to the information sources.” According to the majority opinion, “each patent explains that this is an advantage over prior art systems that stored information in one location, which made it difficult to keep up with massive record flows from the network devices and which required huge databases.”  The nexus with the tated benefit is difficult to find in many of the claims themselve.  See Claim 1 below, which was taken as representative of the asserted claims of Amdocs ‘065 patent:

1. A computer program product embodied on a computer readable storage medium for processing network accounting information comprising:

computer code for receiving from a first source a first network accounting record;

computer code for correlating the first network accounting record with accounting information available from a second source; and

computer code for using the accounting information with which the first network accounting record is correlated to enhance the first network accounting record.

You’ll note that the claim is an almost pure software claim — requiring “computer code” “embodied on a computer readable storage medium.”  The code has three functions: (1) receiving a network accounting record; (2) correlating the record with additional accounting information; and (3) using the accounting information to “enhance” the original network accounting record.  The claim term “enhance” is construed narrowly than you might imagine as the addition of one or more fields to the record.  An example of an added field would be a user’s name that might be added to the accounting record that previously used a numeric identifier.   The court also found that the term “enhance” should be interpreted as requiring that – and doing so in a “a distributed fashion … close to their sources” rather than at a centralized location.  This narrow interpretation of the term “enhance” do not flow naturally from the claim language, but do turn out to be crucial to the outcome.

In reviewing the claim, the court noted that “somewhat facially-similar claims” have been alternatively invalidated as abstract ideas and found eligible.  Compare, for example, Digitech with Enfish and DDR.   Here, the court wrote that the claims are “much closer” to the ones found eligible.  I might rewrite their opinion to say that the judges in the majority prefer the decisions finding eligibility over those invalidating software patent claims.

The two recent Supreme Court cases of Alice and Mayo spell out the court’s two-step framework for determining whether a patent is improperly directed to one of the excluded categories of abstract ideas, natural phenomena, and laws of nature.  Briefly, the court first determines whether “the claims at issue are directed to one of those patent-ineligible concepts.”  If so, the decision-maker must then determine whether any particular elements in the claim “transform the nature of the claim into a patent-eligible application.”  This second step requires consideration of additional elements both individually and in combination in search for an “inventive concept . . . sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself.” [Quoting Mayo and Alice throughout].

In making its eligibility conclusion in Amdocs, the appellate majority focused on the claim requirement (as construed) that processing be done in a distributed fashion.  According to the court, “enhancing data in a distributed fashion” is “an unconventional technological solution . . . to a technological problem (massive record flows which previously required massive databases).”  Remember here though that we are not talking about patenting a distributed system, but rather patenting a “computer program product embodied on a computer readable storage medium” used to implement the features.

Rather than taking Alice/Mayo steps in turn, the majority accepted “for argument’s sake” that the claims were directed to abstract ideas. However, the claim adds “something more” beyond an abstract idea.  Here, the court notes that the claims require “distributed architecture—an architecture providing a technological solution to a technological problem. This provides the requisite ‘something more’ than the performance of “well-understood, routine, [and] conventional activities previously known to the industry.”

Despite being the stated “unconventional” idea of using a distributed architecture, the court noted that the patent may still fail on anticipation or obviousnesss grounds.

Writing in dissent, Judge Reyna offered several different arguments. First, Reyna argue that the court’s skipping of Alice/Mayo Step 1 helped lead to an incorrect result. If you do not define the abstract idea at issue, how do you know whether the claim includes something more?  Reyna also argued that the “distribution architecture … is insufficient to satisfy Alice step two” because the limitation is not actually found in the claims and, even as interpreted provide only a functional result.  Reyna does note that the specification provides sufficient description of a distributed architecture, but that the claims themselves lack the requisite detail.

The specifications disclose a distributed system architecture comprising special-purpose components configured to cooperate with one another according to defined protocols in a user-configurable manner for the purpose of deriving useful accounting records in a more scalable and efficient manner than previously possible. The disclosed system improves upon prior art systems by creating a specific “distributed filtering and aggregation system . . . [that] eliminates capacity bottlenecks” through distributed processing. ’ The disclosed system is patent eligible. But the inquiry is not whether the specifications disclose a patent-eligible system, but whether the claims are directed to a patent ineligible concept.

[Read the opinion here]

There’s No Such Thing as a Content Based Unconstitutional Condition

I asked my former student Zachary Kasnetz to write this post on his forthcoming article explaining the Federal Circuit’s errors in its en banc Tam decision. A draft version of his article is available online: ssrn.com/abstract=2864016. – DC

By Zachary Kasnetz

I would like to thank Professor Crouch for this opportunity to share my views on the Federal Circuit’s decision in In re Tam, 808 F.3d 1321 (Fed. Cir. 2015) (en banc), in advance of the Missouri Law Review’s publication of my article.  This post discusses some of the arguments I make as to why the court erred in holding Section 2(a) of the Lanham Act facially unconstitutional.

Section 2(a) of the Lanham Act prohibits registration of any mark that “may disparage . . . persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt or disrepute.”  15 U.S.C. 1052(a).  It has long been controversial and commentators have largely  agreed that it is unconstitutional.  See In re Tam, 808 F.3d at 1334 n.4 (citing commentary).  Tam held: (1) Section 2(a) was a content-based and view-point based restriction on speech; (2) it regulated the expressive, not commercial aspects of Tam’s mark; (3) it actually regulated speech; (4) registration was not a subsidy or government speech; and (4) could not pass strict or intermediate scrutiny.  The holding and reasoning are flawed regarding the numbers 1, 2, and 4.[1]

First, the Court reasoned backwards.  First, the court should have decided whether Section 2(a) actually regulated speech at all and then whether it was a government speech or a subsidy.  If the answer to that question was no, then whether Section 2(a) was content and viewpoint-based and whether it impacted the commercial or expressive aspects of Tam’s mark would have been irrelevant.  Government speech and subsidies are not “exempt” from First Amendment scrutiny as the majority claims: they don’t implicate the First Amendment at all because they do not abridge any speech.  See Rust v. Sullivan, 500 U.S. 173, 193 (1991); Pleasant Grove v. Summum, 555 U.S. 460, 467 (2008).

Second, Section 2(a) only impacts the commercial aspects of Tam’s speech because a trademark is “a form of commercial speech and nothing more.”  In re Tam, 808 F.3d at 1376 (Reyna, J., dissenting) (quoting Friedman v. Rogers, 440 U.S. 1 (1979)).  All benefits of registration are commercial in nature, i.e., they make it easier to enforce the mark.  Registration has no impact on Tam’s ability to express any ideas or messages.  Cf. Author’s League of Am. v. Oman, 790 F.2d 220, 223 (2d Cir. 1986).  As Judge Reyna dryly pointed, the majority held that “Mr. Tam’s speech, which disparages those of Asian descent, is valuable political speech that the government may not regulate except to ban its use in commerce by everyone but Mr. Tam.”  Id. at 1378.  There is no First Amendment right to government assistance in preventing others from expressing ideas or views.  Cf. Davenport v. Wash. Educ. Ass’n, 551 U.S. 177, 188-90 (2008).

Therefore, the only basis for the majority’s opinion is the unconstitutional conditions doctrine, under which the government may not condition an important benefit on the surrender of an important constitutional right, even if it could withhold the benefit entirely.  The doctrine is notoriously incoherent and inconsistent in its application.  Tam’s basic holding is that Section 2(a) is an unconstitutional condition because it is a content and viewpoint based regulation/restriction/burden on speech.  But there’s no such thing as a content-based unconstitutional condition.

A condition’s constitutional permissibility turns on the relationship between the condition and the government program at issue.  See, e.g., USAID v. Alliance for Open Soc’y Int’l, Inc., 133 S. Ct. 2321, 2329 (2013).  The more “germane”, i.e., reasonably related to the goals of program, a condition is, the more likely it is to be constitutional.  See Sullivan, Unconstitutional Conditions, 102 Harv. L. Rev. 1413, 1420-21 (1989).  Any condition on a government benefit or participation in a government program implicating the First Amendment necessarily draws content-based distinctions: the question is whether that distinction is reasonably related to the program’s goals.  According to the majority, the goals of federal trademark law are (1) protecting the rights of mark holders and (2) preventing consumer deception and confusion.  If we accept that this is correct, the constitutionality of Section 2(a) turns on its relation to those goals.  The majority believes it is “completely untethered” those purposes.  In re Tam, 808 F.3d at 1354.  I disagree.

Trademarks allow consumers to quickly identify the source and quality of goods or services.  Therefore, trademark law conditions registration on a mark meeting certain requirements, including that it not be disparaging.  Certain kinds of marks are better at this than others, lying across the spectrum of distinctiveness from arbitrary or fanciful to generic.  Given the massive amount of information bombarding consumers, I argue that marks communicating other information or messages are less effective.  The government has an interest in ensuring that “the stream of commercial information flows cleanly as well as freely.”  Va. Bd. of Pharmacy v. Va. Citizen’s Consumer Council, Inc., 425 U.S. 758, 771–72 (1976)).  Disparaging marks, by definition, communicate more than the source and quality the good or service they attach to.  By denying the benefits of federal registration, Section 2(a) mildly incentivizes the selection of more effective marks.  Thus, it is reasonably related to trademark law’s goals.  Moreover, it only likely affects the choice of marks: it is not trying to “leverage [a government benefit] to regulate speech outside of the program itself.”  USAID v. Alliance for Open Soc’y Int’l, Inc., 133 S. Ct. at 2329 (2013).

Trademark law draws many distinctions between different marks based on their content.  As a far as I know, the constitutionality of the ban on registering trademarks containing “the flag or coat of arms of the United States, or of any State or municipality, or of any foreign nation,” 15 U.S.C. § 1052(b), has never been questioned.  Nor has the ban on those containing “a name, portrait, or signature identifying a particular living individual . . , or the name, signature, or portrait of a deceased President of the United States during the life of his widow, . .”  Id. at § 1052(c).  The government has never been required to show that such marks would actually be confusing or insufficiently distinctive despite the fact that this provision obviously singles out a category of potential trademarks based solely on their content.

Does Section 2(a) Actually Impact Speech?

I am also extremely skeptical that denying registration to disparaging marks actually has a chilling effect on speech.  The majority fears that Section 2(a) chills potential selection of disparaging marks, but the real issue isn’t whether trademark choice is being affected, but whether “ideas or viewpoints” will be suppressed.  Simon & Schuster v. Members of N.Y. State Crime Victims Bd., 502 U.S. 105, 116 (1991).  But trademarks are “commercial speech and nothing more.”  Friedman v. Rogers, 447 U.S. at 562.  Consider Tam.  If he had known that there was a real possibility that he would have been unable to register THE SLANTS because it was disparaging he would have chosen not to create his music or would not have made music intended to express pride in his Asian heritage?  I doubt it and I have not seen any evidence to support such a claim.  Perhaps he would have chosen a different name for his band, but again I’m skeptical.  Thus, Section 2(a) is “exceedingly unlikely” to suppress or chill expression of any ideas and viewpoints.  See Lyng v. Int’l Union, UAW, 485 U.S. 360, 365 (1988).

= = = = =

The author is an Associate at Growe Eisen Karlen Eilerts in St. Louis.  He earned his J.D. from the University of Missouri in May 2016 and his B.A. from the University of Maryland in 2012.

[1] Assuming arguendo, that I am wrong about numbers 1, 2, and 4, I agree that Section 2(a) could not pass strict or intermediate scrutiny.  I also agree that placement on the register does not turn Tam’s purportedly disparaging message into government speech.

Supreme Court Update: Extending the ITC’s Reach Beyond US Borders

by Dennis Crouch

Constitutional Challenge to Inter Partes Review: Although the Constitutional issues in Cooper v. Lee and MCM v. HP were law-professor-interesting, they were not substantial enough for certiorari.  The Supreme Court has now denied the Cooper and MCM petitions — leaving the IPR regime unchanged.  Although Cooper v. Square is still pending, its chances are slight. The Supreme Court has also denied certiorari in Encyclopaedia Britannica (malpractice), Gnosis (appellate review), and GeoTag (case-or-controversy).

A new 101 Challenge: In its first conference of the term, the Supreme Court denied all of the pending petitions regarding patent eligibility.  However, Trading Technologies has filed a new petition asking whether a new card game is categorically unpatentable so long as it uses a standard deck (rather than a novel deck) of cards.  My post on the case asks: Does the Patent Statute Cabin-in the Abstract Idea Exception?  That question references Section 100 of the Patent Act that expressly allows for the patenting of new use of a known manufacture.

Extra Territoriality of Trade Secrecy Law: On the trade secrecy front, Sino Legend has petitioned to review the Federal Circuit’s affirmance of the International Trade Commision’s ban on Legend’s importation of rubber resins used for tire production. The underlying bad-act was a trade secret misappropriation that occurred in China and the question on appeal asks: Whether Section 337(a)(1)(A) permits the ITC to adjudicate claims regarding trade secret misappropriation alleged to have occurred outside the United States.  A Chinese court looked at the same case and found no misappropriation.

Design Patent Damages: Oral arguments were held earlier this week in Samsung v. Apple. During the arguments, all parties agreed that (1) the statute does not allow for apportionment of damages but rather requires profit disgorgement; (2) the article-of-manufacture from which profits can be calculated may be a component of the product sold to consumers; and (3) the determination of what counts as the article-of-manufacture is a question of fact to be determined by the jury.   The only dispute then was on the factors that a jury should be considered and when the “inside gears” of a product should ever be included in the calculation.

Upcoming Supreme Court Oral Argument: SCA Hygiene (laches) on November 1; Star Athletica (copyright of cheerleader outfit) on October 31.


Does the Patent Statute Cabin-in the Abstract Idea Exception? (Yes)

by Dennis Crouch

In a new Supreme Court petition, Trading Technologies (TT) has again challenged USPTO and Federal Circuit eligibility determinations.

TT v. Lee asks the following question:

Given that 35 U.S.C. § 100(b) sets forth that a patent eligible “process” includes a “new use of a known process, machine, manufacture, composition of matter, or material,” did the Federal Circuit err by holding that an indisputably new and non-obvious use (i.e., game steps) of an existing manufacture (i.e., playing cards) was patent ineligible under Alice Corp. v. CLS Bank Int’l, 134 S.Ct. 2347 (2014)?

The underlying appellate decision In re Smith involves a patent application claiming a new method of playing Blackjack. The new approach offered by offers ability to bet on the occurrence of “natural 0” hands as well as other potential side bets.  Claim 1 in particular requires a deck of ‘physical playing cards” that are shuffled and then dealt according to a defined pattern.  Bets are then taken with the potential of more dealing and eventually all wagers are resolved.  The Federal Circuit affirmed the PTAB/Examiner determinations that the claimed method of playing cards constitutes an unpatentable abstract idea. As I previously wrote:

The court held that a wagering game is roughly identical to fundamental economic practices that the Supreme Court held to be abstract ideas in Alice and Bilski. . . . Following the Board’s lead, the appellate court then found that the “purely conventional steps” associated with the physical act of playing cards do not “supply a sufficiently inventive concept.”

Important for this case, the court noted that some card games are patent eligible, but that universe appears to be limited only to patents claiming “a new or original deck of cards.”  Of course, the patent statute expressly states that processes are patent eligible – and that set of eligible processes “includes a new use of a known process, machine, manufacture, composition of matter, or material.”  35 U.S.C. 100(b).

Above the Statute?: An important fundamental question is whether the eligibility exceptions of Alice and Mayo supersede the statute.  Some argue that their origins are Constitutional – embedded in the “discoveries” limitation and thus control the law regardless of the statutory text.  But the Supreme Court has repeatedly indicated that the abstract idea and law of nature exceptions are grounded in the 35 U. S. C. §101 (despite the absence of express language).  Under a plain language interpretation, these atextual exceptions should not be extended so far as to conflict with the statute — especially the express definitions of §100(b). Thus, TT writes:

Under the statute, new processes that use conventional equipment or materials are clearly patent eligible subject matter. 35 U.S.C. § 100(b) (patent eligible processes include “a new use of a known process, machine, manufacture, composition of matter, or material.”). This Court has never abrogated § 100(b). And Alice did nothing to change this. Indeed, to fail the first step of the Alice test, a claim needs to tie up an “abstract idea,” which for purposes of this test was defined to be a preexisting practice that serves as a fundamental “building block of human ingenuity,” such as a “longstanding” and “prevalent” economic practice. . . . The Federal Circuit has improperly extended Alice step one to claims that indisputably recite a new set of game steps that was not preexisting, let alone “fundamental.”

My own take is that the Constitutional intellectual property clause probably does have some teeth and – as an extreme example – would not empower Congress to authorize patents covering abstract ideas as such.  That said, Congressional power certainly extends to authorizing the grant of patents covering the types of inventions being identified as abstract ideas under Alice Corp such as the blackjack game at issue here.

[In re TT – Petition]

DISCLOSURES – The petition was filed by my friends and former colleagues Leif Sigmund and Jennifer Kurcz at the MBHB firm and the firm is a paid sponsor of Patently-O.  I also represented TT in other matters up until 2007.  That said, I have not discussed this particular case or my here with TT/MBHB other than to request a copy of the petition after I noted its filing.

Not Eligible: Supreme Court Denies All Pending Subject Matter Eligibility Petitions

The Supreme Court has greatly simplified the patent docket by denying certiorari in 10+ cases.  Gone are GEA Process (IPR termination decision), Amphastar (scope of 271.e safe harbor) , Commil (appellate disregard of factual evidence), MacDermid (obvious combination), Jericho (Abstract Idea) , Trading Technologies (mandamus challenging CBM initiation), Tobinick (interference), Neev (arbitrator autonomy), Genetic Tech (eligibility), Essociate (eligibility), Dreissen, and Pactiv (ex parte reexamination procedure).   Notably, all of the eligibility petitions have been denied.

The constitutional challenges of MCM and Cooper are the only cases that particularly survived the Court’s latest culling. Those cases have been relisted for consideration at the next conference (October 7). However, there is some chance that the court is simply waiting for Square’s responsive brief due October 12.  Meanwhile, on October 11, the court will hear oral arguments in Samsung v. Apple.

First Amendment Finally Reaches Patent Law

The big news from Intellectual Ventures v. Symantec (Fed. Cir. 2016) is not that the court found IV’s content identification system patents invalid as claiming ineligible subject matter.  (Although that did happen). Rather, the big event is Judge Mayer’s concurring opinion that makes “make two points: (1) patents constricting the essential channels of online communication run afoul of the First Amendment; and (2) claims directed to software implemented on a generic computer are categorically not eligible for patent.”

Read Judge Mayer’s opinion in full:

MAYER, Circuit Judge, concurring.

I agree that all claims on appeal fall outside of 35 U.S.C. § 101. I write separately, however, to make two points: (1) patents constricting the essential channels of online communication run afoul of the First Amendment; and (2) claims directed to software implemented on a generic computer are categorically not eligible for patent.


Supreme Court Patent Cases – September 28 Update

by Dennis Crouch

Cooper v. Lee and Cooper v. Square are both ask the same question: whether 35 U.S.C. §318(b) violates Article III of the United States Constitution, to the extent that it empowers an executive agency tribunal to assert judicial power canceling private property rights amongst private parties embroiled in a private federal dispute of a type known in the common law courts of 1789, rather than merely issue an advisory opinion as an adjunct to a trial court.”  The issues here are also parallel to those raised in MCM Portfolio v. HP (“Does IPR violate Article III of the Constitution?”).  The cases received a boost this month with the Court’s call for response (CFR) in Cooper v. Square.  Square had previously waived its right to respond, but its response is now expected by October 11, 2016.  Under Supreme Court R. 37, the Call for Response reopens the period for filing of an amicus curiae brief in support of petitioner. (~ due October 8, 2016).  Eight Amici Curiae briefs were filed in MCM and two in Cooper v. Lee.  In general, each brief additional brief incrementally increases the odds of certiorari.  Statistical analysis also suggests that a call for response significantly increases the odds of certiorari being granted.

I wrote earlier this week about the new IPR process challenge in Ethicon where the patentee has challenged Director Lee’s delegation of institution decision authority to the PTAB.  The case is one of statutory interpretation but uses the separation-of-function doctrine as an interpretive guide. The same question is also presented in LifeScan Scotland, Ltd. v. Pharmatech Solutions, Inc.  Both petitioners (Ethicon and LifeScan) are owned by J&J.

The final new petition is a personal jurisdiction case: Mylan v. Acorda.  The Hatch-Waxman setup involved Mylan preparing and filing its abbreviated new drug application that created a cause of action for infringement under 35 U.S.C. 271(e)(2). Although the ANDA preparation occurred in West Virginia and the filing in Maryland, the infringement lawsuit was filed by Acorda in Delaware.  Mylan asks: “Whether the mere filing of an abbreviated new drug application by a generic pharmaceutical manufacturer is sufficient to subject the manufacturer to specific personal jurisdiction in any state where it might someday market the drug.”  The argument builds on the non-patent decision Daimler AG v. Bauman, 134 S. Ct. 746 (2014). In the pro-business case of Daimler, the Supreme Court reduced the scope of general personal jurisdiction to states where the defendant company is incorporated or has its personal place of business.


In the claim construction front, the Supreme Court also called for a response in Google v. Cioffi. In that case Google suggests an interpretative principle of “strictly construing” amended claim language against the patentee. [GoogleCioffiPetition]

On the merits side – we have three patent cases pending oral arguments.  First-up is the design patent damages case of Apple v. Samsung.   Although not a party, the Solicitor General has requested to been granted leave to participate in oral arguments.   Its brief, the SJ argued (1) Section 289 does not permit apportionment but rather requires award of the infringers profits on the relevant article of manufacture; but (2) the article of manufacture can be a “component” rather than a finished product sold to end-users.  In the end, the SJ argues that the jury should have been tasked with determining the appropriate article-of-manufacture and that the case should be remanded to determine whether a new trial is warranted.  Briefing continues in both SCA Hygiene (laches) and Life Tech (Component Export liability).



Affinity II: Who Has the Burden for Alice Step II?

by Dennis Crouch

A few days ago I wrote about the Federal Circuit decision in Affinity Labs. v. DirecTV  affirming that Affinity’s U.S. Patent No. 8,688,085 claims an ineligible abstract idea rather than a patent eligible invention.

The companion case – Affinity Labs v. Amazon was decided by the same panel of Chief Judge Prost and Judges Bryson (author) and Wallach and U.S. Patent No. 7,970,379 and also affirmed that the challenged claims lack eligibility under Section 101.

In DirectTV, the court first “stripped” the representative claim “of excess verbiage.”  Using the same approach but different words, the Amazon court here offered its version of the representative claim “stated more succinctly:”  the claim “is directed to a network-based media system with a customized user interface, in which the system delivers streaming content from a network-based resource upon demand to a handheld wireless electronic device having a graphical user interface.” [Full claim text below]

Abstract Idea: Analyzing the claimed invention, the court found that the claims are directed to a high level of generality “describing a desired function or outcome, without providing any limiting detail that confines the claim to a particular solution to an identified problem. The purely functional nature of the claim confirms that it is directed to an abstract idea, not to a concrete embodiment of that idea.”  In Enfish, the court considered technological inventions and queried whether the invention represents “an improvement in the functioning of a computer,” or merely “adding conventional computer components to well-known business practices.”  Here, of course, the invention uses more than just a “computer component” but the court still found Enfish applicable — finding that the claims “fall into the latter [ineligible] category.”  Further, the “tailoring of content based on information about the user . . . is an abstract idea that is as old as providing different newspaper inserts for different neighborhoods.”  Slip opinion at  10.

Burden Shifting for Step Two?:  Once a patent is deemed to be directed to an abstract idea, the burden appears to shift against the patentee to show that the claim includes “something more” such as an “innovative concept” that goes beyond the ineligible abstract idea.  This burden-shifting would go against the traditional rule that each each element in an invalidity analysis must be proven with clear and convincing evidence — and so it may still be proper to say that the challenger also has the burden under Step Two of Alice/Mayo to show the claim includes “nothing more” of patentable weight.  A complication of this internal dialogue is that eligibility is deemed a question of law whereas the C&C evidentiary requirement applies only to questions of fact.  That distinction became important in this case since the district court dismissed the case on the pleadings prior to the consideration of any factual conflicts.

Nothing More:  Enfish substantially increased the overlap between Steps One and Two of the eligibility analysis.  Typically, if a claim includes an eligible inventive concept then it will not be deemed directed to an abstract idea in the first place.   Here, the court found the converse logic also true:

As noted [in our Enfish analysis], representative claim 14 is written in largely functional terms, claiming “a collection of instructions” that perform the functions of displaying a selection of available content on a graphical user interface and allowing the user to request streaming of that content. . . . [These features] do not convert the abstract idea of delivering media content to a handheld electronic device into a concrete solution to a problem. The features set forth in the claims are described and claimed generically rather than with the specificity necessary to show how those components provide a concrete solution to the problem addressed by the patent.

Thus, the claim fails under Step Two as well – Judgment on the Pleadings of Invalidity Affirmed.

= = = = =

The court noted that the title of the patent ““System and Method to Communicate Targeted Information” has essentially no relation to the asserted claims.  That disconnect had no direct impact on patentability.  However, it appears to have lent credence to the notion that the claims lack innovative weight and technical application since the focus of the claims is something different than what was originally thought to be innovative and worth extensive description.

= = = = =

Claim 14: A media system, comprising:

a network based media managing system that maintains a library of content that a given user has a right to access and a customized user interface page for the given user;

a collection of instructions stored in a nontransitory storage medium and configured for execution by a processor of a handheld wireless device, the collection of instructions operable when executed: (1) to initiate presentation of a graphical user interface for the network based media managing system; (2) to facilitate a user selection of content included in the library; and (3) to send a request for a streaming delivery of the content; and

a network based delivery resource maintaining a list of network locations for at least a portion of the content, the network based delivery resource configured to respond to the request by retrieving the portion from an appropriate network location and streaming a representation of the portion to the handheld wireless device.

= = = = =

Affinity Content Distribution Scheme – Abstract Idea

Affinity Labs v. DirecTV (Fed. Cir. 2016)

The Federal Circuit here affirms that Affinity’s challenged claims invalid as directed to an abstract idea.  when “stripped of excess claim verbiage”, Claim 1 of U.S. Patent No. 7,970,379 “is directed to a broadcast system in which a cellular telephone located outside the range of a regional broadcaster (1) requests and receives network-based content from the broadcaster via a streaming signal, (2) is configured to wirelessly download an application for performing those functions, and (3) contains a display that allows the user to select particular content.” Slip opinion.

Alice Step 1: Considering these limitations and the claim’s “character as a whole” the court identified the concept of “providing out-of-region access to regional broadcast content” as an unpatentable abstract idea.  The court explained its conclusion by noting that the practice (1) has been long employed in media distribution; (2) is not tied to any particular technology; and (3) could be implemented by very low-tech technology such as via mail.  The court went on to explain that (4) nothing in the claim “is directed to how to implement out-of-region broadcasting on a cellular telephone. Rather, the claim is drawn to the idea itself.” And, (5) unlike in Enfish, the claims are not directed to “an improvement in cellular telephones but simply to the use of cellular telephones as tools.” Taking all these together, the court found the claim was in fact directed to an abstract idea.

Alice Step 2: Step two of Alice indicates that a patent directed to an abstract idea is patent eligible if it claims “additional features” that constitute an “inventive concept” that go beyond “well-understood, routine, conventional activity.” Mayo. Here, the court found no such additional features. “The claim simply recites the use of generic features of cellular telephones, such as a storage medium and a graphical user interface, as well as routine functions, such as transmitting and receiving signals, to implement the underlying idea. That is not enough.” Slip Opinion at 15-16.

= = = = =

Claim 1 below – seen was used as representative for the analysis:

1. A broadcast system, comprising:

a network based resource maintaining information associated with a network available representation of a regional broadcasting channel that can be selected by a user of a wireless cellular telephone device; and

a non-transitory storage medium including an application configured for execution by the wireless cellular telephone device that when executed, enables the wireless cellular telephone device:

to present a graphical user interface comprising at least a partial listing of available media sources on a display associated with the wireless cellular telephone device, wherein the listing includes a selectable item that enables user selection of the regional broadcasting channel;

to transmit a request for the regional broadcasting channel from the wireless cellular telephone device; and

to receive a streaming media signal in the wireless cellular telephone device corresponding to the regional broadcasting channel, wherein the wireless cellular telephone device is outside of a broadcast region of the regional broadcasting channel, wherein the wireless cellular telephone device is configured to receive the application via an over the air download.


Supreme Court Patent Cases: Malpractice, Obviousness, and Venue

by Dennis Crouch

The Supreme Court will begin granting and denying petitions in early October.  Meanwhile, several new petitions are now on file.  Last week I wrote about the TC Heartland case as a mechanism for limiting venue. Without any good reason, the Federal Circuit overruled a 1957 Supreme Court case that had strictly limited patent venue as spelled out in the patent venue statute 1400(b).  See VE Holdings (explaining its overruling of Fourco Glass). A result of VE Holdings is the expansive venue availability that facilitated the rise of E.D. Texas as the most popular patent venue. TC Heartland simply asks the Supreme Court reassert its Fourco holding – something that could almost be done with a one-line opinion: “REVERSED. See Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957).”  The best arguments for the Federal Circuit’s approach are (1) the reasoning of Fourco itself is a bit dodgy; and (2) VE Holdings is well settled doctrine (decided 26 years ago) and Congress has revised the statutory provisions several times without amending.  As a side note, several members of Congress have suggested they will act legislatively if SCOTUS fails to act.

Two new petitions (Grunenthal v. Teva and Purdue v. Epic) stem from the same Federal Circuit OxyContin case and focus on anticipation and obviousness respectively.  Grunenthal v. Teva questions how ‘inherently’ operates for anticipation purposes.   Purdue suggests that – despite the final sentence of Section 103, that the actual circumstances of the invention should be available to help prove non-obviousness (but still not be available to prove obviousness).   Another new petition includes the BPCIA case Apotex v. Amgen that serves as a complement to the pending Sandoz case questioning the requirements and benefits of providing notice of commercial marketing.

Finally – Encyclopedia Britannica v. Dickstein Shapiro is a patent prosecution malpractice action.  The lower court held the lawyers harmless since Alice would have invalidated the patents even if drafted to perfection. The petition asks whether Alice Corp can excuse patent prosecutors from alleged prosecution errors made well prior to that decision.


Step-One: Don’t Assume an Abstract Idea

by Dennis Crouch

McRO v. Bandai Namco, et al.  (Fed. Cir. 2016)

In an important Eligibility case, the Federal Circuit has ruled that MRCO’s software patent claims are eligible — rejecting District Court Judge Wu’s judgement on the pleadings that the non-business-method claims are invalid as effectively claiming an abstract idea. In my 2014 post in the case I wrote that the case may serve as an opportunity fo the Federal Circuit “to draw a new line in the sand.

The invention at issue is directed toward a specific problem that had troubled the field of animation – automatically animating lip synchronization and facial expression of animated characters. See U.S. Patent Nos. 6,307,576 (“‘576 Patent”) and 6,611,278 (“‘278 Patent”).  The patented method employed by the invention is to key the audio signal to a set of phenome sequences and then create a set of morph-weight-set streams used as input sequences for the animated characters.  The morph stream input provides both timing and movement of facial expressions, including emotion.   The inventions claim priority back to 1997.

In its decision, the Federal Circuit holds “that the ordered combination of claimed steps, using unconventional rules that relate sub-sequences of phonemes, timings, and morph weight sets, is not directed to an abstract idea and is therefore patent-eligible subject matter under § 101. Accordingly, we reverse.”  Thus, the court followed its precedent in Enfish and holds here that the claims do not even meet Alice Step-One.  In addition to the 20+ defendants, briefs were also filed by EFF, Public Knowledge, BSA and The Software Alliance.  The Decision here was authored by Judge Reyna and joined by Judges Taranto and Stoll.

A patent may not effectively cover an abstract idea, law of nature, or natural phenomena. Alice Corp.   The Supreme Court in Alice/Mayo established its two-step framework that first asks whether a patent claim is “directed to” one of these eligibility exceptions.  If so, the claim can be saved if it also includes an “inventive concept” that sufficiently transforms the nature of the claim.  However, “[i]f the claims are not directed to an abstract idea, the inquiry ends.”  McRO at 20.

One problem with the two step framework is based upon the fact that all inventions can be boiled down to an ineligible abstract idea. In Mayo, the Supreme Court recognized this risk in its statement that “all inventions at some level embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas.”  This starting point, risks removing any teeth from Alice/Mayo Step-1.  The Federal Circuit, however, has refused to follow that pathway but instead has set down precedent that courts “must be careful to avoid oversimplifying the claims” in seeking a gist or abstraction. TLI Commc’ns.

A second problem with the framework is that the meaning of “abstract” has not been fully defined.  Here, the Federal Circuit attempts to provide a rough framework based upon the idea of preemption. The court looked particularly for (1) specific limitations that help avoid preemption (e.g. Morse); and (2) more than merely automation of existing human activity. The court also emphasized that the eligibility analysis must consider the claim as a whole.

The court writes:

Here, the structure of the limited rules reflects a specific implementation not demonstrated as that which “any [animator] engaged in the search for [an automation process] would likely have utilized.” Myriad. By incorporating the specific features of the rules as claim limitations, claim 1 is limited to a specific process for automatically animating characters using particular information and techniques and does not preempt approaches that use rules of a different structure or different techniques. See Morse. When looked at as a whole, claim 1 is directed to a patentable, technological improvement over the existing, manual 3-D animation techniques. The claim uses the limited rules in a process specifically designed to achieve an improved technological result in conventional industry practice. Alice. Claim 1 of the ’576 patent, therefore, is not directed to an abstract idea.

I have pasted claim 1 below:

1. A method for automatically animating lip synchronization and facial expression of three-dimensional characters comprising:

obtaining a first set of rules that define output morph weight set stream as a function of phoneme sequence and time of said phoneme sequence;

obtaining a timed data file of phonemes having a plurality of sub-sequences;

generating an intermediate stream of output morph weight sets and a plurality of transition parameters between two adjacent morph weight sets by evaluating said plurality of sub-sequences against said first set of rules;

generating a final stream of output morph weight sets at a desired frame rate from said intermediate stream of output morph weight sets and said plurality of transition parameters; and

applying said final stream of output morph weight sets to a sequence of animated characters to produce lip synchronization and facial expression control of said animated characters.

Pending Supreme Court Eligibility Cases: Patenting Genetic Discovery

by Dennis Crouch

Three eligibility cases are pending before the Supreme Court.  Of these, the most interesting is likely Genetic Tech v. Merial.  [GeneticTechPetition]

The 1989 priority date of Genetic Tech’s patent reaches back to the heyday of gene discovery and the claims are directed to a technique of detecting gene alleles.  U.S. Patent No. 5,612,179. The claimed method is based upon the insight that genes are typically associated non-coding regions of DNA — i.e., based upon a the phenomenon known as “linkage disequilibrirum”, someone who inherits a particular gene from a parent is also likely to inherit the nearby non-coding DNA regions from the same parent.  Using that insight, the method amplifies DNA segments containing non-coding region associated with the gene and then checks the sequence of the associated coding section (the gene) that is incidentally amplified – looking for alleles of a known gene.

Genetic Tech explains this process in its petition:

Dr. Malcolm Simons discovered that, in the DNA of unrelated individuals, a polymorphism in a non-coding DNA region and a coding region allele could be inherited together. This natural phenomenon is known as “linkage disequilibrium.” The discovery prompted Dr. Simons to invent a new and useful process for detecting a coding region allele of a multi-allelic genetic locus by interrogating a non-coding DNA sequence that is in linkage disequilibrium with that multi-allelic genetic locus. Dr. Simons’ invention, as reflected in claim 1 of the ‘179 patent, was advantageous for a number of reasons, including that it was more reliable and quicker than prior art identification processes that used direct identification of allelic variants.

A number of companies have licensed the patent, but Merial and Bristol-Myers refused.  In the resulting litigation, the district court dismissed the case on the pleadings — finding that the claimed invention lacks eligibility as an unpatentable law of nature under Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289 (2012).  On appeal, the Federal Circuit affirmed — holding that the relationship between coding and non-coding sequences was a naturally occurring phenomenon and that the additionally claimed laboratory techniques were used in a routine and conventional manner known at the time.  Petitioner argues that patentability can be established by the fact that no one was “using the non-coding sequence as a surrogate marker for the coding region allele …” This novel feature survived both the original examination as well as reexamination.

Questions Presented:

  1. Whether the Federal Circuit properly concluded – in conflict with other decisions of the Federal Circuit and this Court – that the definition of a patent-ineligible concept under the Mayo/Alice framework may include both a natural phenomenon and an inventor’s ingenuity in applying that natural phenomenon to a new and useful purpose?
  2. Whether a Rule 12(b)(6) motion may be properly granted based on patent-ineligibility – as the Federal Circuit determined below in conflict with other Federal Circuit decisions – when the record plausibly demonstrates that the claimed process inventively applies a natural phenomenon for a new and useful purpose, the claimed process does not improperly preempt the natural phenomenon, and the claimed process is not routine and conventional?

The defendants in this case (Merial and Bristol-Myers) waived their right to respond to the petition.  That non-response has accelerated the case with a conference set for September 26.  If the case is to move forward, we could expect the court to call for a response (CFR).

I’ll pause here to write a moment about the call-for-response system.  The respondent to a Supreme Court petition for certiorari is not required to file a response but can instead waive her right to respond.  At that point, the Supreme Court may request that a response be filed.  Although the CFR comes from the Court, it is generally known that a single Justice can request the CFR – and that request is often triggered by questions raised by a single clerk.  CFRs almost always issue prior to the conference.  Bringing this back to the eligibility issue: We perhaps didn’t get the message from the Mayo/Alice Opinions and the Sequenom Denial. If it turns out that not even a single Justice (or Clerk) seeks a response in this case, we should understand that the Supreme Court believes it has sufficiently spoken on the issue of eligibility.

= = = =

The two additional eligibility cases pending are Jericho Systems Corporation v. Axiomatics, Inc., et al., No. 15-1502 (Eligibility of Patent No. 8,560,836 under Section 101) and Essociate, Inc. v. Clickbooth.com, LLC, et al., No. 16-195 (please clarify the meaning of ‘abstract idea’ and ‘inventive process’).


Supreme Court Patent Cases: Previewing the October Term 2016

by Dennis Crouch

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

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

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

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

It looks to be an interesting term.

The big list:


Common Sense Distinctions in Section 101 Analysis

by Dennis Crouch

In a short opinion, Judge Taranto has affirmed the lower court ruling that Electric Power Group’s asserted claims lacked subject matter eligibility.  U.S. Patent Nos. 7,233,843; 8,060,259; and 8,401,710.  The court writes:

Though lengthy and numerous, the claims do not go beyond requiring the collection, analysis, and display of available information in a particular field, stating those functions in general terms, without limiting them to technical means for performing the functions that are arguably an advance over conventional computer and network technology. The claims, defining a desirable information-based result and not limited to inventive means of achieving the result, fail under § 101.

Electric Power Group, LLC v. Alstom S.A. (Fed. Cir. August 1, 2016) [EPGvsAlstom] (Judges Taranto, Bryson, and Stoll).

PowerGroupThe claims at issue require the reception of real-time data coming in from a wide geographical distribution; analyzing the data for instability that may be indicative of grid stress; displaying visualizations of the stability metrics; storing the data; and deriving a composite indicator of power grid reliability.  According to the court, this sequence – even when taken as a whole – is an abstract idea.  Thus, a collection of abstract ideas is itself likely to be an abstract idea.

In distinguishing Enfish, the court explained that the claims here merely used “existing computers as tools in aid of processes focused on abstract ideas” while Enfish claimed “computer-functionality improvements . . . a particular database technique—in how computers could carry out one of their basic functions of storage and retrieval of data.”   Although line drawing may be admittedly difficult at times it was not difficult for the court here.

In Step-Two of a Alice/Mayo, the courts asks whether the claims require “something more” than the abstract idea that is sufficient to serve as a foundation for the invention.  Although not entirely clear, this “something more” is generally thought to require an inventive concept – a point of novelty sufficient to transform the idea into a patent eligible invention.   Here, the court found that none of the sources of information, analysis & display techniques, or measures were new or inventive.

The claims in this case . . . do not include any requirement for performing the claimed functions of gathering, analyzing, and displaying in real time by use of anything but entirely conventional, generic technology. The claims therefore do not state an arguably inventive concept in the realm of application of the information-based abstract ideas.

According to the patentee, the benefit of the invention was to provide “humanly comprehensible” information regarding an extremely complex system.  The court rejected that result as offering a patent eligible concept:

Merely requiring the selection and manipulation of information—to provide a “humanly comprehensible” amount of information useful for users, by itself does not transform the otherwise-abstract processes of information collection and analysis.

Common Sense Distinction: Perhaps the most important added element of the opinion is the appellate court’s approval of the lower court’s “important common-sense distinction between ends sought and particular means of achieving them, between desired results (functions) and particular ways of achieving (performing) them.”  Here, the court found that the claims were effectively directed to the problem-to-be-solved rather than the actual and concretely defined solution to the problem.  Although the appellate panel acknowledged that this distinction is not the Alice/Mayo test, but rather as “one helpful way of double-checking the application of the Supreme Court’s framework to particular claims.”

Indeed, the essentially result-focused, functional character of claim language has been a frequent feature of claims held ineligible under § 101, especially in the area of using generic computer and network technology to carry out economic transactions. In this case, the district court’s wrap-up description confirms its, and our, conclusion that the claims at issue fail to meet the standard for patent eligibility under § 101.

This statement of the appellate court is designed to further free district courts to apply common sense in their Section 101 analysis.

BASCOM v. AT&T: Section 101 Jurisprudence Continues to Develop

By Jason Rantanen

BASCOM Global Internet Services, Inc. v. AT&T Mobility LLC (Fed. Cir. June 27, 2016) Download Bascom
Panel: Newman (concurring in the result), O’Malley, Chen (author)

Since Alice v. CLS Bank, the Federal Circuit has issued four opinions rejecting a lack of patent eligible subject matter challenge: DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245 (Fed. Cir. 2014)Enfish LLC v. Microsoft Corp., 2016 WL 2756255 (Fed. Cir. May 12, 2016); Rapid Litigation Management Ltd. v. Cellzdirect, Inc., 2016 WL 3606624 (Fed. Cir. 2016), and BASCOM v. AT&T, with the latter three coming the last few months.  (Many more decisions affirm invalidity on § 101 grounds.)  Each of these opinions is important for understanding the contours of the post-Mayo/Alice patentable subject matter doctrine.   In this post, I’ll summarize BASCOM and examine its treatment of the relationship between steps one and two of the Mayo/Alice framework.

Background: The claimed invention involved in this case is a “system for filtering Internet content.”  Slip Op. at 6.  The patent’s first claim reads:

1. A content filtering system for filtering content retrieved from an Internet computer network by individual controlled access network accounts, said filtering system comprising:

a local client computer generating network access requests for said individual controlled access network accounts;

at least one filtering scheme;

a plurality of sets of logical filtering elements; and

a remote ISP server coupled to said client computer and said Internet computer
network, said ISP server associating each said network account to at least one filtering scheme and at least one set of filtering elements, said ISP server further receiving said network access requests from said client computer and executing said associated filtering scheme utilizing said associated set of logical filtering elements.

At the district court, AT&T moved to dismiss BASCOM’s complaint on the ground that the asserted claims were invalid under 35 US.C. § 101.  “AT&T argued that the claims were directed to the abstract idea of ‘filtering content,’ ‘filtering internet content,’ or ‘determining who gets to see what,” and that none of the limitations “transforms the abstract idea of filtering  content into patent-eligible subject matter because they do no more than recite routine and conventional activities performed by generic computer components.”  Id. at 8.  The district court agreed with AT&T, finding that “the claims were directed to the abstract idea of ‘filtering content’ because ‘content provided on the Internet is not fundamentally different from content observed, read, and interacted with through other mediums like books, magazines, television, or movies,”  Id. at 9, and that “no individual limitation was inventive because each limitation, in isolation, was a ‘well known, generic computer component[]’ or a standard filtering mechanism.”  Id.  Nor were the limitations in combination inventive because “[f]iltering software, apparently composed of filtering schemes and filtering elements, was well-known in the prior art” and “using ISP servers to filter content was well-known to practitioners.”  Id., quoting district court.

“Ordered combination of limitations” can provide the “inventive concept”: On appeal, the Federal Circuit reversed based on the second step of the Mayo/Alice framework.   Critical to its conclusion that the claims were directed to patent eligible subject matter was the court’s focus on the particular arrangement of generic and conventional components in the claims.

“An inventive concept that transforms the abstract idea into a patent-eligible invention must be significantly more than the abstract idea itself, and cannot be simply an instruction to implement or apply the abstract idea on a computer.”  Slip Op. at 14.  Under the court’s step two analysis, the specific limitations were sufficient to establish eligibility on the limited record before the court–not because the limitations themselves provided that “inventive concept,” but because the arrangement of those elements did.  “The inventive concept inquiry requires more than recognizing that each claim element, by itself, was known in the art.  As is the case here, an inventive concept can be found in the non-conventional and non-generic arrangement of known, conventional pieces.”  Slip Op. at 15.  On the limited record before the court, the specific method of filtering content claimed in the patent “cannot be said, as a matter of law, to have been conventional or generic.”  Id. at 16.

The relationship between Mayo/Alice Step One and Step Two:  The court’s step one analysis is, unfortunately, somewhat muddled.  The court first states that the claims are directed to an abstract idea, that of filtering content on the Internet, id. at 12, then shifts to the conclusion that the claims present a “close call,” requiring progression to step two.  Id. at 13 (“This case, unlike Enfish, presents a “close call[] about how to characterize what the claims are directed to….Here, in contrast, the claims and their specific limitations do not readily lend themselves to a step-one finding that they are directed to a nonabstract idea.  We therefore defer our consideration of the specific claim limitations’ narrowing effect for step two.”)

Ultimately, the choice between claims that are clearly directed to an abstract idea and those that are “close calls” may not matter.  If a claim is either unambiguously directed to an abstract idea or is a “close call,” the result is that the claim fails Mayo/Alice step one and the analysis proceeds to step two, the search for an inventive concept.  Viewed in this light, resolving disputes over the articulation of the abstract idea isn’t necessary as long as it fits in the “close call” category.

On the other hand, the articulation of the abstract idea in step does matter because it provides an important ingredient for step two.  Here, the court drew upon the articulation of the “abstract idea” as “filtering content on the Internet” to conduct its step two analysis.  “The claims do not merely recite the abstract idea of filtering content along with the requirement to perform it on the Internet, or to perform it on a set of generic computer components.  Such claims would not contain an inventive concept.”  Id. at 16.  With that articulation of the abstract idea in hand, it is relatively easy to see the method of filtering claimed in claim 1 as providing the necessary “inventive concept.”  The articulation of the abstract idea as “filtering content on the Internet” also provides the foundation for the court’s analysis of the invention here as compared with its previous decisions on patent eligible subject matter.

But if one were to articulate the abstract idea as being “controlling access to content by using centrally-held accounts with different permissions,” it might be significantly more difficult for the claims to pass the step two analysis because that idea is much closer to the inventive concept described by the court.  “The inventive concept described and claimed in the ‘606 patent is the installation of a filtering tool at a specific location, remote from the end-users, with customizable filtering features specific to each end user.”   Id. at 15.  To be sure, it would be harder for such an articulation to fail the Mayo/Alice step 1 analysis, but it’s not immediately clear to me that it would.

Judge Newman’s Concurrence: Concurring in the result, Judge Newman wrote separately “to urge a more flexible approach to the determination of patent eligibility, for the two-step protocol for ascertaining whether a patent is for an “abstract idea” is not always necessary to resolve patent disputes.”  Newman concurrence at 2.  Judge Newman’s concurrence, while raising the academic question of whether there is actually an “abstract ideas” limit on the § 101 categories or instead whether questions of abstractness are fully resolved by application of §§ 102, 103 and 112, does not really offer much in the way of a path forward under current patent law.    To the extent Judge Newman is suggesting that district courts should be able to deny 12(b)(6) motions when there are evidentiary disputes, then I would agree.  But if she is suggesting something else, it is not clear to me how  proposal would fit into the procedural constraints of Rule 12(b)(6) or current § 101 jurisprudence.

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

By Jason Rantanen

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

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

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

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

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

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

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

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

Supreme Court Patent Report: End of 2015 Term

by Dennis Crouch

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

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

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

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

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

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

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

The big list: