The chart below shows Shepard’s citation results for recent Supreme Court eligibility cases. I chart the number of federal court decisions citing to each of these seven major Supreme Court decisions. 2016 numbers do not include November-December 2016.
* I apologize that the chart won’t be easy to read for those who are colorblind. Truthfully, it is hard for anyone to tease out information regarding any particular decision.
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.
By Sarah Burstein, Associate Professor of Law at the University of Oklahoma College of Law
Samsung Elecs. Am., Inc. v. Apple Inc., No. 15-777 (argued Oct. 11, 2016) Transcript
On Tuesday, I attended the oral arguments in Samsung v. Apple. As mentioned in a previous Patently-O post, the Court granted cert on a single issue, namely:
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 relevant statute is 35 U.S.C. § 289, which provides a special additional remedy for certain acts of design patent infringement. Section 289 states:
Whoever during the term of a patent for a design, without license of the owner, (1) applies the patented design, or any colorable imitation thereof, to any article of manufacture for the purpose of sale, or (2) sells or exposes for sale any article of manufacture to which such design or colorable imitation has been applied shall be liable to the owner to the extent of his total profit, but not less than $250, recoverable in any United States district court having jurisdiction of the parties.
Nothing in this section shall prevent, lessen, or impeach any other remedy which an owner of an infringed patent has under the provisions of this title, but he shall not twice recover the profit made from the infringement.
In Apple and a case decided briefly after it, Nordock v. Systems, the Federal Circuit ruled that § 289 requires a court to award the total profit from the entire infringing product to a successful design patentee—even when the design patent claims a small portion of the overall product design.
In its cert petition and merits brief, Samsung argued that the “article of manufacture” in § 289 could be something less than the entire infringing product. In its brief opposing cert, Apple defended the Federal Circuit’s interpretation. Yet, in its merits brief, Apple agreed with Samsung (and the United States) that the relevant “article of manufacture” could be something less than the entire infringing product.
At oral argument, Samsung informed the Court that it was dropping its “causation argument” (i.e., that § 289 must be read in light of background causation principles from general tort law) and wanted to focus on its “article of manufacture” argument (i.e., its argument that a successful design patentee should be entitled to the “total profit” from the “article of manufacture” but that the relevant article should be determined mainly by looking at whether the patent claims a whole design or only part).
Unsurprisingly, the bulk of the oral argument was spent discussing how factfinders should determine what constitutes the relevant “article of manufacture” for the purposes of § 289. The Justices seemed particularly interested in how a jury could be instructed to perform this determination. The Justices spent a lot of time pressing the parties about the desirability of the four-part test proposed by the United States, asking if they thought that approach was appropriate and if there were any factors they would add.
It was also very clear during the argument that Apple really wanted to focus on its new waiver argument. In its merits brief (though not in its brief opposing cert), Apple argued that Samsung failed to preserve the “article of manufacture” argument for appeal. After a few questions, however, the Justices’ patience for this line of argument waned and the Chief Justice rather pointedly told Apple’s counsel to move on. The clear message conveyed was that the Justices didn’t need to be told what was in the record; they were perfectly capable of reviewing it for themselves.
On the whole, and based solely on the arguments, it seemed like the Justices were leaning toward adopting some form of multi-factor test to determine what constitutes the relevant “article of manufacture.” What that test might look like was far from clear. At some points, the Justices seemed visibly frustrated by the prospect of coming up with a workable test; whether they were convinced that any of the proposed tests would, indeed, be workable remains to be seen.
In this observer’s opinion, the real problem is the attempt to add a qualitative element to this test, instead of focusing on what the patentee actually claims. Also, it’s no wonder that the Justices and parties had difficulty trying to identify the relevant article of manufacture for the D’305 patent, which claims a design for a single screenshot of the iPhone graphical user interface (“GUI”). Like other GUI designs, the D’305 patent claims a design for software, not a design for a screen (no matter what the PTO says).
In any case, there was no indication that any of the Justices were seriously considering upholding the Federal Circuit’s whole-product rule, which a couple of justices derided as clearly absurd. Justice Breyer did express some concern, at the end, about subverting the original congressional intent. However, he seemed more concerned about creating/affirming a rule with “absurd results.”
One thought: The phrase “article of manufacture” doesn’t just appear in § 289. It also appears in § 171, which defines design-patentable subject matter. Although the Federal Circuit wasn’t asked to construe that phrase in § 289 until Apple, it has issued a number of decisions on what constitutes an “article of manufacture” in the context of § 171. The Federal Circuit didn’t mention any of those cases in its decision in Apple and the parties haven’t relied on them to make their points before the Supreme Court. However, under normal principles of statutory construction, this phrase should mean the same thing in both of these key design patent provisions. It seems fairly clear that the Federal Circuit expanded the definition of “article of manufacture” in § 171 without thinking of the potential consequences for § 289 (arguably leading to the worst of the “absurd results” created by the Federal Circuit’s Apple/Nordock rule). And it seems likely that the reverse might happen here—the Justices might redefine the “article of manufacture” in § 289 without considering any potential consequences for § 171. Of course, those issues weren’t briefed. But it’s still an issue worth keeping an eye on.
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.
by Dennis Crouch
In its decision in this trademark registration case, the Federal Circuit found the statutory prohibition against registering “disparaging marks” an unconstitutional governmental regulation of speech in violation of the First Amendment. (En banc decision). I noted in my December 2015 post that “there would be a good chance for Supreme Court review of the case if the government presses its position.”
The Supreme Court has now granted the USPTO’s petition for writ of certiorari asking:
Whether the disparagement provision of the Lanham Act, 15 U.S.C. 1052(a), which provides that no trademark shall be refused registration on account of its nature unless, inter alia, it “[c]onsists of . . . matter which may disparage . . . persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt, or disrepute” is facially invalid under the Free Speech Clause of the First Amendment.
In the case, Simon Tam is seeking to register a mark on his band name “The Slants.” The USPTO refused after finding that the mark is disparaging toward individuals of Asian ancestry.
Tam’s responsive brief was unusual in that he agreed that Certiorari should be granted. The brief also restated and expanded the question presented as follows:
1. Whether the disparagement clause bars the registration of respondent’s trademark.
2. Whether the disparagement clause is contrary to the First Amendment.
3. Whether the disparagement clause is unconstitutionally vague under the First and Fifth Amendments.
While the Federal Circuit majority opinion had agreed that the disparagement clause was contrary to the First Amendment, only a two-judge concurring opinion indicated that the clause is unconstitutionally vague. Thus, the reframing of the question presented here appears an attempt to offer alternative reasons for affirmance. The Supreme Court offered no indication as to which question is proper.
Congratulations to Ron Colemen for shepherding this case and Profs Volokh and Banner who apparently wrote the petition response.
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).
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.
TC Heartland v. Kraft Foods (Supreme Court 2016) [Petition for Writ of Certioari]
Patent litigation continues to be concentrated in a small number of venues. This case is potentially a big deal because it could eliminate this concentration — especially patent cases in the E.D.Texas. Both the PTO and Congress appear in favor of venue reforms, but statutory reforms will likely wait until the Supreme Court decides TC Heartland.
Background: The scope of patent venue is codified in 28 U.S.C. § 1400(b) and limits venue to judicial districts “where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.” At first glance, this venue statute would seem to significantly limit venue — For instance, few patent infringement defendants actually reside or have a place of business in the E.D. Texas. That narrowness was confirmed in the Supreme Court’s decision in Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957). The issue in Fourco Glass involved the parallel statute of 28 U.S.C. § 1391 (titled “Venue generally”) that broadly defined a corporation’s residence to include “any judicial district in which it is … licensed to do business or is doing business.” Despite the seeming broadening statutory definition, the Supreme Court held that the more general Section 1391(c) could not be used to expand venue beyond what was contemplated in Section 1400(b). Rather, the court held that “where the defendant resides” in § 1400(b) is limited to “the state of incorporation only.” Fourco Glass.
We hold that 28 U.S.C. § 1400(b) is the sole and exclusive provision controlling venue in patent infringement actions, and that it is not to be supplemented by the provisions of 28 U.S.C. § 1391(c).
Id.
In 1988 Congress amended 1391(c) to expand the definition of residency “for all venue purposes” to include “any judicial district in which such defendant is subject to the court’s personal jurisdiction.” Based upon that change, the Federal Circuit determined in 1990 that Fourco Glass had been implicitly overruled and that the new provision of 1391(c) now does redefine and greatly expand Section 1400(b) even though the legislative history of the 1988 amendment did not discuss patent venue. VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990).
The chart below from the cert petition shows the 1988 statutory change that the Federal Circuit found sufficient to indicate an overruling of Fourco Glass.
It is this 1990 combination of 1400(b)/1391(c) that is now the status quo – venue is proper in any any federal court that has personal jurisdiction over the accused infringer.*
TC Heartland challenges the VE Holding interpretation offering broad venue. It writes:
The question in this case is thus precisely the same as the issue decided in Fourco: Whether 28 U.S.C. § 1400(b) is the sole and exclusive provision governing venue in patent infringement actions and is not to be supplemented by 28 U.S.C. § 1391(c).
The Supreme Court previously decided patent venue in Stonite Products Co. v. Melvin Lloyd Co., 315 U.S. 561 (1942) and also held that the specific patent venue provisions should prevail and remain unmodified by the general venue provisions.
I’ll be happy if TC Heartland wins because it will make it much easier for me to watch patent cases here in Missouri.
The new petition is filed by James Dabney and John Duffy who were the forces behind KSR v. Teleflex.
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* The one major caveat is that Congress again amended 1391(c) in 2011 and the associated legislative history suggests a Congressional recognition that “VE Holding is the prevailing law.” Update and Correction – On suggestion from a reader, I followed chased down the above quote – it does not actually come from the Congressional Record but instead is Judge Moore’s conclusion found in the TC Heartland case. The opinion states:
In fact, before and after these [recent] amendments, in the context of considering amending the patent venue statute, Congressional reports have repeatedly recognized that VE Holding is the prevailing law.
For its conclusion, the court cites several Congressional reports that I have not read: “See H.R. Rep. No. 110–314, at 39–40 (2007); S. Rep. No. 110–259, at 25 (2008); H.R. Rep. No. 114–235, at 34 (2015) (stating that “Congress must correct” our holding in VE Holding by amending § 1400); cf. Venue Equity and Non-Uniformity Elimination Act of 2016, S. 2733, 114th Cong. § 2(a) (2016).” An important note with this is that the court did not identify any record contemporaneously with the 2011 report that suggests a conscious choice to keep VE Holding as the prevailing law.
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:
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.
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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’).
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. Apple. In 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:
Earlier this year, the Federal Circuit in a 2-1 panel decision in In re Queen’s University held there was a privilege over communications between a patent agent and client with respect to patent prosecution. That decision is here. I gave a talk earlier this year about how I think this case creates some risks even if it is followed, and the powerpoint for that talk is here.
A civil case in Texas has given another reason to be careful. Plaintiff filed a patent application and apparently used a patent agent to do the work. When the defendant refused to pay the plaintiff for using the invention (it seems), the defendant sought discovery of all communications between the patent agent and the plaintiff. The trial court ordered their disclosure.
The plaintiff sought mandamus review. The court of appeals refused to grant that extraordinary relief, stating in part:
No Texas statute or rule recognizes or adopts a patent-agent privilege. The trial court declined to recognize such a privilege here. Relator asks this Court to recognize a new discovery privilege and determine that the trial court abused its discretion for not recognizing the new privilege. Neither this Court nor the trial court has the authority to adopt a new discovery privilege. In re Fischer & Paykel Appliances, Inc., 420 S.W.3d at 848. We decline to do so here and, therefore, conclude the trial court did not abuse its discretion by refusing to adopt the privilege.
Further, Queen’s University is not binding here. The Federal Circuit applies its own law for substantive and procedural issues if those issues are “intimately involved in the substance of enforcement of the patent right.” 820 F.3d at 1290. This includes determination of whether documents are discoverable “in a patent case because they relate to issues of validity and infringement.” Id. at 1291. If the case involves substantive issues of patent law, such as claim construction, validity, and inequitable conduct, then the Federal Circuit applies its own patent law precedent. Id. Communications between a non-attorney patent agent and his client “that are not reasonably necessary and incident to the prosecution of patents before the Patent Office,” however, are outside the scope of a patent-agent privilege. Id. at 1301–02. Whereas the federal common law governs privilege in a federal case, “in a civil case, state law governs privilege regarding a claim or defense for which state law supplies the rule of decision.” Id. at 1294 (quoting FED. R. EVID. 501).
This case is not a patent infringement case. It is a breach of contract case governed by Texas law. The underlying dispute does not involve a determination of the validity of the patent or whether Tabletop Media, LLC infringed on the patent. The Queen’s University court expressly excluded such cases from the scope of the privilege, and neither this Court nor the trial court is required to apply federal patent law to the merits of the case. Where, as here, the substantive claims are governed by state law, the state privilege law also applies. Texas does not recognize a patent-agent privilege, and we decline to create a new common law privilege.
A copy of that decision, In re Andrew Silver (Dallas Ct. App. 05-160074-CV, Aug. 17, 2016) is here.
I am not sure that reasoning makes sense, since the choice of law analysis underlying it is missing: whether a communication is privileged doesn’t turn on where the proceeding is filed or what law gave rise to the claim, which seems to be the Dallas court of appeals’ view. (For example, the Dallas approach would mean that a communication that is not privileged under some foreign country’s law would be privileged if suit were filed in the US.)
Hopefully the Texas Supreme Court will fix this, since it seems to be wrong and is going to make a mess.
by Dennis Crouch
Halo Electronics v. Pulse Electronics (Fed. Cir. 2016)
On remand from the Supreme Court, the Federal Circuit has shifted its holding on enhanced damages (as required by the Supreme Court) and remanded for reconsideration:
Because the district court applied the Seagate test in declining to enhance damages . . . we vacate its unenhanced damages award with respect to products that were delivered in the United States, and remand for further proceedings consistent with the Supreme Court’s opinion on enhanced damages.
The only remaining in the case is that of enhanced damages under 35 U.S.C. § 284. In its Halo decision, the Supreme Court held that the provision “gives district courts the discretion to award enhanced damages . . . in egregious cases of misconduct beyond typical infringement.” The court rejected the Federal Circuit’s prior test under Seagate, noting that it was both “unduly rigid” and “impermissibly encumbers the statutory grant of discretion to district courts.” (quoting Octane Fitness).
According to the evidence previously presented,
“Pulse allegedly knew of the Halo patents as early as 1998. In 2002, Halo sent Pulse two letters offering licenses to its patents, but did not accuse Pulse of infringement in those letters. The president of Pulse contacted a Pulse engineer, who spent about two hours reviewing the Halo patents and concluded that they were invalid in view of prior Pulse products. Pulse did not seek an opinion of counsel on the validity of the Halo patents at that time and continued to sell its surface mount electronic package products. A Pulse witness later testified that she was “not aware of anyone in the company . . . that made a conscious decision” that “it was permissible to continue selling” those products.”
Hearing this evidence, the jury found that “it [was] highly probable that Pulse’s infringement was willful.” However, the district court held that it could not find willfulness under Seagate because the obviousness defense was not objectively baseless.
On remand, the district court must now “exercise its discretion and to decide whether, taking into consideration the jury’s unchallenged subjective willfulness finding as one factor in its analysis, an enhancement of the damages award is warranted.” The statement from the Federal Circuit here is interesting and important in its focus on the question of enhancement rather than willfulness. Notably, the court does not suggest that the district court first determine whether Pulse was a willful infringer and then determine whether to enhance damages. Rather, the Federal Circuit indicates that the discretion for enhanced damages is a full bundle of discretion and willfulness only “one factor in [the] analysis.” This approach matches with the statutory language of Section 284 that does not mention willfulness but rather simply indicates that “the court may increase the damages up to three times the amount found or assessed.”
![florence-nightingale-1[1]](https://cdn.patentlyo.com/media/2016/08/florence-nightingale-11.jpg)
At the Time of the Infringement: Of course, as the Supreme Court wrote, the discretion is not limited. In considering Pulse’s culpability, the Federal Circuit also noted the Supreme Court’s statement that “culpability is generally measured against the knowledge of the actor at the time of the challenged conduct.” Thus, an important question on will be the level of culpability at the time of infringement. There will also be a question of who-knew-what and the extent that the court will follow Florence Nightengale’s opinion that the person ‘in charge’ must “not only to carry out the proper measures yourself but to see that every one else does so too; to see that no one either willfully or ignorantly thwarts or prevents such measures.”
by Dennis Crouch
DBN (formerly DeLorme) v. US International Trade Commission (Supreme Court 2016)
In addition to district court infringement litigation, U.S. law offers a second avenue for patent enforcement – the United States International Trade Commission (USITC). In today’s free-trade environment, the USITC’s role is somewhat counter — protecting of U.S. industry. A substantial portion of USITC work involves enforcement actions to prohibit importation into the U.S. of “articles that … infringe a valid and enforceable” patent. See 19 U.S.C. 1337.
Despite the statutory language “articles that . . . infringe”, in Suprema an en banc Federal Circuit held that the USITC has the power to block importation based upon an inducement theory of infringement — even if the imported products themselves are not infringing. (6 – 4 en banc decision)
In a well written petition, DBN has challenged the holding of Suprema – asking “Whether the International Trade Commission’s jurisdiction over the importation of ‘articles that … infringe a valid and enforceable’ patent extends to articles that do not infringe any patent.”
The case also involves an interesting separation of powers issue — although the USITC found the patent enforceable, a district court found the patent invalid. DBN terms this a “zombie patent” penalty. In the case, the ITC first issued the exclusion order and the patent was later found invalid. In that interim, DBN violated the exclusion order and the ITC assessed a $6 million contempt penalty that is being challenged in the second question presented: “Whether the Federal Circuit erred in affirming the Commission’s assessment of civil penalties for the domestic infringement of a patent that has been finally adjudicated to be invalid.”
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:
by Dennis Crouch
Patentees in the biotech and software industries had placed substantial hope on the pending Supreme Court case of Sequenom v. Ariosa: The hope being that the case would serve as a vehicle for the Court to step-back from the strong language of Alice and Mayo that has led to rejection and invalidation for many. The Supreme Court has now denied certiorari in Sequenom – effectively ending that campaign.
by Dennis Crouch
The Supreme Court has granted a petition for writ of certiorari in the pending patent case of Life Tech. v. Promega Corp (14-1538) – focusing only on Question 2:
Whether the Federal Circuit erred in holding that supplying a single, commodity component of a multi-component invention from the United States is an infringing act under 35 U.S.C. § 271(f)(1), exposing the manufacturer to liability for all worldwide sales.
The court will not review the Billy Idol question of whether one can induce ones self.
As the question presented indicates, the case focuses on the statutory interpretation of Section 271(f)(1). That section provides for infringement liability against someone who exports components of a patented invention. The text:
Whoever without authority supplies … from the United States all or a substantial portion of the components of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.
I have underlined the requirement that at least “a substantial portion of the components” be supplied before infringement occurs because that language forms the basis for the case.
Here, the case in question involves certain genetic testing that occurred abroad. However apparently a single component of the invention (Taq polymerase) was supplied from the US. For those who have not learned biology in the last 20 years, Taq polymerase is now a commodity product used to amplify DNA via the polymerase chain reaction (PCR).
The jury found that export of the single component was sufficient to meet the requirement of “a substantial portion of the components” when the accused genetic testing kits include a primer mix, a PCR reaction mix, a buffer solution, control DNA, and the polymerase Taq. However, the district court granted JMOL against the patentee. On appeal, the Federal Circuit sided with the jury – finding that substantial evidence supported the verdict.
[The asserted claim] recites five components: a primer mix, a polymerizing enzyme (such as Taq polymerase), nucleotides, a buffer solution, and control DNA. Tautz patent, LifeTech’s domestic arm supplies the Taq polymerase to its facility in the United Kingdom, which both manufactures the remaining four components and assembles all the components into the accused STR kits. Taq polymerase is an enzyme used to amplify the DNA sequences in order to obtain enough replicated sample for testing. Without Taq polymerase, the genetic testing kit recited in the Tautz patent would be inoperable because no PCR could occur. LifeTech’s own witness admitted that the Taq polymerase is one of the “main” and “major” components of the accused kits. In short, there is evidence in the record to support the jury’s finding that a polymerase such as Taq is a “substantial portion” of the patented invention.
On the question of law, the Federal Circuit held that, in some circumstances “a party may be liable under § 271(f)(1) for supplying or causing to be supplied a single component for combination outside the United States.” In his essay on the decision, Jason Rantanen wrote this holding was “probably erroneous.”
The no-change decision in Cuozzo was the biggest immediate patent law news from June 20, 2016. However, two other actions by the court that day may end up having a greater long term impact. Namely, that same day the court called for the views of the US Solicitor General (CVSG) in both Impression Products v. Lexmark and Sandoz v. Amgen.
Sandoz Inc. v. Amgen Inc., et al., No. 15-1039 (petition for writ of ceritorari filed February 16, 2016; 4 briefs filed in support); and Amgen Inc., et al. v. Sandoz Inc., No. 15-1195 (counter-petition filed March 21, 2016).
Standing alone, a CVSG order significantly increases the odds that a particular case will be granted certiorari. Those odds would then be significantly increased again if the SG supports certiorari. These cases are largely ancillary to patent prosecutors because they focus on how a patent is used. Yet, their impact could shape the business model of patents licenses as property.
By Dennis Crouch
The Supreme Court has upheld the AIA provision barring challenges to the Patent Office’s decision to institute inter partes review. 35 U. S. C. §314(d). In addition, Justice Breyer’s majority opinion approved of the Patent Office’s approach of applying the broadest reasonable construction (BRI) standard to interpret patent claims – finding it a “reasonable exercise of the rulemaking authority that Congress delegated to the Patent Office.”
The Court was unanimous as to the BRI standard however, Justices Alito and Sotomayor dissented from the no-appeal ruling – they would have interpreted the statute as limiting interlocutory appeals but still allowing review of the decision to institute within the context of an appellate review of the PTO’s final decision on the merits.
Cuozzo Speed Technologies, LLC v. Lee, 579 U. S. ____ (2016).
No Appeal: The court began with the express language of the statute which expressly states that the decision of “whether to institute an inter partes review . . . shall be final and non-appealable.” The provision is plain on its face and indicates congressional purpose of delegating authority to the Patent Office. The dissenting opinion offered by Justice Alito offered to limit the statute as preventing only interlocutory appeals, but the majority rejected that interpretation as lacking textual support and being ‘unnecessary’ since the APA “already limits review to final agency decisions.”[1] The Supreme Court also analogized the PTO’s initiation decision to that of a grand jury – which is likewise unreviewable. “The grand jury gets to say— without any review, oversight, or second-guessing— whether probable cause exists to think that a person committed a crime” (quoting Kaley v. United States, 571 U. S. ___ (2014)).
If you remember, Cuozzo did not present a Constitutional challenge to the AIA regime and the majority opinion offered a glimmer of limitation in that regard. Notably, the Court suggested that challenges to the decision to institute might be appealable if based upon a Constitutional issue or some other issue outside “well beyond” the post issuance review proceeding statutory provisions.
We conclude that the first provision, though it may not bar consideration of a constitutional question, for example, does bar judicial review of the kind of mine-run claim at issue here, involving the Patent Office’s decision to institute inter partes review.
The opinion here includes a number of nuances that will be interesting to tease-out, but the bottom line is that IPR remains a powerful tool for challenging patents.
Claim Construction during Inter Partes Review: Regarding the Broadest-Reasonable-Interpretation being applied to patent claims, the court was unanimous in siding with the USPTO. The court began by noting that Congress granted rulemaking authority to the USPTO to create regulations governing inter partes review and that this authority empowered the USPTO to enact rules both substantive and procedural that are reasonable in light of the statutory text. Since the statute was “not unambiguous” as to the appropriate claim construction standard, and therefore that the USPTO must be given leeway in determining its administrative approach.
Cuozzo had argued that IPR proceedings were like trials in many ways and therefore the claim construction should be parallel to that of trial proceedings. The Supreme Court rejected that analogy – finding that IPR proceedings serve a purpose much broader than merely “helping resolve concrete patent-related disputes among parties.”
[I]nter partes review helps protect the public’s “paramount interest in seeing that patent monopolies . . . are kept within their legitimate scope.” Precision Instrument Mfg. Co. v. Automotive Maintenance Machinery Co., 324 U. S. 806 (1945); see H. R. Rep., at 39–40 (Inter partes review is an “efficient system for challenging patents that should not have issued”).
In finding BRI reasonable, the court followed this public-interest pathway and found that BRI helps to provide stronger bounds on patent scope:
We conclude that the regulation represents a reasonable exercise of the rulemaking authority that Congress delegated to the Patent Office. For one thing, construing a patent claim according to its broadest reasonable construction helps to protect the public. A reasonable, yet unlawfully broad claim might discourage the use of the invention by a member of the public. Because an examiner’s (or reexaminer’s) use of the broadest reasonable construction standard increases the possibility that the examiner will find the claim too broad (and deny it), use of that standard encourages the applicant to draft narrowly. This helps ensure precision while avoiding overly broad claims, and thereby helps prevent a patent from tying up too much knowledge, while helping members of the public draw useful information from the disclosed invention and better understand the lawful limits of the claim. See §112(a); Nautilus, Inc. v. Biosig Instruments, Inc., 572 U. S. ___ (2014).
Affirmed.
Most of the IPR-related petitions for writ of certiorari that are still pending are likely to fall-away at this point. However, the major caveats in the majority opinion (noted above) offer some light for both Cooper v. Lee and MCM v. HP since those petitions challeng the system on US Constitutional grounds.
USPTO Director Michelle Lee offered the following statement in reaction to the Cuozzo decision:
The USPTO appreciates the Supreme Court’s decision which will allow the Patent Trial and Appeal Board (PTAB) to maintain its vital mission of effectively and efficiently resolving patentability disputes while providing faster, less expensive alternatives to district court litigation.
Director Lee will likely step-down as the Obama Administration moves out. A portion of her legacy will remain as the named respondent.
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[1] 5 U. S. C. §704
by Dennis Crouch
In Kirtsaeng v. John Wiley & Sons (2016), the Supreme Court has vacated the Second Circuit’s ruling denying attorney-fee awards in the copyright case – but offered a balanced opinion that places a number of limits on when fees may be awarded.
The opinion holds the reasonableness of the losing party’s position should be a substantial factor. I.e., the more reasonable that position, the less likely that fees should be awarded. However, objective reasonableness is not the ‘controlling factor.’
That means in any given case a court may award fees even though the losing party offered reasonable arguments (or, conversely, deny fees even though the losing party made unreasonable ones). For example, a court may order fee-shifting because of a party’s litigation misconduct, whatever the reasonableness of his claims or defenses. Or a court may do so to deter repeated instances of copyright infringement or overaggressive assertions of copyright claims, again even if the losing position was reasonable in a particular case. Although objective reasonableness carries significant weight, courts must view all the circumstances of a case on their own terms, in light of the Copyright Act’s essential goals.
[internal citations omitted].
The problem with the Second Circuit decision was that it appeared to allow reasonableness to be a presumptive controlling factor. “[T]hat goes too far in cabining how a district court must structure its analysis and what it may conclude from its review of relevant factors.”
The decision does not cite either of the Supreme Court’s attorney fee cases from 2014. (Octane Fitness and Highmark). However, the principles at issue here are likely to carry-over directly to patent cases – namely that although the reasonableness of a losing-party’s argument is an important factor in attorney fee awards, it should not prescriptively control the outcome. That said, the copyright statutory language for attorney fees is quite different from that of the patent statute. The major difference is that the copyright statute indicates discretionary authority for district courts in their fee awards while the patent statute limits fee awards to “exceptional cases.” That difference suggests to me that fee awards (according to the statute) should be more difficult to obtain in patent cases than in copyright cases. In both patents and copyrights, the Supreme Court has now called for a flexible analysis and has also particularly indicated that the broader purposes of the respective intellectual property laws should be considered when determining whether to award fees.
In a new petition for writ of certiorari, Jericho Systems has asked the Supreme Court to review its abstract idea test:
Whether, under this Court’s precedent in Alice Corp. Party Ltd. v. CLS Bank International, 134 S. Ct. 2347 (2014), and Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289 (2012), a patent may be invalidated as an “abstract idea” under 35 U.S.C. § 101 when it claims a specific implementation and does not preempt other uses of the abstract idea.
Jericho Systems Corp v. Axiomatics – Petition for Certiorari.
The district court ended the case with a judgment on the pleadings – finding that the asserted claims of Jericho’s Patent No. 8,560,836 lacked eligibility under Alice and Mayo (focusing on claim 1 as axiomatic).
Using the ‘gist analysis’, the district court found that:
[T]he gist of the claim involves a user entering a request for access, looking up the rule for access, determining what information is needed to apply the rule, obtaining that information, and then applying the information to the rule to make a decision.
This is an abstract idea. The abstract idea being that people who meet certain requirements are allowed to do certain things. This is like Axiomatic’s example of making a determination if somebody is old enough to buy an R rated movie ticket.
Thus, finding that the claim encompasses an abstract idea, the district court moved to Step 2 of the Alice/Mayo analysis – and again sided with the defendant:
As al ready stated, [the claimed invention simply] uses standard computing processes to implement an idea unrelated to computer technology. It does not change [sic] way a computer functions or the way that the internet operates.
On appeal, the Federal Circuit affirmed in a R.36 judgment without opinion. On this point, the petition cites Jason Rantanen’s recent post indicating that around 50% of Federal Circuit decisions are being resolved without opinion. Jason Rantanen, Data on Federal Circuit Appeals and Decisions, PATENTLY-O (June 2, 2016).
A grant of certiorari in this case would serve as a salutary reminder to the Federal Circuit about the appropriate use of one-word affirmances—which currently resolve over 50 percent of that court’s cases. Rantanen, supra (showing that the percentage of Rule 36 opinions in appeals from district courts has increased from 21 percent to 43 percent in less than a decade). If the Federal Circuit is content to allow district court opinions to effectively substitute for its own opinions at such a high rate, that practice should not be permitted to “cert proof ” issues that are otherwise cleanly presented and worthy of this Court’s review. Cf. Philip P. Mann, When the going gets tough . . . Rule 36!, IP Litigation Blog (Jan. 14, 2016) (arguing that the Federal Circuit relies on summary affirmance under Rule 36 to “sidestep difficult issues on appeal and simply affirm”).
One issue that the district court (and obviously the Federal Circuit) failed to address was that of preemption – what is the relevance of the fact that substantial, practical, an and non-infringing applications of the given abstract idea are available and not covered by the patent. Petitioner argues that issue is critical to the analysis. “[T]he lower courts regularly decline any discussion of preemption in favor of rote analysis of patent language at so high a level of generality that the claim language is rendered all but meaningless. This leads to the untenable result that patents—such as the one here—that do not preempt other uses of the alleged “abstract idea” at issue are nevertheless held to violate Alice.”