Patent Law Blog (Patently-O)

FTC on Patent Trolls

By Dennis Crouch

The Federal Trade Commission has decided to move forward with a full study of patent assertion by companies who are in the business of buying and then asserting patents. In FTC lingo, these are referred to "Patent Assertion Entities" or PAEs. From the agency:

PAEs are firms with a business model based primarily on purchasing patents and then attempting to generate revenue by asserting the intellectual property against persons who are already practicing the patented technologies. The FTC is conducting the study in order to further one of the agency's key missions—to examine cutting-edge competition and consumer protection topics that may have a significant effect on the U.S. economy.

In addition to seeking voluntary information, the FTC proposes to use its subpoena power of to require the assertion entities to provide information to the agency and address the following questions:

• How do PAEs organize their corporate legal structure, including parent and subsidiary entities?
• What types of patents do PAEs hold, and how do they organize their holdings?
• How do PAEs acquire patents, and how do they compensate prior patent owners?
• How do PAEs engage in assertion activity (i.e. demand, litigation, and licensing behavior)?
• What does assertion activity cost PAEs?; and
• What do PAEs earn through assertion activity?

http://www.ftc.gov/opa/2013/09/paestudy.shtm

Federal Circuit: Intentional Abandonment Equals Unintentional Abandonment?

Network Signatures v. State Farm (Fed. Cir. 2013)

Section 282 of the Patent Act lists the defenses to allegations of patent infringement. In recent years, the Federal Circuit has applied that statute somewhat strictly in finding that the section defines the complete list of defenses. In one case, the court held that the patent office's improper revival of an abandoned patent application could not justify fit as defense. See Aristocrat Technologies Australia v. International Game Technologies (IGT) (Fed. Cir. 2008) (erroneous revival not a cognizable defense under §282).

The present case also involves revival of an abandoned application. Trying a different tact, the defendant here (State Farm) argued that the patent is unenforceable because the patentee lied to the PTO regarding the "unintentional" nature of the abandonment. (Generally, abandoned patents and patent applications can only be revived if the abandonment was unintentional). The charge is inequitable conduct.

The patent at issue is owned by the US Government but currently exclusively licensed to the private company – Network Signatures. U.S. Patent No. 5,511,122. The patent issued in April 1996 and the second maintenance fee was due in October 2003. (7 ½ years after issuance). The PTO then gives patentees another six-months grace period to pay the fee. However, the Navy decided not to pay the fee because of there was no known "commercial interest" in the patent at that time. As a result, the patent was deemed abandoned and thus unenforceable in April 1996. Two weeks later, the predecessor of Network Signatures contacted the Navy IP folks to see whether it could license the patent. At that point, the patent suddenly became valuable and the Navy immediately requested that the PTO revive the patent based upon the "unintentional" abandonment of the application. Without requiring the submission of any evidence or explanation, the PTO granted the petition and revived the patent. Since obtaining the license, Network Signatures has filed almost 100 infringement lawsuits against a wide variety defendants. Now, I should mention here that the predecessor to Network Solutions had actually tried to contact the Navy prior to final expiration to express interest in the patent, but was not routed to the IP department until after the patent had been abandoned.

Neither the patent statute nor the regulatory rules "unintentional," but the MPEP indicates that "[a] delay resulting from a deliberately chosen course of action on the part of the applicant is not an 'unintentional' delay within the meaning of [the code]." MPEP 711. Seemingly addressing the particular situation at issue here, the MPEP indicates that "a change in circumstances that occurred subsequent to the abandonment of an application does not render 'unintentional' the delay resulting from a previous deliberate decision to permit an application to be abandoned." Id. On the other hand, a "mistake of fact" appears to be a justified "unintentional" reason.

After reviewing this evidence, the district court sided with the defendant and held (on summary judgment) the patent unenforceable due to inequitable conduct based upon the patentee's statements that the abandonment was unintentional. On appeal, however, the Federal Circuit has reversed – finding that the patentee's action does not constitute "material misrepresentation with intent to deceive."

Mr. Karasek's compliance with the standard PTO procedure for delayed payment, using the PTO form for delayed payment, does not provide clear and convincing evidence of withholding of material information with the intent to deceive the Director. On matters unrelated to the substantive criteria of patentability, but within the authority of the Director, "it is almost surely preferable for a reviewing court not to involve itself in the minutiae of Patent Office proceedings and to second-guess the Patent Office on procedural issues at every turn." Laerdal Med. Corp. v. Ambu, Inc., 877 F. Supp. 255, 259 (D. Md. 1995) (citation and internal quotation marks omitted).

Judge Newman penned the opinion that was joined by Judge Wallach with the result of a reversal. With the complete reversal, it appears that the majority opinion result is a summary judgment of no inequitable conduct.

Writing in Dissent, Judge Clevenger argued that the unintentionality statement made by the patentee was clearly material but that the question of intent should go to trial. For Judge Clevenger, the issue of materiality is clear: "If the PTO had known the true facts, I have no doubt whatsoever that Karasek's revival petition would have been denied." However, from Judge Clevenger's perspective, the issue of intent is still up in the air. In particular, whether the Karasek knew that the circumstances of the revival were, and made a deliberate decision to withhold them.

Responding to Judge Clevenger's position in a footnote, Judge Newman explained that we could not expect further explanation from the attorney regarding the unavaoidability of the abandonment because PTO rules and the revival official form only require a statement that the abandonment was unavoidable. In essence, because the standard practice is to not explain the reasons for abandonment that we should not blame the filer for failing to provide reasons.

PTO Post-Issuance Filings

By Jason Rantanen

This afternoon my frequent collaborator Lee Petherbridge will be presenting Unenforceability (which we wrote with Polk Wagner) at the Houston Intellectual Property Law Association's annual IP Institute.  As we were talking about the presentation, our conversation turned to the subject of the AIA's impact on post-grant proceedings at the PTO (particularly supplemental examination).  I was able to assemble the following charts based on data from the PTO's website (specifically, from this page and this page).

Note that the inter partes review data points are my estimates based on graphical data from the PTO; practically speaking, however, any deviations from the "true" values are going to barely show up here due the scale of this graph. 

Unsurprisingly, there was a large jump in both ex parte and inter partes filings in Q4 of 2012.  These spikes corresponded with the approximately 5-fold fee increase for filing an ex parte reexamination request, and the transition to inter partes review coupled with a similarly high fee structure on September 16, 2012.  Since then, ex parte reexamination requests have remained low while inter partes review filings have been on the rise, eclipsing even pre-September 16 inter partes reexamination levels (for just the first two months of Q4 of FY 2013, there have already been more than 130, which constitutes more inter partes filings than any previous 3-month quarter except for Q4 2012). 

What about supplemental examination requests?  In the past I've expressed skepticism that supplemental examination will be a widely used mechanism.  To date, the actual filing data appears to have born that skepticism out: the PTO's supplemental examination final rules predicted about 1,430 requests anually; as of August 30, 2013 there were 40. 

 

Source: http://www.uspto.gov/aia_implementation/statistics.jsp

 

What surprised me the most about this data is that supplemental examination was widely believed to be the new path to ex parte reexamination for patent owners (i.e.: rather than file an ex parte reexamination request, just file a supplemental examination request), including by the PTO itself.  See 77 Fed. Reg. 48828, 48847 (Aug. 14, 2012) ("In view of the benefits to patent owners afforded by supplemental examination under 35 U.S.C. 257(c), the Office is estimating that all 110 requests for ex parte reexamination that would have been filed annually by patent owners will instead be filed as requests for supplemental examination.").  So  far, however, traditional ex parte reexamination requests are an order of magnitude greater than supplemental examination filings.  Of course, this can all change with time - inter partes post grant proceedings started off slow but now have eclipsed ex parte reexamination.

One last chart, again from the PTO's website: pre-issuance submissions are becoming a relatively common, although by no means ubiquitous, type of filing. 

 

Source: http://www.uspto.gov/aia_implementation/statistics.jsp

  

Amending the America Invents Act 2013

By Dennis Crouch

One aspect of the Goodlatte discussion draft legislation is a series of "Improvements and Technical Corrections to the Leahy-Smith America Invents Act." The AIA was passed in September 2011 and is gradually being fully implemented across the US patent system. The further changes here are fairly substantial, although buried within the proposed bill itself. The following post offers some explanation of the provisions with only a few comments on the policy implications.

1. REPEAL OF CIVIL ACTION TO OBTAIN A PATENT

For several years, the PTO has been pushing to weaken or eliminate the "civil action" option that is currently available to patent applicants who are refused a patent. The current system allows a patent applicant to file a federal lawsuit that asks a district court to order the PTO to issue a patent covering the claimed invention. The civil action approach allows for extensive presentation of evidence, live witness testimony, and an ultimate decision by a district court judge. And, since the civil action is not an "appeal" per se, substantial deference is not given to prior factual findings by the PTO (as long as the applicant presents its own evidence on point). The civil action approach is not widely used because of the expense of pursuing a district court claim. However, it has been a very successful approach for a number of patent applicants. Under the new provision, the only avenue for challenge an adverse PTO decision on the merits of an application would be through appeal to the Court of Appeals for the Federal Circuit.

2. POST GRANT REVIEW ESTOPPEL SUBSTANTIALLY NARROWED

The current estoppel rules of post-grant review indicate that a petitioner will be estopped from latter asserting in-court that the challenged patent "invalid on any ground that the petitioner raised or reasonably could have raised during that post-grant review." The amendment would substantially narrow the estoppel to cover only grounds that the petitioner actually raised.

This change would result in Post-Grant review being much more of a parallel option rather than an alternative option to challenging patent validity.

3. CONSTRUING CLAIMS DURING POST-GRANT and INTER-PARTES REVIEW

The proposal would require that the claims under review be construed in the same way that they would be construed by a district court rather than using a "broadest reasonable construction." The statute as written requires that the PTAB construe "each claim of the patent in accordance with the ordinary and customary meaning of such claim as understood by one of ordinary skill in the art and the prosecution history pertaining to the patent." However, that method is somewhat different than what has been ruled as the law by the Federal Circuit.

4. CODIFICATION OF DOUBLE PATENTING DOCTRINE

The statute would create a new statutory provision that is intended to codify the obviousness-type double patenting doctrine. This ensures that the doctrine is carried through into the AIA. I have not parsed through the new provision to see if it does what they say it does:

35 U.S.C. §106 that reads as follows:

A claimed invention of a patent issued under section 151 (referred to as the 'first patent') that is not prior art to a claimed invention of another patent (referred to as the 'second patent') shall be considered prior art to the claimed invention of the second patent for the purpose of determining the non-obviousness of the claimed invention of the second patent under section 103 if—

(1) the claimed invention of the first patent was effectively filed under section 102(d) on or before the effective filing date of the claimed invention of the second patent;

(2) either—

(A) the first patent and second patent name the same inventor; or

(B) the claimed invention of the first patent would constitute prior art to the claimed invention of the second patent under section 102(a)(2) if an exception under section 102(b)(2) did not apply and, if applicable, if the claimed invention of the first patent had not been effectively filed under section 102(d) on (but was effectively filed before) the effective filing date of the claimed invention of the second patent; and

(3) the patentee of the second patent has not disclaimed the rights to enforce the second patent independently from, and beyond the statutory term of, the first patent.

5. EXPANDING THE SCOPE OF COVERED_BUSINESS_METHOD REVIEWS

The AIA creates an option for third parties to attack patents on non-technological "covered business method" innovations through the use of a new post-grant review proceeding. Through the review program, third parties can raise any ground of invalidity and can use this approach to pre-AIA patents. The amended provision would appear to sweep-in virtually all software-type patent claims.

Under the changes, the 7-year sunset provision would be removed; the expansive definition of business methods found in SAP America, Inc. v. Versata Dev. Group, Inc., CBM2012-00001, 12 Paper 36 (January 9, 2013), would be codified; and the "non-technological" requirement would be clarified/expanded to make clear that a claim's recitation of technological features does not make the claim technological "if it is readily apparent that the recited [technological] feature is anticipated by or obvious in light of the prior art."

6. SHRINKING PATENT TERM ADJUSTMENT

The bill proposes a clear rule that no PTA can be awarded for any delays that occur following the filing of a Request for Continued Examination (RCE). This would reduce the patent term for a substantial portion of patents and the bill indicates that the recalculation would be retroactive against any patent application still pending at the time of enactment.

7. OVERTURNING OF GUNN V. MINTON

Although not a statutory change, the bill would make the "clarifying" statement that:

CLARIFICATION OF JURISDICTION.—Congress finds that the Federal interest in preventing inconsistent final judicial determinations as to the legal force or effect of the claims in a patent presents a substantial Federal issue that is important to the Federal system as a whole.

This provision has the potential of bringing patent malpractice claims back under Federal Court jurisprudence. And, to the extent that patent licenses depend upon the scope of a patent claim, licensee disputes would also be heard in Federal Courts.

Patent Reform 2013 – A Discussion Draft

by Dennis Crouch

House Judiciary Chairman Bob Goodlatte has released a new version of a "discussion draft" of proposed legislation focusing attention on "abusive" litigation tactics. In a major way, the Bill is focused on making it more difficult for patentees to enforce their patents and is designed to put additional financial risk on patentees who lose in court. Members of both the House and Senate are looking for constituent input on this topic. Senator Leahy is also likely to distribute a draft bill within the next month or so.

[Download Goodlatte - Patent Discussion Draft]

1. Raising Pleading Requirements for Allegations of Patent Infringement

Under current Federal Circuit precedent, a patentee pleading patent infringement can file a bare-bones complaint that basically only indicates the patent at suit and the general activity by the defendant that leads to the infringement accusation. In Iqbal and Twombly, the Supreme Court generally raised the pleading standards and federal courts now require significantly more factual assertions in complaints than they did a few years ago. However, the Federal Circuit found that patent infringement complaints fall within an exception that allows less-informative pleadings so long as they comply with Form 18 of the FRCP. The court has applied the higher Iqbal standards to other pleadings such as defenses and counterclaims raised in an answer and especially focused on allegations of inequitable conduct.

The bare-bones approach of Form 18 leaves tremendous wiggle. And, patentees typically do not identify, for instance, (1) which claims of the patent are being asserted, or (2) what products or services of the defendant are allegedly infringing. The amendment would essentially tell patentees that patent infringement must be pled with particularity. And, at least the patentee must identify those two important elements listed above (if known). In addition, the proposal in its current form asks for a claim chart showing "where each element of each claim . . . is found within the accused instrumentality" and a description, "with detailed specificity, how the terms in each claim … correspond to the functionality of the accused instrumentality." The complaint would also be required to list all other cases where the patent has been asserted and identify whether the patents at issue are subject to any FRAND commitment.

One exemption that appears throughout the proposal is that these changes do not apply when an innovator drug company is suing a would-be generic manufacturer. Rather, throughout the proposal an exception is made for cases where the cause of action arises under 35 U.S.C. § 271(e)(2) (the typical statutory provision invoked in innovator-generic patent litigation).

Federal courts have been using a "notice pleading" system since the 1930's – requiring a "short and plain statement of the claim showing that the pleader is entitled to relief." FRCP 8. It would be interesting to see some pre-1938 complaints and consider whether the apocryphal tale that "fact pleading" was actually much more comprehensive. But the changes appear to move the patent world into the world of fact pleading. The idea behind notice pleading is to provide the accused with sufficient notice of the claim without unduly burdening the plaintiff or creating overly formalistic rules. However, for at least some cases, the current standard does not provide sufficient notice for an accused infringer to actually understand what the patentee is claiming. In addition to providing better notice, the proposed legislation would also significantly raise the burden of filing a patent infringement complaint.

The statute also requires that the Judicial Conference propose rules that would eliminate Form 18 as it stands and create a new form that complies with the new factual pleading described above.

How the courts will likely solve this problem before Congress takes action: The courts recognize that the current pleading standard is too low in patent cases (including a likely majority of Federal Circuit judges). To deal with this the court basically has two options: (1) amend Form 18 through the Judicial Conference procedures; or (2) decide that the court is not bound by Form 18.

2. Award Attorney Fees for Prevailing Parties – And Against All Interested Parties

The new bill creates a presumption in favor of attorney fees being awarded to the prevailing party. Unlike other proposals during the past couple of years, the discussion proposal here is not overtly biased against patent assertion. Rather, the attorney fee statute (§ 285) would require courts to award "reasonable fees and other expenses" to the prevailing party "unless the court finds that the position [of the losing party] was substantially justified or that special circumstances make an award unjust."

Now, in order to ensure that patent holding companies are able to pay as losing party, the provision allows for attorney fee recovery against "interested parties" that have been joined under new provision 299(d). Under 299(d), interested parties include assignees, anyone with a right to sue, anyone with a right to sublicense, and anyone with a direct financial interest in the patents. However, neither ordinary contingency fees attorneys nor equity owners of the patentee qualify for joinder despite their obvious financial interests.

3. Limit Discovery in Patent Cases.

For many reasons, patent lawsuits are hotly litigated and the discovery process is long+expensive. The discussion bill provides for particular limits on discovery prior to claim construction. Under the proposal, a court would be barred from allowing discovery prior to a claim construction decision (except for discovery necessary for claim construction).

In addition, the bill would require the judicial conference to propose a number of limits on discovery that have the potential of significantly changing the process of patent some litigation.

4. Additional Initial Disclosures for Public Release

Under current law, information on each patent lawsuit is sent to the USPTO and placed on public record there. The proposed legislation would extend that program by requiring the patentee in an infringement lawsuit to disclose (1) any assignees of the patent; (2) any entities with the right to enforce or sublicense the patent; (3) any entity with a financial interest in either the patent or the plaintiff; (4) the ultimate parent entity of any of the entities named.

In addition, the law would mandate updates of assignee information for all patents within 90-days of any change of assignee.

5. Exception for Customer Lawsuits that Allows for Stay of those Actions

Sometimes alleged infringement is simply based on the defendant's use of an infringing product. The proposed legislation would require a court to stay actions against such customers pending resolution of the case against the manufacturer. However, the grant of stay requires that the customer agrees that the court decisions in the manufacturer suit will become res judicata have preclusive affect against the customer.

6. Foreign Bankruptcy Effect on US Patent License

Business bankruptcy and reorganization is sometimes mind-bending. Bankruptcy trustees are generally authorized to choose whether to reject or enforce (assume) any of the contracts that were binding on the debtor at the time of bankruptcy filing. However, the Bankruptcy code significantly reduces that power when the contract involves the a license of the debtor's intellectual property rights. 35 U.S.C. §365(n). One issue that has arisen lately is the impact of foreign bankruptcy on the debtor's US intellectual property rights holdings. The proposed bill protect the creditor-licensees in those cases so that an IP owner's foreign bankruptcy cannot be used to unilaterally cancel one of its licensee's US IP rights. To be clear, 365(n) applies to US IP rights, but not Trademark rights or state-law rights other than trade secret rights.

Next Federal Circuit Judge: Todd Hughes

The Senate has unanimously (98-0) confirmed Todd Hughes to the US Court of Appeals for the Federal Circuit. With Hughes on the bench, the Federal Circuit will now have a full-bench of twelve judges in addition to six judges with senior status. Although not a patent litigator, Hughes has apparently argued more cases at the Federal Circuit than any other attorney based upon his long career in the commercial litigation branch of the Department of Justice. No date has been announced for his swearing-in. However, Chief Judge Rader prefers to take action quickly and I expect that Judge Hughes will be hearing cases within the next few weeks.

Hughes is the first openly gay judge to be confirmed for any Federal appellate court. The 98-0 confirmation decision suggests that no senator has a principled reason for rejecting judicial candidates based upon their sexual orientation.

Congratulations Judge Hughes!

Patent Reform 2013

Coming soon … "Anti-troll" bills in both the House and Senate that focus on transparency in patenting and litigation, attorney fees, reducing discovery costs, raising pleading requirements, and offering an outlet for lawsuits against the customers of infringing manufacturers.

Patent Law Federalism

Activision TV v. Pinnacle Bancorp (D.Neb 2013)

The Supreme Court has held that state governments are preempted from legislating substantial patent law issues and from deciding patent law cases. Rather, in those contexts, patent law is the exclusive purview of the US national government. Of course, the Supreme Court also recently held (again) that there are many patent law issues that are not "substantial" and that a state can still exert power over those lesser issues. See Minton v. Gunn.

Activision owns a number of patents, including U.S. Patent Nos. 8,330,613 and 7,369,058. And the company has sued a host of defendants alleging infringement based upon the use of a digital menu board - as shown here at Western Sizzlin.

After five local companies received cease-and-desist letters from Activision TV, the Nebraska Attorney General's office began an inquiry and then filed a cease and desist letter against the Texas based law firm of Farney Daniels ordering that the firm to stop sending these letters. The Attorney General letter raised a variety of potential violations involving unfair and deceptive actions and offered the following concluding paragraph:

The possible violations specified in this letter are serious and require your immediate and unconditional cooperation. Given the significant ramifications posed to Nebraska consumers and businesses by your potentially unlawful conduct, I hereby demand that you immediately cease and desist the initiation of any and all new patent infringement enforcement efforts within the State of Nebraska pending the outcome of this office's investigation.

(Bold in original) [AG Letter].

In response, Activision amended its complaint against Pinnacle Bancorp to include allegations against the Attorney General and his chief deputies and requesting a declaratory judgment that Farney Daniels' enforcement actions do not violate Nebraska State Law and that the Attorney General's action violates "Activision's rights under 42 U.S.C. § 1983, the First, Fifth, and Fourteenth Amendments to the U.S. Constitution" as well as the Supremacy Clause found in Article IV. Activision also requested a preliminary injunction. For its part, the State Attorney General argued that Activision had no authority to bring the action because the Attorney General letter was sent to the law firm Farney Daniels and not to the patentee. The Attorney General also stood by its guns in alleging that the letters from Farney Daniels were unlawful under Nebraska law.

[T]here are a number of possibly deceptive statements in the Farney Daniels letters on which businesses to detrimentally rely. For example, the letters warn there are "serious consequences for infringement," and "[i]nfringers who continue to infringe in the face of an objectively high risk of infringement of a valid patent can be forced to pay treble (triple) the actual damages, as well as the patent owner's litigation costs, including all attorney's fees." The letters ... that [the recipients] contact Farney Daniels and Plaintiff "within three weeks of the date of this letter ... further claiming Plaintiff has "suffered damages due to...past infringement, and will suffer damages and irreparable harm in the future in the absence of injunctive relief." . . . The MPHJ letters also "encourage" the business to "retain competent patent counsel to assist you in this matter" and warn that "additional steps might be required" if a license is not purchased.

In all respects, these seem like "threats to sue." . . . These threats to sue are deceptive, the Attorney General believes, because Farney Daniels had no intention of suing all, most, or many of these targeted businesses if they did not agree to licenses, and, of the businesses they actually sued, Farney Daniels had no intention of actually serving summons and/or prosecuting the case to trial. In the debt collection arena, misrepresentations of legal consequences have been held to violate deceptive trade practices laws.

Furthermore, they may be deceptive to the extent Farney Daniels and Plaintiff implied that they have a reasonable basis for identifying the target business as one that actually infringes on the patent. . . . Further facts that may show Farney Daniels' intent, and/or the amount of letters it sent nationwide or to Nebraska businesses, however, have not yet been developed, as the investigation is still nascent.

With regard to the Supremacy clause and patent law's preemption of state-law, the Attorney General argued that its consumer protection action does not impact the patent laws.

Federal law does not preempt the state regulation of entrepreneurial letter writing campaigns. The Attorney General's possible state law deceptive trade practices claims do not involve any legal application to the validity of the patent, to the scope of what is infringing, or to the public domain in any way.

Finally . . . the July 18 letter in no way affects Plaintiff's rights to bring suit in this or any Court.

In considering these claims, the Federal District court partially granted Activision's preliminary injunction motion. In particular, the court held that "Farney Daniels can file an appearance in this case or any other federal cases without running the risk of violating the State of Nebraska Attorney General's cease and desist order. Further, Farney Daniels and its attorneys may proceed to prosecute their cases, including all discovery, as it would in any other lawsuit."

What's missing from the court order, however, is any discussion of whether Farney Daniels can continue to pursue any pre-filing activity such as threatening suit against alleged infringers.

Testing comments

This post is for testing out a potential change to the comments. Add your thoughts below.

2014 Holiday Gift Guide for Patent Attorneys – No. 1

I've been biking to work almost every day this semester – usually taking my kids to school on our train but sometimes on my own. You'll note that the bike has a 36-v battery that speeds us up and down the rolling hills of Columbia Missouri and makes the 5-mile ride feel like a breeze. The result is that I get some gentle morning exercise but arrive at work ready to teach. Because Columbia has nice bike trails and easy bike parking, I the bike ride turns out to be quicker than driving. For gifting purposes, Volton does mail-order and then takes about 20 minutes to build – easy enough that any patent attorney could figure it out. [voltonbikes.com] - Dennis

Is "Insolubly Ambiguous" the Correct Standard for Indefiniteness?

By Dennis Crouch

Nautilus v. Biosig Inst. (on petition for writ of certiorari 2013)

A major focus of attention in the current arena of patent reform is on the notice function of patent claims and, in particularly, the standard for definiteness. Most of the time, the scope of a patent's coverage is only known once a district court construes those claims. And, in many cases, that knowledge is really delayed until Federal Circuit review. A substantial portion of the blame in this area can be placed on patentees who intentionally draft claims of ambiguous scope. Of course, the Supreme Court has long recognized the policy benefits of allowing ambiguity in patent coverage. (See, Doctrine of Equivalents). Most technology users would prefer to understand the scope of claims before litigation and use that information to decide whether to obtain a license. However, the ambiguity (in combination with other factors) lead to the common practice of holding-out until a court construes the claims.

For indefinite claims, the statutory guidelines come from 35 U.S.C. § 112(b) that requires claims that "particularly point[] out and distinctly claim[] the subject matter which the inventor … regards as the invention." The doctrine of indefiniteness finds its statutory support from §112(b). And, when a claim is indefinite it is both unpatentable and invalid.

Once a patent issues, it tends to be quite difficult to invalidate that patent on indefiniteness grounds. The difficulty begins with the statutory presumption of validity under § 282 that requires clear and convincing evidence of invalidity. That difficulty continues with the standard for indefiniteness itself. In particular, the Federal Circuit has required that invalidity by indefiniteness requires proof that the challenged claim is ambiguous in a way that is "insoluble." In Biosig, the Federal Circuit similarly held that indefiniteness of an issued claim can only be found "if reasonable efforts at claim construction result in a definition that does not provide sufficient particularity and clarity to inform skilled artisans of the bounds of the claim."

In a new petition, John Vandenberg's team at Klarquist Sparkman has asked the Supreme Court to reconsider the Federal Circuit's standard on this point. Nautilus presents the following questions:

1. Does the Federal Circuit's acceptance of ambiguous patent claims with multiple reasonable interpretations—so long as the ambiguity is not "insoluble" by a court—defeat the statutory requirement of particular and distinct patent claiming?

2. Does the presumption of validity dilute the requirement of particular and distinct patent claiming?

Many of these same issues have been previously addressed by the Supreme Court in pre-1952 decisions. See, for example, United Carbon Co. v. Binney & Smith Co., 317 U.S. 228 (1942). In Union Carbide, the court wrote that:

The statutory requirement of particularity and distinctness in claims is met only when they clearly distinguish what is claimed from what went before in the art and clearly circumscribe what is foreclosed from future enterprise. A zone of uncertainty which enterprise and experimentation may enter only at the risk of infringement claims would discourage invention only a little less than unequivocal foreclosure of the field. Moreover, the claims must be reasonably clear-cut to enable courts to determine whether novelty and invention are genuine. . . . Whether the vagueness of the claim has its source in the language employed or in the somewhat indeterminate character of the advance claimed to have been made in the art is not material. An invention must be capable of accurate definition, and it must be accurately defined, to be patentable.

Interpreting the precursor to Section 112(b), 35 U.S.C. § 33 (1932). The old § 33 included the parallel requirement of claims that "particularly point out and distinctly claim the part, improvement, or combination which he claims as his invention or discovery."

In the Union Carbide, the court's problem with the claims was what it called functionality, writing: [T]he claims are but inaccurate suggestions of the functions of the product, and fall afoul of the rule that a patentee may not broaden his claims by describing the product in terms of function. Holland Furniture Co. v. Perkins Glue Co., 277 U.S. 245; General Electric Co. v. Wabash Corp., 304 U.S. 371. The particular claims at issue in Union Carbide are as follows:

1. Substantially pure carbon black in the form of commercially uniform, comparatively small, rounded, smooth aggregates having a spongy porous interior.

2. As an article of manufacture, a pellet of approximately one sixteenth of any inch in diameter and, formed-of a porous mass of substantially pure carbon black.

See U.S. Patent No. 1,889,429. Read the claims again and look for the functional limitations, then read the Supreme Court's decision.

In General Electric Co. v. Wabash Corp., 304 U.S. 364 (1938), the Supreme Court similarly took issue with the indefiniteness of issued patent claims.

The limits of a patent must be known for the protection of the patentee, the encouragement of the inventive genius of others, and the assurance that the subject of the patent will be dedicated ultimately to the public. The statute seeks to guard against unreasonable advantages to the patentee and disadvantages to others arising from uncertainty as to their rights. The inventor must inform the public during the life of the patent of the limits of the monopoly asserted, so that it may be known which features may be safely used or manufactured without a license and which may not.

. . . . Patentees may reasonably anticipate that claimed inventions, improvements, and discoveries, turning on points so refined as the granular structure of products, require precise descriptions of the new characteristic for which protection is sought. In a limited field, the variant must be clearly defined.

GE v. Wabash.

Reaching further back to the 19^th century, the court wrote in Merrill v. Yeomans, 94 U.S. 568 (1876) that a patentee has no excuse for ambiguous or vague descriptions.

The growth of the patent system in the last quarter of a century in this country has reached a stage in its progress where the variety and magnitude of the interests involved require accuracy, precision, and care in the preparation of all the papers on which the patent is founded. It is no longer a scarcely recognized principle, struggling for a foothold, but it is an organized system, with well-settled rules, supporting itself at once by its utility, and by the wealth which it creates and commands. The developed and improved condition of the patent law, and of the principles which govern the exclusive rights conferred by it, leave no excuse for ambiguous language or vague descriptions. The public should not be deprived of rights supposed to belong to it, without being clearly told what it is that limits these rights. The genius of the inventor, constantly making improvements in existing patents,—a process which gives to the patent system its greatest value,—should not be restrained by vague and indefinite descriptions of claims in existing patents from the salutary and necessary right of improving on that which has already been invented. It seems to us that nothing can be more just and fair, both to the patentee and to the public, than that the former should understand, and correctly describe, just what he has invented, and for what he claims a patent.

Merrill (1876). These cases are in obvious tension with the Federal Circuit's current standard. However, there remains only a small chance that the Supreme Court will hear the case.

One key to the petition here is the argument that the Federal Circuit made it triply difficult to invalidate a claim on indefiniteness ground by (1) using the presumption of validity of § 282 to create stringent elements for the invalidity defense and then (2) also requiring clear-and-convincing evidence to prove those elements; all while (3) regularly ignoring the reality that indefiniteness is a question of law (as are patentable subject matter and obviousness).

AIA Changeover: Claiming Subject Matter Not Found in the Provisional Application

By Dennis Crouch

New patent applications are now being examined under the first-to-file rules codified in the America Invents Act of 2011. In my patent class, I talk about these as effectively rules of evidence that indicate what does and does-not count as evidence against patentability. Any change in the rule of law always has changeover difficulties where policymakers must figure out where to draw the line between the old and new rules. For the AIA, new patent applications filed on or after March 16, 2013 are examined under the new rules so long as the new application contains (or ever contained) at least one claim whose effective filing date is on or after March 16, 2013.

Under the new rules, the USPTO also requires that patent applicants help the PTO understand whether a new application should be examined under the AIA. In particular, the applicant must tell the PTO whenever it is pursuing a patent application that claims priority to a pre-AIA filing but that includes (or once included) at least one claim that had a post-AIA priority date. In the cut-out above, this statement is shown as a check-box as part of the application data sheet form.

The Risk: Over the next year, this issue will arise in thousands of cases – typically those will involve a pre-AIA provisional application followed by a post-AIA non-provisional application with some amount of new matter added in the claims. Under the rules, if any of the claims in that non-provisional lacked sufficient support in the provisional then the entire application is to be analyzed under the first-to-file regime of the AIA. Of course, the difficulty is that in US law the dividing line between supported and unsupported subject matter is not crisp and the determination is now being placed on patent applicants to make that determination at the risk of an inequitable conduct finding down-the-line.

Overturning the PTOs Approach?: It is possible that the USPTO's interpretation of the new law is incorrect. The PTO rules require a patent-by-patent analysis of the effective filing date. Under the USPTO's approach either a patent is an AIA patent or it is not. However, another reading of the AIA suggests that the proper approach is to go claim-by-claim rather than patent-by-patent. In particular, revised Section 102 focuses on the "effective filing date of the claimed invention" not the effective filing date of the patent application as a whole. 35 U.S.C. 102(a). In addition, the definitions Section 100(i) also focuses on individual claims – indicating that the effective filing date of a "claimed invention" is "(B) the filing date of the earliest application for which the patent or application is entitled, as to such invention, to a right of priority [or benefit]." It seems to me that the statutory guidance of Sections 102 and 100(i) collectively instruct us to consider the effective date of a claimed invention rather than for a patent application as a whole, and when thinking about prior provisional/parent/grandparent applications, the focus should be on whether those prior applications disclose the claimed invention in question.

But the PTO's Approach is Probably Correct: Now, the PTO's rule makes sense under the AIA, Section 3(n) that provides that the first-to-invent rules apply to

any application for patent, and to any patent issuing thereon, that contains or contained at any time— (A) a claim to a claimed invention that has an effective filing date as defined in [35 U.S.C. §] 100(i) … that is on or after the effective date described in this paragraph; or (B) a specific reference under [35 U.S.C. §§] 120, 121, or 365(c) … to any patent or application that contains or contained at any time such a claim.

The result here is really that whether-or-not a claim is adjudicated under the first-to-file regime is determined on a patent-by-patent basis but the priority date (i.e., effective filing date) associated with any particular claim may be prior to March 16, 2013, even when the patent is being adjudicated under first-to-file.

Trends in Inequitable Conduct

By Jason Rantanen

Last fall, I presented a set of data on inequitable conduct pleadings at the America Invents Act: One Year Later conference at the Indiana University Mauer School of Law. That data revealed two significant findings: first, that the rate at which inequitable conduct pleadings rose between 2000-2008 was much slower than previously believed (and never came close to the alleged 80% of all patent cases) and second, that since 2008 the rate at which inequitable conduct is pled has fallen substantially.  The results of that study have since been published in IP Theory; you can read the relatively short article here: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2266041.

Since the article only included data up to the end of 2012, however, I thought it would be useful to update it to include 2013 data.  The below chart compares the number of patent cases in which an Answer was filed to the number of patent cases in which an Answer was filed containing the term "inequitable conduct" for each year based on searches performed in LexMachina.  The 2013 data is as of 9/18/2013.



This chart indicates that the rate at which inequitable conduct is being pled continues to decline (at least measured through this crude metric), although it may have reached a plateau.  I've also generated a similar chart that shows Answers containing "inequitable conduct" as a percentage of all "Answers" in patent cases that are searchable using LexMachina; it shows a similar pattern.  

Competitive and Paid Patent Prosecution Law Internship Starting Now

By Dennis Crouch

The attorneys at Plumsea Law Group in Bethesda are organizing an interesting trial – Starting October 15, the group will be bringing-on five new paid interns as part of a four-month-long intensive patent prosecution training program. This is designed as a real training program, although it is also a recruiting tool and one or two of the interns may be hired-on following the internship. [Job Posting on Patently-O Jobs]. The technology focus is on mechanical-engineering and physics.

I caught up with Patty Hong who is one of the attorneys running the program. Patty provided me with some further details on the program:

1. Who?

New law school graduates or even older graduates who do not have patent prosecution experience and face that obstacle when interviewing with law firms. We are also open minded about newly graduated engineers who may be thinking about the PTO or law school.

2. What?

The program will be an intensive, closely supervised training being run by 3-4 attorneys in the firm. Patty notes "This is school – we have been developing a training set for teaching newbies how to draft from scratch." Folks at the firm follow a particular "information design / movie making approach" to patent application drafting.

3. When?

The first program will start October 15, 2013 and will last for four months. If the first goes well, the firm expects to repeat.

4. Where?

The program will be based in the firm's Bethesda, MD office. Interns must be physically present for the program. "We know there may be a demand to do this as a distance learning, but that's not available this time."

5. How?

"We've been developing a method for this for years, and we will fine tune it for people who may have never seen, touched or smelled a patent. We will use an issued patent at first, and use our writing materials to teach how to think about what they are writing. The open interview session will include an on-the-spot writing sample that they need to produce. Something routine and narrative like 'describe what you had for breakfast today, and how you prepared it.'"

6. Why?

"Patent drafting is a craft, and this is an apprenticeship." Students will walk away with real training and a good writing sample.

Apply immediately by submitting your resume with grades/rank, a writing sample and cover letter explaining your interest in this opportunity. Please highlight relevant PTO / law firm / industry experience. Interviews will be held the mornings of September 26, October 2, 3, 9 and 10. The interview will include a short writing portion. Apply by emailing Patricia Hong at: [email protected].

Raising Maintenance Fees for Non-Practiced Inventions

By Dennis Crouch

Post-grant patent maintenance fees offer an easy mechanism for shifting patentee behavior. In the US, patent holders must pay a maintenance fee three times during the life of an issued patent. I think of the fee as akin to property tax. When a real-property owner fails to pay the property taxes, the state forecloses. In the patent system failure to pay the maintenance fees similarly results in the property right be taken from the non-payer. However, instead of reselling the patent at auction, the government instead announces that the previously patented invention is no longer protected by any exclusive right, i.e., that the patent right has been abandoned.

Patent rights are usually thought of as normal goods in that a higher price typically leads to a lower quantity demanded. In the maintenance fee context, higher maintenance fees lead to more patents being abandoned. And, most patents go abandoned by the time that the third-maintenance fee rolls around because patent holders decide that the extra payment is not worth the extra money.

In a recent draft article titled Removing the Troll from the Thicket: The Case for Enhancing Patent Maintenance Fees in Relation to the Size of a Patent Owner's Non-Practiced Patent Portfolio, Professor David Olson (BC) focuses on maintenance fees as a mechanism for going after entities with large patent portfolios that are not being practiced. Olson writes:

It is proposed that patent maintenance fees be increased according to a sliding scale tied to the number of non-practiced patents a patent owner has in its portfolio. Thus, as the size of a firm's patent portfolio increases, so too does the maintenance fee multiplier charged for all its patents, beginning with the second maintenance fee due date. All patents with common ownership interests would be aggregated in determining the fee enhancement. Because the enhanced fees do not kick in until 7.5 years after issuance, incentives to invent and to disseminate should not be significantly reduced. This proposal will encourage large patent portfolio holders to pare down their holdings by determining which of their older patents are not worth maintaining. This will benefit competitors and new inventors who are currently subject to hold-up problems from large portfolios — many of which are particularly caused by old, low-value patents held en masse.

[Read the article here: http://ssrn.com/abstract=2318521]. Olson's approach is essentially a weak version of a "working requirement" seen in some countries that makes a patent unenforceable unless it is being used by the patentee. Instead of requiring working, Olson provides a monetary incentive.

Although Olson's article is focused on the problem of "trolls," his proposal would have its greatest impact on large technology companies such as IBM, Samsung, Intel, and others whose patent porfolios include large numbers of patents that are not being practiced. Those companies are already "suffering" from major increases in maintenance fees implemented by the USPTO earlier in 2013.

In my mind, the largest political roadblock to implementation is the increased burden placed on patent owners to actually understand the patents that they own. Because of the complexity and highly technical nature of modern patents and patent claims, it is rarely a trivial process for a patent owner to know whether its patents actually cover its processes in place. This is especially true because patents tend to be filed well before a commercial embodiment is on the market. Olson acknowledges this problem with the statement that a "possible objection is that this Article's proposal will be expensive and burdensome for patent holders. . . . This burden and expense should not be understated. Accordingly, it may make sense to give a fairly long lead-in time to allow firms to comply. But it should also be noted that while this will be burdensome to patent owners, the current system with all of its uncertainty as to ownership and patent coverage is burdensome and costly to others." Olson also writes that the patent owner is the "least cost avoider" in terms of determining whether the underlying invention is being practiced by the patentee. The problem with that argument is that, under the current system, nobody even needs to ask that question because it is irrelevant to patentability or patent enforcement (except as to remedies). Hopefully in a follow-on paper, Olson can provide us with a better mechanism for judging whether his proposal is better than the status quo or other alternatives. Setting this aside, Olson's paper comes at an opportune time as Congress is currently drafting legislation and considering proposals to address the "problem of patent trolls."

Other Posts:

• http://www.patentlyo.com/patent/2012/09/patent-maintenance-fees.html
• http://www.patentlyo.com/patent/2011/03/paying-maintenance-fees.html

http://www.patentlyo.com/patent/2009/02/reinstating-pat.html

Bits & Bytes from Jonathan Hummel

RECENTLY

#1. Intellectual Ventures deals with Nest Labs, help avoid Honeywell

Jeff John Roberts, at GigaOM, reports on a deal released last Wednesday between patent behemoth Intellectual Ventures, and a maker of home thermostats, Nest Labs. While the details of the deal are not yet public, it seems likely that the deal included the sale of some patents and the licensing of others. It looks like Nest Labs is seeking refuge from the Honeywell litigation rainstorm beneath the Intellectual Ventures umbrella. Likely the deal gives Nest Labs some weapons to use against larger Honeywell in future litigation.

#2. NUEDEXTA Capsules litigation comes to an end

Wockhardt (BSE & NSE) and Avanir Pharmaceutifcals (AVNR) have reached an agreement, ending their litigation over marketing and selling of NEUDEXTA capsules. The settlement agreement grants Wockhardt the right to begin selling a generic version of NUEDEXTA on July 30, 2026, or earlier under certain circumstances.

#3. Ministry of Sound v. Spotify

Stuart Dredge, for The Guardian, reports that Ministry of Sound is suing Spotify for infringment. The dance music group, Ministry of Sound alleges that Spotify is infringing several copyrights because Spotify has failed to remove users playlists. Ministry of Sound argues that some playlists on the streaming music service mirror the group’s dance compilations. A major issue is the contribution of ordering and arranging the songs in a playlist. Spotify has the rights to stream all the tracks on the playlists in question, but the issue here is whether the compilation structure - the order of the songs - can be copyrighted.

#4. Santa Clara Professor to joins Whitehouse  Office of S&T

Colleen Chien, Associate Professor at Santa Clara University School of Law, will serve in the White House Office of Science and Technology Policy (OSTP) as senior advisor for intellectual property and innovation to Todd Park.  Professor Chien has been published extensively on patent assertion entities (she coined the term), and the secondary market for patents.

 

PENDING

#1. Google going for noise in eBooks.

Victoria Slind-Flor, at Bloomberg, reports that Google is seeking a patent covering what it calls “triggered sounds.” "Existing e-book readers don’t take 'full advantage' of their capabilities to immerse a reader, Google says. The technology covered by the patent would allow certain trigger points in the text to call forth prerecorded sounds related to the contents of the book.

Publication Number: 20130209981

Application Number: 13/397,658

 

COOL TECH

#1. Interplanetary Internet?!

Reports out of the White House Office of Science and Technology (OSTP) carry news of the first steps in creating an interplanetary internet. Phil Larson and Mike Gazarik reported that on September 6, NASA launched the Lunar Atmosphere and Dust Environment Explorer (LADEE) mission to study the thin atmosphere around the moon. However, the satellite will also be testing a new technology, the Laser Communications Relay Demonstration. This technology is supposed to allow much faster data transmission between objects in space and ground control on Earth.

 

UPCOMING EVENTS

• Intellectual Property Symposium – Oct. 4 – University of Missouri School of Law –  Columbia, MO

“Resolving IP Disputes: Calling for an Alternative Paradigm,” hosted by the Center for Dispute Resolution at the University of Missouri School of Law. The Keynote Address will be delivered by Greg Gorder, the founder and vice chairman of Intellectual Ventures.

Links:

• Although the event is free, please sign-up in advance: http://tinyurl.com/MUPatentLaw
• Printable Brochure and Schedule: http://www.patentlyo.com/ResolvingIPDisputesBrochure.pdf

 

• Supreme Court IP Review Conference – Sep. 26 – Chicago-Kent

The Supreme Court IP Review (SCIPR) is a conference designed to provide intellectual property practitioners, jurists, legal academics and law students with a review of IP cases from the U.S. Supreme Court's 2012 Term, a preview of cases on the docket for the 2013 Term, and a discussion of cert. petitions to watch.

• The Honorable Diane Wood of the U.S. Court of Appeals for the Seventh Circuit will deliver the keynote address at SCIPR 2013
• Register online for SCIPR 2013 by 12:00 pm (CST), September 23, 2013.

 

• Fair Use and Copyright Clearance for Creative Clients: A Review of Recent Case Law and Practice – 9/24

ABA section of Intellectual of Property Webinar/Teleconference

 

 

JOBS

#1. IP Attorney (Electrical Engineering / Computer Sciences) - Law Firm - McLean, Va.

• Roberts Mlotkowski Safran & Cole, P.C. (RMSC), an  Intellectual Property Law Firm (RMSC) located in prestigious Tysons Corner, Virginia seeks a Patent Attorney with 2-5 years experience having an electrical engineering or computer sciences degree. 

 

#2. Patent Attorney / Patent Agent - Law Firm - Syracuse, N.Y.

• Burr & Brown, a Syracuse, New York Law Firm seeks experienced patent attorneys or patent agents to handle foreign-based patent prosecution. Candidates must have substantial experience prosecuting cases before the USPTO.

 

 

Please email me at [email protected] with any leads for future Bits & Bytes

Related articles

Intellectual Ventures v. Symantec

Nest Labs Strikes Patent Deal With Intellectual Ventures

Three Myths About Intellectual Ventures

Bits & Bytes from Jonathan Hummel

Nest Labs signs patent deal with Intellectual Ventures

September 19, 2013 is Missouri's annual Tech Expo here at the University of Missouri.  [http://motechexpo.missouri.edu/] Sponsors include both the Polsinelli law firm and Dentons.

Hricik: Why Section 101 is Neither a "Condition of Patentability" nor an Invalidity Defense

By Dennis Crouch

On his side of the blog, Professor David Hricik again raises the question of whether Section 101 can serve as the basis for a defense to patentability.

[http://www.patentlyo.com/hricik/2013/09/why-section-101-is-neither-a-condition-of-patentability-nor-an-invalidity-defense.html]

The basic notion is that the defenses to charges of patent infringement are listed in 35 U.S.C. § 282 and there is no statutory pathway for recognizing § 101 as such a defense. Hricik also discusses some amount of legislative history in drafting of the 1952 Patent Act that bolsters his conclusion. The Supreme Court approach makes sense then only by ignoring the statutory language and legislative history.

Other Posts:

• Hricik, Are the Courts Correct in Their Assumption that a Patent Issued on Non-patentable Subject Matter is Invalid?
• Crouch, Can a Third Party Challenge Section 101 Subject Matter Eligibility in the USPTO's new Post-Grant Review Procedure?
• Kappos, PTAB and Patentability Challenges (responding to my post above)    
• Crouch, Beyond Question: RMail Challenges the Use of Subject Matter Eligibility as an Invalidity Defense

There are a few potential legal challenges on this question that are rising through the process, including the Versata case (Inter partes (CBM) review on eligibility grounds). In Sinclair-Allison v. Fifth Ave. Physician (2013-1177), the accused infringer is counter-intuitively agreeing with Hricik that subject matter eligibility is not a validity defense but instead is an off-book "eligibility defense." The point of the line of argument is that the presumption of validity shouldn't apply to eligibility challenges.

Jon Stewart Show Takes on Biotech Patents

The Daily Show with Jon Stewart
Get More: Daily Show Full Episodes,The Daily Show on Facebook

The show stars McAndrews partner Scott McBride.

Oral Argument Recap: Lighting Ballast Control v. Philips

Guest Post by Jonas Anderson, Assistant Professor at American University, Washington College of Law.

This morning, the Federal Circuit sat en banc in the case of Lighting Ballast Control v. Philips.  The case is the latest and most significant challenge to the court’s de novo standard of review in claim construction cases.  In taking the case en banc, the Federal Circuit asked the parties to brief three questions:

• Should the Federal Circuit overrule Cybor Corp. v. FAS Techs. Inc., 138 F.3d 1448 (Fed. Cir. 1998) (in which the Federal Circuit held that “as a purely legal question, we review claim construction de novo on appeal including any allegedly fact-based questions relating to claim construction.”)?

• Should the Federal Circuit afford deference to any aspect of a district court’s claim interpretation?

• If so, which aspects should be afforded deference?

Both parties in this case agree that de novo review is not the appropriate standard of review for all aspects of claim construction.  The parties’ positions differ, however, as to the proper scope of appellate deference: Lighting Ballast argues that the court should completely abandon its practice of de novo review and afford deference to all aspects of claim construction decisions; Universal Lighting Technologies (the appellee), on the other hand, argues that deference is appropriate only in resolving “disputed issues of historical fact.”  The PTO echoes ULT’s stance.  In a recent paper forthcoming in the Northwestern University Law Review co-authored with Professor Peter Menell of Berkeley Law School, we argue that de novo review has already been replaced at the Federal Circuit with a more deferential standard, albeit informally.  We find evidence for out theory in the significant drop in reversal rate that has occurred over the past decade: from a high of 44% of terms in 2004 to 20% reversed in 2011.

Despite both parties arguing that Cybor should be modified to some degree and numerous Federal Circuit judges having expressed that belief in prior cases, the tone of the arguments today was certainly one of skepticism.  The three main topics addressed:

National Uniformity Concerns -  Judge Lourie’s initial question was whether deference would disrupt the national uniformity of patent law that the Federal Circuit was designed to achieve.  ULT admitted that the possibility of non-uniform claim construction decisions would be a negative outcome of overruling Cybor, but FRCP 52(a) is in tension with a pure de novo review of claim construction.  The acting Solicitor of the PTO, Nathan Kelley, closed his argument by addressing the non-uniformity concern.  Kelley argued that any non-uniformity that occurred in light of a lowered deference standard would be a benefit to the public because it would result in reduced patent scope in some parts of the country.  While that is obviously not ideal, Kelley’s point was that the concern should not be an overriding one for the court since any non-uniformity is a benefit, not a burden, to the public. 

Line-drawing Problems between Issues of Fact and Issues of Law – The issue that perhaps most captivated the Judge’s attention was whether a deferential standard was workable.  Judge Moore, perhaps one of the court’s most vocal critics of Cybor, was clearly troubled with the solution offered by ULT and the PTO.  She asked for a precise definition of a “historical fact” no less than three times, and never received an answer that satisfied her.  Because claim construction is ultimately an effort to decipher the meaning that a PHOSITA would ascribe to a claim term, she feared that every claim construction decision (other than when the patentee acts as his own lexicographer) would be considered a question of fact.  Despite the PTO and appellee’s repeated assurances that their preferred level of deference would amount to no more than a “small change” in the law, Judge Moore and others (including Judge Dyk, Lourie, and Reyna) seemed troubled by the potential implications of the change.  Judge Lourie asked whether every case would now involve litigants attempting to frame legal determinations as factual determinations.

The Impact of Stare Decisis – This issue, pursued extensively by Judge Taranto, seemed to take the litigants by surprise.  Judge Taranto repeatedly asked about the court’s ability to revisit a clearly established en banc precedent with no intervening Supreme Court case or other change in the law.  Neither side seemed to have a ready answer to his question.

Judge O’Malley, who was on the original panel decision, played a pivotal role in the argument, attempting to clarify the position of the PTO and ULT.  She interpreted their position as one in which a district court judge’s decision as to the historical meaning of a claim that was based on extrinsic evidence would be given deference, but if that interpretation runs counter to the Federal Circuit’s de novo review of the intrinsic evidence the district court’s decision would not impact the case.  This middle position was clearly not satisfactory to a number of judges.  In light of the skepticism, ULT’s counsel essentially backed away from his position that Cybor should be modified; on rebuttal he suggested that the court may well not want to modify Cybor. 

Ultimately, it will be interesting to see if the court decides to maintain the de novo standard or tries to find a way to disentangle factual issues from legal ones.  As a skeptical Judge Dyk quipped about the latter option, “let’s just experiment and see how difficult it would be.”  I sense that some on the court would like to make those distinctions (Judge O’Malley in particular), but I’m unsure whether enough votes exist to make the change.  I don’t think the court will gravitate to Lighting Ballast’s position of a pure legal error standard.  Characterizing all claim construction decisions as factual seems too radical of a departure to the court. Judge Lourie appeared taken aback when Lighting Ballast’s counsel suggested that the specification should be treated as parole evidence: “That is an extraordinary argument.”  Indeed, switching from de novo review to complete deference to all district court claim construction decisions appears, at this stage, very unlikely.

Ed.: You can listen to the oral argument here.

Acting Director Rea to Step Down from USPTO

by Dennis Crouch

In a message to her USPTO colleagues, USPTO Acting Director Teresa Stanek Rea has announced her intent to leave the agency in the near future. Director Rea joined the USPTO in 2011 as Deputy Director after Sharon Barner stepped down from that position. Rea worked closely with then USPTO Dave Kappos in developing and implementing key elements of the America Invents Act. She has been Acting Director since Kappos stepped down in January 2013. Prior to joining the USPTO, Rea was a partner at the law firm of Crowell & Morning.

The Obama administration has not yet nominated a replacement for Dave Kappos. That decision has apparently been delayed for the past nine months because the position of Secretary of Commerce (the USPTO Director's Boss) was also open. Penny Pritzker has now assumed office as the 38^th US Secretary of Commerce and we can expect an announcement of a new USPTO director within the next few weeks. It is unclear whether Director Rea will stay on until an appointed director takes office. If not, the usual succession decision would place Peggy Focarino with the duties of Acting Director (although without that title). Ms. Focarino is currently Commissioner of Patents.

High Point v. Buyer’s Direct – Tell me more, tell me more (about design patents and § 103)

Guest Post By Sarah Burstein, Associate Professor of Law at the University of Oklahoma College of Law

High Point Design LLC v. Buyer’s Direct, Inc. (Fed. Cir. Sept. 11, 2013) Download High Point v Buyers Direct
Panel:  Schall (author), O’Malley, Wallach

High Point Design LLC (“High Point”) and Buyer’s Direct, Inc. (“BDI”) both manufacture fuzzy slipper-socks. In this case, BDI accused High Point of infringing U.S. Des. Patent No. D598,183 (the “D’183 patent”). In May, the district court granted summary judgment in favor of High Point, concluding that the patented design was invalid as obvious and as functional. It also dismissed BDI’s trade dress claim.

The most interesting parts of this decision deal with the issue of obviousness. In the design patent context, the § 103 analysis has two steps. First, the court must identify a proper primary reference—i.e., a “something in existence” that has “basically the same” appearance as the claimed design. Second, other references can be used (assuming certain conditions are met) to modify the primary reference “to create a design that has the same overall visual appearance of the claimed design.”

In High Point, the district court identified two Woolrich slippers, the “Penta” and the “Laurel Hill,” as primary references. In particular, the district court found that the Penta slipper “looks indistinguishable” from the claimed design and that the Laurel Hill slipper had some “insubstantial” differences but “nonetheless has the precise look that an ordinary observer would think of as a physical embodiment” of the claimed design. The district court did not, however, include any images of these designs. For your reference, however, here is a chart comparing the Penta slipper to some of the drawings from the D’183 patent: 

On appeal, the Federal Circuit decided that the district court erred in its primary reference analysis in a number of ways. According to the Federal Circuit, the district court “erred by failing to translate the design . . . into a verbal description.” On this point, the court relied on its 1996 decision in Durling v. Spectrum Furniture Co., Inc. In Durling, the court divided the first step of the § 103 analysis (i.e., the determination of whether there is a proper primary reference) into two parts, instructing district courts to: “(1) discern the correct visual impression created by the patented design as a whole; and (2) determine whether there is a single reference that creates ‘basically the same’ visual impression.” According to the Federal Circuit, the district court’s analysis in High Point failed to satisfy both of these requirements.

As to the “first part of the first step”—i.e., “discern[ing] the correct visual impression”—the Federal Circuit noted that, under Durling, “the trial court must first translate [the design patent’s] visual descriptions into words,” so that “the parties and appellate courts can discern the internal reasoning employed by the trial court to reach its decision as to whether or not a prior art design is basically the same as the claimed design.”[1] The Federal Circuit found the district court’s description of the D’183 patent to be insufficient because it described the claimed design at “too high a level of abstraction.” So it reversed and remanded on the issue of obviousness, instructing the district court to “add sufficient detail to its verbal description of the claimed design to evoke a visual image consonant with that design.” The Federal Circuit did not, however, explain how much detail would be “sufficient” to meet this evocation standard.

This part of the opinion may seem strange in light of the 2008 en banc decision in Egyptian Goddess, Inc. v. Swisa, Inc., in which the Federal Circuit cautioned district courts against “attempt[ing] to ‘construe’ a design patent claim by providing a detailed verbal description of the claimed design.” In Egyptian Goddess, the Federal Circuit did attempt to distinguish Durling, stating in a footnote that “[r]equiring such an explanation of a legal ruling as to invalidity is quite different from requiring an elaborate verbal claim construction to guide the finder of fact in conducting the infringement inquiry.” Whether that distinction is persuasive is an issue for another day.

As to the second part—i.e., determining whether there is a reference with “basically the same” impression—the Federal Circuit concluded that the district court failed to adequately explain its reasoning. It stated that, on remand, “the district court should do a side-by-side comparison of the [potential primary reference and the claimed design] to determine if they create the same visual impression.”

The Federal Circuit identified a number of other errors in the district court’s § 103 analysis, including its use of an “ordinary observer” standard. The Federal Circuit reiterated that “the obviousness of a design patent must . . . be assessed from the viewpoint of an ordinary designer,” notwithstanding some unfortunate dicta (my characterization, not the court’s) in the 2009 case of Seaway Trading Corp. v. Walgreens Corp.

However, despite all of its criticisms of the district court’s analysis, the Federal Circuit did not say that the district court’s conclusion was wrong. Indeed, the Federal Circuit expressly refused to take a position on the ultimate issue of whether the D’183 patent was obvious. And the Federal Circuit did not say that the Penta or the Laurel Hill slippers could not qualify as primary references. So it will be very interesting to see what happens on remand.

Resolving IP Disputes: Calling for an Alternative Paradigm

I hope that you'll join us here at the University of Missouri School of Law for our upcoming Symposium on October 4, 2013 focused on Resolving Intellectual Property Disputes (with particular focus on patents). The event is titled "Resolving IP Disputes: Calling for an Alternative Paradigm" and is sponsored by the MU School of Law's Center for the Study of Dispute Resolution as well as the Journal of Dispute Resolution (JDR). Professor Jim Levin and I are organizing the event and have lined up a set of really interesting speakers (in my view). These include Greg Gorder who is a co-founder of the multi-billion-dollar patent market maker Intellectual Ventures. I expect that the event will be fairly small with about 100 patent law professionals coming in from around the country.

To the extent that you have interested colleagues who do not read Patently-O, please forward this invitation!

Links

• Although the event is free, please sign-up in advance: http://tinyurl.com/MUPatentLaw
• Printable Brochure and Schedule: http://www.patentlyo.com/ResolvingIPDisputesBrochure.pdf

Thanks, Dennis Crouch ([email protected])

Patent Practitioners

The USPTO lists 42,000 registered patent practitioners (including both patent attorneys and patent agents). The chart above groups those practitioners by registration year. The most recent enrollees are Thomas Dunham, Alexander Farrell, Erin Foley, and Mark Metzke. Congratulations.

The following chart shows the percentage of patent attorneys who list an employer on the USPTO Registration Information.

 

UK Take on Software Patent Eligibility: Claim Must include Feature that is both Technological and Innovative

By Dennis Crouch

Lantana Ltd. v. UK Comptroller General of Patents, [2013] EWHC 2673 (Pat)

Earlier this month, High Court Judge Colin Birss released a new opinion on the European view of software patentability as seen through the eyes of an English judge. The basic rule coming from the EPC is that "programs for computers . . . as such" are not patentable. EPC Article 52. This particular case arises from the refusal of the UKIPO (not the EPO) to grant a patent to Lantana. However, the UK Patents Act of 1977 implements Article 52 UK roughly follows the law set down by the EPO.

Digging in, the main subject-matter related question that the UK court asks in software related inventions is whether the invention offers an innovative technological contribution beyond the computer program itself. In HTC v Apple [2013] EWCA Civ 451 and Aerotel Ltd v Telco Holdings Ltd, [2006] EWCA Civ 1371, the UK Court of Appeals explained the four-step process for determining whether a particular claimed invention meets this technological contribution requirement. The steps are:

i) construe the claim;

ii) identify the actual contribution offered by the claimed invention;

iii) determine whether the contribution falls solely within the scope of excluded subject matter (i.e., programs for computers); and

iv) determine whether the contribution is actually technical in nature.

In those cases, the courts made clear that the technical contribution could be either a technological mechanism or a technological effect.

A key point in the US debate on patentable subject matter is whether the technological (or non-abstract) contribution needs to be innovative. In the UK/EPO, the answer is yes, that contribution must itself be innovative in the way that it makes a "contribution to the known art."

Here, Judge Birss followed anything but an integrative approach to patentable subject matter. Rather, the focus is on whether the elements of the invention that qualify as subject-matter-eligible (i.e., technological) also offer an innovative contribution. Lantana argued that this approach conflated the question of subject matter eligibility with those of novelty and non-obviousness. However, Judge Birss disagreed:

Mr Beresford [Counsel for Lantana] submitted that [Judge Birss's approach] conflicted with the acceptance by the examiner that the claim was novel and non-obvious. I do not agree. Those matters [decided by the examiner] apply to the claim as a whole, that is to say the entire combination of features. The point here is a different one, i.e. that the idea of an email message containing machine readable instructions as a contribution to the art in this case is wrong. The computers in the claim are not operating in a new way. . . .

The claim has been found to be novel and inventive by the examiner and in that sense it makes a contribution of some kind to the art [when examined as a whole], but the applicant has been unable to identify anything which this claim can fairly be said to contribute which has a technical character.

Thus, the focus here is on finding elements of the invention that are both innovative and have a technical character. Although Judge Birss did not cite to the U.S. case of Parker v. Flook, 437 U.S. 584 (1978), he could have so reach out for support. In Flook, the U.S. Supreme Court similarly pushed patent applicants for an inventive concept that itself is a practical application, writing:

Even though a phenomenon of nature or mathematical formula may be well known, an inventive application of the principle may be patented. Conversely, the discovery of such a phenomenon cannot support a patent unless there is some other inventive concept in its application.

I suspect that the rule supported by Judge Birss here is not too far removed from that which the current U.S. Supreme Court would also fashion if given the chance. However, the current USPTO does not require that particular elemental linkage.

One important result of this approach – well recognized by Judge Birss is that the scope of subject matter eligibility shifts over time. The Lantana case involves a particular use of email systems. If the patent had been filed in the early days of email and was able to introduce an a technological mechanism that was new at the time then the application would be subject matter eligible. However, the reality is that email systems were already very well known by the time Lantana filed its application. In Judge Birss' words, the technological aspect of the invention was "conventional." As such, there was no technological contribution to be found.

In the end, the result here is that Lantana's appeal has been dismissed with the UKIPO's judgment of nonpatentability still standing.

= = = = =

As an aside, Lantana is a small US based company and the listed inventor John Wysham is the company CEO. The US version of the application (Serial No. 12/867825) was abandoned after a final obviousness rejection.

= = = = =

More information from:

• Outlaw
• Hal Wegner
• James Newton (MIP)

Wawrzynski v. H.J. Heinz Company: CAFC Jurisdiction and Preemption of State Law Claims

By Jason Rantanen

The primary issue in this case is whether the Federal Circuit has subject matter jurisdiction over the appeal.  On that issue, the court's analysis of the arguments presented by the parties is solid.  However, in addition to concluding that it lacks jurisdiction, the panel seemingly also rules on a substantive issue in the appeal: whether patent law preempts the plaintiff's state law claims for unjust enrichment and breach of implied contract based on its alleged use (without payment) of the plaintiff's creative ideas.  Without engaging in any substantive analysis, the court concludes that "nothing in federal patent law now stands in the way of Mr. Wawrzynski pursuing his state law claims," a result that is - at least based on the court's minimal discussion of the issue - difficult to reconcile with substantial Supreme Court precedent on the subject.

Wawrzynski v. H.J. Heinz Company (Fed. Cir. 2013) Download Wawrzynski v Heinz
Panel: Newman, Plager (author), Prost 

David Wawrzynski is an entrepreneur who owns his own food delivery company.  During the 1990's, he developed a method for dipping and wiping an article of food, such as a French fry, in a specially configured condiment package.  In 1997, the patent office granted him a patent, No. 5,676,990, for a "Method of Food Article Dipping and Wiping in a Condiment Container."  The sole drawing in that patent is below.

In 2008, Wawrzynski sent a letter to the Heinz Company presenting his condiment packaging ideas (including his "Little Dipper" concept) and soliciting a meeting.  He included promotional materials that depicted a condiment package similar to the container depicted in the '990 patent and stated that the features of the "Little Dipper" were subject to his patent.  Heinz invited Wawarzynski to meet with his representatives to present his product ideas, which he did.  At that meeting, Wawrzwynski contends that he shared the idea of creating a "dual function" product that permitted a customer to either dip a food article or squeeze out the condiment.  Following the meeting, Heinz indicated that it was not interested in Wawrzynski's product ideas and did not wish to receive additional information from him.

A few months later, Heinz released its new "DIP & SQUEEZE" packet.  In a surprising coincidence, my wife happened to bring a couple of these items home on Friday so I took the following picture:

On October 5, 2010, Wawrzynski filed a lawsuit against Heinz in Michigan state court. (Heinz removed on the basis of diversity jurisdiction.)  Wawrzynski's amended complaint contains two legal claims: breach of an implied contract and unjust enrichment based on Heinz's alleged use of Wawrzynski's ideas for condiment packaging.  The general allegations also reference the '990 patent. 

The case was subsequently transferred to the Western District of Pennsylvania and Heinz filed an answer and counterclaim alleging that it did not infringe the Wawrzynksi patent and that the patent was invalid.  Wawrzynski answered the counterclaim stating, among other things, that "Mr. Wawrzynski avers that there is no case in controversy regarding the ‘990 Patent because he admits that Heinz is not infringing on it."  He also provided Heinz with a covenant not to sue on the '990 patent.

During the district court proceedings, Wawrzynski filed a motion to dismiss Heinz's counterclaim and Heinz filed a motion for summary judgment on the ground that Wawrzynksi's non-patent claims were preempted by federal patent law.  The district court denied Wawrtzynski's motion, concluding that "Wawrzynski's admission and covenant were "manufactured" and did not change the fact that Wawrzysnki's complaint made allegations based upon the '990 patent."  Slip Op. at 5, quoting district court.  The court also granted Heinz's motion for summary judgment.  Wawrzynski appealed the district court's rulings.

No Jurisdiction: Under the Federal Circuit's jurisdictional statute, 28 U.S.C. § 1295, if the case arises under the Federal patent laws, the court has jurisdiction; if the case is one purely of state law claims, not involving a patent issue, it does not.  Although both parties contended that the Federal Circuit had jurisdiction, the court concluded that it did not.  Wawrzynski argued that the post-AIA version of Section 1295 applied.  Under this version of Section 1295, the court has jurisdiction over appeals in actions "in which a party has asserted a compulsory counterclaim arising under any Act of Congress relating to patents." However, the newer version only applies to actions commenced on or after September 16, 2011 and this action commenced before that date.  Nor did the date of Heinz's counterclaim (September 28, 2011) count; the AIA speaks in terms of the date the action commences.

The Federal Circuit also rejected Heinz's jurisdictional argument.  Heinz argued that Wawrzynski's complaint did, in fact, assert a claim of patent infringement.  But this was not the case.  First, under the "well-pleaded complaint rule," the plaintiff is the master of the complaint and can "eschew[] claims based on federal law [and] choose to have the cause heard in state court."  Slip Op. at 10, quoting Caterpillar Inc. v. Williams, 482 U.S. 386, 398-99 (1987).  Here, Wawrzynski's complaint raised only two causes of action, both based on state law.  Although it referenced the patent, "[t]he complaint does not have a count for patent infringement or anything similar."  Slip Op. at 10.  Ultimately, the court concluded that the "sparse background discussion of the patent does not make a well-pleaded complaint for patent infringement." Slip Op. at 12.  Based on this, the court ordered the appeal transferred to the Third Circuit.

The Preemption Puzzle: Despite concluding that it lacked jurisdiction, the panel nevertheless went on to apparently rule on the issue of preemption, or at least make clear its opinon on the subject.  I find the following three paragraphs particularly puzzling.  The court seems to hold that there is no preemption in a highly summary fashion:

We note that some of the issues underlying our jurisdictional analyses also underlie the district court's summary judgment merits analyses. To fully assess the question of our jurisdiction, we necessarily have analyzed and decided certain of these issues.

For example, we have concluded that the relief requested in the complaint aligns with state law claims and not a claim for patent infringement. We also found support for Mr. Wawrzynski's contention that certain of the ideas and materials he allegedly provided to Heinz are not found in his patent. These conclusions, along with our overarching conclusion that the complaint does not present a well-pleaded patent law issue, undercut conclusions relied upon by the district court to support its grant of summary judgment of preemption. Accordingly, it appears that nothing in federal patent law now stands in the way of Mr. Wawrzynski pursuing his state law claims.

With regard to the district court's finding of non-infringement of the ′990 patent by Heinz's ‘Dip & Squeeze®’ packet, Mr. Wawrzynski's responsive pleadings contain both a concession that Heinz's product does not infringe and a covenant not to sue. Thus, it would appear that in any event there is no case or controversy remaining to support a subsequent judgment on the issue of infringement.

Slip Op. at 13 (emphasis added).  Notwithstanding the court's rather cursory dismissal, however, patent law preemption of state law claims involving ideas and other intangibles is a  complex and challenging analysis (as my unfair competition students have learned over the past two weeks).  The central Supreme Court precedent is well known: Sears v. Stiffel, Bonito Boats v. Thunder Craft Boats, Kewanee Oil v. Bicron, and the circuits have struggled with issues of preemption for decades.  While it is conceivable that some of Wawrzynski's claims are not preempted by patent law, it seems at least equally plausible that many of them are.  Given the complexity and importance of this issue, it is surprising that the panel did not choose to either let the Third Circuit address the issue or analyze the issue itself in meaingful detail if it believed it was necessary to satisfy the approach described in Gunn v. Minton (which the opinion does not mention). 

Patent Appeal Outcome by Art Unit Groups

By Dennis Crouch

This is a continuation of an analysis of ex parte appeal decision outcomes at the US Patent Office (USPTO). The focus of this post is on individual art-unit groups within the USPTO and decisions by the Board of Patent Appeals and Interferences (BPAI, now renamed PTAB). The chart may provide helpful information to both patent applicants and examiners considering whether to appeal. The set-up in these ex parte is always the same – the patent applicant is appealing an examiner's final rejection. Thus, a reversal means that the patent applicant wins on all counts and, in most cases, a patent issues soon thereafter. Under the MPEP, "[t]he examiner should never regard such a reversal as a challenge to make a new search to uncover other and better references." A new rejection following reversal requires approval from one of the Technology Center (TC) directors. Cases that are affirmed-in-part result in some claims being allowed. And an affirmance sustains all of the examiner's rejections. Now, to be clear, a Board affirmance does not mean that all of the claims in the patent are rejected since some of the claims may have been previously allowed and the applicant only appealed the rejected claims.

The chart includes particular information on what happens following affirmance of an examiner rejection. In patent prosecution the patent applicant can keep prosecution going indefinitely through the amendment / RCE process. The setback of an appeal-affirmance is no different. Following affirmance, the patent applicant can amend claims, file a request for continued examination (RCE) and keep going. It appears that a substantial number of patent applicants who want to continue prosecution prefer at that point to instead file a continuation application – beginning the process somewhat afresh and potentially with a new examiner. To highlight these options, I included information on the percent of applications where the case was abandoned following affirmance and also where the case was abandoned following affirmance without the continued prosecution of a child (continuation) application.

To create the chart below, I first generated a database of all ex parte decisions by the Board of Patent Appeals & Interferences (BPAI) decided between January of 2005 and August of 2011. I used these cutoff dates because accurate data from decisions prior to 2005 is more difficult to obtain and I wanted to allow some time following the decision to 2011 cutoff date to trace the eventual outcome. The August 2011 cutoff allows for two-years of post-decision outcome tracing. I then took a random sample of about half of those Board decisions and obtained the electronic filewrappers from the USPTO's PAIR database associated with the underlying applications. The filewrapper allowed me to identify the art unit associated with the case; whether the application has been abandoned, patented, or is still pending; and whether any continuation applications have been filed that claim priority to the original application.

The chart below is grouped by Art-Unit Group that includes up-to-ten art units and roughly follows mid-level grouping done at the USPTO. Thus, Art-Unit Group 1610 includes all art units ranging from 1610-1619. More information on these art units and technology centers is available here: http://www.uspto.gov/about/contacts/phone_directory/pat_tech/. The chart then includes the number of Board decisions included in the sample, the percentage of those decisions that are reversed, affirmed-in-part, and affirmed; the percentage of affirmed cases that were then abandoned following affirmance; and finally the percentage of affirmed cases that were then abandoned following affirmance without a child-application that is either still live or patented.

Some notes: The Art Unit Groups with the highest affirmance rates are now defunct (2840 and 1750). The lowest affirmance rates are in Art Unit Groups 3650 (Material and Article Handling), 3630 (computerized vehicle controls), and 2480 (Video Compression/Recording).

Art Unit Group	Decisions in Sample	Affirmed	Affirmed-in-Part	Reversed	Abandoned following Affirmance	Abandoned Without Child Following Affirmance
1610	300	57%	7%	35%	90%	58%
1620	166	58%	11%	29%	79%	58%
1630	182	45%	13%	41%	83%	63%
1640	176	57%	9%	34%	87%	59%
1650	123	63%	12%	25%	87%	52%
1710	157	51%	10%	38%	83%	58%
1720	116	52%	11%	37%	77%	57%
1730	111	63%	8%	29%	80%	59%
1740	96	61%	6%	30%	90%	66%
1750	28	79%	7%	14%	82%	50%
1760	200	70%	8%	22%	78%	48%
1770	116	61%	8%	31%	85%	61%
1780	221	60%	10%	29%	83%	52%
1790	1050	66%	10%	23%	87%	57%
2110	112	64%	13%	22%	74%	58%
2120	78	64%	13%	22%	78%	66%
2130	25	44%	24%	32%	64%	55%
2140	38	66%	16%	18%	76%	76%
2150	86	56%	16%	27%	58%	48%
2160	285	54%	13%	33%	69%	57%
2170	270	56%	16%	27%	77%	60%
2180	148	61%	13%	25%	67%	57%
2190	90	57%	14%	27%	76%	69%
2420	65	58%	11%	31%	63%	50%
2430	132	64%	14%	18%	71%	53%
2440	173	52%	14%	32%	57%	44%
2450	145	55%	20%	24%	66%	55%
2460	26	65%	4%	31%	71%	65%
2470	31	58%	13%	29%	56%	50%
2480	18	33%	22%	44%	50%	17%
2490	15	67%	13%	20%	80%	40%
2610	291	53%	14%	32%	76%	59%
2620	351	52%	16%	32%	81%	65%
2810	163	57%	10%	32%	69%	56%
2820	86	64%	13%	23%	76%	51%
2830	185	65%	11%	22%	73%	56%
2840	20	80%	15%	5%	88%	88%
2850	113	63%	13%	24%	79%	68%
2860	18	67%	11%	22%	75%	33%
2870	105	66%	13%	20%	74%	57%
2880	76	57%	17%	26%	77%	63%
2890	53	55%	9%	36%	79%	62%
3610	93	52%	18%	29%	75%	54%
3620	343	54%	13%	32%	81%	58%
3630	167	32%	25%	43%	79%	66%
3640	113	42%	25%	34%	81%	66%
3650	162	31%	29%	40%	76%	54%
3660	73	49%	18%	33%	92%	64%
3670	148	43%	20%	36%	79%	57%
3680	207	43%	17%	38%	77%	54%
3690	113	58%	15%	27%	62%	45%
3710	146	53%	20%	27%	82%	61%
3720	274	42%	21%	36%	85%	59%
3730	194	46%	18%	36%	81%	52%
3740	198	34%	20%	43%	75%	54%
3750	87	40%	16%	43%	86%	66%
3760	250	45%	18%	36%	82%	41%
3770	114	38%	21%	39%	81%	53%
3780	74	54%	19%	27%	85%	60%

One One problem with the current system is that 

Contract Dispute: When Paying to Settle a Case Counts as Revenue

Jang v. Boston Scientific (Third Circuit 2013)

Dr. Jang is an inventor on BSC's stent patent no. 5,922,021. Jang's contract requires BSC share 10% of royalty revenue with Jang, including "any recovery of damages" from infringers with a $60 million cap. The question in this case was whether a prior settlement with Cordis involved such a recover of damages.

In that prior 2003 case, Cordis and BSC countersued one another. A jury found that Cordis infringed the Jang patent and that BSC infringed Cordis patents. However, the parties settled before the court calculated or awarded damages. The settlement involved a payment of $1.725 billion from BSC to Cordis. BSC admitted that the settlement agreement represented the net difference between its expected damages and those it owed Cordis. In essence, the fact that Cordis infringed the BSC/Jang patent reduced the amount that BSC owed to Cordis. However, BSC argued that it did not owe Jang anything because BSC did not receive any damages or revenues in the deal. The district court sided with BSC on the pleadings on appeal, however, the Third Circuit reversed – finding that Jang's case should move forward. In particular, the appellate panel held that (1) the cash-offset qualifies as a "recovery of damages" and (2) that "BSC violated the implied covenant of good faith and fair dealing by structuring a settlement to thwart the agreed purpose of [the contract provision]."

A cash offset is the functional equivalent of a cash payment. . . . Courts have long recognized the equivalence of a debt offset and a cash payment through the common-law "right of setoff." . . . In this case, BSC made money on the Jang patent. It lost money on Cordis' separate claim. That its gain and loss were consolidated to produce one net payment does not change the fact that the Jang patent produced a monetary gain for BSC.

The real question is whether that gain qualifies as a "recovery." We see no reason why it should not; it makes no difference to BSC's bottom line whether it receives a check for the Jang infringement claim or reduces its debt by the same amount.

Writing in dissent, Judge Barry argued that the language of the contract was clear and contemplated damage recovery, not offsetting claims.

Although the case involves patent law it is at heart a contract dispute. Thus, the appeal was heard by the regional circuit court rather than the Federal Circuit. In a prior dispute over the same contract, the Federal Circuit claimed appellate jurisdiction apparently based upon the fact that a quasi-infringement analysis was required to settle the dispute. Under Gunn v. Minton, that case (if heard today) would not likely be heard by the Federal Circuit.

= = = = =

A large number of patent assignment deals similarly involve substantial “upside.”  If one of the parties to the deal is a litigation expert then the the other party may well assume that full enforcement of the deal will also require litigation.

Patently-O Bits & Bytes by Lawrence Higgins

Patent Jobs:

• Steven Rinehart is looking to hire a former US Patent and Trademark Office (USPTO) examiner/patent agent for patent prosecution work. Any patent agents hired can work from home anywhere in the US. (Salt Lake City, Utah) [Link]
• O'Brien Jones, PLLC is seeking full-time registered patent attorneys and patent agents with 2-5 years relevant experience. (Tysons Corner, Va) [Link]
• The Silicon Valley office of Alston & Bird has an immediate opening for a Patent Prosecution associate with at least 4 years' experience in the preparation and prosecution. (EE, computer engineering or computer science is required) [Link]
• Nike seeks a Utility Patent Specialist who will research innovation developments for utility patent opportunities. [Link]

Upcoming Events:

• American Conference Institute is hosting the FDA Boot Camp in Boston, MA on September 17-18, 2013. ACI's FDA Boot Camp has been designed to give products or patent litigators, as well as patent prosecutors, industry in-house counsel, and life sciences investment and securities experts, a strong working knowledge of core FDA competencies. Register with discount code "PTO200".  [Link]
• The Licensing Executives Society (LES) will hold their annual meeting September 22-25, in Philadelphia. The annual meeting is themed "IP Matters in Every Deal" the meeting is a must-attend IP, licensing and business development event. Patently-O readers save $100 with code PO13.  [Link] 
• American Conference Institute is hosting the Paragraph IV Disputes Master Symposium in Chicago, IL on October 3-4, 2013.  At this symposium, there will be in-depth discussions and practical take aways that will prepare you for this new era of extreme Hatch-Waxman litigation. Critical sessions will address all facets of Paragraph IV litigation from pre-litigation concerns to the commencement of suit through final adjudication. Register with discount code "PTO200".  [Link]
• The USPTO's 18th Annual Independent Inventor Conference will be held October 11-12. For two days, independent inventors and small business owners will have an unparalleled opportunity to learn, network, and jumpstart their creative endeavors. Experts and senior officials from the USPTO will present valuable information on patents, trademarks, and other intellectual property (IP) matters while successful business owners and inventors will relate their inspiring personal experiences in bringing their dreams to market.  [Link]
• The EPO will hold their Patent Information Conference on October 22-24, in Bologna, Italy.  The EPO Patent Information Conference 2013 will be organized in co-operation with the Directorate General for the Fight against Counterfeiting - Italian Patent and Trademark Office.  [Link]
• AIPLA annual meeting will take place October 24-26, in Washington, DC. The Annual Meeting offers  opportunities to connect with others in the IP industry from around the world to learn during sessions such as: Navigating Through the PTAB and Federal Courts After the AIA; Trademark Fair Use; What You Need to Know About the Hague Agreement; Evolving IP Rights in China, and IP Issues Facing Government R&D Contractors.  [Link]
• American Conference Institute is hosting the FDA Boot Camp Devices Edition in Chicago, IL on November 5-6, 2013.  Many products liability lawyers, patent counsel, business and investment experts, medical and regulatory affairs professionals, and those involved in pricing and reimbursement — despite their tenure in working with FDA-regulated devices — are not well-versed in the essentials of the approval process and the regulatory hurdles of the post-approval period. ACI's Third Annual FDA Boot Camp – Devices Edition has been designed to give you a strong working knowledge of core FDA competencies. Register with discount code "PTO200".  [Link]
• IQPC is hosting its Patent Infringement Litigation Summit on December 9^th and 10^th in San Francisco. The Summit will bring together in-house counsel from major companies, law firm attorneys and representatives from other vendors to facilitate strategy and information sharing among these key stakeholders. [Link]
• The Chisum Patent Academy is now accepting registrations for their 2014 Advanced Patent Law seminars, to be held
  • March 5-7, 2014: Cincinnati, Ohio
  • August 13-15, 2014: Seattle , Washington
  • August 18-20, 2014: Seattle, Washington

  The Academy applies for 18 CLE credits in each state where seminars are held. [Link]

Contact [email protected] with leads for future Bits and Bytes.

Surprise! The Law of Subject Matter Eligibility Remains Unsettled

By Jason Rantanen

Accenture Global Services, GMBH v. Guidewire Software, Inc. (Fed. Cir. 2013) Download Accenture v. Guidewire
Panel: Rader (dissenting), Lourie (author), Reyna

It is difficult to think of an issue that has more deeply divided the Federal Circuit over the past few years than subject matter eligibility.  Accenture is the latest barrage and counter-barrage in this seemingly endless war.  Unlike Ultramercial v. Hulu, though, in which Judge Rader wrote the majority opinion and Judge Lourie concurred in the result, the forces arguing against subject matter eligibility of computer programs won today's battle. 

At issue in the case were claims 1-7 and 8-22 of Patent No. 7,013,284.  Claim 1 read:

A system for generating tasks to be performed in an insurance organization, the system comprising:

an insurance transaction database for storing information related to an insurance transaction, the insurance transaction database comprising a claim folder containing the information related to the insurance transaction decomposed into a plurality of levels from the group comprising a policy level, a claim level, a participant level and a line level, wherein the plurality of levels reflects a policy, the information related to the insurance transaction, claimants and an insured person in a structured
format;

a task library database for storing rules for determining tasks to be completed upon an occurrence of an event;

a client component in communication with the insurance transaction database configured for providing information relating to the insurance transaction, said client component enabling access by an assigned claim handler to a plurality of tasks that achieve an insurance related goal upon completion; and

a server component in communication with the client component, the transaction database and the task library database, the server component including an event processor, a task engine and a task assistant;

wherein the event processor is triggered by application events associated with a change in the information, and sends an event trigger to the task engine; wherein in response to the event trigger, the task engine identifies rules in the task library database associated with the event and applies the information to the identified rules to determine the tasks to be completed, and populates on a task assistant the determined tasks to be completed, wherein the task assistant transmits the determined tasks to the client component.

The district court (Judge Robinson, one of the ) held claims 1-7 (system claims) and claims 8-22 (method claims) invalid under 35 U.S.C. § 101.  Accenture appealed only claims 1-7. 

System Claims Ineligible Subject Matter: In an opinion authored by Judge Lourie, the majority agreed with the district court that the claims were patent ineligible subject matter.  The majority provided two bases for its conclusion.  First, "because the system claims offer no meaningful limitations beyond the method claims that have been held patent-ineligible" and second, "because, when considered on their own, under Mayo and our plurality opinion in CLS Bank, they fail to pass muster." Slip Op. at 10.

The majority first compared the system claims to the method claims that were conclusively invalid because Accenture failed to appeal them.  Relying on the plurality opinion in CLS Bank v. Alice, the majority concluded that the proper approach is to "compare the substantive limitations of the method claim and the system claim to see if the system claim offers a “meaningful limitation” to the abstract method claim, which has already been adjudicated to be patent-ineligible."  Id. Because the court found no additional "meaningful limitation" in the system claims, they were as patent ineligible as the method claims. 

The majority also concluded that the method claims were invalid under Section 101 even standing on their own.  Applying a preemption analysis to the abstract idea at the heart of the system claims, the majority concluded that the additional imitations did not "narrow, confine, or otherwise tie down the claim so that, in practical terms, it does not cover the full abstract idea itself."  Slip Op. at 15.  Furthermore, "simply implementing an abstract concept on a computer, without meaningful limtiations to that concept, does not transform a patent ineligible claim into a patent-eligible one."  Id.

Judge Rader's Dissent: Unsurprisingly, Judge Rader disagreed with the majority.  Central to his disagreement was the belief that the plurality framework relied upon by the majority in this case lacks precedential value.  "[N]o part of CLS Bank, including the plurality opinion, carries the weight of precedent.  The court's focus should be on Supreme Court precedent and precedent from this court."  Slip Op. at 20.  He also disagreed with the basic idea of the comparing the system claims to the invalid method claims, characterizing it as estoppel that will have the effect of "requiring litigants to appeal the invalidity of every claim or else risk the potential for estoppel or waiver of other claims."  Id. And Judge Rader would have concluded that, even on the merits, the claimed systems present patent-eligible subject matter.  "The claims offer “significantly more”  than the purported abstract idea, ..., and meaningfully limit the claims’ scope."  Id. at 4, quoting Mayo v. Prometheus, 132 S.Ct. 1289, 1293 (2012).

Judge Rader also once again proclaims his view that the courts' approach to patent law's subject matter eligibility requirement is pure folly:

In conclusion, I note that prior to granting en banc review in CLS Bank, this court commented: “no one understands what makes an idea abstract.” CLS Bank Int’l v. Alice Corp., 685 F.3d 1341, 1349 (Fed. Cir. 2012), opinion vacated, 484 F. App’x 559 (Fed. Cir. 2012) (internal quotations marks omitted). After CLS Bank, nothing has changed. “Our opinions spend page after page revisiting our cases and those of the Supreme Court, and still we continue to disagree vigorously over what is or is not patentable subject matter.” MySpace, Inc. v. GraphOn Corp., 672 F.3d 1250, 1259 (Fed. Cir. 2012); see generally CLS Bank. Indeed, deciding what makes an idea “abstract” is “reminiscent of the oenologists trying to describe a new wine.” MySpace, 672 F.3d at 1259.

I take this opportunity to reiterate my view that “the remedy is the same: consult the statute!” CLS Bank, 717 F.3d at 1335 (additional reflections of Rader, C.J.). The statute offers broad categories of patent-eligible subject matter. The “ineligible” subject matter in these system claims is a further testament to the perversity of a standard without rules—the result of abandoning the statute.

Slip Op. at 23.  That said, Judge Rader's thoughts about indeterminacy should perhaps be taken with a grain of salt: his opinions indicate, after all, that he has very strong views that one side of the subject matter eligibility battle is right and the other wrong.

One other thing of note about this case: Mark Lemley - who has written a great deal about patenting of computer-implemented inventions, including a recent post on PatentlyO - was the lead attorney for the defendant.

Soverain’s ‘314 Patent is Now Truly Invalid

Soverain Software v. Newegg (Fed. Cir. 2013) (on rehearing)

In a rare grant of rehearing, the Federal Circuit has amended its original decision in this case. In the original opinion, the Federal Circuit reversed the lower court's finding of non-obviousness and replaced that with a holding that the asserted claims are obvious as a matter of law. [Link]

According to the request for rehearing – "The panel's decision analyzed the wrong claim of the '314 patent. The asserted claims at trial were claims 35 and 51--not claims 34 and 51." I reviewed the original briefs and those briefs suggest that claim 34 should be the focus. However, the Federal Circuit allowed the patentee another shot on appeal.

Claim 34 – the one already found obvious by the court – is directed to a "network-based sales system" that links a buyer's computer with a "shopping cart computer" and that facilitates certain purchasing functionality, including using a "payment message" that initiates the transaction once activated. Claim 35 adds one further limitation to the mix – that "shopping cart computer is programmed to cause said payment message to be created before said buyer computer causes said payment message to be activated."

After reviewing the small amount of evidence presented, the court held that claim 35 is also invalid as obvious.

On this rehearing, Soverain has not provided any new information concerning the specific limitation of claim 35. The inclusion of an additional known element from a similar system, as set forth in claim 35, is subject to review on established principles, as summarized in KSR International Co. v. Teleflex Inc., 550 U.S. 398, 417 (2007) (an unobvious combination must be "more than the predictable use of prior art elements according to their established functions"). The supplemental briefing reinforces the absence of dispute that that the element in claim 35 is in the CompuServe Mall prior art.

On consideration of the additional briefing and arguments, we confirm that claim 34 is representative of the "shopping cart" claims, including claim 35, and conclude that dependent claim 35 is invalid on the ground of obviousness. The court's judgment is amended accordingly.

Now Soverain's patent is really invalid.

In its motion for rehearing en banc, Soverain cited my prior Patently-O essay for the notion that the original opinion was big news in the way that the court fully reversed the lower court's finding of nonobviousness. The en banc rehearing request focuses on the distinction between questions of fact and law and argues that Federal Circuit improperly delved into a fact-finding expedition. The fact-law divide is difficult for questions of obviousness since the ultimate question of obviousness is an issue-at-law based upon the factual determinations found in the Graham analysis. In its opinion, the Federal Circuit states that it is only deciding the ultimate legal question while the en banc request argues that the court delved into the factual underpinnings without providing appropriate deference. That en banc request has been denied.

I suspect that Soverain will push for a petition for writ of certiorari. In the en banc rehearing request, the company added Seth Waxman to the list of counsel and the company has at least 15 live infringement cases involving the '314 patent. (U.S. Patent No. 5,715,314). The damages overturned by the court here amounted to $2.5 million plus costs and an ongoing royalty of $0.15 per infringing transaction until the patent expires in 2015 (denying injunctive relief).

Now, before you feel too sorry for Soverain, you should note that the company has a set of additional patents in the family that it can still assert. See, e.g., 5,909,492, 5,708,780, 6,449,599, and 7,272,639.

What Happens Following a USPTO Board Decision

By Dennis Crouch

The chart above provides further analysis from the prior post entitled Ex Parte Appeal Outcome by Assignee 2005-2013. The chart here shows the result following BPAI/PTAB ex parte decisions and is derived from a set of 21,000 applications associated with an appellate decision between 1/2005 and 8/2011. For the majority of cases, the appellate decision appears determinative. A major caveat to these results is that about 45% of the abandoned cases are associated with a continuation application filed prior to abandonment.

Interpreting CLS Bank Int’l v. Alice

Guest Post by Professor Bernard Chao

The issue of patentable subject matter eligibility has been in considerable flux. Currently, it's unclear whether adding computer limitations to an otherwise unpatentable concept somehow renders the concept patent eligible. The Federal Circuit tried to settle this question when the entire court heard CLS Bank Int'l v. Alice, 717 F.3d 1269 (Fed. Cir. 2013). But the judges could not find common ground and the decision contained seven separate opinions reflecting at least three distinct approaches. Now it has been suggested that the CLS Bank Int'l provided the lower courts with absolutely no guidance. After all, no opinion garnered more than five judges' support. In an effort diminish Lourie's opposing opinion, Judge Rader even went so far as to say that "nothing" in the CLS Bank Int'l decision "beyond our judgment has the weight of precedent." Id. at 1292, n 1.

Ironically, under the so called Marks rule, Judge Rader may not just be wrong, his opinion could be considered the holding of the court. The United States Supreme has said that when one of its decisions has no majority opinion in support of the judgment, "the holding of the Court may be viewed as that position taken by those Members who concurred in the judgment[] on the narrowest grounds." Marks v. United States, 430 U.S. 188, 193 (1977). Now there is some disagreement about how to identify the narrowest concurring opinion. What's more it's unclear if the Marks rule applies to en banc decisions of the various Courts of Appeals. But there is certainly plenty of room to argue that Judge Rader's opinion is the Federal Circuit's holding under Marks.

To understand how the Marks rule would apply to CLS Bank Int'l, we have to examine the decision's different opinions. I discuss these opinions in some detail in an upcoming article in the Berkeley Technology Law Journal, but I will provide a very short summary of the judges' views here. Judge Lourie's opinion (joined by Judges Dyk, Prost, Reyna and Wallach) took a "strong view" of § 101's subject matter patent eligibility requirement. Consequently, these five judges would have found that all of Alice's claims were ineligible for patenting. Judge Rader (joined by and Judges Linn, Moore and O'Malley) took a relatively "weak view" of § 101's eligibility requirement. But Judges Rader and Moore applied this methodology differently than Judges Linn and O'Malley. Rader and Moore argued that the method and media claims were not patent eligible, but the system claims were. In contrast, Linn and O'Malley's would have left all the claims intact. Finally, Judge Newman took an even weaker view of §101 arguing for almost no scrutiny of patentable subject matter eligibility whatsoever. Accordingly, she would have also found all the claims were patent eligible.

Both Lourie's and Rader's opinions concurred in the judgment of patent ineligibility for the method claims. So seven judges agreed that the method claims were not patent eligible. Lourie's strong view advocated for a rule that would render many claims patent ineligible, while Rader's weak view is more conservative and jeopardizes a smaller set of claims. As applied to the patents in CLS Bank Int'l, this meant that only the method claims would be ineligible. Under one interpretation of Marks, Rader's opinion is the narrowest view supporting the end result and would be considered the holding of CLS Bank Int'l.

To be clear, I actually disagree with Rader's analysis and say so in my article. I also don't want to overstate the significance of the Marks analysis. Clearly, CLS Bank Int'l is still shaky precedent and the success of any appeal to the Federal Circuit may simply be panel dependent. Hopefully, the Supreme Court will resolve the issue. In fact, the Court is currently considering a petition for certiorari in Wildtangent v. Ultramercial. But in the meantime, software patents continue to be challenged on subject matter patent eligibility grounds and the Marks rule provides one way to try to interpret the confusing precedent now.

Bits & Bytes from Jonathan Hummel

RECENTLY 

#1. Minnesota becomes the first state to settle with a Patent Troll

Jennifer Bjorhus , of the Star Tribune reports that recently, the state of Minnesota reached a settlement agreement with MPHJ Technology Investments, LLC, a Delaware corporation. If the state discovers that any Minnesota residents or companies actually paid MPHJ Technology money for either a license or an alleged infringement, MPHJ will have to pay a $50,000 civil penalty and refund all money. Swanson’s office said it’s not clear how many Minnesota companies were targeted but estimated it to be hundreds.

 

#2.  The next phase in the Apple/Samsung Saga

Gene Quinn, at IPWatchdog, reports that Apple and Samsung, interestingly enough, wound up on the same side of the argument. See Apple, Inc. v. Samsung Electronics Co. (Fed. Cir., August 23, 2013).The two tech giants are arguing back against a district court decision to allow some sensitive information to become publicly available. Both parties filed motions to seal certain writings, and district Judge Lucy Koh denied the motions. Appeals joined at the Federal Circuit, that court issued an order staying the unsealing of certain documents.

 

#3. Intellectual Ventures opens a DC lobbying office

Christina Wilkie, at the Huffington Post, reports that Intellectual Ventures, the largest patent holding firm in the United States, is opening a lobbying office in the nation’s capital. This latest move for the Bellevue, Washington based patent holding firm will probably set a trend for other firms with similar business models. The recent outcry from the patent community and the general anxieties over firms with similar practices mean these companies are going on the offensive, trying to set the course for policy rather than react to it.

 

#4. New Zealand decides the software question

Reuven Cohen, for Forbes, reports that New Zealand has banned software patents. In a bill passed earlier today, the Government of New Zealand announced that software in the country will no longer be patentable. In taking the position, New Zealand joins many other nations. "For example, U.S. patent law excludes “abstract ideas”, and this has been used to refuse some patents involving software. In Europe, “computer programs as such” are excluded from patentability and European Patent Office policy is consequently that a program for a computer is not patentable if it does not have the potential to cause a “further technical effect” beyond the inherent technical interactions between hardware and software.”"

 

PENDING

#1. IBM Applies for a Virtual Shared Shopping Experience

Steve Brachmann, writing for IPWatchdog, reports International Business Machines’ recent application for a patent on a “a system for collaborative shopping” whereby users can see what is in other people’s carts and interact via computers and smartphones. The rise of online shopping in the past decade is marked, and this idea represents another way to make the often singular online experience more social.

U.S. Patent Application No. 20130211953

 

UPCOMING

1. October 4 Symposium and CLE on Resolving Patent Disputes

• A Symposium focusing on "Resolving IP Disputes: Calling for an Alternative Paradigm." The symposium is sponsored by the MU School of Law's Center for the Study of Dispute Resolution as well as the Journal of Dispute Resolution (JDR).
• There is no fee to attend or to receive CLE, but it would help us if you register using the following link: https://docs.google.com/forms/d/1hWoGc0DvHBDcc-wsO-06fphE8oRjWEbTESDLdLKqnPI/viewform 

2. The World Congress 2nd Annual: Generic Top-Level Domain Names Summit

September 25, 2013 • New York City, NY

Tools to Protect Trademark Rights and Strategies to Prepare Your Company for the Launch of gTLDs

Event Website  |  Brochure  |  Set Reminder  |  Register

-       See more at: http://www.worldcongress.com/events/index.cfm?IndustryID=3#sthash.Km7egeE1.dpuf

 

3. ABA Trademark Fundamentals: Managing Your IP in a World of Social Media Sept. 12, 2013 Webinar/Teleconference

 

JOBS

Patent Prosecution Associate - Law Firm - Washington D.C.

-       Wenderoth, Lind & Ponack, L.L.P. is seeking a Patent Prosecution Associate to join our Mechanical group.

-       Wenderoth, Lind & Ponack, L.L.P. offers a competitive benefits package and an enjoyable work environment. Salary is commensurate with experience.

-       Apply on-line by e-mailing your cover letter, resume and transcripts to: [email protected].

IP/Patent Attorney - Law Firm - New York, N.Y.

-       Bruzga & Associates, a New York City boutique IP law firm seeks an associate patent attorney having an electrical engineering degree.

-       This is an opportunity to hone your advocacy skills, have meaningful client interaction, and significantly contribute to the firm, rather than just being a “cog in the wheels” of a big firm.

 

Contact [email protected] with leads for future Bits & Bytes.

Related articles

Minn. orders alleged patent troll to stop

Trolls Aren't Welcome in Lake Wobegon

Ex Parte Appeal Outcome by Assignee 2005-2013

By Dennis Crouch

The following table shows the decision outcome of ex parte appeal to the BPAI/PTAB for a number of patent owners, including the top-twenty-five owners of appealed applications as well as a few others with particularly high or low win rates. As a reminder, in ex parte cases, the PTAB reviews rejections by the patent examiner. Thus, an affirmance always represents a decision upholding the examiner's rejection. A reversal fully-sides with the patentee and "AIP" are cases "affirmed-in-part." PTAB decisions normally stick -- that is --the vast majority of affirmed cases are subsequently abandoned by the patentee while the vast majority of the reversed and AIP cases are subsequently issued as patents.

Anyone considering these numbers should keep in mind that appeal statistics can be largely driven by the cases selected for appeal rather than by the quality of counsel handling the appeal. Parties with an especially high affirmance rate may be less selective than those that are typically more successful. However, I would also suspect that a company like Boston Scientific or Medtronic puts much more effort per application (i.e., $$$) than does IBM or HP.

Preliminary Injunctions against Non-Parties

This is an interesting case on several levels. The most important portion appears to be something of an afterthought in the opinion. This seeming afterthought gives district courts authority to issue a preliminary injunction to block non-parties from distributing products believed to be infringing (and sourced from a defendant). And further, the opinion holds that non-party has no right to appeal the preliminary injunction decision even after being named as a defendant.

By Dennis Crouch

Aevoe v. AE Tech (Fed. Cir. 2013)

The usual process of appellate procedure is that interlocutory decisions by a district court judge are not appealable. Rather, the losing party must ordinarily wait until a final judgment ends the lawsuit before filing an appeal. This is an often frustrating rule – especially when the future appeal involves a questionable court decision early in the litigation.

One exception to the appellate final-judgment rule involves interlocutory judgments on motions for injunctive relief. The appellate jurisdictional statute provides for immediate jurisdiction over appeals from the "granting, continuing, modifying, refusing or dissolving injunctions, or refusing to dissolve or modify injunctions". 28 U.S.C. § 1292(a)(1).

In this case, Aevoe sued AE Tech in January 2012 and immediately moved for a preliminary injunction to stop AE Tech's sales of allegedly infringing touch-screen protectors. U.S. Patent No. 8,044,942. The court quickly granted the motion for preliminary relief and, although AE Tech had a right to immediately appeal that decision, it failed to file its notice of appeal within the 30 day deadline found in the Federal Rules of Appellate Procedure. Fed. R. App. Proc. 4(a)(1).

In May 2012, AE Tech indicated that it had redesigned its products and had begun to sell them once again. However, on motion, the district court found that the new products represented a failed attempt to design around the patents with only "trivial" and "nonfunctional" design changes and that the new product was not colorably different from the enjoined products and consequently held AE Tech in contempt. At that point, the district court also changed the language of the preliminary injunction order to add language blocking enjoining "colorable imitations" of the patent and to particularly call-out the redesigned product. AE Tech immediately appealed that change in the preliminary injunction as well as the contempt order.

On appeal, the Federal Circuit has dismissed the case – finding that it lacks appellate jurisdiction since (1) the minor change to the preliminary injunction order does not account as a decision "modifying" the order; (2) AE Tech had waived it right to appeal the original order; and (3) contempt decisions regarding preliminary injunctions are not immediately appealable.

The court's basic point here is that the new product line here was already covered by the original injunction language and it is not a "modification" of the injunction to particularly call-out that fact in the language of the injunction grant.

Put simply, whether "colorable imitations" were explicitly mentioned in the injunction language or not, such imitations fell within its scope; the district court was obligated to apply the colorable differences test in the contempt proceeding. Thus, the legal relationship between the parties was in no way altered by the court's changes to the injunction language. Neither the … addition of the "colorable imitation" language nor the explicit description of the actual redesign amount to a modification of the preliminary injunction upon which this court could predicate jurisdiction. . . .

The result here is that the lower court's opinion was one "interpreting an injunction" rather than "modifying an injunction" Since the jurisdictional statute (1292) does not provide for immediate appeals based upon a lower court interpretation or minor clarification.

Because the district court did not substantively modify the January 2012 injunction, AE Tech's appeal derives from a contempt order which is not an appealable interlocutory order. Because the contempt order is not appealable under 28 U.S.C. § 1292(a), this court does not have jurisdiction over AE Tech's appeal.

Enjoining a Non-Party: One issue in the case is that one defendant (S&F) was not joined as a defendant until March of 2012. The appellate court found that it was "beyond debate" that S&F was also "within the express language of the original injunction" since it applied to any party who had notice of the injunction and S&F had been put on notice. A critical feature of the opinion is the conclusion that S&F was in cahoots with AE Tech and thus could be enjoined under FED. R. CIV. P. 65(d)(2)(C) and avoid the ordinary rule that non-parties are not subject to court injunctions. Rule 65(d) allows injunctions against non-parties "who are in active concert or participation" with an enjoined party.

To be clear, the relationship between the original defendant (AE Tech) and prior non-party (S&F) appears to be that S&F was the sole distributer of AE Tech products retail market. The court writes:

AE Tech sold its allegedly infringing products directly to the S&F Defendants for distribution who, in turn, sold the AE Tech products in the marketplace. At the time of those transactions, the S&F Defendants had notice of the injunction, had been apprised of which products were enjoined, and informed Aevoe that they obtained the barred products solely from AE Tech. The S&F Defendants did not obtain the redesigned product from any entity other than AE Tech and AE Tech did not distribute those products through any other entity. Accordingly, by virtue of their distribution agreement, the S&F Defendants were "privies" of AE Tech, did not act independently of AE Tech, and were, thus, subject to the original injunction.

This decision appears to fall roughly in line with the Supreme Court's decision in Golden State Bottling Co., v. NLRB, 414 U.S. 168 (1973) where the court wrote that Rule 65(d) was a codification of common law that allowed injunctions against a non-party "bona fide purchaser, acquiring, with knowledge that the wrong remains unremedied."

Trading Technologies v. Open E Cry: Doctrinal Formalism in Patent Law

By Jason Rantanen

Trading Technologies International, Inc. v. Open E Cry, LLC (Fed. Cir. 2013) Download Trading Tech v Open E Cry
Panel: Lourie (author), Plager, Benson (District Judge)

The traditional - and certainly most widely held - view in patent law is to view its issues as formally distinct doctrines; crystalline pillars supporting the temple.  This view emphasizes the formal distinction between patent law doctrines and rejects attempts to cross between them.  Each doctrine is an independent whole.  Trading Technologies v. Open E Cry exemplifies this view.  (It's worth noting that this opinion notwithstanding, some of the most successful patent litigators that I've met have succeeded by rejecting the formality of doctrines and building their litigation strategy around the intersticial spaces between the doctines.)

Trading Technology ("TT") owns a series of related patents generally pertaining to software for electronic trading on a commodities exchange.  The four patents at issue in this appeal claim priority based on an application that ultimately issued as Patent No. 6,772,132.  In an earlier appeal, Trading Technologies International, Inc. v. eSpeed, Inc., 595 F.3d 1340 (Fed. Cir. 2010), the Federal Circuit considered the correct construction of claims of the '132 patent that required a graphical user interface having a "static" display of market price information.  In eSpeed, the Federal Circuit held that "static," as used in the claims of the ’132 patents, "required a price column that moves only in response to a manual re-centering command."  In reaching this result, eSpeed concluded (among other things) that:

“[t]he inventors’ own specification strongly suggests that the claimed re-centering feature is manual” because the written description “only discusse[d] manual re-centering commands” and referred to “the present invention” as including a manual one-click re-centering feature.

While the earlier litigation was pending, TT filed the applications that matured into the patents involved in this suit. In those applications, TT introduced new claims that lacked the term "static" in any form.  As a result, three of the new patents had identical written descriptions to the '132 patent but claims that differed in one key way: they did not include "static" limitations.  (In the fourth patent TT pursued the strategy of filing a continuation-in-part; the result was that TT was able to add new disclosures). 

TT filed multiple actions based on this second round of patents. The district court consolidated the actions and subsequently grand summary judgment of invalidity of the four  new patents based on lack of adequate written description under 35 U.S.C. § 112(a).  The district court based its ruling on the earlier eSpeed opinion, concluding that eSpeed required holding the claims invalid for lack of written description. The Federal Circuit summarized the district court's action as follows:

According to the district court, eSpeed’s construction of “static” in the ’132 and ’304 patents turned “on the premise that the invention described in the specification was limited to static price axes that move only with manual re-centering.” Id. at 1045. Because the ’411 patent’s claims lacked that term and therefore appeared to cover displays with automatic re-centering, the district court concluded that any decision upholding those broader claims as supported by the same written description “would be at odds with the Federal Circuit’s binding findings in the eSpeed Decision.” Id. In granting the Defendants’ motion for summary judgment, the district court expressly declined to evaluate the parties’ evidence or make its own findings on the merits because the court determined “as a matter of law that the eSpeed Decision controls.”

Slip Op. at 12.  On appeal, the Federal Circuit rejected this reasoning, reversing the grant of summary judgment and remanding for further proceedings.  The court based its conclusion on the formal distinction between the doctrines of claim construction and written description, a distinction that it explained in detail:

Despite their similarities, however, claim construction and the written description requirement are separate issues that serve distinct purposes.

In construing claims, a court seeks to discern the meaning of a particular term used in one or more claims of a patent, based, inter alia, on evidence drawn from the specification, the surrounding claim language, the prosecution history, and relevant extrinsic sources....While guided by the specification, the focus of claim construction remains on defining a discrete claim term to better ascertain the boundaries of a claim. In contrast, the written description analysis considers the bounds of the specification itself. The written description requirement prevents patentees from claiming more than they have actually invented and disclosed to the public, as measured by the written description of the invention provided with their patent applications.

This case illustrates the distinction. In eSpeed, we were called upon to evaluate the proper construction of “static,” a term used in the claims of the ’132 and ’304 patents. Accordingly, we considered the evidence relevant to a proper reading of that term, starting with those patents’ common written description. eSpeed, 595 F.3d at 1353–55. Noting that the patents referred to one-click centering as part of the invention and did not discuss automatic re-centering, we concluded that the specification “strongly suggests” that a “static” price column would require manual re-centering. Id. at 1353–54. And even though the patents described price columns that “do not normally change positions unless a re-centering command is received,” ’132 patent col. 7 ll. 46–48 (emphasis added), we concluded that “the inventors jettisoned the word ‘normally’ during prosecution” by limiting the term “static” in response to an indefiniteness rejection, eSpeed, 595 F.3d at 1354. In sum, we concluded that the disputed claim term should be limited to require a manual re- centering command in the claims of the ’132 and ’304 patents.

But our decision in eSpeed did not thereby determine whether the same written description would also support different claims drawn to a non-“static” display. In particular, we did not make “findings regarding the specification . . . that are dispositive” as to the present written description challenge. See Summary Judgment Order, 852 F. Supp. 2d at 1044. On the contrary, we merely determined the best construction for a single disputed claim term, a term that is absent from the claims of the ’411, ’768, and ’374 patents now before us. That analysis did not require us to pass on the outer limits of the pa- tents’ written description, nor did we endeavor to do so. In fact, our prior examination of that written description did not even settle the limited claim construction issue then facing the court, see eSpeed, 595 F.3d at 1353–54 (concluding that the specification “strongly suggests” that the claimed re-centering feature is manual), much less conclusively find that the same written description could never support any claim to a display with a non-“static” price axis.

Slip Op. at 17-18.

Prosecution History Estoppel: The court also reversed grant of summary judgment of prosecution history estoppel, concluding that statements made in connection with the earlier '132 patent did not extend through to the subsequent patents in the same lineage in this case.  "Prosecution history estoppel can extend from a parent application to subsequent patents in the same lineage, Elkay, 192 F.3d at 981, as can a prosecution disclaimer, Omega Eng’g, 334 F.3d at 1333–34. But “arguments made in a related application do not automatically apply to different claims in a separate application.” Biogen, Inc. v. Berlex Labs., Inc., 318 F.3d 1132, 1139 (Fed. Cir. 2003)….In this case, the intrinsic record specific to the ’055 patent distinguishes eSpeed and compels a different result." Slip Op. at 24.

Disclosure: Several years ago, Dennis represented Trading Technologies in a previous case at the District Court level. That said, we haven't talked about the substance of these cases.

Hiring New Law Professors

By Dennis Crouch

I posted earlier that we're looking to hire a new intellectual property law professor here at the University of Missouri School of Law. At least two other schools are looking for new IP-focused law faculty: University of New Hampshire (formerly Franklin Pierce Law Center) and Syracuse University. UNH is filing its "Chair in Patent Law" and looking for "an accomplished patent law scholar and teacher" ready to move to beautiful Concord, New Hampshire. Contact John Greabe, Chair, Appointments Committee, at [email protected]. Syracuse is seeking "applicants with teaching and scholarly interests in law and technology, commercialization of technology, and intellectual property. The College of Law is particularly interested in applicants who will bring diversity to the faculty." Contact Professor Margaret Harding, Chair, Appointments Committee, at [email protected].

More jobs available here: http://www.patentlyo.com/jobs/

Without More, Product Supplier has no DJ Jurisdiction for Protecting its Customers against Infringement Litigation for Using Product

By Dennis Crouch

Cisco Systems, Inc. v. Alberta Telecom (d/b/a TR Tech) (Fed. Cir. 2013)

In a non-precedential opinion, the Federal Circuit has extended the Supreme Court's recent holding in Nike v. Already with reference to patent cases. The result here is that Cisco customers continue to face patent infringement liability for using Cisco products, but that Cisco cannot file a declaratory judgment lawsuit to clear its distribution chain from litigation threats. Although ostensibly following MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007), the appellate court here retreats at least from more liberal interpretations of that decision. The case is interesting because it appears that the holding here is substantially based upon an offered covenant-not-to-sue seemingly made by TR Tech's counsel during oral arguments on appeal. This parallels the court's recent decision in Organic Growers v. Monsanto where the court also relied upon statements made during oral arguments in order to make its decision. It is unclear whether this strategy is the proper way for the court to handle appeals especially because the law is not well settled with regard to the binding effect of unprepared oral statements made during appellate oral arguments. In the Monsanto case, the court wrote:

If we rely on Monsanto's representations to defeat the appellants' declaratory judgment claims (as we do), those representations are binding as a matter of judicial estoppel. It is well-established that a party who successfully argues one position is estopped from later adopting a contrary position in a case involving the same patent.

In reality, I don't believe that the notion of judicial estoppel is quite a clear-cut as the judges appear to believe here.

The basic setup in this case is that Cisco's routers form an integral part of most computer networks. And, TR Tech's patents cover a particular network configuration facilitated by Cisco routers. TR sued various Cisco customers for infringement and alleged that the infringement was based upon those defendants' use of Cisco routers. In response, Cisco filed a declaratory judgment lawsuit against TR – seeking judgments of patent invalidity and noninfringement. The district court dismissed the case – finding it "difficult to tell from the record [of the customer lawsuits] whether a justiciable controversy yet existed between Cisco and TR Labs." In the appellate oral arguments, TR Tech stated that the company had ""no basis for suing [Cisco] either for direct or indirect infringement;" that Cisco's routers have substantial non-infringing uses; and that TR Labs would be "happy" to give Cisco a covenant-not-to-sue Cisco for infringement of any of the asserted patents. (To be clear, it does not appear that any covenant-not-to-sue has been effectuated). The court writes:

It is understandable that Cisco may have an interest in saving its customers from infringement contentions premised, even in part, on their use of Cisco products. In the circumstances presented here, that interest is simply insufficient to give rise to a current, justiciable case or controversy upon which federal declaratory judgment jurisdiction may be predicated.

In writing the opinion, Judge O'Malley is somewhat careful to distinguish two recent Federal Circuit opinions: Arkema Inc. v. Honeywell International, Inc., 706 F.3d 1351 (Fed. Cir. 2013) and Arris Group, Inc. v. British Telecommunications PLC, 639 F.3d 1368 (Fed. Cir. 2011). In Arkema, the Federal Circuit allowed the DJ-plaintiff to add newly-issued patents to the DJ action and in Arris Group, the court found DJ-jurisdiction based upon patent lawsuits against customers that included indemnification claims against the DJ-plaintiff as well as pre-litigation allegations of infringement by the patentee against the DJ-plaintiff. None of those factors existed here.

Judge Rader’s Obviousness Tutorial: Including the Conclusion that Older Prior Art is Less Credible and a Restatement that Objective Indicia of Nonobviousness Play a Critical Role

By Dennis Crouch

Leo Pharmaceutical Products, Ltd. v. Rea, 2013 WL 4054937 (Fed. Cir. 2013)

In a pre-AIA filing, Galderma challenged Leo's U.S. Patent No. 6,753,013 in an inter partes reexamination before the USPTO's now renamed Board of Patent Appeals. The patent claims a "storage stable and non-aqueous" pharmaceutical composition used to treat skin conditions such as psoriasis. Prior to the invention, it was well known that a combination of Vitamin-D along with a corticosteroid could form the basis of an effective treatment. However, no one had been able to manufacture a storage stable form of the combination. This was especially challenging because the stable forms of the active ingredients prefer different pH levels. To achieve the storage stable results, Leo added a solvent to the mixture. The claim identifies the solvent in a markush group that likely includes thousands of potential compounds. During the reexamination, Leo also added the particular limitation that "said pharmaceutical composition is storage stable and non-aqueous."

In reviewing the case, the Board first construed these new terms "storage stable" and "non-aqueous" and then found the patent invalid as obvious over the prior art. On appeal, the Federal Circuit has reversed.

Claim Construction: The Federal Circuit continues, for the time being, to give no deference to PTO claim construction decisions. Here, the term "storage stable" was difficult to construe because it was never used during prosecution of the original patent application and only added during reexamination. However, the patent does discuss the composition's "ability to resist degradation" according to test results presented in the specification and the PTO accepted that definition as proper. Noting that one of ordinary skill "would have reasonably looked to the described stability test as defining what was meant by 'storage stable.'" On appeal, the Federal Circuit rejected that definition as impermissibly narrow and that instead allowed a broader definition. Although not elucidated by the opinion, the patentee is walking a fine line with this amendment between (1) having a sufficiently broad patent and (2) improperly adding new matter to the claims in violation of the written description requirement.

Obviousness: This decision may become a somewhat important obviousness case for patentees. The Board found the patent claims obvious in light of a combination of three prior art references. The Board basically found that it would have been obvious for someone of skill in the art to take the prior art combination of Vitamin-D and corticosteroids and add in the claimed solvent in order to achieve storage stability.

On appeal, the Federal Circuit faulted the Board for failing to give credence to the patentee's identification of the problem (that a stable form should be designed). The prior art did not particularly recognize the problem but rather "either discouraged combining vitamin D analogs and corticosteroids … or attempted the combination without recognizing or solving the storage stability problems." Leo also presented evidence that, at the time of the invention, researchers were being "warned that vitamin D should not be combined with other drugs requiring a low pH ( e.g., corticosteroids)."

[T]he record shows no reason for one of ordinary skill in the art to attempt to improve upon either Dikstein or Serup using Turi. The ordinary artisan would first have needed to recognize the problem, i.e., that the formulations disclosed in Dikstein and Serup were not storage stable. To discover this problem, the ordinary artisan would have needed to spend several months running storage stability tests Only after recognizing the existence of the problem would an artisan then turn to the prior art and attempt to develop a new formulation for storage stability. If these discoveries and advances were routine and relatively easy, the record would undoubtedly have shown that some ordinary artisan would have achieved this invention within months of Dikstein or Serup. Instead this invention does not appear for more than a decade.

Now, the Federal Circuit's language here obviously includes some amount of doublespeak or could perhaps be described as slicing the bologna awfully thin since according to the court, researchers (1) recognized that vitamin D could not be stably combined with low pH drugs such as corticosteroids but (2) did not recognize that vitamin-D could not be stably combined with corticosteroids.

Old Prior Art: In the discussion, Judge Rader uses an interesting between-the-lines or perhaps behind-the-scenes analysis of the prior art:

First, the Board found motivation to combine Dikstein or Serup with Turi because one of ordinary skill would have used vitamin D to solve the well-known side effects of steroid treatment. However, combining Turi and vitamin D to address the side effects of a steroid treatment is only straightforward in hindsight. Turi was publicly available in the prior art for twenty-two years before the ′013 patent was filed, yet there is no evidence that anyone sought to improve Turi with vitamin D. According to the record, even when Serup published the well-known side effects of steroid-induced atrophy in 1994, no one—including Serup—sought to improve Turi by adding vitamin D to Turi's corticosteroid composition. Serup even targeted the precise side effects that the Board believed would have motivated the addition of a vitamin D analog to Turi's corticosteroid composition, yet Serup did not seek to improve Turi by adding vitamin D. . . .

The elapsed time between the prior art and the ′013 patent's filing date evinces that the ′013 patent's claimed invention was not obvious to try. Indeed this considerable time lapse suggests instead that the Board only traverses the obstacles to this inventive enterprise with a resort to hindsight. It took over a decade—after Dikstein's disclosure of the benefits of combining vitamin D and corticosteroid treatments into one formulation—for Dikstein's formulations to be tested for storage stability. And, until the advancement made by the inventors of the ′013 patent, no one had proposed a new formulation that would be storage stable. The problem was not known, the possible approaches to solving the problem were not known or finite, and the solution was not predictable. Therefore, the claimed invention would not have been obvious to try to one of ordinary skill in the art. Indeed ordinary artisans would not have thought to try at all because they would not have recognized the problem.

Under Judge Rader's point of view here, older prior art should be seen as less credible in the obviousness analysis. The logic obvious improvements would have happened quickly and the long time span between improvements suggest that the improvement was not an obvious one. This logic is bolstered in cases such as this where research is ongoing in the area and a market has already developed.

Although the patentee claimed a wide variety of solvents, the Federal Circuit also found that there were many more potential solvents available to try and the PTO did not offer specific reasons why the ones selected would have been particularly obvious to try.

In addition, the Board found that a person of ordinary skill in the art would have been capable of selecting the correct formulation from available alternatives. Specifically, the Board found more than eight different classes of additives ( e.g., diluents, buffers, thickeners, lubricants). The Board also found more than ten different categories of composition forms ( e.g., liniments, lotions, applicants, oil-in-water or water-in-oil emulsions such as creams, ointments, pastes, or gels). "Based on these broad and general disclosures," the Board reasoned that an artisan would have been able to "mak[e] choices about what ingredients to include, and which to exclude" in formulating a composition with a vitamin D analog and steroid. To the contrary, the breadth of these choices and the numerous combinations indicate that these disclosures would not have rendered the claimed invention obvious to try. See Rolls–Royce PLC v. United Techs. Corp., 603 F.3d 1325, 1339 (Fed.Cir.2010) (claimed invention was not obvious to try because the prior art disclosed a "broad selection of choices for further investigation"). . . . .

This court and obviousness law in general recognizes an important distinction between combining known options into "a finite number of identified, predictable solutions," KSR, and " 'merely throwing metaphorical darts at a board' in hopes of arriving at a successful result," Cyclobenzaprine, quoting Kubin. While the record shows that, as early as 1995, the prior art indicated that both vitamin D analogs and corticosteroids were effective treatments for psoriasis, that same prior art gave no direction as to which of the many possible combination choices were likely to be successful. Instead, the prior art consistently taught away from combining vitamin D analogs and corticosteroids.

One important feature of PTO decision making is that Board conclusions of fact only require substantial evidence to be affirmed on appeal. Here, the Federal Circuit avoided that issue by indicating that all of its decisions were based upon the Board failure to properly apply the law to those facts. "In this case, however, with no material factual disputes, this court cannot share the Board's analysis and application of the law to those facts."

Objective Indicia of Non-Obviousness: Judge Rader writes:

The court now turns to the Board's analysis of the objective indicia of nonobviousness. The Board reasoned that "the strong case of obviousness outweighs the experimental evidence and testimony about the advantages of the claimed composition." Contrary to the Board's conclusion, this court finds the objective indicia, in concert with the entire obviousness analysis, present a compelling case of nonobviousness. In fact, the objective indicia of nonobviousness highlight that the Board's analysis regarding the combination of Serup or Dikstein with Turi was colored by hindsight.

Whether before the Board or a court, this court has emphasized that consideration of the objective indicia is part of the whole obviousness analysis, not just an afterthought. … When an applicant appeals an examiner's objection to the patentability of an application's claims for obviousness, the PTO necessarily has the burden to establish a prima facie case of obviousness which the applicant then rebuts. However, during inter partes reexamination, the Board is reviewing evidence of obviousness—including objective indicia—submitted by two adversarial parties for the claims of an issued patent. Thus, the Board should give the objective indicia its proper weight and place in the obviousness analysis, and not treat objective indicia of nonobviousness as an afterthought.

Objective indicia of nonobviousness play a critical role in the obviousness analysis. They are "not just a cumulative or confirmatory part of the obviousness calculus but constitute[ ] independent evidence of nonobviousness." Ortho–McNeil Pharm., Inc. v. Mylan Labs., Inc., 520 F.3d 1358, 1365 (Fed.Cir.2008). This case illustrates a good reason for considering objective indicia as a critical piece of the obviousness analysis: Objective indicia "can be the most probative evidence of nonobviousness in the record, and enables the court to avert the trap of hindsight." Crocs, Inc. v. Int'l Trade Comm'n, 598 F.3d 1294, 1310 (Fed.Cir.2010) (internal quotation marks omitted). Here, the objective indicia of nonobviousness are crucial in avoiding the trap of hindsight when reviewing, what otherwise seems like, a combination of known elements.

Unexpected results are useful to show the "improved properties provided by the claimed compositions are much greater than would have been predicted." See In re Soni, 54 F.3d 746, 751 (Fed.Cir.1995) (internal quotation marks omitted). This record shows "extensive experimental evidence" of unexpected results that contradict the Board's obviousness finding. J.A. 14. The Board concluded that the "unexpected results" claimed by Leo Pharmaceuticals were not surprising or unexpected. J.A. 19. However, substantial evidence does not support the Board's conclusion.

During reexamination, the inventors of the ′013 patent submitted test results that analyzed the Dikstein and Serup formulations. The inventors found that the formulations disclosed by Dikstein and Serup result in significant degradation of the vitamin D analog and corticosteroid. See J.A. 1041–46 (testing formulations in Serup); J.A. 1625–27, 2152–2154 (testing formulations in Dikstein). The inventors also tested an improvement of Serup using Turi, by replacing Serup's solvent with POP–15–SE, and still found significant degradation of the corticosteroid component. See J.A. 1045–46. These test results are a strong indication that the ′013 patent's combination of known elements yields more than just predictable results.

In addition to evidence of unexpected results, Leo Pharmaceuticals provided other objective indicia of non-obviousness. For example, the commercial success of Leo Pharmaceutical's Taclonex® ointment is a testament to the improved properties of the ′013 patent's claimed invention. Taclonex® is the first FDA-approved drug to combine vitamin D and corticosteroids into a single formulation for topical application. While FDA approval is not determinative of nonobviousness, it can be relevant in evaluating the objective indicia of nonobviousness. See Knoll Pharm. Co., Inc. v. Teva. Pharm. USA, Inc., 367 F.3d 1381, 1385 (Fed.Cir.2004). Here, FDA approval highlights that Leo Pharmaceutical's formulation is truly storage stable, something that the prior art formulations did not achieve.

The record also shows evidence of long felt but unsolved need, i.e., the need for a single formulation to treat psoriasis. The length of the intervening time between the publication dates of the prior art and the claimed invention can also qualify as an objective indicator of nonobviousness. See Ecolochem, Inc. v. S. Cal. Edison Co., 227 F.3d 1361, 1376–77 (Fed.Cir.2000). Here, the researchers were aware of the benefits of using both vitamin D and corticosteroids in the treatment of psoriasis as early as 1986. See, e.g., Dikstein col. 1, ll. 9–16. And Turi, upon which the Board relied to make its case, issued in 1978. Yet, it was not until the ′013 patent's filing in 2000— twenty-two years after Turi and fourteen years after Dikstein-that the solution to the long felt but unsolved need for a combined treatment of vitamin D and corticosteroid was created. The intervening time between the prior art's teaching of the components and the eventual preparation of a successful composition speaks volumes to the nonobviousness of the ′013 patent.

Here, the objective indicia—taken in sum—are the most "probative evidence of nonobviousness ... enabl[ing] the court to avert the trap of hindsight." Crocs, Inc., 598 F.3d at 1310. Viewed through the lens of the objective indicia, as opposed to the hindsight lens used by the Board, the ′013 patent would not have been not obvious over Turi in combination with Dikstein or Serup. Therefore, this court reverses the Board's obviousness determination.

October 4 Symposium and CLE on Resolving Patent Disputes

Dear readers –

I want to invite you to join us here at the University of Missouri School of Law on October 4, 2013 for a Symposium focusing on "Resolving IP Disputes: Calling for an Alternative Paradigm." The symposium is sponsored by the MU School of Law's Center for the Study of Dispute Resolution as well as the Journal of Dispute Resolution (JDR). Professor Jim Levin and I are organizing the event. If you are planning to attend from out of town, please let me know and we can help with logistics. I expect for this to be a fairly small event with about 100 intellectual property and dispute resolution professionals in attendance in addition to a number of academics, students, and business folks. There is no fee to attend or to receive CLE, but it would help us if you register using the following link:

https://docs.google.com/forms/d/1hWoGc0DvHBDcc-wsO-06fphE8oRjWEbTESDLdLKqnPI/viewform

-- Dennis ([email protected])

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Abstract of the Symposium

Patents now pervade the American business culture and marketplace. The number of issued patents continues to increase as does the intensity of enforcement. Most new products and services are covered by one or more patents – only some of which are owned by the manufacturer or service provider.

Patents have the potential of serving as tools for business transactions – a legal mechanism for capturing and transferring the value of innovation while allowing the resulting information to be spread widely. However, patent enforcement through litigation is incredibly expensive and time consuming. Litigation costs regularly exceed $10,000,000 in contested cases and lasts for years.

This year's Journal of Dispute Resolution symposium explores alternative mechanisms for resolving patent disputes and for proactively transforming would-be disputes into cooperative business arrangements. At the same time, patents may be different from other private-law concerns. The power of patents to block use the use of useful articles creates a strong public interest in results that both encourage innovation without unjustly limiting access to information or ideas.

This symposium is sponsored by the University of Missouri School of Law and the Journal of Dispute Resolution, the flagship journal of the University of Missouri's Center for the Study of Dispute Resolution.

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Brief Agenda for the Symposium

Friday, October 4th

8:00 AM to 8:30 AM – Continental Breakfast and Coffee Reception Sponsored by Turner Boyd LLP

8:30 AM to 8:45 AM – Introductory Remarks

8:45 AM to 9:40 AM – 1st Panel-- Disputes with an industry focus, including biotechnology and smartphone disputes: Dean Gary Myers (MU), Kevin Noonan (MBHB), Jorge Contreras (American University)

9:45 AM to 10:40 AM – 2nd Panel-- Practical issues of resolving disputes before the USPTO: Anne Craig (Harvard), Matthew Smith (now with Turner Boyd), Jaron Brunner (DWT)

10:55 AM to 11:55 AM – Keynote: —Greg Gorder (Co-Founder of Intellectual Ventures)

1:20 PM to 2:15 PM – 3rd Panel—Transparency in in patent disputes and patent information: Yvette Liebesman (SLU), Dennis Crouch (MU), Bernard Chao (U Denver)

2:15 – Conclusion

2:20 – Reception Sponsored by the Biotech and Pharma Patent Blog Patent Docs

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I look forward to seeing you there.

SkinMedica v. Histogen

By Jason Rantanen

SkinMedica Inc. v. Histogen Inc. (Fed. Cir. 2013) Download SkinMedica v Histogen
Panel: Rader (dissenting), Clevenger, Prost (author)

SkinMedica owns Patents No. 6,372,494 and 7,118,746, which relate to methods for producing pharmaceutical compositions containing "novel conditioned cell culture medium compositions,...[and] uses for the[m]."  A conditioned cell culture medium is an artificial environment that supplies the components necessary to meet the nutritional needs of the growing cells.  The conditioned medium at issue here also included extracellular proteins that, according to the patentees, may be useful for treating skin conditions such as wrinkles, frown lines, etc. 

The written descriptions of the '494 and '746 patents explain that a novel and important aspect of their invention is the difference between growing cells in two-dimensions and growing cells in three-dimensions. 

Claim 1 of the '494 patent:

1. A method of making a composition comprising:

(a) culturing fibroblast cells in three-dimensions in a cell culture medium sufficient to meet the nutritional needs required to grow the cells in vitro until the cell culture medium contains a desired level of extracellular products so that a conditioned medium is formed;

(b) removing the conditioned medium from the cultured cells; and

(c) combining the conditioned medium with a pharmaceutically acceptable carrier to form the composition.

(emphasis added by court).  At issue was the phrase "culturing...cells in three-dimensions."  The district court construed this phrase to mean "growing...cells in three dimensions (excluding growing in monolayers or on microcarrier beads."  Following claim construction, the district courted summary judgment of noninfringement for Histogen as it was undisputed that Histogen grew its cells on microcarrier beads. 

Limits on Ordinary Meaning: On appeal, the Federal Circuit affirmed the district court's claim construction. The court first agreed with SkinMedica that "the ordinary meaning of “culturing . . . cells in three-dimensions” would reach the use of beads."  However,

If the specification reveals “a special definition given to a claim term by the patentee that differs from the meaning it would otherwise possess[,] . . . the inventor’s lexicography governs.”.... And if the specification reveals “an intentional disclaimer, or disavowal, of claim scope by the inventor,” the scope of the claim, “as expressed in the specification, is regarded as dispositive.”

Slip Op. at 13 (citations omitted).  An  high hurdle applies when dealing with implied rather than express redefinition, as an "implied redefinition must be so clear that it equates to an explicit one."  Id. at 29, quoting Thorner v. Sony Computer, 669 F.3d 1362, 1368 (Fed. Cir. 2012).  Here, according to the majority, the inventors did precisely that for "culturing...cells in three dimenations":

In the written description, the patentees plainly and repeatedly distinguished culturing with beads from culturing in three-dimensions. They expressly defined the use of beads as culturing in two-dimensions. And they avoided anticipatory prior art during prosecution by asserting that the conditioned medium produced by two-dimensional cultures was inferior and chemically distinct from the conditioned medium produced by three-dimensional cultures. Because none of the evidence called to our attention by SkinMedica would reasonably lead to a different reading of the intrinsic evidence, we find that the inventors clearly redefined the scope of “culturing . . . cells in three dimensions” by disclaiming the use of beads—which would otherwise be included in the ordi- nary meaning of that phrase.

Id. at 15.  In support of this conclusion, the majority opinion walks through a lengthy discussion of the text of the specification and prosecution history, addressing language such as "beads, as opposed to cells grown in three dimensions and the use of "i.e."  The result was a disavowal of beads from the scope of the claim term at issue:

"In sum, although the inventors never explicitly redefined three-dimensional cultures to exclude the use of beads, their implicit disclaimer of culturing with beads here was even “so clear that it equates to an explicit one. Without fail, each time the inventors referenced culturing with beads in the specification, they unambiguously distinguished that culture method from culturing in three-dimensions."

Id. at 27. 

Incorporation by Reference: One of SkinMedica's counter arguments was that the written description incorporated a voluminous technical treatise, Cell & Tissue Culture: Laboratory Procedures ("Doyle") in its entirety and that Doyle describes three-dimensional culturing with beads.  Among the majority's bases for rejecting SkinMedica's argument was the lack of any specific reference to Doyle:

Third, even if we assume that the passage from Doyle discusses what one of ordinary skill in the art might understand to be three-dimensional culturing with beads, the inventors’ general citation of Doyle does not indicate any reliance on that particular passage to define “culturing in three-dimensions” and to abandon the otherwise clear disclaimer of beads in the specification. When discussing cell culture methods, the patentees make the following reference to Doyle:

The cells may be cultured in any manner known in the art including in monolayer, beads or in three-dimensions and by any means . . . . Methods of cell and tissue culturing are well known in the art, and are described, for example, in [Doyle], supra; Freshney (1987), Culture of Animal Cells: A Manual of Basic Techniques, infra.

’494 patent col. 10 ll. 2–6.

It is clear from that passage that the inventors did not refer to Doyle in order to define what they meant by “three-dimensional culturing” in their patent. They did not indicate their reference to Doyle was for that purpose; nor did they even refer with any detailed particularity to the passages in Doyle that, according to SkinMedica, may have discussed three-dimensional culturing with beads. When the inventors wanted to use Doyle to explain the potential scope of terms they used, they did so specifically....We see no reason for such a non-specific reference to trump the clear disclaimer in the specification of culturing with beads.

Slip Op. at 35-36. 

Judge Rader's Dissent: Writing in dissent, Judge Rader disagreed that the patentee had met the "heavy presumption" in favor of the ordinary meaning of claim language.  Central to Judge Rader's opinion was the distinction between growing cells "on beads" and growing cells in three-dimensions using beads.  

Deference battle? Judge Rader's dissent also relied on testimony by SkinMedica's technical expert, Dr. Salomon.  The majority agreed with district court's decision to give Dr. Salomon's testimony "no weight"; in Judge Rader's eyes, "Dr. Salomon's testimony, when viewed as a whole, deserves great weight and respect."  Slip Op. at 47. 

Federal Circuit: Secret Patent Trials are OK

By Dennis Crouch

By their nature, patents have the power to control the ways that we can use our property. Gun laws can prohibit gun owners from shooting in certain areas. In the same way, a patent covering a particular gun will prohibit an individual (without license) from building or using a gun with that design. This is true even if the individual owns all the raw materials necessary to build the gun. Following this train reasoning, Courts have historically recognized that the public has a right to access patent information. Traditionally, US courts have operated in a manner that is open and public. However, in recent years more and more judges have allowed the courts to become a largely secret adjudication forum. [Note here that this issue will be a topic of one of our panels at the October 4 Conference here at Mizzou]. This parallels the rise in the ongoing secret adjudication both for grand juries and national security issues.

In Apple Inc. v. Samsung Electronics Co. (Fed. Cir. 2013), the Federal Circuit largely rejects any general public interest in patent and litigation information and instead holds that the public interest must be definite and particularized in order to have merit. The court writes:

We recognize the importance of protecting the public's interest in judicial proceedings and of facilitating its understanding of those proceedings. That interest, however, does not extend to mere curiosity about the parties' confidential information where that information is not central to a decision on the merits. While protecting the public's interest in access to the courts, we must remain mindful of the parties' right to access those same courts upon terms which will not unduly harm their competitive interest. For the reasons set forth above, we hold that the district court abused its discretion in refusing to seal the particular documents that Apple and Samsung challenge in these appeals.

Ordinarily, this type of appeal does not reach a court of appeals because most district court judges are extremely willing to allow parties to keep file documents, briefs, and testimony under seal in a way that is generally kept secret from the public. As with most disputes, the judge does not intervene when all parties agree to keep information secret. Here, Judge Koh refused to keep documents under seal even though both parties (Apple and Samsung) had stipulated that they could be so filed.

Writing for the court, Judge Prost highlights what the "extraordinary" notion that a patent trial should be open to the public.

Consistent with the extraordinary level of interest in the case, the press was given extraordinary access to the judicial proceedings. Unlike many patent trials, which often contain mountains of sealed exhibits and occasionally have closed courtroom proceedings, the district court explained to the parties before the trial that "the whole trial is going to be open." Consequently, the district court agreed to seal only a small number of trial exhibits. And shortly after the close of business each day, the parties, by order of the court, provided the press with electronic copies of every exhibit used at trial that day. Similarly, most exhibits attached to pre-trial and post-trial motions were ordered unsealed.

In its decision, the Federal Circuit purported to follow Ninth Circuit law requiring that "That is, the party [wanting to seal records] must articulate compelling reasons supported by specific factual findings that outweigh the general history of access and the public policies favoring disclosure, such as the public interest in understanding the judicial process." Here, the inclusion of trade secret information is often sufficient to warrant sealing of records.

In rejecting the district court's decision, the Federal Circuit held that Judge Koh had applied a too stringent standard. In particular, Judge Koh asked for "compelling reasons" for sealing the documents while the law only requires "good cause."

USPTO: Software Composition Inventions are Unpatentable under §101 unless they Clearly Disavow that the Storage Mechanism is a Transitory Wave or Signal

By Dennis Crouch

Ex parte Mewherter (PTAB 2013)

The USPTO has recently designated Ex parte Mewherter as a precedential decision with regards to its treatment of rejections under 35 U.S.C. § 101. The opinion basically holds that standard Beauregard claims (computer readable storage media) are not patent eligible because they could encompass transitory signals that are unpatentable under the Federal Circuit's Nuijten decision.

IBM's Patent Application Serial No. 10/685,192 is directed to a "system for converting slide show presentations" that converts each slide into "raster imagery" and then extracts contextual data (such as titles) and places those "in proximity to the raster imagery." The claim at issue here is claim 16, that is written as follows:

16. A machine readable storage medium having stored thereon a computer program for converting a slide show presentation for use with a non-presentation application, the computer program comprising a routine of set instructions for causing the machine to perform the steps of:

Extracting a slide title for a first slide in a slide show presentation produced by a slide show presentation application executing in memory of a computer;

Converting said first slide with said slide title into a raster image;

Disposing both said slide title and said raster image of said slide in a markup language document; and

Repeating said extracting, converting and disposing steps for a selected group of other slides in the slide show presentation.

The examiner rejected the claim under 35 U.S.C. § 101 as claiming non-statutory subject matter. In particular, the examiner indicated that the instructions could be imbedded in a signal or wave and are therefore unpatentable under In re Nuijten (Fed. Cir. 2007). In its appeal to the PTAB, IBM argued that its claimed "machine readable storage medium" is sufficiently fixed to avoid the transitory concerns expressed by the Federal Circuit in Nuijten. In the appeal, however, the PTAB affirmed the examiner's rejection – finding that under the "broadest reasonable interpretation" a "machine readable storage medium" continues to encompass unpatentable transitory signals. Here, the specification does not particularly define the claim term and IBM did not offer any promise that the claim is limited to non-transitory signals.

In its 2012 examination training, the USPTO offered parallel guidance:

When the specification is silent (no special definition of a CRM provided in original disclosure):

– It is acceptable to amend the claims to exclude the signal embodiment by adding "non-transitory" to modify the computer readable media.

– See "Subject Matter Eligibility of Computer Readable Media" (Jan. '10)

"Non-transitory" is not a requirement, but simply one option.

– Applicant can choose other ways to amend the claim in accordance with the original disclosure.

– Not acceptable to just add "physical" or "tangible"

– Nuijten's ineligible signals were physical and tangible.

– Not acceptable to add "storage" absent support in original disclosure because the broadest reasonable interpretation of computer readable storage media based on common usage covers signals/carrier waves.

The bottom line here is that patent applicants must now specifically disclaim transitory waves or signals as their compositional carrier of any software claims.

Revisiting the Indispensable Party

By Dennis Crouch

In Yesterday's case of University of Utah v. Max-Planck-Gesellschaft, the Federal Circuit held that the patent owner (here, University of Massachusetts) was not an indispensable party to an inventorship dispute. Judge Moore dissented. And, I think Judge Moore has the better argument here based upon the statutory language. Here's why. The statutory hook for bringing the case is found in 35 U.S.C. 256 that allows a "court before which such matter is called in question" to "order correction of the patent." However, the statute requires that any correction of inventorship be made "on notice and hearing of all parties concerned." In my mind, that statute largely ends the debate.

Federal Circuit Rejects Supreme Court Original and Exclusive Jurisdiction over State-vs-State Inventorship Disputes

By Dennis Crouch

A highlight of this opinion is Footnote 1 of Judge Moore's dissenting opinion that states "The majority baldly asserts that issues of patent ownership and inventorship are not sufficiently grand for the Supreme Court to resolve in the first instance. That is not our decision to make. It is for the Supreme Court to itself decide."

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University of Utah v. Max-Planck-Gesellschaft (Fed. Cir. 2013)

In 2011, University of Utah (UUtah) filed a federal lawsuit under 35 U.S.C. § 256 to correct the inventorship of U.S. Patent No 7,078,196. That patent is directed to Small Interfering RNAs (siRNAs) and methods of creating those molecules that are the current study of intensive genetic therapy research.

According to USPTO records, the patent is owned collectively by the Max-Planck Institute as well as MIT, the Whitehead Institute and the University of Massachusetts. Dr. Brenda Bass – a UUtah professor – alleges that Dr. Thomas Tuschl - a UMass Professor – incorporated her ideas into his patent but then did not name her as an inventor. All of these assignees were named as defendants in the complaint filed in Federal District Court.

The appeal raises interesting issues of civil procedure, federalism, and sovereign immunity. The 11^th Amendment to the U.S. Constitution generally provides sovereign immunity to state governments from any cause of action in Federal Court brought by citizens of another state or country. However, the 11^th Amendment does not provide for immunity in state-vs-state actions. Rather, the U.S. Constitution provides that "In all [Federal] Cases . . . in which a State shall be Party, the supreme Court shall have original Jurisdiction." Art III, §2, cl. 2. Following the constitutional guidance, the jurisdictional statutory code provides that the "Supreme Court shall have original and exclusive jurisdiction of all controversies between two or more States."

Rather than fighting the battle in District Court, UMass (a state institution) argued that the case brought by UUtah (another state institution) should be seen as a state-vs-state conflict that should go directly to the Supreme Court in the matter of first instance.

In order to avoid that result (but still reach the same result), UUtah dropped UMass as a defendant and instead list the leaders of UMass (including its president Robert Caret) as the defendants. Based upon that change, District Court Judge Saris held that the case should no longer be seen as a state-vs-state case and that, as a consequence, the Supreme Court did not have exclusive original jurisdiction. Judge Saris also found that correction of inventorship was not a "core sovereign interest sufficient to make this a dispute between States," but that the case could proceed against the named officials under the Ex parte Young doctrine. Particular to this case is that the remedy demanded was an order directing the USPTO to correct inventorship rather than calling for any monetary or injunctive relief against the state.

Although the district court case is not final, the Federal Circuit took an immediate appeal under the Collateral Order Doctrine.

On appeal, the Federal Circuit has affirmed – finding that "UMass is not a real party in interest under the Supreme Court's caselaw." Although both the Constitution and Statute appear clear, the US Supreme Court has been reluctant to take cases such as this and has thus added requirements that the case be "serious," "dignified," and raising "important" federalism concerns. In addition, the Supreme Court has considered whether there are other avenues for relief. And, both of the competing states must be indispensable parties to the lawsuit.

On this notion, UMass argues that UUtah is seeking the property of UMass (i.e., its patent) and that is sufficient to make UMass a real party that cannot be "plead around."

Agreeing with UMass, the Federal Circuit instead held that the case is about "inventorship" and the identity of the individual inventor of a patent is not a "core sovereign interest" that need be raised directly to the Supreme Court. In addition, the Federal Circuit agreed that the formal shift from suing the University to suing the University President in his Official Capacity was sufficient to evade the state-vs-state setup. Finally, the appellate panel found that UMass (a patent owner) is not an indispensable party to the case since its interests are being adequately protected by the other co-owners and its named officials.

In reality, UUtah UMass [Updated] likely does not want the Supreme Court to directly hear the case. Rather, the strategy here is that the University is largely betting on the likelihood that the Supreme Court would decline to exercise jurisdiction – effectively ending the case.

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Writing in Dissent, Judge Moore vigorously disagreed with the majority's holding.

The majority erroneously holds that a patent-ownership dispute between two state universities is not a "controversy between two or more States." It then compounds this error and holds that a patent owner is not an indispensable party to an action that seeks to reassign title to the patents-in-suit. I respectfully dissent.

I. Subject Matter Jurisdiction

The district court lacks jurisdiction over UUtah's claims against the UMass Officials because those claims raise a dispute between two States, Utah and Massachusetts. Article III of the U.S. Constitution vests the Supreme Court with original jurisdiction over cases in which a State is a party. As § 1251(a) expressly states: "The Supreme Court shall have original and exclusive jurisdiction of all controversies between two or more States." There is no dispute that UUtah and UMass are instruments of Utah and Massachusetts, respectively, and that a suit between those institutions could only be brought in the Supreme Court. The majority, however, concludes that § 1251(a) does not apply here because UUtah elected to sue the UMass Officials rather than UMass. That conclusion is incorrect.

To determine if a suit implicates the Supreme Court's exclusive original jurisdiction, we look "behind and beyond the legal form" of the claim and determine "whether the State is indeed the real party in interest." Arkansas v. Texas, 346 U.S. at 371. The majority agrees with this general proposition but holds that the UMass Officials, not UMass, are the real parties in interest. I disagree.

This case involves a dispute between UMass and UUtah over who owns the rights to the Tuschl II patents. UMass is the assignee of the Tuschl II patents and UUtah "wants to own the patents." UUtah is pursuing that interest through a correction of inventorship claim under 35 U.S.C. § 256 and a corresponding request for an order that UUtah owns the patents. … UUtah also alleges in its complaint that it "should be the sole owner or an owner" of the Tuschl II patents. It specifically requests that the court "order assignment of all right title and interest" in the patents to UUtah. Indeed, the majority recognizes (1) that UUtah specifically requested that the court assign it all rights to the Tuschl II patents and (2) that UUtah will obtain the rights to the patents if it prevails on its correction of inventorship claims. This is a dispute about ownership, plain and simple.

UUtah cannot recast the nature of this dispute by suing the UMass Officials as stand-ins for UMass. Indeed, the majority never holds that the UMass Officials have any interest in this proceeding. Nowhere does the majority suggest that the UMass Officials are "parties concerned" that may be subject to a correction of inventorship action under § 256(b). . . .

Section 1251(a) contains "uncompromising language": the Supreme Court has original and exclusive jurisdiction over "all controversies between two or more States." Mississippi v. Louisiana, 506 U.S. 73, 77, 113 S.Ct. 549, 121 L.Ed.2d 466 (1992). The majority errs when it concludes that § 1251(a) does not apply to this dispute because the "State has no core sovereign interest" in inventorship or patent ownership. Maj. Op. at 13–15. The majority's "core sovereign interests" test is at odds with the plain language of the statute, which contemplates "all controversies" between states fall within 1251, not just those involving core sovereign interests. There is simply no basis to limit the statute in such a way.

Moreover, requiring a core sovereign interest to implicate the Supreme Court's exclusive jurisdiction erodes the Court's discretion to decide which controversies it will hear. The existence of the Supreme Court's exclusive jurisdiction and its discretion to exercise that jurisdiction are separate concepts. The Court's exclusive original jurisdiction extends to "all controversies between two or more States." 28 U.S.C. § 1251(a). The Court, however, is not required to exercise its jurisdiction over every controversy. The Court tends to exercise its jurisdiction sparingly, depending upon the nature of the interest of the complaining State, the seriousness and dignity of the claim, and the availability of another original forum to resolve the dispute. Mississippi v. Louisiana, 506 U.S. at 76–77. The concept of a "core sovereign interest" has roots in opinions that address whether the Supreme Court will decide to exercise its jurisdiction over a dispute, not whether the Court's exclusive original jurisdiction over the controversy exists. See id. at 77; Texas v. New Mexico, 462 U.S. 554, 570, 571 n. 18, 103 S.Ct. 2558, 77 L.Ed.2d 1 (1983); Connecticut ex rel. Blumenthal v. Cahill, 217 F.3d 93, 109 (2d Cir.2000) (collecting cases). The majority's conflation of those two concepts strips the Supreme Court of its discretion to decide if a case is sufficiently serious to exercise jurisdiction over it. It reallocates that power to the lower courts—who will decide which subset of cases—those implicating core sovereign interest—will be presented to the Supreme Court. FN1

The majority finds support for its decision in the Second Circuit's split decision in Cahill. With all due respect, even if we adopt the flawed logic of the majority in Cahill, this case would still fall within the Supreme Court's exclusive jurisdiction in § 1251. The majority correctly recognizes that, generally, a State is the real party in interest if " the effect of the judgment would be to restrain the Government from acting, or compel it to act." Maj. Op. at 14 (quoting Cahill, 217 F.3d at 106). But the majority nevertheless concludes that UMass is not the real party in interest because a judgment to correct inventorship "will not require or restrain UMass from acting." Id. at 13. This is not correct.

A judgment in UUtah's favor will restrain UMass's ability to act. If successful, UUtah will be declared sole owner of the Tuschl II patents and UMass will have no interest in them. UMass will not be able to license or assign the patents. And UUtah will be able to exclude UMass from practicing the inventions claimed in the patents. Patent rights are the quintessential right to restrain. The effect of this judgment will be to prevent UMass from exploiting the Tuschl II patents or the technologies they cover. This certainly "restrain[s] the Government from acting."

UUtah alternatively requests that Dr. Bass be found to be a co-inventor. A finding that Dr. Bass is a co-inventor of the Tuschl II patents will result in UUtah co-owning those patents. The effect of the judgment would be that UUtah could practice or license the patents without UMass's consent and without having to account to UMass. See 35 U.S.C. § 262. The judgment would thus restrain UMass from asserting its rights in the Tuschl II patents against UUtah or any of UUtah's licensees. Again, this restrains UMass from acting.

The majority ignores these effects on UMass. Without explanation, the majority asserts that UMass will only be "more or less affected by the decision" and that transfer of the Tuschl II patents to UUtah will "not deplete the state treasury." Maj. Op. at 15. This is incorrect. A correction of inventorship by the PTO will give UUtah an ownership interest in the Tuschl II patents by operation of law and dilute or revoke UMass's property interest. Indeed, as the majority also recognizes, UUtah expressly asks the court to order the reassignment of the patents to UUtah. The central effect of a judgment in UUtah's favor will be to deplete the assets of the current owners of the Tuschl II patents, one of whom is UMass. UMass is thus the real party in interest in this case.

This is a dispute between two state universities over who owns a valuable patent portfolio—a dispute over property ownership. As undesirable as it may be, we are bound to follow the plain language of § 1251(a): "The Supreme Court shall have original and exclusive jurisdiction of all controversies between two or more States." It is up to the Supreme Court to decide if it wants to exercise its exclusive jurisdiction over this controversy. We should not contort the statute to avoid a perceived injustice FN2 that would result if the Court declined to exercise jurisdiction over UUtah's claims.

UUtah initiated an action that seeks to obtain UMass's interest in the Tuschl II patents. That is a controversy between two States and can only be brought in the Supreme Court. Accordingly, we should reverse the district court's decision that it had jurisdiction over UUtah's claims against the UMass Officials.

II. Indispensable Party

The majority's holding that UMass is not an indispensable party to this action is incorrect. We have held that when a plaintiff brings a declaratory judgment action seeking to invalidate a patent or hold it not infringed, the patentee is both a necessary and indispensable defendant in that action. A123 Sys., Inc. v. Hydro–Quebec, 626 F.3d 1213, 1217–19, 1220–22 (Fed.Cir.2010); Enzo APA & Son, Inc. v. Geapag A.G., 134 F.3d 1090, 1094 (Fed.Cir.1998). It would be nonsensical to suggest that all patent owners must be joined in a suit seeking to invalidate the patent, but they need not be joined in a suit over patent ownership. Indeed, § 256(b) requires a court, before it orders a correction of inventorship, to provide "notice and hearing of all parties concerned," i.e., those with an "economic stake" in the patent. Chou, 254 F.3d at 1359–60. We should apply our general rule that all co-owners must be joined in an action that affects their patent. See Ethicon, Inc. v. U.S. Surgical Corp., 135 F.3d 1456, 1467 (Fed.Cir.1998).

The majority instead holds that UMass is not an indispensable party because UUtah joined "all of the Tuschl Patent owners except UMass," each of whom are "jointly represented by legal counsel." Maj. Op. at 21. It is not enough that UMass and the named defendants "share the same overarching goal" of defeating UUtah's inventorship and ownership claims. A123 Sys., 626 F.3d at 1221 (holding that absent patentee was an indispensable party when the named party had "overlapping" but not "identical" interests).

The majority deviates from our longstanding requirement that all patent owners be joined, citing an exception created in Dainippon Screen Manufacturing Co. v. CFMT, Inc., 142 F.3d 1266 (Fed.Cir.1998). It is true that, like Dainippon Screen, the named defendants here are represented by common counsel. But the majority omits the "highly relevant" facts from Dainippon Screen—the absent party was a wholly-owned subsidiary of the named party and was created by the named party to enforce the patents-in-suit. 142 F.3d at 1267–68, 1272–73. We allowed the suit to go forward because "the parties' interests in the asserted patents were not just common, but identical." A123 Sys., 626 F.3d at 1221 (discussing Dainippoin Screen ).

There is no party in this suit which represents UMass's interest in the Tuschl II patents. Other defendants also have an interest in the patents, but they do not represent UMass's interest. Indeed, their interests may well diverge. For example, the non-UMass defendants may choose to settle with UUtah in a way that diminishes UMass's rights, such as stipulating that Dr. Bass is the sole inventor of the Tuschl II patents in exchange for ownership interests in the patents. That risks extinguishing UMass's rights to the patents without UMass participating in the lawsuit.

The majority further claims that defendant Alnylam can represent UMass's interest because UMass "handed sole and exclusive control of this suit over to Alnylam." Maj. Op. at 21. That right, however, is conditional. If there is a conflict of interest, Alnylam loses its right to control UMass's defense. Id. The agreement thus contemplates that Alnylam and UMass may not have identical interests. Because UMass does not have identical interests with any of the named defendants, it is an indispensable party in this case. I dissent from the majority's contrary holding.

Hiring an IP Law Professor at the University of Missouri

I wanted to post this hiring announcement for – We are looking to hire a tenure-track or (tenured) professor to teach and research in the field of intellectual property. My Dean Gary Myers and the faculty are looking to expand our intellectual property focus at the law school in several different ways, including through hiring additional faculty.

Job Posting

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Job Description

The University of Missouri School of Law seeks entry-level or lateral candidates for a full-time tenure track position in the area of Intellectual Property. The School of Law is looking for individuals with a strong commitment to scholarship, teaching, and public service. Candidates must have an excellent academic record and either legal practice experience or advanced academic training.

The University of Missouri-Columbia is the flagship campus of the University of Missouri system and is one of only 34 public universities in the country belonging to the American Association of Universities, a group of elite research universities. As both a research and land grant university, we have opportunities for interdisciplinary interaction that are unmatched at all but a handful of other universities. In addition, Columbia is regularly ranked as one of the most livable cities in the country.

Application Procedure

Review of applications will begin immediately and will continue until all available positions are filled. The School of Law will review the Faculty Appointments Registration applications as they are distributed by the AALS. (If you are participating in the Faculty Appointments Register you do not need to mail or email your materials.) Applicants who are not participating in the Faculty Appointments Register must apply by submitting a cover letter and resume at http://hrs.missouri.edu/find-a-job/academic/.

The University of Missouri is an equal opportunity/ADA institution and is particularly interested in applications from women and minorities. Additional information about the School of Law is available at www.law.missouri.edu. To request ADA accommodations, please contact Associate Dean Rigel Oliveri at 573-882-5068.    

Benefit Eligibility

This position is eligible for University benefits. The University offers a comprehensive benefits package, including medical, dental and vision plans, retirement, and educational fee discounts. For additional information on University benefits, please visit the Faculty & Staff Benefits website at http://www.umsystem.edu/totalrewards/benefits

Equal Employment Opportunity

The University of Missouri is an equal access, equal opportunity, affirmative action employer that is fully committed to achieving a diverse faculty and staff. For more information, call the Associate Vice Chancellor of Human Resource Services/Affirmative Action officer at 573-882-4256.

To request ADA accommodations, please call Human Resource Services at 573-882-7976. TTY users, please call through Relay Missouri, 1-800-RELAY (735-2966) or en Español at 1-800-520-7309.

Patent Ethics by Hricik

Professor David Hricik writes Patently-O's Ethics Blog: Patent Ethics by Hricik available online at patentlyo.com/hricik. For the past year, Professor Hricik took a hiatus while clerking for Randall Rader – Chief Judge of the Court of Appeals for the Federal Circuit. He is now back online and has four recent posts:

• Thinking of investing in a business that competes with a former client?
• Some recent cases on Prosecution Bars
• An attempt at some humor.
• Hello, everyone!

Welcome back David Hricik!

Patently-O Bits & Bytes by Lawrence Higgins

Upcoming Events:

• American Conference Institute is hosting the FDA Boot Camp in Boston, MA on September 17-18, 2013. ACI’s FDA Boot Camp has been designed to give products or patent litigators, as well as patent prosecutors, industry in-house counsel, and life sciences investment and securities experts, a strong working knowledge of core FDA competencies. Register with discount code “PTO200”.  [Link]

• The Licensing Executives Society (LES) will hold their annual meeting September 22-25, in Philadelphia. The annual meeting is themed "IP Matters in Every Deal" the meeting is a must-attend IP, licensing and business development event.  [Link] 

• American Conference Institute is hosting the Paragraph IV Disputes Master Symposium in Chicago, IL on October 3-4, 2013.  At this symposium, there will be in-depth discussions and practical take aways that will prepare you for this new era of extreme Hatch-Waxman litigation. Critical sessions will address all facets of Paragraph IV litigation from pre-litigation concerns to the commencement of suit through final adjudication. Register with discount code “PTO200”.  [Link]

• The USPTO’s 18th Annual Independent Inventor Conference will be held October 11-12. For two days, independent inventors and small business owners will have an unparalleled opportunity to learn, network, and jumpstart their creative endeavors. Experts and senior officials from the USPTO will present valuable information on patents, trademarks, and other intellectual property (IP) matters while successful business owners and inventors will relate their inspiring personal experiences in bringing their dreams to market.  [Link]

• The EPO will hold their Patent Information Conference on October 22-24, in Bologna, Italy.  The EPO Patent Information Conference 2013 will be organized in co-operation with the Directorate General for the Fight against Counterfeiting - Italian Patent and Trademark Office.  [Link]

• AIPLA annual meeting will take place October 24-26, in Washington, DC. The Annual Meeting offers  opportunities to connect with others in the IP industry from around the world to learn during sessions such as: Navigating Through the PTAB and Federal Courts After the AIA; Trademark Fair Use; What You Need to Know About the Hague Agreement; Evolving IP Rights in China, and IP Issues Facing Government R&D Contractors.  [Link]

• American Conference Institute is hosting the FDA Boot Camp Devices Edition in Chicago, IL on November 5-6, 2013.  Many products liability lawyers, patent counsel, business and investment experts, medical and regulatory affairs professionals, and those involved in pricing and reimbursement — despite their tenure in working with FDA-regulated devices — are not well-versed in the essentials of the approval process and the regulatory hurdles of the post-approval period. ACI’s Third Annual FDA Boot Camp – Devices Edition has been designed to give you a strong working knowledge of core FDA competencies. Register with discount code “PTO200”.  [Link]

 

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