Patent Law Blog (Patently-O)

Gene Patent Debate Returns to the Federal Circuit

by Dennis Crouch

Association for Molecular Pathology v. USPTO and Myriad Genetics (Fed. Cir. 2012)

The Supreme Court recently issued a GVR order in this case with instructions for the court to reconsider its decision in light of Mayo v. Prometheus.  The Federal Circuit has now released a new briefing schedule — asking the parties to file supplemental briefs by June 15, 2012 addressing the issue: What is the applicability of the Supreme Court’s decision in Mayo to Myriad’s isolated DNA claims and to method claim 20 of the ’282 patent? Non-parties may file briefs of  up to 15–pages in length that are due on the same date.  Oral arguments will be held July 20, 2012.

Claim 1 of Myriad's patent is directed to “an isolated DNA coding for a BRCA1 polypeptide” with a particular amino acid sequence.  DNA coding for BRCA1 is a naturally occurring mutation and is clearly unpatentable. The catch here is that Myriad claims “isolated DNA” that the patent defines as “substantially separated from other cellular components which naturally accompany a native human sequence.”

Claim 20 of the patent is directed to the scientific method of finding a cancer treatment that involves (1) growing a host cell that has been genetically modified to include a BRCA1 gene and then (2) testing to see whether any compound particularly inhibits the growth of those cells.  A key question for this claim is whether its breadth effectively extends to cover an abstract idea — namely, using the scientific method to discover a treatment for BRCA1 cancer. 

Self-Replicating Technologies

Guest Post by Jeremy Sheff. In view of the pending Monsanto case, I asked Professor Sheff to provide some of his thoughts on the patenting of self-replicating technologies –  DC.  This essay is cross-posted on PrawfsBlawg.

Self-replicating technologies, once the subject of theory and fantasy, are now upon us. The original self-replicating machine—the living organism—has already been harnessed by biotechnology engineers and, more to the point, their lawyers.  The next wave of self-replicating technologies, be they nanomedical robots or organic computers, are not far behind. Rather than triggering a “grey goo” apocalypse, these technologies are, at present, raising far more prosaic issues of intellectual property and antitrust law.

Those issues have now apparently caught the attention of the Supreme Court.  A few weeks ago, the Court called for the views of the solicitor general on the certiorari petition in the case of Bowman v. Monsanto.  This is the latest in a series of cases in which the Federal Circuit has addressed the application of the doctrine of patent exhaustion to the genetic engineering technology embodied in Monsanto's "Roundup-Ready" herbicide-resistant seeds.  Seeds are the prototypical self-replicating technology, and a number of similar herbicide-resistant crops are in the pipeline of the largest agribusiness concerns.  In each of the Roundup-Ready cases, a farmer has argued that Monsanto's patent rights do not extend to the second generation of soybeans grown from a patented first-generation seed.  In each case, the Federal Circuit found for Monsanto and against the farmers.

Patent exhaustion (or "first sale") doctrine serves as a limit on patent rights, and provides that once a patentee has made an authorized sale of an embodiment of its patented invention, its patent rights with respect to that embodiment are exhausted, and the purchaser is free to use or re-sell the embodiment as it sees fit.  Like analogous doctrines in copyright and trademark, it is motivated by competition concerns.  Its aim is to enable the creation of downstream or secondary markets in patented articles, and to prevent patentees from using their intellectual property rights to gain market power in markets other than the market for the patented technology.  When the Supreme Court last spoke on the issue, it rebuked the Federal Circuit for giving these pro-competitive policies insufficient weight.  It seems to be considering an encore in the Roundup-Ready cases.  For reasons I'll explain after the jump, I think that would be a mistake.

The Federal Circuit's analysis of patent exhaustion in the Roundup-Ready cases is admittedly not a model of the judicial craft.  Framing the issue as a formal question whether a second-generation soybean is a different "article" than the first generation seed from which it grew, the court's main justification for its result was the bare assertion that any alternative result would "eviscerate" Monsanto's patent.  But this is a question-begging explanation, and there are other, better reasons why a patentee's sale of a single embodiment of its self-replicating technology ought not to exhaust patent rights with respect to the second, third, or nth generation of the technology that is propagated from that first embodiment.  Moreover, these reasons are consistent not only with the reasons for granting patent rights in the first place, but with the pro-competitive principles that justify limiting those rights through exhaustion doctrine.

To get at these reasons, I propose a thought exercise.  Let's imagine that the Roundup-Ready cases came out the other way--that purchasers of Roundup-Ready seed from Monsanto were free, as a matter of patent law, to use all subsequent generations of soybeans grown from those first purchased seeds however they saw fit.  What would we expect the Monsantos of the world to do?  How do we believe their behavior might be influenced by this new legal framework?

One possible answer to this question is: not at all.  It may be that the additional revenues to be derived from selling additional embodiments of a self-replicating technology to the same customer are trivial (perhaps due to the structure of demand), and that the prospect of any one customer re-selling a subsequent generation of the technology to another potential customer of the patentee is remote.  Nanomedicine, particularly personalized nanomedicine, may one day prove that this is a possible result.  But in the agriculture context, it strikes me as unlikely.  

Where the technology at issue is an input for the production of a commodity, and the demand for that technology is broad and essentially undifferentiated, I would expect that the possibility of re-sale of nth generation seeds by the patentee's customers would significantly eat into the patentee's revenue stream, potentially making it impossible for the patentee to recoup the investment in research and development required to develop the technology in the first place.  This is the classic free-rider problem that patent law is supposed to prevent: we preserve the incentive to engage in costly research and development by giving the inventor a limited-time monopoly.  Other scholars have noted that this free-rider rationale is particularly salient for inherently self-disclosing inventions (inventions that are easy to copy once they have been introduced to the public).  I would add that self-replication exacerbates the problem of self-disclosure: the patentee selling an embodiment of its invention would not only be teaching competitors how to practice the invention, it would in essence be building their factories as well.

So there are sound justifications grounded in the innovation policies underlying patent law for the Federal Circuit's rulings in the Roundup-Ready cases.  But of course, patent exhaustion doctrine is concerned not only with innovation policy, but also with competition policy.  This brings me back to my earlier question: how would we expect the Monsantos of the world to react to the free-rider problem if patent law did not protect them against competition from nth generation copies of their own first-generation products?  I can imagine two possible strategies a technologist might pursue to circumvent the free-rider problem: contract and secrecy.  And I think both of these alternatives are inferior to the patent solution crafted by the Federal Circuit on competition grounds.

Take the contract approach, which has been explicitly advocated by Yee Wah Chin, one of the attorneys representing the interests of Monsanto's farmer customers.  To avoid the problem of free-riders Monsanto might, for example, restrict sales of its seeds to customers who sign a license agreement in which the customers undertake to monitor the uses of nth generation embodiments.  So, a farmer might have to agree to sell his soybean crop only to buyers who have their own license agreement with Monsanto, or to Monsanto itself.  Or Monsanto could include field-of-use restrictions in its licenses, as Ms. Chin proposes: "Monsanto could have licensed seedmakers to sell seed embodying Monsanto technology on condition that the second-generation seed be either consumed or sold to buyers who agree to either consume the seed or isolate that seed from other seed and sell the seed only for consumption."  

This does not strike me as a pro-competitive result, for a few reasons.  First, it incentivizes Monsanto to extend its influence into downstream markets--such as the market for commodity soybeans and their derivative products--in ways that it would have little incentive for under the Federal Circuit's approach.  This downstream market creep is precisely the type of expansion of patent rights that exhaustion doctrine is supposed to prevent, out of fear that the patentee's interests are not likely to be consistent with the efficient functioning of those downstream markets.  Second, and perhaps more importantly, forcing Monsanto to look to contract rights to protect its investment in research and development shifts the costs of monitoring and enforcing the Roundup-Ready patents from Monsanto itself onto its customers, who are likely to face higher monitoring costs.  

We must remember, Monsanto's customers are largely farmers, who lack Monsanto's economies of scale, its greater expertise with its own technology, and its understanding of the functioning of the markets for that technology.  Moreover, shifting enforcement responsibility from the patentee to its customers is likely to create agency costs where they would not otherwise exist.  A farmer who is paying Monsanto a premium for Roundup-Ready seeds probably has far weaker incentives to vigorously monitor for violation of Monsanto's license terms than does Monsanto itself, which is reaping the premium.  Finally, in the event that a customer breaches these monitoring obligations, either maliciously or negligently, Monsanto's technology could fall into the hands of a competitor who is not in privity of contract with Monsanto and thus (absent any unfair competition type of claim) would be free to use the nth generation seed (in which Monsanto's patent rights are exhausted) to compete with Monsanto.  An individual farmer is likely to be judgment-proof in the face of the claims Monsanto might make should such a competitive threat emerge outside the reach of its licensing provisions, which once again leads us to the original problem: how would we expect Monsanto to respond to this risk of free-riding?

This brings me to the last alternative to the Federal Circuit's solution in the Roundup-Ready cases: secrecy.  Monsanto might seek to prevent free-riding by refusing to release its technology to public view, and relying on trade secret protection to protect against free-riding.  But in order to preserve its secret (a prerequisite of trade secret protection),  Monsanto would have to ensure that nothing it released into the market disclosed its genetic technology.  As I noted above, self-replication can be seen as a heightened form of self-disclosure, and so this type of secrecy would be fairly hard to maintain.  Indeed, I think the only plausible way of doing so would be to pursue a course of comprehensive vertical integration.  Monsanto would not only have to be in the business of propagating seeds, but also in the business of cultivating and harvesting soybeans, and processing them into useful products (oil, animal feed, industrial adhesives, tofu, you name it) that do not reveal the genetic material at the core of Monsanto's invention.  Even if this were technically possible (a big if), the effect on all sorts of markets, both for inputs and outputs of the soybean market, is likely to be catastrophically anti-competitive.  Where the alternative is such drastic shocks to competition in the market for, e.g.,  miso paste, soy-fed livestock, and arable land, the Federal Circuit's decisions in the Roundup-Ready cases start to look surprisingly pro-competitive.

The big question in my mind, then, is not whether the Federal Circuit's reached the right result in the Roundup-Ready cases.  Given the factual setting of those cases, I think the answer to that question is a relatively uncontroversial yes.  The real question, to me, is whether the same holds true for self-replicating technologies other than seeds for agricultural commodities.  I already noted above one type of self-replicating technology--personalized nanomedicine--that may not present the same incentives for patentees, their customers, and their competitors, as do herbicide-resistant soybeans.  Given how little we can presume to know about the future development of other self-replicating technologies, it is likely unwise to try to set a rule today to govern the rights of downstream users for all such technologies that may arise tomorrow.  And for this reason alone, it may be worth getting some discussion of the issue from the Supreme Court, which seems particularly sensitive (almost to a fault) to the hazards of establishing brittle legal rules to govern the unknown future of technology.  If the analysis that emerges is more substantive and functionally-minded than the under-argued, formalist analysis of the Federal Circuit (admittedly, another big if), I would be happy to see the Court take the case, if only to put the type of issues I've discussed in this post on the table.

What Happened to All the Cases: Why So Many Section 337 Cases Give Rise to Relatively Few Exclusion Orders

Guest Post by Michael G. McManus and Rodney R. Sweetland, III. Both authors are partners at the Duane Morris law firm. 

There is something of a paradox regarding the fate of Section 337 cases at the ITC. On the one hand, it is often noted that Section 337 cases are less likely to settle prior to trial than district court patent cases.  One commentator reports that between 2000 and 2008 46% of investigations were settled prior to hearing.[1] While this is a significant number of settlements, it indicates that most Section 337 cases have historically gone to hearing.  On the other hand, with more than three hundred investigations filed since 2005, and Section 337 complainants’ reported win rate of 58%, one would therefore expect to find well over one hundred exclusion orders in place.  In fact, as of this writing, there are only about 50 exclusion orders in effect arising from patent-based 337 investigations.  What happened to all the cases?

The present article will review the course of Section 337 complaints filed in 2008, 2009 and 2010 and describe their fate.

2008

In calendar year 2008, there were 36 Section 337 actions filed.[2]  Of these 36, 16 were decided by ALJ decision and 20 by settlement.[3]  Of the 16 resolved by decision, 3 were decided on summary determination, and 13 were decided by final initial determination (sometimes referred to as an “ID”). 

• Of the 20 investigations resolved by settlement, 18 were settled prior to hearing and 2 subsequent to hearing. In addition, 2 of the investigations that led to IDs resulted in subsequent settlements for a total of 22 settlements.
• Of the 36 actions filed in 2008, 21 were resolved prior to hearing (18 by settlement and 3 by SD) and 15 went to hearing (13 led to Final IDs and 2 were settled after hearing).
• Of the 13 IDs issuing from 2008-filed complaints, 7 found a violation and 6 found no violation for a complainant win rate of 54% at the ID stage.
• Nine of the 36 cases resulted in exclusion orders (including several arising from default judgments) with eight of the exclusion orders still in effect.

2009

In calendar year 2009, there were 34 Section 337 complaints filed.[4]  Of these 34, thirteen were determined by Administrative Law Judge (“ALJ”) decision and 21 by settlement.  Of the 13 resolved by decision, one was decided on summary determination and 12 by Final Initial Determination. 

• Of the 21 cases resolved by settlement, 18 were resolved prior to hearing, and 3 were resolved after the hearing, but prior to the Final ID. In addition, 3 of the investigations that led to IDs resulted in settlements for a total of 24 settlements.
• Of the actions filed in 2009, 19 were resolved prior to hearing (18 by settlement and 1 by SD) and 15 went to hearing (12 led to Final IDs and 3 were settled after hearing).
• Of the 12 IDs arising from 2009-filed cases, six found a violation and six found no violation for a 50% win rate at the ID stage. Of the six that found a violation, 2 led to LEOs, 2 led to settlement and 2 were reversed by the Commission. Of those IDs that found no violation, five were reviewed and affirmed by the Commission and one settled. 
• Five of the 34 cases resulted in exclusion orders. Two resulting from final IDs and 3 resulting from defaults. All 5 remain in effect.

2010

In calendar year 2010, there were 58 Section 337 complaints filed.[5]  Of these 58, 21 were decided by ALJ decision and 34 by settlement (the ID for three investigations had not yet issued as of this writing).  Of the 21 resolved by decision, 2 were decided on summary determination and 19 by final initial determination. 

• Of the 34 investigations resolved by settlement, 33 settled prior to hearing and one settled subsequent to hearing but before the ID. 
• Of the actions filed in 2010, 35 were resolved prior to hearing, 33 by settlement and 2 by summary determination. 23 went to hearing. Of these 23, 19 resulted in IDs, 1 settled subsequent to hearing, and 3 remain pending. 
• Of the 19 IDs arising from 2010-filed cases, 8 found a violation and 11 found no violation for a complainant win rate of 42% at the ID stage. 
• A significant number of 2010 cases are presently undergoing Commission review, however, 5 cases have resulted in exclusion orders thus far. 

Cumulative statistics

Cumulating the foregoing, and disregarding the 3 cases awaiting a Final ID, yields the following:

• 69 of 125 (55%) investigations settled prior to hearing
• 6 of 125 (5%) investigations settled after hearing but before ID
• 44 of 125 (35%) investigations led to an ID
• 6 of 125 (5%) investigations decided on SD

Further, 4 of the 44 cases with an ID subsequently settled.[6]  Thus, the cumulative settlement rate, considering cases at all stages before the Commission, is 63% (79 of 125).[7]

The ALJ’s issued 44 IDs in the case sample. Of these, 21 found a violation, and 23 found no violation. This yields a complainant success rate of 48% at the Initial Determination stage (there are too many cases that remain pending to derive complainant success rate through the Target Date). 

CONCLUSION

We are now in a position to answer the question, what happens to all the cases? First, the cumulative settlement rate for the time period at issue, 63%, is somewhat higher than expected.  Second, the complainant win rate for the relevant period, at least at the ALJ stage, is somewhat below the historical average. These two factors lead to fewer exclusion orders.

There is no quantitative explanation for the lower settlement rate of ITC cases relative to similar district court case.[8]  It may be that the structure of Section 337 proceedings does not lend itself to settlement.  In a district court jury case, the trial, and particularly the verdict, provide a decisive moment, with the joy of victory and the agony of defeat.  At the ITC, however, there is no comparable inflection point.  The hearing does not end with a decision; rather, the ID issues about 3 months subsequent to the hearing.  The ID yields a winner and a loser, however, in virtually every case the litigants promptly seek review by the full Commission.  The decision-making process is more drawn out and does not drive settlement “on the courthouse steps.”

Moreover, the simple speed of Section 337 proceedings may militate against settlement.  It often takes time for parties’ psychology to move from that of a combatant to a strictly rational economic agent. 

Similarly, there is no definitive explanation for the complainant win rate falling somewhat below the historical average.[9]  There is constant change in the ALJs, the Commission staff, the litigants, the law and the way the Commission is perceived among litigants. Some combination of these factors may affect win rate but the more likely explanation is that it is simply an artifact of the relatively small sample size. 

In view of the foregoing, practitioners can counsel their clients that, in recent years, 1) few cases are decided on summary determination, 2) a slim majority of cases settle prior to hearing and that 3) there is roughly a 50-50 chance of an ID yielding the desired result.

---

[1] Schaumberg, A Lawyer's Guide to Section 337 Investigations Before the U.S. International Trade Commission at 3.

[2] ITC Inv. Nos. 337-TA-632 through 337-TA-667

[3] For purposes of this article, the term “settlement” includes default judgments and withdrawn complaints.

[4] ITC Inv. Nos. 337-TA-668 through 701.

[5] ITC Inv. Nos. 337-TA-702 through 759.

[6] This article does not track settlements occurring after the Commission’s Final Determination; however, such settlements do occur making the total settlement rate slightly higher than reported here.

[7] This is still somewhat lower than most reported district court settlement rates for patent cases.  See Patstats.org, FY 2009 PATENT CASE DISPOSITIONS BY DISTRICT COURTS (reporting 88.6% settlement rate for 2009 cases); Jay P. Kesan & Gwendolyn G. Ball, How are Patent Cases Resolved? An Experimental Examination of the Adjudication and Settlement of Patent Disputes, 84 WASH. U. L. REV. 237, 259 (2006) (reporting approximately 80% settlement rate).

[8] See, generally, Colleen V. Chien, Patently Protectionist? An Empirical Analysis of Patent Cases at the International Trade Commission, Wm. & Mary L. Rev. 60 (2008) at 99-103.

[9] The present article counts defaults as settlements. Were these counted as judgments favorable to the complainant, the complainant win rate would be higher.

 

Federal Jurisdiction over Patent Malpractice Cases – Supreme Court Shows Interest in Gunn v. Minton

By Dennis Crouch

Gunn v. Minton, (on petition for Writ of Certiorari at the U.S. Supreme Court)

Vernon Minton developed a set of software that he leased to the Texas Int'l Stock Exchange (TISE) more than one year before filing a provisional patent application on the invention embodied by the product. The USPTO granted Minton U.S. Patent No. 6,014,643. However, in a later lawsuit against NASDAQ, the patent was invalidated via the on-sale bar of 35 U.S.C. § 102(b) and that invalidity finding was upheld on appeal. Minton v. Nat'l Ass'n of Sec. Dealers, Inc., 336 F.3d 1373 (Fed. Cir. 2003). In that decision, the Federal Circuit confirmed that the lease constituted a sale for 102(b). In a post-judgment motion, Minton asked the district court to consider whether the use by TISE was an experimental use. However, the court refused to consider that issue because of its untimely introduction.

The present lawsuit arose when Minton then sued his patent litigation counsel (who have now joined the Fulbright & Jaworski firm). The crux of the malpractice claim is that the litigation counsel failed to timely plead the experimental use question. Minton sued in Texas state court and lost on a pretrial motion based upon the trial court's judgment that Minton had failed to present "a scintilla of proof . . . to support his claims." That no-damages judgment was affirmed by the Texas court of appeals. However, the Supreme Court of Texas took an orthogonal view and held that Texas courts lacked subject matter jurisdiction over case. In particular, the Texas Supreme Court held that Minton's malpractice claim required resolution of a substantial question of patent law and therefore fell within the exclusive "arising under" jurisdiction of the federal courts and, eventually, the Court of Appeals for the Federal Circuit. This ruling gives Minton another shot at winning the case - this time in federal district court.

The 5-3 Texas Supreme Court decision followed the lead set by the Federal Circuit in Air Measurement Tech., Inc. v. Akin Gump Strauss Hauer & Feld, L.L.P., 504 F.3d 1262 (Fed. Cir. 2007) and Immunocept, L.L.C. v. Fulbright & Jaworski, L.L.P., 504 F.3d 1281 (Fed. Cir. 2007). In those cases the Federal Circuit gave a broad interpretation to arising under jurisdiction based upon the court's congressionally mandated goal of national uniformity in the patent system. Both the Akin Gump and the Fulbright Jaworski cases were decided on the same day by the same panel and both penned by then Chief Judge Paul Michel. (Judges Lourie and Rader joined the panels). Although the Texas court did not treat the Federal Circuit decisions as binding precedent, the court chose to adopt the logic of those decisions. The dissent argued that the State of Texas has a strong interest in (and a regulatory scheme in place for) ensuring that Texas attorneys maintain a high level of quality and that federalism concerns suggest that many of these cases should be adjudged at the state court level. In a non-patent case, the Supreme Court approved of this more nuanced analysis of arising under jurisdiction in the case of Grable & Sons Metal Products, Inc. v. Darue Eng'g & Mfg., 545 U.S. 308 (2005).

The lawyer defendants have now appealed to the U.S. Supreme Court – asking that court to provide its verdict on the breadth of arising under jurisdiction for non-patent cases that require interpretation of a patent law issue. Gunn presents the following question:

Did the Federal Circuit depart from the standard this Court articulated in Grable & Sons Metal Products, Inc. v. Darue Eng'g & Mfg., 545 U.S. 308 (2005), for "arising under" jurisdiction of the federal courts under 28 U.S.C. § 1338, when it held that state law legal malpractice claims against trial lawyers for their handling of underlying patent matters come within the exclusive jurisdiction of the federal courts? Because the Federal Circuit has exclusive jurisdiction over appeals involving patents, are state courts and federal courts strictly following the Federal Circuit's mistaken standard, thereby magnifying its jurisdictional error and sweeping broad swaths of state law claims - which involve no actual patents and have no impact on actual patent rights - into the federal courts?

This may be surprising to some, but in most cases the respondent does not actually file any response to a Supreme Court petition for writ of certiorari. The Supreme Court tends to only hear important cases that are well represented on both sides. The lack of response is intended to suggest that the case should not rise to that threshold level of importance. Here, Minton declined to respond to the petition. However, in a recent order, the Supreme Court has asked for Minton's response. This judicial action suggests interest in the case, and that interest may be prompted that may be further spurred by the recent spate of decisions showing some disagreement within the Federal Circuit on the very issue. In a supplemental filing in support of its petition, Gunn argued that "[t]he Federal Circuit, which created the jurisdictional morass at issue in this case, is thus split within itself regarding whether to abandon the misguided and overly-broad jurisdictional standard it articulated in Air Measurement Tech., Inc. v. Akin Gump Strauss Hauer & Feld, L.L.P., 504 F.3d 1262 (Fed. Cir. 2007) and Immunocept, L.L.C. v. Fulbright & Jaworski, L.L.P., 504 F.3d 1281 (Fed. Cir. 2007)."

If the Supreme Court takes the case, argument will likely be scheduled for late 2012.

Status of Applications

The chart below shows the status of utility patent applictions filed over the past eight years. This morning, I pulled a random sample of 10,000 patent applications published 2005–2012 and checked the application status. For the chart below, grouped the applications according to the number of years since filing and plotted the percentage that are patented, abandoned, and still pending (WIP).  Thus, for applications that were filed 7-8 years ago, just over 60% have issued as patents; about 35% were abandoned; and the remaining 3% are still pending. 

Update 1: Here, I looked application-by-application and did not consider whether a particular application had any “family history.”  Thus, an original application followed by a divisional application would be considered two separate applications in my dataset. However, the filing of an RCE does not divide the application into two for my dataset.  One reader asked about re-files.  Of the abandoned cases in my sample, about 20% have one or more “children” applications that claim priority to the abandoned application. Patented cases are much more likely to be associated with follow-on applications than are abandoned cases.

Guest Post by Dr. Shine Tu: Luck/Unluck of the Draw: An Emprical Study of Examiner Allowance Rates

Dr. Shine Tu is an Associate Professor of Law at the West Virginia University College of law.  For the past year, Dr. Tu, a former patent attorney with Foley & Lardner, has conducted a massive empirical examination of patent prosecution.  Massive, in the sense that Dr. Tu and his assistants examined the prosecution behavior of every patent issued in the last ten years.  In Luck/Unluck of the Draw: An Empricial Study of Examiner Allowance Rates, available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1939508 and forthcoming in the Stanford Technology Law Review, Dr. Tu discusses some of the findings from his study. - Jason

Luck/Unluck of the Draw: An Emprical Study of Examiner Allowance Rates

Dr. Shine Tu

One of the greatest banes of a patent applicant is the examiner who will not allow an application that should be allowable.  During a trip to the PTO for an Examiner interview, I passed by the office of Examiner X with a sign that stated “0% allowance rate ☺ [ed.: smiley face].”  Evidently, the smiley face was inserted to add insult to injury.  I asked the examiner that I was with if Examiner X really had a 0% allowance rate, and she said “yes.”  (I later verified that this was correct)  I asked why this was the case, and she stated, “some examiners believe an allowance is an affront to their being.”  Of course, our patent system would be a complete failure if the ability to get a patent was solely determined by which examiner you were lucky/unlucky enough to draw.

In an attempt to determine the extent of this behavior, I set out to comprehensively study allowance rates of specific examiners by art unit, technology center and the PTO as a whole.  To be as comprehensive as possible, I coded over 1.5 million patents in an attempt to code every patent ever issued in the last 10 years (from January 2001-July 2011).

The results of this study were surprising.  I found two interesting populations of examiners.  First, I found a significant population of examiners who on average, issue a disproportionately small number of patents per year (low allowance rate examiners).  Second, I found a small but significant population of examiners, who on average, issue a disproportionately large number of patents per year (high allowance rate examiners).

The first population of low allowance rate examiners consist mainly of secondary examiners (junior examiner usually with less than 5 years of experience and no signatory authority).  These examiners, on average, issue a very small number of patents per year (less than 5 patents per year).   For example, between 2002-2011 in technology center 3700, approximately 17% (306 examiners) of the examiners issued less than 0.35% (823 patents) of the patents in this art unit.  Accordingly, these low allowance rate examiners issued approximately 2.7 patents per examiner.

In contrast, I found a second population of high allowance rate examiners that consist mainly of primary examiners (senior examiners usually with more than 5 years of experience and full signatory authority).  These examiners, on average, issue a high number of patents per year (more than 50 patents per year).  For example, between 2002-2011 in technology center 3700, approximately 12% (215 examiners) of the examiners issued approximately 51% (120,822 patents) of the patents in this art unit.  Accordingly, these high allowance rate examiners issued approximately 561.9 patents per examiner.

There are many good reasons why an application should not be allowed.  However, one reason that should not play a role is an uneven / inconsistent application of patentability rules.  Examiners should be consistent in the way they apply patentability rules within their own docket.  Additionally, examiners should be consistent in the way they apply patentability rules compared to examiners within their art unit.  This study suggests that examiners even within the same art unit may be applying the rules of patentability in an inconsistent manner. 

There are many limitations with this study.  First, I note that there is no ideal allowance rate.  Second, I note that this is only descriptive data.  Finally, I note that I focus only on issued patents.  I could not obtain data related to the total number of filed applications for each art unit, thus I cannot calculate the percentage allowance rate per art unit (because I do not have a denominator of “filed applications”).  This is a significant limitation because all of these results are limited by the “denominator” problem.

Additionally, it is possible both populations of examiners are doing an outstanding job.  That is, it is possible that the low volume examiners are simply getting harder cases (but I am skeptical of this explanation).   Additionally, it is possible that the low volume examiners are “doing a more thorough job” since they are mainly secondary examiners and thus have more time to spend per application for review and detailed analysis.  Furthermore, it is possible that high volume examiners are doing an adequate job because they are simply more experienced and not only know the field better, but know how to quickly make “good” rejections.  In order to obtain some substantive answers to overcome these limitations, I am currently reviewing a sample of prosecution histories to determine if these two populations of examiners truly are applying the patentability rules in an inconsistent manner. 

A full draft of “Luck/Unluck of the Draw: An Empirical Study of Examiner Allowance Rates” is available on SSRN at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1939508 and is forthcoming in the Stanford Technology Law Review.  Comments are appreciated.

Advanced Fiber Technologies v. J&L Fiber Services

By Jason Rantanen

Advanced Fiber Technologies (AFT) Trust v. J&L Fiber Services, Inc. (Fed. Cir. 2012) Download 11-1243
Panel: Lourie (author), Dyk (dissenting in part), Prost

This opinion provides guidance on the process of construing claim constructions and illustrates the continuing disagreement among the Federal Circuit judges about claim interpretation.

The technology at issue in this case involves screening devices used in the pulp and paper industry. Advanced Fiber Technologies (AFT) patented a screening device that purports to offer substantially increased efficiency and flow capacity.  Two of the asserted independent claims include the term "screening medium"; the third contains the synonym "screening plate."  The district court construed "screening medium" as "a perforated barrier through which stock is passed to remove oversized, troublesome, and unwanted particles from good fiber."  Slip Op. at 8.  It further interpreted a term from its construction, "perforated," as meaning "pierced or punctured with holes."  Id.  Based on this meaning of "perforated," the district court granted summary judgment of noninfringement as against the accused device, which used a "wedgewire" screen (a screen made by assembling closely spaced parallel wires).  AFT appealed, challenging not the district court's construction of the term "perforated" but its construction of "screening medium."

Although not explicitly discussed by the opinion, construing claim constructions (which the majority refers to as "derivative construction" on page 14) raises some difficult issues above and beyond the challenges that come with construing the claim terms themselves - specifically, the degree of relationship between the claim term and the interpretation of the claim term's construction. 

The majority opinion in Advanced Fiber provides some guidance in this area.  First, the derivative construction "must follow the guiding principles set forth in Phillips." Slip Op. at 14.  Second, whether "construing a claim term or a disputed term within a claim construction, our ultimate goal is determining the meaning and scope of the patent claims asserted to be infringed.'" Id., quoting Markman, 52 F.3d at 976. 

Applying these two points, the majority agreed with AFT, concluding that the district court improperly relied on extrinsic evidence that contradicted the intrinsic evidence and that its own interpretation of "perforated" as simply "having holes or openings" was "fully consistent with the language of claim 1, "a screening medium having a plurality of openings therethrough," and claim 10.  Slip Op. at 17.

Comment: The majority's approach to derivative constructions looks to be fairly useful, in that it suggests that derivative constructions should relate back to the meaning of the claim itself rather than going down the rabbit hole of attempting to independantly interpret interpretations.  This approach thus adds to the methodology for construing constructions developed in Cordis Corporation v. Boston Scientific Corporation, 658 F.3d 1347 (Fed. Cir. 2011), another recent case dealing with an issue of derivative construction. 

Writing in dissent, Judge Dyk would have affirmed the district court's construction.  In Judge Dyk's view, the court should have read more into arguments the applicant made during prosecution and found that the applicant explicitly adopted the definition of "perforated plate" from a technical manual, the Handbook of Pulp & Paper Terminology, that the applicant cited during prosecution for the definition of "screen plate."

Note: Based on my reading of the opinion and the appellee's brief, neither the district court nor J&L appear to have relied on the Handbook's definition of "perforated plate." 

Federalism and Patent Law: Courts Split on Scope of Federal Circuit Arising Under Jurisdiction

In a trio of decisions, the several members of the Federal Circuit have expressed their disagreement with the court's expansion of appellate jurisdiction to cover attorney malpractice cases that involve patent law issues.

• Landmark Screens, LLC v. Morgan Lewis & Bockius, LLP (Fed. Cir. 2012)(O'Malley, J., concurring);
• Byrne v. Wood, Herron & Evans, LLP (Fed. Cir. 2012)(O'Malley, J., joined by Wallach, J., dissenting from denial of the petition for en banc rehearing); and
• USPPS, Ltd. v. Avery Dennison Corp. (Fed. Cir. 2012)(O'Malley, J., joined by Mayer, J., concurring).

Attorney malpractice is a state law claim, but the Federal Circuit has (and thus the Federal Courts have) claimed exclusive jurisdiction over many patent prosecution related malpractice claims if the well-pled complaint requires the determination of a substantial issue of patent law.

In Minton v. Gunn, 355 S.W.3d 634 (Tex.2011), the Texas Supreme Court agreed with the Federal Circuit's extension of jurisdiction, but made an interesting and important statement that Texas courts "are not bound by the holdings of the Federal Circuit." This situation sets up the need for Supreme Court review. Minton was a 5-3 decision. The dissenting justices argued that state courts should maintain jurisdiction over the case based on its application of the 2005 US Supreme Court case of Grable & Sons Metal Prods., Inc. v. Darue Eng'g & Mfg., 545 U.S. 308 (2005). In that case, the US Supreme Court held that federalism principles require a cautious and balanced approach to the removal of traditional state court claims to federal court.

The dissent in Minton wrote:

The Federal Circuit's focus on this mandate [of uniformity] is understandable, but uniformity in patent law is not the be-all and end-all of jurisprudence. It must give way to the contours of federal question jurisdiction provided by the Supreme Court. See Grable. In turn, this Court has its own mandate, of at least equal importance to that of the Federal Circuit. We owe a duty to the people of this state to exercise the judicial power, see Tex. Const. art. V, §§ 1, 3, and that duty includes vital matters such as ensuring consistency and certainty in the civil law of the state, see Tex. Gov't Code § 22.001, and regulating the practice of law, id. § 81.011(c). Accordingly, we should not risk the confusion and inconsistency that will result from having two sets of binding precedent in Texas legal malpractice law—one stemming from this Court and the other courts of this state, and another, entirely outside of our control after today's opinion, developing under the direction of the Federal Circuit, largely uninformed by the deep roots of Texas jurisprudence and the requirements of the Texas Constitution.

This Court should not be quick to follow Federal Circuit case law that fails to follow the test set forth by the Supreme Court. Because this case fails to meet three of the four elements required by the Supreme Court for federal-element "arising under" jurisdiction, the court of appeals was correct when it held that exclusive federal patent jurisdiction does not lie here. I therefore respectfully dissent.

In a parallel 2011 case, an Illinois state appellate court held that Magnetek's claim against Kirkland & Ellis for deficient representation in a patent litigation lawsuit did not arise under patent law. In that case, the court wrote that the largest patent law issue – whether the patent was enforceable or not – had already been decided by a separate court and therefore was not at issue in the case. Magnetek, Inc. v. Kirkland and Ellis, LLP, 954 N.E.2d 803 (Ill.App. 2011).

A petition to the Supreme Court is likely in at least one of these cases.

Patently-O Bits & Bytes by Lawrence Higgins

IP's contribution to the US economy

• A recent USPTO whitepaper reports that IP industries contribute $5 trillion and 40 million jobs to the US economy. Some of the report major findings are:
  • The entire US economy relies on some form of IP, because virtually every industry either produces or uses it.
  • IP-intensive industries directly accounted for 27.1 million American jobs, or 18.8% of all employment in the economy, in 2010.
  • Jobs in IP-intensive industries pay well compared to other jobs. Average weekly wages for IP-intensive industries were 42% higher than the average weekly wages in non IP-intensive industries.
  • Growth in copyright-intensive industries (2.4%), patent-intensive industries (2.3%), and trademark-intensive industries (1.1%) all outpaced gains in non-IP intensive industries.

  Report

Rights of the dead

• At Coachella 2012 Tupac Shakur appeared on stage and as if he was actually alive and performing. What rights does the family of Tupac or other deceased entertainers have when it comes to situations like this?
• California Civil code Section 3344.1 (a)(1) reads in part:
  • Any person who uses a deceased personality's name, voice, signature, photograph, or likeness, in any manner, on or in products, merchandise, or goods, or for purposes of advertising or selling, or soliciting purchases of, products, merchandise, goods, or services, without prior consent from the person or persons specified… shall be liable for any damages…
  Section (a) (2) reads:
  
  • For purposes of this subdivision, a play, book, magazine, newspaper, musical composition, audiovisual work, radio or television program, single and original work of art… shall not be considered a product, article of merchandise, good, or service if it is fictional or nonfictional entertainment, or a dramatic, literary, or musical work.
  Having a dead celebrity performing electronically on stage seems like it falls into the audiovisual work exception under section (a) (2). I have yet to see anyone attempt to file a business-method patent on the dead touring, but I assume that someone may attempt to monopolize the business. [Link]

Patent Jobs:

• Edell, Shapiro & Finnan is seeking an experienced EE patent attorney with an advanced degree in EE or physics. The firm is also seeking an associate/agent/tech writer with an EE or computer science degree to work at their Rockville, MD office. [Link]
• Amgen is searching for Sr. Counsel with 4 years of patent or IP practice to work at their California location. [Link]
• North Star IP is looking for a patent associate with 3 to 4+ years of prosecution experience and a background in EE, computer engineering, or computer science to work at their DC office. [Link]
• Sterne, Kessler, Goldstein & Fox is seeking experienced electrical IP attorneys with a degree in EE or computer engineering to work at their DC office. [Link]
• Cantor Colburn is searching for an associate ME/EE patent attorney with 3-5 years of experience. [Link]
• Cantor Colburn is looking for IP litigation associates with 2-4 years of litigation experience. [Link]
• The Kohler Company is seeking an IP attorney with 2+ years of experience to work at their Kohler, Wisconsin location. [Link]
• Rutan & Tucker is searching for a patent associate/agent with 3-4 years of experience to work at their California office. [Link]
• Rathe Lindenbaum is looking for a patent attorney/agent with experience in mechanical, electromechanical or chemical engineering and 3+ years of experience to work at their Milwaukee office. [Link]
• NONY is looking for a US patent attorney/agent or UK patent attorney to work at their Paris, France office. [Link]

Upcoming Events:

• The University of Colorado School of Law will hold a conference on April 24^th. The conference, Patents on the Range or Wild Frontier, will discuss the future of patent policy. Guest speakers include: David Kappos, Don Rosenberg, John Thorne, Paul Ohm, Bernard Chao, and many others. [Link]
• ACI will hold its 6^th Annual Paragraph IV Disputes conference on April 24-25 in New York City. The conference will cover topics such as: the impact of the AIA on Hatch-Waxman litigation, claim construction, prior art obviousness and obvious-type double patenting, and many other topics. (Patently-O readers register with PO 200 for a discount). [Link]
• The DC Bar IP Law Section 2012 Annual Spring Reception will be held April 25^th. The D.C. Bar Intellectual Property Law Section awards the 2012 "Champion of Intellectual Property" Award to the late Paul J. Luckern, Chief Judge of the International Trade Commission. Guest include Chief Judge Randall R. Rader of the U.S. Court of Appeals for the Federal Circuit, Judge Theodore R. Essex of the ITC, and Lynn I. Levine, Director of the ITC's Office of Unfair Import Investigations. [Link]
• Fitch, Even, Tabin & Flannery, LLP will present a free one-hour CLE webinar, "Trademark Protection Strategies in Social Media," on April 25, 2012 at 12 noon EST. The proliferation of social media outlets frequented by millions of users have created untold opportunities for trademark exposure and potential infringement. Joseph T. Nabor will discuss strategies to protect trademarks in the social media arena, including monitoring and enforcement against infringement, creating social media policies, related ethics issues, and using social media in litigation support. [Link]
• LES 2012 Spring Meeting – "Licensing to Solve the Innovation Gap" will be held May 15-17, Boston, MA. Speakers from GE Healthcare, Harvard, Hoffmann-LaRoche, Intel, Johnson & Johnson, Merck, MIT, Pfizer, Stanford and more will share their expertise on licensing to solve the innovation gap. (Patently-O readers save $100 by using promo code PO12 when registering) [Link]
• The World Research Group is holding its 4th Annual Corporate IP Counsel Forum on May 16-17 in NYC. The Corporate IP Counsel Forum will address key issues and uncover latest developments related to IP in the form of case studies and panel discussions. Some of the topics include, but are not limited to: The America Invents Act and its impact on patent litigation and prosecution, IP monetization strategies for small and mid-size companies, Patent valuation, The top 10 most influential court cases in IP this year, Patent eligibility, Invention mining, Divided infringement, Best practices for combating non-practicing entities, Appeals to the U.S. Court of Appeals for the Federal Circuit, Copyright infringement. [Link]
• The Annual DRI Business Litigation and Intellectual Property Seminar will be held May 16-18, 2012, in New York City. Attendees will learn trial and appellate advocacy skills in business litigation get up-to-date on the last trends in intellectual property and business litigation, and network with in-house counsel, business and intellectual property trial lawyers and experts from across the country. Speakers include: Former ABA President, Dennis W. Archer, Dennis Archer PLLC, and David Leitch, VP and General Counsel of Ford Motor Company. [Link]
• The San Francisco Intellectual Property Law Association is hosting its annual seminar in Healdsburg, the center of one of California's best wine regions, from June 1-3. Speakers include Hon. Margaret A. (Peggy) Focarino, USPTO Commissioner of Patents, Hon. Robert Stoll, former USPTO Commissioner of Patents, Hon. Gerard F. Rogers, Chief Administrative Trademark Judge of the TTAB, Hon. Randall R. Rader, Chief Judge of Federal Circuit, Hon. Susan Illston, Judge of N.D.CA, Hon. Edward J. Davila, Judge of N.D.CA, as well as professors and leading practitioners. [Link]
• On May 21-22 Ronald Slusky will hold a seminar in Chicago, the seminar teaches a comprehensive approach to analyzing inventions and capturing them in a sophisticated set of patent claims. The seminar is based on Ronald's book, Invention Analysis and Claiming: Patent Lawyer's Guide. [Link]
• ACI will hold a Biosimilars conference May 22-23 in New York, NY. The conference will focus on the legal, regulatory, and commercial realities of biosimilars. [Link]
• The ACI 3^rd annual Hatch-Waxman Boot Camp will be held June 25-26 in San Diego. Topics to be covered include: the organization, jurisdiction of the FDA and the PTO and their interplay in the patenting of drugs and biologics, how the approval process for drugs and biologics is connected to the patenting of these products, how the Hatch-Waxman Act established the paradigm for market entry of generic small molecule drugs – and how biosimilar and many others. [Link]

Contact Lawrence.Higgins@patentlyo.com with leads for future Bits and Bytes.

Patent Specifications Continue to Rise in Size

by Dennis Crouch

In 2008, I reported on a trend that I termed the “Rising Size and Complexity of the Patent Document.”  Since then, the size of patent specifications have continued to grow. Patent specifications continue to grow — another 10% on average since 2008.

The chart below shows the average number of characters in the body of utility patent applications grouped by application filing year and includes data from all applications filed during the given year and published since 2005.

.

As the second chart suggests, shorter applications (those in the first quartile) are less likely to issue as patents within the four years of the publication date. To build this chart, I calculated the specification size for each application published 2005–2007 and also determined whether a resulting patent had issued.

Copyright Lawsuit against Patent Firms Continue: Firms Claim Fair Use and Copyright Misuse

John Wiley & Sons v. McDonnell Boehnen Hulbert & Berghoff (MBHB) (N.D. Ill.) (Complaint)

Earlier this year, Wiley sued the MBHB law firm for copyright infringement. The basis of the lawsuit stems from the firm's compliance with its duty to inform the USPTO of information materially related to the cases that it is handling. See 37 C.F.R. 1.56. The complaint identifies two short scientific articles that the firm submitted to the USPTO:

• Raznikov, V., et al., "A new approach to data reduction and evaluation in high resolution time-of-flight mass spectrometry using a time-to-digital convertor data recording system," Rapid Communications in Mass Spectrometry, vol. 15, No. 8, pp. 570-578 (2001); and
• Erchak, A., et al., "Enhanced coupling to vertical radiation using a two dimensional photonic crystal in a semiconductor light-emitting diode," Applied Physics Letters, vol. 78, No. 5, pp. 563-565 (2001).

The crux of Wiley's argument is that the firm infringed Wiley's exclusive rights by submitting these documents to the USPTO as well as by allegedly sharing the articles with the inventors and storing a copy in the firm's files. I contacted one of the authors – Nobel Laureate, Dr. Alan Heeger – from the parallel Schwegman case. Dr Heeger had not previously heard of the lawsuits. He had only two comments: (1) that the lawsuits seem "somewhat strange" and (2) that he is not receiving any royalties from the article.

More Background on the Case

The MBHB law firm has now filed its answer to the complaint – arguing that Wiley's lawsuit is both troubling and disruptive to the operation of the US patent system.

Plaintiffs seek in this case to create unprecedented liability for law firms filing patent applications that would change long established practices in fulfilling legal obligations under the Patent Law and Regulations requiring patent practitioners to disclose prior art to the United States Patent and Trademark Office ("USPTO"). Such a result would undermine the Patent Office's ability to get full disclosure of relevant prior art to the detriment of our patent system and, thus, to innovation in general. Fortunately, Plaintiffs' claims are without merit.

The process of securing U.S. patents is dictated by complicated USPTO Rules and Federal regulations. Failure to comply with those Rules and Regulations could lead, among other things, to fraud on the USPTO and could jeopardize a patent's scope, validity and enforceability. . . .

Now, Plaintiffs John Wiley & Sons, Ltd. and American Institute of Physics ("Plaintiffs") attempt to introduce a costly new requirement into this long-standing practice. They seek to impose a requirement on those practicing patent prosecution to negotiate a license with the holder of the copyright in the journals before complying with the Patent Office's prior art submission requirements. Plaintiffs' misguided attempt to change established practice will only serve to undermine the full disclosure requirements of the USPTO and interfere with access to the constitutionally mandated patent system.

Because of the negative impact of claims such as the Plaintiffs' on the patent system, and thus on its goal of encouraging innovation, the Patent Office has taken the unusual step of posting on its website a position paper from Bernard J. Knight, Jr., General Counsel of the USPTO, stating the USPTO's position that copying and submitting non-patent literature ("NPL") by patent applicants in order to satisfy the USPTO's disclosure requirements is fair use. The official position paper addressed all four fair use factors and concluded that "we believe that it is a fair use for an applicant to make copies of NPL and submit those copies to the USPTO during examination in an [Information Disclosure Statement]." The General Counsel's position was based in part on the fact that "the applicants here are not 'exploiting' the copyrighted work, and are instead merely submitting it, pursuant to a legal requirement, based on its factual, rather than its expressive, content [and] the use could be considered transformative." The General Counsel also concluded that "there is no basis for concluding that the applicants submission of NPL to the USPTO has any significant negative impact on the market for the submitted NPL."

Plaintiffs' attempt to characterize MBHB's alleged use of the scientific journal articles as anything but a legal, customary practice by attorneys to comply with their legal obligations during patent prosecution is unavailing. MBHB is being sued simply for following the requirements of the patent regulations. An adverse judgment against MBHB would harm not just MBHB, but all firms who practice in this area, and interfere with the federal government's interest in promoting an inexpensive and efficient patent system whereby prior art is appropriately disclosed. Plaintiffs' allegations, thus, fit squarely within the parameters of what the Copyright Act deems as a fair use. Accordingly, as a matter of law, Plaintiffs lack meritorious grounds for their copyright infringement suit.

The answer claims includes a number of defenses including fair use; copyright misuse; immunity under the Noerr-Pennington doctrine; and implied license.

Supreme Court: District Courts must Review PTO Factual Findings De Novo in Cases Challenging Board Decisions

By Dennis Crouch

Kappos v. Hyatt (Supreme Court 2012)

This case involves a patentee's right to a file a civil action in district court challenging the USPTO's refusal to grant a patent. 35 U.S.C. § 145. In a unanimous decision, the Supreme Court has affirmed the Federal Circuit ruling that the patent applicant's presentation of new evidence to the district court requires that court to make de novo factual findings that consider both the new evidence and the administrative record. The USPTO had asked that the court to apply a higher standard of deference to agency factual findings.

This ruling has two major caveats:

• Deference will be given to PTO factual findings if the applicant fails to present any new contradictory evidence at the trial.
• Although it must undertake a de novo review, a court can give less weight to newly presented evidence based upon its consideration of "the proceedings before and findings of the Patent Office."

In its brief, the USPTO argued that the standard employed here would "encourage patent applicants to withhold evidence from the PTO intentionally with the goal of presenting that evidence for the first time to a nonexpert judge." The Supreme Court rightfully rejected that scenario as "unlikely" in most cases. There are two reasons for this: (1) as the Court notes, this strategy would serve to undermine their chances of directly obtaining a patent from the USPTO based upon the speculative strategy of having a court find the invention patentable; and (2) in my estimation, some amount of new evidence (such as expert testimony and test results) can always be obtained after trial. This is especially true because of the limited manner in which testimony can be presented to an examiner or in an ex parte appeal to the Board.

In this particular case, however, Hyatt has some reason to sandbag because his application was filed pre-1995 and covers basic building blocks of the modern computer. The delay in issuance likely means additional revenue sources that may persist for 17 years from the issue date.

This result here is appropriate in our current world where ex parte appeals to the PTO Board have become a standard and regular aspect of patent prosecution. Those appeals have become somewhat commodified and many firms offer a fixed price. This makes business sense under Hyatt because the applicant still has a chance to fully press its case and present additional evidence after losing at the Board.

Justice Thomas penned the majority opinion.

In a concurring opinion, Justice Sotomayor (joined by Justice Breyer) offered some thought as to particular times when a district court may offer less weight to evidence presented only at trial. Justice Sotomayor primarily discussed the 1927 deliberate suppression case of Barrett Co. v. Koppers Co., 22 F. 2d 395, 396 (3^rd Cir. 1927). In that case, the patent applicant refused to allow their witnesses to answer questions from the chief examiners. The appellate court in that case ruled that the applicant was estopped from later introducing evidence that it had purposely withheld. Learned Hand wrote in a later case that estoppel should not apply when the suppression was merely negligent. Relying on these cases, Justice Sotomayor wrote her suggestion that

when a patent applicant fails to present evidence to the PTO due to ordinary negligence, a lack of foresight, or simple attorney error, the applicant should not be estopped from presenting the evidence for the first time in a §145 proceedings.

Although not expressly stated, I suspect that the purpose of "keeping costs low" would fall within Justice Sotomayor's category of permissible suppression. Of course, these suggestions from Sotomayor are not part of the majority opinion, which did not cite Barrett or the Learned Hand decision of Dowling v. Jones, 67 F. 2d 537 (2^nd Cir. 1933).

In application of this rule to the facts here, Justice Sotomayor began with the presumption that new evidence should be allowed and found that the USPTO had not (yet) met its burden to show wrongful suppression.

Dennis Kennedy

I’m happy that Dennis Kennedy is speaking to my copyright class tomorrow!

Supreme Court: Generic Pharma Manufacturer Has Standing to Pursue FDA Mis-Label Claim against Patentee

By Dennis Crouch

Caraco Pharmaceutical Laboratories, Ltd. v. Novo Nordisk A/S, (Supreme Court 2012)

This decision only slightly shifts balance of power in the pharmaceutical industry away from patentees toward generic manufacturers. The case may serve as a good example a complex issue that the Supreme Court appears to understand and deal with in a nuanced fashion.

The FDA maintains a listing of approved drug treatments and any patents that cover the treatment. The listing – known as the Orange Book – is essentially managed by the individual patentee-manufacturers who regularly provide the FDA with updated information of new listings and de-listings. Patentees receive a number of benefits from listing patents in the Orange Book, including constructive standing to sue based upon a generic company's filing of an abbreviated new drug agreement (ANDA) as well as an up-to-30-month stay of FDA approval of any generic versions.

Although the diabetes drug repaglinide has three FDA approved uses, Novo's listed patent covers only one of those methods of use. Relying upon that limitation of coverage, Caraco filed an ANDA application requesting permission to sell the drug for the other two uses but carving out the patented use from its application. Novo then changed its Orange Book listing to indicate that its patent actually covered all three approved uses.

In the ensuing litigation, Caraco filed a counterclaim seeking an order to force Novo to amend its use-code listings. The Federal Circuit, however refused to allow the counterclaim.

In a unanimous decision penned by Justice Kagen, the Supreme Court has reversed, holding that a generic drug manufacturer may employ the counterclaim provision of the Hatch-Waxman Act to force correction of a use code that inaccurately describes the brand's patent as covering a particular method of using a drug.

The Federal Circuit had given the statute a highly technical reading – noting that such a counterclaim for correction was only available if "the patent does not claim … an approved method of using the drug." 21 U. S. C. §355(j)(5)(C)(ii)(I). Since the patent did cover one approved method, the appellate panel majority reasoned that there was no standing to correct the two incorrect listings.

The Supreme Court rejected that analysis as counter to the context surrounding the provision in the law.

The statutory counterclaim we have considered enables courts to resolve patent disputes so that the FDA canfulfill its statutory duty to approve generic drugs that do not infringe patent rights. The text and context of the provision demonstrate that a generic company can employthe counterclaim to challenge a brand's overbroad use code. We accordingly hold that Caraco may bring a counterclaim seeking to "correct" Novo's use code "on the ground that" the '358 patent "does not claim . . . an approved method of using the drug"—indeed, does not claim two.

Reversed.

Justice Sotomayor penned a short concurring opinion calling for further reform to the statute and within the FDA to better ensure that generic drugs can become quickly available for uses that are not covered by any valid patent. The concurring opinion calls the agency to task for failing to exercise its authority in regulating listings in the Orange Book.

The Frand Wars: Who’s on First?

Guest Post by Jorge L. Contreras

Standards are powerful market tools that enable products and services offered by different vendors to interoperate: think WiFi, USB, and the pervasive 3G and 4G telecommunications standards. Yet once standards are widely adopted, markets can become "locked-in" and switching to a different technology can be prohibitively costly. Because patent holders have the potential to block others from deploying technology covered by their patents, the industry associations that develop standards ("standards development organizations" or "SDOs") often demand a trade-off from the companies that participate in standards-development: you can have a say in the technical direction of the standard, but in return you must license your patents that are essential to the standard on "fair, reasonable and non-discriminatory" (FRAND) terms.

Last month, I discussed a series of statements released by Apple, Microsoft and Google seeking to clarify how they interpret FRAND licensing commitments. Both the U.S. Department of Justice and the European Commission looked carefully at these interpretations in evaluating Google's $12 billion acquisition of Motorola Mobility, Apple's purchase of a number of Linux-related patents, and the $4.5 billion acquisition of Nortel's patent portfolio by a group including Microsoft, Apple, and RIM. The agencies concluded that these transactions did not present significant antitrust concerns, basing their reasoning in part on the interpretations of FRAND offered by Apple, Microsoft and Google.

Independently of these agency determinations, there continues to be significant disagreement among market participants over the meaning of FRAND. This disagreement arises both in reference to the level of royalties that should be considered "reasonable", and whether other tactics, such as seeking injunctive relief, are fair game when FRAND commitments have been made. Such disagreements have serious consequences because a commitment to grant a license on FRAND terms is not itself a license. A license to operate under a patent is not granted until the parties can agree on those "fair, reasonable and non-discriminatory" terms. So, if the parties can't agree on the terms of the FRAND license for a particular "standards-essential" patent, the frustrated licensee must either refrain from implementing the standard (and lose a significant market opportunity) or risk infringing the patent. The typical result: litigation.

To help get a handle on the current state of play in the courts, Table 1 offers a summary of some of the principal cases in which FRAND issues are currently being litigated in the U.S. and Europe. These disputes form only a part of the larger patent wars currently being waged across the smart phone industry. That wide-ranging litigation involves even more players and extends to patents that are not necessarily essential to the implementation of industry standards. But the more focused skirmishes over FRAND issues are important too, as some of the most basic technology needed to make mobile devices interoperate is covered by standards, and the terms on which "standards-essential" patents will be licensed will affect all players in the market, both large and small. Thus, while the scale, complexity and rapid pace of this litigation virtually guarantees that any summary will be incomplete and quickly outdated, I hope that it will be useful (at least temporarily) for those who want an overview of the current state of play regarding FRAND.

Table 1 – Current FRAND Litigation

Parties	Court	FRAND Issue(s)	Status
	W.D. Wash	Royalty rate, injunctions	Summary judgment hearing scheduled May 2012, trial scheduled Nov. 2012.   Moto currently enjoined from enforcing German injunctions
	European Comm'n	Injunctions, licensing conditions	EC investigation announced in Apr. 2012
	N.D. Ill. & W.D. Wis.	Royalty rate	Ill. trial scheduled June 2012; Wis. trial scheduled Nov. 2012
	S.D. Cal.	Defensive suspension, injunctions	Apple complaint filed Feb. 2012
	N.D. Cal.	Injunctions, failure to disclose	Summary judgment motion scheduled for hearing May 2012; mediation pending
	Netherlands - Hague	Injunctions
	European Comm'n	Injunctions	EC investigation announced in Jan. 2012
	Del. Ch.	ITC exclusion orders	Huawei complaint filed Oct. 2011

Microsoft v. Motorola (W.D.Wash, Case No. C10-1823-JLR): This case relates to Motorola patents covering the IEEE's 802.11 (WiFi) standards and the ISO/IEC's and ITU's H.264 video codec standards. In 2010, Motorola offered to license these patents to Microsoft at a proposed royalty of 2.25% of the end product (i.e., each Xbox 360, PC/laptop or smart phone implementing the standard). Microsoft did not take a license, sought declaratory relief that Motorola breached its FRAND obligations to the SDOs, and Motorola sued Microsoft for patent infringement. The crux of Microsoft's argument is that Motorola's license offer is inherently unreasonable because it is not tied to the value of Motorola's technical contribution and because it seeks to assess royalties on the price of a PC/laptop rather than Microsoft's contribution to that product (i.e., the Windows operating system). Microsoft has also contended that the absolute value of Motorola's royalty demand (about $4 billion, presumably across all product lines) is unreasonable and far exceeds the amounts that Microsoft pays to other holders of larger numbers of standards-essential patents. Motorola counters that its 2.25% royalty rate has been offered for many years and is well within industry norms (citing examples of royalty rates much higher than this). It also contends that Microsoft refused to negotiate in good faith, thereby repudiating its right to receive a FRAND license. In February, the District Court denied Microsoft's first motion for summary judgment, but each party has made additional motions for summary judgment relating to FRAND and breach of contract issues, which will be heard in May.

Last week, the court granted Microsoft a preliminary injunction and temporary restraining order preventing Motorola from enforcing injunctions enjoining the sale of Microsoft products in Germany, a matter on which the Mannheim Regional Court is scheduled to rule shortly. Microsoft has requested that the International Trade Commission (ITC) similarly postpone ruling on Motorola's infringement claims until the Washington court has had the opportunity to rule on the FRAND matter.

European Commission Investigations. On April 3, the European Commission (after receiving complaints from Microsoft and Apple) announced that it initiated an investigation to determine whether Motorola violated European competition law by failing to comply with its FRAND commitments to standard-setting organizations. In particular, the EC has stated that it will investigate whether Motorola's attempts to obtain injunctions on the basis of standards-essential patents, and the licensing terms that it has offered, amount to an abuse of dominant position in violation of Article 102 of the EU Treaty. In January, the EC opened a similar investigation of Samsung to determine whether its attempts to obtain injunctive relief in various European patent actions pending against Apple violated Samsung's FRAND commitments to ETSI and otherwise ran afoul of EC competition law. The EC has actively investigated FRAND compliance in the past, most notably the allegedly excessive royalty rates charged by Qualcomm on the CDMA and WCDMA wireless 3G communications standards. The Qualcomm investigation, which was initiated in October 2007, was closed in November 2009 after Qualcomm reached settlements with the original complainants in the case.

Apple v. Motorola (N.D. Ill, Case No. 1:11-cv-08540, transferred in part from W.D. Wis., Case No. 10-CV-00662-BBC). Apple and Motorola have been embroiled in patent litigation over smart phones and other products since late 2010. Not all of the patents at issue relate to standardized technology, but in a few critical cases standardization and FRAND issues are front and center. Most significant is the dispute playing out in the Northern District of Illinois before Judge Richard Posner, sitting by designation. In that case, Apple argues that Motorola should be equitably estopped from enforcing certain patents relating to the ETSI GSM/WCDMA and UMTS/3GPP standards. The gist of Apple's complaint appears to be that Motorola did not offer to license Apple on terms that were FRAND. Yet Motorola maintains that it did, beginning in 2007, offer to license its patents to Apple at its customary rate of 2.25%. The dispute, then, revolves around the issue whether this licensing offer complies with Motorola's FRAND obligations to ETSI and possibly other SDOs and, if not, what remedies are available to Apple. Trial is scheduled for June. Trial in Illinois is scheduled in June. It appears that some, but not all, of the FRAND-related claims in this case remain in the Wisconsin court, which is scheduled for trial in November.

Apple v. Motorola (S.D. Cal., Case No. 12CV0355 JLS BLM). Last year the Apple-Motorola patent litigation spread to Germany and Motorola obtained an injunction against the sale of certain Apple products (e.g., iPhones) from the Regional Court (Landesgericht) of Mannheim (the injunction was recently suspended by the Higher Regional Court (Oberlandesgericht) in Karlsruhe pending further proceedings). Among the many patents being asserted by Motorola are two that are essential to the GPRS standard developed at the European Telecommunications Standards Institute (ETSI). This February, Apple brought a declaratory judgment action against Motorola in the Southern District of California, alleging that Motorola violated its FRAND obligations to ETSI when it sought an injunction from the Mannheim court. Apple bases its FRAND claim on a license that Motorola previously granted to Qualcomm, the supplier of GPRS-based communication chips used in the iPhone. Based on the pleadings, it appears that under the Motorola-Qualcomm license Motorola covenants not to sue Qualcomm's customers (such as Apple) for using Qualcomm's GPRS-based chips. However, Motorola seems to have revoked Apple's immunity under the Qualcomm license, asserting that Apple's enforcement of different patents against Motorola triggered the "defensive suspension" provisions of that license. In the California suit Apple seems to claim that either Motorola's revocation of Apple's rights under the Qualcomm license, or its enforcement of patents against Apple in Germany, violates Motorola's FRAND obligations to ETSI. The case is still at an early stage, and Apple's FRAND-based arguments, as well as Motorola's defenses, will presumably be clarified in the future.

Apple v. Samsung (N.D. Cal. Civil Action No. 11-CV-01846-LHK). Apple is also involved in wide-ranging patent litigation with Samsung, maker of the Galaxy smart phone than runs Google's Android operating system. In the Northern District of California, Apple and Samsung are each asserting patents against each other. Apple has moved for partial summary judgment arguing that Samsung failed to disclose patents essential to the ETSI UMTS telecommunications standard used in the iPhone and iPad, that Apple is licensed under these patents pursuant to a cross-license between Samsung and Intel (the supplier of chipsets used in these Apple products), and that Samsung's FRAND commitments to ETSI prevent it from now seeking injunctive relief against Apple. Apple's FRAND argument is interesting, in that it relies on French law (which purportedly governs the ETSI IPR policy and declarations). Samsung counters that Apple only sought a FRAND license from Samsung after Apple initiated litigation, then rejected Samsung's FRAND license offer and "steadfastly refused to engage in meaningful FRAND negotiations" (Samsung's Opposition to Apple's Motion for Partial Summary Judgment, Apr. 2, 2012, at 11). The sum of these actions, according to Samsung, is that Samsung's FRAND obligations should no longer prevent it from seeking an injunction against Apple under these circumstances. A hearing on Apple's motion is scheduled for May, 2012. The case is particularly noteworthy, as it involves not only FRAND issues, but also allegations that Samsung violated ETSI's patent disclosure rules (thus rendering Samsung's patents unenforceable), allegations reminiscent of those made in Rambus v. Infineon, 318 F.3d 1081 (Fed. Cir. 2003), cert. denied, 124 S.Ct. 227 (2003), and Qualcomm v. Broadcom, 584 F.3d 1004 (Fed. Cir. 2008). This month, the parties agreed to submit at least part of the dispute to mediation.

Apple v. Samsung (District Court – Hague, Netherlands, Case numbers 400367 / HA ZA 11-2212, 400376 / HA ZA 11-2213 and 400385 / HA ZA 11-2215). In March, a district court in the Hague, Netherlands, denied Samsung's request for an injunction against Apple, basing its reasoning (according to news reports – I do not have access to an English translation of the decision) on Samsung's commitment to grant FRAND licenses. The court apparently found that because Apple was willing to negotiate in good faith, Samsung's request for an injunction against the sale of Apple products in the Netherlands would not be sustained.

Huawei v. InterDigital (Del. Ch., No. 6974). InterDigital Communications has asserted eight patents relating to 3G telecommunications standards against Huawei in the ITC, seeking an exclusion order against the importation of infringing Huawei products into the U.S. Huawei alleges in an action brought in the Delaware Chancery Court that InterDigital has breached its commitments to ETSI and 3GPP by seeking to enforce its patents against Huawei products without first offering to enter into a FRAND license. Because an exclusion order is the only remedy that the ITC is authorized to grant, Huawei seeks to have the ITC action dismissed on this basis, as well as the establishment of a FRAND royalty rate for InterDigital's 3G patents.

Supreme Court to Hear International Copyright Exhaustion Case

By Dennis Crouch

Kirtsaeng v. John Wiley & Sons, Inc. (Supreme Court 2012)

The Supreme Court has granted certiorari in another international copyright exhaustion case. Previously, in Omega v. Costco, the court stalled in a 4-4 tie and left the case without an opinion. Copyright exhaustion – also known as the "first sale doctrine" – is codified under 17 U.S.C. § 109(a) and allows the holder of a copy of a work "lawfully made under this title" to sell or otherwise dispose of the copy without the copyright holder's permission. Without this doctrine, such a sale could be considered a violation of the copyright holder's exclusive distribution rights under section 106(3). The question in this case is whether the exhaustion doctrine applies to authorized copies manufactured outside of the US and then imported. Copyright holders argue that exhaustion does not apply because the foreign copies were not "lawfully made under this title," but instead were lawfully made in a region not subject to US copyright law. A win for the copyright holders would support a system of price discrimination that would allow a rights-holder to block third-party imports of legitimate (non-counterfeit) products into the US. The rule would also tend to encourage foreign manufacture.

The question presented:

How do Section 602(a)(1) of the Copyright Act, which prohibits the importation of a work without the authority of the copyright's owner, and Section 109(a) of the Copyright Act, which allows the owner of a copy "lawfully made under this title" to sell or otherwise dispose of the copy without the copyright owner's permission, apply to a copy that was made and legally acquired abroad and then imported into the United States?

The case is expected to be argued this fall.

Exclusive Rights of Importation: The particular facts of the case are interesting. John Wiley sells textbooks at a reduced rate in Thailand. Kirtsaeng imported eight Wiley books and resold them in the US. Although Wiley had profited from the original sale in Thailand, the company argued that the importation also violated US law because the foreign sale did not exhaust the copyright and that, therefore, Wiley maintained exclusive rights of importation and distribution. A jury awarded Wiley statutory damages of $75,000 per copy for a total of $600,000 for the eight books. The Second Circuit affirmed that judgment.

Patent Law: Patent law's exhaustion doctrine is not based upon a statute but does run roughly parallel to the copyright law as outlined above. In the Jazz Photo cases, the Federal Circuit ruled that international sale does not exhaust US patent rights. If the Supreme Court reverses in Kirtsaeng, this will likely be seen as an implicit reversal of Jazz Photo and its progeny. Thus, the case will obviously impact patent law. The AIPLA filed a brief in support of the petition – focusing on the need for resolving the circuit split.

John Wiley's cases are still pending against various patent law firms for failing to obtain a license to make copies of prior art documents before making copies and submitting those to the USPTO as required by law. The defendant law firms are expected to file their answers later this month.

Supreme Court Looks to Take Trademark Standing Case Following Covenant-not-to-Sue

by Dennis Crouch

Already (YUMS) v. Nike (SCT 2012)

Nike sued YUMS back in 2009 alleging trademark infringement, unfair competition, and dilution under both federal and NY state law.  The complaint included the image below comparing YUMS brand shoes with Nike’s federal trademark registration number 3,451,905.  The design is related to Nike’s Air Force 1 shoe that was first released in 1982. The Yums intentionally retro look is apparently fashionable for skaters and freestyle BMX riders. [Buy the shoes here] (The image does not show the shoes’ creative soles.)

After being sued, YUMS counterclaimed — seeking to cancel the registration.  However, before the court could reach a decision on the merits, Nike’s attorneys at Banner & Witcoff provided YUMS with a covenant-not-to-sue on the AF1 design rights. In the document, Nike wrote that YUMS brand “no longer infringe or dilute the Nike Mark at a level sufficient to warrant the substantial time and expense of continued litigation."

The covenant was limited to YUMS current shoes as well as ‘colorable imitations’ of current lines. In particular, Nike promised to:

refrain from making any claim(s) or demand(s), or from commencing, causing, or permitting to be prosecuted any action in law or equity, against [Yums] or any of its [successors or customers], on account of any possible cause of action based on or involving trademark infringement, unfair competition, or dilution, under state or federal law in the United States relating to the [Nike eAir Force 1 Mark] based on the appearance of any of [Yums]’s current and/or previous footwear product designs, and any colorable imitations thereof, regardless of whether that footwear is produced, distributed, offered for sale, advertised, sold, or otherwise used in commerce before or after the Effective Date of this Covenant.

YUMS was apparently happy with the document, but not fully satiated.  Rather, YUMS maintained its declaratory judgment lawsuit — arguing that the Nike Mark continued to improperly chill its innovative marketing efforts.  However, the district court dismissed the case — finding that it lacked subject matter jurisdiction because there was no ongoing case or controversy.  Important for its ruling, YUMS had not taken any “meaninful steps” toward developing a new potentially infringing product not covered by the covenant-not-to-sue.

On appeal, the Second Circuit affirmed, holding specifically that the cancelation power under 15 U.S.C. § 1119 does not provide federal courts with an independent basis for jurisdiction absent an actual case-or-controversy between the parties.

Supreme Court: Now, YUMS has appealed to the US Supreme Court — relying upon the expertise of Jim Dabney and Prof John Duffy (of KSR fame) to bring their case. They raise the simple question: “Whether a federal district court is divested of Article III jurisdiction over a party's challenge to the validity of a federally registered trademark if the registrant promises not to assert its mark against the party's then-existing commercial activities.”  The complaint raises a circuit split between the Second Circuit here and the Ninth Circuit, which is much more friendly to DJ trademark actions in this type of situation. In addition, the petition highlights Supreme Court precedent that suggest broad jurisdiction should be available to challenge the validity of suspect intellectual property rights. See Lear, Inc. v. Adkins, 395 U.S. 653 (1969), MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007), Cardinal Chem. Co. v. Morton Int'l, Inc., 508 U.S. 83 (1993), and Scott Paper Co. v. Marcalus Mfg. Co., 326 U.S. 249 (1945).

The Supreme Court has now asked Nike to respond to the petition – due May 4.  This move greatly increases the odds that the petition will eventually be granted.

Of interest, a key element of the Myriad gene patent case is whether the ACLU and AMP have standing to sue.  This case may shed further light on that outcome.

Patently-O Bits & Bytes by Lawrence Higgins

Patent Jobs Roundup:

• Harrity & Harrity is looking for patent attorneys/agents with a background in EE, computer science, or physics and a minimum of 2 years of experience drafting patent applications to work at their Fairfax, VA office. [Link]
• The USPTO Office of the Solicitor is seeking an experienced patent attorney. [Link]
• Vierra Magen Marcus & DeNiro is seeking patent associates or agents with 1+ years of patent prosecution experience and degree in EE or CS to work at their San Francisco office. [Link]
• Faegre Baker Daniels is searching for an experienced trademark attorney to work at their Colorado office. [Link]
• Faegre Baker Daniels is looking for a patent litigation associate with 1-2 years of experience to work at their Minneapolis office. [Link]
• Myers Wolin is seeking a partner level patent or trademark attorney or small practice group with portables to work at their Morristown, NJ office. [Link]
• Hoffmann & Baron is seeking a patent attorney/agent with a minimum of 3-5 years of experience in the areas of computers and business methods to work in their Parsippany, NJ office. [Link]
• Faegre Baker Daniel's is searching for a patent agent with a degree in EE or CS and patent experience to work in their Chicago office. [Link]
• Larson Newman is looking for patent attorneys with an EE degree and 3-5 years of experience to work in their Austin office. [Link]
• Akerman Senterfitt is seeking a chemical patent associate with 1-3 years of experience to work in their Denver office. [Link]
• Gilead Sciences is searching for patent litigation counsel with a BS in life sciences and 5-8 years of experience to work at their Foster City, CA office. [Link]
• Carlson, Gaskey & Olds is looking for a patent attorney with 4-8 years of patent litigation experience to work at their Birmingham, MI office. [Link]
• Klarquist Sparkman is seeking a litigation associate with 1-2 years of experience to work in their Portland office. [Link]
• Klarquist Sparkman is seeking a patent attorney/agent with an advanced degree in organic chemistry and 3+ years of experience to work in their Portland office. [Link]
• Cardinal Intellectual Property is looking for a patent search professional with a JD degree and a technical degree to work remotely. [Link]
• Berkeley Lab is searching for a patent attorney with at least 5 years of experience as a patent attorney/agent. [Link]
• Faegre Baker Daniels is seeking a trademark litigation associate with 2-3 years of trademark and copyright litigation experience to work in their Minneapolis office. [Link]
• Cardinal Intellectual Property is looking for a patent search attorney to work at their Evanston, IL location. [Link]
• Wellstat Management Company is searching for a patent attorney/agent with at least 5 years of experience and a background in biomedical or mechanical engineering to work at their Gaithersburg, MD location. [Link]
• Stroock
• Faegre Baker Daniels is looking for a junior patent litigation associate with 1-2 years of experience to work in their Denver or Boulder office. [Link]
• Nixon & Vanderhye is searching for a patent attorney/agent with experience drafting and prosecuting patent applications to work in their Arlington, VA office. [Link]
• The DuPont Company is seeking patent agents with experience in preparing and prosecuting patent applications under USPTO TC1600 to work at their Wilmington, DE location. [Link]
• Covidien is looking for an IP attorney with 4-6 years of experience to work at their New Haven, CT location. [Link]
• Hagens Berman is searching for a patent litigation attorney with 3+ years of experience to work at their Seattle office. [Link]
• The USPTO is seeking patent examiners with an engineering degree to work at their Alexandria or Detroit locations. [Link]

Despite Therasense: Federal Circuit Finds Aventis Patent Unenforceable

by Dennis Crouch

This is an important case showing that inequitable conduct based upon failure to cite prior art will continue to be viable.

Aventis Pharma v. Hospira (Fed. Cir. 2012)

Aventis holds two patents that cover its branded chemotherapy drug Taxotere. According to the patent, the active drug is mixed with other ingredients to form a perfusion that can be injected intravenously without causing anaphylactic or alcohol intoxication symptoms.

In litigation to prevent Hospira from bringing a generic form to market, the district court ruled the patents unenforceable for inequitable conduct during prosecution of the patents. On appeal, the Federal Circuit has affirmed that holding. This case marks the first time that the appellate court has upheld an inequitable conduct finding since raising the standard of proof in the 2011 Therasense v. BD en banc decision.

Inequitable conduct occurs when a patent applicant intentionally and materially misleads the patent office. Both intent and materiality must be proven. In Therasense, the court additionally held that materiality is normally only satisfied if the misconduct was a "but-for" cause of the given patent being issued. (Caveat for egregious misconduct).

This case involves the most typical inequitable conduct allegation: failing to notify the USPTO of a known reference that impacts patentability.

Lets walk through the steps of materiality and intent:

Materiality: In addition to inequitable conduct, the court also held a few of the patent claims invalid as obvious – relying upon the withheld reference. According to the court, this fact alone proves materiality – since the reference rendered the claim invalid. Two procedural issues add to this conclusion: (1) Claims are (according to the law) more narrowly construed at trial than at the USPTO and therefore references that are material at trial would have definitely been material at the USPTO. (2) Invalidation requires clear and convincing evidence but proof of materiality for inequitable conduct only requires a preponderance of the evidence. As such, information that works to prove the higher standard would certainly work to prove the lower standard.

Intent: To win, the defendant must show that the defendant had specific intent deceive. This can be proven by inference, but only if that conclusion is the "single most reasonable inference able to be drawn from the evidence." Here, the inventor testified that he saw the references as explaining failed experiments and therefore need not be disclosed to the PTO. However, the judge found that the inventor lacked credibility and that some evidence suggested the inventor had learned valuable information from the reference.

On appeal, the court confirmed that these elements were met and that the patents were therefore obtained through inequitable conduct.

The Impact of Mayo v. Prometheus: Three Weeks In

By Dennis Crouch

It has been three weeks since the Supreme Court decided Mayo v. Prometheus, and in that time four additional decisions have been released that rely on the Supreme Court opinion.

1. In Association for Molecular Pathology (AMP) v. Myriad Genetics, Inc., the Supreme Court granted certiorari, vacated the Federal Circuit decision and remanded for further consideration of patentability of Myriad's claims to isolated DNA strands based upon the outcome of Mayo v. Prometheus.
2. In SmartGene v. Advanced Biological Laboratories, a DC District Court relied upon Mayo v. Prometheus to invalidate a patent claiming a system and method using a computer program to guide the selection of therapeutic treatments. In that case, the court noted that the steps of the claims were invalid because they added nothing "specific" to the abstract idea of choosing a therapy "other than what is well-understood, routine, conventional activity, previously engaged in by those in the field."
3. In Nazomi Communications, Inc. v. Samsung Telecommunications, the patent claimed a method of "executing an instruction" that resolves a reference when needed and updates a data structure to indicate that the reference has been resolved. The N.D. California district court found that the claims do not violate the patentable subject matter limitation of Section 101 because they "do more than recite an abstract idea and say 'apply it.'"
4. In L.A. Printex Industries, Inc. v. Aeropostale, the Court of Appeals for the 9^th Circuit was asked to determine whether a lower court had correctly dismissed a copyright infringement lawsuit over a floral fabric design. In a footnote, the court cited the Mayo decision in support of the notion that "ideas, first expressed by nature, are the common heritage of humankind" and not protectable as intellectual property rights.

by Dennis Crouch

I created a database of utility patents running up through April 8, 2012 and tallied the number of patents that list more than twenty claims. More claims tend to create a greater likelihood that at least one of the claims will be found both valid and infringed. On the other hand, more claims raise the cost of prosecution, increase the odds of the patent being held unenforceable, and correlates with greater prosecution time.

The underlying data is available here: https://docs.google.com/spreadsheet/ccc?key=0Avb15LgT1GHYdFVFQ19rajh6MkVIZ3FCTkRWM2pia2c. Feel free to use the data with acknowledgement.

Inter Partes Reexamination: Standard for Initiating Reexamination No Longer Requires "New" Issues

The threshold standard for initiating an inter partes reexamination was changed on September 16, 2011 - the enactment date of the America Invents Act.  The revised law eliminates the old “substantial new question of patentability” standard and now requires “a reasonable likelihood that the requester would prevail with respect to at least 1 of the claims challenged in the request.”  This reasonable likelihood of prevailing (RLP) standard must now be met before the USPTO can initiate an inter partes reexamination.

In my initial review of the change, I wrote that the new standard is “stricter” than the old.  Certainly, a reasonable likelihood of success is more difficult to prove than simply raising a substantial question. However, I must add an important caveat — the old standard required that the substantial question be “new” while the revised standard does not have such a limitation. 

In a recent petition decision, the USPTO confirmed this analysis — indicating that the a reexamination request under the RLP standard can be based entirely upon issues previously addressed by the Office. In other words, “the determination of whether the question presented in the request are new is no longer a prerequisite of the determination of whether to order inter partes reexamination.” (Quoting from the petition decision) The USPTO wrote:

Whether the issue being brought forth for consideration has been addressed in a previous Office proceeding does not preclude reexamination under the current standard for ordering inter partes reexamination. Under 35 U.S.C. 312, the Office has the discretion to reconsider issues that have been addressed in the past, provided the estoppel provisions of 35 U.S.C. 317 do not apply.

In a footnote, the decision noted that the question of whether the raised objections to patentability are “new” is simply “not relevant to deciding this petition.”

File Attachment: Dismissal of Petition.pdf (210 KB).

Robert Frame had argued on behalf of petitioner that the new RLP standard should be interpreted as SNQ+.  Frame pointed to the House Report on the AIA that stated:

The threshold for initiating an inter partes review is elevated from 'significant new question of patentability' -a standard that currently allows 95% of all requests to be granted -- to a standard requiring petitioners to present information showing that their challenge has a reasonable likelihood of success.

As discussed above, that approach was rejected by the USPTO (CRU).

The patent being reexamined is No. 8,028,491 and covers a particular type of tactile warning surface units used to warn visually impaired individuals of a hazard (such as a curb).  The design allows the surface units to be wet-set (in concrete) and also replaceable.  This type of device is required in many situations in order to comply with requirements of the ADA.

In 2011, the patent holder (ADA Solutions) filed suit against several alleged infringers. On that same day, several of the accused infringers filed this reexamination request. (The parties are litigating other patents as well).

Unenforceable Patents

By Jason Rantanen

Although the en banc Federal Circuit raised the bar for establishing inequitable conduct in Therasense v. Becton Dickinson, findings of inequitable conduct are still possible as illustrated by the district court's decision on remand in that case last week.  Given that the harsh consequence of a finding of inequitable conduct remain unchanged by Therasense, it remains a very real risk for patent holders asserting their patents in litigation.  What, then, are the characteristics of patents that historically have been the subject of an inequitable conduct finding? 

In a recently released draft paper, Lee Petherbridge, Polk Wagner, and I discuss the results of a study in which we empirically examined patents that were determined to be unenforceable due to inequitable conduct and compared them to litigated patents.  We report evidence that unenforceable patents are different from litigated patents.  Unenforceable patents have significantly longer pendency, more parent applications, and contain more claims.  Unenforceable patents also cite fewer U.S. patent references.  Surprisingly, we found no evidence that patents with foreign inventors are more likely to be unenforceable and no evidence that the subject matter of a patent associates with an inequitable conduct determination.  Using these observations, we hypothesize about why inequitable conduct happens, how inequitable conduct relates to patent policy, and what - if anything - practitioners who are concerned about an inequitable conduct determination might take as potential warning signs.

We are still grappling with what our results might teach about why inequitable conduct happens. As this is a working draft, we welcome any comments about that or any other aspects of the study.  The paper can be downloaded here: http://papers.ssrn.com/abstract=2031173.

In 2011, the USPTO issued a record number of utility patents – just shy of 225,000 issued patents.  My indicators are that the 2012 figure will be around 6–10% greater.  On April 3, the USPTO issued 5,176 utility patents — once again a new record and fully 200 more than the previous record set in March of this year.

USPTO Director Dave Kappos took office in August of 2009.  The record number of grants on a single day prior to that was 4,418 - set in 1999 under the leadership of Q. Todd Dickinson who heads the the AIPLA.

Punishing Prometheus: Part V - The Long Punt and the Improbable Return

Guest Post by Robert R. Sachs of Fenwick & West LLP
Read Part I; Part II; Part III; and Part IV.

The Bilksi decision punted on the question of what is an abstract idea, leaving it the Federal Circuit to devise a test. Judge Rader and Judge Dyk proposed different versions of an “I know it when I see it” test. Sadly, the Prometheus decision is of a piece with Judge Dyk’s approach—boiling the claim down to a point where the court can say it’s nothing more than _____  [pick at least one: abstract idea, law of nature, natural phenomena].

But interestingly the Court punted even more deeply in Prometheus—and perhaps, just perhaps, gave inventors and us crafty patent attorneys an out, a chance for a long return. A key premise of the Court’s analysis is that all of the claim elements, apart from the alleged law of nature, were “well­ understood, routine, conventional activity.” This not the normal state of affairs, either before the USPTO or before a court in patent litigation. The Court thus held out for another day:

We need not, and do not, now decide whether were the steps at issue here less conventional, these features of the claims would prove sufficient to invalidate them.

This sentence, a model of clarity, not it is.  It seems to suggest that had the other steps been “unconventional,” that is non-obvious, the claim would have stood a chance. This is how the Court rationalized the Diehr decision, noting that the steps of “installing rubber in a press, closing the mold, constantly determining the temperature of the mold, constantly re- calculating the appropriate cure time through the use of the formula and a digital computer, and automatically opening the press at the proper time” were “nowhere suggested” as being “obvious, already in use, or purely conventional.” But of course the Diehr court never “suggested” that because the novelty and obviousness of that process was not before the Court then, and it (wisely) did not frame the discussion in that way, no less because it has already stated that it was not going to dissect the claim into old and new parts.  To position Diehr in this way is highly disingenuous of the Court.  Moreover, I have a very strong feeling that even 54 years ago in 1968, putting rubber in mold, putting the mold in the oven, and taking it out of the oven when it was done was pretty well known in the art. 

In any event, if this hint is correct, then there remains a path to patent eligibility, one that seems both relatively straight forward and fraught with complexity, much like any long punt return: just run the ball all the way down the field.  On our playing field, you need only (!) make sure that there are at least some elements that “apply” whatever law of nature is in your claim in an “unconventional” manner.  

Surely, good advice. Alas, there are several problems with such a facile rule. First, once you start dissecting a claim and evaluating each element by itself, it becomes very easy to map each element onto some prior art. That is after all, what many patent examiners do; I’m just sayin’.

Second, some claims, like those in Prometheus, are by designed to reflect the business operation of the inventor and his company, and avoid problems such as multi-actor infringement. For example, had Prometheus added more “unconventional” limitations to the claims, in particular reciting steps relating to the manner of treating the patient based upon the thiopurine level, the claim would have had significantly less commercial value, if any, since Prometheus was in the business of testing for diseases, not in the business of treating them.

This is, of course, something for which the Court does not evidence an understanding or a concern. But it is something that the Court should both understand and care about—since the entire purpose of the patent law is to encourage innovation through economic incentives.  If that is the theory, then the incentives to patent must be aligned with the value proposition that the innovator seeks to exploit.  It follows that reducing the value of the incentive should reduce the level of innovation. (I’m not saying here that in fact this is true; I’m merely stating this as hypothesis).

What is the Law?

The Court has spliced together disparate, essentially contrary opinions into a legal virus, a self-validating meme that cannot be defeated by logic or example. I said earlier that the Court’s analysis was “not even wrong.”  The Court’s reliance on claim dissection, on hand waving rules of “is it enough?” and “does it add something significant?”; its confusing of statistical relationships with “natural laws;” and its shear daftness in believing that Section 101 must lord over Sections 112, 102 and 103 all combine to create a powerful “means for” invalidating any patent, now extant or in the future.  Give me any patent claim, and I can craft an argument using the Court’s Prometheus analysis that it is invalid. And like any theory that is not falsifiable—that is not even wrong—you could not logically defeat my argument: for I could always say: “it’s not enough.” 

Zeus punished Prometheus for stealing fire—knowledge—from the gods of Mount Olympus and giving it to Man: chaining him to a rock so his innards may be eaten by a bird of prey. So too has the Court sat in judgment of the modern Prometheus, for “stealing” a small bit of knowledge from the equivalent—and equivalently false—god, the laws of nature. Like their namesake, this Prometheus has had its innards exposed for the taking, and its discovery is now available for anyone to feast upon.

There may or may not be laws of nature. Even Einstein’s theory of relativity is not immune to criticism. But there is a law which is universal, immutable and everlasting, a law that will be confirmed yet again by this decision: The law of unintended consequences. 

 

Patently-O Bits & Bytes by Lawrence Higgins

Are Companies Acting as Government Contractors Immune From Patent Infringement Suits?

• The CAFC, in Zoltek Corp. v. United States, No. 2009-5135 (Fed. Cir. Mar. 14, 2012), Zoltek was the assignee of a patent for manufacturing carbon fiber sheets with controlled surface electrical resistivity. The carbon fiber at issue was used by Lockheed Martin to build the F-22 fighter jet, pursuant to a government contract. The manufacturing of the fibers started in Japan, and thereafter imported into the US, where the fibers were processed into sheets and used for F-22.

  The court held that when the US is subject to suit under 28 USC 1498(a) for alleged infringement of a patent by a contractor acting by and for the US, the contractor by law is rendered immune from individual liability for the alleged infringement. The court further held that, when a product of a patented process is… imported into the US by or for the US, there is direct infringement under a 1498 action. (In addition the US waives sovereign immunity) Opinion

  28 USC 1498

  • (a) Whenever an invention described in and covered by a patent of the United States is used or manufactured by or for the United States without license of the owner thereof or lawful right to use or manufacture the same, the owner's remedy shall be by action against the United States in the United States Court of Federal Claims for the recovery of his reasonable and entire compensation for such use and manufacture.
  • (c)The provisions of this section shall not apply to any claim arising in a foreign country.

USPTO Will Admit 10 Additional Schools into its Patent Law Clinic Certification Pilot Program

• The Pilot Program started began in 2008 with 6 schools and expanded in 2010 to 16 schools. Students in the patent program can expect to draft and file a patent application and respond to an office action. Each law school clinical program must meet and maintain the requirements for USPTO certification in order for student practitioners to practice before the USPTO. The program provides real-world experience to students interested in the field of IP. Submissions will be accepted through June 1, 2012. [Link]

Patent Jobs:

• Hoffmann & Baron is seeking a patent attorney/agent with a minimum of 3-5 years of experience in the areas of computers and business methods to work in their Parsippany, NJ office. [Link]
• Faegre Baker Daniel's is searching for a patent agent with a degree in EE or CS and patent experience to work in their Chicago office. [Link]
• Larson Newman is looking for patent attorneys with an EE degree and 3-5 years of experience to work in their Austin office. [Link]
• Akerman Senterfitt is seeking a chemical patent associate with 1-3 years of experience to work in their Denver office. [Link]
• Gilead Sciences is searching for patent litigation counsel with a BS in life sciences and 5-8 years of experience to work at their Foster City, CA office. [Link]
• Carlson, Gaskey & Olds is looking for a patent attorney with 4-8 years of patent litigation experience to work at their Birmingham, MI office. [Link]
• Klarquist Sparkman is seeking a litigation associate with 1-2 years of experience to work in their Portland office. [Link]
• Klarquist Sparkman is seeking a patent attorney/agent with an advanced degree in organic chemistry and 3+ years of experience to work in their Portland office. [Link]
• Cardinal Intellectual Property is looking for a patent search professional with a JD degree and a technical degree to work remotely. [Link]
• Berkeley Lab is searching for a patent attorney with at least 5 years of experience as a patent attorney/agent. [Link]
• Faegre Baker Daniels is seeking a trademark litigation associate with 2-3 years of trademark and copyright litigation experience to work in their Minneapolis office. [Link]
• Cardinal Intellectual Property is looking for a patent search attorney to work at their Evanston, IL location. [Link]
• Wellstat Management Company is searching for a patent attorney/agent with at least 5 years of experience and a background in biomedical or mechanical engineering to work at their Gaithersburg, MD location. [Link]
• Stroock
• Faegre Baker Daniels is looking for a junior patent litigation associate with 1-2 years of experience to work in their Denver or Boulder office. [Link]
• Nixon & Vanderhye is searching for a patent attorney/agent with experience drafting and prosecuting patent applications to work in their Arlington, VA office. [Link]
• The DuPont Company is seeking patent agents with experience in preparing and prosecuting patent applications under USPTO TC1600 to work at their Wilmington, DE location. [Link]
• Covidien is looking for an IP attorney with 4-6 years of experience to work at their New Haven, CT location. [Link]
• Hagens Berman is searching for a patent litigation attorney with 3+ years of experience to work at their Seattle office. [Link]
• The USPTO is seeking patent examiners with an engineering degree to work at their Alexandria or Detroit locations. [Link]

Upcoming Events:

• On April 10^th join the United States Patent and Trademark Office Managers, Design Examiners, Design Patent Practitioners and Industrial Designers from across the country in a lively and thought-provoking discussion at the USPTO. They will discuss rules and techniques relating to proper graphic descriptions of design patent claims, confer on best practices aimed at the broadest protection of industrial designs in the United States, and hear from members of the design community on the importance of strong industrial design protection in an increasingly design-conscious world. [Link]
• The IP Section of the Atlanta Bar Association and Georgia State University Law School will hold its 8^th annual SpringPosium at the Barnsley Gardens resort on April 13 &14. Some example seminars will include: the new America Invents Act, Federal Court best practices, IP law and life practice management, and recent developments in damages law. Guest speakers include: Clerk of Court and Chief Deputy Clerk of the US Court of Appeals for the Federal Circuit, Jan Horbaly and Pamela Twiford and Clerk of Court of the US District Court for the North District of Georgia, James Hatten.
• The European Generic Medicines Association is hosting the 10th EGA International Symposium regarding Biosimilar Medicines on April 19-20 in London. Greenblum & Bernstein is providing a pre-symposium workshop on April 19, 2012 titled: Biosimilars In America: IP Strategy and Due Diligence. The workshop will explore the mechanics of the Biologics Act with an emphasis on how the Act relates to the involved intellectual property and how the intellectual property may impact the biosimilar applicant's strategy for entering the market. [Link]
• The University of Colorado School of Law will hold a conference on April 24^th. The conference, Patents on the Range or Wild Frontier, will discuss the future of patent policy. Guest speakers include: David Kappos, Don Rosenberg, John Thorne, Paul Ohm, Bernard Chao, and many others. [Link]
• ACI will hold its 6^th Annual Paragraph IV Disputes conference on April 24-25 in New York City. The conference will cover topics such as: the impact of the AIA on Hatch-Waxman litigation, claim construction, prior art obviousness and obvious-type double patenting, and many other topics. (Patently-O readers register with PO 200 for a discount). [Link]
• The World Research Group is holding its 4th Annual Corporate IP Counsel Forum on May 16-17 in NYC. The Corporate IP Counsel Forum will address key issues and uncover latest developments related to IP in the form of case studies and panel discussions. Some of the topics include, but are not limited to: The America Invents Act and its impact on patent litigation and prosecution, IP monetization strategies for small and mid-size companies, Patent valuation, The top 10 most influential court cases in IP this year, Patent eligibility, Invention mining, Divided infringement, Best practices for combating non-practicing entities, Appeals to the U.S. Court of Appeals for the Federal Circuit, Copyright infringement. [Link]
• The Annual DRI Business Litigation and Intellectual Property Seminar will be held May 16-18, 2012, in New York City. Attendees will learn trial and appellate advocacy skills in business litigation get up-to-date on the last trends in intellectual property and business litigation, and network with in-house counsel, business and intellectual property trial lawyers and experts from across the country. Speakers include: Former ABA President, Dennis W. Archer, Dennis Archer PLLC, and David Leitch, VP and General Counsel of Ford Motor Company. [Link]
• The San Francisco Intellectual Property Law Association is hosting its annual seminar in Healdsburg, the center of one of California's best wine regions, from June 1-3. Speakers include Hon. Margaret A. (Peggy) Focarino, USPTO Commissioner of Patents, Hon. Robert Stoll, former USPTO Commissioner of Patents, Hon. Gerard F. Rogers, Chief Administrative Trademark Judge of the TTAB, Hon. Randy R. Rader, Chief Judge of Federal Circuit, Hon. Susan Illston, Judge of N.D.CA, Hon. Edward J. Davila, Judge of N.D.CA, as well as professors and leading practitioners. [Link]
• On May 21-22 Ronald Slusky will hold a seminar in Chicago, the seminar teaches a comprehensive approach to analyzing inventions and capturing them in a sophisticated set of patent claims. The seminar is based on Ronald's book, Invention Analysis and Claiming: Patent Lawyer's Guide. [Link]
• ACI will hold a Biosimilars conference May 22-23 in New York, NY. The conference will focus on the legal, regulatory, and commercial realities of biosimilars. [Link]

Contact Lawrence.Higgins@patentlyo.com with leads for future Bits and Bytes.

Self-Replicating Inventions: Supreme Court asks for Government’s Views in Monsanto Patent Exhaustion Case

By Dennis Crouch

Bowman v. Monsanto (Supreme Court Docket No. 11-796, 2012)

In 2011, the Federal Circuit again affirmed that Monsanto's genetically modified seeds patents can be used to stop farmers from saving and replanting the GM seeds. The farmer, Vernon Bowman, then petitioned the Supreme Court asking for a writ of certiorari – presenting the following question:

Patent exhaustion delimits rights of patent holders by eliminating the right to control or prohibit use of the invention after an authorized sale. In this case, the Federal Circuit refused to find exhaustion where a farmer used seeds purchased in an authorized sale for their natural and foreseeable purpose - namely, for planting. The question presented is:

Whether the Federal Circuit erred by (1) refusing to find patent exhaustion in patented seeds even after an authorized sale and by (2) creating an exception to the doctrine of patent exhaustion for self-replicating technologies?

In its brief-in-opposition, Monsanto reformulated the question as follows:

Whether the Federal Circuit correctly ruled that Monsanto's patent rights in biotechnology related to genetically modified plants (here, patented technologies that make soybeans resistant to glyphosate-based herbicides) are independently applicable to each generation of soybeans embodying the invention, such that a grower who, without authorization from Monsanto, creates a new generation of genetically modified soybeans infringes Monsanto's patents.

CVSG: Now, the Supreme Court has invited the Solicitor General to file briefs expressing the views of the United States in the case. This is a significant step toward grant because it shows some interest in the case. Typically a call for the views of the Solicitor General (CVSG) requires the vote of at least four justices. However, those votes appear to be easier to obtain than a vote to grant certiorari or a vote to reverse the lower court. A study of 30,000 petitions reported that a petition on the paid docket is four times more likely to be granted once the Court calls for a response. Thompson and Wachtell, An Empirical Analysis of Supreme Court Certiorari Petition Procedures: The Call for Response and the Call for the Views of the Solicitor General, 16 George Mason L. Rev. 237 (2009). In his study of patent cases, Professor Duffy found that the SG's opinion is extremely important in predicting whether the Supreme Court decides to hear a case on the merits. John F. Duffy, The Federal Circuit in the Shadow of the Solicitor General, 78 Geo. Wash. L. Rev. 518 (2010).

DOJ – USPTO – FTC – ETC.: The USPTO would almost certainly agree with the Federal Circuit's opinion and recommend against a grant of certiorari. Of course, the Supreme Court is not asking the opinion of Raymond Chen (USPTO Solicitor General), but rather the opinion of Solicitor General of the United States (acting on behalf of the US). In the power struggle, the USPTO is only one voice and may well lose-out here to other interests (as it has in other recent cases). In 2005, the SG (then Paul Clement) filed a brief in the parallel case of McFarling v. Monsanto recommending that the petition be denied. The McFarling petition did not focus on exhaustion. However, in a footnote the SG brief noted that "whether (and, if so, to what extent) the patent-exhaustion doctrine applies to restrictions on the use of a materially identical patented product that was produced by the patented product sold by the patentee" is "novel."

Mark Walters of Frommer Lawrence & Haug is lead counsel for Bowman. Seth Waxman is counsel of record for Monsanto.

London Masterclass: The Real, Dramatic and Ongoing Changes to United States Patent Law and their Impact on the Practice of Patent Law

By Dennis Crouch

This summer, I will be leading a professional summer course (masterclass) on U.S. Patent Law at the University College of London (UCL) Faculty of Laws. The event is sponsored by UCL and chaired by the Rt Hon Prof. Sir Robin Jacob. In three two-hour sessions, we will look at recent changes to the US patent law and their impact on the practice of law – with a particular focus on issues involving UK and European patent law professionals and their clients.

The three sessions are as follows:

• Monday 18 June - 6-8pm: Changes in the Way Patents are Prosecuted in the US.
• Thursday 28 June - 6-8pm: US Patent Litigation Structure and Changes to the Process.
• Wednesday 4 July - 6-8pm: Litigating at the USPTO (Pre and Post-Grant); Subject Matter Eligibility.

The course is geared toward patent law professionals, experienced users of the patent system, and others considering entering the field. I am looking forward to meeting you there and perhaps the pub after.

UCL is offering an early-bird special for those who sign-up early:

• https://ibil-us-patents.eventbrite.com/?nomo=1

Guest Post: Prometheus v Mayo – A European view

Guest post by Paul Cole, European Patent Attorney, Lucas & Co.

How is the Prometheus invention viewed by the EPO, and what are the differences between the reasoning of EPO appeal boards and of the US Supreme Court concerning patent eligibility?

An indication is that the EPO granted EP-B-1114403 (Seidman) which corresponds to US 6355623 and has a main claim that reads:

An in vitro method for determining efficacy of treatment of a subject having an immune-mediated gastrointestinal disorder or a non-inflammatory bowel disease (non-IBD) autoimmune disease by administration of a 6-mercaptopurine drug, comprising

determining in vitro a level of 6-thioguanine in a sample from said subject having said immune-mediated gastrointestinal disorder or said non-inflammatory bowel disease (non-IBD) autoimmune disease,

wherein said treatment is considered efficient if the level of 6-thioguanine is in the range of about 230 pmol per 8x10⁸ red blood cells to about 400 pmol per 8x10⁸ red blood cells.

The above claim is not an outlier. The forward references of the '633 patent include US 7524851, whose equivalent EP-B-1695092 has a main claim that reads:

A method for monitoring azathioprine therapy in an individual, said method comprising

measuring the level of 6-thioguanosine diphosphate and 6-thioguanosine triphosphate in a sample from said individual, and

calculating a concentration ratio of 6-thioguanosine triphosphate to 6-thioguanosine triphosphate and 6-thioguanosine diphosphate,

wherein a concentration ratio greater than 0.85 is indicative of superior clinical responsiveness to azathioprine therapy, and wherein a concentration ratio less than 0.85 is indicative of inferior clinical responsiveness to azathioprine therapy.

In a communication dated 26 October 2007 and available in the EPO's online file the Examining Division decided that the '851 claim was novel and inventive based on the technical effect of improved therapeutic efficiency. In accordance with EPO practice, from that effect a technical problem based on the Seidman disclosure as starting point could be reconstructed which was to provide an improved method of monitoring azopurine therapy.

If the '403 patent had been challenged e.g. in an opposition the EPO would have been bound to follow established case law and hold that the claimed method was patent-eligible firstly because it is carried out on a sample from the subject and secondly because an in vitro measurement is made, see the Enlarged Appeal Board decision in G 3/08 PRESIDENT'S REFERENCE in which the long-standing practice of the Appeal Boards was approved. An argument that the "wherein" features should be disregarded for assessment of novelty or inventive step taking into account the exclusions under art. 52 EPC as a mere discovery or mere presentation of information would have been likely to fail because, as seen above, improvement in therapeutic efficiency is treated at least at first instance as a technical effect.

The CAFC in its opinion on remand of 17 December 2010 reasoned in broadly similar terms to what would be expected from an EPO Appeal Board dealing with patent-eligibility. It held that treatment and optimization formed part of an inherently patent-eligible treatment protocol (opinion, page 20) and continued:

We agree with the district court that the final "wherein" clauses are mental steps and thus not patent-eligible per se. However, although they alone are not patent-eligible, the claims are not simply to the mental steps. A subsequent mental step does not, by itself, negate the transformative nature of prior steps. Thus, when viewed in the proper context, the final step of providing a warning based on the results of the prior steps does not detract from the patentability of Prometheus's claimed methods as a whole. The data that the administering and determining steps provide for use in the mental steps are obtained by steps well within the realm of patentable subject matter; the addition of the mental steps to the claimed methods thus does not remove the prior two steps from that realm.

As to the overall significance of the "wherein" clauses in the context of the claim as a whole, the CAFC appears to have accepted that they helped define a technical result (opinion at pp.22-23):

Although the wherein clauses describe the mental processes used to determine the need to change the dosage levels of the drugs, each asserted claim as a whole is drawn to patentable subject matter. Although a physician is not required to make any upward or downward adjustment in dosage during the "warning" step, the prior steps provide useful information for possible dosage adjustments to the method of treatment using thiopurine drugs for a particular subject. Viewing the treatment methods as a whole, Prometheus has claimed therapeutic methods that determine the optimal dosage level for a course of treatment. In other words, when asked the critical question, "What did the applicant invent?," Grams, 888 F.2d at 839 (citation omitted), the answer is a series of transformative steps that optimizes efficacy and reduces toxicity of a method of treatment for particular diseases using particular drugs.

From a European standpoint the key ruling of the Supreme Court is that the reasoning of the CAFC and the EPO Appeal Boards should not be followed. Its reasons are set out in the slip opinion pp. 20-21:

Third, the Government argues that virtually any step beyond a statement of a law of nature itself should transform an unpatentable law of nature into a potentially patentable application sufficient to satisfy §101's demands… The Government does not necessarily believe that claims that (like the claims before us) extend just minimally beyond a law of nature should receive patents. But in its view, other statutory provisions—those that insist that a claimed process be novel, 35 U. S. C. §102, that it not be "obvious in light of prior art," §103, and that it be "full[y], clear[ly], concise[ly], and exact[ly]" described, §112—can perform this screening function.

This approach, however, would make the "law of nature" exception to §101 patentability a dead letter …

What role would laws of nature, including newly discovered (and "novel") laws of nature, play in the Government's suggested "novelty" inquiry? Intuitively, one would suppose that a newly discovered law of nature is novel. The Government, however, suggests in effect that the novelty of a component law of nature may be disregarded when evaluating the novelty of the whole… But §§102 and 103 say nothing about treating laws of nature as if they were part of the prior art when applying those sections. Cf. Diehr, 450 U. S., at 188 (patent claims "must be considered as a whole").

If the CAFC/EPO approach is to be abandoned, what is the alternative? The rule followed by the Supreme Court is that the claimed combination of features must amount to significantly more than the natural law itself and that limiting the law to a particular technological environment or adding insignificant post-solution activity does not suffice. The Court was aware of the need for caution and warns in its opinion:

The Court has recognized, however, that too broad an interpretation of this exclusionary principle could eviscerate patent law. For all inventions at some level embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas.

In effect the Mayo rule corresponds to the "contribution approach" suggested at first instance in the UK in Merrill Lynch's Application [1988] R.P.C. 1 which was to consider whether the inventive contribution resided only in excluded matter. That approach also has its difficulties and it was rejected by the UK Court of Appeal in Genentech's patent [1989] R.P.C. 147 where it was observed that:

Such a conclusion, when applied to a discovery, would seem to mean that the application of the discovery is only patentable if the application is itself novel and not obvious, altogether apart from the novelty of the discovery. That would have a very drastic effect on the patenting of new drugs and medicinal or microbiological processes.

The Supreme Court acknowledges that the rule ought not to be interpreted to cover newly discovered first or subsequent medical indications for a known substance (slip opinion at page 18):

Unlike, say, a typical patent on a new drug or a new way of using an existing drug, the patent claims do not confine their reach to particular applications of those laws.

It is, however, less than clear by what logic new drugs escape the rule in Mayo but the Prometheus test is caught by that rule. For example, nitroglycerin was first synthesized in 1847 and was used as an explosive. In 1878 it was introduced as a treatment for angina by Dr William Murrell. Suppose Dr Murrell had claimed a pharmaceutical composition for the treatment of angina or other heart conditions comprising nitroglycerin and a pharmaceutically acceptable carrier or diluent. The anti-angina activity of nitroglycerin could be regarded as a mere phenomenon of nature "though just discovered", the reference to treatment of cardiac disorder could be a mere limitation to a particular technological environment and formulation into tablets or other forms for convenient administration to the patient could be regarded as an insignificant post-solution activity since the incorporation of active ingredients into tablets or other dosage forms was well known long before 1878. The pharmaceutical composition claim which is in standard form for a first medical indication would block research into further formulations and further medical indications for nitroglycerin. Indeed, blocking further development was an objection raised in the 1790's to James Watt's patent for a steam engine. It might be said that the hypothetical Murrell claim confines the reach of what has been discovered to the particular application of pharmaceuticals but it might equally be said that the Prometheus claim confines the reach of what has discovered to the particular application of a blood test for metabolites of drugs of a particular family. If there is a distinction, arguably it is no more than pragmatism.

Such a conclusion is consistent with the arguments of Robert Sachs in Part III of his Guest Post, where he singles out relative terminology and conclusory statements. A question expressed as "doing significantly more" or "adding enough" is a matter of degree rather than of kind, and provides no unequivocal forward guidance. Indeed the Supreme Court accepted the limitations of its guidance (slip opinion at page 24) where it said:

In consequence, we must hesitate before departing from established general legal rules lest a new protective rule that seems to suit the needs of one field produce unforeseen results in another.

Perhaps the wisest course is to take the opinion at its word and accept that beyond disapproving the CAFC/EPO approach Mayo makes no new rule and does nothing positive to explain what is patent-eligible and what is not.

Paul Cole wrote more on the topic in a recent guest post on Warren Woessner's blog Patents4Life.

 

Means-Plus-Function: Invalid as Indefinite

by Dennis Crouch

Ergo Licensing v. CareFusion 303 (Fed. Cir. 2012)

In a split opinion, the Federal Circuit has affirmed a lower court ruling that Ergo's asserted claims are invalid. Judge Moore explains in her opinion, that the claims are indefinite under 35 U.S.C. § 112 (2) because the means-plus-function limitations are not supported by any corresponding structure disclosed in the specification.  Judge Linn joined Judge Moore's opinion.  Judge Newman dissented. 

Describing, Enabling, and Defining: 35 U.S.C. § 112 (1) requires that a claimed invention be fully described and enabled. In addition, the claims must be drafted in a manner that particularly identifies the scope of rights being claimed.  35 U.S.C. § 112 (2).  Although overlapping, these three requirements—written description, enablement, and definiteness—are separate and distinct requirements. Thus, a claim may fail the definiteness requirement even though the invention sought to be patented was fully described in the original specification in "full, clear, concise, and exact terms" and in a way that "enables any person skilled in the art … to make and use the same."

Means-Plus-Function: Patent claims ordinarily recite particular "structure, material, or acts" as elements that both provide for the inventive step and limit the scope of rights. 35 U.S.C. § 112 (6) allows a patentee to alternatively draft limitations as "a means or step for performing a specified function without the recital of structure, material, or acts in support thereof." To a lay reader, these means-plus-function claims appear quite broad. For instance a claimed "means for connecting elements A and B" seemingly covers any method or structure that accomplishes the claimed function. However, the statute itself require that means-plus-function claims be given a much more limited scope. Under § 112 (6), a means-plus-function claim "shall be construed to cover the corresponding structure, material, or acts described in the specification and equivalents thereof." Thus, to know the meaning of a claimed "means for connecting," we must look to the patent specification to see what particular connecting means were disclosed and the scope of the claim would be limited only to those disclosed structures and their equivalents. The result here is that means-plus-function claims typically have a scope that is much narrower than one might expect on the initial reading.

Undefined Means: In recent years, a number of means-plus-function claims have been invalidated as lacking definiteness under § 112 (2). (I.e., invalid as indefinite). Courts follow the following approach: (a) The statute requires that a means-plus-function element be defined according to corresponding structure found in the specification. (b) If no corresponding structure is found then the term cannot be defined and (c) is therefore invalid as indefinite.

This case offers yet another example of claims being held invalid based upon means-plus-function claim elements that lack corresponding structure in the specification. The claims recite a "control means for controlling [an] adjusting means." The patentee argued that its disclosure of a general purpose computer was sufficient structure because a computer would be able to accomplish the task-at-hand. On appeal, the court rejected the patentee's argument and affirmed that such a computer was insufficient structure since a general purpose computer could not accomplish the function required by the claim. The court wrote that the patentee could have satisfied the requirement by additionally including the algorithm that the computer would use to accomplish its task."

If special programming is required for a general purpose computer to perform the corresponding claimed function, then the default rule requiring disclosure of an algorithm applies. It is only in the rare circumstances where any general-purpose computer without any special programming can perform the function that an algorithm need not be disclosed.

Thus, the means-plus-function limitation has no corresponding structure in the specification because "there is no algorithm described in any form for the function of 'controlling the adjusting means.'" As a result, the claim is invalid as indefinite.

In an extended dissent, Judge Newman argued that the ruling amounts to a formalistic technicality that is unfair to patentees – especially when the enablement and written description tests are not offended by the claim.

Disfavored by Patentees: Because of their narrow scope and high-likelihood of invalidity, "means for" claiming has been on a steady decline for the past two decades. The chart below shows a time series of the percent of patents that include at least one "means for" claim limitation. (Note – my search was for "means for" and so some MPF claims are not counted). These days, the only ones being caught in this trap are either (1) being poorly advised or (2) attempting to improperly extend the scope of their patent beyond what was actually invented. In my view, prudent patent applicants today never rely on MPF claims as their broadest or strongest claims. However, many still find some role for those claims and it is important to recognize that means-plus-function claim scope varies dramatically on the international level.

Device for: The majority opinion suggests the next frontier of challenge – patent claims that rely heavily on functional language but that do not use the magic "means" language. Here, the court at least suggests that an equivalent claim drafted as a "device for controlling" would have been invalid under the same analysis. The court wrote "The [hypothetical] recitation of 'control device' provides no more structure than the term 'control means' itself, rather it merely replaces the word 'means' with the generic term 'device.'"