July 2012

New Statute of Limitations for Disciplinary Proceedings

Patent

by Dennis Crouch

The USPTO has issued its final rules relating to changes to the statute of limitations for initiating disciplinary proceedings against US patent attorneys and agents.  77 FR 45247. The change is required by the America Invents Act of 2011 (AIA) and will have an effective date of August 30, 2012.

Under the new law, any disciplinary proceeding before the USPTO must be commenced “not later than the earlier of either the date that is 10 years after the date on which the misconduct forming the basis for the proceeding occurred, or 1 year after the date on which the misconduct forming the basis for the proceeding is made known to an officer or employee of the Office.  The statute also authorizes the USPTO to regulate the process of informing USPTO officers. 

Here, the final rules identify two key points:

  • The one-year statute of limitations is triggered once the Office of Enrollment
    and Discipline (OED) Director receives a grievance forming the basis of
    the complaint.
  • The OED will accept a grievance from any source, but it must be in writing.

Prior to this change, disciplinary actions were generally understood to be subject to a five-year statute of limitations.

This final rule amends the rule that was proposed in January 2012.  In the original proposal, the one-year timeline would not have been triggered until the USPTO first completed a preliminary review of the case and received a “complete, written response” from the accused practitioner.”  At that time, I commented that the USPTO’s interpretation of the one-year deadline was in tension to the text of the new statute.

 

Prosecution Disclaimer: Another Reexamination Trap

Patent, ,

by Dennis Crouch

Grober v. Mako Products (Fed. Cir. 2012)

In 2006, David Grober won an academy award for the best technical achievement of the year for his “perfect horizon” camera stabilization head.  The camera head is designed to compensate for motion during land, air, and sea operations of a camera.  Grober’s patent No. 6,611,662 covers the camera head and is the subject of this appeal.

This case is like many that involve parallel legal proceedings.  Grober filed an infringement action in 2004, Mako then filed an inter partes reexamination request – asking the USPTO to take a fresh look at the patent.  The district court stayed the litigation until 2006. At that time, the court became antsy and reopened the case.  After claim construction, the district court ruled that the accused products did not infringe the asserted claims and dismissed. Later, during the course of the appeal, the USPTO finally decided the reexamination by confirming the patentability of the asserted claims.

The primary issue on appeal is the construction of the claim term “payload platform.”  The district court narrowly construed the term as limited to a “horizontal surface” and that consequently led to a non-infringement holding.   To reach its conclusion, the district court highlighted Grober’s statements made to the PTO in the pending reexamination.

In reviewing the claim construction de novo, the appellate panel agreed that statements made in an ongoing, pending reeexamination were relevant to the claim construction.  See Krippelz v. Ford (Fed. Cir. 2012). In this case, however, the Federal Circuit held that the reexamination statements were not direct enough to constitute prosecution disclaimer.

Grober’s statements were not an unambiguous disavowal that clearly and unmistakably disclaims claim scope or meaning. In this instance, the reexamination history did not define or limit, let alone clearly and unmistakably disclaim, claim scope.

The appellate court’s approach here looked particularly to the words used by to the patentee in the reexamination to identify any actual limitations or disclaimers and refused to read-between-the-lines to find implied disclaimers.  In this sense, the decision supports the long-held prosecution strategy of keeping the prosecution history file thin. 

The Federal Circuit then offered its own broader construction of the term and remanded the case for reconsideration.

Comment: Although Grober may have escaped, this case highlights one of many ways that a parallel reexamination can serve as a trap for a plaintiff-patentee.  These traps go well beyond the straightforward risk of having claims cancelled or narrowed.

 

 

Federal Circuit Upholds Sanctions Against Litigation Counsel

Patent

By Dennis Crouch

Rates Technology and James Hicks v. Mediatrix Telecom (Fed. Cir. 2012)

James Hicks represented Rates Technologies (RTI) in the litigation against the accused infringers (including Mediatrix) in the Eastern District of New York. During discovery, the court found that RTI had failed to adequately answer several interrogatory answers and, as a litigation sanction, dismissed the case and fined RTI and Hicks $43k each. RTI did not appeal. However RTI’s attorney Hicks did appeal – arguing that he should not be personally sanctioned because the information needed to answer the interrogatory was not within his personal possession and because the discovery orders were not directed personally toward him. The Federal Circuit rejected those arguments.

The primary contention interrogatory at issue is perhaps the most basic for any patent infringement case. The question is:

Separately for each claim of the Patents-in-suit that [RTI] contends is infringed, state the basis for that contention, including … identification on an element-by-element basis of the component … of each accused Mediatrix product that allegedly satisfies each element.

RTI apparently never answered this question.

Pre-Filing Information Insufficient: Before filing a patent infringement lawsuit, the plaintiff’s attorneys are required to conduct some amount of reasonable inquiry to comply with Rule 11 of the Federal Rules of Civil Procedure. This typically includes an element-by-element analysis to ensure that the accused products actually infringe the asserted patent. Of course, before filing, the scope of a plaintiff’s knowledge is often limited. The patentee likely lacks technical information associated with the accused products (as well as full knowledge of the defendants’ product lines). Thus, a full infringement contention normally requires some amount of discovery from the accused infringer. Further complicating this cat-and-mouse game of discovery is the fact that plaintiffs prefer to delay fully explaining their infringement contentions in order to maintain flexibility in the litigation and to keep opposing counsel guessing.

One solution proposed by Peter Menell, et al., in their newly updated Patent Case Management Judicial Guide is to require infringement and invalidity contentions be exchanged early in the case – certainly before claim construction. Most local patent rules follow that process and judges then use the contentions in thinking about the claim construction and also to limit discovery. The problem with this approach is that the claim construction tends to significantly alter the case and may well require amendments to the contentions.

Ongoing Debate: Is Software Patentable?

Patent

by Dennis Crouch

A pair of recent Federal Circuit decisions continue to highlight ongoing ambiguities and difficulties regarding the scope of patent subject matter eligibility for software related patents.

  • Bancorp Services, L.L.C. v. Sun Life Assur. Co. of Canada (U.S.), — F.3d —-, 2012 WL 3037176 (Fed. Cir. 2012) (computer related financial claims are not patent eligible).
  • CLS Bank Intern. v. Alice Corp. Pty. Ltd., 103 U.S.P.Q.2d 1297 (Fed. Cir. 2012) (computerized stock trading platform claims are patent eligible).

Both decisions agree on several main points: that the mere inclusion of a computer limitation does not make a claim patent eligible and that the claim form (method, system, etc.) does not change the subject matter eligibility analysis. Although perhaps a revisionist history, Bancorp explains that the differing outcomes are based upon factual distinctions in the two cases:

In CLS, we reversed the district court and held that method, system, and medium claims directed to a specific application of exchanging obligations between parties using a computer were patent eligible under § 101. In faulting the district court for “ignoring claim limitations in order to abstract a process down to a fundamental truth,” we explained that the asserted claims in CLS were patent eligible because “it [wa]s difficult to conclude that the computer limitations … d[id] not play a significant part in the performance of the invention or that the claims [we]re not limited to a very specific application of the [inventive] concept.” Here, in contrast, the district court evaluated the limitations of the claims as a whole before concluding that they were invalid under § 101. As we explained above, the computer limitations do not play a “significant part” in the performance of the claimed invention. And unlike in CLS, the claims here are not directed to a “very specific application” of the inventive concept; as noted, Bancorp seeks to broadly claim the unpatentable abstract concept of managing a stable value protected life insurance policy.

Despite this attempted reconciliation, it is clear that the CLS majority has a different approach to subject matter eligibility questions. Perhaps the key difference is the question of how we think of “the invention.” In CLS, the invention is defined by the claim. In Bancorp and the CLS dissent, the court looks for the core inventive concept as the starting-point for its subject matter eligibility analysis.

It is simply ridiculous that after 40 years of debate, we still do not have an answer to the simple question of whether (or when) software is patentable.

Prior Art Enablement: Burden on Patent Applicant to Prove Non-Enablement

Patent, ,

by Dennis Crouch

In re Antor Media Corp (Fed. Cir. 2012)(Lourie, J.)

As part of an ex parte reexamination process, the Board of Patent Appeals (BPAI) found Antor’s patent claims invalid as both anticipated and obvious based upon the combination of four prior art references.  The patent under reexamination – No. 5,734,961 – covers a fairly simple network-based data transfer method. 

On appeal to the Federal Circuit, Antor challenged the anticipation holding.  Its argument was that the examiner had not provided any evidence that the asserted prior art was sufficient to enable anyone to practice the Antor invention.  The Federal Circuit agreed that prior art must provide an enabling disclosure (for anticipation), but still rejected Antor’s argument by holding that the USPTO need not even consider the enablement question unless the applicant first presents prima facie evidence of non-enablement.

The court held

“that, during patent prosecution, an examiner is entitled to reject claims as anticipated by a prior art publication or patent without conducting an inquiry into whether or not that prior art reference is enabling.  As long as an examiner makes a proper prima facie case of anticipation by giving adequate notice under § 132, the burden shifts to the applicant to submit rebuttal evidence of nonenablement.”

Thus, prior art references are presumed to be sufficiently enabled. Here, the court affirmed that Antor had not rebutted this presumption of enablement because the patentee did “not show[] that undue experimentation would be needed to practice the claimed invention” based upon the disclosure in the prior art.  

Enablement is normally treated as a question of law. Here, however, enablement of the prior art is a subset of the factual inquiry into anticipation. As such, it appears that the court has treated enablement of the prior art as an underlying question of fact and applied the substantial evidence rule to its review of the BPAI decision. 

To be clear, the prior art enablement question looks to whether the arguably anticipatory prior art sufficiently enables the invention now being patented.  You’ll notice that the above discussion focused on anticipation rather than obviousness. The conclusion that a prior art reference lacks enablement does not exclude the reference from consideration during an obviousness challenge.  Thus, Antor mounted (and lost) a separate argument against the obviousness rejections that had been affirmed by the BPAI. See Amgen Inc. v. Hoechst Marion Roussel, Inc. (Fed. Cir. 2003) (“Under § 103 … a reference need not be enabled; it qualifies as a prior art, regardless, for whatever is disclosed therein”).

Introducing David Hricik

Patent

By Dennis Crouch

I am happy to introduce Professor David Hricik as a new Patently-O contributor. Hricik is likely the most well-known and well-respected expert on U.S. patent lawyer ethics and so it makes sense that his focus on Patently-O will also be on patent law ethics, patent lawyer malpractice, and inequitable conduct. His two-volume treatise on patent ethics (co-authored with Mercedes Meyer) is published by Oxford University Press and has become a required reference for patent attorneys dealing with our regularly arising ethical questions. Hricik has been working in patent law for almost 25 years: The first 14 as a (patent) litigator and the last ten as a law professor.

Hricik will be blogging at: www.patentlyo.com/hricik. We’ve added a new tab at the top of the page that links to Hricik’s site.

His first three posts are up, including Best Mode, the AIA, and Conflicts of Interest.

Welcome David Hricik.

Administrative Rules for Implementing a First-to-File System

Patent

On Monday, the USPTO is expected to publish a set of proposed administrative rules for implementing the new first-to-file regime codified by the Leahy-Smith America Invents Act (AIA). A pre-publication copy is attached. Changes to Implement the First Inventor to File Provisions of the Leahy-Smith America Invents Act. Once finalized, the rules should become effective by March 16, 2013. Comments on the rules are due by October 5, 2012.

The rules identify four primary areas of legal changes: (1) conversion of the United States patent system from a "first to invent" system to a "first inventor to file" system; (2) treating U.S. patents and U.S. patent application publications as prior art as of their earliest effective filing date, regardless of whether the earliest effective filing date is based upon an application filed in the U.S. or in another country; (3) eliminating the requirement that a prior public use or sale be "in this country" to be a prior art activity; and (4) treating commonly owned or joint research agreement patents and patent application publications as being by the same inventive entity for purposes of 35 U.S.C. 102, as well as 35 U.S.C. 103.

Download Pre-Pub-FedReg

Making Pre-Grant Submissions More Efffective

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by Dennis Crouch

The America Invents Act (AIA) expands the opportunity for third-party pre-issuance submissions in patent cases. Beginning September 16 of this year (2012), anyone will be permitted to submit published documents ('printed publications') that are relevant to the examination of a pending application along with a concise explanation of the importance of the documents submitted. 

In a recently issued set of final rules, the USPTO outlines the procedures that it has put in place to handle the new filings. Changes To Implement the Preissuance Submissions by Third Parties Provision of the Leahy-Smith America Invents Act, 77 F.R. 42150 (2012).

Targeted preissuance submissions offer an extremely inexpensive mechanism for limiting competitor patent scope. The process has little downside (in most cases) but does require additional competitor monitoring.  The effectiveness of the process has not been tested.  Although the process has major limitations, I believe that it will serve as an effective tool in the hands of skilled practitioners.  I have spoken with several attorneys who are already preparing their preissuance submissions to be filed in late September.

Key points: 

  • Implementation: Although the pre-grant submissions cannot be filed before September 16, once that date passes, they may be filed in applications that were already on file with the USPTO. I know of some individuals who are already preparing materials for pre-grant submissions against competitor applications. Presumably they will file those sometime on or after September 16, 2012. 
  • Deadlines: During the legislative process, the PTO supported these third-party submissions, but offered some concern that late-stage submissions could create problems for both patent applicants and for the USPTO examination process.  Thus, for most cases the preissuance submission must be filed before the first office action rejection is mailed.  In cases where there is no office action rejection or where the PTO works quickly, submissions will be allowed if within an alternative deadline of within six-months of publication.  The PTO will not consider any submissions submitted after the notice of allowance.
  • Requirements: Submissions may be done anonymously and electronically, but must include (1) A list identifying the items being submitted; (2) a concise description of the relevance of each item listed; (3) a legible copy of each non-U.S. patent document listed; (4) an English language translation of any non-English language item listed; (5) a statement by the party making the submission that the submission complies with the statute and the rule; and (6) the required fee ($0 if fewer than three-documents submitted).
  • Results: The patent examiner is required to consider compliant third-party submissions in preparation for the next office action.  The submitted documents will be listed on the face of the patent as considered.

How to make preissuance submissions more effective?: Some may have a more nuanced or longer-term strategy, but the usual realistic goal of a third-party submission is to limit the scope of a competitor's pending application.  Barring retaliatory competitor action, the only downside is that a broad patent may still issue with a prosecution history reflecting that the examiner considered the submitted documents.  No estoppel is created by the submissions.  The identical argument will not be available during a later post grant review and may be more difficult to prove at trial than it would have been if never considered at the USPTO.

  1. Quality Art: The best preissuance submissions will begin with on-point prior art.  Examiners will not likely be tolerant of submissions that lack prima facie credibility.
  2. Concise and Well Drafted: There is a large risk of examiners ignoring submissions that appear as a large stack of dense documents.  The concise explanation should be designed to quickly lead examiners to a rejection based upon the submitted documents.   
  3. Explaining Known Art: Rather than submitting new prior art, applicants may re-submit art already in the file along with an explanation of how the art should be applied.   
  4. Reputation: Certain practitioners and entities will earn reputations as filing credible/incredible. 
  5. Protect Potential Space: Remember that the patent applicant is still likely to receive a patent. The pre-issuance submission is useful for limiting and defining patent scope.  The record will reflect that the patent definitely does not cover X.  With the normal unpredictability of claim construction, this defining role result can be quite helpful down the road if the patent is ever litigated.  Practicing entities should use the process to clear a path for their own current and potential technology usage.  As discussed below, a third party may be satisfied with the applicant adding a definition to a claim term rather than actually amending the claim. 
  6. Internal Prior Art: Remember that e-mails and other correspondence can potentially serve as printed publications under the patent laws.  (See caselaw on 35 USC 102(a) & 102(b)).
  7. Other Questions of Patentability: The statute calls for the submission of documents “of potential relevance to the examination” and is certainly not restricted to issues of novelty and nonobviousness.  The rules do not allow an applicant to simply submit an argument without an underlying published document. For a definiteness issue, a dictionary definition may serve as the hook.  For a new-matter question, the document could be the related parent application. For a patentable subject matter issue, the document might be Mayo v. Prometheus.

Arguments Serving as Published Evidence: A third-party challenging enablement might want to hire an expert to study the application; publish an expert report; and then submit the report (along with a concise explanation) following these new procedures.  This approach appears to fit within the statute that allows the submission of “any … printed publication of potential relevance.”  However, in its notice of final rules, the USPTO has indicated that it will not accept materials created and published merely for the purpose of challenging the pending application in question.  The USPTO appears to understand that the statute is broadly written and thus does not directly prohibit the filing of such documents.  The Office instead concludes that the submission would be rejected because the required concise explanation of such a document “would likely be deemed an improper attempt by the third party to impermissibly participate in the examination of the application because the relevance of the document being described is its discussion of the patentability of the application.”  In this sense, the Office seems to be setting up a conflict between these new submission procedures found in 35 USC 122(e) and the prohibition on protests and pre-grant oppositions left unamended in 35 USC 122(c). 

I believe that the USPTO is probably wrong on its analysis of the law here — in many (if not most) cases, this type of evidence should be allowed under the law.  The statute does not provide a particular mechanism for challenging the PTO's refusal to consider these submissions, but the Office is unlikely be convinced on petition without resorting to the filing of a federal case. As an aside, the filing of a non-compliant submission will likely trigger the applicant's duty of disclosure.  In that case, the applicant will likely re-file the submission as part of an information disclosure statement.

Note: Some of these ideas came from reading Hal Wegner's useful report on Third Party Submissions: The Final Rule.

Patent

Next week I'll be speaking at the central region AUTM (Ass'n of University Technology Managers) meeting in Oklahoma City along with Terry Rea (USPTO Deputy Director) and Kevin Noonan (MBHB). The session is moderated by Angela Parsons (FR).  See you there.   I recently had some interesting discussions the new benefits of partnering with universities created by the AIA.  

 

I won't make it there, but the National Association of Patent Practitioners (NAPP) annual conference will be August 18-21 in DC. [Brochure].

More on the Death of the Best Mode Requirement

Patent

By Jason Rantanen

Despite (or more likely because of) the effective demise of the requirement that patent applicants disclose the invention's best mode at the time of filing the application, several academic commentaries on the subject have appeared recently, including two that I co-authored.  Below I summarize our most recent work along with two other notable recent articles on best mode.

  • In The Pseudo-Elimination of Best Mode: Worst Possible Choice?, a short essay recently published in the UCLA Law Review Discourse, we argue that by equivocating on the best mode requirement – eliminating it as an argument against validity during an infringement action while technically retaining it in section 112 – Congress may have not only failed to achieve the goal of leveling the playing field between U.S. and foreign applicants, but may have tilted it from uneven in one direct, if it ever was uneven, to uneven in the other.  The article can be downloaded here: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2103278.  Our previous article, In Memoriam Best Mode is discussed here.
  • In Patent Reform and Best Mode: A Signal to the Patent Office or a Step Toward Elimination?,  Ryan Vacca provides a detailed history of the best mode requirement up through the America Invents Act, before examining whether the Patent and Trademark office has the ability to enforce the requirement itself.  Professor Vacca concludes that the PTO's methods are unlikely to be effective, and recommends that "if Congress believes it made the right decision in the AIA concerning best mode, then Congress should simply bite the bullet and formally eliminate best mode as a requirement for patentability."  The article can be downloaded here: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1957768
  • In Best Mode Trade Secrets, Brian Love and Christopher Seaman conclude that it may become routine post-AIA for patentees to concurrently assert both patent rights and trade secret rights in certain types of cases.  The authors identify undesirable consequences of this change, and suggest an approach courts could consider in order to limit dual claims of trade secret and patent protection.  The article can be downloaded here: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2056115

Deciding Foreign Case Law; Certifying Questions; and Patent Assignments

Patent

by Dennis Crouch

The Wi-LAN decision focuses on a litigation discovery dispute. In 2009, Wi-LAN had its attorneys at Kilpatrick Townsend (then Townsend) analyze the scope of LG's infringement.  After LG refused to pay, Wi-LAN forwarded the results of the Townsend inquiry (the Townsend Letter) to LG.  Once litigation started, LG requested that Kilpatrick disclose documents and testimony relating to the Townsend Letter.  Kilpatrick refused based upon its argument that the requested information was protected by attorney-client privilege.  On the other side, LG argued that any privilege was waived by Wi-LAN's voluntary disclosure of the results.  The district court sided with LG and held Kilpatrick in contempt-of-court.

On appeal, the Federal Circuit has vacated the decision –  holding that the district court applied the wrong standard in determining the scope of waiver. Hefe, the court focused on Ninth-Circuit law to determine the scope of privilege waiver and held that –  if faced with this case – would require a fairness balancing before requiring disclosure of otherwise privileged information.

The most inwardly interesting aspect of the decision stems from the short opinion dubiante by Judge Reyna.  A dubiante opinion is typically seen as the weakest form of concurrence.  Here, Judge Reyna writes:

The majority embarks on a winding course as it explores Ninth and other regional circuit case law, and evidentiary rules. At the start of its journey, the majority recognizes, “The parties do agree that the Ninth Circuit has not spoken squarely on this issue, i.e., whether fair-ness balancing is either required or proscribed in this case.”

Still, the majority discerns a trend in the law and on that basis takes a guess that the Ninth Circuit, if its hand were at the helm, would hold that there must be a fair-ness balancing in the context of express extrajudicial waivers.

I examine the trend and find in it no gates that lead to secure blue water. Indeed, I find that even a route that lies opposite the route charted by the majority is as good a route as any.

Thus, while instinct tells me the majority could be correct, I am concerned that our heading is not based on an accurate bearing. As I cannot prove or disprove our result, I go along with the majority—but with doubt.

Certifying Questions of Non-Federal-Circuit-Law: The decision here could well be contrasted with the court's recent opinion in Preston v. Marathon Oil (Fed. Cir. 2012).  That case involved a patent ownership dispute between Mr. Preston and his former employer Marathon.  At oral arguments, the court discovered a disputed question of Wyoming law as to whether particular additional consideration is necessary to support an IP assignment agreement signed by an at will employee.  The Wyoming supreme court took-up that case and held that the continuation of the at-will employment is sufficient consideration.   Preston v. Marathon Oil Co., 277 P.3d 81, 82 (Wyo. 2012).  Based on the state court decision, the Federal Circuit then quite easily held that the assignment agreement was valid and that the disputed patents were owned by Marathon.

Perhaps Judge Reyna would have been more satisfied with certifying the Wi-LAN case to the Ninth Circuit for determination of the privilege question in that case.  

= = = = =

Employment agreements are generally covered by local law –  thus, this result may vary state-to-state. One catch is that the court has federalized some bits of the law of IP assignments. Probably most importantly, the Federal Circuit has held that a prospective assignment agreement works to automatically transfer ownership rights at the moment of invention –  so long as the previously-signed agreement includes the correct magic words.

Made or Conceived: As an aside –  but critical to Preston's case – the IP assignment agreement included an assignment of any “invention … made or conceived” while at Marathon.  Preston argued that he had the idea for the invention before starting work.  The Federal Circuit found Preston's argument lacking, even if factually correct since the invention was made (i.e., reduced to practice) after Preston joined Marathon.  The Court did not indicate whether this aspect of its decision was decided under state law or federal law.  

Loughlin v. Ling

Patent

By Jason Rantanen

Loughlin v. Ling (Fed. Cir. 2012) Download 11-1432
Panel: Lourie (author), Rader, Moore

This opinion concerns the relationship between 35 U.S.C. § 135(b)(2), which limits the circumstances under which an interference may be provoked, and 35 U.S.C. § 120, which provides the benefit of an earlier filing date based on a prior application.  Section 135(b)(2) states:

A claim which is the same as, or for the same or substantially the same subject matter as, a claim of an application published under section 122(b) of this title may be made in an application filed after the application is published only if the claim is made before 1 year after the date on which the application is published.

(emphasis added).  Ling et al. filed their original application on January 16, 2004.  Four months later, Loughlin et al. filed their application, which was published on November 18, 2004, and which subsequently issued as a patent.  On February 5, 2007, Ling filed a second application that was granted priority to the original application under section 120.  Seeking to provoke an interference, on February 21, 2007, Ling copied into this second application claims from Loughlin's pending application. 

Loughlin contended that Ling's was barred from provoking an interference by § 135(b)(2), as the claims were made more than a year after Loughlin's application was published and Ling's second application was filed in 2007, well after Loughlin's application was published (in 2004).

The Federal Circuit disagreed, affirming the Board of Patent Appeals and Interference's ruling that the priority benefit of § 120 applies to § 135(b)(2) – in essence, treating Ling's second application as if it had been filed as of the filing date of the first, thus taking it outside the scope of the "application filed after" language.  "We agree with Ling that the Board correctly interpreted § 135(b)(2) in view of the plain language of that statute and the benefit provision of § 120. The first sentence of § 120 permits an application to claim the benefit of an earlier filing date, such that the application is treated as having been effectively filed on the earlier date."  Slip Op. at 8.  In reaching this conclusion, the court noted the broad applicability of section 120, such as in the context of § 102(b), (d), and (e), and that the Board has consistently interpreted § 135(b)(2) as including the priority benefit of § 120.

CLS Bank v. Alice: The “Nothing More Than” Limitation on Abstract Ideas

Patent, , ,

By Jason Rantanen

CLS Bank International v. Alice Corporation Pty. Ltd. (Fed. Cir. 2012) Download 11-1301
Panel: Linn (author), O'Malley, Prost (dissenting)

Despite two recent opinions by the Supreme Court, the issue of patent eligible subject matter continues to sharply divide the Federal Circuit.  CLS Bank v. Alice Corporation illustrates this point neatly, even going a step further.   Unlike other recent opinions involving questions of patent eligible subject matter that have approached the issue in a relatively narrow, case-specific manner, here the majority implements a sweeping rule with significant implications for future cases – a rule that the dissenting judge criticizes as being irreconcilable with Supreme Court's precedent.

Background: Alice sued CLS for infringement of four patents covering, in the majority's words, "a computerized trading platform for exchanging obligations in which a trusted third party settles obligations between a first and second party so as to eliminate 'settlement risk'.  Settlement risk is the risk that only one party's obligation will be paid, leaving the other party without its principal."  Slip Op. at 2.  The patents included method, system, and computer program product claims. Claim 1 of Patent No. 7,149,720 is representative of the system claims:

1. A data processing system to enable the exchange of an obligation between parties, the system comprising:
a data storage unit having stored therein information about a shadow credit record and shadow debit record for a party, independent from a credit record and debit record maintained by an exchange institution; and

a computer, coupled to said data storage unit, that is configured to (a) receive a transaction; (b) electronically adjust said shadow credit record and/or said shadow debit record in order to effect an exchange obligation arising from said transaction, allowing only those transactions that do not result in a value of said shadow debit record being less than a value of said shadow credit record; and (c) generate an instruction to said exchange institution at the end of a period of time to adjust said credit record and/or said debit record in accordance with the adjustment of said shadow credit record and/or said shadow debit record, wherein said instruction being an irrevocable, time invariant obligation placed on said exchange institution.

The district court granted summary judgment of invalidity based on a failure to claim patent eligible subject matter.  Alice appealed.

The majority's "nothing more than" limitation: In reversing the district court, the majority focused on the "abstract ideas" exception to patent eligible subject matter.  Examing the concept of "abstract ideas," the majority concluded that despite substantial precedent and commentary, its meaning remains unclear and its boundary elusive.  There is, of course, some guidance in the precedent, notably the machine or transformation test and concerns about preempting an entire field of innovation.  There are also computer-specific opinions, which the majority distilled down into the rule that "a claim that is drawn to a specific way of doing something with a computer is likely to be patent eligible whereas a claim to nothing more than the idea of doing that thing on a computer may not."  Slip Op. at 18 (emphasis in original). But even this rule allows for "great uncertainty" as to the meaning of "abstract ideas."

Against this backdrop, the majority did not attempt to define the concept of "abstract ideas."  Instead, it implemented a new rule that minimizes the need to make such a determination and strongly favors a conclusion of patentable subject matter when claims involve anything that might be characterized as an abstract idea.  The majority's rule:

"this court holds that when—after taking all of the claim recitations into consideration—it is not manifestly evident that a claim is directed to a patent ineligible abstract idea, that claim must not be deemed for that reason to be inadequate under § 101…Unless the single most reasonable understanding is that a claim is directed to nothing more than a fundamental truth or disembodied concept, with no limitations in the claim attaching that idea to a specific application, it is inappropriate to hold that the claim is directed to a patent ineligible “abstract idea” under 35 U.S.C. § 101."

Slip Op. at 20-21 (emphasis added).  Applying this rule, the majority concluded that Alice's claims were directed to patent eligible subject matter.  In reaching this conclusion, it emphasized the need to look at the claim as a whole rather than to generalize the invention as the district court did.  Applying this approach, the majority concluded that the computer limitations "play a significant part in the performance of the invention" and that the claims are "limited to a very specific application of the concept of using an intermediary to help consummate exchanges between parties." Id. at 26. 

The majority also emphasized a theme previously discussed on PatentlyO: that district courts have the discretion to determine the order in which to assess questions of validity, and may execise that discretion in the interests of judicial efficiency: "Although § 101 has been characterized as a “threshold test,” Bilski II, 130 S. Ct. at 3225, and certainly can be addressed before other matters touching the validity of patents, it need not always be addressed first, particularly when other sections might be discerned by the trial judge as having the promise to resolve a dispute more expeditiously or with more clarity and predictability."  Slip Op. at 13 (emphasis added).

Judge Prost's Dissent: Writing in dissent, Judge Prost sharply criticized the majority for "responding to a unanimous Supreme Court decision against patentability with even a stricter subject matter standard."  Dissent at 8.    "The majority resists the Supreme Court’s unanimous directive to apply the patentable subject matter test with more vigor. Worse yet, it creates an entirely new framework that in effect allows courts to avoid evaluating patent eligibility under § 101 whenever they so desire."  Id. at 1.  Judge Prost was equally critical of the majority's departure from the Supreme Court's case-specific approach to questions of patent eligible subject matter.  "The majority has failed to follow the Supreme Court’s instructions—not just in its holding, but more importantly in its approach."  Id. at 3.

Central to Judge Prost's dissent is the view that the Supreme Court in Prometheus required that to be patent eligible the subject matter must contain an "inventive concept."  "Now there is no doubt that to be patent eligible under § 101, the claims must include an “inventive concept.”  Dissent at 3. Finding nothing inventive in the claims – they consist of the abstract and ancient idea together with its implementation via a computer – the dissent concludes that they cannot constitute patent eligible subject matter.

The Heart of the Dispute: One interpretation of the divide between majority and dissent is that it flows from fundamentally different approaches to the question of what the "invention" is for purposes of § 101.  The majority sees the "invention" as rigidly defined by the claims: "ignoring claim limitations in order to abstract a process down to a fundamental truth is legally impermissible," and accuses the dissent of doing just that.  Slip Op. at 23.  In contrast, the dissent, while recognizing the importance of the claims, strips them of jargon in order to ask "So where is the invention"?  Dissent at 5.  The majority's approach resembles the standard patent law approach to dealing with the concept of the invention; the dissent's is much more similar to how the Supreme Court analyzes questions of patentable subject matter. 

In any event, given the fundamental disagreement between the majority and dissent, this will be a case to keep a close eye on.

Correction to original post: Judge Lourie was joined by Judge O'Malley, not Judge Moore.

Sciele v. Lupin: The Presumption of Validity Does Not Change

Patent

By Jason Rantanen

Sciele Pharma Inc. v. Andrx Corporation (Fed. Cir. 2012) Download 12-1228
Panel: Moore (author), Lourie, Prost

Lupin sought permission to market a generic version of Fortamet, an extended-release tablet of metaformin hydrochloride.  In response, Shionogi filed a lawsuit asserting infringement of Patent No. 6,866,866, thus triggering a 30-month stay of FDA approval.  The stay expired while the litigation was still ongoing and Lupin attempted an at risk launch of its generic product.  Shionogi obtained a preliminary injunction to prevent Lupin from selling its product that Lupin appealed.

This opinion is noteworthy largely for its discussion of the presumption of validity.  Lupin argued that the presumption of validity should not apply because of errors committed by the patent office during prosecution: the patent office erroneously issued the patent with claims that had been both rejected by the examiner and cancelled by the applicant.  Shionogi argued that there should be a heightened presumption of validity because the prior art references relied on by Lupin were before the PTO during prosecution. 

The Federal Circuit rejected both arguments, although it acknowledged that the specific circumstances could carry some weight in the overall determination.  "Whether a reference was previously considered by the PTO, the burden of proof is the same: clear and convincing evidence of invalidity…The burden does not suddenly change to some-thing higher–“extremely clear and convincing evidence” or “crystal clear and convincing evidence”–simply because the prior art references were considered by the PTO."  Slip Op. at 10-11.  However, the fact that references were previously before the PTO could impact the weight the court or jury assigns to the evidence: "For example, it could be reasonable to give more weight to new arguments or references that were not explicitly considered by the PTO when determining whether a defendant met its burden of providing clear and convincing evidence of invalidity."  Id.

Likewise, while the court rejected the argument that the presumption of validity did not apply because of the PTO's errors during prosecution, it allowed those errors to be considered: "We can take it all into account, including both the fact that the Cheng and Timmins references were before the Patent Office and the bizarre circumstances surrounding the issuance of the claims in this patent."  Id. at 12.

Against this backdrop, the CAFC concluded that the district court's obviousness analysis was flawed because it overstated the fact that the references were not before the PTO in KSR and incorrectly rejected Lupin's substantive arguments on disclosure and motivation to combine.

Although the standard for determining whether the patentholder has demonstrated a likelihood of success on the merits is a significant issue in some preliminary injunction appeals, this does not appear to be one where the outcome would have turned out differently if the CAFC had applied a standard other than whether the applicant raised a substantial question as to validity.'  The Federal Circuit judges were clearly persuaded that there was a strong obviousness challenge to the patent. 

Three new USPTO Satellite Offices: Denver, Dallas, and San Jose

Patent

Patent2011074On Monday, the USPTO is expected to announce the location of its three new satellite patent offices: Denver, Colorado; Dallas, Texas; and San Jose, California.  A fourth satellite office sited in Detroit, Michigan was particularly identified in the 2011 America Invents Act and is slotted to host a grand opening event next week (July 12).  The USPTO’s primary office will remain in Alexandria, Virginia –  just outside of Washington DC.  The satellite offices are expected to each house around 100 patent examiners and a handful of administrative patent judges.  These offices will also serve as check-in centers for examiners taking part in the PTO’s popular telework (work-from-home) program.  In addition, the satellite offices are expected to include high-quality teleconferencing equipment that patent applicants can use to conduct examiner interviews and argue appeals even when decision makers remain in DC.  Expect for the three new satellite offices to open in early 2013.

Although not tremendous, the new satellite office locations will serve as a boon for local patent attorneys and also local high-tech entrepreneurs.  A major open question is whether the USPTO will have the ability be able to hire and retain high-quality electrical engineers to staff its silicon valley patent office.

The USPTO continues to hire new patent examiners, administrative patent judges, and others. In particular, the Office currently has a “critical need for electrical engineers” but is also hiring mechanical engineers and chemistry gurus.