Patent Law Blog (Patently-O)

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Carnegie Mellon v. Marvell: Another $1b verdict.

By Dennis Crouch

Marvell's stock price plunged about 10% following news that a jury had awarded well over $1 billion patent infringement verdict to Carnegie Mellon University. Download MarvellVerdict.  The verdict is based upon finding of direct literal infringement of claim 4 of Patent No. 6,201,839 and claim 2 of Patent No. 6,438,180. The CMU hometown Pittsburgh jury also found that Marvell induced infringement by encouraging customers to use its chips. Regarding validity, the jury held that the asserted claims were neither anticipated nor obvious. One of the key pieces of evidence in the trial was an old email from a Seagate engineer noting that the CMU invention went well beyond the current state of the art. (Of course, that email was focused on advances found in the disclosure rather than the broad claims asserted by CMU.) Seagate was apparently happy to provide that document to be used against its market competitor. It is that same Seagate engineer's prior patent application that served as the core of Marvell unsuccessful invalidity argument.

An interesting element of the verdict involved particular willfulness questions. The jury particularly held that (1) Marvell knew of the asserted patent before the lawsuit; (2) had no reasonable defense for its actions; and (3) knew or should have known that its actions were infringing. The verdict did not, however, ask whether the action was "willful." CMU will ask the court to rely upon those answers to treble the damage award. If the damage award is trebled (tripled) and interest added, the award will be roughly equivalent to Marvell's $3.8b market valuation. (The award is larger than CMU's current endowment.) In the initial complaint, CMU also requested attorney fees and a permanent injunction.

This is the second billion dollar judgment against a Quinn Emanuel client awarded in the past few months.

Marvell has announced that it will prevail on appeal. In a pretrial ruling, district court judge Nora Fischer denied Marvell's motion for summary judgment of anticipation, but noted that it was a "close call" based upon her construction of the asserted claims. Marvell did not exercise its authority to seek a reexamination of the patent at the USPTO. Over the next six months, both parties will file and respond to post-verdict motions. Judge Fischer announced her intention to make a final ruling in the case in May 2013. If the verdict is confirmed by Judge Fischer, Marvell will then have an opportunity to appeal after posting a "supersedeas bond." If the damage award is roughly equivalent

The asserted patent claims are basically signal processing logic algorithms for determining the value of items coming from a computer memory signal. This is necessary because the "0" and "1" that we normally talk about for binary digital signals is not actually accurate. In particular, the invention indicates that you should apply a "signal dependent" function to calculate the value as a way to overcome noise in the signal. Apparently a key distinguishing factor from the prior art is that the decoding functions used are "selected from a set of signal-dependent functions." The asserted claims do not identify the particular functions used, only that functions are used.

The two infringing claims are as follows:

Claim 4 of US Patent 6,201,839:

A method of determining branch metric values for branches of a trellis for a Viterbi-like detector, comprising:

selecting a branch metric function for each of the branches at a certain time index from a set of signal-dependent branch metric functions; and applying each of said selected functions to a plurality of signal samples to determine the metric value corresponding to the branch for which the applied branch metric function was selected, wherein each sample corresponds to a different sampling time instant.

Claim 2 of US Patent 6,438,180 (Claim 2 is dependent from Claim 1 and I combined the two together):

A method of determining branch metric values in a detector, comprising:

receiving a plurality of time variant signal samples, the signal samples having one of signal-dependent noise, correlated noise, and both signal dependent and correlated noise associated therewith; selecting a branch metric function at a certain time index; and applying the selected function to the signal samples to determine the metric values, wherein the branch metric function is selected from a set of signal-dependent branch metric functions.

Folks focused on subject matter eligibility issues will notice the obvious problems raised by the asserted claims.

Technical Amendment H.R. 6621

H.R. 6621 has passed in the Senate, but only after the Senate eliminated section (m) of the bill that would have brought to light information regarding the hundreds of "pre-GATT" patent applications that have been pending since 1995. According to Capitol Hill rumors, well known patentee Gil Hyatt was able to convince one Senator to put a hold on the bill that would have eliminated possibility of passage barring the amendment. Hyatt apparently has a number of applications pending that claim architecture and logic design of very basic integrated circuits. There are several hundred of these pre-GATT applications pending. The majority are apparently ones delayed because of Department of Defense secrecy orders. However, a substantial number would be properly classified as submarine patents whose existence is currently unknown but that potentially claim a broad scope of coverage that could potentially cover elements of an entire mature industry (such as integrated circuits). Because the Senate amended the bill, it must be passed again by the House and signed by the President before conclusion of the term.

Related articles

H.R. 6621 has passed in the House

H.R. 6621 Hits a Temporary Snag

AIA Technical Amendment (H.R. 6621) Moving Forward

Congressional Misunderstandings (Apparently) Motivate H.R. 6621

The Plot Thickens around H.R. 6621

Technical Amendment to AIA Passes House

H.R. 6621: Proposed Modifications to the America Invents Act of 2011

Congressional Corrections Regarding H.R. 6621

EFF: Limit Software Patents

Guest Post by Julie Samuels.  Samuels holds an endowed chair at EFF aptly named the Mark Cuban Chair to Elimiate Stupid Patents.  EFF's brief in the CLS Bank case is available here: http://www.patentlyo.com/files/eff--iso-cls.pdf. 

Since the Supreme Court’s 2010 Bilski ruling, the Federal Circuit has been consistent on only one point in its § 101 jurisprudence—and that’s on being inconsistent. In the face of the Federal Circuit’s failure to provide a workable § 101 standard, the Supreme Court issued its unanimous ruling in Mayo v. Prometheus, essentially telling the Federal Circuit to take the patentable subject matter inquiry seriously. Yet the Federal Circuit paid no heed when it issued ruled in CLS Bank v. Alice, all but ignoring the Supreme Court (for many of us court watchers, the Federal Circuit’s failure to address Mayo was shocking; even Judge Prost, in her dissent, admonished the majority for “fail[ing] to follow the Supreme Court’s instructions—not just in its holding, but more importantly in its approach.”).

So it really was no surprise when the Federal Circuit agreed to take CLS en banc. We, along with many others, hope that this case would provide the Court an opportunity to head the Bilski Court’s warning that:

The Information Age empowers people with new capacities to perform statistical analyses and mathematical calculations with a speed and sophistication that enable the design of protocols for more efficient performance of a vast number of business tasks. If a high enough bar is not set when considering patent applications of this sort, patent examiners and courts could be flooded with claims that would put a chill on creative endeavor and dynamic change. (130 S. Ct. at 3229).

As currently interpreted, § 101 leaves parties unable to discern a patent’s metes and bounds or assess its validity, making inadvertent infringement an unfortunate cost of doing business. This has led to a dangerous and dramatic increase in patent litigation, particularly surrounding business method patents or those covering software. For better or worse (and I think worse), the major uptick in these cases involved non-practicing entities. Some data that we included in our amicus brief filed in CLS Bank:

• From 200-2002, NPE litigation accounting for only about five percent of patent litigation;[1] in 2007 that figure was 22 percent and in 2011 it was 40 percent.[2]
• Litigation surrounding software patents has also greatly increased:

[3]

• For the first time in 2011, spending by both Apple and Google on patents exceeded the firms’ spending on new product research and development.[4]
• NPEs now disproportionately target small companies; at least 55% of unique defendants sued by NPEs make under $10 million a year.[5]

These statistics are a direct result of the legal instability surrounding § 101. One way to stem this problem is to create incentives for those facing litigation (or litigation threats) to pursue their meritorious defenses of noninfringement and invalidity. Section 101 could play that role, in fact, the Mayo Court seemed to state as much: “to shift the patent-eligibility inquiry entirely to these late sections [§§102, 103, 112] risks creating significantly greater legal uncertainty, while assuming that those sections can do work that they are not equipped to do.” 132 S. Ct. at 1304.

 Yet no version of recent § 101 jurisprudence offers much hope of settling the law. Instead, we recommended in our brief (filed along with Public Knowledge) that the Federal Circuit take another route and adopt a stricter construction of § 112(f), as recently proposed by Prof. Mark Lemley. Specifically, instead of attempting to figure out whether a broad, functional claim is abstract or not, a court may first use § 112(f) to narrow the claim to the structures and their equivalents recited in the patent and then, if questions remain, make a § 101 inquiry.  

 While § 112(f) has traditionally been applied to apparatus claims, it’s clear that Congress intended it to apply to method claims as well. Despite this, software patents often do not detail actual algorithms or explain how to actually carry out the methods they attempt to claim; as such they should be indefinite under cases like Aristocrat Techs. v. Int’l Game Tech. If the claims do specify the algorithms, then the § 101 inquiry will be limited to those algorithms and their equivalents. These questions—of whether §112(f) applies; if it does, how the claims should be limited; and then if § 101 permits that narrowed claim—could all be accomplished at early stages of litigation, before expensive discovery and motion practice.

---

[1] James Bessen, Jennifer Ford and Michael Meurer, The Private and Social Costs of Patent Trolls, Boston Univ. School of Law, Working Paper No. 11-45, 2011 (“Bessen 2011”), at 6.

[2] Sara Jeruss, Robin Feldman & Joshua Walker, The America Invents Act 500: Effects of Patent Monetization Entities on US Litigation (2012) at 5, 25.

[3] James Bessen, A Generation of Software Patents, Boston Univ. School of Law, Working Paper No. 11-31 (June 21, 2011), at 19

[4] Zak Islam, Smartphone Industry Spent $20 Billion on Patents in 2011, tom’s hardware (October 9, 2012), http://www.tomshardware.com/news/Patents-Smartphone-Apple-Google-Motorola,18231.html

[5] Colleen Chien, Startups and Patent Trolls, Santa Clara Univ. School of Law, Accepted Paper No. 09-12 (September 28, 2012)

Expediting Prosecution: Comparing Track 1 Prioritized Examination, Accelerated Examination, the Patent Prosecution Highway, and Petitions to Make Special Based on Age

Max Colice, Matthew A.  Smith, and Andrew Cheslock, Foley & Lardner LLP[1]

The USPTO’s new Track 1 Prioritized Examination program allows an applicant to reach final disposition (allowance, final rejection, abandonment) within 12 months of filing. To qualify for this program, an applicant must file a simple, one-page petition and a $4800 petition fee ($2400 for small entities). According to the USPTO’s Track 1 website, the current pendency to final disposition is just over 5 months.[2]  But how does Track 1 compare to the USPTO’s other programs for expediting examination?

Right now, the USPTO offers three other programs for expediting examination of utility applications: Accelerated Examination (AE), the Patent Prosecution Highway (PPH), and Petitions to Make Special based on an applicant’s age or health. Like Track 1, AE’s goal is to reach final disposition within 12 months of filing. Unlike Track 1, an applicant pays only a nominal petitions fee, but must conduct a search and submit an accelerated examination support document characterizing the search results. The PPH, in contrast, does not require a fee or a support document; rather, the applicant files a PPH request based on an allowance or favorable search report from a corresponding foreign or PCT application (if necessary, the U.S. claims must be amended to “sufficiently correspond” to the allowable foreign claims.)  According to the USPTO, examination of a PPH case should begin about 2–3 months after the PPH request is granted.[3]  And unlike the Track 1 and AE petitions, which must be filed with the application, a PPH request can be filed any time before examination begins. Petitions to Make Special based on an applicant’s age or health are free, but apply only to those applicants older than 65 or in very poor health.

Which of these programs is the best?  To answer that question, we reviewed approximately 350 applications filed in these programs since 2006 (the Track 1 applications date only from that program’s institution on September 26, 2011.)  We then determined the average and median times from effective filing date to date of allowance for the allowed applications in our sample, plus the standard deviation in these times:

Days from Effective Filing Date to Allowance

Program	Mean	Median	Standard Deviation
Track 1 Prioritized Examination	184	207	101
Accelerated Exam (AE)	317	248	292
Patent Prosecution Highway (PPH)	565	543	215
Petition to Make Special Based on Age	806	675	575

We found that the Track 1 applications were allowed on average 184 days after the application’s effective filing date, compared to 317 days for AE, 565 days for the PPH, and 806 days for applications made special based on an applicant’s age.[4] For reference, the average application pendency across non-expedited applications in 2011 was about 1240 days (1022 days when counting RCEs as new filings).[5] The data were clear: for the allowed applications in our sample, Track 1 was the fastest.

But that is not the whole story.  Despite its relatively high up-front cost, Track 1 applications may also be the least expensive to prosecute, especially for small entities.  To estimate prosecution costs, we tabulated the mean number of office actions for the allowed applications in our sample. Multiplying the mean number of office actions by an estimated cost to the applicant for preparing and filing a response and adding the extra petition costs, if any, yields an “expectation cost” for each program. We did not account for RCE costs because there were less than 3 office actions, on average, per application in each program.

We found that, on average, there were only 1.2 office actions to allowance for the Track 1 applications, 1.3 office actions for PPH applications, 1.7 office actions for AE applications, and 2.2 office actions for applications made special based on an applicant’s age. (For reference, the USPTO averages about 2.7 office actions per final disposal for other cases.[6]) If the cost of responding to an office action is about $2600 per recent AIPLA data,[7] then the expectation cost of filing and prosecuting a Track 1 application at large entity rates is $7920 (i.e., 1.2 × 2600 + 4800). In contrast, the expectation cost of filing and prosecuting an AE application is about $4420 plus the cost of conducting the pre-examination search and preparing the AE support document. If the cost of conducting the search and preparing the support document exceeds $3500, then filing and prosecuting a Track 1 application should, on average, cost less than filing and prosecuting an AE application.

In fact, the benefit of Track 1 for small entities may be even greater. At small entity rates, the expectation cost of filing and prosecuting a Track 1 application is only $5520. This means that Track 1 should be less expensive, on average, than AE if the cost of the search and the support documents (which does not change with entity size) is more than $1100 (the difference between the $5520 Track 1 expectation cost for small entities and the $4420 expectation cost for prosecuting an AE application). According to the AIPLA 2011 Economic Survey, a novelty search is about $2000, which suggests that Track 1 may be less expensive on average than AE for small entities.

For small entities, a Track 1 application has a good chance of being cheaper to prosecute than a regular application. Assuming 2.7 office actions on the normal track at a cost to the applicant of $2600 per office action, the expectation cost of prosecuting a normal application is $7020. Conversely, the expectation cost of prosecuting a Track 1 application for a small entity is only $5520—including the Track 1 petition fee.  Of course, the applicant should expect to incur all of the costs for a Track 1 application within 12 months (or less) instead of over 2–3 years (or more) as would be the case with a normal application.

In sum, Track 1 examination appears to be significantly faster on average than the USPTO’s other programs for expediting examination. Surprisingly, prosecuting a Track 1 application may cost less than prosecuting an AE application even accounting for the large fee for participating in the Track 1 program.

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[1] The authors are attorneys at Foley & Lardner LLP.  This article reflects the views of the authors and not necessarily the views of Foley & Lardner LLP or its clients.

[2] http://www.uspto.gov/patents/init_events/Track_One.jsp

[3] http://www.uspto.gov/patents/init_events/pph/pphbrochure.pdf

[4] For comparison purposes, current Director Kappos recently quoted an average of 153 days to “final disposition” for Track 1 cases, with an allowance rate of about 50%.  The term “final disposition”, of course, includes a variety of actions other than the allowances in our study.

[5] http://www.patentlyo.com/patent/2012/03/total-patent-application-pendency.html

[6] http://www.uspto.gov/ip/global/patents/PPH_slides_for_WS_RT_(2).ppt

[7] The AIPLA 2011 Economic Survey gives response costs, in 2010, of $3000 for relatively complex electrical, computer, biotech and chemical cases; $2500 for relatively complex mechanical cases; and $1850 for minimally complex cases.

Countdown to March 16, 2013

by Dennis Crouch

New patent applications filed three months from now will fall under the US new First-to-File regime created by the America Invents Act of 2011.  Those applications will no longer be able to claim invention-date priority, will have much more limited pre-filing grace period, will be subject to prior user rights and broad post-grant review, and can be invalidated by public uses and sales of similar inventions in foreign countries.  On the other hand, absent a derivation problem, secret prior invention or reduction to practice by a third party will no longer be relevant to patentability.

How are you preparing for this March 16, 2013 changeover?

Patents Issued Per Year

This includes final numbers for 2012

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Recent Design Patent Litigation

By Dennis Crouch

• D. 624,501 –a dual USB adapter owned by Ever Win International. Ever Win's product is available from Amazon for $20 and is allegedly being infringed by similar devices being sold at CVS and other locations.

1. Mr. BD Kidd has sued Home Depot and others for infringing his Patent No. D.646,537 covering a crimping tool that fits in your pocket.

   

• Nebo's No. D.659,869 covers these funky flashlights that are allegedly being infringed.

• Jugs Inc. owns No. D.451,566 that covers a five-position batting practice tee that is allegedly being infringed by Wilson's and others. Wilson's has asked for a declaratory judgment of invalidity alleging that it began using its version of the product (shown in yellow) in 1996, five years before the patent's 2001 priority date.

 .

• Oakley has again asserted its D. 397,350 that covers eyeglass fronts.

• Lulumon has asserted its Design Patent No. D.645,644 against Calvin Klein. Klein immediately caved.

Patent Law Treaties Implementation Act of 2012 becomes Law

By Dennis Crouch

President Barack Obama has now signed-into-law the Patent Law Treaties Implementation Act of 2012, Pub. Law 112-211 (December 19, 2012). The new law contains two titles that provide domestic law required to implement a treaty.

• TITLE I--HAGUE AGREEMENT CONCERNING INTERNATIONAL REGISTRATION OF INDUSTRIAL DESIGNS
• TITLE II--PATENT LAW TREATY (PLT) IMPLEMENTATION

In the grand scheme of patent law, neither treaty is especially substantive. However, the Hague Agreement will likely have a much more substantial impact on the practice of protecting design rights on a global scale. In particular, the Hague Agreement creates a direct connection between US design patent application filing and European (and other) design right registration application and allowing a combined international application. The Hague Agreement implementation has a (likely) one-year effective date and will apply to applications filed after the effective date.

A draft mark-up and commentary can be downloaded here: http://www.patentlyo.com/PLT.pdf

BPAI Backlog and its Hopeful Trajectory

by Dennis Crouch

The PTAB continues to show signs of taking control of its ex parte appeals docket.  The backlog of cases has remained fairly steady for the past nine months.  The hope is that the trajectory will fit to a second-order polynomial with the backlog beginning to decrease substantially over the next two years. More than hope, the PTAB continues to hire more judges to work in Washington DC as well as in Detroit, Dallas, and San Jose. As these judges come online, the Board’s potential throughput will continue to increase. Of course hope can only sustain us for so long.

In re Rosuvastatin Calcium Patent Litigation

By Jason Rantanen

In re Rosuvastatin Calcium Patent Litigation (Fed. Cir. 2012) Download 10-1460
Panel: Newman (author), Plager (concurring), Mayer (dissenting)

This appeal arises in the context of the patent war over rosuvastatin, a multi-billion dollar pharmaceutical product sold by Astrazeneca under the name CRESTOR.  At issue on appeal was the central component of Astrazeneca's protection for rosuvastatin: the composition patent (RE 37,314).  The short version is that Astrazeneca has won for the time being: the Federal Circuit ruled in favor of Astrazeneca on all issues.  However, the composition patent is set to expire in 2016, and Astrazeneca previously failed in its bid to enforce its later-expiring method-of-use patents against the generic manufacturers.

Reissue: The '314 patent is a reissue of Patent No. 5,260,440, whose specification describes rosuvastatin as the preferred embodiment.  During the prosecution of the '440 patent, the prosecuting attorney became aware of two potentially relevant prior art references through an internal search report.  The prosecuting attorney did not disclose the references to the PTO, however (no IDS was filed at all), and when the '440 patent issued the patent contained a broad genus claim that overlapped with one of the references.

Several years after the patent issued, it was discovered during licensing negotiations that no IDS had been filed during prosecution of the '440 application and that the examiner had not cited the two references.  The patent holder initiated reissue proceedings, which ultimately resulted in the patent being limited to the specific compound rosuvastatin and its salts. 

In addition to raising an inequitable conduct argument (which the court rejected on lack of intent grounds), the defendants argued that reissue was improper because there was no error and because there was deceptive intent.  While the AIA removed the statutory requirement that the error providing the basis of the reissue occur "without any deceptive intention," this opinion is significant for its broad interpretation of what constitutes "error" in the context of a reissue, an issue that will have ongoing importance:

Precedent establishes that for reissue purposes “error is established where there is no evidence that the appellant intentionally omitted or abandoned the claimed subject matter.” Ball Corp. v. United States, 729 F.2d 1429, 1435–36 (Fed. Cir. 1984). Here, the district court found as fact that Shionogi erred by failing to file an IDS citing the Sandoz and Bayer references, and by omitting a specific claim to the preferred species. However, the court found no evidence of a deliberate choice to omit or abandon the rosuvastatin species, which was described in the specification as the most effective product. 

Slip Op. at 21.  The court further noted that past precedent supports the practice of narrowing claims through reissue. 

On deceptive intent (which will still be relevant for any reissue proceedings initiated prior to September 16, 2012), the majority held that deceptive intent for reissue purposes applies the same standard as deceptive intent in the inequitable conduct context.

Judge Mayer, writing in dissent, disagreed that reissue was proper.  "A patentee cannot establish correctible "error" under section 251 simply by demonstrating that his original patent contains a defect...Instead, reissue is warranted only where a patentee "supplies...facts indicating how...ignorance," accident, or mistake caused an error in his claims." Dissent at 6-7.  He also expressed concern about the consequences of the majority's broad reading of "error":

The claims of a validly-issued patent serve an important notice function, alerting the public of the metes and bounds of an inventor’s discovery. [] This public notice function will be subverted if the “error” requirement is read out of the reissue statute and patentees are given free reign to rewrite their claims whenever they find it expedient to do so. []

Dissent at 13 (citations omitted).

ANDA Filing by a US Subsidiary "On Behalf Of": One of the generic manufacturers, Apotex, raised a creative theory of noninfringement.  Apotex Corp. is a United States affiliate of the Canadian Company Apotex Inc.  The Abbreviated New Drug Application that triggered the infringement suit was signed and filed by the US affiliate on behalf of the Canadian company.  Given this arrangement, Apotex raised a number of arguments supporting the theory that the US affiliate did not "submit" the ANDA within the meaning of the infringement statute, 35 U.S.C. §271(e)(2)(A), and thus it could not infringe the patent.  (The Canadian company was not a party to the suit).

Judge Newman, writing for the majority, affirmed the district court's rejection of this theory without substantial analysis.  Slip Op. at 31.  Judge Plager's concurrence, however, provides a detailed analysis of why Apotex's arguments fail to preclude liability for infringement.  One key bit: 

More directly, however, in this case Apotex U.S. clearly intends to engage in, and presumably submitted the ANDA for the purpose of, selling the approved drug in the United States. The statute speaks not only in terms of engaging in commercial manufacture, but, disjunctively, in terms of engaging in the drug’s “use or sale.” As an acknowledged sales agent for the primary applicant, Apotex U.S. can be treated as simply having “submit[ted]” an application for an ANDA for the purpose of “engag[ing] in the commercial . . . sale of [the] drug . . . claimed in a patent.”  

Concurrence at 6.

Nonobviousness and No Inequitable Conduct: The Federal Circuit also affirmed the district court's ruling that the '314 patent was nonobvious and that it was not unenforceable due to inequitable conduct.  On obviousness, the defendants used a "lead compound" theory, arguing that a prior art patent publication suggested that a particular compound ("Compound 1b") would be a good "lead compound" for further research and that there was a motivation to modify that compound to arrive at the claimed invention.  The Federal Circuit affirmed the district court's conclusion that the defendants failed to demonstrate that there was a motivation for selecting Compound 1b as a lead compound or making the relevant modification.  It further agreed that the idea that it might be "obvious to try" making and testing this compound was negated by evidence of skepticism in the field. 

On inequitable conduct, the Federal Circuit affirmed the district court's finding of lack of deceptive intent.  It declined to disturb the court's finding that the withheld references were material.

Moving forward with a small claims patent court

The Patents County Court has been deciding "small" patent cases for the past 20 years. Under Hon. Colin Birss, the court now limits claims to £500,000. Larger claims can be brought in the High Court. In the US, all patent infringement cases are heard in Federal District court. And, it ordinarily does not make much sense to file a patent lawsuit when there is less than $1,000,000 at stake.

Over the next year, the USPTO and perhaps other agencies will be holding hearings on whether the US should develop a small claims proceeding for lower-value patent enforcement actions. In a recent release, the USPTO has asked for input on whether this type of enforcement proceeding would have market value and, if created, what parameters should guide its implementation.

Among the information of interest to the USPTO is whether there is a need and desire for this type of proceeding, in what circumstances is this proceeding needed if such a need exists, and what features this proceeding should possess. In particular the USPTO seeks information about core characteristics of a patent small claims proceeding including characteristics such as subject matter jurisdiction, venue, case management, appellate review, available remedies, and conformity with the U.S. constitutional framework (e.g. 7th Amendment).

https://s3.amazonaws.com/public-inspection.federalregister.gov/2012-30483.pdf. Email comments to David.Gerk@uspto.gov by March 18, 2013.

Prior proposals in the 1980's and 1990's received positive treatment from the bar, but failed to garner congressional support.

Something can be both Funny and Improperly Scandalous, even a Federal Circuit Opinion

By Dennis Crouch

In re Fox (Fed. Cir. 2012)

Since 1979, Ms. Fox has been selling rooster-shaped chocolate lollypops. These sell well in my birthplace of Columbia South Carolina - home of the Gamecocks. Naturally, Fox calls her lollypops "Cock Suckers."

The USPTO refused to register her trademark on the phrase – calling it scandalous since the common definition of a cocksucker is someone who performs fellatio. On appeal, the Federal Circuit has affirmed – holding that a double entendre nature of the mark does not cure its vulgarity.

So too the association of COCK SUCKER with a poultry-themed product does not diminish the vulgar meaning—it merely establishes an additional, non-vulgar meaning and a double entendre. This is not a case in which the vulgar meaning of the mark's literal element is so obscure or so faintly evoked that a context that amplifies the non-vulgar meaning will efface the vulgar meaning altogether. Rather, the mark is precisely what Fox intended it to be: a double entendre, meaning both "rooster lollipop" and "one who performs fellatio." . . .

We therefore see no reason why the PTO is required to prove anything more than the existence of a vulgar meaning to a substantial composite of the general public in order to justify its refusal. . . .

We recognize that there are "whimsical" and humorous aspects to Fox's mark. But the fact that something is funny does not mean that it cannot be "scandalous."

Toward the end of the opinion, the court attempted to offer some libertarian condolences to Ms. Fox – writing that

Nothing in this decision precludes Fox from continuing to sell her merchandise under the mark at issue. . . . If Fox is correct that the mark at issue "bring[s] [nothing] more than perhaps a smile to the face of the prospective purchaser," then the market will no doubt reward her ingenuity. But this does not make her mark registrable.

Left unsaid is that, based upon the results of this decision, the market will also copy her ingenuity.

As an aside, the nice thing about the rule against scandalous marks is that you never have to worry about trademark infringement when cursing up a storm.

H.R. 6621 has passed in the House

Yesterday evening, the House of Representatives passed H.R. 6621, titled "To correct and improve certain provisions of the Leahy-Smith America Invents Act and title 35, United States Code." The vote was 308-89. For the bill to become law, the Senate would need to take affirmative action before its December recess.

CLS Bank v. Alice Corp: Software Patentability On the Briefs

by Dennis Crouch

Briefing continues in the CLS Bank software patent case.  The accused infringer (CLS Bank) has filed its brief arguing that the Alice patent lacks any core inventive concept and therefore lacks subject matter eligibility under Section 101 of the Patent Act.  Briefs in support of CLS and those nominally in support of neither party have also been filed.  Alice will file its brief in January and I expect a set of additional briefs in support.  As in the Bilski case, Alice's asserted claim here is one that appears invalid on other grounds -- namely obviousness.  However, the district court ruled on summary judgment (and before claim construction) that the claim was invalid as lacking patent eligiblity under Section 101.

The text of the asserted claim is below:

A method of exchanging obligations as between parties, each party holding a credit record and a debit record with an exchange institution, the credit records and debit records for exchange of predetermined obligations, the method comprising the steps of:

(a) creating a shadow credit record and a shadow debit record for each stakeholder party to be held independently by a supervisory institution from the exchange institutions;

(b) obtaining from each exchange institution a start-of-day balance for each shadow credit record and shadow debit record;

(c) for every transaction resulting in an exchange obligation, the supervisory institution adjusting each respective party's shadow credit record or shadow debit record, allowing only these transactions that do not result in the value of the shadow debit record being less than the value of the shadow credit record at any time, each said adjustment taking place in chronological order; and

(d) at the end-of-day, the supervisory institution instructing ones of the exchange institutions to exchange credits or debits to the credit record and debit record of the respective parties in accordance with the adjustments of the said permitted transactions, the credits and debits being irrevocable, time invariant obligations placed on the exchange institutions.

In its first opinion, the Federal Circuit reversed the lower court ruling - finding that the claim did not merely encompass an abstract idea but instead embodied a practical implementation that fits within the scope of patent eligible subject matter.  In a subsequent en banc order, the court asked that the parties focus on two particular questions of law: 

I. What test should the court adopt to determine whether a computerimplemented invention is a patent ineligible “abstract idea”; and when, if ever, does the presence of a computer in a claim lend patent eligibility to an otherwise patent-ineligible idea?

II. In assessing patent eligibility under 35 U.S.C. § 101 of a computerimplemented invention, should it matter whether the invention is claimed as a method, system, or storage medium; and should such claims at times be considered equivalent for § 101 purposes?

I have attempted to extract some core elements of each brief. I should note that all of these brief have much more nuance than is shown. I attempted to categorize the briefs filed on behalf of neither party. My approach was quite subjective and I am confident that others would have classified them in a different manner. 

Practical keys here are (1) whether subject matter eligibility is about the inventive concept or instead more focused on the scope of a well construed claim; (2) invention

Party Brief:

• File Attachment: CLS En Banc Principal Brief.pdf (1920 KB)     

In Support of CLS (Defendant)

• File Attachment: BSA Software Alliance--ISO CLS.pdf (169 KB) Business Software Aliance believes that software should be patentable, but not the software at issue here. 

  "Simple economics makes clear that, if patent protection for software were curtailed, the adverse consequences would be swift and severe. . . . Two factors are of particular significance—whether a claim can be implemented solely via a mental process or necessarily relies upon a machine for execution; and whether the claim uses an abstract idea or law of nature in a way that is novel, useful, and limited. When an invention falls short under both of these standards, it most likey is not patentable under Section 101. . . . Assessed under this framework, the software at issue here is not patentable. . . . It is plain that credit intermediation long preexisted computer implementation, and that it is a process that can be performed in the human mind, or by a human with pencil and paper. In addition, the computer aspect of the claims here does not add anything of substance to the mental process at issue. The computer implementation of the abstract idea is not limited in any fashion. And there is no suggestion that the process here is in anyway dependent upon computer technology to accomplish the directed end."

• Download EFF--ISO CLS Patents are causing more harm than benefit. This is especially true for software patents that regularly include broad functional claims. However, Section 101 analysis is problematic because of its ambiguity. The EFF brief argues that the way to cure this is to more broadly interpret 35 U.S.C. § 112(f) (2012) so that functional software claims be given limited scope under the Federal Circuit's Means-Plus-Function doctrine. This approach stems from a recent article by Mark Lemley and fits directly within the avoidance doctrine that Professor Merges and I suggested in our 2010 article.
• File Attachment: CCIA--ISO CLS.pdf (200 KB) Prometheus requires an inventive concept to pass 101.
• File Attachment: Clearing House Ass'n--ISO CLS.pdf (819 KB)  Banking industry brief argues that "threshold" language means that "the Section 101 inquiry is the first step in the legal framework to determine patentability" and should be rigorously enforced.  
• File Attachment: Google et al.--ISO CLS.pdf (982 KB).  Google acknowledges the difficulty with the abstract idea test because the term "abstract" is so difficult to define.  However, Google argues that the abstract ideas are much easier to identify individually than to define generally. This is roughly the same as know-it-when-you-see-it test for obscinity.  Google also writes that "abstract patents are a plague on the high-tech sector."
• File Attachment: Stites Amicus Brief.pdf (262 KB) "The software patent game is a less than a zero sum game for the participants and has a large inhibiting effect on software innovation." Stites argues that the court should simply eliminate software patents.

 In Support of Neither Party, but Promoting a Stronger § 101 Requirement

• File Attachment: British Airways et al--ISO Neither Party.pdf (191 KB) Supreme Court has rejected the "course-filter" "manifestly-evident" approach offered by the original CLS panel. Whether a claim fails under Section 101 can ordinarily be determined very early in a case and without and detailed claim construction.
• File Attachment: Profs Hollaar & Trzyna--ISO Neither Party.pdf (217 KB) The only way to draw a clear and reasonable line on subject matter eligibility is to focus on its link to technology.
• File Attachment: Juhasz Law Firm--ISO Neither Party.pdf (285 KB) "The test to determine whether a computer-implemented invention is a patent ineligible "abstract idea" should be whether steps that are central to the claim (i.e., not token extra-solution activity) have a "physical" or "virtual" link to a specific real or tangible object."
• File Attachment: Koninklijke Philips--ISO Neither Party.pdf (549 KB) An applicant and patentee should have the burden of proving that the claimed software implementation is subject matter eligible.
• File Attachment: Internet Retailers--ISO Neither Party.pdf (2454 KB) Simply rewriting a method claim as a system or storage medium cannot render the claim subject matter eligible. The Federal Circuit should empower district courts to make 101 determinations very early in cases – well before claim construction or the completion of discovery. "The savings to the parties in money and the courts in time are self-evident. And those savings are more likely to be obtained in precisely those cases in which the patents are least likely to be valid or valuable, cases brought under low-quality patents. Judicious application of Section 101 is likely to winnow out the worst patents at the lowest cost."

In Support of Neither Party, but Promoting a Weaker § 101 Requirement

• File Attachment: IP Owners Ass'n--ISO Neither Party.pdf (301 KB) Software is generally patentable under Section 101. However, a claim "must describe the use of [a] computer with sufficient detail to avoid preempting other uses of the idea and the computer implementation must be a meaningful and significant element of the invention." A detailed claim construction is ordinarily necessary to determine whether that claim is directed to statutory subject matter.
• File Attachment: CLS-Bank_v_Alice_USA-amicus-ISO-Neither-Party.pdf (311 KB) See this.
• File Attachment: Sigram Schindler--ISO Neither Party.pdf (474 KB) The abstract idea test is sufficiently defined.
• File Attachment: NY IP Law Ass'n--ISO Neither Party.pdf (735 KB) Efforts in some decisions to dissect the claim into old and new parts or computer and non-computer elements, should be rejected as squarely inconsistent with the Supreme Court's holdings in Diamond v. Diehr, 450 U.S. 175 (1981), and Bilski. "NYIPLA does not agree that method, system and storage medium claims should ipso facto rise and fall together. Rather, each claim (regardless of its type) should be considered independently as a whole to determine whether it is directed to patent-eligible subject matter."
• File Attachment: IP Law Ass'n of Chicago--ISO Neither Party.pdf (1024 KB) Subject matter eligibility should be broad and flexible. IPLAC's test is similar to the government's factor's in its brief. However, the tone of the IPLAC questions suggest broader eligibility. When a claim includes a computer program, IPLAC would ask: "(a) Are the claims drawn to subject matter otherwise statutory, because if so, they do not become nonstatutory simply because they use a mathematical formula, computer program or digital computer. Diehr. (b) Are process claims, as a whole, without regard to the novelty of any element or steps, or even of the process itself, nothing more than a statutory process and not an attempt to patent a mathematical formula, because if so, they are not nonstatutory. (c) Do the claims implement or apply a formula in a structure or process which, when considered as a whole, is performing a function which the patent laws were designed to protect (e.g., transforming or reducing an article to a different state or thing), because if so, the claims are statutory. (d) Do the claims apply the laws to a new and useful end, because if so, they are statutory."
• File Attachment: Conejo-Valley-Bar-Assn--ISO-Neither-Party.pdf (1589 KB) There is no need for a strong section 101 eligibility requirement because the other sections of the patent act do the work already.
• File Attachment: IBM--ISO Neither Party.pdf (1624 KB) "In the exceptional case when the patent eligibility of a computer implemented invention is not readily apparent, the functional requirement of a computer counsels in favor of patent eligibility." Methods are different from systems and are different from storage media. As such, the subject matter eligibility issues are also different and thus, a system claim might be patent eligible while its parallel method claim may be ineligible.

H.R. 6621 Hits a Temporary Snag

Rep. Lamar Smith pushed for a voice vote today for H.R. 6621. However quick passage was thwarted by the Orange County Republican Dana Rohrabacher. Rohrabacher's concern regards revised section (m) of the Bill that would require the USPTO to provide a report to Congress of pre-URAA cases that are still pending at the USPTO (i.e., patent applications filed prior to June 8, 1995 that are still pending at the USPTO). The particular concern is that the report would publicly identify the names of the inventors concerned and thus be contrary to the law requiring information regarding those applications be kept secret until patent issuance. It is unclear whether Smith will push for a roll call vote later this week or instead again amend the bill to mollify Rohrabacher's concern.

CAFC Obviousness Decision Trends and KSR

By Jason Rantanen

Following up on Dennis's post earlier this morning, below I've provided a few charts showing the Federal Circuit's practice of citing KSR in its obviousness opinions.  The data comes from a study of the court's post-KSR obviousness jurisprudence that I'm currently writing up; as a result, it only runs through April 30, 2012.  The pattern is noticibly different from that of the BPAI/PTAB data that Dennis provided, both for all opinions involving obviousness and for just those arising from the PTO. 

The first chart shows the rate at which the Federal Circuit cited KSR at least once in an opinion addressing obviousness.  The rate at which the court cited KSR actually climbed a bit in 2011. 

The next chart is a moving (lagged) average, which means that each point represents the average rate that the Federal Circuit cited KSR over the 20 preceding opinions.  For example, the first point represents the average rate at which the Federal Circuit KSR in opinions 1-20 following KSR, the second point opinions 2-21, etc. The first data point thus corresponds with the Federal Circuit's 20th opinion on obviousness after KSR while the last data points corresponds with the Federal Circuit's 155th opinion after KSR.

The last chart follows the same format as the first chart, limited to appeals arising from the PTO.

BPAI/PTAB Obviousness Decision Trends

The vast majority of BPAI/PTAB decisions focus on the question of obviousness. Basically, the Board is reviewing whether or not an examiner's obviousness rejection is proper. I created the chart above by using a simple text search for obviousness related terms within each BPAI/PTAB merits decision during the past six years and found that roughly 80-85% of Board decisions discuss obviousness to some degree. I previously tested this methodology against an actual reading of cases and found that my automated methodology correlates quite well. The results for the percentage of obviousness decisions are in blue. A subset of those cases are found in red and represent the percentage of Board merits decisions that cite to the Supreme Court's decision in KSR Int'l Co. v. Teleflex, Inc., 550 U.S. 398 (2007). That decision was important because it changed the law of obviousness as applied by the USPTO.

Apparent from the chart is the fact that the BPAI/PTAB is citing KSR much less frequently in 2012 than it did in 2008-2009. My hypothesis is that a smaller percentage of applicants are fighting about the law of obviousness and more are now focused on application of that law. Mixed into this is the reality that the Board is also writing shorter opinions -- leaving less room for pesky citations.

Apple v. Samsung: Court Denies Permanent Injunction and Allows Samsung to Continue Selling Infringing Devices

By Dennis Crouch

File Attachment: Apple_Samsung_Injunction_Denied.pdf (145 KB).

If the Apple-Samsung patent infringement lawsuit had been litigated back in 2005, the parties would have likely settled by now. Ebay changed that calculus and now an adjudged infringer such as Samsung can afford to push cases and appeals further because there is little downside risk that a US court will actually force the company to stop distributing its well known and respected products.

In an order on December 17, 2012, Judge Koh denied Apple's motion for permanent injunctive relief to stop Samsung from continuing to infringe Apple's patents and trade-dress. Thus, Apple must be satisfied with the payment of money damages. Although major, the ruling is not unexpected since based both on the law (eBay) and the fact that the court previously denied Apple's motion for preliminary injunctive relief based upon Apple's failure to prove irreparable harm.

In order to be eligible for injunctive relief the prevailing party must show that it will suffer irreparable absent an injunction. A key to current irreparable harm doctrine is proof of the nexus between the infringement and the irreparable harm. I.e., that infringement of the particular features or designs protected by the patent right (as opposed to some other factor) will cause the loss of market share. Unlike infringement and damages, the issues associated with injunctive relief are all seen as equitable issues and therefore decided by the judge rather than a lay jury.

Here, Apple alleged three irreparable injuries: "(1) loss of market share; (2) loss of downstream and future sales; and (3) injury to Apple's ecosystem." The court found apple had proven injury, but apple failed to prove the causal nexus between the particular adjudged infringing acts and the irreparable harm. As it turned out, Apple did not even present an analysis of alleged harm on a claim-by-claim or even a patent-by-patent basis. In considering this, the court found that Apple's had not proven that any of "its three [infringed] design patents covers a particular feature that actually drives consumer demand." The same problem existed with the utility patent that was found infringed. Rather Apple's proof was "simply too general."

Many factors go into making a product easy to use, but the features for which Apple is asserting patent protection are very specific. A consumer may want a phone that is easy to use, but this does not establish that a tap-to-zoom feature, for example, or any given type of gesture, is a driver of consumer demand. Thus, Apple's evidence of a survey showing the importance of ease of use as a general matter, PX 146.6, does not establish that infringement of any of Apple's patents caused any harm that Apple has experienced. To establish the required nexus, Apple must make a showing specific to each patented feature. This, Apple has not done.

Without establishing a causal nexus between the proven harm and the proven infringement there is no room for justifying injunctive relief. Therefore Judge Koh denied relief. Apple has an immediate right to appeal this decision to the Federal Circuit even as the district court continues to decide additional post-verdict motions. To be clear, this is a major win for Samsung, but Apple still has a right to appeal and is sitting on a $1 billion verdict.

The court has also released its reasoning for denying the Samsung motion for new trial based upon juror bias.  The motion was based primarily on interviews given by the jury foreman (Velvin Hogan) after the verdict.  Samsung alleged that Hogan was biased and had lied during voir dire.  File Attachment: Apple_Samsung_New_Trial_Denied.pdf (130 KB).

Patenting Software: Obama Administration Argues “Sometimes”

By Dennis Crouch

CLS Bank Int'l v. Alice Corp (Fed. Cir. 2012)

The US Government has filed its amicus brief in the pending en banc CLS Bank case that focuses on the patentability of software systems. Download CLS-Bank_v_Alice_USA-amicus-ISO-Neither-Party. The brief generally rejects the idea that software per se represents patentable subject matter but is favorable toward the patenting of computerized applications that either improve computer performance, use technology in a unique technological way, or transform the local environment.

Unlike some recent briefs, this has been filed with the support of both the USPTO and the DOJ. The brief suggests a claim-by-claim subject matter analysis that begins with claim construction and only then asks "whether the challenged claim, properly construed, incorporates enough meaningful limitations to ensure that it amounts to more than a claim for the abstract idea itself." The brief then lists a set of factors that the government sees as important in making that determination:

• Is the computer only nominally or tangentially related to the performance of the invention?
• Is the computer generically recited or, instead are specific, unconventional computer equipment or tools required?
• Is the invention focused primarily on non-technological fields or does the invention improve the ability of a computer to function as a computer?
• Is the computer used generically for its automation or communication functions or does the computer manipulate particular data in particular, specific, and useful ways?
• Is the abstract idea merely described within a particular environment or is the abstract idea part of an invention that transforms its environment.
• Are the computer related elements merely conventional steps described at a high level of generality in a way that would be employed by anyone wanting to apply the abstract idea.

Each of these determinations is riddled with problems as is the potential weighting in an overall abstract-idea analysis. However, the overall approach adds substantially to the the

The brief suggests that all claimed features can contribute to subject matter eligibility, but some caution should be used to not allow "mere 'drafting effort designed to monopolize [an abstract idea] itself'" (quoting Mayo). Regarding the product/process divide, the government writes that the form of the claim should not impact subject matter eligibility because those differences come from the "draftsman's art" rather than the invention itself.

Perhaps attempting to endear itself to the Federal Circuit, the brief implicitly criticizes Supreme Court patent decisions by arguing that "the §101 inquiry should focus on the actual language of each challenged claim, properly construed, not a paraphrase or parody of the claims. Unfortunately, the government does not have any Supreme Court precedent to back-up this argument.

As a final point, the government brief argues that the presumption of validity associated with patent rights lead to a conclusion that a patent can only be invalidated on subject matter eligibility grounds based upon "clear and convincing evidence." Reading between the lines, this seems to mean that any conclusions draw from the factors above must be proven with clear and convincing evidence. While §101 eligibility may be a question of law, the government additionally argues that it is a factual question as to whether "limitations recited in a claim do not, in practice, impose any meaningful limitations on their claim scope." Of course, prior to issuance or during post-grant review there is no presumption of validity.

Related articles

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

Director Kappos: Some Thoughts on Patentability

Federal Circuit To Announce Whether Software is Patentable?: En Banc Rehearing on Section 101 Issues

Ultramercial v. Hulu: Computer Programs and Patentable Subject Matter

Federal Circuit Continues Split on Patentable Subject Matter

Ongoing Debate: Is Software Patentable?

Patentable Subject Matter: Supreme Court Challenges Chief Judge Rader's Broad Notion of Software Patentability

CLS Bank v. Alice Corp: Patenting Software Ideas

Ongoing Battles over Patentable Subject Matter

AIA Technical Amendment (H.R. 6621) Moving Forward

By Dennis Crouch

Representative Lamar Smith has put forward an amended version of H.R. 6621 (http://docs.house.gov/billsthisweek/20121217/BILLS-112hr6621-SUS.pdf). The amended bill removes the provision that would have crippled the value of pending pre-Uruguay Round Agreement Act (URAA). In my estimation about 200 of those applications filed prior to June 8, 1995 are still in prosecution at the USPTO. That change makes the bill less controversial and sets up easy passage in the House leadership has set the bill up for a voice vote this week, perhaps as early as Tuesday, December 18. At this point no opposition to the bill has been raised in Congress. To become law, the Senate would need to pass the bill before its December recess.

Important changes include the following:

Less Patent Term Adjustment: The current language of Section 154(b) suggests an applicant may begin accumulating PTA as of the filing date of an international PCT application that is later followed by a US national stage application. The proposed amendment would eliminate that option by clarifying that the PTA calculations only begin "commencement of the national stage under section 371 in an international application." The change also provides that the PTO calculate PTA with the issuance rather than at the notice of allowance. This is obviously problematic for some because it blocks patentees from clearing-up PTA issues prior to patent issuance. See 35 U.S.C. 154(b)(3)(C). This also effectively limits the timing for administratively challenging PTA determinations to a two-month period. In my first read through of the Bill, I failed to recognize that the amendment would require an administrative challenge prior to filing a district court challenge. Thus, the two-month-from-issuance deadline becomes a fairly hard deadline for correcting PTA. The statute does not clarify what happens if the USPTO fails to decide the PTA challenge prior to the six-month deadline for filing a district court case. Courtenay Brinkerhoff has a nice post criticizing the provision here: http://www.pharmapatentsblog.com/2012/12/11/hr-6621-adds-new-roadblocks-to-patent-term-adjustment-appeals/.

Post-Grant Dead Zone: Once the AIA is fully implemented, an issued patent will be immediately challengeable through a post-grant review. Then, after a nine-month window, challenges will be available through inter partes review. However, the AIA has bit of an implementation issued because (1) post-grant reviews will only be available for patents issued on applications filed on or after March 16, 2013; (2) inter partes reviews are available for all patents, but only those that have been issued for at least 9-months; and (3) the old inter partes reexaminations are no longer available. This creates something of a dead zone in that for the next couple of years patents will not be challengeable through any inter partes system until 9-months after issuance. H.R. 6621 would eliminate that 9-month dead zone by allowing inter partes reviews to be filed at any time for applications with an effective filing date before March 16, 2013.

Delaying Inventor's Oath: Section 115(f) of the AIA indicates that an either (1) an oath, (2) a substitute statement, or (3) sufficient assignment must be submitted prior to the notice of allowance of a patent application. The amendment would push that deadline back to be "no later than the date on which the issue fee for the patent is paid."

Sharing Fees Between the Patent and Trademark Side: The AIA requires that, for the most part, fees collected on patents be used to cover "administrative costs of the Office relating to patents" while fees collected on the trademark side be used to cover "administrative costs of the Office relating to trademarks." H.R. 6621 would eliminate that restriction and thus allow patent fees to pay for trademark operations and vice versa.

Derivation Proceedings: The AIA eliminated the ongoing viability of interference proceedings (although some will be pending for years) but created a new beast known as a derivation proceeding. H.R. 6621 would clean up the language for initiated a derivation proceeding under 35 U.S.C. §135(a). I need to think some about the language to understand the substance. I have created a rough mark-up of this language. (http://www.patentlyo.com/CompareNewOldDerivation.docx).

Smith on Design Patents

By Dennis Crouch

When I began writing Patently-O in 2004, design patents were largely thought of as akin to a pre-ball Cinderella: In rags, forlorn, and quite pitiful. Things have changed.  Design patents are more valuable than ever and their trajectory continues to rise.

Matthew A. Smith (Foley) recently put together a short treatise on design patents (short for a treatise) and offered to publish Version 0.9 here as a preliminary draft for commentary. Coverage in the 82 page volume includes general background on the laws of design patents; design patent application preparation and prosecution; design patent enforcement; tests of design patent validity; and design patent remedies.  As per his usual, Smith's approach is to provide straightforward analysis in practical terms and with direct reference to the underlying sources of law.

Read it while its hot: Matthew A. Smith, Design Patents, Ed. 0.9 (Prelim. Draft) (Dec. 17 2012).  http://www.patentlyo.com/2012-12-17_design_patents.pdf [Updated]

Judicial Network of the Patent Trial and Appeals Board (PTAB)

by Dennis Crouch

Here is an image from a project that I'm working on with PTAB/BPAI decisions.  Each node (circle) represents one of the 160 or so PTAB judges that have participated in an ex parte patent appeal since January 2010.  These are cases where a patent examiner has twice rejected a patent application and the applicant then asks for appellate review. 

Node size varies according to the number of cases decided during the past three years.  For the most part, smaller nodes represent newer judges. Connections between judges are created each time two judges sit on the same panel.  I have also color-coded the judges according to their primary technology area.  Thus, judges coded as red judge mostly cases from Technology Center 2100 (Computer Architecture, Software, and Information Security) while judges coded as orange mostly hear cases from Technology Center 1600 (Biotechnology and Organic Chemistry). (Tech Centers).  There is extensive overlap between Tech Centers 2400, 2600, and 2800 and so I grouped those together and colored them green.  Judges coded yellow had no discernable primary technology area. 

As may be discernable from the chart, judges are much more likely to be empanelled with others in the same technology area.  Mechanical engineers are especially separate and, for the most part, TC1600 judges only interact with themselves and TC1700 judges.*  The result here is that, in the usual case, all three judges on a panel have the same technology focus. 

Now, back in 2009 there were only about 80 judges on the entire board. That made technological specialization difficult. Since then the PTAB has doubled in size and is expected to continue to rapidly grow over the next year. One question that the USPTO will need to address is whether to double-down on technological specizlization or instead to take measures that ensure that the judges have a broader spectrum of experiences.  The answer may well depend upon whether the appeals brought to the PTAB are more due to (alleged) (1) examiner errors in understanding the technology at issue or (2) examiner errors in understanding how to apply the law of patents.  Those questions are ones that we'll save for another post.  

Related articles

PTAB Backlog: Over the Hump!

Pending Appeals Not Impacted by BPAI->PTAB Transformation

P-T-A-B: Patent Trial and Appeal Board

Kappos: PTAB Has Authority to Challenge Section 101 issues

Two recent 101 Cases at the PTAB

Structuring a Privateering Contract

By Dennis Crouch 

The world of patent deals and monetization schemes are difficult to report on because the details of most deals (and often all aspects of the deals) are kept secretly buried under binding confidentiality clauses. Patrick Anderson recently wrote about US Patent 6,081,835 and its unique ownership setup. The information on the patent ownership is now public through an interesting decision by Judge Ellis.   Download SuffolkTech.EllisDecision. The patent is being asserted by Suffolk Tech against Google, and Google challenged Suffolk's standing to sue - claiming that the company did not hold complete rights to the patent. With that defense in mind, Judge Ellis explored the ownership structure.

It turns out that the patent was originally owned by British Telecom based upon an underlying UK invention. BT transferred its ownership interest to IPValue who immediately transferred rights to Suffolk Tech as part of the deal. It was already known that IPValue is a joint venture of Goldman Sachs, General Atlantic Partners and Boston Consulting Group.

In the invest-to-sue market, patent buyers rarely pay cash. Rather, in these deals the majority of compensation to the seller is at the back-end -- after the purchaser has successfully licensed the patent rights. In this case, BT sold the patent (transferring title), but and received as compensation a contract right to "50% of the Adjusted Gross Proceeds derived from exploitation of the '835 Patent" with the additional caveat that IPValue's sale of the patent (other than to Suffolk) within one-year of the BT-IPValue deal would result in 90% of the proceeds going to BT. The contract also includes restrictions on fees to contingency counsel; a $10 buy-back clause if IPValue fails to bring in sufficient revenue; and a non-exclusive license-back to BT.

On the standing point, Judge Ellis found that the deal left Suffolk Tech with title, core rights to practice and enforce the patent, and "all other substantial rights" in the patent. "As a result of the assignments, BT retained only a non-exclusive license to practice the patent and the right to share in revenue from the exploitation of the patent." As such, Suffolk Tech can properly assert the patent without joining BT or IPValue as co-plaintiffs.

Joff Wild at iam has some interesting thoughts on the case as well:

It turns out that BT has decided that it does not want to get its hands dirty directly, so like countless others before it (including [Intellectual Ventures]) it has turned to a third party to do the heavy lifting. That is what the privateer model is all about. It is being used, in one way or another, increasingly frequently by operating companies in the US, which for whatever reason decide they would prefer not to become involved in patent monetisation programmes that may involve aggressive assertion. NPEs that I can think of off the top of my head which have had close relationships with operating companies at some time or another include: Rockstar, RoundRock, Acacia, MOSAID, Intellectual Ventures, Sisvel and IPCom. No doubt readers of this blog can think of many more. From where I sit it is a perfectly legitimate activity, aimed as it is at maximising the value of key corporate assets – which is exactly what companies are supposed to do. At least some, however, are a little coy about their arrangements; while it is becoming increasingly clear that US antitrust authorities, and perhaps those in Europe too, are going to take a much closer look at the whole privateer model.

The last line of Joff's statement will continue to raise interest in upcoming years.

USPTO Financial Tidbits

by Dennis Crouch

The USPTO's Chief Financial Officer Tony Scardino provided a few interesting bits of information in his PPAC presentation:

• Final fee rules are expected to be finalized and implemented at least by April 1.
• PTO's estimated budget is $2.5 billion, but current revenue is below that target.
• Sequestration beyond the fiscal cliff would potentially cut $240 million from the budget. [Corrected]

http://www.uspto.gov/about/advisory/ppac/121312-05-ocfo-update.pdf

  

Federal Circuit Rejects Due Process Challenge to AIA on False Marking Retroactivity

By Dennis Crouch

Ken Brooks v. Dunlap and US Government (Fed. Cir. 2012)

As expected, the Federal Circuit has rejected Brooks' argument that the Leahy-Smith AIA's retroactive elimination of his false-marking cause-of-action was unconstitutional. Brooks is a patent attorney operating out of northern California. He has no apparent relation with Dunlap other than his discovery that Dunlap's guitar string winders were (allegedly) falsely marked with patent numbers that had expired and invalidated. Under the pre-AIA law, "any person" had standing to bring suit for false marking and collect 1/2 of any resulting fine (with the US government receiving the other half). 35 U.S.C. § 292 (2010). In response to a rash of several hundred false-marking claims, section 292 was amended to restrict private standing to only persons "who has suffered a competitive injury as a result of a [false marking] violation." 35 U.S.C. § 292 (2012).

Brooks filed his lawsuit in September 2010 - one year before the AIA was enacted. However, the AIA includes a retroactivity clause stating that "[t]hese amendments . . . shall apply to all cases, without exception, that are pending on, or commenced on or after, the date of the enactment of this Act." Based upon that change, the district court dismissed the case for lack of standing.

On appeal, Brooks offered a due process challenge -- arguing that the Due Process Clause of the U.S. Constitution bars Congress from applying the AIA's amendments to § 292 to pending qui tam actions. In general, there is no rule against changing the legal regime in a way that adversely affects particular parties who have conformed their actions to benefit from the prior rules. If the change constitutes a Fifth Amendment Takings then the government must provide compensation. And, the legal change would very likely be an improper ex post facto law if it criminalized past actions as felonies. Apart from these exceptions, a retroactive change in the law will be enforced so long as it passes the very low standard of rational basis review. As the Supreme Court wrote in 1984, the "burden is met simply by showing that the retroactive application of the legislation is itself justified by a rational legislative purpose." Pension Benefit Guar. Corp. v. R.A. Gray & Co., 467 U.S. 717 (1984).

In considering the Congressional record, the Federal Circuit easily found a rational basis for the retroactive nature of the law, including eliminating "the perceived abuses and inefficiencies stemming from false marking claims that were initiated before the AIA was signed into law" and avoiding "a live question about the constitutionality of the then-existing qui tam provision."

At bottom, Congress made a considered choice to modify the private cause of action in § 292(b) and apply that modification to pending as well as future cases. Given Congress's legitimate concerns with respect to the cost and constitutionality of pending qui tam actions, we conclude that the retroactive application of amended § 292 to pending actions was a rational means of pursuing a legitimate legislative purpose.

Dismissal affirmed.

Coming Soon: A European Unified Patent Court (UPC) and Unified Patents

By Dennis Crouch

Europe has taken another major step toward actualizing a Unified Patent Court that intends to offer greater consistency in proceedings and judgments across the 25 participating member states. The new system passed by the European Parliament additionally creates an enforceable Unified Patent (European Patent) instead of requiring patent registration in each country. Risk-averse patentees will want to continue to obtain national rights in at least a handful of countries. However, for any given application, the Unified Patent appears to be an exclusive-alternative. Before it can become effective, least 13 EU member states need to ratify the package (including the big-three of UK, Germany, and France). The current forecast is that the first Unified Patent will be issued in 2014.

The setup for the Unified Patent itself appears straightforward. When the EPO grants a patent today, the owner really has a set of individual national patent rights that must be validated at the national level (with the payment of additional fees and translation costs). Under the new system, the patent right granted by the EPO will be enforceable via the court system described below without the national validation step. This approach saves the local fees and also translation costs. Under the rules, the patent must be filed in the English, German, or French language. No other translations of the application materials will be required. Spain and Italy could not suffer the language offense and will likely opt-out of the system. The EPO will set renewal fees with a discount for small entities.

In the agreed-upon enforcement system, a set of designated specialized trial courts in Paris, London, and Munich and potentially other locales will have exclusive jurisdiction over the enforcement of Unified Patents. It appears that an ordinary trial will be overseen by a tribunal of judges and have a "multinational composition." Judges will either be legally qualified (with patent litigation experience) or technically qualified. Those courts will have power to determine infringement as well as unenforceability. A specialized tribunal sited in Luxembourg will hear appeals and the Court of Justice of the European Union (CJEU) would remain the top court. The national courts will still be available to enforce national patents for a transitional period. After that, however, the UPC will apparently also be the sole judge of national rights.

This is a quite interesting development, but it is clear that European patent law will continue to be a mess for many years to come.

Related articles

The unitary patent

A new highest patent court for Europe? Not as long as the Court of Justice of the EU is here

It Took 30 Years, but the EU Finally Agreed to a Unified Patent System

The Proposed Unified Patent Court for Europe: conditio sine qua non for a Unitary Patent or unavailing venture into the unknown?

Europe Achieves Historic Agreement on Unitary Patent

'Troll' warning as EU gets unitary patent scheme, after decades of failure

Mark-Up and Commentary on the Patent Law Treaties Implementation Act of 2012

By Dennis Crouch

I have posted a draft Mark-Up and Commentary on the Patent Law Treaties Implementation Act of 2012.

Download it here: patentlyo.com/PLT.pdf.

At this point, the mark-up is very much a draft. I will release a more final version once the bill is enacted. President Obama is expected to sign the bill into law at least by December 21, 2012.

The following is my introduction to the document:

* * * * *

On December ___, 2012, President Obama enacted the Patent Law Treaties Implementation Act of 2012, Public Law No 112-___ (S. 3486).

The new law is designed to implement two patent law treaties:

(1) The Geneva Act of the Hague Agreement Concerning the International Registration of Industrial Designs adopted at Geneva on July 2, 1999 ("Hague Agreement") and

(2) The Patent Law Treaty ("PLT").

Both treaties were ratified by the Senate without opposition in 2006, and both are intended to simplify the formal obligations and reduce costs for American rights-holders when seeking patent protection outside the United States. A corollary result is that that treaty implementation also eases the obligations of foreign rights-holders when seeking patent protection within the United States.

The Hague Agreement

Implementation of the Hague Agreement creates an international design application that can serve as the basis for filing industrial design applications in countries around the world. The new provisions are codified in ten new sections of the Patent Act and a handful of amendments within the statute. See 35 U.S.C. §§ 381 – 390. In addition to the added statutory language, the USPTO is also required to "perform all acts connected with the discharge of its duties under the treaty." 35 U.S.C. 382. One such obligation is to forward any international application to the International Bureau of WIPO who would then publish the application. Currently, most international design applications are filed directly with WIPO. However, it seems that the US structure will likely encourage applicants to file the international application in the US first.

The international design application is roughly the design parallel to the international utility patent application known as the PCT application. This should significantly reduce the cost of obtaining design protection in additional countries. Although the Hague Agreement is an important step, global industrial design laws vary widely. The next relatively small step toward harmonization would be to rationalize the various rules and laws regarding drawings in design patent applications. Drawings are especially important for design rights because those drawings typically define the scope of rights being claimed. At this point, harmonization on this front does not necessarily require further negotiations within the Hague Agreement but could instead be accomplished through bilateral and multilateral agreement between the various offices administering the design rights.

For domestic applicants, the new law extends the term of design patents by an extra year to 15-years as calculated from the design patent's date of issuance. In the US, no maintenance fees are due and so design patents tend to remain in force for their entire 15-years unless subject to any terminal disclaimers.

International design patent applications are published soon after filing. However, an applicant can delay the publication for up to 30-months. Upon publication, those design applications will be considered prior art as of the application filing date. The publication will also create the prospect of provisional rights under 35 U.S.C. 154(d)(1) to allow a patentee to collect back-damages against unauthorized pre-issuance usage of the design by someone with actual knowledge of the pending application. For several reasons, provisional rights been only marginally useful for utility patent holders. However, there is some expectation that provisional rights will be more useful for design patent holders because (1) the patents more often cover products released on the market during the application period; (2) design inventions are more often copied but those copies easier to identify; and (3) design patents are more rarely amended during prosecution.

Patent Law Treaty

The Patent Law Treaty is a procedural treaty that is designed to limit formal and procedural requirements that countries can place on patent applicants and patentees. The Patent Law Treaty also provides a particular filing date standard.

The key change is that a utility application will now be given a filing date even if filed without claims. 35 U.S.C. 111. The quasi-requirement of drawings is also removed from the filing date requirement. Thus, the filing date requirement will now read as follows: "The filing date of an application shall be the date on which a specification, with or without claims, is received in the United States Patent and Trademark Office." Id. Some applicants will rely upon this change to reduce the immediate transaction costs of moving from a provisional application filed without claims to a non-provisional application that previously required claims.

Purpose

This volume is intended to serve as helpful tool in understanding implementation of the new provisions of the law and should be especially helpful for those wanting to understand how the law has changed.

Patents for Humanity

Senators Leahy and Coons have introduced the Patents for Humanity Program Improvement Act of 2012 (S. 3652). The bill is relatively minor and will be an uncontroversial extension of the Humanitarian Awards Pilot Program created by the Patent Office earlier in 2012.

A bit of background, the Patents for Humanity program is an incentive program intended to encourage the use of patented technologies to help alleviate poverty and suffering. The incentive is a bit like the (perhaps outgoing) charitable donation tax break. However, instead of offering a direct monetary reward the PTO has offered an accelerated examination certificate. According to the implementation rules, the certificate can be used to accelerate either an ex parte reexamination proceeding (including an appeal to the Board) or else an appeal to the Board (PTAB) in an ordinary application or reissue. A group of designated experts will soon be selecting the first group of up to 50 winners.

It is a bit unclear what this acceleration certificate is worth, but at least several thousand dollars and perhaps more – especially for someone going through ex parte reexamination or reissue. However, there is no guarantee that the winner will have a need to use the certificate.

The legislation provides a mechanism for an award winner to turn the accelerated examination award into cash. In particular, statutory provision states that "A holder of an acceleration certificate issued pursuant to the Patents for Humanity Program … or any successor thereto … may transfer (including by sale) the entitlement to such acceleration certificate to another person."

Regarding the Bill, Director Kappos writes: "If the bill is enacted, recipients of a Patents for Humanity award could sell their certificate on the open market, turning their good deeds into operating capital."

In a press release associated with the Bill, Senator Leahy writes:

Following a Judiciary Committee hearing in June, I asked Director Kappos whether the program would be more effective, and more attractive to patent owners, if the acceleration certificate were transferable to a third party. He responded that it would, particularly for small businesses. The Patents for Humanity Program Improvement Act of 2012 simply makes these acceleration certificates transferable.

Director Kappos described the Patents for Humanity Program as one that provides business incentives for humanitarian endeavors. All Senators should support both the approach and the objective.

This bill is uncontroversial and has a strong likelihood of passage as long as Senator Leahy pushes it forward and Representative Lamar Smith agrees with its importance.

Two events on Monday, December 10.

Two important events on Monday, December 10, 2012

• FTC and DOJ will hold a workshop on patent assertion entities (PAEs) – also known as "patent trolls." http://www.ftc.gov/opp/workshops/pae/agenda.pdf. The agencies are considering ways that additional regulation and/or antitrust enforcement could be used to control negative effectives of patent assertion. This conference also highlights the renewed focus on patents outside of the USPTO. (Free Webcast Available)
• Also in DC, the IPO is hosting its annual conference on USPTO law and practice. I will be speaking on a design patent panel that will include a discussion of the role of the new Hague agreement and also changes in design patent practice highlighted by the Smartphone wars. http://www.ipoef.org/AM/Template.cfm?Section=Calendar1&ContentID=32154&Template=/CM/HTMLDisplay.cfm.

See you in DC.

Reissue Cannot Be Used to Remove Terminal Disclaimer

In re Yamazaki (Fed. Cir. 2012)

Yamazaki filed a terminal disclaimer back in 1996 linking his future Patent No. 6,180,991 to his prior Patent No. 4,581,476. However, after a substantial amendment in the case, Yamazaki filed a petition request to withdraw the terminal disclaimer. As the petitions office has been historically known to do, it took no action on the petition for some time. Meanwhile, the examiner allowed the case, Yamazaki paid the issue fee, and the '991 patent issued in 2001. Since the petition was never decided, the PTO files continued to indicate the presence of a terminal disclaimer. The PTO eventually dismissed the petition based upon its conclusion that a terminal disclaimer cannot be nullified after issuance. The impact is fairly drastic here – with a terminal disclaimer the '991 patent expired in 2003; without a terminal disclaimer the '991 patent would not expire until 2018.

In January 2002 Yamazaki filed a reissue application seeking to fix the terminal disclaimer. Appallingly, the USPTO did not act on the reissue until 2004 (after the prior patent had expired). After an in-person interview in 2005, the examiner agreed in writing that a Reissue application could be used to correct a terminal disclaimer. However, the PTO refused to take any action for two more years and then reversed course. Yamazaki then appealed in 2007 and the BPAI finally issued its decision in 2011. That decision – made by an expanded panel of seven Administrative Patent Judges – held that a Reissue could not be used to remove a terminal disclaimer.

On appeal, the Federal Circuit has affirmed – holding that the plain language of Section 251 coupled with Section 253 prohibit using a reissue to expand a patent's term.

In particular, Section 251 facilitates the correction errors through reissue, but states that once the correction is made USPTO will reissue the patent "for the unexpired part of the term of the original patent." Section 253 indicates that a terminal disclaimer made in writing to the USPTO is "considered as part of the original patent." With these two statutes in hand, the court found that expanding the term by eliminating the terminal disclaimer would contradict the explicit instructions given by the statutory provisions. (Although Section 253 is focused on issued patents, the court held that its interpretation should also apply to pre-issuance disclaimers).

The court paused for a moment to criticize the USPTO delays – calling them puzzling and undeniably unfortunate. However, in the end, those delays do not change the ultimate result.

By Dennis Crouch

FTC v. Watson Pharmaceuticals, 12-416 (SCOTUS 2012)

The Supreme Court has granted certiorari in the pharmaceutical reverse-payment case.

Issue presented:

Whether reverse-payment agreements are per se lawful unless the underlying patent litigation was a sham or the patent was obtained by fraud (as the court below held), or instead are presumptively anticompetitive and unlawful (as the Third Circuit has held).

Justice Alito has recused himself. This means that only four justices are required to maintain the per se lawful standard.

= = = = =

Other pending petitions include:

Upsher-Smith Laboratories v. Louisiana Wholesale Drug Company - Whether the Third Circuit erred by holding, contrary to the Second, Eleventh, and Federal Circuits, that an agreement settling patent litigation that does not restrict competition outside the scope of the exclusionary right granted by the patent itself may presumptively violate the antitrust laws.

Merck & Co. v. Louisiana Wholesale Drug Company - Whether the federal antitrust laws permit a brand-name manufacturer that holds the patent for a drug to enter into a settlement of patent litigation with a prospective generic manufacturer, where the settlement includes a payment from the brand manufacturer to the generic manufacturer but does not exclude competition beyond the scope of the patent.    

Montgomery v. Kappos – Whether a research proposal which was never in fact performed can, as a matter of law, inherently anticipate a patent claim under Tilghman v. Proctor.    

Retractable Technologies v. Becton, Dickinson and Co. - (1) Whether a court may depart from the plain and ordinary meaning of a term in a patent claim based on language in the patent specification, where the patentee has neither expressly disavowed the plain meaning of the claim term nor expressly defined the term in a way that differs from its plain meaning; and (2) whether claim construction, including underlying factual issues that are integral to claim construction, is a purely legal question subject to de novo review on appeal.    

GlaxoSmithKline v. Classen Immunotherapies - Whether the Federal Circuit's interpretation of 35 U.S.C. § 271(e)(1)'s safe harbor from patent infringement liability for drugs – an interpretation which arbitrarily restricts the safe harbor to pre-marketing approval of generic counterparts – is faithful to statutory text that contains no such limitation and decisions of this Court rejecting similar efforts to impose extra-textual limitations on the statute.

Ninestar Technology Co. v. US International Trade Commission – Whether the initial authorized sale outside the United States of a patented item terminates all patent rights to that item.

W.L. Gore v. C.R. Bard – Whether it is consistent with Section 116 to deny joint-inventor status to the maker of the successful material, and instead deem the experimenter the sole inventor, on the ground that the maker did not communicate to the experimenter the exact property that turned out to be key."

Maintaining Uncertainty in the Standard of Review for Exceptional Cases

By Jason Rantanen

Highmark, Inc. v. Allcare Health Management Systems, Inc. (Fed. Cir. 2012) (Order Denying Rehearing En Banc) Download 11-1219 order
Concurring opinion by Judge Dyk, joined by Judge Newman
Dissenting opinion by Judge Moore, joined by Judges Rader, O'Malley, Reyna, and Wallach
Dissenting opinion by Judge Reyna, joined by Judge Moore, O'Malley, and Wallach, and Chief Judge Rader in part

Earlier this year, a divided panel of the Federal Circuit held that the element of objective baselessness in an exceptional case determination is subject to de novo review as opposed to a more deferential form of review in Highmark v. Allcare.  Yesterday, the Federal Circuit declined to grant en banc review of that holding, a decision that spawned two dissents signed by what now constitutes half the court.  (Judge Linn assumed senior status shortly after participating the decision).  As discussed below, in declining to grant en banc review the court preserved—and arguably  increased—the uncertainty about which standard of review applies.

David Hricik previously wrote an extensive discussion of the panel decision in Highmark; background details are available there.  Following that decision, Highmark filed a petition for rehearing en banc challenging the majority's application of a de novo standard when reviewing the issue of whether the litigation was objectively baseless in connection with an exceptional case determination under 35 U.S.C. § 285.  The full court declined to rehear the appeal en banc. 

The Dissenting Judges: Objective Baselessness is Reviewed for Clear Error.  In an act that speaks volumes about the strength of the views of the dissenting judges, two separate judges, Judge Moore and Judge Reyna, each wrote dissents and also signed on to each other's opinions.  Both dissents essentially contain the same themes: that the majority's holding regarding the standard of review in Highmark is (1) contrary to the court's own precedent; (2) inconsistent with the Supreme Court's prior rulings; (3) inconsistent with other court's approaches to similar issues in the Rule 11 and Equal Access to Justice Act context; and (4) fundamentally unsound. There are nuanced differences between the opinions; for example, Judge Reyna sharply criticizes the panel majority's over-reliance on developments in the willful infringement context, a part of the opinion that Judge Rader does not join, while Judge Moore offers a milder disagreement.  The overarching point of the dissenting judges, however, is that all elements of the exceptional case determination, including that of objective baselessness, are reviewed for clear error, with deference given to the district court judge on factual determinations.

The Concurring Judges: Objective Baselessness is Reviewed De Novo.  Writing in support of the decision not to grant rehearing en banc, Judge Dyk joined by Judge Newman argued that (1) the prior opinions did not involve a dispute between the litigants as to whether objective baselessness is a question of law to be reviewed de novo on appeal; (2) that Supreme Court precedent requires objective baselessness to be treated as a question of law; (3) that sections 284 (willful infringement) and section 285 (exceptional case) should be read as involving the same inquiry with the same standard of review; and (4) that policy supports de novo review of the issue of objective baselessness.  Judge Dyk further pointed out that the court is in agreement on most of the legal issues in exceptional case determinations — just not this one. 

Substantial Implications. The opinions of the dissenting judges raise two substantial implications.  The first is the enhanced uncertainty surrounding the standard of review for exceptional case determinations.  I read the dissenting judges as saying that not only do they it think the decision not to grant a rehearing en banc was wrong, but that they view the Highmark holding as invalid.  Both dissents stress the point that the Highmark holding is inconsistent with the court's prior precedent.  Judge Reyna also points out the well-established rule that to the extent a panel's decision on a point of law is inconsistent with an earlier panel's decision on that point, the earlier holding controls.  See Reyna Dissent at 4-5.  While the court acting en banc can overrule the first panel's holding, a decision not to grant en banc review of the second panel would seem not to be the same as the en banc court actually adopting the second panel's holding.  As a result, it may be that the dissenting judges, who now comprise half the voting judges for en banc purposes (and in a month will comprise a majority when Judge Bryson assumes senior status), may not believe themselves bound by the Highmark holding.  If this is the case, the split will continue until it is eventually resolved by the en banc Federal Circuit or the Supreme Court. 

A second implication is that both Judge Moore and Judge Reyna appear to be skeptical of the court's recent holding in Bard Peripheral Vascular v. W.L. Gore that objective recklessness in a wilfulness determination is subject to de novo review, and are joined by at least two other judges in their skepticism.  See, e.g., Moore dissent at 3, n. 1 ("For reasons simlar to those discussed below, this court should also revisit Bard en banc.). 

Patenting Animals Produced through Selective Breeding

By Dennis Crouch

In re Ditto (Fed. Cir. 2012)

In a non-precedential opinion, the Federal Circuit has done it again (ditto) and affirmed the PTO Patent Board decision rejecting patentability. Here, the court affirmed that Mr. Ditto's claimed cross between a bobcat and a domestic cat is anticipated by the prior art. In particular, the Pixie-Bob has been around for some time.

In the appeal, the USPTO solicitor also argued that the cat claims were all "patent-ineligible because they encompass a product of nature." Here, the "product of nature" argument is based upon the fact that a domestic cat and bobcat can and will "naturally" mate without further human intervention. However, the Solicitor did distinguish this case from the patenting of animals with particular traits developed through a selective breeding process. An example of this is U.S. Patent No. 5,602,302 (Mikami) that claims a bronchial hypersensitive guinea pig created by brother-sister mating of guinea pigs identified as hypersensitive. In distinguishing the '302 patent, the Solicitor wrote that:

the claims of the Ditto application do not demonstrate how the claimed cat breed is a product of human intervention. The claims include no detail regarding how the cats are bred, what traits are desired for breeding, or what results are expected. All that is required is that a "purebred cat" is produced by mating a bobcat, lynx, or bobcat lynx with a domestic cat. Id. Moreover, … the specification fails to provide detail regarding what kind of characteristics or traits are required in the claimed "purebred" cat. While Ditto argues that there is no difference between the [patented] guinea pig … and Ditto's cat, the Mikami patent is different from Ditto's application in significant ways: Mikami discloses a specific breeding process used to prepare guinea pigs with a particular trait, while the Ditto application requires "[n]o specific amount or type of breeding" and "the breeding program may terminate upon identification of any desired effect." In short, unlike Ditto's application, Mikami's claims recite a specific desired trait and Mikami's patent discloses a specific method of breeding used to obtain that trait, distinguishing Mikami's claimed guinea pigs from those in nature.

In its decision, the Federal Circuit refused to decide the subject matter eligibility question and instead affirmed on grounds of anticipation. The court simply wrote that " we do not reach its section 101 rejection." In this case, the court followed the course that Professor Merges and I suggested in or 2010 article on the avoidance doctrine. Some on the court have argued instead that Section 101 questions should be treated as antecedent questions that cannot be avoided.

Related articles

Patents Encompassing a Human Organism

Suing the USPTO for Issuing Bad Patents

Pregis v. Kappos and Free-Flow Packaging (Fed. Cir. 2012)

Pregis was bothered by its competitor Free-Flow's air-packaging patents and so, in 2009, Pregis sued Free-Flow for declaratory judgment of invalidity and non-infringement. In the same lawsuit, Pregis also sued the USPTO in order to prevent the agency from issuing two of Free-Flow's pending applications. When those two patents issued, Pregis amended its complaint to allege that the PTO's action in issuing the patents was "arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law." Under the Administrative Procedures Act (APA), Pregis argued, such an action should be nullified by the court.

The district court rejected those claims for lack of subject matter jurisdiction – holding that "the Patent Act and its own scheme clearly expresses Congress' intent to preclude putative third party infringers from seeking judicial review" under the APA of PTO decisions to issue patents.

On appeal, the Federal Circuit affirmed the dismissal – noting that its own prior precedent already holds "that apotential infringer cannot sue the PTO under the APA to attack the validity of an issued patent." See Syntex (U.S.A.) Inc. v. United States Patent & Trademark Office, 882 F.2d 1570 (Fed. Cir. 1989) and Animal Legal Defense Fund v. Quigg, 932 F.2d 920 (Fed. Cir. 1991).

We affirm the district court's dismissal of Pregis' APA claims and hold that a third party cannot sue the PTO under the APA to challenge a PTO decision to issue a patent. The comprehensive legislative scheme of the Patent Act "preclude[s] judicial review" of the reasoning of PTO decisions to issue patents after examination under 35 U.S.C. § 131, and competitors have an "adequate remedy in a court" for the issuance of invalid patents. 5 U.S.C. §§ 701(a)(1), 704.

It is not surprising that this creative lawyering was orchestrated by the pair of James Dabney and Professor John Duffy who previously orchestrated the KSR decision. Although the opinion by Judge Reyna is well written it leaves the court open to the argument that this is a patent law specific and protectionist decision that should instead be based on a broader look at how when and where APA challenges are allowed. I suspect that we can look forward to a petition for a writ of certiori in the upcoming months.

Related articles

Suing the USPTO to Cancel Improperly Issued Patents

Exelixis v. Kappos: Court Finds PTO is Still Undercalculating Patent Term Adjustments

Request for Comments on Request for Continued Examination (RCE) Practice

By Dennis Crouch

USPTO Deputy Director Teresa Stanek Rea recently published a notice and RFC on the future of Requests for Continued Examination (RCEs). In my view, RCEs are not particularly a problem per se, but instead RCEs are a symptom of a troubled application-examination complex that typically requires multiple rounds of negotiation before the applicant and examiner agree on the appropriate scope of protection. That said, RCEs serve as a good breakpoint for discussion because they are filed after at least two formal rounds of rejection. Reducing the number of rounds of formal negotiation is an important key reaching the PTO's stated goals of pendency reduction. RCEs also win the attention of applicants (because of the fees due) and PTO management (because of the credits owed to examiners). Importantly, the current user fee charged for an RCE does not cover the expected cost of two additional rounds of examination.

In 2007 the USPTO unsuccessfully pushed a set of rules that would have limited the number of RCEs that could be filed in a given application. Upon taking office as USPTO Director in 2009, David Kappos withdrew those publicly maligned rules. That decision returned us to our current baseline that allows a patent applicant the right to file an unlimited number of RCEs. If the recent PTA case of Exelixis holds, a patent's term will be generously extended based on a guarantee patenting within three-years – even when multiple RCEs are filed by the patent applicant.

Over the past three years, RCE filings have remained fairly steady – around 155,000 per year. However, because of a strategic decision to preferentially focus on unexamined applications, the backlog of RCE applications has grown to over 90,000 pending applications. Deputy Director Rea writes that the RCE backlog "diverts resources away from the examination of new applications." Part of limited growth of RCE filings is likely due to some efforts by the PTO such as the Quick Path Information Disclosure Statement (QPIDS) pilot program and the After Final Consideration Pilot (AFCP). However, the PTO does not see these programs as sufficient.

The PTO has identified that there is a problem, but is asking for input from the patent law community in order to identify appropriate solutions. As guidance, the PTO has generated the following questions, noting that "the Office is particularly interested in receiving information that facilitates an understanding of filing strategies related to RCEs."

1. If within your practice you file a higher or lower number of RCEs for certain clients or areas of technology as compared to others, what factor(s) can you identify for the difference in filings?
2. What change(s), if any, in Office procedure(s) or regulation(s) would reduce your need to file RCEs?
3. What effect(s), if any, does the Office's interview practice have on your decision to file an RCE?
4. If, on average, interviews with examiners lead you to file fewer RCEs, at what point during prosecution do interviews most regularly produce this effect?
5. What actions could be taken by either the Office or applicants to reduce the need to file evidence (not including an IDS) after a final rejection?
6. When considering how to respond to a final rejection, what factor(s) cause you to favor the filing of an RCE?
7. When considering how to respond to a final rejection, what factor(s) cause you to favor the filing of an amendment after final (37 CFR 1.116)?
8. Was your after final practice impacted by the Office's change to the order of examination of RCEs in November 2009? If so, how?
9. How does client preference drive your decision to file an RCE or other response after final?
10. What strategy/strategies do you employ to avoid RCEs?
11. Do you have other reasons for filing an RCE that you would like to share?

In addition to the normal written comment submission process, the PTO is also accepting comment through a collaborative tool known as IdeaScale that allows for comments on comments. See http://www.uspto.gov/patents/init_events/rce_outreach.jsp.

Related articles

New Track I Prioritized Examination for RCE Applications

Addressing the USPTO Backlog

Guest Post: The RCE Cliff

Patent Stats for FY 2012

Exelixis v. Kappos: Court Finds PTO is Still Undercalculating Patent Term Adjustments

Are Patent Filings Increasing or Decreasing?

Patent Application Outcomes: Rising Allowances and Falling Abandonments

By Dennis Crouch

The USPTO patent allowance rate has seen a steady rise since David Kappos took the helm as Director in 2009. Early-on Kappos announced that his version of patent quality meant that bad patents should not issue and that right-sized inventions should be allowed. That statement was a shift from the prior administration that publicly focused solely on the side of avoiding the issuance of bad patents. Kappos' ideas and theories have permeated the USPTO, both in its culture and in performance reviews.

The first chart below shows a monthly time series of the USPTO allowance rate.

The allowance rate is calculated based solely upon the number of applications that either (1) receiving a notice-of-allowance or (2) being abandoned within a single month. The allowance rate is calculated as the percentage of allowances within that that total number of disposals. Allowance-Rate = Number-Allowed / (Number-Allowed + Number-Abandoned).

I should note that, although data includes utility, plant, and reissue applications, there are not enough plant or reissue applications to shift the results. At times the USPTO reports count RCE filings as abandonments. For the figure above I ignored RCE filings – meaning that they do not directly impact the allowance rate shown below. Because RCEs are filed in so many applications, counting RCEs as abandonments would dramatically push-down the allowance rate. Conversely, there is also a credible argument that the allowance rate shown above is unduly low because a substantial percentage of abandoned applications are re-filed in the form of a continuation or divisional application. If the allowance rate is calculated as the percentage of US patent families stemming from a non-provisional application that include at least one issued patent, then the allowance rate would likely be closer to 80%.

In several recent posts, I have written about the reality that the USPTO is issuing more patents than ever – a historical high. Up to now, my working hypothesis has been that the increased allowance rate represents only a minor explanation for the increase in the number of issued patents. Rather, my hypothesis has been that there has generally been an increased throughput that means both more allowances and more abandonments. However, my thoughts have shifted in the process of rethinking the substantial increase in allowance rates demonstrated above.

The chart below shows the number of allowances compared with the number of abandoned applications for each fiscal year.

As is apparent, increase in throughput at the USPTO is entirely accounted-for by an increase in the number of allowances. The chart below divides the data on a monthly basis (but uses a six-month average because of a large amount of monthly variance).

I like to think of patent prosecution as a negotiation between the patent applicant and the USPTO over the proper claim scope and patent coverage. As with any negotiation, changes in the practice of one party will normally result in changes to the practice of the other party. We have public statements from Director Kappos suggesting intention to move toward a higher allowance rate, but it is unclear whether part of the shift is also due to changes in practice by patent attorneys. One change in practice that I suggested earlier is the general increase in the number of provisional patent applications as well as foreign applications. I have a working hypothesis that applicants have increased their reliance on those tools as mechanisms to self-select the best applications for filing and abandoning the patent even before filing a non-provisional. Still, it is cognitively difficult for me to separate the clear shift in the data in 2010 from the cotemporaneous statements and managerial moves by Director Kappos.

It will be interesting to see how this chart develops over the next two years as the next PTO director takes over and provides her own imprimatur.

Related articles

Are Patent Filings Increasing or Decreasing?

Patent Application Outcomes: Rising Allowances and Falling Abandonments

Patent Stats for FY 2012

Provisional Patent Applications as a Flash in the Pan: Many are Filed and Many are Abandoned

USPTO Patent Grants: Another Record Year (3rd in a Row)

Guest Post:Claim Construction Catch-22: Why the Supreme Court Should Grant Certiorari in Retractable Technologies

Guest Post by Peter S. Menell (UC Berkeley School of Law) and Jonas Anderson (American University Washington College of Law).

After nearly two decades of lower court confusion, there was a glimmer of hope that the Supreme Court might intervene to clarify the standard of appellate review of claim constructions determinations.   Following strongly worded dissents from denial of rehearing en banc, the Supreme Court invited the Solicitor General’s views on the certiorari petition in Retractable Technologies, Inc. v. Becton, Dickinson and Co., 653 F.3d 1296 (Fed. Cir. 2011), denial of rehearing en banc, 659 F.3d 1369 (2012).

In its filing last week, the Solicitor General has unfortunately recommended against Supreme Court review principally on the ground that Retractable Technologies is not an “appropriate vehicle” because the district court did not specifically rely upon factual findings.  Therein lies the Catch-22.  No district court since at least the Federal Circuit’s 1998 en banc Cybor ruling has been willing to make factual findings in construing patent claims for the pragmatic, logical, and legal reason that to do so would contradict Federal Circuit law that claim construction is a pure question of law.

As we have chronicled at length elsewhere, see Anderson & Menell, From De Novo Review to Informal Deference: An Historical, Empirical, and Normative Analysis of the Standard of Appellate Review for Patent Claim Construction (2012) available at <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2150360>,  Anderson & Menell, Appellate Review of Patent Claim Construction: The Reality and Wisdom of a “Mongrel” Standard the Federal Circuit, the Federal Circuit has struggled mightily over the standard of appellate review since the Markman case.  A slim majority adheres to de novo review notwithstanding the Supreme Court’s recognition of the “mongrel” character of claim construction.  The confusion has contributed to a high, variable, panel-dependent reversal rate of claim construction determinations.  Fearing reversal for relying upon expert testimony, district judges avoid and/or mask use of experts in determining how skilled artisans interpret patent claims.  Numerous studies indicate -- and district court and several Federal Circuit jurists believe -- that the de novo standard has significantly increased the uncertainty and costs of patent litigation, reduced settlement rates, and misapplied the Supreme Court’s Markman ruling.

The SG’s rationale overlooks a critical and unique structural feature of the federal patent system: the Federal Circuit’s exclusive jurisdiction over patent appeals.  Circuit splits are not possible on patent issues and district courts throughout the land are bound by the Federal Circuit’s interpretation of patent law.  Under the SG’s logic, therefore, the standard of appellate review will not be ripe for Supreme Court review unless a district court defies the Federal Circuit.  Such logic nearly guarantees that there will never be an “appropriate vehicle” for considering this issue, notwithstanding the vehement cries for help from Chief Judge Rader, Judge Moore, and Judge O’Malley.

It is possible that the Federal Circuit will eventually revisit this standard on its own, although the historical record does not inspire confidence.  As we chronicle in our article, members of the Federal Circuit have repeatedly sought to revisit the de novo standard since the Markman decision to no avail.  Meanwhile, district courts and the patent system have endured a doubtful application of the Supreme Court’s Markman ruling, causing substantial disruption and wasted resources.

To avoid the Catch-22, the Supreme Court should view dissents from rehearing en banc in the Federal Circuit as a proxy for a circuit split.  Furthermore, the fact that a “split” has festered since the time of Markman strongly indicates that the standard of appellate review is ripe for Supreme Court consideration.  The SG has missed these critical points in its assessment of the Retractable Technologies certiorari petition.

The Fox Group v. Cree: Expanding Section 102(g) Prior Art

By Jason Rantanen

The Fox Group, Inc. v. Cree, Inc. (Fed. Cir. 2012) Download 11-1576
Panel: Newman, O'Malley (dissenting-in-part) and Wallach (author)

In The Fox Group, the Federal Circuit substantially expands the scope of prior art under 35 U.S.C. § 102(g). There are two main components of this expansion: the panel's unanimous interpretation of the reduction to practice requirement as not necessitating repeatability and the majority's sharp narrowing of what constitutes abandonment, suppression or concealment.

While Section 102(g) will be eliminated as a category of prior art for patents based on applications filed on or after March 16, 2012, it will continue to apply to a large number of patents for many years to come.

Background: In 1995, Cree grew a low defect silicon carbide (SiC) crystal and sent a sample to a university scientist for analysis.  The scientist advised Cree that there was an exceptionally low defect area in this sample.  That same year, a Cree researcher showed a cropped image of the sample and described its low defect nature, stating that it had an area with less than 1,000 dislocations per square centimeter and no micropipes.  The researcher also described the high quality of the sample in an article published in 1996 that included an image of an X-ray topograph of the crystal.  The article did not describe how the crystal was created and there was no evidence in the record that Cree took any steps towards commercialization prior to 2004.  

Fox is the assignee of Patent No. 6,562,130, filed on May 4, 2001.  The '130 patent claims a low defect SiC crystal having, among other properties, a density of dislocations per square centimeter of less than 10⁴ and a density of micropipes of less than 10 per square centimter.  Fox sued Cree for infringement of the '130 patent in 2010 and Cree responded by arguing that its prior invention rendered the '130 patent invalid under 102(g).  The district court granted summary judgment in favor of Cree and Fox appealed.

Under 35 U.S.C. § 102(g)(2), a person is not entitled to a patent if:

before such person’s invention thereof, the invention was made in this country by another inventor who had not abandoned, suppressed, or concealed it. In determining priority of invention under this subsection, there shall be considered not only the respective dates of conception and reduction to practice of the invention, but also the reasonable diligence of one who was first to conceive and last to reduce to practice, from a time prior to conception by the other.

There are two core requirement for 102(g) prior art.  First, the challenger must establish that the alleged prior inventor reduced its invention to practice first or, alternately, was the first party to conceive of the invention and then exercised reasonable diligence in reducing that invention to practice.  Second, the prior inventor must not have abandonned, suppressed, or concealed the invention.  The court's opinion addresses both.

Reduction to Practice: The court found that Cree satisfied the first element of prior inventorship by reducing the invention to practice in 1995 by (1) creating the crystal sample (which met all the limitations of the asserted claims of the '130 patent) and (2) recognizing that it was a low-defect crystal.  In reaching this conclusion, the CAFC rejected Fox's argument that reduction to practice of a product invention requires that the the prior inventor "must prove repeatabliity to prove that it had reduced the invention to practice."  Slip Op. at 9.  In other words, it was sufficient that Cree had created the crystal once; there was no requirement for it to prove that it could be done again. 

Suppresssion or Concealment: The more significant aspect of the opinion relates to the issue of suppression or concealment.  Here, Fox argued that Cree suppressed or concealed its invention because it (1) did not file a patent application for its Kyoto Wafer, (2) did not present proof of commercialization that would allow for reverse engineering, and (3) did not otherwise provide adequate disclosure because it failed to reveal the details of the growth conditions under which boule G0259 was made."  Slip Op. at 10.  

In rejecting Fox's argument, Judges Wallach and Newman concluded that disclosure of an product invention to the public requires only that the inventor make the existence of its invention known to the public.  (Note: the majority does not actually use the word "existence of"; however, in my view that's the only logical way to read the opinion, given that this is the only information that Cree disclosed).  Provided that general details about the invention are given to the public, it is irrelevant whether or not an invention is commercialized or a patent is filed.  "Filing a patent application and commercializing a product are only two convenient ways of proving an invention has been disclosed to the public."  Slip Op. at 11.  Here, it was sufficient that Cree sent samples of its boule for testing by Dr. Dudley, an outside evaluator, the product itself (though not the process used to make it) was described in a published paper, and knowledge of the product was disseminated outside of the company in the Kyoto presentation."  Id.  The crux of the majority's reasoning:

The purpose of § 102(g) is to bar an inventor from receiving a patent on an invention that has already been invented and was not abandoned, suppressed, or concealed. Apotex, 254 F.3d at 1038-39. If the patent claimed a process, then a prior inventor would have to prove prior invention of the process which had not been abandoned, suppressed, or concealed, to invalidate the patent under § 102(g). “Cree promptly and publicly disclosed its findings concerning the low defect properties of the SiC material from which the [Kyoto Wafer] was cut through a presentation at the 1995 International Conference and a published paper on the subject.” Fox Group, 819 F. Supp. 2d at 535. Accordingly, Cree promptly made its invention, a SiC material with low defect densities, known to the public. Fox has not produced sufficient evidence raising any genuine issues of material fact to show that Cree suppressed or concealed its invention.

Writing in dissent, Judge O'Malley emphatically disagreed with the majority on this issue:

Because Cree made the fact of its invention known to the public, the majority, like the district court before it, concludes that Fox can never establish abandonment, suppression, or concealment. Under the majority’s approach, an inventor could publicly announce that it made a product, with no explanation as to how it did so, and then hide it away in a closet indefinitely. As long as the inventor describes a product in general terms, the inventor cannot, according to the majority, be accused of abandoning, suppressing, or concealing the invention.

The majority’s approach cannot be the law. If a prior inventor could disclose the mere existence of a product and take no further action for nine years, the concept of abandonment, suppression, or concealment would be rendered meaningless. Consistent with our prior case law, where there is no enabling written disclosure, there must be evidence that the prior inventor timely made its
invention available to the public in some other way – e.g., through public use, commercialization, or filing a patent application claiming the invention. Such a requirement is consistent with § 102(g)’s general goal of giving the public the benefit of the invention. See Checkpoint, 54 F.3d at
761 (Section 102(g) “encourages prompt public disclosure of an invention by penalizing the unexcused delay or failure of a first inventor to share the ‘benefit of the knowledge of [the] invention’ with the public after the invention has been completed.” (citation omitted)).

Judge O'Malley further pointed out that this case was before the court on a grant of summary judgment of invalidity; in light of this posture, it was especially inappropriate to hold that Cree had not suppressed or concealed the invention. In particular, Judge O'Malley pointed to evidence indicating that Cree had a broad policy of concealing its production methods, and in light of that policy took specific steps to avoid enabling its competitors to make the invention. 

Comment: In my view, the majority erred in concluding that merely disclosing general information about the invention suffices to preclude any subsequent inventor from obtaining a patent.  In addition to Judge O'Malley's reasoning why this cannot be correct (including an analysis of why it is inconsistent with the CAFC's precedent), the effect of the majority's holding is to cause 102(g)(2) to swallow much of the remainder of Section 102.  Under the majority's reasoning, any disclosure about an invention, no matter how superficial or non-enabling, becomes potential prior art as long as there is secret information about a reduction to practice of the invention.  The effect of the court's opinion is to incentivize lower quality, non-enabling disclosures of information as, in the near term at least, this is all that is apparently necessary to defeat patentability.

Patent Law Treaties Implementation Act of 2012

By Dennis Crouch

It appears that the Patent Law Treaties Implementation Act of 2012 will soon become law. The U.S. Senate passed the bill earlier this year (S. 3486) by a unanimous vote and this morning the House passed the identical version in a voice vote. President Obama is expected to sign the bill into law within the next two weeks.

The Bill provides the domestic legislation required to implement both: (1) The Hague Agreement Concerning International Registration of Industrial Designs ("Hague Agreement") and (2) The Patent Law Treaty ("PLT"). Both treaties were ratified by the Senate in 2007.

In discussing the pending bill last week, I wrote that the USPTO has lobbied for passage of this bill and provided the original draft legislation. 

On the industrial design front,  substantive elements of the changed law include (1) an extension of the design patent term by an additional year with the resulting term being fifteen years from issuance; (2) allowing applicants to include up to 100 different design inventions within a single international design application; and (3) creation of provisional rights as of the publication date of the international application. About 45 countries, including virtually all of Europe have signed-on to the Hague Agreement (Geneva Act).

A major change with regard to the patent law treaty is that the law would now allow for revival of unintentionally abandoned international applications.   

Related articles

Patent Issues in the 2012 Lame Duck Session of Congress

Rader: Reviving the Doctrine of Equivalents

By Dennis Crouch

John Deere v. Bush Hog (Fed. Cir. 2012)

When I was a kid, we had a "John Deere Bush Hog" for mowing pasture land (AKA "bush hogging"). Several years later I learned that we really had a John Deere brand rotary cutter. The Bush Hog company also sells its own brand of rotary cutter. In this case, Deere sued Bush Hog for infringing its U.S. Patent No. 6,052,980. That patent claims a deck for a rotary cutter that is more easily cleanable.

One claim limitation required that an upper deck wall be sloped "rearwardly from said central portion into engagement with, and being secured to, said lower deck wall." Apparently in the accused Bush Hog device, the upper deck wall does not directly contact the lower deck wall. As per usual, that infringement issue was posed as a claim construction question determined by the judge as a matter of law. Here, the district court judge ruled that the "into engagement with" limitation required direct contact and that there could therefore be no literal infringement of the claim. When pressed on the doctrine of equivalents, the district court revived the vitiation exception to the DOE and ruled that the claims could not be extend to cover no direct contact when they claim the exact opposite of direct contact.

On appeal, the Federal Circuit doubly rejected the district court opinion.

On claim construction, the court ruled that "engagement" between two metal sheets does not require direct contact, but may instead be facilitated through indirect contact. The court demonstrated this conclusion with reference to a drawing from the Deere patent where a filler plate (shown in blue) provides the engagement between the upper deck (yellow) and the lower deck (red).

On Vitiation of the Doctrine of Equivalents: Although dicta, Judge Rader continued his opinion a repudiation of the district court's mistreatment of the vitiation doctrine. Of course, the doctrine is regularly mistreated because it is lacking in logical sense. The doctrine of equivalents allows a patentee to capture some amount of scope that goes beyond the literal scope of the claims as written. As a matter of course, this always involves rejecting the literal bounds created by one or more claim limitation. However, the doctrine of vitiation rises to stop a patentee from applying the DOE in a way that negates the meaning of one or more claim term. In his opinion, Chief Judge Rader attempts to cut through this knot and cautions against the programmatic use of the vitiation doctrine:

Courts should be cautious not to shortcut this inquiry by identifying a "binary" choice in which an element is either present or "not present." Stated otherwise, the vitiation test cannot be satisfied by simply noting that an element is missing from the claimed structure or process because the doctrine of equivalents, by definition, recognizes that an element is missing that must be supplied by the equivalent substitute. If mere observation of a missing element could satisfy the vitiation requirement, this "exception" would swallow the rule. . . . [P]reserving the doctrine in its proper narrowed context requires a court to examine the fundamental question of whether there is a genuine factual issue that the accused device, while literally omitting a claim element, nonetheless incorporates an equivalent structure.

Chief Judge Rader goes on to explain how the suggested use of the DOE in this case likely does not vitiate the relevant claim terms.

In this case, the district court construed "contact" to require "direct contact," and thus found that allowing "no direct contact" would vitiate the court's construction. Yet, a reasonable jury could find that a small spacer connecting the upper and lower deck walls represents an insubstantial difference from direct contact. See TurboCare Div. of Demag Delaval Turbomachinery Corp. v. Gen. Elec. Co., 264 F.3d 1111, 1124 (Fed. Cir. 2001) (construing claim term "contact" to require "touching" but remanding question of whether "indirect contact" could be equivalent). Thus, the trial court erred by invoking the vitiation

Rader's basic idea here an attempt to move away from the technical limitations that have pushed the DOE toward obscurity over the past several years. In his view, vitiation should not be seen as a technical doctrine but instead simply a tool for district courts to use when the claim language is so far from the asserted equivalent that no reasonable jury would find infringement.

On remand, the new claim construction breathes new life into Deere's infringement case.

Solicitor General to the Supreme Court: Deny Cert. in Retractable Technologies

Guest Post by Andrew Dhuey

The U.S. Solicitor General has recommended that the Supreme Court deny certiorari in Retractable Technologies, Inc. v. Becton, Dickinson and Co. The key issues in Retractable concern i) the role of the specification in interpreting patent claim language and ii) the level of deference, if any, the Federal Circuit should give to trial court claim constructions. The SG's recommendation is a setback for those who hope the Court will address these two fundamental questions of patent law and procedure. In recent years, the Court has followed about 80% of the SG's recommendations that certiorari be denied. See, e.g., p. 276 of this 2009 George Mason Law Review article.

A Supreme Court decision in Retractable could fundamentally alter the way trial courts construe patent claims and how the Federal Circuit reviews claim constructions. If the Court decides to review the case, it might limit or overrule the Federal Circuit's en banc decisions in both Phillips v. AWH Corp. and Cybor Corp. v. FAS Techs., Inc. Or the Court might deny review and leave the status quo intact.

Pertinent Facts and Procedural History

Retractable Technologies, Inc. ("RTI") and Becton, Dickinson ("BD") manufacture retractable medical syringes that are designed to reduce the risk of needlestick injuries and infections to health care workers. RTI accuses BD of infringing U.S. Patents 5,632,733 and 7,351,224. The disputed issue of greatest precedential importance concerns the meaning of the claim term "body" as it is used in both patents to describe the structure of RTI's claimed retractable syringe. BD's accused syringe has a two-piece body, so the question of literal infringement hinges largely on whether "body" is limited to a one-piece structure.

Judge David Folsom (E.D. Tex.) sided with RTI on the construction of "body" as not being limited to a single-piece structure. Judge Folsom gave the construction short treatment in his claim construction order, adopting the reasoning and conclusion of his fellow Eastern District of Texas jurist, Leonard Davis, who construed the same term in related patents in earlier litigation RTI brought against New Medical Technologies.

In the earlier case, Judge Davis observed that the specifications of the patents-in-suit did suggest a one-piece structure limitation. Still, he opined, the claims themselves pointed in the opposite direction:

In sum, the Court finds that "body" . . . simply means "hollow outer structure that houses the syringe's components." . . . The only construction of "body" that is consistent with the . . . claim language is a structure that may be one or more pieces. This reading is consistent with the specification, despite some indications to the contrary.

A divided Federal Circuit panel reversed based on the district court's claim construction of "body". Circuit Judge Alan Lourie wrote the Court's opinion, joined by Senior Circuit Judge S. Jay Plager. The majority "agree[d] with BD that the claimed 'body' is limited to a one-piece structure in light of the specifications." Chief Judge Randall Rader dissented: "Because the language of the claims make clear that 'body' does not contain [a one-piece structural] limitation, and it is improper to import limitations from the specification into the claims, I respectfully dissent."

Judge Plager wrote a short concurrence to underscore the majority's position that claims must not be interpreted in ways that go beyond what the inventor disclosed:

However much desired by the claim drafters, who want claims that serve as business weapons and litigation threats … the claims cannot go beyond the actual invention that entitles the inventor to a patent. For that we look to the written description.

RTI petitioned for rehearing en banc, which the Court denied. Circuit Judge Kimberly Moore, joined by Chief Judge Rader, dissented from the denial of the petition. Judge Moore opined that the panel majority "attempt[ed] to rewrite the claims to better conform to what it discerns is the 'invention' of the patent instead of construing the language of the claim." This ran afoul of proper claim construction under Phillips, she contended, and it has happened with such frequency to warrant en banc review.

Judge Moore also suggested that the Court should reconsider Cybor en banc.

We have waited five years (since Amgen Inc. v. Hoechst Marion Roussel, Inc., 469 F.3d 1039 (Fed. Cir. 2006), where six judges claimed a willingness to review Cybor) for that ever-elusive perfect vehicle to review the issue of deference to the district court's claim construction. The Supreme Court held that claim construction was a "mongrel practice." Markman v. Westview Instruments, Inc., 517 U.S. 370, 378 (1996). As such it is clearly a mixed question of law and fact and deference should be given to the factual parts.

Circuit Judge Kathleen O'Malley also dissented from the denial of RTI's petition, but her concern was limited to the de novo standard of review mandated by Cybor.

The SG's Denial Recommendation

In response to RTI's petition for a writ of certiorari, the Supreme Court solicited the SG's views on whether to review the case. The SG recommended a denial of the petition, opining that "[n]either of the questions set forth in the petition for a writ of certiorari warrants review in this case."

On the first question concerning the role of the specification in interpreting patent claim language, the SG contends that there is general doctrinal agreement among Federal Circuit judges:

There is broad agreement among the judges on the Federal Circuit about the principles of law that govern that inquiry, and the Federal Circuit's claim-construction jurisprudence is fully consistent with this Court's precedents. Although different judges sometimes disagree about the proper interpretation of particular claim terms, that is simply the inevitable result of case-by-case adjudication, not a reason for this Court's intervention.

Regarding the second question about the standard of appellate review for claim constructions, the SG agreed that the issue might warrant review in a future case, but not this one:

In an appropriate case, this Court's intervention might be warranted to determine the appropriate standard of review when a district court makes subsidiary factual findings in the course of construing a disputed patent claim. The district court in this case, however, did not make any factual findings about the meaning of the term "body," the state of the relevant art, or any other matter.... Nor did the court consider any expert testimony, make any credibility determinations, or receive any documentary evidence. Rather, the district court's hearing consisted entirely of the oral argument of counsel regarding the claim language, the specification, and pertinent legal authorities.... Because the district court's claim-construction ruling did not depend on the resolution of any questions of fact, this case does not present the question whether a claim-construction ruling that is predicated on factual determinations should nevertheless be subject entirely to de novo appellate review.

RTI may now file a brief responding to the SG's recommendation. The Court will likely decide whether to grant or deny RTI's petition in one of its January conferences.

Andrew Dhuey is an appellate lawyer in Berkeley, California.

I can now say with almost complete confidence that the USPTO will grant over 250,000 utility patents in calendar year 2012.  This will obviously be a record. The prior record was set in 2011 with just under 225,000 utility patents.

Patent Exhaustion for GM Seeds

By Dennis Crouch

Bowman v. Monsanto (SCOTUS 2012)  Download 11-796 ts

The farmer Vernon Bowman has filed his opening merits brief explaining his exhaustion defense against Monsanto's patent infringement charges. The case involves Monsanto's patented soybeans that have been genetically modified to be resistant to the broadleaf herbicide glyphosate, i.e., RoundUp Ready. U.S. Patent Nos. 5,352,605 and RE 39,247.

According to the statement of facts, Bowman purchased genetically modified soybeans on the commodity markets from a third party vender. It is assumed for the case that those seeds were grown and sold by farmers pursuant to a contract with Monsanto. As such, under traditional patent exhaustion principles, Monsanto's patents conferred no more control over the use, destruction, or distribution of those soybeans. This would have allowed Bowman to use the soybeans as feed or for biodiesel. However, Bowman chose to use the soybeans as seeds to grow a second generation of soybeans. Because soybeans self-fertilize, beans from the second and subsequent generations are genetically identical to the first generation and thus fit within the scope of Monsanto's patents. Although perhaps irrelevant to this case, Bowman admittedly purchased the commodity seeds with the hope that they were glyphosate resistant and then relied upon glyphosate resistance in the growing process. At the same time, he took pains to ensure that he was not violating any contract with Monsanto or pushing the grain dealer to violate such a contract.

Monsanto sued Bowman for patent infringement and won.

Exhaustion: Both the district court and the Court of Appeals for the Federal Circuit held that the exhaustion doctrine does not apply to new copies of a patented product created by the accused infringer. Monsanto sees its seed patents as akin to a book covered by copyright. When the publisher sells copies of the book, the copyright in those copies is exhausted -- allowing the purchaser to resell or distribute the copies without reprisal. However, there is a major limitation to the exhaustion doctrine -- copyright still protects against using the legitimate copy to make further unauthorized copies. For Monsanto, the fact that the patent is exhausted vis-à-vis a first generation of seeds says nothing about whether the patent is exhausted for the second or subsequent generation. Unlike the copyright laws, the patent law of exhaustion has not been codified, but the two doctrines are largely in step. The Supreme Court is currently considering a copyright exhaustion case, Kirtsaeng v. John Wiley & Sons, Inc. However, the outcome of that case is unlikely to impact Bowman's.

Monsanto also relies upon a property-law defense that limitations-on-use placed on the sale of patented goods operate as conditions that also bind subsequent purchasers. Here the original farmers were bound by contract not to replant the soybeans. Following the rule of derivative title, Monsanto argued (and the lower courts agreed) that "farmers could not convey to the grain dealers what they did not possess themselves." And further, that the grain dealers could only transfer to Bowman as much right as they possessed -- that right being ownership of the soybeans without the right to use them as seed.

Pathway to Victory: Bowman's pathway to a Supreme Court victory seems to rest on two necessary holdings: (1) that the patent rights were fully exhausted in the seeds Bowman purchased and (2) that the exhaustion applies to subsequent generations of seeds. In my view, the first principle is will be easier to accomplish. The second is more difficult.

In Quanta Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617 (2008), the Supreme Court confirmed that "[t]he longstanding doctrine of patent exhaustion provides that the initial authorized sale of a patented item terminates all patent rights to that item." The correct view is here is that a condition on use does not bind subsequent purchasers of personalty unless those buyers agree by contract to be so bound. This is the ordinary rule that courts follow involving personal property and I see no reason to change that rule based upon the fact that the personal property happens to be covered by a patent.

Subsequent Copies: The fact that a patented product is the subject of a legitimate sale that exhausts the patent rights does not give the purchaser the right to use that original as the source for generating subsequent copies. Rather, the creation of those additional copies will be deemed counterfeit and infringing. Bowman does not challenge these basic principles. Rather, Bowman argues that soybeans are different because they are self-replicating seeds. Bowman writes:

If patent rights in seeds sold in an authorized sale are exhausted, patent rights in seeds grown by lawful planting must be exhausted as well. Due to the self-replicating nature of the invention, subsequent generations of seeds are embodied in previous generations . . . because seeds will self-replicate by normal use.

The farmers that I know largely side with Bowman on the issues, but they would quarrel with the idea of self-replication. In fact, farmers do an incredible about of work to grow a commercially viable crop. At a minimum for a good crop, the seeds need to be planted in sufficiently fertilized soil, watered (hopefully by rain), weeded (perhaps with glyphosate), and harvested. The timing must be right to ensure sufficient light and heat, and the fields must be protected from invading wildlife. In this sense, Bowman's statement that "Roundup Ready® seeds have been engineered to include everything one needs to practice the invention" is disingenuous. In any event, it takes much more outside input to grow a second generation of soybeans than it does to distribute electronic copies of my copyrighted writings or deliver electronic copies of non-patent prior art to the USPTO. In fact, we teach in law school that the ease of replication is an important factor in understanding the role of intellectual property rights. In an e-mail, David Snively, executive vice president and general counsel for Monsanto agrees with this point, writing that the "patent system protects – and should protect – the rights to easily replicated technologies like herbicide-tolerant seeds, just as it does for those who invent computers or life-saving medicines."

Perhaps the self-replication difference is not about energy input, but more about the nature of the product (a living organism in the form of a seed) and the fact that living organisms reproduce as part of their natural life cycle. Monsanto added an important element to its soybeans (glyphosate resistance), but Monsanto started with an incredible life form with the ability to reproduce in our natural world. Monsanto did not change or enhance any of those reproductive abilities and its attempt to control reproduction is could be seen as akin to the improper tying arguments. The fact that Monsanto made a big claim (the seed itself) doesn't change the fact that its contribution is far less than 1% of the genetic material important for a soybean's life cycle.

Finally, the hook on the argument may be that self-replication is the "normal use" of a product. This market expectation is important and could win the day. In the brief, Bowman takes pains to establish that replanting is an important normal use of commodity seeds. It is unclear to me whether the court will buy this factual argument and would be an important gap that could be filled by an amicus filing.

Growing not Making: Bowman also suggests an interesting additional argument – that growing the seeds does not constitute "making" seeds under 35 U.S.C. § 271(a). Bowman writes:

The seeds at issue here will self-replicate or "sprout" unless stored in a controlled manner to prevent this natural occurrence. Humans can (and most often do) assist in the process of self-replication. For instance, Bowman planted Roundup Ready® seeds and treated them with glyphosate. This activity led in part to the creation of new soybeans having the patented Roundup Ready® trait. But it was the planted soybean, not Bowman, that "physically connected" all elements of the claimed invention into an "operable whole."

Referencing and quoting Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518 (1972). While important, this argument seemingly would not offer a complete win for Bowman because he may also be liable for using or selling the second generation.

One interesting rhetorical element of Bowman's brief is the way that it claims the middle ground by arguing that the court "should not create an exception to the traditional exhaustion doctrine for self-replicating technologies." (Bold in original). The starting point depends upon your perspective and I suspect that Monsanto will have a similar statement arguing that Bowman is asking for the exception.

Monsanto's brief of the merits is due January 16, 2013. Oral arguments and a decision will follow.

Related articles

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

Self-Replicating Technologies

Self Replicating (and Alive) Inventions: Supreme Court Grants Certiorari in Monsanto v. Bowman

Seeds of Exhaustion: Monsanto Is Coming to the United States Supreme Court

When Monsanto's Patents Expire

Supreme Court Grant Certiorari in Monsanto v. Bowman

H.R. 6621: Proposed Modifications to the America Invents Act of 2011

On November 30, Rep. Lamar Smith introduced H.R. 6621, a Bill titled "To correct and improve certain provisions of the Leahy-Smith America Invents Act and title 35, United States Code". Because of its late introduction, the Bill would need to be passed and enacted before the new Congressional session begins in early January. The most likely outcome is that no action will be taken and the Bill will be reintroduced in 2013. A second viable alternative is that the language of the Bill will be included as part of a massive fiscal cliff resolution Bill. The Bill includes a number of interesting elements. In that case, there would be virtually no official debate on the Bill or its contents.

Killing pre-GATT applications: There are currently around 200 applications pending that were filed prior to the 1995 patent term changeover. Once issued, those applications will have a patent term of 17 years from the issuance date. If issued as patents, these applications will likely be disruptive to settled interests in various industries. H.R. 6621 would alter the rules for calculating patent term for any application still pending 1-year from the Bill's implementation date. For those applications, the patent term would be 20 years from filing -- meaning that those patents will likely be expired. Because of their pre-URAA filing date, those applications would not be eligible for patent term adjustment. At this point, I am unsure how the change would impact applications whose issuance was delayed due to a US Government secrecy order. On 2012, the USPTO has issued 24 applications with pre-URAA filing dates. Of those, five were delayed due to secrecy orders. One example is Patent No US8,278,099 is interesting in that it claims a monoclonal antibody to human thrombopoietin and is owned by Genentech. Prosecution of that application was delayed for 10 years pending the outcome of an interference in a related case. The application makes clear that the claimed antibody could be either isolated from a human or else prepared by recombinant or synthetic methods. This breadth brings the claimed antibody within the ambit of the Myriad gene patent challenge. If isolated human genes are not patentable what about isolated human antibodies? But I digress.

Post-Grant Dead Zone: Once the AIA is fully implemented, an issued patent will be immediately challengeable through a post-grant review. Then, after a nine-month window, challenges will be available through inter partes review. However, the AIA has bit of an implementation issued because (1) post-grant reviews will only be available for patents issued on applications filed on or after March 16, 2013; (2) inter partes reviews are available for all patents, but only those that have been issued for at least 9-months; and (3) the old inter partes reexaminations are no longer available. This creates something of a dead zone in that for the next couple of years patents will not be challengeable through some inter partes system for the first 9-months. H.R. 6621 would eliminate that 9-month dead zone by allowing inter partes reviews to be filed at any time for applications with an effective filing date before March 16, 2013.

Delaying Inventor's Oath: Section 115(f) of the AIA indicates that an either an oath, substitute statement, or sufficient assignment must be submitted prior to the notice of allowance of a patent application. The amendment would push that deadline back to be "no later than the date on which the issue fee for the patent is paid."

Less Patent Term Adjustment: The current language of Section 154(b) suggests an applicant may begin accumulating PTA as of the filing date of an international PCT application that is later followed by a US national stage application. The proposed amendment would eliminate that option by clarifying that the PTA calculations only begin "commencement of the national stage under section 371 in an international application." The change also provides that the PTO calculate PTA with the issuance rather than at the notice of allowance. The amendment would also clarify that PTA challenges may only be filed in the Eastern District of Virginia.

US as International PCT Office: H.R. 6621 would eliminate 35 U.S.C. 373. That section currently limits who may file international PCT applications at the USPTO. Under current rules, at least one of the inventors or the assignee must be a resident or national of the United States of America.

Sharing Fees Between the Patent and Trademark Side: The AIA requires that, for the most part, fees collected on patents be used to cover "administrative costs of the Office relating to patents" while fees collected on the trademark side be used to cover "administrative costs of the Office relating to trademarks." H.R. 6621 would eliminate that restriction and thus allow patent fees to pay for trademark operations and vice versa.

Derivation Proceedings: The AIA eliminated the ongoing viability of interference proceedings (although some will be pending for years) but created a new beast known as a derivation proceeding. H.R. 6621 would clean up the language for initiated a derivation proceeding under 35 U.S.C. §135(a). I need to think some about the language to understand the substance. I have created a rough mark-up of this language. (http://www.patentlyo.com/CompareNewOldDerivation.docx).

Noticeably absent from this bill are changes to clarify the new section 102 or to modify the estoppel provisions of post-grant oppositions. Still pending is the Patent Law Treaties Implementation Act of 2012 and the Saving High-Tech Innovators from Egregious Legal Disputes Act of 2012. In my estimation, the first still has a good chance of passing this term while the second does not.

Related articles

Draft Bill Proposes Fixes To America Invents Act

America Invents Act Technical Corrections

Lame Duck Patent Reform: AIA Technical Corrections

Myriad at SCOTUS: Early Reaction

• Eileen Kane: "There is a fair chance that the Court could side with the 2010 district court opinion, which found that the "claimed isolated DNA is not markedly different from native DNA as it exists in nature."
• Kevin Noonan: "The decision [granting cert] is unsurprising in view of the (relative) specificity of the question presented and the overwhelmingly one-sided nature of the amicus briefing."
• Rob Harrison: "It was a bit of a roller coaster day for US biotech Myriad Genetics as it share price plunged 9% on news that the US Supreme Court would be reviewing it '782 patent directed towards the BRACA1 and BRCA2 genes."
• Julie Samuels: Myriad's Dangerous Patents and their Negative Impact on Women's Health
• John Conley and Dan Vorhaus: "[A]ll we know for certain is that four justices (the minimum number needed to grant certiorari in any case) have something that they want to say about the matter."

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Gene Patent Debate Continues: Federal Circuit Finds Isolated Human Genes Patentable

Supreme Court has Granted Cert in the Myriad Case, Question: Are Human Genes Patentable

Supreme Court To Decide If Human Genes Can Be Patented In Myriad Case

Court To Decide If Companies Can Patent WHAT?

US Supreme Court to decide on gene patents in Myriad case

Supreme Court to Hear Case of Human Genes Under Corporate Control

Supreme Court Grants Cert in AMP v. Myriad

Court to decide if human genes can be patented in case of Utah company

Gene Patents: AMP v. Myriad Genetics

Patents Encompassing a Human Organism

by Dennis Crouch

Ex Parte Kamrava (PTAB 2012), APN 10/080,177  Download 10080177

Most Section 101 subject matter eligibility problems can be cured by integrating the ineligible subject matter with subject matter that is patent eligible. This works because the fact that an invention encompassing some ineligible material does not preclude patentability – as long as the invention also includes sufficient eligible subject matter. Following this theory, the Supreme Court in Diamond v. Diehr, 450 U.S. 175 (1981), agreed that a practical use of a mathematical formula was patentable even though the formula on its own would not have been subject matter eligible. 

One exception to the cured-by-integration rule involves the patenting of human organisms.  Generally speaking, a patent clam cannot encompasses a human organism and likewise, a claim encompassing an otherwise unpatentable human organism will not become patentable by integrating elements that are subject matter eligible. Following this rule, applicants typically carve-out offending portions of their claims. Thus, recently issued U.S. Patent No. 8,283,517 claims a "transgenic non-human animal" with certain genetic properties that result in alzheimer's-like brain plaques. Likewise, U.S. Patent No. 8,247,644 claims a "method for manufacturing a non-human animal" that is likely to develop a pulmonary tumor. The PTO sees these as subject matter eligible because they have disclaimed any coverage for human animals.

In Kamrava, the patent is generally directed toward a uterine catheter that can be used to deposit a fertilized embryo. Some of the claims also include the embryo as an element of the claim itself with "the catheter … further comprising an embryo in the distal portion." In its November 26, 2012 decision, the Patent Trials and Appeals Board (PTAB) concluded that those claims could not be patentable.

Focusing first on Section 101, the board noted that an embryo is subject matter ineligible because it is a part of the human body. Further, the combination of the ineligible subject matter with the eligible subject matter catheter offers no cure. "To allow one to sidestep 35 U.S.C. §101 by simply pairing in combination patent-ineligible subject matter with patent-eligible subject matter would impermissibly exalt claim strategy (form) over claimed subject matter (substance)." As a second ground of rejection, the Board raised the new Section 33(a) of the Leahy-Smith America Invents Act. That section prohibits the patenting of "a claim directed to or encompassing a human organism."

The PTAB's form-over-substance statement loses significant weight because, in the same paragraph, the Board note that the claims may become eligible by a simple amendment. As the Board notes, on remand to the examiner, applicant can rather easily cure the defect by claiming a catheter "adapted to hold the embryo" rather than claiming a catheter that includes the embryo. The U.S. does grant patents on non-human organisms, such as a genetically modified mouse, soybean, or bacterium. Canada denies patentability on multi-cellular organisms.

The issues presented here have obvious potential ties to the Myriad gene patent case. However, while most practitioners would agree with the idea that human organisms should not be patentable, the bar is much more divided on the question of the patentability of chemical compounds isolated from a human body, and almost all practitioners agree that methods of treating diseases in humans should be patentable. This case is likely most helpful for those supporting Myriad because it indicates that congress and the PTO have both considered the issue and have drawn a line that prohibits certain patents too closely tied to the core of humanity but allows for the patenting of genes.

The language of Section 33(a) was initially pushed by Representative Dave Weldon as a measure to support the sanctity of life. Although Weldon was out of Congress by the time the AIA passed, he spoke on the issue several times. Most poignantly, Weldon spoke on the issues in 2003 after receiving some initial criticism for his proposal.

[S]ome have continued to misrepresent my amendment by claiming it would also prohibit patent claims directed to methods to produce human organisms. Moreover, some incorrectly claim that my amendment would prohibit patents on claims directed to subject matter other than human organisms. This is simply untrue.

What I want to point out is that the U.S. Patent Office has already issued patents on genes, stem cells, animals with human genes, and a host of non-biologic products used by humans, but it has not issued patents on claims directed to human organisms, including human embryos and fetuses. My amendment would not affect the former, but would simply affirm the latter.

At the time, PTO Director James Rogan also submitted a letter to Congress indicating that the language was already "fully consistent with [current PTO] policy." (Note, parallel language has been regularly included in PTO appropriations bills that prohibit the PTO from spending money on issuing patents directed-to or encompassing human organisms.)

These issues will be interesting as we move forward with the gene patent debate. However, the history of patentability limitations suggest that, unless the Supreme Court takes a radical step in its decision, skilled patent attorneys will continue to be able to protect innovations through the patent system.

There is unlikely to be any successful appeal of this case to the Federal Circuit. Importantly, the applicant had not challenged the notion that an embryo is a human organism. Rather, the applicant argued that the examiner had erred in the claim construction and that the proper claim scope did not include the embryo.  In addition, the applicant's patent attorneys at Blakeley Sokolof have withrdawn from the representation and Dr. Kamrava's medical license has been revoked. 

Can the 271(e)(1) Safe Harbor Help DuPont Escape its $1 Billion Verdict?

Professor Holman has an interesting new post on his blog involving the ongoing battle between Monsanto, E.I. DuPont, and Pioneer HI-Bred.  Earlier this year, a jury concluded that DuPont owed Monsanto $1 billion in reasonable royalty even though DuPont had only done research on its potential product and had never brought it to market.

In post verdict briefing, DuPont is raising an important question of the scope of the Hatch-Waxman Safe Harbor (271(e)(1)).  That statute might be called a “fair use” statute in the way that it identifies a class of unauthorized uses of a patented invention and excuses those uses from infringement liability.   In particular, the statute allows unlicensed use of a patented invention for purposes “reasonably related to the development and submission of information under a Federal law which regulates the manufacture, use, or sale of drugs or veterinary biological products.

Holman notes that the district court has issued a judgment rejecting the safe harbor for these GM foods.  However, certain food additives do count as drugs under FDA rules.  The interesting thought is that a greater regulatory scheme monitoring the use of genetically modified organisms would likely result in a broader safe harbor.  In my view, the safe harbor is unlikely to apply because GMO foods have been classified in the GRAS category – Generally Regarded as Safe. Holman sees some potential that the Federal Circuit would arrive at the opposite conclusion.

Read: Holman, District Court Rejects Argument that Hatch-Waxman Safe Harbor Applies to Genetically Modified Crops at http://holmansbiotechipblog.blogspot.com/2012/11/district-court-rejects-argument-that.html.