Patent Law Blog (Patently-O)

Senate Confirms Evan Wallach as Next Federal Circuit Judge

In a unanimous vote, the Senate has confirmed President Obama's nomination of Judge Evan Wallach as Circuit Judge on the Court of Appeals for the Federal Circuit. In the mid-1990's Wallach was appointed by President Clinton as an Article III judge on the U.S. Court of International Trade (CIT) – handling disputes regarding import transactions and federal statutes affecting international trade. Although the court has limited subject matter jurisdiction, the CIT otherwise has general legal and equitable powers. Judge Wallach is already familiar with Federal Circuit judges and Federal Circuit practice because CIT decisions are appealed to the Federal Circuit. In addition to his work in international trade, Judge Wallach is recognized as a leading expert on the international law of war. During a decade of private practice, Wallach represented business and media interests at the Las Vegas firm of Lionel Sawyer. He is a Vietnam War veteran (army) and later served as a Judge Advocate General. In the 1980's Wallach also served as counsel for Senator Harry Reid. He holds degrees from Arizona (Journalism), Berkeley (JD), and Cambridge (LLB).

While Judge Wallach does not have extensive experience handling patent law issues. He did preside over a two-week patent infringement jury trial in Nevada. Mikohn Gaming Corp. v. Acres Gaming Inc., No. CV-S-97-1383 (D. Nev. Aug. 2, 2001).  In that case, the jury found the patent infringed and awarded $1.5 million in damages.

In his responses to questions from the Senate, Judge Wallach indicated his view that the “most important attribute of a judge” is: “Commitment to fundamental rule of law principles, including predictability, uniformity, transparency, neutrality and stare decisis.”

• Tony Dutra and Matt Osenga write more

Patent Reform Passes

H.R. 1249, the Leahy-Smith America Invents Act, passed the House today with broad bipartisan support. The Senate passed its version of the bill (S. 23) on March 8th by a vote of 95 to 5.

The House and Senate will now conference to attempt to work out differences between the bills and then a final vote on a compromise bill will have to take place (likely in the Senate). The final version will include a first-to-file regime but will not likely provide the USPTO with any guarantee of full funding.  

The litigation involving the interpretation of the many new provisions of the Bill will occupy Patently-O posts for at least the next decade.

iLOR v. Google: Rejected Claim Construction Does Not Render Case "Objectively Baseless"

By Jason Rantanen

iLOR, LLC v. Google, Inc. (Fed. Cir. 2011)
Panel: Rader, Linn, Dyk (author)

This case involved a district court exceptional case determination based a finding that the suit was objectively baseless and brought in bad faith.  iLOR, the assignee of Patent No. 7,206,839, sued Google for infringement of the '839 patent by Google's Notebook product.  In denying iLOR's request for a preliminary injunction, the district court rejected iLOR's proposed construction of the only claim term in dispute, subsequently granting summary judgment of noninfringement.  The Federal Circuit affirmed the district court's denial of the preliminary injunction, agreeing that the language of the claim, the specification and the prosecution history supported the district court's construction.  See iLOR, LLC v. Google, Inc., 550 F.3d 1067 (Fed. Cir. 2008).  Following the Federal Circuit's disposition of that appeal, the district court granted Google's request to recover its attorneys' fees and costs and expenses, finding the case exceptional on the ground that it was "not close" on the merits (i.e.: ("objectively baseless") and iLOR had acted in subjective bad faith.  iLOR appealed.

In reversing the district court, the CAFC first likened the exceptional case standard for a suit brought by a patent plaintiff (absent misconduct during patent prosecution or litigation) to that of willful infringement.  "The objective baselessness standard for enhanced damages and attorneys’ fees against a non-prevailing plaintiff under Brooks Furniture is identical to the objective recklessness standard for enhanced damages and attorneys’ fees against an accused infringer for § 284 willful infringement actions under In re Seagate Technology, LLC, 497 F.3d 1360 (Fed. Cir. 2007) (en banc)."  Slip Op. at 8-9.  Thus, just as willfulness requires an assessment of both objective and "subjective" (i.e.: known or so obvious that it should have been known) prongs, so too does the exceptional case determination. And just as for willfulness, the objective assessment "is to be determined based on the record ultimately made in the infringement proceedings."  Id. at 10.

Comment: At some points, the Federal Circuit's opinion is confusingly imprecise in its usage of "objective baselessness."  Although in some instances it refers to the "objective baselessness" standard as being identical to the overall objective recklessness standard for willfulness (which includes, according to the court, both objective and subjective elements), at other times it treats it as being identical to only the "objective" prong of the analysis.  The only reading that makes sense is that when the court indicates that "objective baselessness" is identical to the willfulness "objective recklessness" standard, what it is really referring to is the overall standard for an exceptional case determination based on a meritless case theory, while when it compares it to the "objective" prong of the willfulness analysis, it really is referring to "objective baselessness."

Applying this framework, the CAFC concluded that iLOR's claim construction was not objectively baseless, and thus it was unnecessary to consider the issue of subjective bad faith.  The CAFC pointed to iLOR's arguments supporting its proposed construction, which - although the court disagreed with them - had some merit.  The CAFC also commented on the difficulty of claim construction, "in which the issues are often complex and the resolutions not always predictable."  Id. at 13.  And the court noted that the fact that it "held oral argument and issued a precedential written opinion in the first appeal suggests that we did not regard the case as frivolous."  Id. at 13-14.  In short, "simply being wrong about claim construction should not subject a party to sanctions where the construction is not objectively baseless."  Id. at 14.

In re Glatt Air Techniques, Inc.: Single Embodiment Commercial Success

By Jason Rantanen

In re Glatt Air Techniques, Inc. (Fed. Cir. 2011)
Panel: Newman, Prost (author), Moore

Glatt Air Techniques involves the reexamination of Patent No. 5,236,503, relating to an improvement to an apparatus known as a Wurster coater used to coat particles such as pharmaceutical ingredients.  The improvement comprises a shield means, such as a physical shield or air wall, positioned adjacent the spray nozzle that prevents particles from prematurely entering the stream of the coating spray before the spray pattern has fully developed, thus causing blockages in the apparatus.  During reexamination, the examiner rejected the claim at issue as obvious in light of the prior art, a determination that was upheld by the Board of Patent Appeals and Interferences.  In reaching its conclusion, the Board also rejected Glatt's commercial success evidence because it related only to a single embodiment - a physical shield - and the claim also covered the use of an air wall.  Thus, the Board concluded, the evidence was not commensurate in scope with the claim.

On appeal, the CAFC first found that the Board had failed to establish a prima facie case of obviousness.  It also disagreed with the Board's rejection of Glatt's evidence of commercial success, expanding on its past holding that "commensurate" does not mean "every" embodiment.   "The fact that Glatt’s commercial products only contain one type of shielding means does not make its commercial success evidence irrelevant. Under the PTO’s logic, there would never be commercial success evidence for a claim that covers more than one embodiment."  Slip Op. at 10.  Citing past precedent, the CAFC went on to state that "we have consistently held that a patent applicant “need not sell every conceivable embodiment of the claims in order to rely upon evidence of commercial success.” Id. (quoting In re DBC, 545 F.3d 1373, 1384 (Fed. Cir. 2008).  Thus, "commercial success evidence should be considered should be considered 'so long as what was sold was within the scope of the claims.'” Id.

Comment: Note that simply being commensurate with the scope of the claim does not necessarily satisfy the nexus requirement, as illustrated by the outcome of In re DBC.

Update: PharmaPatents Blog provides a detailed discussion of the CAFC's reversal of the Board's prima facie case of obviusness, asking whether there was anything else the applicant could have done to avoid a rejection by the examiner and Board.   

Judge Moore Weighs In on Vacatur of Invalidity Opinions

By Jason Rantanen

The Ohio Willow Wood Company v. Thermo-Ply, Inc. (Fed. Cir. Order 2011)
Panel: Rader (author), Newman (additional views), Moore (concurrence)

When a patentee is faced with an judgment of invalidity or inequitable conduct, it is a relatively common tactic to settle with the accused infringer who, as a condition of the settlement agreement, then joins the patentee in a joint motion for vacatur of the adverse decision.  Although vacatur requires exceptional circumstances, it is sometimes granted by the district court.  See e.g., Gracenote, Inc. v. MusicMatch, Inc.; Block Financial v. LendingTree; New Medium v. Barco.

The situation becomes more complex, however, when settlement occurs while the case is on appeal. Willow Wood involves an appeal of an Eastern District of Texas judgment invalidating the asserted claims of Patent No. 7,291,182.  While the appeal was pending, the parties settled and filed a motion for remand to the district court for consideration of a motion for vacatur.  In July 2010, the CAFC issued an order pointing out the high standard for vacatur and ordered the parties to explain what extraordinary circumstances would be presented to the district court that would justify vacatur.  Ohio Willow Wood Co. v. Thermo-Ply, Inc., (Fed. Cir. Order July 29, 2010) (nonprecedential). 

After considering the parties' response, along with an intervention request by a third party also being sued for infringement of the patent, the panel granted the request for "the limited purpose of the district court's consideration of the parties' motion for vacatur."  Ohio Willow Wood Co. v. Thermo-Play, Inc. (Fed. Cir. Order 2011) (Willow Wood II). The CAFC retained jurisdiction, however, "so that any of the parties may seek appellate review by notifying the Clerk of the Court within thirty days of entry of the district court’s decision on remand."  Id. at 3.

Concerned about the remand's potential imprimatur on the joint vacatur motion, Judge Moore, writing in concurrence, expressed the opinion that vacatur of existing invalidity opinions should be a rare and disfavored event, particularly in the patent context.  Citing U.S. Bancorp Mortgate Co. v. Bonner Mall Partnership, 513 U.S. 18, 29 (1994), the judge reiterated the high threshold for justifying vacatur following settlement: "[o]nly in 'exceptional circumstances' should a district court grant vacatur at the request of the litigants."  Willow Wood II concurrence at 2.  This is particularly true with respect to patents:

In this case, for example, the patentee has already sued another party on the patent in question. If the decision that invalidated the patent at issue is not vacated, then the patentee will be collaterally estopped from asserting this patent in this and other suits, thereby saving courts and litigants the time and money it takes to proceed with patent litigation. Patent litigations are among the longest, most time-consuming types of civil actions. As of 2009, 384 patent cases had been pending in the district courts for three years or more. 2009 Admin. Off. U.S. Cts. Ann. Rep., at Table S-11. Moreover, the costs of patent litigation are enormous with an average patent case costing upwards of $3 million for each side. See American Intellectual Property Law Association, Report of the Economic Survey 2009 I-129 (2009). If the district court vacates its invalidity judgment then other defendants and other district courts will be forced to proceed with infringement suits, as there would likely be no collateral estoppel. Even if there were no other suits pending, these concerns should still weigh heavily against vacatur, as the only reason the patentee would want an invalidity judgment vacated is to potentially enforce the patent against others.

Concurrence at 3-4.

Judge Moore's decision to weigh in on the merits of the vacatur issue was criticized by Judge Newman, however, who wrote separately "to point out that the views of our colleague in separate concurrence are not the court’s remand order." Willow Wood II, additional views at 2.  Although favoring the remand on the basis that the district court is in the better position to rule on the issue of vacatur, Judge Newman declined to endorse Judge Moore's proffer of judicial advice, commenting that "[o]ur remand should be unencumbered by even the appearance of prejudgment or of the weight to be given to various considerations. Indeed, the issues on which our colleague in concurrence offers judicial advice are more complex than is here recognized."  Id.

In re Microsoft: Presence Created Solely for Purposes of Litigation Does Not Support Venue

By Jason Rantanen

In re Microsoft Corporation (Fed. Cir. Order 2011)
Panel: Newman, Friedman, Laurie (per curium)

The Federal Circuit's decision in In re Microsoft, which granted Microsoft's request for a writ of mandamus ordering the Eastern District of Texas to transfer the case to Washington State, originally issued as a nonprecedential order in early November; the CAFC reissued it as precedential today.  The order adds another piece to the now fairly substantial body of law surrounding review of denials of requests to transfer venue.  Allvoice Develop-ments, a company operated from the United Kingdom, sued Microsoft in the Eastern District of Texas for infringing Patent No. 5,799,273.  Microsoft, which is headquartered in the Western District of Washington (where a substantial portion of its employees and operations are located), requested a transfer of venue to Washington State. 

In denying Microsoft's motion to transfer venue, the district court relied on the existence of a local Allvoice office in Tyler, as well as Allvoice's incorporation under the laws of Texas.  The court also weighed the witness factor against transfer because Allvoice had identified potential non-party witnesses in New York, Massachusetts and Florida who, the court found, would find Texas more convenient for trial.  Although the court found that the sources of proof factor weighed in favor of transfer, it did so only slightly because Allvoice said that its documents were maintained in its office in the E.D. Texas. 

On appeal, the Federal Circuit granted Microsoft's request for a writ, likening this case to In re Genentech, Inc., 566 F.3d 1338 (Fed. Cir. 2009), and concluding that the district court abused its discretion by denying transfer.  The CAFC first noted that there was a vast disparity with respect to the convenience of witnesses: all individuals identified by Microsoft as having material information relating to the patents reside within 100 miles of the W.D. Wash.; all but two of the witnesses identified by Allvoice reside outside Texas, and even those two witnesses appear to be relatively peripheral.

Particularly notable, however, was the CAFC's refusal to consider Allvoice's presence in the E.D. Texas.  "Allvoice’s argument … rests on a fallacious assumption: that this court must honor connections to a preferred forum made in anticipation of litigation and for the likely purpose of making that forum appear convenient."  Slip Op. at 5.  Thus, just as transferring thousands of pages of relevant documents to the offices of litigation counsel in Texas in order to assert that the location of those documents favored non-transfer was entitled to no weight in In re Hoffmann-La Roche Inc., 587 F.3d 1333 (Fed. Cir. 2009), so too is the existence of an office created solely for the purpose of manipulating venue a meaningless fact for the venue analysis.  Nor did the CAFC ascribe any weight to extra step of incorporating under the laws of Texas, noting that it was done sixteen days before filing suit.

Judge Kathleen O'Malley Confirmed to the Federal Circuit

By Jason Rantanen

On Wednesday, the Senate confirmed Kathleen McDonald O'Malley to fill the vacancy left by Judge Schall when he took senior status.  Judge O'Malley currently serves as a U.S. District Judge for the Northern District of Ohio, and will be the only sitting Federal Circuit judge to have previously served as a district court judge.   She was nominated for her first judgeship by President Clinton in 1994, prior to which she served in government and private practice.  An earlier Patently-O discussion of Judge O'Malley is available here. 

Two vacancies on the CAFC remain unfilled and although nominees were proposed during the 111th Congress (Jimmie Reyna and Edward DuMont), those nominations were not acted on.  

Prometheus Laboratories v. Mayo: The Broad Scope of Statutory Subject Matter

By Jason Rantanen

Prometheus Laboratories, Inc. v. Mayo Collaborative Services (Fed. Cir. 2010)
Panel: Rader, Lourie (author), Bryson

Last Friday, the Federal Circuit released its second noteworthy post-Bilski decision (the first being Research Corp v. Microsoft).  The opinion, Prometheus v. Mayo, issued following a grant-vacate-remand order from the Supreme Court instructing the CAFC to revisit its original decision in light of Bilski.  Despite this procedural posture, however, the new opinion is quite similar to the old, arriving at the same conclusion through essentially the same reasoning.   

Prometheus initially came to the Federal Circuit following a district court grant of summary judgment of invalidity under § 101 (lack of patentable subject matter).  After the CAFC reversed the ruling of invalidity using its "machine-or-transformation" test, Mayo sought review by the Supreme Court.  The Court granted certiorari, vacated the CAFC decision, and remanded for consideration in light of its Bilski opinion.  Earlier Patently-O commentary includes a summary of the original Federal Circuit opinion and a discussion of the remand.

The patents-in-suit claim a method for determining whether a patient has received a therapeutically efficacious amount of drugs such as 6-mercaptopurine ("6-MP") and azthiopurine ("AZA"), which are used to treat inflammatory bowel diseases but can produce toxic side effects.  In the human body, these drugs metabolize into 6-MP metabolites, including 6-methylmercaptopurine ("6-MMP") and 6-thioguanine ("6-TG").  By administering the drug, measuring the subject's levels of 6-MMP and 6-TG and comparing them to pre-determined levels, toxicity can be minimized and efficacy maximized. 

Claim 1 of Patent No. 6,355,623 is representative:

1. A method of optimizing therapeutic efficacy for treatment of an immune-mediated gastrointestinal disorder, comprising:
    (a) administering a drug providing 6-thioguanine to a subject having said im-mune-mediated gastrointestinal disorder; and
    (b) determining the level of 6-thioguanine in said subject having said immune-mediated gastrointestinal disorder,
    wherein the level of 6-thioguanine less than about 230 pmol per 8x108 red blood cells indicates a need to increase the amount of said drug subsequently administered to said subject and
    wherein the level of 6-thioguanine greater than about 400 pmol per 8x108 red blood cells indicates a need to decrease the amount of said drug subsequently administered to said subject.

Although similar in most respects, some claims of the second patent-in-suit, No. 6,680,302, dispense with the "administering" step.

The Patents Do Not Claim a Physical Phenomena
On remand, the CAFC again rejected Mayo's argument that the '623 and '302 patents claim a "natural phenomenon."  In seeking a judgment of invalidity under Section 101, Mayo contended (and the district court agreed) that the "administering" and "determining" steps are merely necessary data-gathering steps for the use of the correlations between 6-TG and 6-MMP and therapeutic efficacy or toxicity in patients.  Because these correlations are simply natural phenomena, Mayo reasoned, they were unpatentable.

As before, the Federal Circuit disagreed, noting that Bilski provides a broad - although not unlimited - scope for patent protection, and “an application of a law of nature or mathematical formula to a known structure or process may well be deserving of patent protection.”  Slip. Op. at 12, quoting Bilski, 130 S.Ct. at 3230.  Furthermore, the court stated, neither the Supreme Court's order to vacate and remand the original Prometheus decision nor Bilski dictates a wholly different analysis or different result.  

The crux of the CAFC's determination that the asserted claims recite a patent-eligible application of naturally occurring correlations between metabolite levels and efficacy or toxicity as opposed to the natural correlation itself rests on the specific treatment steps recited by the claims: the "administering" step and the "determining" step.  "The inventive nature of the claimed methods stems not from preemption of all use of these natural processes, but from the application of a natural phenomenon in a series of steps comprising particular methods of treatment." Slip. Op. at 15-16.

In support of its conclusion, the court reiterated its earlier determination that the treatment methods in Prometheus's patents satisfy the "machine-or-transformation test.  Although this is not the exclusive test, post-Bilski, it nevertheless provides important clues to subject matter patentabilty.  In applying the machine-or-transformation framework, the court specifically rejected Mayo's argument that the disputed claims simply claim natural correlations and the associated data-gathering steps, broadly stating that the asserted claims are "claims to methods of treatment, which are always transformative when one of a defined group of drugs is administered to the body to ameliorate the effects of an undesired condition."  Slip Op. at 17.  Even leaving out the administration step does not make the claims unpatentable, as the CAFC also found the "determining" step to be transformative because it involves "[s]ome form of manipulation, such as the high pressure liquid chromatography method specified in several of the asserted dependent claims or some other modification of the substances to be measured, [which] is necessary to extract the metabolites from a bodily sample and determine their concentration."  Id. at 18.

In reaching this conclusion, however, the court was forced to distinguish its earlier decision In re Grams, 888 F.2d 835 (Fed. Cir. 1989), which similarly claimed a process that involved "(1) performing a clinical test on individuals and (2) based on the data from that test, determining if an abnormality existed and determining possible causes of any abnormality by using an algorithm."  Id. at 20.   Unlike the claims in Grams - which the CAFC found unpatentable "because the tests were just to 'obtain data'" (Slip Op. at 20) - the claims of the Prometheus patents "require the performing of clinical tests on individuals that were transformative." 

Mental Steps
In addition to its overarching analysis of the subject matter issue, the opinion also includes an interesting discussion of the use of mental steps in patent claims.  Although the CAFC agreed that the final "wherein" clauses are mental steps, "A subsequent mental step does not, by itself, negate the transformative nature of prior steps. Thus, when viewed in the proper context, the final step of providing a warning based on the results of the prior steps does not detract from the patentability of Prometheus’s claimed methods as a whole." Slip Op. at 21. Because no claim in the Prometheus patents claims only mental steps, "contrary to Mayo’s assertions, a physician who only evaluates the result of the claimed methods, without carrying out the administering and/or determining steps that are present in all the claims, cannot infringe any claim that requires such steps." Id.

Additional Commentary
In addition to an extensive discussion about the decision in response to Dennis's post on Sunday, other sites commenting on the decision include:

• Patent Docs
• patents4life
• IP Watchdog
• Chris Holman's IP Blog
• Hal Weger of Foley has suggested that another grant of certiorari may be down the road, given the opinion's refusal to discuss a three-Justice dissent from the dismissal of certiorari in Lab. Corp., 548 U.S. 124, that was cited with approval by five Justices in two concurrences in Bilski.

The Federal Circuit's Use of Legal Scholarship

By Jason Rantanen

Professors Lee Petherbridge and David Schwartz have released a draft of their new study on the use of legal scholarship by the Federal Circuit.  In the paper, the authors question the conventional wisdom that the Federal Circuit is less likely than other circuit courts of appeals to use legal scholarship in its decision making, and conclude that this oft-repeated claim is contrary to the empirical evidence. 

Methodology and Dataset:  The authors conducted a search of all the reported opinions for the United States circuit courts of appeals for the years 1990-2008 using a mechanical approach to identify each opinion citing to legal scholarship at least once, followed by a custom-made computer program that identified individual citations to legal scholarship. 

Findings: Contrary to result expected under the conventional wisdom, the authors found that the Federal Circuit's use of legal scholarship is similar to that of the regional circuits.  Although it falls on the lower end of the spectrum of judicial citations, the overall frequency with which the CAFC cites legal scholarship is within the range expressed by the regional circuits, and the median frequency of citations per judge falls around the middle of the regional circuits.

The authors also discovered that, unlike some of the high-frequency-of-citation regional circuits, the Federal Circuit lacks any legal scholarship "super citers," such as Judges Posner, Easterbrook, Calibresi, Becker, and Kozinski, which may explain why its overall citation frequency falls on the lower end of the regional circuits.   

Implications: Based on their empirical analysis, the authors conclude that the "claim that the Federal Circuit does not use legal scholarship as much as it should because it does not use it as often as the regional circuit courts of appeals is essentially eviscerated."  Thus, the authors recommend that future scholarship should focus on the merits of the Federal Circuit's use of scholarship, asking questions about when and how the court uses legal scholarship.

The authors also suggest that adding or encouraging an existing judge to become a "super citer" might be beneficial.  They reason that having a small number of judges who regularly study and use legal scholarship allows that scholarship to make its way into the jurisprudence at a measured rate, where it can be considered by the remaining judges who rely on more traditional tools for developing the law.  This mechanism encourages jurisprudential innovation while preventing sudden dramatic shifts. 

Read the Paper: Download here.

In re Vistaprint Ltd.: Venue Transfer Denied

By Jason Rantanen

In re Vistaprint Ltd. (Fed. Cir. 2010)
Panel: Gajarsa, Schall (author), and Moore

In a counterpoint to its recent decision in In re Acer, this morning the Federal Circuit denied a request for a writ of mandamus seeking transfer of venue out of the Eastern District of Texas.  The underlying action was bought by ColorQuick, LLC, which holds a patent relating to the preparation of production data for printing, against Vistaprint Limited and OfficeMax Incorporated.  As in Acer, none of the parties resided in Texas: Vistaprint, a foreign corporation, has a wholly-owned subsidiary in Massachusetts; OfficeMax is a Delaware corporation with its principal place of business in Illinois; and ColorQuick is a New Jersey corporation.  Both the panel and author in this appeal were identical to the panel and author that granted the writ in In re Acer.

In denying the request for a writ, the CAFC acknowledged the lack of residency, but ruled that the district court did not abuse its discretion in denying transfer.  The panel first noted that although a trial court has broad discretion in transfer decisions pursuant to 28 U.S.C. § 1404(a), "that is not the same as saying that it may accord weight simply as it pleases."  Slip Op. at 4.  Applying that standard, the panel concluded the district court's weighing of factors in this case did not amount to a "patently erroneous result."  Id. (quoting In re Volkswagen of Am., Inc., 545 F.3d 304, 310 (5th Cir. 2008) (en banc)). Specifically, the CAFC concluded that the district court had not abused its discretion in weighing two factors relating to judicial economy: that the trial court had gained substantial experience in construing the claims of the same patent during a prior litigation and that there was a related case currently pending before the same court.

The CAFC also rejected the petitioners' argument that it is always improper for a district court to deny transfer based on judicial economy when all of the convenience factors clearly favor transfer.  While the court noted the importance of the convenience factors, it also recognized that "§ 1404(a) commits the balancing determination to the sound discretion of the trial court based not on per se rules but rather on an 'individualized, case-by-case consideration of convenience and fairness.'"  Slip Op. at 6-7 (quoting Van Dusen v. Barrack, 376 U.S. 612, 622 (1964)).  In this specific case, the CAFC could not conclude that "the trial court's balancing was so unreasonable as to warrant the extraordinary relief of mandamus."  Id. at 8.

Note: The opinion's final footnote appears to summarize the panel's overarching view on mandamus petitions directed to the venue transfer issue.  It states:

Our holding today does not mean that, once a patent is litigated in a particular venue the patent owner will necessarily have a free pass to maintain all future litigation involving that patent in that venue. However, where, as here, the trial court performed a detailed analysis explaining that it is very familiar with the only asserted patent and the related technology, and where there is a co-pending litigation before the trial court involving the same patent-in-suit, and pertaining to the same underly-ing technology and accusing similar services, we cannot say the trial court clearly abused its discretion in denying transfer.

Guest Post: Origins of the Clear and Convincing Standard

Guest Post by Professor Jeffrey Lefstin (U.C. Hastings)

Microsoft’s petition for certiorari in the i4i case challenges the Federal Circuit’s rule that patent invalidity must be proven by “clear and convincing evidence,” even when the defense rests on prior art not considered by the PTO. Nearly all of the briefs filed in the case, and nearly all academic commentary as well, assume that the rule was devised by the Federal Circuit early in its history. For example, one brief asserts that the “position of the Federal Circuit traces to dicta in a 1983 Federal Circuit panel decision [Connell v. Sears, Roebuck & Co.] that gave no reasoning and cited no authority whatsoever.”

The actual history of the rule challenged in i4i is rather different. The rule was not a creature of the Federal Circuit, but rather of its predecessor court, the Court of Customs and Patent Appeals. The CCPA held in Astra-Sjuco v. ITC, 629 F.2d 682 (CCPA 1980) that patents must be proven invalid by clear and convincing evidence. It had already held, in Solder Removal Co. v. ITC, 582 F.2d 628 (CCPA 1978), that the statutory presumption of validity is not weakened when a challenger introduces prior art not considered by the PTO.

In its first decision, South Corp. v. United States, 690 F.2d 1368 (Fed. Cir. 1982), the Federal Circuit adopted the CCPA’s case law as controlling precedent. The Federal Circuit’s early cases were quite clear: in holding that the presumption of validity was unaffected by prior art not before the PTO, the court was following the binding precedent of the CCPA, rather than creating a new rule of law.[1]

How did the CCPA, which ordinarily heard appeals from the PTO, come to create a rule governing patent litigation? Under the Trade Act of 1974, the International Trade Commission was given the power to bar importation of articles that would infringe U.S. patents. In its final years, the CCPA heard a handful of appeals – Astra-Sjuco and Solder Removal among them – from infringement complaints decided by the ITC.

It is probably not coincidental that the CCPA devised a patentee-friendly rule. For most of its history, the CCPA heard only appeals from the PTO. From this perspective it saw only the benefits of the patent system: inventors bringing their inventions to the PTO. Even in the ITC infringement cases, the CCPA saw only domestic patentees who might be injured by foreign competition.

In contrast, the regional Circuit Courts of Appeals, in their many years’ experience with infringement cases, routinely saw the costs of the patent system: infringers, perhaps even innocent infringers, who were nonetheless forced to pay heavy damages and abandon otherwise legitimate and productive activity. Given that perspective, it is not surprising that prior to 1982, several of the Circuit Courts of Appeals had held that the presumption of validity should be weakened when a challenger presents prior art not considered by the PTO. But intentionally or not, when the Federal Circuit adopted the CCPA’s precedent in South Corp., it instantly consigned any conflicting precedent from the Circuit Courts to the dustbin of history.

However, the precedent from the CCPA is not the end of the story. In South Corp., the Federal Circuit adopted not only the precedent of the CCPA, but also of its other predecessor court:  the United States Court of Claims. The Court of Claims heard patent infringement actions brought against the United States government under 28 U.S.C. § 1498, and the Federal Circuit has repeatedly held that the patent jurisprudence of the Court of Claims is binding upon it. (Most notably, the Federal Circuit maintained that the Court of Claims’ decision in Pitcairn v. United States compelled its narrow view of the experimental use defense in Roche, Embrex, and Madey.)

There was a long line of precedent from the Court of Claims holding unequivocally that the presumption of validity was weakened when a challenger introduced prior art not considered by the PTO: General Elec. Co. v. United States, 572 F2d 745, 761 (Ct. Cl. 1978); Douglas v. United States, 510 F.2d 364, 369 (Ct. Cl. 1975); Nossen v. United States, 416 F.2d 1362, 1371 (Ct. Cl. 1969); Ellicott Mach. Corp. v. United States, 405 F.2d 1385, 1392 (Ct. Cl. 1969); Martin-Marietta Corp. v. United States, 373 F.2d 972, 977 (Ct. Cl. 1967). As far as I can determine, the Federal Circuit has never taken note of these decisions. But under the Federal Circuit’s own case law, the line of authority descending from the Court of Claims is just as binding as that of the CCPA.

Note: Prof Lefstin discusses the how the CCPA’s unique perspective shaped the law it bequeathed to the Federal Circuit in a paper forthcoming in the Loyola of Los Angeles Law Review, available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1565818.

---

[1] See, e.g., D.L. Auld Co. v. Chroma Graphics Corp., 714 F.2d 1144, 1147 n.2 (Fed. Cir. 1983).

The Federal Circuit and Inequitable Conduct: Part III

By Jason Rantanen

Yesterday, I discussed our conclusion that the Federal Circuit applies a stricter standard than the lower tribunals it reviews and that this preference for patentee success manifests through the intent to deceive component of the inequitable conduct analysis.   In this post, I raise some broad ideas about inequitable conduct jurisprudence.  The paper raises others as well, but the ones that follow offer a good perspective into what we believe may be going on. 

The first idea is that the Federal Circuit might be applying a standard for intent to deceive that is higher than that required by its own caselaw.  In other words, the Federal Circuit’s articulated standard – intent greater than gross negligence – might be lower then the court’s normative perspectives on inequitable conduct.  At least some circuit judges might be applying a requirement more akin to knowledge or purpose.  This idea finds some support in the empirical evidence.  Our data indicate that patentee win rates can vary dramatically (from 40% to 100%) depending on the judge authoring the opinion, as the below graph of 14 judges who sat on the bench during the past decade illustrates. 

Following closely from this first idea, and also suggested by the Figure, is the notion that when it comes to inequitable conduct the Federal Circuit might be having trouble communicating its standard – particularly with respect to intent – because it is not speaking with one voice.  If the mental state standard applied at the appellate level differs between judges, lower tribunals might have a difficult time “locking on” to the Federal Circuit’s standard.  This problem could be amplified by the fact that, as we have shown, the Federal Circuit does not seem to have balancing jurisprudence, which theoretically would address mental state standards above the threshold.  Thus, rather than having a single standard for intent to deceive that is further refined through the balancing inquiry, Federal Circuit jurisprudence might have at least two distinct (and somewhat bipolar) mental state requirements, one higher than the other.  This state of affairs might produce jurisprudential variation (and perhaps confusion among district courts), and might concentrate (as we have observed) inequitable conduct’s focus on intent to deceive.

Another idea the paper raises is that uncertainty around the standard might reflect jurisprudential design (albeit, probably unintentional jurisprudential design).  For example, perhaps the Federal Circuit believes inequitable conduct doctrine is necessary to protect the integrity of the patent system, but is strongly biased against successful (for the patent challenger) inequitable conduct claims.  Thus, the court might desire to maintain the threat of inequitable conduct so as to encourage patent applicants to take appropriate care in dealing with the public.  Yet allowing too many findings of inequitable conduct might be equally bad, as it could lead the public to question the validity of the patent system altogether, and moreover might invite the “plague” of overasserting inequitable conduct so frequently warned about.  An obfuscated standard for intent to deceive might be just right for balancing these concerns, because it provides a structural context that allows the Federal Circuit to maintain the threat of inequitable conduct – and keep the patent bar in line – but rarely find inequitable conduct.  In effect, this structure encourages patentees to police themselves, and also creates a mechanism by which private parties are responsible for ensuring that patent applicants do not misbehave towards the government, i.e., the law sets up a system that mostly enforces itself. 

The entire paper, which also includes additional observations, ideas, and recommendations, can be downloaded here, and we welcome all comments.  In addition to responding below, comments can be sent to us directly at prm.icpaper@gmail.com.  If the download link does not work for you, and you would like a copy of the paper, please email the above address and I will be happy to send you a PDF.

The Federal Circuit and Inequitable Conduct: Part II

By Jason Rantanen

Part II of this series describes the methodology used in our working paper The Federal Circuit and Inequitable Conduct: An Empirical Analysis, and summarizes some of the key findings.  You can download the entire paper here.  In addition to responding below, comments can be sent either directly to us or to prm.icpaper@gmail.com.

Methodology
The study uses the technique of “content analysis,” which permits researchers to systematically read and empirically analyze the text of judicial opinions.  In broad terms, we first screened all Federal Circuit opinions that contained the term “inequitable conduct” to identify cases that analyzed the issue.  We read all of these cases, coding pertinent information from each independent analysis of inequitable conduct.¹  Overall, we coded information from 361 inequitable conduct analyses between the years 1983 and 2010.  The coded information constitutes the empirical data, and the paper reports these data using a variety of statistical presentations and arguments. 

Results
We first examined patent applicants’ success before the Federal Circuit as opposed to lower tribunals.   Our analysis reveals that patentees are quite likely to succeed before the Federal Circuit, winning 76% of the time, a rate of success higher than that observed in the lower tribunal judgments the court is analyzing.  Overall, the Federal Circuit affirms lower tribunal findings of no inequitable conduct 91% of the time, but affirms findings of inequitable conduct only 45% of the time, as illustrated by the below graphs.  This suggests to us that the Federal Circuit is applying a stricter standard than in the lower tribunal opinions it reviews.



 
We next looked at the analytical structure of the inequitable conduct doctrine, which consists of three components: a materiality inquiry, an intent to deceive inquiry, and a discretionary judicial balancing of materiality and intent undertaken with a view toward deciding whether a patent applicant acted inequitably toward the public. 

Examining the data in this light revealed two key findings.  First, when the Federal Circuit gives a single reason for patentee success, that reason is nearly two and a half times more likely to be lack of intent to deceive than it is to be lack of materiality.  Second, balancing is expressly discussed only 8% of the time and forms the basis for a reversal only 2% of the time.  We think this means that the balancing inquiry does not play much of a substantive role in Federal Circuit inequitable conduct jurisprudence.  To be clear, while it looks like lower tribunals need to engage in this step of the analysis, the Federal Circuit does not seem to have any jurisprudence that guides or constrains how lower tribunals actually apply this step.  Instead, balancing at the Federal Circuit looks like a formality, such as checking a box or touching a base, as opposed to a meaningful guide to determining whether a patent applicant engaged in equitable conduct.

* * *

¹In other words, if a case involved a claim that four patents were procured by inequitable conduct and the court’s analysis addressed all of the patents in a single textual analysis or rationale, then a single record entry was made in the dataset.  By contrast, if the court used one textual analysis or rationale to find, perhaps, that one of the patents was procured inequitably, and then used a single textual analysis or rationale to find that the other three were not, then two record entries were made in the dataset.

The Federal Circuit and Inequitable Conduct: Part I

By Jason Rantanen

Professor Lee Petherbridge, Ali Mojibi and myself are circulating a draft of our paper Inequitable Conduct and the Federal Circuit: An Empirical Analysis for comment.  The underlying study examines the content of the entire body of Federal Circuit inequitable conduct jurisprudence, and the paper offers several interpretations of the reported data.

Among the most interesting are: that the Federal Circuit seems to apply a stricter standard for inequitable conduct than a substantial number of the tribunals it reviews; that the Federal Circuit’s inequitable conduct standard is applied primarily through the intent to deceive component of the analysis; and that while the apparent lack of clarity in the inequitable conduct standard may be a result of judicial variation on the court, it may also represent a preference by the Federal Circuit to effect a jurisprudential design, the purpose of which is to encourage good faith behavior on the part of patent applicants while only rarely finding inequitable conduct. 

The abstract reads as follows:

Inequitable conduct is unique judicially created doctrine designed to punish patent applicants who behave inequitably toward the public in the course of patent acquisition.  Its name alone strikes fear into the hearts of patent prosecutors, and justly so – for when successfully asserted, inequitable conduct can have devastating consequences that reach far beyond a patentee’s case.  The need for a systematic empirical study of inequitable conduct jurisprudence has become especially pressing now that the Federal Circuit is reviewing inequitable conduct en banc – in terms so broad as to be unprecedented in the history of the doctrine.  This Article reports such a study. 

The study reported here provides evidence, inter alia, that the Federal Circuit applies an inequitable conduct standard stricter than that applied by a substantial number of the tribunals it reviews.  The Federal Circuit’s stricter standard manifests primarily through the intent to deceive component of inequitable conduct doctrine.  For all intents and purposes the Federal Circuit has no substantive jurisprudence around the balancing component, and the materiality component is comparatively less impactful then intent to deceive.  The court appears to have trouble communicating its stricter standard to lower tribunals.  We offer some explanations for why this might be so, and offer some modest suggestions that might advance inequitable conduct doctrine.

The complete Article can be downloaded here.   As this is a work in progress, we are particularly interested in any comments, including alternate explanations for the results we discuss.  In addition to responding below, comments can be sent to us directly or to prm.icpaper@gmail.com.

Judge Jimmie V. Reyna

President Obama has announced the nomination of Jimmie V. Reyna to fill the open slot on the Court of Appeals for the Federal Circuit that was created when Judge Mayer moved to Senior Status in June 2010. The Spring 2010 nominations of Kathleen O'Malley and Ed DuMont are still pending Senate confirmation. Federal Circuit Judges Newman, Lourie, Gajarsa, Dyk, and Bryson are all eligible to take senior status.

Reyna has an all-star reputation as head of the International Trade practice of the Williams Mullen firm.  His professional focus fits well within the Federal Circuit's jurisprudence over  international trade decisions by the Court of International Trade (CIT) and the International Trade Commission (ITC). Reyna has also been an active member of Hispanic legal community and the majority of his work appears to involve US-Mexico trade. His third book on international trade will be published later this year.

Guest Post: The Great Haste and Less Milling of Beer v. United States

 

Guest Post: The Great Haste and Less Milling of Beer v. United States (Fed. Cir. 2010, cert. pet. pending)

By Andrew Dhuey

When patent litigators hear the term “rocket docket”, they usually think of the U.S. District Court for the Eastern District of Virginia, long-known for its dedication to accelerated justice. The term doesn’t usually call to mind the U.S. Court of Appeals for the Federal Circuit, though its docketing-to-disposition time has averaged a reasonable 9-10 months. The recent case of Beer v. United States, however, shows that it is possible to have the Federal Circuit decide your appeal on the merits and rule on your en banc hearing petition in a mere 85 days, docketing to disposition.

Beer concerns a newsworthy issue dear to the hearts of federal judges: their pay. Eight current and former federal judges seek to recover cost-of-living adjustments Congress promised federal judges in 1989, but failed to deliver in 1995-97, 1999 and 2007. While the Beer parties disagreed on whether this deprivation of COLAs was an unconstitutional diminishing of judicial pay, they all agreed that the Federal Circuit rejected this exact position in Williams v. United States (Fed. Cir. 2001). In 2002, the Supreme Court denied cert. in Williams over the dissent of Justice Breyer, joined by Justices Scalia and Kennedy.

With the issue resolved in Williams, why did these federal judges raise the same pay issue again in a 2009 U.S. Court of Federal Claims case? The answer rests not with any changes in the law, but instead with changes in the makeup of the Supreme Court. All four justices who joined the court since 2002 (Chief Justice Roberts and Justices Alito, Sotomayor and Kagan) replaced justices who voted to deny cert. in Williams. Assuming the Beer judges still have the three Williams dissenters on their side, they can win on the merits with two of the four newest justices.  

Of course, before they could even file their cert. petition, the Beer judges needed to work their way through the Claims and Federal Circuit courts. To expedite that process, the judges conceded that both the Claims court and the Federal Circuit panel were bound to follow Williams. Their purpose was to overturn Williams, which could only be done by the Federal Circuit sitting en banc, or by the Supreme Court.

On Nov. 3, 2009, thirteen days after filing their notice of appeal at the Federal Circuit, the Beer appellants filed a Petition for Initial Hearing En Banc or, in the Alternative, Motion for Summary Affirmance. Alas, the clerk’s office rejected this filing since the appellants included a copy of their trial court complaint, and that apparently is not okay. [Side note to Judge Beer, et al: none of your court clerks can hold a candle to Federal Circuit clerks when it comes to finding a way to reject a filing]. Appellants’ counsel, Christopher Landau of Kirkland & Ellis, resolved this problem the following day, and the case was then before all 12 active Federal Circuit Judges.

On Jan. 15, 2010, the court denied the petition for initial hearing en banc over the dissent of then-Chief Judge Michel, joined by Judges Lourie and Moore, and the separate dissent of Judge Newman. With that denial of the en banc petition, a three-judge panel granted the Beer appellants’ motion for summary affirmance, with a concurrence by Judge Mayer, who reiterated his previous view that Williams was wrongly decided, but that “neither Congress nor the Supreme Court has done anything in the interim that would warrant this court taking the matter up again.” The Federal Circuit had thus resolved Beer on the merits, en banc, only 85 days after docketing.  

So what, you ask? How could this possibly be of interest to you, a patent litigator? Well, you have a point – you probably won’t have occasion to stipulate at the district court or the BPIA, and on appeal, that your client is toast due to applicable, binding Federal Circuit case law. But some patent litigants are out to make a big, precedential splash (e.g. ,the ACLU in its challenges to the BRCA gene patents). Perhaps in some of these “big picture” cases, a litigant has no realistic hope on the merits, absent the overruling of a Federal Circuit panel decision. [This was not the case for the ACLU, which actually won at the district court].  Or perhaps obliterating a binding precedent would be so valuable to a litigant (e.g., a “frequent defendant”) that it would be willing to concede away weak but non-frivolous arguments on the merits in order to directly attack the harmful precedent, post haste.

Maybe you’ll never have a Beer, but in the right, highly-exceptional patent case, you might want to use the Beer strategy.

Andrew Dhuey is an appellate lawyer last seen being chased by a flower-carrying guy in a dress.

Federal Circuit Splits on Validity of Means Plus Function Claim

Telcordia Technologies, Inc. v. Cisco Systems (Fed. Cir. 2010)

Chief Judge Rader and Judge Prost sparred over the level of explanation necessary to ensure that a means plus function (MPF) claim is found definite. The Patent Act (35 U.S.C. 112 p6) permits claim limitations written as a "means or step for performing a specified function." The statute provides that an MPF "claim [limitation] shall be construed to cover the corresponding structure, material, or acts described in the specification and equivalents thereof." However, the claim will be found indefinite and therefore invalid if the specification fails to include at least some structure that is clearly linked or associated with the claimed function. “The question is not whether one of skill in the art would be capable of implementing a structure to perform the function, but whether that person would understand the written description itself to disclose such a structure.” (Quoting Tech. Licensing Corp. v. Videotek, Inc., 545 F.3d 1316, 1338 (Fed. Cir. 2008)).

Telcordia's patent in this case is directed to a double-ring network that is designed to withstand either a line-cut or a failed node. One element of the claim requires a "monitoring means, associated with the first ring and the second ring, for evaluating the integrity of the multiplexed subrate communications on the first ring and the second ring."

Writing for the majority, Chief Judge Rader (joined by Judge Lourie) held that the claimed "monitoring means" had been properly described in the specification. The dissent cited the same precedent but could not find anything in the specification that links disclosed structures to the claimed function. In discussing the opinion, Foley's Hal Wegner described the opinion as "pitting the leader of the older generation [of Federal Circuit Judges] against a contender from the next generation."

Stats: About 15% of newly issued patent included at least one claim having an MPF limitation. And, of those patents that include an MPF limitation, about half recite fewer than five such limitations. It appears that attorneys are using MPF claim language primarily as a back-up. Longer claim-sets are more likely to include means-plus function language. Thus 21% of patents with above-average-sized claimsets (by character count) include a means-plus-function limitation while only 11% of patents with below-average-sized claimsets include an MPF limitation. Looking claim-by-claim, I found that only 3% of the recently issued patents include means-plus-function limitations in every independent claim. Patents with MPF terms are more frequently associated with non-assigned patents (usually individual inventors). Patents arising from certain countries are much more likely to include MPF limitations. The chart below looks at the most common foreign filing jurisdiction for priority claims and reports the percentage of US patents arising from those foreign filings that include MPF limitations. [More Data]

 

Bilski v. Kappos and the Anti-State-Street-Majority

The 1998 Federal Circuit decision in State Street Bank opened the door to patent protection on a wider variety of innovations — especially in the fields of business methods and software. State Street held that an invention should be patent eligible under 35 U.S.C. §101 if it involves some practical application and “it produces a useful, concrete and tangible result.”

Although not rejected by the majority opinion, it is clear that the broad “useful, concrete, and tangible result” test is dead. That test is conclusively rejected by what I term the Anti-State-Street Majority — a majority created by the combining the two concurring opinions in Bilski and their five-justice majority. The result is that the scope of patentable subject matter is certainly narrowed from its 1998 high-water-mark.

* * * * *

In Bilski v. Kappos (2010), the majority opinion neither endorses nor rejects State Street — writing instead that “nothing in today’s opinion should be read as endorsing interpretations of §101 that the Court of Appeals for the Federal Circuit has used in the past. See, e.g., State Street, 149 F. 3d, at 1373; AT&T Corp., 172 F. 3d, at 1357.”

The two concurring opinions in Bilski (2010) both explicitly reject the Useful-Concrete-And-Tangible-Result test of State Street. Justice Stevens writes that “it would be a grave mistake to assume that anything with a ‘useful, concrete and tangible result,’ may be patented. (Justice Stevens concurrence at FN 1). Justice Breyer reiterated his prior statement that “if taken literally, the statement [that anything which produces a useful, concrete, and tangible result, is patentable] would cover instances where this court has held the contrary.” (Justice Breyer concurrence). The two concurrences are in agreement on this point and are signed by five Supreme Court Justices — leading to a second majority on that particular point.

Of course, in its In re Bilksi decision, the Federal Circuit already repudiated State Street as inadequate and "insufficient to determine whether a claim is patent-eligible under § 101."

Cumulatively, this means that the broadest notion of patentable subject matter as represented by State Street is not the law. Although not "the test" it appears that the USPTO will continue to use the machine-or-transformation test as a "tool" for determining whether particular process claims fit within Section 101. A recent Post-Bilski notice to examiners indicated as much:

Examiners should continue to examine patent applications for compliance with section 101 using the existing guidance concerning the machine-or-transformation test as a tool for determining whether the claimed invention is a process under section 101. If a claimed method meets the machine-or-transformation test, the method is likely patent eligible under section 101 unless there is a clear indication that the method is directed to an abstract idea. If a claimed method does not meet the machine-or-transformation test, the examiner should reject the claim under section 101 unless there is a clear indication that the method is not directed to an abstract idea. If a claim is rejected under section 101 on the basis that it is drawn to an abstract idea, the applicant then has the opportunity to explain why the claimed method is not drawn to an abstract idea.

I'm sure that our notion of the law will continue to develop as the Bilski decision makes its way into daily practice.

• Bilski v. Kappos: A Preliminary Analysis of the Opinion
• Bilski v. Kappos: Read the Opinion

Blackboard: Federal Circuit Again Find Software-Related Means-Plus-Function Claims Invalid for Failing to Disclose Sufficient Structure

Blackboard v. Desire2Learn (Fed. Cir. 2009) 08-1368.pdf

Blackboard's patent covers an internet-based educational support system and method. (U.S. Pat. No. 6,988,138). On summary judgment, the district court (Judge Clark, E.D. Tex.) found claims 1-35 invalid as indefinite, but a jury found found that Desire2Learn liable for infringement of claims 36-38. On appeal, the Federal Circuit agreed that Claims 1-35 are indefinite, and – after altering the claim construction – held that the remaining claims were also invalid as anticipated.

Means-Plus-Function: Blackboard's seemingly broadest claim (claim 1) includes several means-plus-function clauses, including a "means for assigning a level of access and control." The specification briefly discusses an "access control manager" (ACM) with an "access control list." On appeal, however, the court found that brief description to be an insufficient "disclosure of the structure that corresponds to the claimed function" and consequently indefinite under 35 U.S.C. §112 ¶2. See In re Donaldson, 16 F.3d 1189 (Fed. Cir. 1994)(en banc).

"[W]hat the patent calls the 'access control manager' is simply an abstraction that describes the function of controlling access to course materials, which is performed by some undefined component of the system. The ACM is essentially a black box that performs a recited function. But how it does so is left undisclosed."

Important for patent drafter, means-plus-function claims require disclosure in the specification even if the means are already well known in the art.

The fact that an ordinarily skilled artisan might be able to design a program to create an access control list based on the system users' predetermined roles goes to enablement. The question before us is whether the specification contains a sufficiently precise description of the "corresponding structure" to satisfy section 112, paragraph 6, not whether a person of skill in the art could devise some means to carry out the recited function.

Because claims 2-35 all depend upon claim 1, they are all invalid as indefinite

Claim construction: At the trial, Blackboard's expert could only identify one difference between claims 36-38 and the prior art. Namely, that the Blackboard patent identified a "single login" feature that allowed one user to have various roles within the system. "For example, Blackboard asserted that its claimed method would allow a graduate student who was a student in one course and a teacher in another to use a single login to obtain access to both courses and to obtain access to the materials for each course according to the graduate student’s role in each." However, on appeal, the Federal Circuit determined that the claims do not actually require that feature -- leading them to hold the claims invalid based primarily on the admissions of Blackboard's own expert.

[O]nce the claims are properly construed, the conclusion of anticipation is dictated by the testimony of Blackboard’s own witnesses and the documentary evidence that was presented to the jury. Based on that evidence, and in the absence of a “single login” requirement in claims 36-38, it is clear that the prior art contains every limitation of those claims.

Defendant Desire2Learn wins a complete victory (after a few million in attorney fees).

Federal Circuit Awards Sanctions for Frivolous Appeal

E-Pass v. 3Com, Palm, Visa, et al. (Fed. Cir. 2009)

This litigation began in 2000 when E-Pass sued for infringement of its electronic credit card patent. Patent No. 5,276,311. The district court granted summary judgment of non-infringement, which was affirmed on appeal. The district court then found the case exceptional under 35 U.S.C. § 285 and awarded attorneys' fees to the defendants. E-Pass appealed that judgment. In a counter-motion, PalmSource also asked for attorneys fees for the appeal – arguing that the appeal was frivolous as well. The Federal Circuit affirmed the trial court without opinion, but wrote an extensive opinion finding a frivolous appeal.

Frivolous Appeal: An appeal is frivolous if the appellant fails "to present cogent or clear arguments for reversal." In addition, the court may award sanctions based on misconduct or misrepresentations to the appellate court.

Here, the court found that E-Pass did not present any specific argument relating to the attorney fees for one of the defendants – PalmSource. Instead, the plaintiff-appellant focused on its case against the other defendants. E-Pass did not "challenge any finding of the district court relating to litigation misconduct in the case against PalmSource." Furthermore, E-Pass did not change its strategy even after being notified of PalmSource's frivolous appeal argument. Adding to E-Pass's problems are "multiple misrepresentations" to the Federal Circuit – primarily in referring to the defendants collectively when each stood in different situations. Perhaps the straw-that-broke-the-camel's-back was E-Pass's use of the quote that "a trial court may only sanction the patentee if both the litigation is brought in subjective bad faith and the litigation is objectively baseless." With the help of PalmSource and the CAFC clerks, the court easily found that a critical exception to the sanctions rule had been left off. Notably, the full quote reads: "Absent misconduct in the litigation or in securing the patent, a trial court may only sanction the patentee if both the litigation is brought in subjective bad faith and the litigation is objectively baseless."

Sanctions and attorney fees granted against E-Past and its counsel, jointly and severally.

In dissent, Judge Bryson saw serious misconduct, but would not have imposed sanctions.

Accepting that in those regards E-Pass’s briefs on appeal fell short of the standards we expect of counsel in this court, I nonetheless conclude that the shortfall is not so egregious as to call for the imposition of sanctions.

Tafas v. Doll: Continuation Limits Invalid; Limits on Claims and RCEs are OK

Tafas v. Doll (Fed. Cir. 2009)

The PTO has attempted to implement new rules that limit both the number of continuation applications that may be filed and the number of claims that may be included within each application. The district court issued a summary judgment ruling that blocked implementation of the rules. On appeal, the Federal Circuit has vacated-in-part – finding that some of the limitations on continuations improperly conflict with 35 U.S.C. § 120, but that the remaining limits are "within the scope of the USPTO's rulemaking authority." The case is not finally decided. Rather, the lower court must now decided whether any of the rules are "arbitrary and capricious;" conflict with the Patent Act in ways not already addressed; violated proper rulemaking procedure; are impermissibly vague; or impermissibly retroactive.

Final Rule 78 (Continuations): The PTO's Final Rule 78 would have required that any applicant wanting to pursue more than two continuation applications file a petition "showing that the amendment, argument, or evidence sought to be entered could not have been submitted during the prosecution of the prior-filed application." According to the court, that rule is in conflict with Section 120 of the Patent Act, which entitles the application to the filing date of a prior-filed application. In a concurring opinion, Judge Bryson noted that the conflict arises only because the limit is on the "number of continuations co-pending with the first-filed application."

Final Rule 114 (RCEs): The PTO's Final Rule 114 operated in the same way as Rule 78 except that it applied to Requests for Continued Examination (RCEs) rather than continuation applications. Because RCEs are not implicated by Section 120, the Federal Circuit found no conflict there.

Final Rules 75 and 265 (Claims): These rules would require an examination support document (ESD) for any application that includes more than five independent claims or twenty-five total claims. The ESD includes a preexamination prior art search, a list of the most relevant references and limitations disclosed by each reference, an explanation of how each independent claim is patentable over the submitted references, and an analysis of how each limitation of the claims is disclosed and enabled by the specification. The Federal Circuit found that the lower court was wrong in finding that the PTO exceeded its authority in implementing these rules.

Rulemaking Authority: The initial focus of the court's analysis is on the Rulemaking Authority of the USPTO. 35 U.S.C. § 2(b) gives the PTO authority to "establish regulations, not inconsistent with the law, which . . . (A) shall govern the conduct of proceedings in the office; . . . (C) shall facilitate and expedite the processing of patent applications, particularly those which can be filed, stored, processed, searched, and retrieved electronically . . . (D) may govern the recognition and conduct of agents, attorneys, or other persons representing applicants or other parties before the Office . . . ." The PTO is also required – under Section 132(b) – to "prescribe regulations to provide for the continued examination of applications for patent at the request of the applicant." Although, these rules do not provide any "general substantive rulemaking power" to the PTO, the court will still grant Chevron deference to the PTO's interpretation of "statutory provisions that relate to the exercise of delegated authority."

Substantive v. Procedural: Without substantive rulemaking authority, the case turns on whether the limits are procedural or substantive. This is a difficult question to answer, and the Federal Circuit chose to follow the 1994 JEM case decided by the DC Circuit. In that case, the court found new rules procedural because they did not "foreclose effective opportunity to make one's case on the merits." With that rule as the framework, the conclusion is somewhat easy. The new rules do not "foreclose effective opportunity" – they only require justification for additional continuations and an ESD filing for additional claims.

"[A]pplicants who diligently present all of their amendments, arguments, and evidence as soon as possible during prosecution will be granted as many RCEs as they require. Thus, applications that are submitted in compliance with these timing requirements will be fully examined and given all of the benefits provided by the Patent Act. We do not believe that requiring applicants to raise all then-available amendments, arguments, and evidence by the second continuation application or the first RCE is so significant a burden that applicants will be effectively foreclosed from obtaining the patent rights to which they are entitled."

The Federal Circuit admits that the rules puts a large amount of authority in the hands of the PTO – to grant or reject petitions. However, the court took a wait and see approach: "[The courts] will be free to entertain challenges to the USPTO's application of the Final Rules." Oddly, the Court refused to hold the PTO to any of its official or unofficial public statements regarding how it will interpret the rules. "[T]hese comments do not bind the USPTO."

No Inequitable Conduct Problem: Relying on Kingsdown, the Federal Circuit noted that the ESD requirement is unlikely to cause any inequitable conduct problem for applicants. "[D]oubt about the judiciary's ability to apply its own doctrine in a way that yields fair results and discourages frivolous allegations should not preclude the USPTO from promulgating rules that are within its statutory authority."

Dissent by Rader: Judge Rader would have affirmed "[b]ecause the Final Rules drastically change the existing law and alter an inventor's rights and obligations under the Patent Act, they are substantive and the PTO exceeded its statutory rulemaking authority under 35 U.S.C. § 2(b)(2)."

Notes:

• This case was formerly captioned Tafas v. Dudas.
• In response to the decision, the PTO released the following statement: "The United States Patent and Trademark Office is pleased that the United States Court of Appeals for the Federal Circuit confirmed that the Final Rules are within the agency's rulemaking authority and that the rules regarding requests for continued examination, claims, and examination support documents are consistent with the law. We are further considering other aspects of the opinion, including the Federal Circuit's conclusion that the rule regarding continuations conflicts with the Patent Act."

  

Patently-O Bits and Bytes No. 92

• New Commerce Secretary: Gary Locke. Former Washington State Governor, Partner at Davis Wright Tremaine. Gov. Locke is Chinese American and co-chairs the firm's China practice. He is also an Eagle Scout, a Yalie, and a Terrier.
• 
  USPTO Deferred Examination Comments Due February 26:
  
  
  • http://www.uspto.gov/main/homepagenews/2009feb09.htm
  • https://uspto.connectsolutions.com/p91717658/ (Watch the Roundtable discussion)
  
  
  
  
• 
  Cert Denied: The Supreme Court has denied certiorari in the following patent related cases.
  
  
  • Singleton v. Volkswagen (E.D. Texas Venue Case where 5^th Circuit ordered transfer).
  • Forest Labs v. Caraco (Declaratory Judgment standing).
  • FTC v. Rambus (Duties of a patent holder in standard setting negotiations).
  • Burandt v. Dudas (When is a failure to pay "unavoidable").
  • Apotex v. Roche (reverse doctrine of equivalents).
  
  
  
  
• 
  Judge Linn recently gave a Keynote address to the PTO examiner's corps. [Read it here]. Judge Linn started as a patent examiner in 1965. The following are some quotes from the full speech:
  
  
  • "Your job is much harder now than it was for me all those years ago. The technology of today's inventions is immensely more complex than ever before. The length and breadth of applications is greater. The volume of prior art is much larger. The legal issues are more intricate and harder to comprehend. And the law is in a continual state of change. Compounding all of this is the perception among some individuals that the work of the PTO in general, and the examiners in particular, is somehow of secondary importance and questionable quality. It is commonly said that the real action in patents is in private or corporate practice."
  • "Your job is to grant patents—valid patents. And that takes a combination of skills, reasoning and informed judgment. The Examiner's task is to assess the patentable merits of each invention, as presented, and to grant patents where patents are due. No applicant wants an invalid patent. Similarly, no examiner wants to grant an invalid patent. Thus, both the applicant and the examiner play parallel and complementary—not contradictory— roles in seeing to it that valid patents are issued."
  • "[R]eading legal decisions, particularly those of the Board and the Federal Circuit, is not only the best way to learn how to make the tough decisions you are regularly called upon to make, but also the best way to make your job easier and more enjoyable. You might ask, "why should I bother to read decisions of the Board and the Federal Circuit? After all, I have all the guidance I need in the MPEP, and I don't have time to spend reading other cases that have nothing to do with me." The answer is that the cases bring to life the statutes and rules you are required to apply and give you real world examples of how those statutes and rules apply in similar cases. The MPEP has some guidelines, but they are just a sampling and cannot possibly reflect the full range of claims and circumstances you face every day. Keeping up with the law by reading decisions of the Board and the Federal Circuit will allow you to master your craft and will result in your standing out from your peers."
  • "The last point I want to make is to not forget about §112. … [I]t is not correct to trivialize or ignore these kinds of Informalities [such as claims that are vague and indefinite or lacking in support in the written description]. Indeed, these kinds of problems affect not only the applicant but the public as well in a significant way. … In case after case before my court, the central debate revolves around the meaning of claims terms that, for example, were added during prosecution and do not appear anywhere in the written description. For those cases, the meaning of the claim limitation has to be inferred from other words, leaving the issue open to unnecessary dispute and leading frequently to protracted and costly litigation. You have the authority and the responsibility to not let that happen and to insist that applicants use words in the claims that find unambiguous and full support in the written description."
  
  
  
  

Obviousness; Scope and Content of the Prior Art; Secondary Considerations

Süd-Chemie v. Multisorb Technologies (Fed. Cir. 2009)

Süd-Chemie holds a patent covering a desiccant container for keeping products dry in shipment. In an infringement action, the Kentucky district court found the patent invalid as obvious. On appeal, the Federal Circuit vacated - holding that the lower court had erred in its analysis of the scope and content of the prior art. There are two primary take-away points from Sud-Chemie. First, obviousness jurisprudence continues to require detailed analysis of the claims and the prior art. I.e., KSR did not suddenly allow handwaving as a substitute for evidence and clear argument. Second, well presented secondary indicia of nonobviousness continue to be important in rebutting obviousness allegations.

Here, the claimed patent required the use of "compatible polymeric materials" used in a laminate seal. The prior art disclosed the use of laminate materials taken from the same general class of materials. However, the Federal Circuit recognized that the prior art did not specify that the selected materials be "compatible" in a way to allow for a proper laminate seal.

This is a case where a definition of the claim term in the specification greatly aided the patentee. The specification defined "compatible" materials as those that "mix on a molecular scale and will crystallize homogeneously." The prior art reference did not teach this form of compatibility. In fact, the prior art appeared to teach "incompatible" materials.  

Multisorb ignores the fact that while the ’942 patent requires the inner surfaces of the laminate and microporous films to have similar softening points, Komatsu [the prior art] requires the films to have dissimilar softening points. Komatsu thus does not teach the use of a microporous film that is compatible with the inner surface of the laminate film.

Looking at secondary considerations, the Federal Circuit instructed district courts to "attend carefully to any evidence of ... secondary considerations of nonobviousness." Here, the focus is on the surprising and unexpected result that compatible materials formed stronger bonds even without adhesive.

The Federal Circuit did not apply these findings to form a conclusion on the issue of obviousness. Rather, the court remanded for further development of the facts.

[NOTE- This decision is from January 2009]

Orion and Taurus: NPEs at the Federal Circuit

Erich Spangenberg has at least two pending appeals at the Federal Circuit: Taurus IP v. Daimlerchrysler (and Hyundai) and Orion IP v. Hyundai Motor. In the Taurus case, the Wisconsin District Court found the asserted patent (6,141,658) invalid and also asserted jurisdiction over Spangenberg and Orion IP via a veil-piercing theory. In a recent order, the Federal Circuit properly refused to allow Chrysler and Mercedes to present argument and documents "in camera" in that case. [Link] In the Orion case, a Texas court found Hyundai liable for infringement of the asserted patent (5,367,627) and awarded $34 million in damages. Hyundai has posted $25 million bond to stay the full payment until the appeal is concluded. [LINK ]. The general rule is that money damages will be stayed pending appeals if bond is posted, and that injunctive relief might be stayed.

The '627 patent is patent reformer's poster child for damages reform. The patent covers a method that helps a sales clerk properly order the parts that match a customer's needs. It is hard to know what the value of the incremental invention as compared with the prior art back in 1989 when the original application was filed. I will note that the $34 million patent has only 15 claims and includes means-plus-function language in the claims. Claim 1 of the patent is reproduced below:

1. A computerized method of selling parts for particular equipment specified by a customer, comprising the steps of: a) receiving information identifying a customer's parts requirements for the equipment, comprising the step of receiving equipment application information, comprising an identification of the equipment with which one or more parts are to be used; b) electronically specifying information identifying a plurality of parts and specifications for the parts; c) gathering parts-related information for one or more parts within the plurality of parts which meets the customer's requirements, comprising the step of electronically associating at least one of the parts within the plurality of parts with the received equipment application information; and d) receiving the gathered parts-related information and compiling the parts-related information into a proposal meeting the customer's requirements.

Although the '658 patent does not claim priority to the earlier '627 patent, it does have one overlapping inventor and a large amount of overlapping scope.

Looking Ahead: Preclusive Effect of Prior Claim Construction

Shire v. Sandoz, M-893 (Fed. Cir. 2009)

In a recent order, the Federal Circuit agreed to hear an interlocutory appeal considering the issue preclusive effect of a prior claim construction decision. The patent in suit has been construed at least twice before, but the lower court here "refused to give preclusive effect" to either prior ruling. This will be an interesting case to follow.

2009-M893.2-6-09.1.PDF

Federal Circuit Disposition Statistics

The Federal Circuit had done a nice job summarizing their outcomes for the past year. Looking at cases decided on the merits, patent cases arising from district court were affirmed 55% of the time; affirmed-in-part 24% of the time; and reversed 19% of the time.

Federal Circuit Statistics Page

Federal Circuit Begins Publishing Orders on Motions

The Federal Circuit has taken another valuable step toward transparency in its operations. Notably, the court has begun to post electronic versions of orders resolving motions that are processed through its Senior Staff Attorney. Publication began on January 30, 2009. I have sought some clarification from the Court on its statement that "certain orders are not posted on this page."

The outcomes of motions are important to the parties involved as well as amicus filers. There have also been occasions when the outcome of a motion impacts stock prices. Perhaps the most common stock-swinging issue involves the Federal Circuit's decision on whether to stay injunctive relief pending appeal. Previously, these orders were difficult to obtain electronically or remotely.

Certain motions may be decided by the Clerk – especially when a motion is unopposed. Others go to a Federal Circuit judge assigned to handle motions that month. My understanding is that the Senior Staff Attorney will ordinarily present the motion (and response) to the judge with a potential order as well. If a case is already scheduled on the hearing calendar, motions will be transmitted to the panel for adjudication.

Most of the orders are mundane. Here is a sample from last week:

• IGT v. Alliance Gaming: Denying motion to dismiss on for lack of subject matter jurisdiction (no final order).
• Blackboard v. Desire2Learn: Granted motion to remove protective order covering the E.D. Tex. supplemental claim construction judgment.
• Garber v. CME: Extension of time granted.
• The Forrest Group v. Bon Tool: Motion granted to allow Paul Hletko to file an amicus brief. Forrest Group had opposed.
• Excel Innovations v. Indivos Corp: Motion granted to allow Mark Davies to take over as principal counsel.

Links:

• Search for CAFC Orders [LINK]
• CAFC Guide to Motion Practice [LINK]
• Top 10 easy-to-fix problems with motions [LINK]

Cardiac Pacemaker v. Jude: Challenging 271(f) Liability for Components of a Method

Cardiac Pacemakers v. St. Jude Medical (On motion for en banc rehearing)

35 U.S.C. § 271 defines various types of patent infringement including direct infringement and contributory infringement. Section 271(f) details a special cause of action that captures some transnational activities. In particular, Section 271(f) creates a cause of action for supplying components of a patented invention to be assembled abroad.

In 2007, the Supreme Court ruled on a 271(f) case -- finding that software per se cannot be considered a "component" under the statute. Microsoft v AT&T, 550 U.S. 437 (2007). In December 2008, the Federal Circuit decided Cardiac Pacemaker and held that the Microsoft v. AT&T did not overrule a prior precedential ruling that Section 271(f) does extend to cover components of a claimed method. “[T]he Supreme Court’s decision does not alter [the] holding” that “271(f) applies to components used in the performance of patented methods and processes.” The precedent in question is Union Carbide v. Shell. Although the Federal Circuit denied a request to rehear the Union Carbide case, Judges Lourie, Michel, and Linn, argued then that the issue was ready for en banc review. Judge Dyk also dissent from the en banc denial in Union Carbide.

In their decision, the panel (Judges Newman, Mayer, & Lourie) practically begged for en banc rehearing: "As a panel, we cannot reverse the holding of another panel of this court. We thus affirm the district court’s decisions relating to damages." [Link] Of course, Judge Mayer signed-on to Judge Rader's original Union Carbide opinion.

Now, the defendant (St. Jude) has asked for a rehearing en banc. If unsuccessful, we can expect a petition for a writ of certiorari. The FCBA and AIPLA joined forces in an amicus brief supporting the rehearing en banc and for a reversal of the Union Carbide analysis. Writing on behalf of Cisco, Intel, Microsoft, Oracle, and Symantec, Ed Reines also argues that the rule should be overturned. The tech companies argue in particular that the limit on exports creates major adverse economic incentives.

"A very common business arrangement is for United States companies to export instructions, materials, recipes, and other knowledge-exports to Asian and other off-shore locations where manufacturing processes takes place. An overbroad extraterritorial interpretation of § 271(f) to apply to process patents creates potential worldwide liability for companies based in the United States that export anything that can properly be considered a process step. Yet, if their competitors exist outside the United States, they are not exposed to liability for United States patent infringement for supporting foreign manufacturing processes."

A good handful of judges have at least loosely indicated that they would support an en banc rehearing -- making this a very likely candidate.

Notes:

• Discussion of the December 2008 Cardiac decision
• Read the December 2008 Cardiac decision

Briefs:

• Petition for Rehearing En Banc.pdf
• FCBA-AIPLA Amicus Brief.PDF
• Cardiac TechCo Amicus Brief.pdf

Federal Circuit Announces Proposed Amendments to Its Internal Operating Procedures

The Federal Circuit has proposed several amendments to its Internal Operating Procedures (IOP).  Comments on the proposed changes are due by July 18, 2008. Most of the proposed changes reflect current practice. [Proposed changes]

Notable changes include:

• Motion practice: When a motion relates to an appeal that has already been remanded, the motion may be referred to the same panel for consideration.
• Expedited Appeal: The ‘motion panel’ may choose to hear an appeal as the ‘merits panel’ upon granting a motion to expedite.
• Confidential Material: Materials submitted subject to a protective order will be disposed of upon completion of the case.
• Making orders Public: The old rules distinguished how precedential and non-precedential materials were publicized. Under the new rule, “all dispositions” are to be published in the daily disposition sheet.

Formalism at the CAFC: Equitable Plea for Revival is Rejected

Burandt v. Dudas (Fed. Cir. 2008)

Burandt’s patent expired in 1994 for failure to pay the maintenance fee. His former employer held legal title to the patent — although Bruandt arguably held an equitable interest in the title.  At that time, Bruandt was also mentally disabled. It was not until December 2001 (seven years later) that Bruandt learned of the expiration.

Burandt took several years to obtain legal title to the patent and then file a petition asking the PTO to accept an unavoidably delayed payment of the maintenance fee. (37 C.F.R. 1.378(b)). The PTO rejected his plea as did the U.S. District Court. Burandt argues that the PTO’s refusal to revive the patent was “arbitrary, capricicious, [and] an abuse of discretion” and consequently, a violation of the Administrative Procedures Act (APA). 

On appeal, the CAFC panel sided with the PTO — finding that the Patent Act (Section 41(c)(1)) gives the PTO director discretion to accept late maintenance fees “if the delay is shown to the satisfaction of the Director to have been unavoidable.”

“While it may well have been the intent of Congress to permit patentees to avoid the inequitable loss of patent rights, Congress gave the Director the responsibility of determining the circumstances under which a late payment may be waived.”

In this caes, Burandt’s former employer – as legal title holder – was responsible for taking reasonable care to pay the maintenance fees. Here, the court distinquished between the legal title holder and an equitable title holder:

“[I]t is the actions of the party responsible for making payments of the maintenance fees, the legal title owner, that must be considered when evaluating unavoidable delay under 35 U.S.C. § 41(c).”

In the court’s view, the legal owner is the “owner of record.” Thus, because the former employer was still “the owner of record [it had] the legal responsibility of paying the maintenance fees.”

In the somewhat similar case of Futures Technology v. Quigg (E.D.Va 1988), the district court allowed an equitable title holder to revive an application that had been abandoned by the owner of record. The CAFC formally distinguished this case as (1) not binding precedent and (2) dealing with a pending application rather than an issued patent. In addition, the court noted that in Futures Technology, the equitable title holder had asked the owner of record about the patent application on a more regular basis and the legal title holder had made misrepresentations to the equitable owner.

Expired patent remains expired.

Notes:

• Hunton & Williams apparently handled the case pro bono on Burandt’s behalf.

CAFC: Failing to Submit Invention Inspiration OK; Failing to Submit Product Code of Preferred Input Not OK.

TALtech v. Esquel Apparel (Fed. Cir. 2008) (nonprecedential)

Summary: (1) An applicant need not disclose its own prior work or inspiration for invention if merely cumulative of other references cited; (2) Failing to identify the brand of adhesive tape used in the invention was a best mode violation — resulting in claim invalidation; (3) There is no presumptive order of the steps in a process claim – unless the claim language “requires an ordering of steps” either implicitly or explicitly.

One of TAL’s employees – John Wong – was inspired by TAL’s use of heat-fusible adhesive tape in manufacture raincoats. Over a long process of trial and error, Wong figured out how to use a particular variety of adhesive tape to create a dress shirt that does not pucker after washing. 

After receiving a US utility patent, TAL became embroiled an patent litigation with another Hong-Kong based manufacturer – Esquel Apparel. In that litigation, the district court found TAL’s patent unenforceable due to inequitable conduct during prosecution and invalid for failing to submit fulfill the “best mode” requirement of 35 U.S.C. 112 (inter alia).  Based on the inequitable conduct, the court also awarded attorney fees to Esquel.

Inequitable Conduct: “In this case, the district court found TAL liable for inequitable conduct because inventor John Wong had not disclosed the raincoat seam that inspired his invention to the PTO.” On appeal, the CAFC first dispelled any notion that a patent applicant is required to disclose the inspiration for the invention. Although not stated by the court, 35 U.S.C. 103(a) arguably indicates that the inspiration is not relevant to the patentability inquiry: “Patentability shall not be negatived by the manner in which the invention was made.”

Here, the CAFC noted that TAL’s raincoat may well have been “merely cumulative” to a German patent application that was submitted during prosecution. “If the undisclosed raincoat seam was merely cumulative to [the German application], then no inequitable conduct lies in its nondisclosure.”

Best Mode: At the time of filing, Wong had settled upon a particular type of adhesive tape – known as Vilene SL33 – as the best way to form the seams.  The patent application did not, however, disclose Vilene SL33.  A patent may be invalidated for failing to submit a “best mode” if (1) the inventor possessed a best mode at the time of filing; and (2) the written description fails to disclose the best mode in a way to allow one reasonably skilled in the art to practice that mode.

Possession of the Best Mode: The evidence clearly showed that Wong “experimented with many adhesives but settled on a preference for one.” Thus, the court agreed that the first prong was met — the inventor did possess a best mode at the time of filing – i.e., Vilene SL33.

On the second prong the CAFC disregarded the applicant’s argument that the PTO “prefers the use of generic names of products” and that there is no evidence that the Vilene brand products are actually better quality than other brands.  Instead, the court honed-in on the result of the first prong – that Vilene SL33 was the best mode known to the inventor – and agreed that the best mode had not been disclosed. “TAL has not explained how the written description teaches one having reasonable skill in the art the way to practice the best mode as found in the analysis of the first prong – the use of Vilene SL33.”

Process Order: “Generally, there is no presumption of order, and so a claim with many steps can be infringed by an accused process performing the claimed steps in any order. However, we will find that the claim requires an ordering of steps when the claim language, as a matter of logic or grammar, requires that the steps be performed in the order written, or the specification directly or implicitly requires such a narrow construction.”

In this case, the claimed process implicitly requires a particular ordering. In particular, the bonding adhesive must be presented before a folding step because the folding step requires that the garment abut the bonding element.

Conclusion: The asserted claims were found invalid and not infringed. The remand appears only necessary to determine inequitable conduct and consequently potential attorney fees.

Ex Parte Bilski: On the Briefs:

In Ex Parte Bilski, an en banc Federal Circuit plans to reconsider the scope of patentable subject matter as it relates to business methods and so called mental methods. Perhaps more importantly to the patent system as a whole, the court is considering the proper procedures going forward for determining whether a particular invention falls within the scope of 35 USC 101.

In its en banc decision, the CAFC invited non-party amici briefs, which were due April 7. (Scroll down to find the briefs).  In reading through the briefs, the first aspect that caught my attention was a common theme that institutional strengths and weaknesses of the PTO and Courts should help dictate the ultimate subject matter rule.  

• Prof Morris: Through its examiners, the PTO has expertise in determining the technical questions of novelty, nonobviousness, and indefiniteness. On the other hand, examiners do not have the expertise to decide “philosophical and abstract” issues of statutory subject matter.
• Prof Lemley*: Arbitrary subject matter boundaries have generally been difficult to enforce and usually result in patent attorneys using “magic words” to avoid the limits. (*NOTE: I signed Prof Lemley’s brief along with 21 other law professors.)
• Prof Collins: A test that excludes “human cognition” elements is administrable.
• EFF: Proposed three-step process provides a more “efficient and meaningful” way to administer the Section 101 threshold.
• AIPLA: Section 112 should guard claim scope rather than Section 101.

Narrow or Expansive: The main thrust of the Bilski arguments, however, focus on whether patentable subject matter should be narrow or expansive. I have categorized the briefs on this axis:

Expansive Subject Matter:

• Prof Lemley: We cannot predict the next area of innovation, and arbitrary limits on patent scope reduces incentives in those potential areas. “Bad patents” should be dealt with using the true tools of the Patent Act: Sections 102, 103, and 112. “Mental methods” should be allowed if they fall within the other requirements of patentability.
• Regulatory Data Corp (Prof Duffy): Even under a narrow definition, applied economics is now part of the “useful arts.”  Statutory subject matter should only limit claims directed to abstract ideas, physical phenomena, or principles of nature.
• AIPLA: We should continue to follow Diehr, State Street, & AT&T.
• RMC: Business methods should be patentable.
• American Express: Patenting of business and information management processes encourages the development of those useful societal tools.
• Accenture: Business methods should be patentable regardless of any physicality limitations. Congress has deemed that business methods should be patentable via 35 USC 273.
• Greg Aharonian: The Supreme Court’s 1876 Cochraine test does not exclusively define “process.” Rather, a patent eligible process should be broadly defined to include any process or method that yields a “useful concrete and tangible result.”
• Koninklijke Philips: The court should be wary of relying upon precedent that focused on traditional manufacturing methods. Rather, the court should look at the broad definition of process required by Congress in 35 U.S.C. 100(b).

Narrow Subject Matter:

• Prof Sarnoff: The court should return to the precedent of Flook. The inventive concept of a patent cannot be an abstract idea (such as hedging risk). Likewise, an information processing method must include significant post-solution activity. State Street is unconstitutionally over-broad.
• End Software patents: Software should not be patentable even when loaded on a computer. Rather, to be patentable, there must be significant additional (non-information processing) physical activity.
• American Civil Liberties Union: Patents mental processes would violate the first amendment.
• EFF: There must be a technological component of a patentable invention.
• Computer & Communications Industry Association: The CAFC should shed its “patentee-centric approach” and insted try to meet the needs of the modern world. In particular, the court should consider the systemic policy implications of its decisions. The policy implications of broader patent coverage is more litigation & rent seeking.
• IBM: There is no sound policy for allowing business method patents.
• American Institute of CPAs: Tax methods should not be patentable because they preempt free use of the tax laws. (Of course, the same could be said of CPAs charging corporations for their service).
• SAP: A process should both (1) have a concrete, useful, and tangible result and (2) be “sufficiently machine-like” in order to avoid preempting work-arounds. However, software processes should be patentable.
• Prof Collins: The court should add a “human cognition” exception to Section 101. Steps involving human cognition should receive no consideration in judging patentability.
• Red Hat: Software patents put a huge kink in the open source software movement.
• Financial Services Industry: State Street and its progeny are unduly broad. A token inclusion of a ‘machine’ in a claim would not render that claim patentable subject matter.
• Dell & Microsoft: A patentable invention must operate on “something physical.” To be patentable, software should be tied to a computer and cause some physical transformation (such as movement of electrons). And, following Comiskey, a patent should not be granted under 103 if the inventor merely combined well known computer hardware with inventive but otherwise unpatentable software.

Other?

• Yahoo! and Prof Merges: A strict “technology” requirement is too inflexible. State Street taught us that such a strict requirement does not fit well with “onrushing technology.” The Yahoo!/Merges test: a patent eligible process must itself be “stable, predictable, and reproducible” and its result must be “useful, concrete, and tangible.”  Bilski’s claims would not be eligible because they do not define a “stable” process.
• Intellectual Property Owners Association: A process that is either implemented by a machine or that transforms matter into another state is patentable subject matter.  IPO favorably cites the Flook limitations on on information processing.
• Business Software Alliance: Courts should err on the side of patentable subject matter because Sections 102, 103, and 112 make-up any slack. Software should be patentable. However, Bilski’s invention is not patentable because it is an abstract idea.
• Washington State IP Law Assn: The CAFC should re-write State Street to be consistent with Supreme Court precedent.
• Prof Morris: Subject matter questions should be avoided. Rather the PTO and courts should look to the substantive rules of 102, 103, and 112 to decide the issue. Section 101 jurisprudence has been both haphazard and unfair.

The elephant in the room is the recent Comiskey decision. There, it appeared that the court refused to give any patentable weight to the portion of the invention directed to non-statutory subject matter. In its brief, the Boston Patent Law Assn asks the court to clarify the following statement from Comiskey:

“The routine addition of modern electronics to an otherwise unpatentable invention typically creates a prima facie case of obviousness. Moreover, there is no pertinent evidence of secondary considerations because the only evidence offered is of long-felt need for the unpatentable mental process itself, not long-felt need for the combination of the mental process and a modern communication device or computer.”

Notes:

• I signed Professor Lemley’s brief along with twenty-one other law professors. The theory behind the brief follows the IPO brief that I helped draft in the Metabolite case.

Amici Briefs:

• Accenture: www.patentlyo.com/patent/bilski.accenture.pdf
• ACLU: http://www.aclu.org/pdfs/freespeech/in_re_bilski_aclu_amicus.pdf
• AIPLA: www.patentlyo.com/patent/bilski.aipla.pdf
• AMEX: www.patentlyo.com/patent/bilski.amex.pdf
• BIO: www.patentlyo.com/patent/bilski.bio.pdf
• BPLA: www.patentlyo.com/patent/bilski.bpla.pdf
• BSA: www.patentlyo.com/patent/bilski.bsa.pdf
• CCIA: http://www.ccianet.org/docs/filings/ip/CCIA-Bilski-Amicus.pdf
• CPA: www.patentlyo.com/patent/bilski.aicpa.pdf
• Dell & Microsoft: www.patentlyo.com/patent/bilski.microsoft.pdf
• EFF (Schultz) www.patentlyo.com/patent/bilski.eff.pdf
• Eli Lilly: www.patentlyo.com/patent/bilski.lilly.pdf
• EOS (End of Software) www.patentlyo.com/patent/bilski.eos.pdf
• Financial Services Industry: www.patentlyo.com/patent/bilski.fsi.pdf
• IBM: www.patentlyo.com/patent/bilski.ibm.pdf
• IPO: www.patentlyo.com/patent/bilski.ipo.pdf
• Mr. Aharonian: www.patentlyo.com/patent/bilski.aharonian.pdf
• Mr. Morgan: www.patentlyo.com/patent/bilski.morgan.pdf
• Philips: www.patentlyo.com/patent/bilski.philips.pdf
• Prof Collins: www.patentlyo.com/patent/bilski.collins.pdf
• Prof Lemley: www.patentlyo.com/patent/bilski.lemley.pdf
• Prof Morris: www.patentlyo.com/patent/bilski.rjmorris.pdf
• Prof Sarnoff: www.patentlyo.com/bilski.sarnoff.pdf
• RDC (Duffy) www.patentlyo.com/patent/bilski.duffy.pdf
• Red Hat: http://www.redhat.com/f/pdf/federal_circuit_brief.pdf
• RMC: www.patentlyo.com/patent/bilski.acr.pdf
• SAP: www.patentlyo.com/patent/bilski.sap.pdf 
• Software & Information Industry Assn: www.patentlyo.com/patent/bilski.siaa.pdf [sic]
• WA IP: www.patentlyo.com/patent/bilski.wash.pdf
• Yahoo! & Prof Merges: http://www.patentlyo.com/patent/bilski.yahoomerges.pdf
  

 

 

 

 

Zyprexa Patent Upheld on Appeal

Eli Lilly v. Zenith Goldline (Fed. Cir. 2006)

Lilly’s patent covers olanzapine (Zyprexa®) and its use for the treatment of schizophrenia. Three generic manufacturers (Zenith (IVAX), Dr. Reddy’s, and Teva) filed an ANDA and Lilly responded with a complaint in the Southern District of Indiana.  After a bench trial, the district court agreed with Lilly that the patent was valid, infringed, and enforceable.  The defendants appealed to the Court of Appeals of the Federal Circuit.

Anticipation: To anticipate the invention, a prior art reference “must disclose each and every feature of the claimed invention, either explicitly or inherently.”  However, in both Petering and Schaumann, prior art references that disclosed the family of the claimed compound were found to anticipate the claimed compound — even though the claimed compounds were not specifically discussed.

Here, the CAFC found that those cases were not applicable because the closest reference to olanzapine did not spell out “a definite and limited class of compounds that enabled a person of ordinary skill in the art to at once envisage each member in this limited class.”

Obviousness: The CAFC agreed that the prior art references did not suggest a the compound. In addition, Lilly provided strong evidence of secondary considerations, including: “(1) a long-felt and unmet need; (2) failure of others; (3) industry acclaim; and (4) unexpected results.”

The record shows a long-felt need for a safer, less toxic, and more effective clozapine-like drug; a decade (or more) of failure to find a replacement for clozapine; a reasonable amount of commercial success for olanzapine; and a number of awards for olanzapine as indicators of industry acclaim.

Public Use: Prior to filing the patent application, Lilly conducted Phase I clinical safety trials. The court found, however, that the trials were well within the experimental use exception:

In this case, Lilly tailored its tests to their experimental drug safety and efficacy purpose, adequately monitored for results, and maintained confidentiality throughout the duration of the study. The trial court did not err in finding no public use.

 

Plumtree: DJ Jurisdiction, On-Sale Bar

Plumtree v. Datamize (Fed. Cir. 2006)

Declaratory Judgment Jurisdiction: The Datamize patents cover software authoring tools for creating software kiosks. Datamize had earlier sued Plumtree for patent infringement and had also told Plumtree that it would be infringing the soon-to-issue continuation application. When the continuation did issue, Plumtree filed a declaratory judgment action — giving the CAFC one last opportunity to opine on its reasonable apprehension test before the Supreme Court issues its MedImmune decision in early 2007.

A declaratory judgment action requires an actual controversy between interested parties. The DJ plaintiff must show (1) some action by the patentee that creates a reasonable apprehension of facing a patent infringement lawsuit and (2) some activity on the part of the DJ plaintiff that could constitute infringement. With a few bright-line exceptions (such as that seen in MedImmune), the court looks to the totality of the circumstances when determining whether a reasonable apprehension of suit exists. 

Here, the court found that the prior suit on similar technology exhibited a “course of conduct” indicating a “willingness to protect [its patented] technology”and thus “created a reasonable apprehension of suit.”

On Sale Bar: Once jurisdiction was established, the CAFC looked to determine whether the Datamize patents were invalid for being on-sale more than one year prior to the filing of the application. Here, the appellate panel found that sale of a kiosk did not violate the on-sale bar because the patents did not cover the kiosks themselves.  The court noted, however, that the on-sale bar would be triggered if either (1) the sales contract required use of the patented method or (2) the patented method was actually used to complete the contract prior to the critical date.  Plumtree, however, could not prove either of those — the agreement “did not unambiguously require use of the patented method” and there was no evidence that the patented method was actually performed prior to the critical date.

Notes: This is the second CAFC opinion involving these two parties. The earlier case involved the same technology but a different patent.  That patent was invalid as indefinite because the claims included the terms “aesthetically pleasing.”

Judge Moore Opinions: Short, Focused, and To-The-Point

In re Hays (Fed. Cir. 2006) (Nonprecedential)

New Circuit Court Judge Kimberly Moore’s first opinion is likely to be predictive of her future work — short, focused, and to-the-point. 

This case involves a pretty neat invention of a tissue holder for an automobile visor. The BPAI had rejected the claims as anticipated, but the PTO later conceded that the cited reference (relating to a golf-tee holder that clips to a lapel) was not anticipatory.

The PTO is fully expected to present a new grounds of rejection.  In all likelihood, the patent will never issue because another round of appeal would be prohibitively expensive for this type of invention.

Vacated and Remanded.

• This does not really count as Judge Moore’s first opinion because it is a non-precedential opinion. In a few weeks, we’ll get the real one.

Inducement Requires Knowledge of The Patent and Culpable Mens Rea

DSU Medical v. JMS (Fed. Cir. 2006) (en banc)

The interesting portion of this opinion rests in Section III.B, where the CAFC convened an en banc panel to clarify that “inducement” of infringement requires intent to induce actual infringement, which necessarily requires knowledge of the patent.

Section 271(b) of the Patent Act spells out the tort: “Whoever actively induces infringement of a patent shall be liable as an infringer."

Applying the language of Grokster, the CAFC clarified that in patent cases, “the intent requirement for inducement requires more than just intent to cause the acts that produce direct infringement. . . . [I]nducement requires evidence of culpable conduct, directed to encouraging another’s infringement.”  According to the court, this culpable conduct requires knowledge of the patent and an intent to induce infringement of the patent.

As Kevin Noonan has noted, the distinction in this case is that “there was evidence (an opinion of counsel and testimony from corporate officials) that the defendant believed that the accused behavior was not infringement. Thus, CAFC said the evidence supported the trial court's finding that the defendant did not intend to induce infringement, which was the mens rea required for liability under 35 USC 271(b).”

Even under DOE, "predetermined" combo must be determined beforehand

Planet Bingo v. Gametech (Fed. Cir. 2006).

Planet Bingo is the exclusive licensee of two patents covering a way to play bingo.  This game combines the numbers with an indicator (such as the color red) to give enhanced awards. The patent claims a “predetermined” winning combination, and that is where the dispute lies.

In the accused game of “rainbow bingo,” the color of the first ball chosen serves as the indicator.  Since that color is not known before the game begins, the court found it was not “predetermined.” as required by the claims.

Planet Bingo, however, asserted infringement under the DOE. Although the defendant’s indicator color is not known before the game begins, it is known immediately after the first bingo ball is drawn — something that is equivalent.  The CAFC disagreed, finding that under Warner-Jenkinson, a color that is “predetermined” cannot, as a matter of law, be equivalent to a color that is selected immediately after the game starts.

Here, the court focused particular attention on foreseeability of the asserted equivalent — apparently assuming that most variations in the bingo-arts would be foreseeable.

Unjust Enrichment For Stealing Ideas Does Not Create Patent Jurisdiction

Thompson v. Microsoft (Fed. Cir. 2006).

Thompson sued Microsoft for unjust enrichment under Michigan law.  Arguing that Microsoft stole his idea, patented it, and implemented it in various products. In its motion to dismiss, Microsoft argued that the claim was preempted by federal patent law. (citing Ultra-Precision).

Instead of hearing the appeal, however, the CAFC declined jurisdiction because the case did not arise under federal patent laws as required by Christianson & Holmes v. Vornado.

Thompson’s well-pleaded complaint does not establish that the right to relief necessarily depends on resolution of a substantial question of federal patent law. Thus, the district court’s jurisdiction does not "aris[e] under" section 1338.

In particular, the court noted that preemption alone does not create jurisdiction. An inventorship issue might create an issue, but Thompson’s claim could have theoretically succeeded without proving inventorship (in the strict patent sense).

Case transferred to the Sixth Circuit Court of Appeals.

In Preliminary Injunction Decision, CAFC Forecasts Post-eBay Jurisprudence

Sanofi v. Apotex (Fed. Cir. 2006)

Generic manufacturer Apotex wants to make something similar to Sanofi’s Plavix (clopidogrel bisulfate) and filed an ANDA alleging that Sanofi’s patents were invalid.

The two parties worked together to negotiate a settlement.  The agreement, however, was not accepted by state attorneys general even after new terms were presented. Under provisions of the agreement, the regulatory denial killed the settlement and the parties resumed litigation.

Sanofi then filed a motion for preliminary injunction to stop Apotex from selling its product. Within 21 days, the district court issued a PI. (During that time, Apotex shipped six-months of product). Apotex then appealed the PI.  Preliminary injunction jurisprudence has its own four-factor test that is similar to that of permanent injunctions. The plaintiff must show:

• Reasonable likelihood of success on the merits of the case;
• Irreparable harm if an injunction is not issued;
• Balance of hardships tipped in favor of the plaintiff; and
• Public interest that is not negatively impacted.

The major difference between the factors for consideration in preliminary injunctive relief and those for permanent relief is that preliminary relief requires a showing of a likelihood of success while permanent relief requires success on the merits as a precondition. Thus, the final three factors will give some indication of how the court will rule in post-eBay injunction cases.

Likelihood of success on the merits: Apotex took the odd position of arguing anticipation based on a broadly worded claim of a prior art patent that was examined during prosecution.  The CAFC confirmed that this made the burden of proving invalidity at trial “especially difficult.”  On obviousness, the CAFC confirmed that the unpredictability of enantiomer activity made the claimed dextrorotatory formation nonobvious even if the molecule as a whole was known.

On Irreparable Harm: The settlement agreement between the parties included a provision that capped any damages for infringement by Apotex — seemingly an admission that Sanofi would settle for money damages. The court did not buy-into this argument, but only because of the technicality that the agreement also contemplated an injunction.

Balance of hardships tip entirely in Sanofi’s favor because Apotex chose to launch its product under threat of injunctive relief.  It could have avoided the situation altogether and thus should not benefit from this factor.

Public Interest: The CAFC continued its line of the “importance of the patent system in encouraging innovation.” Interestingly, the court focuses on how the expense of pharmaceutical inventions necessitates strong patent protection. . . . begging the question of whether less expensive innovations (such as software) have less of a public interest in strong patent protection.

Court Retains Article III Jurisdiction To Determine Attorney Fees

Highway Equipment v. Feco (Fed. Cir. 2006).

The district court dismissed the case with prejudice after the plaintiff gave the defendant a covenant not to sue. Just before trial, the plaintiff gave up and granted a covenant not to sue. The district court dismissed the case, but retained jurisdiction to decide the issue of attorney fees (fees denied).

On appeal, the CAFC first decided the issue of Article III jurisdiction — holding that even after dismissing the case major, the lower court properly retained jurisdiction over the attorney fee issue. The appellate panel then agreed that attorney fees were not justified in this case.