Tag: Federal Circuit

Claim Construction Disputes Must Be Decided Before Applying Alice

On August 16, 2019, the Federal Circuit issued a 2-1 decision holding that a lower court erred by adjudicating patent eligibility without resolving the parties’ claim construction dispute. See MyMail, Ltd. v. ooVoo, LLC et al., Nos. 2018-1758, 2018-1759 (Fed. Cir. Aug. 16, 2019).

The patents at issue in MyMail cover methods for modifying toolbars displayed on Internet-connected devices. In response to defendants’ motion for judgment on the pleadings that the patents claim ineligible subject matter, MyMail raised a legal dispute over the proper construction of “toolbar.” The district court granted defendants’ motions without addressing the parties’ claim construction dispute, and without construing “toolbar.” The Court found in a split decision that the district court erred.

The majority held that “[d]etermining patent eligibility requires a full understanding of the basic character of the claimed subject matter.”  Accordingly, “if the parties raise a claim construction dispute at the Rule 12(c) stage, the district court must either adopt the non-moving party’s constructions or resolve the dispute to whatever extent is needed to conduct the § 101 analysis.”  Because the district court never addressed the parties’ claim construction dispute, or otherwise construed “toolbar,” the Federal Circuit vacated and remanded for further proceedings.

In his dissent, Judge Lourie argued that the facts of the case demonstrate that the parties’ claim construction dispute is “little more than a mirage,” and the claims at issue are “clearly abstract, regardless of claim construction.”

Implications

This decision provides patentees with another tool to help delay early patent eligibility decisions by raising legal issues over the proper scope of the claims. It is important to note, however, that this decision does not mean that judges must always construe the claims before ruling on patent eligibility—only when the parties raise a dispute. Further, patentees should weigh the relative pros and cons of raising claim construction issues early in a case, as this may come with some risks including putting a stake in the ground without sufficient discovery concerning the accused products.

© 2019 Brinks Gilson Lione. All Rights Reserved.

For more on patent law see the National Law Review Intellectual Property law page.

Genotyping Patent Claims Do Not Escape The Reach of s. 101

In Genetic Veterinary Sciences, Inc. v. Laboklin GMBH & Co., the University of Berlin, App. No. 2018-1565 (Fed. Cir., Aug. 9, 2019), a Fed. Cir. panel affirmed the district court’s JMOL ruling that the claims of the University’s U.S. Pat. No. 9,157,114 were patent-ineligible because they merely involved the discovery of a natural phenomenon. Interestingly, the Judges on the panel were Wallach, Hughes and Stoll, all of whom dissented from the refusal of the Fed. Cir. to rehear the Athena decision en banc. However, Athena was a straightforward “If A, then B” diagnostic test, while the claims of the ‘114 patent were not written as diagnostic claims, but as “method of genotyping” claims:

An in vivo method for genotyping a Labrador Retriever comprising:

  1. obtaining a biological sample from the Labrador Retriever,
  2. genotyping a SUV39H2 gene encoding the polypeptide of SEQ ID NO:1[;] and
  3. detecting the presence of a replacement of a nucleotide T with a nucleotide G at position 972 of SEQ ID NO:2.

This “genotyping method” detected a single point mutation in the gene that confirms the presence of a skin condition, HNPK, in the dog, that is heritable if both parents possess the mutation. It can also be used to confirm whether or not a skin condition present in the dog is HNPK.  However, the absence in the claim of a step directed to drawing a diagnostic conclusion from the presence of the mutation, while in accord with the PTO’s 2014 101 Guidance, did not save this claim from the judicial exception prohibiting claiming a law of nature. Rather, the claim jumped from a legal frying pan of Athena into the legal fire of Ariosa, that bars patenting the mere discovery or observation of a natural phenomenon:

“Similarly [to Ariosa], In re BRCA1 – & BRCA2-Based Hereditary Cancer Test Patent Litigation, we concluded that the claims were directed to a patent ineligible law of nature because the claims’ “methods, directed to identification of alterations of the gene, require[d] merely comparing the patient’s gene with the wild–type gene and identifying any differences that ar[o]se”. 774 Fed.. Cir.755, 763 (Fed. Cir. 2014). In each of these cases, the end result of the process, the essence of the whole, [Ed. note: Is this some new poetic legal standard?] was a patent-ineligible concept”. [Ed. note: “concept” seems to be veering into abstract idea-land.]…Taken together, the plain language of claim 1 demonstrates that it is directed to nothing more than ‘observing or identifying’ the natural phenomenon of a mutation in the SUV39H2 gene….Thus the asserted claims are directed to a natural phenomenon at Alice step 1.”

Since the next section of the opinion is entitled “The Asserted Claims Do Not Recite an Inventive Concept”, you know this opinion is going to end badly for Labokin, the exclusive licensee of the university patent. Given that this opinion was written by the dissenters in the Athena petition for rehearing in banc, might this case turned out differently? Could the existence of the mutation in some of the SUV39H2 genes have been part of a public data base but its significance be unknown until the inventor discovered that the mutation could be correlated to the presence of HPNK? In other words, could the panel have begun by giving weight to the fact that one could observe the mutation without knowing what it means?

To get “credit” for the discovery of the utility of the mutation, claim 1, at the least, would need a mental process step that draws a diagnostic conclusion, a la Athena. Now the Athena dissenters would argue that the discovery of the utility of the correlation should provide the “inventive step” required by Alice step 2. But the Fed. Cir.’s Meriel decision precludes that outcome, since that panel ruled that the discovery of the utility of a correlation cannot meet the “inventive step” requirement. (Genetics Techs. v. Meriel is cited at page 25 of the slip opinion, but only as supporting a finding a lack of inventive step when the laboratory techniques employed to carry out the diagnostic procedure are routine, conventional, etc.)

So to get this claim past the “inventive concept” gatekeepers, it would also need to recite a positive action step of some sort. Here, the panel cites and distinguishes Vanda because it taught “a specific method of treatment for specific patients, using a specific compound at specific doses to achieve a specific outcome.” Remember, the claims of Vanda recited a first genotyping step, and then drawing a conclusion from that step, but didn’t stop there. This case did not give the dissenters much to work with, so they wrote a decision that Siri could have come up with. This case could at least have taken a swing at the failure of the Alice test to consider the claim elements in ordered combination. Judge Newman may yet get to write for a panel that has the nerve to distinguish Mayo and to find that an “If A, then B” diagnostic claim based on the discovery if the utility of a natural correlation is patent eligible because the steps, considered as a whole, are not conventional or well-known to the art.

© 2019 Schwegman, Lundberg & Woessner, P.A. All Rights Reserved.

For more on patent eligibility see the National Law Review Intellectual Property law page.

Federal Circuit Concurring Opinion Recommends En Banc Review of Prior Ineligible Subject Matter Decision

On October 9, 2018, the United States Court of Appeals for the Federal Circuit affirmed a grant of summary judgment of invalidity due to patent-ineligible subject matter in Roche Molecular Systems, Inc. v. Cepheid, No. 2017-1690, applying its prior holding concerning claims directed to similar technology in In re BRCA1- & BRCA2-Based Hereditary Cancer Test Patent Litigation, 774 F.3d 755, 760 (Fed. Cir. 2014).  In a concurring opinion, Judge O’Malley recommended that the full court revisit the holding in BRCA1.  If the full court decides to revisit BRCA1, this could strengthen patent protection for other biotech inventions.

Background

Roche’s U.S. Pat. No. 5,643,723 includes claims directed to a method for detecting a pathogenic bacterium using a short, single-stranded nucleotide sequence known as a “primer” and other claims directed to the primers themselves.

Roche accused Cepheid of infringing the ‘723 patent and Cepheid filed a motion for summary judgment of invalidity under 35 U.S.C. § 101. The U.S. District Court for the Northern District of California granted the motion, relying on the Federal Circuit’s holding in BRCA1 relating to primers.  Specifically, the district court held that the claims were unpatentable under § 101 because “the primer claims in this case, which have genetic sequences identical to those found in nature, are indistinguishable from those held to be directed to nonpatentable subject matter in In Re BRCA1.”

Majority Opinion

The Federal Circuit affirmed the summary judgment of patent ineligibility based on its prior holding in BRCA1.  Specifically, the majority noted that the primers of the ‘723 patent have identical nucleotide sequences as naturally occurring DNA, just like the primers in BRCA1.  The majority rejected Roche’s argument that its synthetic primers differed from those in the naturally-occurring gene based on the presence of a 3-prime end and 3-prime hydroxyl group, noting that the “same argument was made in BRCA1.”

Concurring Opinion

Although Judge O’Malley agreed with the majority that BRCA1 compelled the conclusion that the claims of the ‘723 patent are not patent-eligible subject matter, she wrote separately to express her further view that the Federal Circuit should revisit en banc the holding in BRCA1 at least with respect to Roche’s primer claims.  BRCA1 involved an appeal from the denial of a preliminary injunction motion brought early in that case.  Judge O’Malley noted that the record in BRCA1 was underdeveloped and the Federal Circuit in BRCA1 did not have the benefit of certain arguments and evidence, such as those presented by Roche, which could support a finding that the primer claims are patent eligible.  For example, Roche demonstrated the ways in which the claimed primers may differ structurally from anything that occurs in nature.

Judge O’Malley also distinguished the Supreme Court’s decision in Association for Molecular Pathology v. Myriad Genetics, Inc., 569 U.S. 576 (2013).  In particular, unlike the claims in Myriad, which were neither “expressed in terms of chemical composition, nor” reliant “in any way on the chemical changes that result from the isolation of a particular section of DNA,” the primer claims in the ’723 patent are expressed in terms of chemical composition and are reliant on the presence of a 3-prime end and a 3-prime hydroxyl group at a nonnaturally occurring location.

Takeaway

Some of the alleged modifications that Judge O’Malley suggests might render Roche’s primers patent eligible and could save other patent claims directed to synthetic DNA.  If the full court agrees with Judge O’Malley’s suggestion to revisit BRCA1, this may strengthen patent protection for other biotech inventions.

 

© Copyright 2018 Brinks, Gilson & Lione

Federal Circuit Clarifies the “Commercial Offer for Sale” Prong of the On-Sale Bar

On July 11, 2016, a unanimous Federal Circuit en banc affirmed that The Medicines Company’s (“TMC”) use of third-party contract manufacturing services did not invalidate U.S. Patent Nos. 7,582,727 and 7,598,343 (the “patents-in-suit”) under the on-sale bar, reverting back to the district court’s original ruling but on modified grounds. The Medicines Company v. Hospira, Inc., No. 2014-1469 (“Hospira”). The Court provided useful guidance for companies and patentees that have third-party agreements to ensure they do not run afoul of the bar.

The on-sale bar under pre-AIA 35 U.S.C. § 102(b) prohibits patentability if “the invention” was “on sale” more than one year before the effective filing date of the invention. Here, TMC contracted with a batch manufacturer, Ben Venue Laboratories (“BV”), to produce Angiomax®, a blockbuster blood thinning drug covered by the patents-in-suit. More than a year before the effective filing dates of the patents-in-suit, TMC contracted with BV to manufacture a new formula of Angiomax® that met FDA requirements. In a decision penned by Judge O’Malley, the Federal Circuit reached the opposite conclusion from last year’s 3-judge panel decision holding that the patents-in-suit were not invalid under the on-sale bar.

The Federal Circuit addressed the first prong of the U.S. Supreme Court’s two-prong Pfaff test, which holds that a “claimed invention” is “on sale” when it is: 1) the subject of a commercial offer for sale; and 2) ready for patenting. Because the Federal Circuit dispensed with the issue on the first prong, it did not reach either the second prong or experimental use. The Court held that a “commercial sale or offer for sale” must bear the “general hallmarks of a sale pursuant to Section 2-106 of the Uniform Commercial Code,” i.e., when parties, intending to be legally bound, agree to give and pass property rights for consideration. An offer for sale can also trigger the bar when the offer rises to a “commercial” level—that is, an offer that another party could make into a binding contract by simple acceptance (assuming consideration).

Here, the Federal Circuit held that the transactions between TMC and BV did not rise to a commercial level. The Court reasoned that § 102 requires the claimed invention to be “on sale,” in the sense that it is “commercially marketed.” The product and product-by-process claims of the patents-in-suit covered a product. But, the contract between TMC and BV was a manufacturing service contract for the claimed product, not a contract for the sale of the product. The Court identified four factors in reaching its decision:

  • Manufacturing Service-Style Terms and Conditions: The Federal Circuit indicated that the invoice between TMC and BV was “to manufacture” the product, and the amount paid to BV was only about 1% of the ultimate market value of the manufactured product— indicating a service, not a sales, contract.

  • No Title Transfer: After clarifying that title transfer is a “helpful indicator” and not dispositive, the Court found that BV lacked title in the claimed products as it was not free to use or sell the products or to deliver the products to anyone other than TMC—reflecting a lack of commercial nature to the transaction (“[T]he inventor maintained control of the invention, as shown by the retention of title to the embodiments and the absence of any authorization to [the manufacturing service provider] to sell the product to others.”)

  • After noting that the confidential nature of the transaction is an important factor but not one of “talismanic significance,” the Court held that the “scope and nature of the confidentiality” imposed on BV supported the view that the sale was not a commercial sale of the patented invention.

  • “‘[S]tockpiling,’ standing alone, does not trigger the on-sale bar.” The Court clarified that mere “commercial benefit” does not trigger the on-sale bar. E.g., mere stockpiling of a patented invention by a purchaser of manufacturing services—irrespective of how the stockpiled material is packaged—does not constitute a “commercial sale” as it is “a pre-commercial activity in preparation for future sale.” Instead, the Federal Circuit focused on “those characteristics that make a sale ‘commercial’ in the most well-understood sense of that term and on what constitutes commercial marketing of a product, as distinct from merely obtaining some commercial benefit from a transaction….”

The Court also refused to create a blanket “supplier exception,” upholding its prior precedent and noting that the focus must be on the commercial character of the transaction and not solely on the identity of the parties.

Takeaways after Hospira

  • Now that contract manufacturing does not per se trigger the on-sale bar, drugmakers and others that cannot make products in-house can rest assured that their patents are free from challenge (“We see no reason to treat [TMC] differently than we would a company with in-house manufacturing capabilities” as “there is no room in the statute and no principled reason . . . to apply a different set of on-sale bar rules to inventors depending on whether their business model is to outsource manufacturing or to manufacture inhouse.”). Yet, careful attention should be paid to the type of contractual terms between patent owners (and/or their exclusive licensees) and third parties.

  • Structure supplier agreements as service manufacturing agreements, not product purchase/requirement contracts, and retain rights with title-retention clauses. The role of confidentiality and non-disclosure agreements over sales or offers for sale, as well as trade secrets, may expand to potentially avoid triggering the on-sale bar.

  • Pre-commercial activities, such as stockpiling and publicizing upcoming availability of a product for sale, should not trigger the on-sale bar. Nonetheless, active steps should be taken to not create an “offer” in the commercial sense, which another party could merely accept to create a contract.

For practice-based tips for practitioners which still apply despite Hospira’s holding, please click here and scroll down to Section IV.  To view the Court’s opinion, please click here.

ARTICLE BY Pratibha Khanduri, Ph.D., Krishan Thakker & Gaby L. Longsworth, Ph.D. of Sterne, Kessler, Goldstein & Fox P.L.L.C.
© 2016 Sterne Kessler

Federal Circuit Requires 180 Day Notice For All Biosimilars, Even After Patent Dance

biosimilars patent danceIn Amgen v. Apotex, the Federal Circuit rejected Apotex’s arguments that the 180-day pre-marketing notice requirement does not apply to biosimilar applicants who participated in the “patent dance” process of the Biologics Price Competition and Innovation Act (“BPCIA”), expanding on its decision in Amgen v. Sandoz that 42 USC § 262(l)(8)(A) is a mandatory, stand-alone requirement. The Supreme Court has asked the Solicitor General to weigh in on whether it should grant certiorari in Amgen v. Sandoz. Will this decision make the Court more or less likely to review the Federal Circuit’s interpretation of this important biosimilar statute?

The Biosimilar Patent Dance

The biologic product at issue is Amgen’s Neulasta® (pegfilgrastim) product. Amgen describes pegfilgrastim as “a recombinantly expressed, 175-amino acid form of … human granulocyte-colony stimulating factor (‘G-CSF’) conjugated to a 20 kD monomethoxypolyethylene glycol (m-PEG) at the N-terminus.” After Apotex filed a Biologic License Application (BLA) seeking FDA approval to market a biosimilar version of Neulasta® (pegfilgrastim), the parties followed several steps of the patent dance procedures, which resulted in Amgen asserting U.S. Patent Nos. 8,952,138 and 5,824,784 in the U.S. District Court for the Southern District of Florida. Those infringement claims are being litigated, although the ‘784 patent has been dropped since it expired.

The Biosimilar 180-Day Notice Dispute

As noted in the Federal Circuit decision, Apotex sent Amgen a letter on April 17, 2015, stating that it was “providing notice of future commercial marketing pursuant to 21 USC § 262(l)(8)(A), though Apotex lacked (as it still lacks) an FDA license.” Amgen sought a preliminary injunction to “require Apotex to provide … notice if and when it receives a license and to delay any commercial marketing for 180 days from that notice.” The district court granted that motion, citing the Federal Circuit decision in Amgen v. Sandoz that notice cannot be given before the biosimilar product is approved. Apotex appealed.

The Federal Circuit Decision

The Federal Circuit decision was authored by Judge Taranto and joined by Judge Wallach and Judge Bryson. The bottom line of the court’s decision is this:

The [§ 262(l)](8)(A) requirement of 180 days’ post-licensure notice before commercial marketing … is a mandatory one enforceable by injunction whether or not [the biosimilar applicant provided a copy of its biosimilar application to the reference product sponsor in accordance with  § 262(l)(2)(A)].

As it had in Amgen v. Sandoz, the court emphasized the “categorical” language used in the statute:

The subsection (k) applicant shall provide notice to the reference product sponsor not later than 180 days before the date of the first commercial marketing of the biological product licensed under subsection (k).

The court noted that § 262(l)(8)(A) “contains no words that make the applicability of its notice rule turn on whether the applicant took the earlier step of giving the [§ 262(l)](2)(A) notice that begins the § 262(l) information-exchange process,” and stood by its holding in Amgen v. Sandoz that the statute is “‘a standalone notice provision’ not dependent on the information-exchange processes that begin with [§ 262](l)(2)(A).”

Further justifying its decision, the court emphasized that the BPCIA created a “two stage” patent litigation process, and found that the 180-day pre-marketing notice is essential to the second stage. In that regard, it explained that the 180 day period “gives the reference product sponsor time to assess its infringement position for the final FDA-approved product as to yet-to-be-litigated patents,” and “gives the parties and the district court the time for adjudicating such matters without the reliability-reducing rush that would attend actions for requests for relief against immediate market entry that could cause irreparable injury.”

The court also considered and rejected Apotex’s arguments based on the relationship between § 262(l)(8)(A) and other sections of the BPCIA, such as § 262(l)(9)(B) and § 262(l)(9)(C), which give the reference product sponsor the right to bring delcaratory judgment actions when the biosimilar applicant fails to follow some or all of the patent dance procedures.

Requiring 180-Days Notice Does Not Extend The 12-Year Exclusivity Period

Perhaps Apotex’s most compelling argument was that the court’s interpretation of 262(l)(8)(A) effectively gives original biologic products 12.5 years of exclusivity rather than the 12 years provided by Congress in § 262(k)(7). The court dealt with this argument in two ways. First, the court noted that “§ 262(k)(7) by its terms establishes the 12-year date only as an earliest date, not a latest date, on which a biosimilar license can take effect” (emphasis added). Second the court hypothesized that the FDA could implement the 12-year exclusivity period by “issu[ing] a license before the 11.5-year mark and deem[ing] the license to take effect on the 12-year date.” In that case, the 180-days notice could be given in time to expire when the 12-year exclusivity period expires.

(The FDA has not yet issued guidance or regulations on this issue, and is not bound by the Federal Circuit decision. Indeed, the U.S. Court of Appeals for the District of Columbia is the appellate court most likely to review the FDA’s interpretation of § 262(k)(7).)

What Will the Supreme Court Do?

As noted above, the Supreme Court has asked the Solicitor General to weigh in on whether it should grant certiorariin Amgen v. Sandoz. Since this decision is consistent with that one, it is not clear that it will make the Court more or less likely to hear the case. The opinion here provides a detailed summary of the patent litigation procedures of the BPCIA and the related sections of the patent infringement statute, 35 USC § 271. That analysis may make the Court more comfortable with the Federal Circuit’s interpretation, or could lead the Court to try its own hand at deciphering a statutory scheme that Judge Lourie characterized as deserving of  “a Pulitzer Prize for complexity.”

ARTICLE BY Courtenay C. Brinckerhoff of Foley & Lardner LLP

© 2016 Foley & Lardner LLP

Case of First Impression: Federal Circuit Endorses Patent-Agent Privilege

In a case of first impression regarding whether communications between a non-lawyer patent agent and a client are legally privileged, a split panel of the US Court of Appeals for the Federal Circuit held that a patent-agent privilege is warranted on a limited basis where an agent is engaged in the congressionally endorsed, authorized practice of law. In Re Queen’s University at Kingston, PARTEQ Research and Development, Case No. 2015-145 (Fed. Cir., Mar. 7, 2016) (O’Malley, J) (Reyna, J, dissenting).

The opinion followed the plaintiffs’ petition for mandamus. At the district court, the petitioners withheld documents reflecting communications between the plaintiffs’ employees and the non-lawyer patent agents who prosecuted the patents-in-suit based on an alleged patent-agent privilege. The district court overruled objections to the magistrate’s order granting defendants’ motion to compel production over the alleged privilege, but agreed to stay the discovery order pending a writ of mandamus. Applying Federal Circuit law, the Court found that mandamus was warranted to decide the issue of first impression, which had split the lower courts.

The Federal Circuit first recognized that “Rule 501 of the Federal Rules of Evidence authorizes federal courts to define new privileges by interpreting ‘common law principles.’” Finding that the respondents did not argue that a patent-agent privilege was foreclosed by the US Constitution, any federal statute or any rule prescribed by the Supreme Court of the United States, the Court turned to reason and experience, as directed by Rule 501, in order to determine whether recognizing a privilege was now appropriate. The majority concluded that it was, holding that the unique roles of patent agents, the congressional recognition of their authority to act, the Supreme Court’s characterization of their activities as the practice of law, and the current realities of patent litigation warranted an independent patent-agent privilege.

The Federal Circuit relied on the Supreme Court’s prior assertion that the preparation and prosecution of patent applications for others constitutes the practice of law. Further, the majority found that Congress had delegated to the commissioner of patents oversight authority concerning lawyers, agents or other persons representing applicants or other parties before the US Patent and Trademark Office (PTO), and that the commissioner had, in fact, allowed both lawyers and agents to practice before the PTO.

In further support, the majority panel cited both the Supreme Court’s recognition of Congress’s delegation of supervisory authority to the commissioner of patents for lawyers and agents alike, and related legislative history acknowledging the practitioners’ equivalent professional rights before the PTO. The majority found that a client has a reasonable expectation that all communications relating to obtaining legal advice on patentability and legal services in preparing a patent application will be kept privileged, and that denying privilege to agents would frustrate Congress’s intent to provide clients a choice between agent and lawyer. As a result, the majority found that a patent-agent privilege is coextensive with the rights Congress affords to patent agents, and serves the same important public interests as the attorney-client privilege.

The Court also noted that the new privilege’s scope is necessarily limited to communications with non-lawyer patent agents when those agents are acting within their authorized practice of law before the PTO. The Court found that the Code of Federal Regulations (CFR) sets forth the acts permitted by non-lawyer agents and helps to define the scope of communications covered under the privilege. For example, communications are due the privilege if made in furtherance of the performance of tasks specifically set forth in the CFR, or “are reasonably necessary and incident to the preparation and prosecution of patent applications or other proceedings before the [PTO] involving a patent application or patent in which the practitioner is authorized to participate.” The Court stressed that it is the burden of the person asserting the privilege to justify its applicability. The Court also cited examples of non-privileged communications, including those with a patent agent who offers an opinion on the validity of another party’s patent in contemplation of litigation or the sale or purchase of a patent, or on infringement.

In dissent, Judge Reyna argued that the public’s need for open discovery outweighed the need for the privilege. The dissent also argued against the new privilege with the following reasoning:

  • The privilege may adversely affect an agent’s duty of candor.

  • Agent communications are already routinely protected because of lawyer involvement.

  • Patent agents and clients are able to destroy written communications through implementation of document-destruction policies.

  • Determining the scope of the privilege is complicated and uncertain.

  • Congress and the Supreme Court have recognized a difference between agents and lawyers.

  • Evidence suggests that Congress did not intend that agents have a privilege.

  • No state has created an agent-client privilege.

  • The Judicial Conference Advisory Committee has not recommended creating the privilege.

  • Lawyers hold the privilege because of their professional status.

  • The Supreme Court has never held that patent agents practice law; it has merely recognized that the Florida Supreme Court has done so under Florida law.

  • Congress has never believed that patent agents practice law.

The Federal Circuit remanded the issue to the district court to determine whether the patent-agent privilege applied.

Article By John C. Low, PhD
© 2016 McDermott Will & Emery

Smartphone Wars – Supreme Court Awakens: Samsung Files Petition for Certiorari in New Hope to Harmonize Design Patent Law

On Monday, in the latest episode of the smartphone wars, Samsung filed a petition for certiorari with the Supreme Court.

Smartphone Wars

Samsung is appealing a Federal Circuit decision that upheld a $399 million judgment against Samsung for infringing three of Apple’s design patents. Samsung argues that the decision, if left unchecked by the Supreme Court, could dramatically increase the value of design patents. While the Supreme Court is the ultimate power in patent jurisprudence, it was a long time ago that it last considered a design patent case; more than 120 years ago according to Samsung. Samsung’s petition presents two fundamental questions concerning design patents:

1. Where a design patent includes unprotected non-ornamental features, should a district court be required to limit that patent to its protected ornamental scope?

2. Where a design patent is applied to only a component of a product, should an award of infringer’s profits be limited to those profits attributable to the component?

With respect to the first question – whether a district court should be required to limit the protection of a design patent to only ornamental features – Samsung argues that the Federal Circuit’s decision conflicts with both Section 171 of the Patent Act and with the Supreme Court’s precedent requiring judicial construction of patent claims.

According to Samsung, the Federal Circuit refusal “to cabin design patents to their protected ornamental scope” conflicts with Section 171 and allows infringement to be “found based on the use of nonornamental attributes.” Thus, argues Samsung, the Federal Circuit broadened the protectable scope of design patents, which are limited to “any new, original and ornamental design for an article of manufacture,” under section 171. Samsung argues the Federal Circuit’s ruling also creates tension with other areas of intellectual property law that routinely enforce limitations to protectable scope, such as copyright doctrine of “filtration” and trademark law’s doctrine of functionality.

Samsung also maintains that the ruling is contrary to Supreme Court precedents in the analogous context of utility patents, which recognize that district courts have a duty to construe patent claims and eliminate unprotected features. In Samsung’s view, similar to a Markman hearing, a district court should instruct a jury to identify non-ornamental features of a design patent and exclude them from the infringement analysis.

Turning to the second question – whether damages should be limited to the profits attributable to the infringing component – Samsung argues that the Federal Circuit’s decision conflicts with Section 289 of the Patent Act and the basic principles of causation and equity.

Samsung urges that “the Federal Circuit’s holding as a matter of law that an infringer of a design patent is liable for all of the profits it made from its entire product, no matter how little the design contributed to the product’s value or sales” be corrected. Samsung argues that the Federal Circuit’s conclusion that the article of manufacture is the entire smartphone, and not specific subcomponents, is wrong based on a natural reading and purpose of Section 289 of the Patent Act, contemporary extrinsic evidence regarding the definition of “articles of manufacture,” and non-controlling case law (see note below).

According to Samsung, the Federal Circuit’s “interpretation of Section 289 also flies in the face of well-settled tort principles of causation” and “ignores that disgorgement of the defendant’s profits is a classic equitable remedy for which the accepted measure of recovery generally is ‘the net profit attributable to the underlying wrong.’” “The cardinal principle of damages in Anglo-American law is that of compensation for the injury caused to plaintiff by defendant’s breach of duty,” This is the backdrop in which Section 289 was adopted. “Where disgorgement is available in patent cases, it has [] been ‘given in accordance with the principles governing equity jurisdiction, not to inflict punishment but to prevent an unjust enrichment by allowing injured complainants to claim ‘that which … is theirs, and nothing beyond this.’”

Samsung claims that certiorari should be granted because the Federal Circuit’s decision dramatically increases the value of design patents relative to other forms of intellectual property. Without correction, design patents will have whatever scope juries choose to give them, and a design-patent holder will be entitled to the infringer’s profits on the entire product even if the patented design applies only to a part of the product, and contributes to only a minor faction of the overall value. The Federal Circuit’s decision allows design patent owners to obtain the infringer’s total profits – a remedy not available under utility-patent law. Samsung contends that such leverage “poses a real danger for companies everywhere,” that it will lead to an “explosion of design patent assertions and lawsuits.”

Will the Supreme Court agree with Samsung that the Federal Circuit has caused a great disturbance in design patent jurisprudence? Difficult to see. Always in motion is the future.

Bush & Lane Piano Co. v. Becker Bros., 222 F. 902, 904 (2d Cir. 1915), (allowed an award of infringer’s profits from the patented design of a piano case but not from the sale of the entire piano, holding that “recovery should be confined to the subject of the patent.”); Young v. Grand Rapids Refrigerator Co., 268 F. 966 (6th Cir. 1920), (Affirmed the denial of all profits from the sale of refrigerators where the infringed patent related only to the design of the refrigerator’s door latch, explaining that it was not even “seriously contended” that the patentee could recover all profits from sales of refrigerators containing that latch.)

Article By, Patrick T. Driscoll, James Wodarski, Michael T. Renaud & Michael C. Newman of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
©1994-2015 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.

Ariosa v. Sequenom: In Search of Yes After a Decade of No

The Federal Circuit this Wednesday declined to reconsider its June decision in Ariosa v. Sequenom, a closely watched medical diagnostics case involving patents on cell-free fetal DNA testing. Biotech companies, investors, and patent lawyers alike should expect a prompt petition for certiorari, and should hope that the Supreme Court grants it.  (Disclosure: I was one of twenty-three law professors who submitted an amicus brief urging the Federal Circuit to grant en banc rehearing.)

In the last decade, the Supreme Court has suggested in case after case that the inventions they were considering were not merely unworthy of patent protection because they were, say, not inventive enough or useful enough or disclosed in enough detail. Rather, the Court in these cases gave us information about the very boundaries of the patent system—by placing the disputed inventions outside those boundaries altogether. But they have not yet told us what is just inside those boundaries.

This legal uncertainty has a significant chilling effect on investment in innovation, one that we are increasingly able to quantify.  As USPTO Chief Economist Alan Marco and I explained in a 2013 paper in the Yale Journal of Law and Technology, when a court issues a decision resolving the legal uncertainty over whether a patent was valid, that newfound certainty actually moves the market as much as the initial patent grant does.  In other words, the unpredictability of courts forces the market to discount—by as much as half—how much trust to put in the legal rights that the Patent Office issues.

Patent holder Sequenom certainly experienced the downside of that uncertainty, as Wednesday’s rehearing denial sent its stock price tumbling over 14% in just two days.  Others have taken a hit as well, such as the large-cap DNA analysis firm Illumina, which has pursued Ariosa in a separate patent litigation and whose stock price fell 7% across the same two-day period.

The reason for this uncertainty is that we are effectively back in the late 1970s, when the Court was prominently rejecting inventions as patent-ineligible subject matter—Gottschalk v. Benson in 1972 and Parker v. Flook in 1978—without saying anything concrete about what was eligible.  Relief would come only after Diamond v. Chakrabarty in 1980 and Diamond v. Diehr in 1981, when the Court finally produced binding precedents going the other way.

The result is that today’s patentees can only try to run away from the settlement risk mitigation patent in Alice Corp. v. CLS Bank (2014), the breast cancer genetic diagnostic patent in AMP v. Myriad (2013), the thiopurine dosage monitoring patent in Mayo v. Prometheus (2012), the energy futures risk hedging patent application in Bilski v. Kappos (2010), and, although they were never definitively adjudicated, the vitamin deficiency diagnostic patents in LabCorp v. Metabolite (2006).  There is no case yet to run toward.

Ariosa v. Sequenom could have been that case and still can be, if the Court grants certiorari.  Certainly the Federal Circuit order has framed the issue well.  The per curiam order denying en banc rehearing was accompanied by three opinions that addressed in different combinations both the reach and the wisdom of the Supreme Court’s recent precedents.

Judge Dyk’s concurrence concluded that the precedents, particularly Mayo and Alice, do apply to the present facts and that those precedents are generally sound.  He invited “further illumination” from the Supreme Court only on whether the all-important inventive concept must come at the second step of the two-step Mayo test (application of the natural law or abstract idea) or may also come at the first step (discovery of the natural law).  Meanwhile, Judge Newman’s dissent concluded that the precedents, particularly Mayo and Myriad, do not apply here, for the facts “diverge significantly.”  She found the Sequenom patent’s subject matter to be eligible and would have proceeded to more specific patentability analysis under §§ 102, 103, 112, etc.

Their midpoint and the best argument for certiorari was Judge Lourie’s concurrence, which agreed that Mayo controls, with “no principled basis to distinguish this case from Mayo”—but which also urged that Mayo and the Supreme Court’s other precedents from Bilski onward are an increasingly unsound basis for differentiating between natural laws and abstract ideas on the one hand, and applications of those laws and ideas on the other hand.  Echoing a previously expressed position of the Patent Office, he favored the “finer filter of § 112” for issues of indefiniteness or undue breadth (rather than what the agency’s post-Bilski Subject Matter Eligibility Guidelines called the “coarse filter” of § 101).

He also pushed back directly against a argument that the Supreme Court frequently invokes to express its preference for flexible standards that foster over predictable rules that can be manipulated: the draftsman’s art.  Decisions from Flook and Diehr to Mayo and Alice have rested in part on the suspicion that patent lawyers may at any time evade substantive doctrinal limitations through clever claim drafting.  To this Judge Lourie’s opinion aptly responded that “a process, composition of matter, article of manufacture, and machine are different implementations of ideas, and differentiating among them in claim drafting is a laudable professional skill, not necessarily a devious device for avoiding prohibitions.”

In these regards, Judge Lourie’s approach may well represent the “center” of the Federal Circuit on subject-matter eligibility.  He was in the en banc majority in Bilski and authored the panel opinion in Mayo.  He authored both panel majority opinions in Myriad (before and after the Supreme Court’s GVR order).  And he authored the five-judge en banc plurality opinion in Alice, whose analysis was ultimately consolidated and endorsed in the Supreme Court’s opinion in that case.

With the issues so well framed and the recent subject-matter eligibility precedents so well synthesized, then, there is reason to be optimistic that a decade of hearing “no” from the Supreme Court may finally give way to a “yes” and better orient us on the true boundaries of our patent system.

Article By Saurabh Vishnubhakat of Texas A&M University School of Law

© Copyright 2015 Texas A&M University School of Law

Federal Circuit Issues First Reversal & Remand of an Inter Partes Review in Microsoft Corporation v. Proxyconn, Inc. Addressing Claim Construction and Amendment Standards

The Federal Circuit issued its first reversal and remand of a final decision in an inter partes review issued by the Patent Trial and Appeal Board (“PTAB”). In Microsoft Corporation v. Proxyconn, Inc., No. 14-1543, a panel composed of Chief Judge Prost, Judge Lourie, and Judge Gilstrap (sitting by designation) held that the PTAB’s constructions of the phrases “two other computers,” “sender/computer,” and “receiver/computer” were unreasonably broad, and remanded for further proceedings consistent with its opinion. The Court’s decision marks the first ever reversal of an inter partes review decision by the PTAB, after 18 straight affirmances. Of the 18, fifteen have been affirmances without opinion issued under Federal Circuit Rule 36.

In brief, the Court upheld the PTAB’s use of the broadest reasonable interpretation (“BRI”) standard, but explained that the standard does not justify giving claims an unreasonably broad or legally incorrect interpretation. The Court then examined the statute and regulations governing amendment practice and concluded that the PTAB’s interpretation was not plainly erroneous or inconsistent with them. Last, in reference to the PTAB’s case-by-case interpretation of the same statute and regulations, the Court explained that while “[a] fluid, case-based interpretation by the PTO of its own regulations risks leaving interested members of the public in a state of uncertainty, without ascertainable standards and adequate notice to comply . . . we cannot say that the PTO has abused its discretion in choosing adjudication over rulemaking.”

In the underlying proceedings before the PTAB, Microsoft challenged Proxyconn’s patent directed to a system for increasing access speed in a packet-switched network. The PTAB concluded that all of the challenged claims, with the exception of one, were unpatentable. Both parties appealed. In addition to contesting the merits, Proxyconn challenged the PTAB’s used of the BRI standard, as well as the PTAB’s denial of Proxyconn’s motion to amend. We discuss each aspect in more detail below.

Broadest Reasonable Interpretation

With respect to BRI generally, the Court stated that it was bound by the panel decision in In re Cuozzo – the first appeal of an inter partes review decided earlier this year, which blessed the Office’s adoption of the hundred year old standard for use in inter partes review. In re Cuozzo is pending a decision on Cuozzo’s request for rehearing en banc, and several amici have submitted briefs expressing concern about the outcome. But practitioners troubled by the Office’s adoption and application of BRI can take some consolation. In this case, the panel rejected the PTAB’s construction as “unreasonably broad,” relying on precedent that constrains the Office’s application of the BRI to interpretations that are legally correct under the canons set forth in Phillips v. AWH Corp. Indeed, the panel dropped a footnote stating that its construction would have come out the same under the Phillips standard.

On the merits, the Court reviewed the Board’s claim constructions de novo. The Court carefully analyzed the technical merits and set forth a detailed interpretation of the claim terms appealed by both parties. This suggests that a meritorious claim construction dispute appealed to the Federal Circuit is likely to receive the same careful consideration and attention to detail that appellants have come to expect from the Court. It also shows that “unreasonably broad” claim interpretations that are inconsistent with settled principles of claim construction are reversible on appeal.

Proxyconn’s Motion to Amend

This appeal also presented the question of whether the PTAB impermissibly relied on the requirements it set forth in Idle Free Systems, Inc. v. Bergstrom, Inc., in denying Proxyconn’s motion to amend. In this case, the panel was not troubled by the PTAB’s reliance on its own decisions, like Idle Free, to promulgate standards for motions to amend. The Court agreed with the Office that the regulation itself “is not an exhaustive list of grounds upon which the Board can deny a motion to amend.” The Court also agreed that it is permissible for the Office to use adjudicative decisions like Idle Free, rather than traditional notice and comment rule-making, to set forth all the conditions that a patentee must meet in order to satisfy its burden of amendment. In that regard, the Court recognized that:

Some question the wisdom of the PTO’s approach. Since IPRs were created, they have rapidly become a popular vehicle for challenging the validity of issued patents. Patentees who wish to make use of the statutorily provided amendment process deserve certainty and clarity in the requirements that they are expected to meet. A fluid, case-based interpretation by the PTO of its own regulations risks leaving interested members of the public in a state of uncertainty, without ascertainable standards and adequate notice to comply. Despite such concerns, we recognize that ‘the choice between rulemaking and adjudication lies in the first instance within the [agency’s] discretion.’ . . . [W]e cannot say that the PTO has abused its discretion in choosing adjudication over rulemaking.

Slip. Op. at 24 (internal citations omitted).

The Court ultimately concluded that the PTAB reasonably interpreted the amendment rules as requiring the patentee to show that its substitute claims are patentable over the prior art of record. But the Court also stressed that “this case does not call on us to decide whether every requirement announced by the Board in Idle Free constitutes a permissible interpretation of the PTO’s regulations.” Slip. Op. at 25, n.4. It noted that the Idle Free decision itself was not before the Court, and expressly declined to address the other requirements that the Board relied upon—highlighting in particular Idle Free’s requirement that the patentee show patentable distinction over all “prior art known to the patent owner.” Idle Free, 2013 WL 5947697, at *4.

Practical Takeaways

Microsoft v. Proxyconn demonstrates the Court’s willingness to give appellants a meaningful review of PTAB decisions despite its track record of issuing summary affirmances. This applies particularly to claim construction appeals, which in most cases will be afforded de novo review – subject to Teva.4 This case also clarifies that remands to the PTAB are possible, though it remains unclear how the PTAB will deal with that remand. Those concerned about the PTAB’s use of the BRI should take heart that its application must still be both reasonable and legally correct. The Court acknowledged the uncertainty parties face when the Office uses adjudication rather than rulemaking to set standards and practices in these new proceedings. However, the Court’s willingness to analyze the PTAB’s application of Idle Free suggests that such decisions themselves are reviewable and should be appealed if their interpretation is improper.

ARTICLE BY Jon E. Wright & Pauline M. Pelletier of Sterne, Kessler, Goldstein & Fox P.L.L.C.
© 2015 Sterne Kessler

Federal Circuit Issues First Reversal & Remand of an Inter Partes Review in Microsoft Corporation v. Proxyconn, Inc. Addressing Claim Construction and Amendment Standards

The Federal Circuit issued its first reversal and remand of a final decision in an inter partes review issued by the Patent Trial and Appeal Board (“PTAB”). In Microsoft Corporation v. Proxyconn, Inc., No. 14-1543, a panel composed of Chief Judge Prost, Judge Lourie, and Judge Gilstrap (sitting by designation) held that the PTAB’s constructions of the phrases “two other computers,” “sender/computer,” and “receiver/computer” were unreasonably broad, and remanded for further proceedings consistent with its opinion. The Court’s decision marks the first ever reversal of an inter partes review decision by the PTAB, after 18 straight affirmances. Of the 18, fifteen have been affirmances without opinion issued under Federal Circuit Rule 36.

In brief, the Court upheld the PTAB’s use of the broadest reasonable interpretation (“BRI”) standard, but explained that the standard does not justify giving claims an unreasonably broad or legally incorrect interpretation. The Court then examined the statute and regulations governing amendment practice and concluded that the PTAB’s interpretation was not plainly erroneous or inconsistent with them. Last, in reference to the PTAB’s case-by-case interpretation of the same statute and regulations, the Court explained that while “[a] fluid, case-based interpretation by the PTO of its own regulations risks leaving interested members of the public in a state of uncertainty, without ascertainable standards and adequate notice to comply . . . we cannot say that the PTO has abused its discretion in choosing adjudication over rulemaking.”

In the underlying proceedings before the PTAB, Microsoft challenged Proxyconn’s patent directed to a system for increasing access speed in a packet-switched network. The PTAB concluded that all of the challenged claims, with the exception of one, were unpatentable. Both parties appealed. In addition to contesting the merits, Proxyconn challenged the PTAB’s used of the BRI standard, as well as the PTAB’s denial of Proxyconn’s motion to amend. We discuss each aspect in more detail below.

Broadest Reasonable Interpretation

With respect to BRI generally, the Court stated that it was bound by the panel decision in In re Cuozzo – the first appeal of an inter partes review decided earlier this year, which blessed the Office’s adoption of the hundred year old standard for use in inter partes review. In re Cuozzo is pending a decision on Cuozzo’s request for rehearing en banc, and several amici have submitted briefs expressing concern about the outcome. But practitioners troubled by the Office’s adoption and application of BRI can take some consolation. In this case, the panel rejected the PTAB’s construction as “unreasonably broad,” relying on precedent that constrains the Office’s application of the BRI to interpretations that are legally correct under the canons set forth in Phillips v. AWH Corp. Indeed, the panel dropped a footnote stating that its construction would have come out the same under the Phillips standard.

On the merits, the Court reviewed the Board’s claim constructions de novo. The Court carefully analyzed the technical merits and set forth a detailed interpretation of the claim terms appealed by both parties. This suggests that a meritorious claim construction dispute appealed to the Federal Circuit is likely to receive the same careful consideration and attention to detail that appellants have come to expect from the Court. It also shows that “unreasonably broad” claim interpretations that are inconsistent with settled principles of claim construction are reversible on appeal.

Proxyconn’s Motion to Amend

This appeal also presented the question of whether the PTAB impermissibly relied on the requirements it set forth in Idle Free Systems, Inc. v. Bergstrom, Inc., in denying Proxyconn’s motion to amend. In this case, the panel was not troubled by the PTAB’s reliance on its own decisions, like Idle Free, to promulgate standards for motions to amend. The Court agreed with the Office that the regulation itself “is not an exhaustive list of grounds upon which the Board can deny a motion to amend.” The Court also agreed that it is permissible for the Office to use adjudicative decisions like Idle Free, rather than traditional notice and comment rule-making, to set forth all the conditions that a patentee must meet in order to satisfy its burden of amendment. In that regard, the Court recognized that:

Some question the wisdom of the PTO’s approach. Since IPRs were created, they have rapidly become a popular vehicle for challenging the validity of issued patents. Patentees who wish to make use of the statutorily provided amendment process deserve certainty and clarity in the requirements that they are expected to meet. A fluid, case-based interpretation by the PTO of its own regulations risks leaving interested members of the public in a state of uncertainty, without ascertainable standards and adequate notice to comply. Despite such concerns, we recognize that ‘the choice between rulemaking and adjudication lies in the first instance within the [agency’s] discretion.’ . . . [W]e cannot say that the PTO has abused its discretion in choosing adjudication over rulemaking.

Slip. Op. at 24 (internal citations omitted).

The Court ultimately concluded that the PTAB reasonably interpreted the amendment rules as requiring the patentee to show that its substitute claims are patentable over the prior art of record. But the Court also stressed that “this case does not call on us to decide whether every requirement announced by the Board in Idle Free constitutes a permissible interpretation of the PTO’s regulations.” Slip. Op. at 25, n.4. It noted that the Idle Free decision itself was not before the Court, and expressly declined to address the other requirements that the Board relied upon—highlighting in particular Idle Free’s requirement that the patentee show patentable distinction over all “prior art known to the patent owner.” Idle Free, 2013 WL 5947697, at *4.

Practical Takeaways

Microsoft v. Proxyconn demonstrates the Court’s willingness to give appellants a meaningful review of PTAB decisions despite its track record of issuing summary affirmances. This applies particularly to claim construction appeals, which in most cases will be afforded de novo review – subject to Teva.4 This case also clarifies that remands to the PTAB are possible, though it remains unclear how the PTAB will deal with that remand. Those concerned about the PTAB’s use of the BRI should take heart that its application must still be both reasonable and legally correct. The Court acknowledged the uncertainty parties face when the Office uses adjudication rather than rulemaking to set standards and practices in these new proceedings. However, the Court’s willingness to analyze the PTAB’s application of Idle Free suggests that such decisions themselves are reviewable and should be appealed if their interpretation is improper.

ARTICLE BY Jon E. Wright & Pauline M. Pelletier of Sterne, Kessler, Goldstein & Fox P.L.L.C.
© 2015 Sterne Kessler