Tag: Intellectual property

Wide-Ranging Senate Bill Aims to Streamline Post-Grant Proceedings and Block Trolls

On Wednesday, Senator Coon—of 101 hearings fame—and five co-sponsors introduced the Stronger Patents Act in the Senate (“Support Technology & Research for Our Nation’s Growth and Economic Resilience”). About 22 of the bill’s 40 pages involve amendments to IPR, PGR and ex parte reexamination that limit appeals and clarify overlapping court and PTO actions. These provisions have been ably summarized by Joshua Rich in a post at PatentDocs, but there are other interesting amendments to 35 U.S.C. so I thought I would start toward the last half of the bill.

Section 106 of the bill, entitled “Restoration of Patents as Property Rights,” amends section 283 to require that a court that finds infringement to presume that further infringement would cause irreparable injury and that remedies available at law are inadequate to compensate for that injury. These are the circumstances that encourage the court to issue an injunction against the infringer.

Section 42 of 35 U.S.C. would be amended to end USPTO fee diversion into the general fund by providing that any fees collectable by the Director shall be “available to the Director” and used to operate the PTO. Remaining unobligated funds are to be maintained in the “USPTO Innovation Promotion Account.”

Section 123(d) would be amended to clarify that a mircoentity includes an applicant who receives the majority of his income for a institution of higher education, or applicant has, or is under an obligation to assign, grant or convey a license or other ownership interest to said institution or the applicant is the institution or the applicant is a 501(c)(3) “nonprofit organization” that holds title to the institution’s patents “for the purpose of facilitating commercialization of the technologies” of the IP.

The bill establishes a pilot program whereby no fewer than six district courts will receive one additional law clerk or secretary who is tasked, with the assistance of the Federal Judicial Center, with helping  the court “develop expertise in patent and PVPA cases”…”for the purpose of expanding the [patent cases pilot program] to address special issues raised in patent infringement suits against individuals or small business concerns.”

The bill introduces Title II—”Targeting Rouge and Opaque Letters” and defines “Unfair or Deceptive Acts or Practices in Connection with the Assertion of a United States Patent” (section 202). The bill makes it an “unfair or deceptive act or practice,” as defined by the ITC, to send written communications that the recipient is or was an infringer of “the patent” and bear liability or owe compensation to another, if the sender, in bad faith (high probability of deceit and intentional avoidance of the truth—defined in more detail in the bill—sends communications regarding 15 specific assertions regarding infringement, licensing and prior suits, or failure to identify the sender.

These bad acts or failures to act are a laundry list of the approaches patent trolls use to intimidate recipient targets or to mask their identities. Bad acts include falsely representing that sender has the right to enforce the patent, that a civil action has been filed against the recipient or other parties, that recipient will be sued, that third parties have taken licenses, including failure to disclose that the other licenses are not to the allegedly infringing acts, that recipient’s alleged infringement has been investigated by sender or that sender has filed an action that sender knew had failed.

A sender cannot seek compensation for infringement of a claim that has been held unenforceable or invalid, acts by recipient after the patent has expired or recipient’s acts that the sender knew were properly licensed.

A sender in bad faith, cannot fail to include the identity of the person asserting the right to license or to enforce the patent, including ultimate parent entities. The patent asserted to be infringed upon must be identified, as must the product or activity of the recipient alleged to be infringing. The name of a contact person must be given to the recipient.

While the sender can argue that any of these acts or failures to act was due to an honest mistake, enforcement is by the FTC and the fines can be as high as $5 million.

Section 204 preempts State laws regarding “transmission or contents of communication relating to the assertion of patent rights,” but does not preempt other State laws relating to state trespass, contract or tort law. The FTC can intervene in suits brought by States and, if the FTC has instituted a civil suit, the State cannot begin an action under section 202.

While I am sure that there are freedom of speech and commerce clause arguments to be made, this bill elevates its prohibitions to the level of shouting “fire!” in a crowded theater. Combined with the proposed traffic laws meant to limit the use of multiple IPR filings, and their associated appeals at every turn in the litigation road, this seems to be a reasonable attempt to untangle the tortuous relationship between district court litigation and post-grant PTO proceedings.

Senator Coons played an important role in the recent Senate subcommittee hearings on the misguided expansion of patent ineligibility under Section 101. He may have found this part of the Patent Statute to be easier to untangle than defining a “natural phenomenon” or an “abstract idea” but I hope that this issue remains on his IP to-do list.

© 2019 Schwegman, Lundberg & Woessner, P.A. All Rights Reserved.
For more on patent laws & legislation see the National Law Review Intellectual Property page.

Ericsson Offers FRAND – District Court Endorses Comparable Licenses, Rejects SSPPU Royalty Rate

On May 23, 2019, the court issued a declaratory judgment in the case of HTC v. Ericsson, No. 18-cv-00243, pending in the United States District Court for the Eastern District of Texas (Judge Gilstrap). That judgment confirmed that Ericsson’s 4G standard-essential patents (“SEPs”) convey significant value to mobile handsets and held that Ericsson made an offer to HTC that complied with Ericsson’s obligations to license on fair, reasonable, and non-discriminatory (“FRAND”) terms. The decision, published on the heels of Judge Koh’s recent opinion in FTC v. Qualcomm, provides much-needed clarity to SEP owners by definitively rejecting the smallest-saleable patent practicing unit (“SSPPU”) royalty theory in favor of a real-world, market-based approach.

The Dispute

Ericsson owns a large portfolio of cellular patents essential to the 2G, 3G, and 4G standards that it licenses to handset makers worldwide. As a member of the ETSI standard setting organization, Ericsson agreed to license these patents on FRAND terms. Ericsson offered a license to HTC at a rate of $2.50 per 4G device, or 1% of the net device price with a $1 floor and $4 cap. HTC countered with a rate of $0.10 per 4G device. HTC sued Ericsson, claiming that Ericsson’s offered royalty rate was too high, and that Ericsson breached its FRAND commitment.

A jury trial was held in February 2019. HTC argued that a royalty base must be calculated based on the profit margin of the baseband processor (which HTC argued was the SSPPU) rather than the price of the device as a whole. Ericsson argued that HTC’s SSPPU approach dramatically undervalued 4G cellular technology and that Ericsson’s patents in particular were worth far more. After a five-day trial, the jury found that Ericsson’s offers did not breach Ericsson’s commitment to license on FRAND terms and conditions.

The Decision

Following the verdict, the district court also issued its findings of fact and conclusions of law in connection with ruling on Ericsson’s request for a declaratory judgment that it had complied with FRAND. This declaration reaffirmed the jury’s findings, while also addressing more fully some key questions.

First, the court stated unequivocally that the ETSI FRAND commitment does not require a company to license its SEPs based on the profit or cost of the baseband processor or SSPPU.The district court’s decision is consistent with Federal Circuit precedent, such as Ericsson v. D-Link, which holds that “courts must consider the facts of record when instructing the jury and should avoid rote reference to any particular damages formula.”

Second, the order went further to conclude that Ericsson’s 4G portfolio is worth significantly more than a royalty rate based on the profit margin or cost of the baseband processor in HTC’s phones (HTC’s “SSPPU”). Looking to industry-wide evidence, the court held that the value of cellular technology far exceeded a valuation based on the price or profit of a baseband processor. The court found that “Ericsson established, and HTC’s own experts conceded, that there are no examples in the industry of licenses that have been negotiated based on the profit margin, or even the cost, of a baseband processor” and that credible evidence supported a finding that “the profit margin, or even the cost, of the baseband processor is not reflective of the value conferred by Ericsson cellular essential patents.”

Third, the court determined that both of Ericsson’s offers to HTC—(1) $2.50 per 4G device or (2) 1% with a $1 floor and $4 cap—were fair, reasonable, and non-discriminatory. The court found that Ericsson’s “comparable licenses provide the best market-based evidence of the value of Ericsson’s SEPs and that Ericsson’s reliance on comparable licenses is a reliable method of establishing fair and reasonable royalty rates that is consistent with its FRAND commitment.” At trial, evidence was presented regarding Ericsson’s licenses with Apple, BLU, Coolpad, Doro, Fujitsu, Huawei, Kyocera, LG, Panasonic, Samsung, Sharp, Sony, and ZTE. The court noted that several of Ericsson’s licenses contained express terms that were “similar or substantially similar” to Ericsson’s offers to HTC and rejected the argument that Ericsson’s offers to HTC were discriminatory.

Why It Matters

Judge Gilstrap’s declaration represents an important development in FRAND case law that looks to industry practice and market evidence rather than untested licensing theories. It affirms that basing a rate on comparable licenses is an acceptable FRAND methodology.

The decision also rejects the SSPPU royalty theory. Some have read the recent FTC v. Qualcommopinion to suggest that a FRAND royalty must be structured as a percentage rate on a baseband processor. Judge Gilstrap’s declaration demonstrates why such a reading is incorrect.  First, the declaration explains that the ETSI FRAND commitment simply does not require a SSPPU royalty base. Second, even if one were to indulge the SSPPU approach, the SSPPU for many standard-essential patents is not limited to a baseband processor. Third, a wealth of market evidence shows that Ericsson’s patents (and standard-essential patents generally) are far more valuable than a baseband processor-based royalty would reflect.

© McKool Smith
This article was written by Nicholas Mathews from McKool Smith.

State Sovereignty 101: State Universities Not Immune to IPR Proceedings

School may be out for the summer, but public colleges and universities would do well to spend their break shoring up strategies and defenses against potential inter partes review (“IPR”) proceedings. Last week the Federal Circuit ruled that states and state agencies (including state affiliated colleges and universities) may not rely on a sovereign immunity defense in a patent IPR proceeding. This decision means that challenges against University of Minnesota patents will proceed at the Patent Trial and Appeals Board (“PTAB”), and that other state affiliated educational institutions also may be subject to such proceedings.

The June 14 decision could open the floodgates to other IPR challenges against patents held by public colleges, universities, and other state entities. State colleges and universities should plan on adjusting various intellectual property clauses of licenses, sponsored research, and other technology transfer and funding agreements in efforts to mitigate the risks associated with an IPR challenge. These institutions also should carefully evaluate and plan for this risk in any assertion or even licensing efforts where a risk of an IPR may arise. Further, public colleges and universities should develop internal strategic plans to reduce the risk of an IPR occurring and to have various strategic approaches to IPR situations should an IPR challenge, or even a threat of an IPR challenge, occur in the future.

In the dispute, Ericsson challenged multiple patents held by the University of Minnesota relating to wireless technologies. The University of Minnesota also faces separate patent challenges to a computer hardware patent and a university patent related to hepatitis C medication.

The Federal Circuit held that for purposes of IPRs, state sovereign immunity is essentially the same as tribal sovereign immunity held by Native American tribes. In 2018, the Federal Circuit ruled that Saint Regis Mohawk could not employ tribal sovereign immunity in a dispute before the PTAB.

“[An] IPR represents the sovereign’s reconsideration of the initial patent grant, and the differences between state and tribal sovereign immunity do not warrant a different result than Saint Regis. We therefore conclude that state sovereign immunity does not apply to IPR proceedings,” the Court wrote in the June 14 ruling. Regents of the Univ. of Minn. V. LSI Corp., No. 2018-1559, 27 (Fed. Cir. Jun. 14, 2019).

The Federal Circuit also wrote that IPR proceedings differ substantively from typical civil litigation, to which sovereign immunity would normally apply unless waived. Instead, the Court writes that IPR proceedings “are essentially agency reconsideration of a prior patent grant.”

In other words, IPRs are more akin to a government agency enforcement action than a civil suit. The PTAB’s primary focus is determining whether a previous patent grant was made in error, rather than resolving a dispute between two adversarial parties. The PTAB may issue a ruling even if the petitioner or patent owner decides not to participate, unlike in civil litigation.

A petition for certiorari was filed in Saint Regis but was denied by the U.S. Supreme Court, which effectively allowed the Federal Circuit decision to stand. It remains to be seen if the University of Minnesota will appeal this ruling or if certiorari would be granted, but if allowed to stand, it is fair to anticipate a significant increase in patent IPR challenges to public colleges and universities as well as to other state agencies.

Click here to read the full opinion from the US Court of Appeals for the Federal Circuit.

Copyright © 2019 Womble Bond Dickinson (US) LLP All Rights Reserved.
Read more about patent inter partes review proceedings on the National Law Review Intellectual Property 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

SAS Indirectly Strengthens the Impact of Estoppel

The Supreme Court decision in SAS Institute v. Iancu[i]will likely strengthen a patent owner’s ability to argue in favor of estoppel and keep a petitioner from getting multiple bites at the invalidity apple in parallel PTAB and district court proceedings. At first glance the Supreme Court’s recent decision appears to be another setback to patent owners. Instead of quickly defeating post grant challenges to at least some challenged claims pursuant to a denial of institution, patent owners will now have to fight petitions even if the Board finds merit with only a single ground challenging patentability. Upon closer examination, however, SAS’s implications for estoppel are favorable and may even resolve a split concerning the scope of estoppel.

The Supreme Court Directive in SAS

SAS addressed the PTAB’s “partial institution” policy, under which the PTAB claimed the power to institute an IPR with respect to only some of the claims challenged in a petition. In SAS, the Supreme Court rejected that policy. The Court explained that if the PTAB decides to institute an IPR, 35 U.S.C. § 318(a) provides that PTAB “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner.” Emphasizing the statute’s use of the phrase “any patent claim,” the Court held that PTAB cannot pick and choose which claims to address, but must instead take the petition as it finds it.[ii] The Court found further support for its interpretation in the structure of the inter partes review process “in which it’s the petitioner, not the Director, who gets to define the contours of the proceeding.”[iii]

The Split on Estoppel

The partial institution policy that SAS rejected has created a split in the interpretation of estoppel under 35 U.S.C. § 315(e). Section 315(e)(2) provides that “[t]he petitioner in an inter partes review . . . that results in a final written decision under section 318(a) . . . may not assert . . . in a civil action . . . that the claim is invalid on any ground that the petitioner raised or reasonably could have raised during that inter partes review.” Congress intended this provision to preclude the same party from re-litigating invalidity in the district court once it had chosen to do so through an IPR. As then-Director of the PTO David Kappos testified, the “estoppel provisions mean that your patent is largely unchallengeable by the same party.”[iv] Similarly, Senator Grassley stated that IPR review “will completely substitute for at least the patents-and-printed-publications portion of the civil litigation.”[v]

Notwithstanding the apparently broad estoppel envisioned by Congress, some courts have interpreted § 315(e) more narrowly. For example, in Shaw Industries Group, Inc. v. Automated Creel Systems, Inc., the Federal Circuit explained that where PTAB partially instituted an IPR, the petitioner was not estopped from raising a ground in district court that it had included in its IPR petition but on which PTAB did not institute. The court reasoned that the non-instituted ground was not raised “during th[e] inter partes review.”[vi] Similarly, in HP Inc. v. MPHJ Technology Investment, LLC, the Federal Circuit explained that “noninstituted grounds do not become a part of the IPR,” and “[a]ccordingly, the noninstituted grounds were not raised and, as review was denied, could not be raised in the IPR.” The court therefore held that “the estoppel provisions of § 315(e)(1) do not apply.”[vii] Other courts have followed suit and even extended that holding.[viii]

A broader interpretation of estoppel tracks what many believe to be the statutory intent, however, as a party should not get two bites at the apple and be able to seek review at both the PTAB and in the district court. Adopting this view, the court in Biscotti Inc. v. Microsoft Corp. cabined Shaw and HP to their facts, holding that they “exempt an IPR petitioner from § 315(e)’s estoppel provision only if the PTAB precludes the petitioner from raising a ground during the IPR proceeding for purely procedural reasons.”[ix] Thus, the court held that § 315(e) estopped the petitioner from asserting any ground that (1) was included in PTAB’s final written decision, (2) was not instituted for non-procedural reasons, or (3) was not included in the petition.[x] Any other decision would result in needlessly protracted litigation as petitioners would re-litigate arguments similar to those that it had already lost or strategically chose not to include in a petition.[xi] The court in Douglas Dynamics, LLC v. Meyer Products LLCtook a similar view with respect to non-petitioned grounds, holding that estoppel applies “to grounds not asserted in the IPR petition, so long as they are based on prior art that could have been found by a skilled searcher’s diligent search.”[xii]

SAS Strengthens Patent Owners’ Estoppel Arguments Because a Petitioner is Deemed to be the “Master of its Complaint”

While SAS had nothing to do with estoppel on its face, much of the disagreement regarding the scope of estoppel arose out of the PTAB’s partial institution policy and the effect of estoppel on non-instituted claims. Because the PTAB no longer has discretion as to partial institution, courts will no longer have to struggle with whether a petitioner is estopped from raising non-instituted grounds for unpatentability in a subsequent or parallel district court proceeding. While a few open issues remain, the patent owner will still be able to argue that SAS supports the idea that petitioners should only get one opportunity to challenge patentability—either at the PTAB or before a jury. The Supreme Court directive from SAS, coupled with recent guidance from the PTAB, suggests that the divide between the broad (Biscotti and Douglas Dynamics) and narrow (Shaw and HP) interpretations of estoppel—at least with respect to pre-institution decisions from the PTAB—may be merging.

Moreover, while SAS does not explicitly resolve whether a petitioner is estopped from arguing non-petitionedclaims in a parallel district court case, the premise behind the Supreme Court’s decision—that the petitioner is the master of its own petition—suggests that estoppel should apply. Some commentators have predicted that because PTAB must now choose between full institution and full denial, “petitioners [will] have an incentive to focus their petitions even further—when choosing claims to challenge, grounds to assert, and prior art to cite—in order to ensure that the likelihood of full institution is greater than the likelihood of full denial.”[xiii] But filing a targeted (and therefore stronger) petition may run the risk of estoppel on any non-petitioned claim. As Biscotti and Douglas Dynamics indicate, petitioners should not be permitted to hold arguments in reserve in case of an unfavorable result at the PTAB. Moreover, SAS supports Biscotti’s and Douglas Dynamic’s interpretation of the meaning of “during” the IPR. While Shaw characterized an IPR as not beginning until institution,[xiv]SAS depicts post grant review as a single process that begins with petitioner defining the scope of the proceeding in its petition.[xv]Applying estoppel to non-petitioned claims would not be inconsistent with a courts’ concern “that estoppel applies only to those arguments, or potential arguments, that received (or reasonably could have received) proper judicial attention.”[xvi]

 Further, SAS will still enable patent owners to rely on the same line of cases to argue for procedural estoppel. Before SAS, the PTAB frequently denied institution in view of procedural deficiencies.[xvii] Now, however, the PTAB will be faced with either denying institution for failure to comply with PTAB rules or allowing institution on all grounds even where some of the challenges are procedurally improper. For example, petitioners could present a single procedurally proper argument to open the door to review and evade page limit requirements by packing the remainder of the petition with grounds that must also be instituted under SAS but that are supported only by improper incorporations by reference.[xviii] While denying institution because of procedural failings could preclude the petitioner from filing another (procedurally proper) petition making the same arguments,[xix] the petitioner, as “master of its complaint,” could have drafted its petition correctly from the start.[xx] In short, the petitioner’s failure to follow the rules should not justify a second bite at the validity apple.

 Finally, pending petitions subject to partial institution could have the same consequences depending on the action of the petitioner post-SAS. PTAB guidance indicates that in such cases, “the panel may issue an order supplementing the institution decision to institute on all challenges raised in the petition.”[xxi] If a petitioner fails to seek supplemental institution or fails to appeal the PTAB’s refusal to supplement, estoppel could apply. While some courts might continue following Shaw and HP by holding that non-instituted claims were not raised “during” the IPR, petitioner “could have raised” those claims and arguments “during” the IPR—even under Shaw’s interpretation—given SAS’s holding because the petitioner should have sought to remedy the non-institution.

The Takeaway

While not obvious at first glance, SAS follows recent decisions like General Plastics that tend to protect patent owners’ rights. While the focus of SAS was on institution and the scope of institution, the Court has armed patent owners with another weapon with which they can challenge serial review of the same patent on the same grounds in multiple petitions and district court proceedings.

[i] No. 16-969 (Apr. 24, 2018).

[ii] Id., slip op. at 1, 4-5.

[iii] Id., slip op. at 12.

[iv] Hr’g on H.R. 1249 Before the Subcomm. on Intell. Prop., Competition and the Internet of the H. Comm. on the Judiciary, 112th Cong. (2011) (statement of David Kappos, Dir., USPTO) (“Those estoppel provisions mean that your patent is largely unchallengeable by the same party.”)

[v] 157 Cong. Rec. S1360-94 (daily ed. Mar. 8, 2011) (statement of Sen. Grassley) (claiming that the estoppel provision “ensures that if aninter partes review is instituted while litigation is pending, that review will completely substitute for at least the patents-and-printed-publications portion of the civil litigation”).

[vi] 817 F.3d 1293, 1300 (Fed. Cir. 2016) (quoting 35 U.S.C. § 315(e)(2)).

[vii] 817 F.3d 1339, 1347 (Fed. Cir. 2016).

[ See, e.g., Verinata Health, Inc. v. Ariosa Diagnostics, Inc., 2017 U.S. Dist. LEXIS 7728, at *8-10 (N.D. Cal. Jan. 19, 2017); Illumina, Inc. v. Qiagen N.V., 207 F. Supp. 3d 1081, 1089 (N.D. Cal. 2016).viii]

[ix] 2017 U.S. Dist. LEXIS 144164, at *21-22 (E.D. Tex. May 11, 2017).

[x] Id. at *22.

[xi] Id. at *17-18, *20-21.

[xii] 2017 U.S. Dist. LEXIS 58773, at *15.

[xiii] Saurabh Vishnubhakat, First Steps After SAS Institute, Patently-O (Apr. 27, 2018), https://patentlyo.com/patent/2018/04/first-steps-institute.html

[xiv] 817 F.3d at 1300.

[xv] Slip op. at 6, 9.

[xvi] Verinata, 2017 U.S. Dist. LEXIS 7728, at *10.

[xvii] See, e.g., Shenzhen Huiding Technology Co., Ltd. v. Synaptics Incorporated, IPR2015-01741, Paper 8 at 29-31 (PTAB Aug. 7, 2015) (partially denying institution due to improper incorporation by reference); Bomtech Elec., Co. Ltd. v. Medium-Tech Medizingeräte GmbH, Case No. IPR2014-00138, Paper No. 8 at 32-33 (PTAB Apr. 22, 2014) (same).

[xviii] See 37 C.F.R. § 42.6(a)(3).

[xix] General Plastic Industrial Co., Ltd. v. Canon Kabushiki Kaisha, IPR2016-01357, Paper 19 (PTAB Sept. 6, 2017).

[xx] Id.

[xxi] Guidance on the Impact of SAS on AIA Trial Proceedings (Apr. 26, 2018) (emphasis added). 

 

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This post was written by Scott W. Hejny and Chelsea Priest of McKool Smith.

Are Foreign Lost Profits Really Lost?

On January 12, 2018, the Supreme Court granted certiorari to review the Federal Circuit’s lost profits decision in WesternGeco LLC v. ION Geophysical Corp., 791 F.3d 1340 (Fed. Cir. 2015), marking the first step toward defining the scope of recovery for damages in the form of lost foreign sales. Under the Patent Act, damages are governed by § 284, which provides:

Upon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court.

While § 284 allows patent owners to recover lost profits and reasonable royalties, the statute is silent as to whether these damages should encompass overseas losses (i.e., from foreign sales or contracts), which could play an important and substantial role in elevating damages – especially for patent holders with international contracts and services.

Background

WesternGeco LLC (“WesternGeco”) is a wholly-owned subsidiary of Schlumberger Limited, a worldwide provider of reservoir drilling and processing technology in the oil and gas industry. Relevant to this case, WesternGeco LLC provides reservoir monitoring and imaging services to help perform seismic surveys. ION Geophysical Corp. (“ION”) offers similar services as WesternGeco and is a competitor.

In 2009, WesternGeco sued ION for patent infringement under 35 U.S.C. § 271(f)(1)-(2). Specifically, 35 U.S.C. § 271(f) provides:

  1. Whoever without authority supplies or causes to be supplied in or from the United States all or a substantial portion of the components of a patented invention . . . in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent . . . shall be liable as an infringer.
  2. Whoever without authority supplies or causes to be supplied in or from the United States any component of a patented invention that is especially made or especially adapted for use in the invention and not a staple article or commodity of commerce suitable for substantial noninfringing use . . . knowing that such component is so made or adapted and intending that such component will be combined outside of the United States . . . shall be liable as an infringer.

The district court found for WesternGeco, awarding it $93,400,000 in lost profits and $12,500,000 in reasonable royalties as damages. On appeal, however, the panel majority reversed the district court’s award of lost profits, observing that the “presumption against extraterritoriality is well-established and undisputed.” Moreover, the Federal Circuit previously stated in Power Integrations v. Fairchild Semiconductor, “[Our patent laws] do not thereby provide compensation for a defendant’s foreign exploitation of a patented invention, which is not infringement at all.” In effect, the majority held that “[u]nder Power Integrations, WesternGeco cannot recover lost profits resulting from its failure to win foreign service contracts.”

WesternGeco’s Petition

WesternGeco filed two petitions for certiorari. Based on the first petition, the Supreme Court vacated the Federal Circuit’s opinion in light of Halo Electronics, Inc. v. Pulse Electronics, Inc., 136 S. Ct. 1923 (2016). On remand, however, the Federal Circuit reinstated its opinion and judgment as to lost profits. As a result, WesternGeco filed a second petition for certiorari on February 17, 2017, which presented the following question:

Whether the court of appeals erred in holding that lost profits arising from prohibited combinations occurring outside of the United States are categorically unavailable in cases where patent infringement is proven under 35 U.S.C. § 271(f).

In its petition, WesternGeco argued that the majority panel “applied the presumption against extraterritoriality in such a duplicative manner [that] defeat[ed] Congress’ intent in enacting § 271(f).” Therefore, the decision “effectively eliminate[d] lost profit damages where infringement is found under § 271(f), limiting patent owners only to a reasonable royalty.” WesternGeco also distinguished its case from Power Integrations, by arguing that “Power Integrations dealt with infringement under § 271(a)” and therefore “reflects no comparable congressional judgment to target certain extraterritorial conduct.”

In an amicus curiae brief submitted on behalf of the United States, the Solicitor General urged the Court to hear this case, stating that the Federal Circuit’s “approach systematically undercompensates prevailing patentees like petitioner, whose transnational business suffered when respondent infringed petitioner’s patents within the United States.”

In addition, WesternGeco argued that allowing patentees to recover lost profits from international sales would be consistent with copyright law, which has been found by several circuits to permit parties to recover foreign damages so long as those damages are directly linked to a domestic predicate act of infringement.

Implications

Although the Supreme Court, in its 2007 opinion in Microsoft Corp. v. AT&T Corp., previously “[r]ecogniz[ed] [that] § 271(f) is an exception to the general rule that [U.S.] patent law does not apply extraterritorially,” the Court ultimately “resist[ed] giving the language . . . an expansive interpretation.”

Patent holders should be aware that the Supreme Court’s decision in WesternGeco may present an opportunity to expand the scope of damages claims to encompass international losses caused by infringement in the United States.

 

© Copyright 2018 Brinks, Gilson & LioneBrinks, Gilson & Lione.
This post was written by Jeffrey J. Catalono and Judy K. He of Brinks, Gilson & Lione.
Read more Intellectual Property News at the Intellectual Property Page.

Aglets, Who Knew?

SneakRTech Corp. wants you to defend their patent and challenge BadGuys, Incorporated’s patent at the U.S. Patent and Trademark Office Patent Trial and Appeal Board (PTAB). The subject matter: aglets.

You run to the internet and find that “aglets” are the metal or plastic component on the end of a shoelace. Even more, you are surprised to find that the science of aglets is varied and deep. There is technology behind the manufacturing of the aglets themselves, the assembly of the aglets to the laces, and the design of the aglets such that they easily insert into the eyelets of the shoe. Chemistry and material science play a role in the technology related to aglets – both metallurgy and polymer science. Some of these disciplines are relatively old (e.g., at least 15 years ago they were well developed), while some disciplines are rapidly evolving (e.g., nanocoatings to provide a color-change depending on the temperature of the environment).

To complicate things further, the patents being defended and challenged have very different applications—one is an aglet for a desert rock climbing shoe, known to be exposed to high heat, low humidity, and abrasive conditions. The other is directed to a snowboarding boot aglet.

So now you face important questions. Do you need two experts? And how do you choose an expert? There are a least four considerations associated with finding the right expert. 

1. Make a wish-list

The first step in selecting an expert is simple – make a wish-list of the ideal traits you want in your expert. This requires answering, or at least thinking about, several questions.

What, and how many, technology spaces are claimed? Consider whether you need multiple experts, based on the variation in technology, including between claims of the same patent. Although Daubert seems to come up less at the PTAB, consider how to position yourself so that any expert you choose will survive a Daubert challenge.

For our example, think about desired attributes of the eventual selected expert. Are we looking for an expert in aglet design, or perhaps manufacturing processes related to attaching the aglets to the lace themselves? Are we looking for industry or academic expertise, or both? Are we looking for a focused specialist in aglets or a broader expertise in understanding the chemistry, material science, and nanotechnology of aglets. Where is the eyelet going to be (e.g., dress shoe, trail runner, hockey skates, etc.)? Does it matter?

What level of education is required to helpfully explain the technology, and relatedly, how are we planning to define the person-of-ordinary-skill-in-the-art? If the technology is relatively developed, how will our expert opine on the state-of-the-art at a time where she may not have even been out of undergraduate school?

Do you need an experienced expert with deposition and court appearances, or will a more novice expert work?

2. Identify potential expert types and sources

Once you have a wish-list of what you want in an expert, you need to determine where to look to find it. A good start can be to research publications, patents, and industry groups in the claimed technology space.

For example, one aglet patent may relate to electroplating processes of aglets specifically designed to be applied after the aglet is attached to the lace, involving complex chemistry and manufacturing concerns. The other aglet patent could be focused on shape design for ease of entry into an eyelet on a shoe.

For the first aglet, the complex chemistry may require a high level of education. The latter aglet may be better suited to a manufacturing engineer having hands on experience in a final assembly plant, or an industrial designer focused on customer experience. These experts may travel in vastly different circles, and may lend themselves to different types of searching. Additionally, consider whether you’re looking for a generalist or a specialist. For specialist experts, several databases are available to search theses/dissertations. This may provide a list of potential experts to consider that have studied your issue deeply.

3. Consider using an expert service – or two

A helpful shortcut to finding your expert and getting them retained early can be utilizing an expert search service. As a practical matter, it can be helpful to use such a service to ensure quick turnaround, especially if you have a good relationship with the headhunter. You can take steps to make the search consultant’s job easier, which will net better results. This includes providing them a list of experts already disqualified, for example based on conflicts, co-counsel or client preference, etc. Coordination with the client and co-counsel is key, and evaluating potential experts and developing the definition of a person of ordinary skill in the art can quickly narrow the list of available experts.

Additionally, provide the expert service your anticipated timeline—it is critical that the expert is available when you need them (e.g., to prepare a declaration, at deposition(s), etc.).

4. Nail the expert interview – gain knowledge and assess quickly

The interview phase needs to include at least three considerations: experience as an expert, substantive background in the technology, and availability now and throughout trial. If an expert has never been deposed before, try to determine whether they have the soft skills needed to be effectively cross-examined. Push them to see how they react to hard questions both substantively and temperamentally. Ask them for some strategy advice for your case to see how they think. Research them – look for skeletons before hiring them. Ask for references.

You now have two experts: Ms. Boot and Dr. Slipper, PhD., to assist on two separate aglet patent cases.

This post was written by Jason D. Eisenberg of  Sterne Kessler., © 2017
For more Intellectual Property legal analysis, go to The National Law Review

Worried About Fake News? You Should Really Worry About Fake Drugs

While the concept of “fake news” continues to trigger Twitter followers and grab headlines, the trade in counterfeit drugs is a worldwide problem of significant scale.  This article discusses the problem and talks about some things trademark owners are doing to address the public safety issues posed by fake drugs.

The Problem.

Trademark counterfeiting?  Most think of fake Rolex watches sold on city street corners or faux designer purses sold in suburban kitchens.  While knock-off luxury goods may seem harmless, the economic harm inflicted on legitimate businesses—and the workers they employ—is enormous.  The Federal Bureau of Investigation estimates that the dollar value of counterfeit goods sold in the U.S. at $200-250 billion annually.  Many of North Carolina’s leading industries, including tobacco, furniture, apparel and pharmaceuticals, are among the most frequent targets of trademark counterfeiting. Also, according to Interpol, trademark counterfeiting often provides for a source of income and reliable import channel for those with other nefarious purposes, such as illegal drug or human trafficking and potentially even terror activities.

In addition to these very negative economic consequences, there is a particular level of harm associated with certain kinds of trademark counterfeiting.  Counterfeit goods aren’t subject to the same regulatory standards and safety inspections as items produced by legitimate manufacturers. So, in areas of manufacture where quality control is important, counterfeit products fall short.  Consider, for example, the potential harm that could be caused by substandard, bogus automobile tires or airplane parts.

Counterfeit pharmaceutical drugs are clearly an area where public safety concerns are paramount.  Counterfeit medicines have been found in all areas of the globe, including the highly regulated U.S. market, and extend to medicines, vaccines, testing and diagnostic equipment, and other medical devices.  Both branded and generic pharmaceutical products can be falsified.  And sales are not just limited to the black market—such products make their way to hospitals and pharmacies, often through internet sales trade channels.

Lifestyle or “popular” drugs are often counterfeited, and there have been recent increases in cosmetic, weight loss and opioid drugs.  However, such drugs are not limited to such trends—counterfeit malaria vaccines, cholesterol medications and cancer treatments can also be found in the U.S.  The World Health Organization (WHO) estimates that an average of up to 10% of medicines are counterfeit, and in developing countries, that percentage is considerably higher.

The Center for Medicine in the Public Interest estimates the annual worldwide dollar value of counterfeit pharmaceuticals at $200 billion annually and rising. Sadly, the damage is far greater than lost sales. WHO estimates that approximately 200,000 people die each year as the result of ineffective counterfeit anti-malarial drugs.

Counterfeit medicines also may cause adverse affects or allergic reactions, and they may not effectively treat the ailment for which prescribed.  They may promote drug resistant disease strains or contain no active ingredient, the wrong active ingredient, or the incorrect strength (too much or too little) or dosage of the intended ingredient.  According to a WHO investigation, approximately 1/3 of such drugs contain no effective ingredient.  Given the lack of inspection of counterfeit manufacturing facilities, such products are often produced under non-sterile circumstances, resulting in bacterial or other contamination.  Clearly, the ways in which counterfeit drugs can cause serious negative patient outcomes are extensive and extreme.

Combating the Problem.

Drug companies, and their attorneys and security departments, take a multi-pronged approach to combating counterfeiting.  Many of these efforts are used to combat counterfeiting generally, but some have been developed with particular focus toward the nuances of the counterfeit pharmaceutical market.

The counterfeiting problem can appear daunting, given an array of unknown manufacturing sources, the breadth of possible sales outlets, and the strong consumer preference for the “cheap but name brand” combination. Successful anti-counterfeiting practices do not generally follow a reactive “Whack-A-Mole” approach, attempting to squelch every low-level advertisement or email blast that comes out. Rather, systematic and strategic prosecution, akin to practices used in the intelligence community, is preferred. Investigations of networks and relationships, rather than merely products and sellers, can help identify high-payoff targets, the disruption of which can have positive effects across several echelons of the counterfeit trade. Focusing limited enforcement resources on valuable choke points which contribute to an ecosystem response can often be the most fruitful and strategic approach.

Counterfeit pharmaceuticals in particular, given their specific methods of typical advertisement and sale, are prone to certain forms of interdiction over others. It is well known that counterfeit pharmaceuticals are advertised heavily on both internet ads and email “spam” messages, all of which attempt to direct a prospective purchaser to a product-ordering website. Attempting to interdict the advertising messages, which are often sent by botnets or third-parties through a referral-affiliate relationship, or to shut down specific websites, is a losing proposition. This is the case because there are hundreds of thousands or more of each, and the costs to re-establish a confiscated website are negligible compared to the significant enforcement costs. However, academic researchers working with industry and enforcement contacts identified several potential chokepoints on which these sorts of pharmaceutical sales pathways rely. See Dharmdasani et al., “Priceless: The Role of Payments in Abuse-advertised Goods,” CCS ’12, October 16–18, 2012, Raleigh, N.C.  One key chokepoint relationship for online transactions is a seller’s host bank, nearly always non-U.S. and non-EU, that is willing to accept abusive credit card transactions related to these unlawful goods from card processors such as Visa and MasterCard.

Pharmaceutical

Nearly all online counterfeit pharmaceutical revenue can flow through these concentrated banking relationships, and researchers discovered that intercepting just one or two of these banking relationships, and seizing related funds, could have ripple effects disrupting thousands of drug transaction websites and referral affiliates. For example, a 2011 study determined that across 95% of spam e-mail for pharmaceuticals and similar goods, only three acquiring bank institutions were used. Id. This research demonstrates a guiding principal of anti-counterfeiting efforts: enforcement is most successful where the “termination cost [to the counterfeiter] is inevitably far higher— in fines, in lost holdback, in time and in opportunity cost—than the cost of the intervention itself [by the rights holder]. … [R]elatively concentrated actions with key . . .  institutions can have outsized impacts.” Id.

Targeted investigations and enforcement are only one aspect of a comprehensive anti-counterfeiting approach. Successful rights holders employ a broad-based strategy, involving secured supply chain management, thorough technology and distribution agreements with market partners, and high-tech security solutions such as secure packaging, microchips, holograms, and the like. The combination of many of these controls can make enforcement actions easier and more productive, and thus reduce the prevalence and success of counterfeit competitors. In addition, it is important to inform consumers and retailers about both the dangers of counterfeits and the value of accessing authentic products. Pharmaceutical companies should engage in advertising to alert the marketplace to the dangers of counterfeit pharmaceuticals and to also assist others in identifying counterfeit drugs – including examination of packaging and medicines for quality, condition, spelling and grammar; and checking manufacturing and expiration dates and batch numbers on both exterior and interior packaging.

The problem of fake drugs is in fact very real news and companies here in North Carolina and around the world are taking steps to defend their brands and protect their customers in the marketplace.

Authentic Vial                Counterfeit Vial

Botox Authentic    Fake Botox Vial

This article originally was published in the August 2017 edition of the Newsletter of the Board of Legal Specialization, a publication of the North Carolina State Bar.

This post was written by Sarah Anne Keefe & Stephen Shaw of Womble Carlyle Sandridge & Rice, PLLC. Copyright © 2017. All Rights Reserved.

Bring on the Bad Word Brands? What Supreme Court’s Decision in Matal v. Tam Means for Trademark Owners

The Supreme Court’s June 19, 2017 decision in the Matal v. Tam case has been burning-up the news wires all week. The decision struck down a 70-year-old ban on federally registering disparaging trademarks, finding that the disparagement clause of Section 2(a) of the Trademark Act violates the First Amendment principal against banning speech that expresses ideas that offend. The decision was joined by all 8 participating justices. The case was heralded as not just a win for the Asian-American dance-rock band The Slants, but also for the Washington Redskins whose trademark registrations were challenged based on the same disparagement clause.

The USPTO was quick to act, issuing Examination Guide No. 1-17 on June 26, providing a framework for how the PTO will examine applications following the Supreme Court’s decision. Opportunistic brand owners were also quick to act; World Trademark Review reports that at least 11 trademark applications for marks that could possibly be deemed disparaging were filed the day of the ruling.

In light of Tam, two other provisions of Section 2(a) — those that preclude registration of immoral and scandalous marks — also seem likely to fall, as both could be interpreted as banning speech likely to offend. In fact, the constitutionality of the scandalousness provision of 2(a) is currently pending before the Federal Circuit (In re Brunetti), and it seems likely the Fed. Cir. will move forward with Brunetti in the aftermath of Tam.

What does Tam mean to brand owners? It seems unlikely that the ability to now federally register offending marks will herald a seismic shift in branding strategies. The ability to use a trademark was never at issue in Tam, simply the ability to protect a mark by federal registration. Similarly, the public’s appetite for offensive brands will likely also not be enhanced by the new ability to obtain federal registration for such source indicia. Just as it is unlikely that the Court’s decision in Tam will persuade my son’s middle school principal that a T-shirt bearing the phrase HOMEWORK.SUCKS (INTA swag courtesy of the folks at dotSucks) is appropriate classroom attire. As always, the strength of a brand goes not to its novelty, but to its long-term ability to communicate the positive attributes of the associated products and services to consumers.

This post was written by Monica Riva Talley of Sterne, Kessler, Goldstein & Fox P.L.L.C.

Intellectual Property Cases to Watch in 2017

The New Year brings excitement and anticipation of changes for the best.  Some of the pending patent cases provide us with ample opportunity to expect something new and, if not always very desirable to everybody, at least different.  In this post, we highlight several cases that present interesting issues and that we anticipate may provide for new and important developments in the patent law this year.

Samsung Electronics Co. v. Apple Inc.

2017 IP cases intellectual propertyThis highly-publicized case, now on remand from the Supreme Court, concerns damages for design patent infringement.

Apple sued Samsung in 2011 for infringement of U.S. Patent Nos. D618,677 (claiming an electronic device having black rectangular front face with rounded corners), D593,087 (claiming an electronic device having a rectangular front face with rounded corners and a raised rim) and D604,305 (claiming a grid of 16 colorful icons on a black screen of an electronic device).  As we reported earlier, a jury found that several Samsung smartphones resembling the iPhone infringe those patents and awarded $399 million in damages to Apple, the entirety of Samsung’s profit from sale of the infringing smartphones.

The Federal Circuit upheld the award. The decision centered on 35 U.S.C. § 289, which provides that an accused infringer manufacturing or using a patented “article of manufacture” is liable to the patent owner “to the extent of his total profit.”  The Federal Circuit rejected Samsung’s argument that damages should not be determined based on the entire smartphone but rather should be limited to individual components covered by the patents, such as a front face or a screen.  The smartphone as a whole was deemed to be an “article of manufacture” in the context of Section 289.  The Supreme Court, in an unanimous (but short) decision, however agreed with Samsung and remanded, stating that an “article of manufacture” is “simply a thing made by hand or machine,” and is broad enough to include both a multicomponent product sold to a consumer and individual components of that product, “whether sold separately or not.”  No test however was provided on how to identify an “article of manufacture” relevant to damages.

On remand, the Federal Circuit will determine whether “the relevant article of manufacture for each design patent … is the smartphone or a particular smartphone component.”  A test for determining what exactly constitutes an “article of manufacture” for the purpose of determining damages in design patent cases is highly anticipated.

TC Heartland LLC v. Kraft Foods Group Brands LLC

This case concerns a choice of venue in patent cases, and a decision by the Supreme Court is expected around June, 2017.

Kraft Foods sued TC Heartland in the District of Delaware, alleging that Heartland’s liquid water enhancer products infringed three of Kraft Foods’ patents.  Heartland moved to either dismiss the action or transfer venue to the Southern District of Indiana, where it is headquartered and incorporated.  In support, Heartland stated that it is not registered to do business and has no presence in Delaware.  After the district court denied its motion, Heartland appealed.  The Federal Circuit affirmed and stated that patent suits may be filed in any judicial district in which the defendant sells an allegedly infringing product (Heartland ships accused products to Delaware, which amounts though to only about 2% of its total sales).  The Federal Circuit has consistently applied this interpretation of the patent venue statute since its 1990 decision in VE Holding, which has since allowed patent holders to file suits in favorable courts that are perceived to be more plaintiff-friendly, such as the Eastern District of Texas. Opponents of this doctrine refer to it as a “forum shopping.”

As we reported before, on December 14, 2016, the Supreme Court agreed to review the Federal Circuit’s decision.  A decision in favor of Heartland would fundamentally change where patent cases can be litigated.  In particular, many patent holders may effectively be barred from bringing suits in the Eastern District of Texas.

Lexmark International v. Impression Products

On December 2, 2016, the Supreme Court granted Impression Products’ petition to hear a case concerning whether patent exhaustion arises from foreign sales.

Lexmark, a manufacturer of printers and cartridges for those printers, sold the cartridges covered by Lexmark’s U.S. patents in the U.S. and abroad.  Some of the cartridges were sold at a reduced price and, according to a “Return program,” were subject to a single-use/no-resale restriction set forth in the user agreement.  With the goal of protecting quality and reputation of its products, and for other reasons, Lexmark required that customers who bought Return program cartridges return the empty cartridges only to Lexmark for remanufacturing or recycling.  Impression, among others, acquired and re-purposed (which included modifying the original chip) both the foreign- and domestically-sold cartridges, and sold the modified cartridges in the U.S.  When Lexmark took legal actions and other defendants agreed to settlements, Impression however argued that the first sale of the cartridges, either in the U.S. or abroad, exhausted Lexmark’s U.S. rights to exclude.

The district court partially sided with Impression, ruling that Lexmark’s sale in the U.S. exhausted its patent rights, despite the express single-use/no-resale restrictions under the Return Program, but concluded that foreign sales did not exhaust Lexmark’s patent rights.  As we said earlier, on February 12, 2016, the en banc Federal Circuit agreed with Lexmark and confirmed two important aspects of the patent exhaustion doctrine, namely that (1) a patentee can “sell[] a patented article subject to a single-use/no-resale restriction that is lawful and clearly communicated to the purchaser” without exhausting the patentee’s rights to that item; and (2) because foreign sales do not permit “the buyer to import the article and sell and use it in the United States,” an authorized foreign sale of a product does not exhaust a patentee’s U.S. patent rights to exclude associated with that product.

In re Aqua Products

This is a pending en banc case before the Federal Circuit regarding whether it is the patent owner who bears the burden of proving patentability of its amended claims in inter partes reviews before the Patent Trial and Appeal Board.

Aqua Products, Inc., as a patent owner, faced a claim amendment issue.  In particular, after an inter partes review (IPR) of Aqua’s patent on a robotic swimming pool cleaners was initiated, Aqua moved to substitute several of the challenged claims with limitations from the claims that were not challenged, effectively amending the claims.  The America Invents Act (AIA) permits patent owners to move to amend claims of a patent, and 35 U.S.C. § 316(d) states that “the patent owner may file one motion to amend the patent,” with additional motions to amend allowed in limited circumstances.

Applying its rule making authority, the PTO ruled that Aqua failed to demonstrate that its amendments would make the claims-at-issue patentable over the known prior art.  On August 12, 2016, the Federal Circuit granted Aqua’s motion for an en banc hearing and asked Aqua and the USPTO to brief whether the USPTO may require that a patent owner bear the burden of persuasion regarding patentability of the amended claims, even though the AIA assigns the burden of proving unpatentability of the proposed claim amendments to an IPR petitioner.  See 35 U.S.C. § 316(e)).

Argument was heard on December 9, 2016, and a blog post on the upcoming decision will appear in due course.

ARTICLE BY Inna Dahlin, PhD & Brad M. Scheller of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
©1994-2017 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.