Table of Contents
Some observations regarding Alice v CLS (04/02/14)
Some interesting stuff in the transcript of arguments in Alice v CLS Bank before the Supreme Court. The court struggles to articulate how claims that could easily have been rejected under KSR obviousness analysis are unpatentable business method claims under 101.
- Audio not yet available
Privity by way of indemnity obligation may start IPR clock (01/27/14)
In Atlanta Gas Light Company v. Bennett Regulator Guards Inc., the PTAB ruled that, because a privity between an indemnified party and its indemnitor does not begin until the indemnitor's obligation manifests by the indemnified party being sued, the one-year IPR clock did not run out. This suggests that the one-year clock will begin with respect to an indemnitor party upon the indemnified party being sued.
Exceptional "exceptional case" case (12/30/13)
Some key findings:
- Actual knowledge of objective baselessness of the plaintiff's claims are not required for the case to be exceptional.
- The court should not conclude that a case is not exceptional simply upon a finding that there is a lack of proof of subjective bad faith. Quoting Highmark Inc. v. Allcare Health Management, the Court states, “subjective bad faith only requires proof that the “lack of objective foundation for the claim 'was either known or so obvious that it should have been known' by the party asserting the claim.”
- Both subjective bad faith and objective baselessness is needed, but a finding of subjective bad faith can be arrived at by “a wide variety of proofs.” The court did not provide specific examples, but concludes with, “the retention of the subjective bad faith requirement may prove to have little effect on this case, as well as many that follow” (emphasis added).
- Bad faith and objective baselessness must be proved by clear and convincing evidence; the court notes that circuits are split on this matter.
- The court addressed criticism regarding fee shifting directly, noting that fee shifting is appropriate in circumstances other than bad faith/objective baselessness, noting prior decisions where exceptionality was found “where there has been willful infringement, fraud or inequitable conduct in procuring the patent, misconduct during litigation, vexatious or unjustified litigation, conduct that violates Federal Rule of Civil Procedure 11, or like infractions” and reiterated that “[l]itigation misconduct and unprofessional behavior may suffice, by themselves, to make a case exceptional under § 285.”
In a concurring opinion, Judge Rader argued that the law should be changed to provide that objective baselessness be sufficient to support fee shifting, and that proof by a preponderance of the evidence should suffice. Judge Rader also supported a return to the “original standard” for exceptional cases, wherein “interests of the patentee and alleged infringer are adequately taken into account in the required evaluation of the totality of the circumstances.” Under standard, prior to 2005 when it was changed by Brooks Furniture, exceptional cases were found by “willful or intentional infringement, . . . vexatious or unjustified litigation, or other misfeasant behavior” was sufficient, and “unprofessional behavior was also found to be relevant to the award of attorneys' fees, and . . . suffice[d], by itself, to make a case exceptional.”
- Hal Wegner's take: “The majority provided a detailed analysis of the history of Section 285 and may have, but for constraint against a panel deviating from binding precedent, gone further to reduce the bar to establish liability for Section 285 attorneys’ fees.”
- I think this case marks a step along a path of liberalizing the standard for exceptional cases by the Federal Circuit. Although not explicitly stated, I think the effect of this decision is that the Federal Circuit is instructing districts to infer subjective bad faith on the basis of objective baselessness. That is, if the plaintiff should have known the case was objectively baseless, then plaintiff exercised bad faith by bringing the case in the first place, and fee shifting is justified.
Fed. Cir. defines "New Grounds" (10/22/13)
The CAFC may provide guidance in its decision In re Lutz Biedermann and Jurgen Harms.
In this case, the PTAB (then referred to as the BPAI) upheld the Examiner's rejection of the same claims on the same art and the same statutory basis, but provided a different rationale, relying on new facts, than the rationale provided and facts identified by the Examiner. The Appellant requested a rehearing, arguing that the Board issued a new ground of rejection. But the Board denied the rehearing and affirmed the examiner's rejection.
Judges Moore, Linn, and O'Malley remanded to the PTAB, stating that: “The articulated reasoning and factual underpinnings of an examiner's rejection are, thus, essential elements of any stated ground of rejection to which applicants are entitled to notice and a fair opportunity to respond” (emphasis added). The court quoted Leitham, 661 F.3d 1316:
[W]hile “the Board need not recite and agree with the examiner's rejection in haec verba to avoid issuing a new ground of rejection,” ”[m]ere reliance on the same statutory basis and the same prior art references, alone, is insufficient to avoid making a new ground of rejection when the Board relies on new facts and rationales not previously raised to the applicant by the examiner. This court's predecessor long acknowledged the right of the Board to make additional findings of fact based upon the Board's own knowledge and experience to fill in the gaps that might exist in the examiner's evidentiary showing. But the Board's power to do so is construed narrowly and when reliance upon such facts changes the thrust of the rejection, the Board's action does everything but cry out for an opportunity to respond.”
Fed. Cir. muddles 101 analysis
In CLS Bank Internat'l v. Alice Corp., the Fed. Cir. issued seven different opinions with the majority opinion by Lourie, Dyk, Prost, Reyna, and Wallach holding that Section 101 subject matter determinations must be made on a case-by-case basis. Stated the court: “Bright line rules may be simple to apply, but they are often impractical and counterproductive when applied to § 101” (Op. p. 17). Instead, the court held that the following analysis should be followed:
- First, determine whether the claimed invention fits within one of the four statutory classes set out in § 101.
- If so, then do any of the judicial exceptions apply, one of which is “abstractness.” The court acknowledges that “deciding whether or not a particular claim is abstract can feel subjective and unsystematic, and the debate often trends toward the metaphysical, littered with unhelpful analogies and generalizations” but explains “abstractness” only by way of the examples presented by precedents.
- Next analyze for preemption: With the pertinent abstract idea identified, the balance of the claim can be evaluated to determine whether it contains additional substantive limitations that narrow, confine, or otherwise tie down the claim so that, in practical terms, it does not cover the full abstract idea itself.
In her dissent, J. Newman found:
In deciding to rehear the patent dispute between CLS Bank and Alice Corporation, the en banc court undertook to remedy distortions flowing from inconsistent precedent on section 101. This remedial effort has failed. This failure undoubtedly reflects the difficulty of the question; I suggest that it also demonstrates that an all-purpose bright-line rule for the threshold portal of section 101 is as unavailable as it is unnecessary. Experience over two centuries of United States patent law supports this conclusion.
- Supreme Court grants cert 12/06/13. Briefs on Certiorari:
- Sep 4 2013 Petition for a writ of certiorari
- Oct 4 2013 Brief amicus curiae of Dale R. Cook
- Oct 7 2013 Brief amicus curiae of Sigram Schindler Beteiligungsgesellschaft mbH
- Oct 7 2013 Brief amici curiae of Professor Lee Hollaar, and Peter K. Trzyna in support of neither party
- Oct 7 2013 Brief amici curiae of Students of Patent Law
- Nov 19 2013 Reply of petitioner Alice Corporation Pty. Ltd.
- Briefs on Substance
- Jan 21 2014 Brief of Petitioner Alice Corporation Pty. Ltd.
BPAI judges "storage medium" per say statutory (old news)
In In Ex Parte Hu, rendered February of 2012, the BPAI held that a claim to a “storage medium” is per se statutory, even without “non-transient” verbiage. Stated the panel:
“We find that the computerreadable storage medium is directed to a tangible storage medium, which can be read by a computer. While a computer-readable medium is broad enough to encompass both tangible media that store data and intangible media that carry a transitory, and propagating signal containing information, a computer readable storage
medium is distinguished therefrom as it is confined to tangible media for storing data.
Fed. Cir. reverses PTAB on inended-use limitation (02/18/13)
A method for verifying the accuracy of logical-tophysical mapping software designed for testing memory devices, said method comprising:
[a] providing a built-in self test (BIST) fail control function to generate multiple simulated memory fails at various predetermined locations within a memory array of a memory device;
[b] testing said memory array via a memory tester;
[c] generating a bit fail map by said logical-tophysical mapping software based on all memory fails indicated by said memory tester, wherein said bit fail map indicates physical locations of all fail memory locations derived by said logical-tophysical mapping software; and
[d] comparing said fail memory locations derived by said logical-to-physical mapping software to said various predetermined memory locations to verify the accuracy of said logical-to-physical mapping software.
In In re Jasinski, the Fed. Cir. reversed the PTAB finding that claims were anticipated by prior art. More specifically, judge Moore agreed with the applicant and reversed the PTO in finding that the highlighted limitations in claim 1 shown here were “a statement of intended use and does not limit the claims.” Judge Moore stated, “We agree with Mr. Jasinski. Not only does the “to verify/verifying” language refer to the “essence of the invention,” it also provides the criteria by which the previously-recited comparing limitation is analyzed. We thus conclude that the “to verify/verifying” language is limiting.
Fed. Cir. overturns BPAI in interpartes case (01/24/13)
In Rexnord v. Kappos, Judge Newman held that a patent was obvious, reversing the Board of Appeals’ holding that the patent was valid, which reversed the interpartes reexam Examiner’s finding that the patent was obvious. It all started around 2003, when Habasit sued Rexnord for patent infringement in Delaware, and Rexnord filed a request for reexamination. The suit was stayed pending the outcome of the reexam. Around 2007 Examiner held that the patent claims were obvious, and Habasit appealed to the PTO Board in response. At some point, the BPAI reversed the Examiner, holding that the patent claims are valid, but Rexnord appealed that decision to the Federal Circuit in 2011.
Eastern District of Virginia holds RCE does not toll "B" Period in ATM calculation (11/09/12)
In Exelixis v. Kappos, the district court for the Eastern district of Virginia held that the Patent Office had not been calculating patent terms correctly.
Specifically, the district court held that the patent term adjustment (PTA) rules do not treat the filing of an RCE to be an applicant delay (as currently viewed by the PTO). The “B” delay provides an adjustment for every day past three-years from the file date to the grant date. The PTO stops this delay after the RCE is filed. The court says, no, you can’t do that. If this becomes law, it may discourage the PTO from sitting on RCEs, which will be a very good thing!
JMOL of no infringement or inducement upheld (09/05/12)
In Mirror Worlds v. Apple, the Fed. Cir. upheld the District court's JMOL of no-infringement stating that the plaintiffs failed to prove actual infringement (direct) by third parties, i.e., consumers, and therefore there was no inducement. The Fed. Cir. opinion merely criticizes the sufficiency of the evidence presented without significant discussion of the actual claim limitations. Judge Prost's dissent does a good job of dissecting the claim and showing that plaintiff succeeded in presenting sufficient evidence for a jury to make a determination that infringement occurred.
Fed. Cir. expands "inducement" for method claims (09/04/12)
In Akamai Tech. v. Limelight Networks, the Fed. Cir. overruled it's previous holding in BMC that, in order to support a finding of induced infringement, not only must the inducement give rise to direct infringement, but in addition the direct infringement must be committed by a single actor. This holding was a logical conclusion based on the propositions that (1) liability for induced infringement requires proof of direct infringement (see Deepsouth Packing Co. v. Laitram Corp. 1); Aro Mfg. Co. v. Convertible Top Replacement Co. 2); Henry v. A.B. Dick Co. 3) and (2) liability for direct infringement requires that a single party commit all the acts necessary to constitute infringement In re Seagate Tech. LLC 4). However, the Fed. Cir. in this ruling holds that, ”[r]equiring proof that there has been direct infringement as a predicate for induced infringement is not the same as requiring proof that a single party would be liable as a direct infringer” (emphasis in original). Thus, “a party who knowingly induces others to engage in acts that collectively practice the steps of the patented method–and those others perform those acts–has had precisely the same impact on the patentee as a party who induces the same infringement by a single direct infringer; there is no reason, either in the text of the statute or in the policy underlying it, to treat the two inducers differently.”
Newman's Dissent: The majority . . . holds that only the “inducer” is liable for divided infringement, and that the direct infringers are not liable although the patent rights are “plainly being violated by the actors' joint conduct. These are dramatic changes in the law of infringement. ¶ On this new “inducement-only rule,” the inducing entity is liable on greatly enlarged grounds, such as merely advising or encouraging acts that may constitute direct infringement. This new rule is not in accordance with statute, precedent, and sound policy. It raises new issues unrecognized by the majority, and contains vast potential for abuse.
Dissent of Linn, Dyk, Prost, and O'Malley: In its opinion today, this court assumes the mantle of policy maker. It has decided that the plain text of §§ 271(a) and (b) fails to accord patentees certain extended rights that a majority of this court's judges would prefer that the statute covered. To correct this situation, the majority effectively rewrites these sections. . . .
SCotUS approved cert.
- Dec 28 2012 Petition for a writ of certiorari filed. (Response due February 1, 2013)
- Feb 1 2013 Brief amici curiae of Google, Inc., et al. filed. VIDED.
Fed. Cir. upholds lower court ruling that continued at-will employment is sufficient consideration for a patent assignment in employment agreement (07/12/12)
In Preston v. Marathon Oil, Plaintiff Yale Preston challenged the validity of a provision in his employment agreement that reads as follows:
(d) “Intellectual Property” means all inventions, discoveries . . . and any other work product made or conceived by EMPLOYEE during the term of employment with MARATHON which (1) relate to the present or reasonably anticipated business of MARATHON GROUP, or (2) were made or created with the use of Confidential Information or any equipment, supplies, or facilities of the MARATHON GROUP. Such property made or conceived by EMPLOYEE (or for which EMPLOYEE files a patent or copyright application) within one year after termnation of employment . . . will be presumed to have been made or conceived during such employment.
3. Disclosure and Assignment of Intellectual Property
EMPLOYEE agrees to promptly disclose to MARATHON and does hereby assign to MARATHON all Intellectual Property, and EMPLOYEE agrees to execute such other documents as MARATHON may request in order to effectuate such assignment.
The district court applied Wyoming law and held, among other things, that Marathon acquired a shop right to Preston's baffle system and is therefore entitled to summary judgment on Preston's patent infringement claim, and following a bench trial that Preston was the sole inventor of the baffle system and was required to assign his interest in the two patents to Marathon pursuant to the employment agreement. Preston appealed the district court's ruling.
The Fed. Cir. certified a question to the Wyoming Supreme Court, asking, “Does continuing the employment of an existing at-will employee constitute adequate consideration to support an agreement containing an intellectual property-assignment provision?” The Wyoming Supreme Court responded with an interesting opinion (PDF).
In Wyoming, this was a case of first impression so investigated other jurisdictions and their own case law:
- In Colorado, the Court of Appeals held that continued employment was not sufficient consideration.
- The Third Circuit applied Pennsylvania law and upheld an assignment where the agreement included a promise by the employer to employ the inventor for a reasonable time – suggesting that “continued at-will” is not sufficient consideration.
- The 9th circuit held (in 1927) 5) that continued employment was sufficient consideration. The court observed that the employer (Goodyear) did not bind itself to employ the inventor (Miller) for any stipulated period and Miller did not agree to remain for any designated length of time.
- Wyoming also looked to its own case law and determined that a covenant not to compete, which under Wyoming low requires separate consideration, is not analogous to patent assignments since patent assignments do not affect the employee’s right to earn a living or otherwise impose an improper restraint of trade.
Wyoming answered the certified question as follows (incidentally, the logic mirrors that of the 9th circuit in 1927):
> We must, consequently, return to the basic precepts of at-will employment. As we mentioned earlier, at-will employment is terminable by either party at any time for any reason or no reason at all. Because of its terminable nature, either party has the power to modify the terms of the employment at any time, and the other party may either accept the new terms and carry on with the employment relationship or reject the new terms and terminate the relationship. The policies behind at-will employment were explained in Townsend v. Living Centers Rocky Mountain, Inc., 947 P.2d 1297, 1299 (Wyo. 1997):
> Our jurisprudence in the employment context has developed from the premise that the stability of the business community is our primary consideration and that stability is best served by applying contract principles in the employment context. Based on that fundamental precept we have produced the rule that, unless an express or implied contract states or establishes otherwise, all employment is a contract for at-will employment. Brodie v. General Chemical Corp., 934 P.2d 1263, 1265 (Wyo. 1997). An at-will employee can be terminated for any or no reason at all. Id. The at-will employment rule offers no remedy to an employee who has been arbitrarily or improperly discharged and has suffered adverse effects on his or her economic and social status regardless of how devastating those effects actually were. Stability in the business community is preserved because, at least at the state level, employers’ and employees’ decisions remain subject only to the express or implied contracts into which they have voluntarily entered or subject to statute.
We believe that the stability of the business community is best served by ruling, consistent with our at-will employment jurisprudence, that no additional consideration is required to support an employee’s post-employment execution of an agreement to assign intellectual property to his employer. If the employee does not agree to that modification of the terms of his employment, he can terminate the relationship without any penalties.
Fed. Cir. discounts secondary evidence of nonobviousness; Newman dissents (06/22/12)
In Wrigley v. Cadbury, the Fed. Cir. upheld a lower court ruling of invalidity of anticipation and obviousness. With regard to anticipation, Judge Newman stated that the panel reached its conclusion by “relying on a . . . reference that does not show the claimed combination at all, but merely presents the ingredients on lists.” The Court held that the claims were obvious because, ”[c]laim 34 recites a combination of elements that were all known in the prior art, and all that was required to obtain that combination was to substitute one well-known cooling agent for another. […] Under these circumstances, it is fair to say that there were 'a finite number of identified, predictable solutions' to the problem of finding physiological cooling agents for chewing gum, and the combination of menthol and WS-23 was 'the product not of innovation but of ordinary skill and common sense” (citations to KSR omitted). Newman argued in her dissent that the Court ignored significant secondary evidence that strongly points to nonobviousness.
Fed. Cir. reverses summary judgement of inducement despite substantial non-infringing uses (06/12/12)
In Toshiba v. Imation, the Fed. Cir., in regard to U.S. Patent 5,892,751, vacated in part the district court's granting of a motion for summary judgment of non-infringement made by Defendant-Appellees. Specifically, the district court held that recording DVDs without “finalizing” them, so that they are only readable by the device that made the recording, was both non-infringing (as admitted by Toshiba) and substantial. To establish contributory infringement liability, the patent owner must show, among other things, that there are no substantial non-infringing uses. Toshiba failed to make this showing, so the district court did not err in granting summary judgment of no contributory infringement. However, to prove inducement, “the patentee must show direct infringement, and that the alleged infringer knowingly induced infringement and possessed specific intent to encourage another's infringement.” The district court erred as a matter of law in holding that “both theories of indirect infringement – that is, contributory and inducing infringement – fail if there are any 'substantial' non-infringing uses.” However, “the existence of a substantial non-infringing use does not preclude a finding of inducement” 6).
BPAI reverses Fed. Cir.; Fed. Cir. says, "That's OK!" (05/19/12)
In In re Baxter, the CAFC approved of the BPAI reversing one of its own decisions. In 2007, the Northern District of California granted a JMOL motion filed by Baxter which overturned the jury's finding of obviousness of the Baxter patent, and as a result the district court upheld the validity of the Baxter patent with the stroke of a pen. Under appeal, the validity determination was upheld (but, “for somewhat different reasons…”). In parallel with the prior litigation, the PTO was conducting a reexamination of the patent, and shortly after the CAFC approval of the validity of the patent, the Reexamination Examiner held that the patent was invalid. Prior to the BPAI decision, the Director refused a request by Baxter to remand the case to the Examiner to consider the CAFC decision. On appeal, to the BPAI held:
“[a]lthough claims 26–31 were not proven invalid in court, a lower standard of proof and the broadest reasonable interpretation standard of claim construction apply at the PTO and therefore the agency is not bound by the court’s determination.” 7)
In this case, the Fed. Cir. found in favor of PTO arguments of invalidity of the patent, following substantially item-by-item, the findings of the Examiner in the Reexamination proceeding. In addition, the Fed. Cir. rejected Baxter's arguments that the PTO should be bound by the prior decision of the Federal Circuit:
We also reject Baxter’s argument that the Board erred because it . . . failed to “give serious consideration” to the district court’s Fresenius decision. […] [F]undamentally, the PTO in reexamination proceedings and the court system in patent infringement actions “take different approaches in determining validity and on the same evidence could quite correctly come to different conclusions.” […] In particular, a challenger that attacks the validity of patent claims in civil litigation has a statutory burden to prove invalidity by clear and convincing evidence. […] Should the challenger fail to meet that burden, the court will not find the patent “valid,” only that “the patent challenger did not carry the ‘burden of establishing invalidity in the particular case before the court.’” […] In contrast, in PTO reexaminations “the standard of proof—a preponderance of the evidence—is substantially lower than in a civil case” and there is no presumption of validity in reexamination proceedings. Id. at 1378.
The court continued:
Lest it be feared that we are erroneously elevating a decision by the PTO over a decision by a federal district court, which decision has been affirmed by this court, the following additional comments must be made. When a party who has lost in a court proceeding challenging a patent, from which no additional appeal is possible, provokes a reexamination in the PTO, using the same presentations and arguments, even with a more lenient standard of proof, the PTO ideally should not arrive at a different conclusion.
However, the fact is that Congress has provided for a reexamination system that permits challenges to patents by third parties, even those who have lost in prior judicial proceedings. Usually one would expect that any such reexamination, such as the one before us, would raise new issues. In this case, the patent examiner relied on new prior art that had not been raised in the prior district court proceeding. Why Fresenius did not present that prior art before the district court we do not know. But the Director apparently found that a substantial new question of patentability had been raised and the examiner was then entitled to conduct a reexamination on the basis of the new art presented and her search of the prior art. Thus, this case is not about the relative primacy of the courts and the PTO, about which there can be no dispute. Finally, we could not conclude that the PTO was barred from conducting the reexamination of the ’434 patent because of the final judgment in Fresenius without overruling Ethicon and Swanson, which we cannot do.
Judge Newman dissented, stating: “My colleagues appear unperturbed by the agency’s nullification of this court’s final decision. Instead, the court itself ignores our own prior final decision, although it is the law of this case. Thus the court violates not only the constitutional plan, but also violates the rules of litigation repose as well as the rules of estoppel and preclusion—for the issue of validity, the evidence, and the parties in interest are the same in this agency reexamination as in the finally resolved litigation. No authority, no theory, no law or history, permits administrative nullification of a final judicial decision. No concept of government authorizes an administrative agency to override or disregard the final judgment of a court. Judicial rulings are not advisory; they are obligatory.” She further stated, “My colleagues justify the PTO’s authority to overrule judicial decisions on the argument that the standard of proof is different in the PTO than in the courts. That theory is flawed, for obviousness is a question of law, and the PTO, like the court, is required to reach the correct conclusion on correct law. Any distinction between judicial and agency procedures cannot authorize the agency to overrule a final judicial decision. Even if the Federal Circuit were believed to have erred in its prior decision, the mechanism for correcting an unjust decision is by judicial reopening, not by administrative disregard. […] This procedure did not occur in this case.”