The Supreme Court decided only two patent cases this term. Helsinn is somewhat important for many patentees and certainly the PTO; while Return Mail more narrowly focuses on the role of Federal Government agencies in challenging patents:
Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc., 139 S.Ct. 628 (2019) (non-public sales are still “on sale” under the America Invents Act (AIA) rewriting of 35 U.S.C. 102).
Return Mail, Inc. v. United States Postal Service, et al., 139 S.Ct. 397 (2019) (IPR statute does not provide for petitions filed by the Federal Gov’t.).
Certiorari has been granted in only one additional patent case: Peter v. NantKwest. That case asks whether the USPTO is permitted by statute to recover attorney fees associated with § 145 civil actions.
An applicant dissatisfied with the decision of the [PTAB] . . . may . . . have remedy by civil action. . . . The court may adjudge that such applicant is entitled to receive a patent for his invention, as specified in any of his claims. . . . All the expenses of the proceedings shall be paid by the applicant.
35 U.S.C. § 145. In this case Laura Peter, USPTO Deputy Director, is the named petitioner on behalf of the Government, standing in for Dir. Iancu who has a conflict of interest in the case. (Irell & Manella represents NantKwest, and Iancu was managing partner at Irell when the representation began.)
In many other countries, litigation losers commonly pay the attorney fees of the victor. One argument against that approach is an access-to-justice problem — parties without much money will not be able to find representation if there is a good chance that they’ll have to pay the other-side’s attorney fees upon losing. In its amicus brief supporting the Government, R Street (Charles Duan) argued that only rich pharmaceutical companies are bringing these cases. “There is thus little reason to believe that those additional expenses will greatly affect the strategic calculus of those patent applicants likely to make legitimate use of § 145.”
As R Street‘s brief outlines, § 145 are used rarely — usually for the most potentially valuable pharmaceutical patents – with top lawyers handling the case (such as Irell & Manella). The real shift from the outcome may come from the USPTO — if it knows someone else is footing the bill, the USPTO may fight these cases harder.
Upcoming Soon: The Supreme Court has one final conference set this term (June 20) and is slated to rule on a number of pending petitions for certiorari:
InvestPic, LLC v. SAP America, Inc., No. 18-1199 (physicality requirement for eligibility);
Romag Fasteners, Inc. v. Fossil, Inc., et al., No. 18-1233 (profit disgorgement under the Lanham Act);
Ariosa Diagnostics, Inc. v. Illumina, Inc., No. 18-109 (prior art date for unclaimed disclosures in a provisional filing);
Texas Advanced Optoelectronic Solutions, Inc. v. Renesas Electronics America, Inc., fka Intersil Corporation, No. 18-600 (infringement associated with and “offer” made in the US to actually “sell” a product in a foreign country);
Dex Media, Inc. v. Click-To-Call Technologies, LP, et al., No. 18-916 (Is the 315(d) time-bar triggered by prior lawsuits that were dismissed without prejudice?); Atlanta Gas Light Company v. Bennett Regulator Guards, Inc., No. 18-999 (same); Superior Communications, Inc. v. Voltstar Technologies, Inc., No. 18-1027 (same). .
Rather than guessing at the court’s potential decisions as to whether or not to grant certiorari, I’ll just wait a few days on these to know the outcome.
We also have the beginnings of a heap of new cases for consideration next term:
HP Inc., fka Hewlett-Packard Company v. Steven E. Berkheimer, No. 18-415 (fact-law divide in eligibility);
Hikma Pharmaceuticals USA Inc., et al. v. Vanda Pharmaceuticals Inc., No. 18-817 (threshold of a natural phenomenon);
Google LLC v. Oracle America, Inc., No. 18-956 (copyright for software interfaces).
Acorda Therapeutics, Inc. v. Roxane Laboratories, Inc., et al., No. 18-1280 (obviousness and blocking patents)
Hyatt v. Iancu, No. 18-1285 (reopening prosecution after successful appeal; “Whether MPEP § 1207.04 violates patent applicants’ statutory right of appeal following a second rejection.”);
Senju Pharmaceutical Co., Ltd., et al. v. Akorn, Inc., No. 18-1418 (R.36 judgments; holistic approach to obviousness)
Glasswall Solutions Limited, et al. v. Clearswift Ltd., No. 18-1448 (eligibility on the pleadings; Berkheimer question);
Enplas Display Device Corporation v. Seoul Semiconductor Company, Ltd., No. 18-1530 (can foreign sales qualify as induced infringement of a U.S. patent — if defendant knew that “the components might be incorporated by third parties into infringing products that might be sold by other third parties in the United States.”)
Zimmer, Inc., et al. v. Stryker Corporation, et al., No. 18-1549 (more on treble damages — is negligence enough?)
This last set of cases won’t see any light until at least October 2019 when the Court returns from its summer break.
In the inter partes review (IPR), the PTAB sided with the patentee UUSI — finding that Samsung had failed to prove the obviousness of UUSI’s U.S. Patent No. 5,796,183. On appeal, however, the Federal Circuit has vacated that decision — holding that the Board’s findings of no motivation-to-combine or reasonable-expectation-of-success were not supported by the evidence.
The patent is directed to multi-point capacitive sensing circuity – the type used for the multi-billion dollar touchscreen market. It’s 1996 priority date situates the invention before a substantial amount of prior art. However, Samsung identified several key prior art references, including U.S. Patent Nos. 5,565,658 (Gerpheide), 5,087,825 (Ingraham), and 5,594,222 (Caldwell).
Obvious by Combination of References: Most often, obviousness is proven with a combination of references that collectively teach the claimed elements. In addition to providing the set of prior art references, the patent challenger must also show that a person of skill in the art (POSITA) would have a “motivation to combine” the references in the way claimed and that such a combination would have a “reasonable expectation of success.”
In KSR v. Teleflex, the Supreme Court explained that the motivation to combine analysis is flexible and not bound to rigid limitations or requirements. The High Court explained: “[I]f a technique has been used to improve one device, and a person of ordinary skill in the art would recognize that it would improve similar devices in the same way, using the technique is obvious unless its actual application is beyond his or her skill.” KSR.
Here, the PTAB decided to exclude Gerpheide from the analysis because its approach was directed toward single-point capacitive sensing rather the multi-point approach of the patentee. On appeal, the Federal Circuit vacated that holding:
The Board’s categorical rejection of the teachings from a single input device to those of a multi input device is not supportable. . . . Samsung presented uncontested evidence that the combination of Ingraham and Caldwell would experience electrical interference, and Gerpheide taught a way to address electrical interference in capacitive touch devices. The fact that Gerpheide and Ingraham/Caldwell involved different types of capacitive touch devices (single versus multi input) does not undermine the motivation to combine the teachings of Gerpheide with Ingraham/Caldwell since
both devices can experience electrical interference. Gerpheide recognized this as a problem and provided a solution to reduce such interference. Thus, a person of skill in the art would have been motivated to include such a feature from analogous prior art in a multi input capacitive touch pad device (i.e., the device of the Ingraham/Caldwell combination). The Board’s contrary conclusion is not supportable.
With regard to reasonable expectation of success, the Federal Circuit also vacated — primarily holding “that the Board’s implicit claim construction was erroneous.” Here, the Federal Circuit found that the PTAB had unduly narrowed the claim scope and that under the broader scope there may indeed be a reasonable expectation.
The American Bar Association’s committee on professional ethics issues ethics opinions interpreting the ABA Model Rules, which are similar to (almost) all state rules, as well as the PTO’s disciplinary rules. Its opinions are not binding, but they hold sway.
The ABA released Formal Opinion 487 (June 18, 2019), addressing how successor counsel should divide fees with predecessor counsel (from a different firm) who have contingent fee agreement with successor counsel’s client in the case. The opinion provides some helpful guidance on what can be — given the literal language of the fee splitting rules — some thorny issues. The summary of the opinion states:
In a contingent fee matter, when a counsel (successor counsel) from one firm replaces a counsel (predecessor counsel) from another firm as counsel for the client, Rules 1.5(b) and (c) require that the successor counsel notify the client, in writing, that a portion of any contingent fee earned may be paid to the predecessor counsel. The successor counsel may not be able to state at the beginning of the representation the specific amount or percentage of a recovery, if any, that may be owed to the predecessor counsel unless the amount or percentage has been agreed by the client and both predecessor and successor counsels. The successor counsel is not bound by the requirements of Rule 1.5(e), either at the time of engagement or upon a recovery, because Rule 1.5(e) addresses situations where two lawyers are working on a case together, not situations where one lawyer is replacing another. Upon a monetary recovery, the successor counsel may only disburse a portionof the overall attorney’s fee to the predecessor counsel with client consent or pursuant to an order of a tribunal of competent jurisdiction. If there is a dispute as to the amount due to the predecessor counsel under Rule 1.15(e) the disputed amount may have to remain in a client trust account until the matter is resolved. If successor counsel negotiates with predecessor counsel on the client’sbehalf, successor counsel must explain to the client the potential conflict of interest in the dual roles pursuant to Rule 1.7, where successor counsel has a personal interest in the amount predecessor counsel may receive or in the timing of the release of funds held pursuant to Rule 1.15(e)
As expected based upon the Federal Circuit’s prior rulings on tribal immunity, the court has now also ruled that 11th Amendment Sovereign Immunity does not protect patents owned by individual states (such as Minnesota) from being cancelled via inter partes review (IPR).
We conclude that state sovereign immunity does not apply to [IPR] proceedings.
What does this mean — state owned patents can more easily be challenged.
By its terms, the 11th Amendment prohibits US (Federal ) courts from exercising power over suits “against one of the United States” that are brought by Citizens of another State or a Foreign State.
The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.
Note, that the 11th Amendments does not prohibit actions against one State brought on behalf of another States or by the Federal Gov’t. Note also that the States also have inherent sovereign immunity that “neither derives from nor is limited by, the terms of the Eleventh Amendment.” Alden v. Maine, 527 U.S. 706, 713 (1999).
Although the terms of the 11th amendment appear to be directed to Article III court activities, immunity has also been found in administrative cases that the courts finds to be “similar to court adjudications.”
In its setup for this decision, the Federal Circuit walked through the patenting process — noting the many flaws and high likelihood that non-patentable claims are allowed to be patented. That foundation then highlights the need for further administrative action in fixing those bad patents — first reexaminations and reissues, and now inter partes review. Because this deeper look is costly, it makes sense to only target cases under dispute — fix the important patents and don’t worry about the rest. In other words, IPR proceedings should be seen as an extension of the examination process, not a court proceeding. The court explains briefly that “IPR represents the sovereign’s reconsideration of the initial patent grant.”
In the Allergan case, the Federal Circuit previously held that Native American tribal immunity does not protect tribal-owned patents from IPR challenges. Here, the court concluded that “the differences between state and tribal sovereign immunity do not warrant a different result than in Saint Regis. We therefore conclude that state sovereign immunity does not apply to IPR proceedings.”
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In an interesting statement, the three judges on the panel – Judges Dyk, Wallach, and Hughes — added a non-binding set of “additional views” to their main opinion that identify am IPR proceeding as “an in rem proceeding to which sovereign immunity does not apply.” The court does not explain why it chose to include this unanimous statement as “additional views” rather than as the holding.
Power Integrations, Inc. v. Semiconductor Components (ON Semiconductor) (Fed. Cir. 2019)
The Federal Circuit has ordered dismissal of On Semiconductor’s IPR petitions against several patents owned by Power Integrations. The basic issue on appeal was interpretation of the time-bar under 35 U.S.C. 315(b)
(b) An inter partes review may not be instituted if the petition requesting the proceeding is filed more than 1 year after the date on which the petitioner, real party in interest, or privy of the petitioner is served with a complaint alleging infringement of the patent.
The statute here is clearly drafted, with the basic ambiguity questions being (1) what counts as a “real party in interest or privy of the petitioner” and (2) whether “served with a complaint” requires a summons under FRCP R. 4 – and what if service is waived? This case focuses on a third question — (3) real party in interest as of when?
Back in 2009, Power Integrations sued Fairchild Semiconductor for infringing the patents at issue and has won two separate $100+ million jury verdicts (both of which have been rejected). A third trial on damages is now likely for later this year (since the patent claims are no longer cancelled).
In 2015, ON (petitioner here) agreed to purchase Fairchild (in a confidential agreement). Prior to completion of the acquisition, ON filed the IPR petitions. On September 19, 2016, ON Semiconductor completed the acquisition. Then, later that week, September 23, 2016, the USPTO issued its institution decision and ultimately held the challenged claims unpatentable as obvious. [Final Written Decision]
Throughout the institution phase, the patentee challenged institution on time-bar grounds — arguing that Fairchild was served with a complaint more than one-year before the IPR petition filing; and that Fairchild is a Privy of petitioner ON. Q.E.D.
The Board, however, sided with petitioner holding (1) the focal point is the status of the parties at the time the petition was filed (thus the subsequent merger does not deny institution); and (2) that “there was insufficient evidence of record to establish control and therefore insufficient evidence to establish privity between Fairchild and ON at the time the petition was filed.” The Board also denied additional discovery into the admittedly confidential relationship.
On appeal, the Federal Circuit has reversed that decision holding that privy relationships developed post-petition but pre-institution should be considered. Thus, the merger (clearly creating privity and Real Party in Interest (RPI)) pre-institution with a time-barred company prevents the IPR from being instituted. For its decision, the court looked particularly to the language of the statute which focuses on institution – “may not be instituted if . . . ”
The Board’s decision under § 315(b) is whether to institute or not. The condition precedent for this decision is whether a time-barred party (a party that has been served with a complaint alleging infringement of the patent more than one year before the IPR was filed) is the petitioner, real party in interest, or privy of the petitioner. In other words, the statute specifically precludes institution, not filing.
When the Board finds that an IPR is barred under § 315(b), it denies institution. It does not reject the petitioner’s filing. The focus of § 315(b) is on institution. The language of the statute, in our view, makes privity and RPI relationships that may arise after filing but before institution relevant to the § 315(b) time-bar analysis. . . .
In light of the foregoing, we hold that this IPR was time-barred by § 315(b) because Fairchild was an RPI at the time the IPR was instituted, even though it was not an RPI at the time the petition was filed.
Result here is that the claims are no longer cancelled – and so the new trial on damages against Fairchild should move forward (barring a settlement).
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*** Save this for another day: the case includes important and interesting discussions of issue preclusion and agency deference.
Data Privacy: Data Privacy or Information Privacy Law is, in short, a way to regulate how companies, individuals, and governments access, use, and collect public information, usually via online. Contemporaneous information privacy law has been around since the 1970’s when the FTC (Federal Trade Commission) first released the Fair Information Practice Principles or the FIPPs, which then served as a foundation for subsequent Data Privacy laws. The principles primarily give the people the right to know when, where, what, and how our data is used and collected. It gives the people substantial transparency with the company regarding our private data and treats our data as our property so that companies must ask before doing anything with our private information. This has been huge news in the last few years because the United States is one of the only highly developed countries that has not enacted comprehensive Data Privacy regulations.
The Senate Judiciary Committee’s Subcommittee on Intellectual Property is holding its third day of testimony on patent eligibility today, June 11, 2019. The State of Patent Eligibility in America: Part III. Hearing begin at 2:30 EST.
The Federal Circuit released two non-precedential decisions today affirming lower court holdings of ineligibility.
Reese v. Spring Nextel (Fed. Cir. 2019). Mr. Reese’s patent claims a “method for sending a call waiting tone . . .” U.S. Patent No. 6,868,150. The problem for Reese is that the asserted claims are drafted in substantially functional form without reciting the particular technological solution. The court explains:
The claims are directed to the abstract idea of receiving information (a calling phone number flagged as private) and sending an indication (an audible tone) to a party already engaged in a call. The claims do not recite any particular method of receiving the information and sending the indicating tone in response. . . . Although Reese argues that the claims require specific telephone features, merely limiting claims to a particular technological environment does not render the claims any
less abstract. . . .
[Regarding step two:] [B]y the ’150 patent’s own terms, the claims do not recite any non-conventional equipment. Further, the claims recite functional language lacking “any requirements for how the desired result is achieved.” Elec. Power Grp. Nothing in the claims requires anything other than conventional telephone network equipment to perform the generic functions of receiving and sending information. Reciting an abstract idea and applying it on telephone network equipment is not enough for patent eligibility. Accordingly,
the claims do not contain an inventive concept.
In re Greenstein (Fed. Cir. 2019) involves a “method for allocation of investment returns” when a single asset is collaboratively owned. The key step in the invention appears to involve using a “computer to assign an investment return to the investor.” According to the inventor, the beneficial focus of the invention is to be able to allocate risk between parties without having to actually buy or sell any additional securities.
On appeal, the Federal Circuit agreed with the USPTO that Greenstein’s claims are directed to ineligible subject matter.
[T]he claims are directed to the abstract idea of allocating returns to different investors in an investment fund, a fundamental business practice that long predates computer technology. Claim 1 involves storing information about each investor in a database, changing the investment returns assigned to at least two of them, and using the computer to keep track of the transfers between investors in the fund. This is simply the “automation of the fundamental economic concept,” OIP
Techs., of allocating investment returns to different investors within a common investment fund. We have long held that such basic management of business information is an abstract idea. As a result, we conclude that the Board correctly held that the claims are directed to the abstract idea of allocating returns in an investment fund.
Nor do the claims recite any further inventive concept. The claims only invoke a computer as a generic tool to store information and record transactions; in times past, these activities could have been performed with pen and paper. As the PTO points out, Alice clearly held that “mere recitation of a generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention.”
In a 6-3 decision, the Supreme Court has decided the U.S. Government is not a “person” capable of petitioning for institution of AIA review proceedings.
Under the statute, a “person” other than the patent owner may petition for AIA Review (IPR, PRG, or CBM). See 35 U.S.C. 311 (for IPR).
In the case, Return Mail sued the US Postal Service (part of the US Federal Government) for infringing its address processing patent and USPS petitioned for CBM review. The PTO agreed that the patent claimed ineligible subject matter and cancelled the claims. On appeal, the Federal Circuit affirmed. Now, the Supreme Court has reversed – holding that the Government is not a person under the statute and therefore cannot petition for AIA review.
The overall outcome here is that the Federal Government is more likely to have to pay royalty fees when it uses someone’s patented invention.
The decision does not address an important background issue of the status of state and foreign governments. Also Companies are still people; but not monkeys.
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Justice Sotomayor led the conservative majority joined by Chief Justice Roberts and Justices Thomas, Alito, Gorsuch and Kavanaugh. Justice Breyer wrote in a dissent that was joined by Justices Ginsberg and Kagan.
The majority here started with its presumption that congressional statutes are not intended to bind or be directed to U.S. Government activity. See Rules are For Other People. Here, the court looked and did not find sufficient textual language to overcome that initial presumption. In particular, the word “person” is used many times in the Patent Act (at least 18 times) and in several different ways. There is basically no indication that this particular use of “person” was designed to include the U.S. Government. The majority also noted the awkwardness:
Finally, excluding federal agencies from the AIA review proceedings avoids the awkward situation that might result from forcing a civilian patent owner (such as Return Mail) to defend the patentability of her invention in an adversarial, adjudicatory proceeding initiated by one federal agency (such as the Postal Service) and overseen by a different federal agency (the Patent Office).
The dissent argued that the government-not-a-person presumption is rather weak and was overcome by the Patent Act. In particular, the majority notes that Federal agencies are authorized to apply for patent protection — even though the statute states that a “person” shall be “entitled to a patent.” See 35 U. S. C. §§ 207(a)(1) and 102(a)(1).
The dissent’s policy argument is hard to follow:
[T]he statutes help maintain a robust patent system in another way: They allow B, a patent holder who might be sued for infringing A’s (related) patent, to protect B’s own patent by more easily proving the invalidity of A’s patent. Insofar as this objective underlies the statutes at issue here, it applies to the same extent whether B is a private person or a Government agency.