Following a rejection by the United States Patent and Trademark Office (“USPTO”) under section 102(f) for a rehabilitative dog harness, the Federal Circuit recently affirmed the rejection because the applicant “did not himself solely invent the subject matter sought to be patented.” In re VerHoef, No. 2017-1976 (Fed. Cir. May 3, 2018).
Jeff VerHoef built a prototype harness to remediate walking difficulties that his dog developed post-surgery. VerHoef recognized that the harness would work better if it were connected to the dog’s toes, and discussed the matter with his veterinarian, Dr. Alycia Lamb. During their discussion, Dr. Lamb suggested that VerHoef should consider using a figure eight strap that fit around the dog’s toes and wrapped around the lower part of the leg. VerHoef implemented the figure eight idea, and, after further adjustments, had a working device that reduced the dog’s walking difficulties. VerHoef filed a patent application naming both him and Dr. Lamb as co-inventors, with a single claim that included Dr. Lamb’s figure eight strap suggestion. After a falling out, VerHoef’s attorney abandoned the joint application, and each inventor then filed their own separate applications reciting the same independent claim contained in the abandoned joint application.
After finding the parallel Lamb application in his prior art search, the examiner rejected the claims in VerHoef’s new patent application under section 102(f), finding that VerHoef did not solely invent the claimed subject matter in light of the parallel Lamb application. The Patent Trial and Appeal Board (“PTAB”) affirmed the examiner’s rejection, and VerHoef appealed.
The Federal Circuit began its analysis by observing that section 102(f) mandates that a patent name the correct inventors of a claimed invention, and that failure to do so renders the patent invalid. Recognizing that joint inventorship is one of the “muddiest concepts” in patent law, the Federal Circuit explained that consideration of the precise limits of what constitutes sufficient contribution was unnecessary for resolving this appeal because VerHoef conceded that the figure eight strap design that Dr. Lamb conceived was an “essential feature” of the claimed invention.
Notwithstanding his concession, VerHoef attempted to argue that he nevertheless was the sole inventor because he maintained “intellectual domination and control of the work” at all times, and that Dr. Lamb’s idea was “emancipated” when she freely gave it to him. The Federal Circuit declined to adopt VerHoef’s “domination” theory, finding that Dr. Lamb’s contribution plainly satisfied Federal Circuit case law concerning the conception requirement for inventorship. The Federal Circuit also rejected VerHoef’s “emancipation” argument since VerHoef had already admitted that Dr. Lamb conceived an “essential feature” of the claimed invention. Deferring to long-standing USPTO practice requiring examiners to reject applications under section 102(f) on the basis of incorrect inventorship, the Federal Circuit concluded that the Board properly sustained the examiner’s rejection of VerHoef’s application.
Although VerHoef was decided under pre-AIA section 102(f), all inventors must still be named in a patent application under the AIA. See 35 U.S.C. §§ 115(a), 116(a). While section § 102 no longer directly states that failure to list proper inventorship results in an application being unpatentable or a patent being invalid, the MPEP reminds examiners to reject applications with improper inventorship. See MPEP § 2157. Even for applications where inventorship is initially incorrect, such as the VerHoef application, inventorship may be corrected under 35 U.S.C. § 256.
The key takeaway: a person who contributes an essential feature of a claimed invention is a joint inventor and the failure to correctly name joint inventors will result in rejection or invalidation of a patent or patent application.
The U.S. International Trade Commission (ITC) has published in the Federal Register final revisions to its rules of practice and procedure governing Section 337 investigations, the investigations that the ITC conducts under 19 U.S.C. § 1337 based on private party complaints against imported articles that allegedly violate U.S. intellectual property rights. This completes a process begun in 2015 when the ITC first initiated a proposed rulemaking for changes to its rules. The rules will go into effect for investigations instituted after June 7, 2018.
Among the changes highlighted by the ITC as most significant are:
Requiring the ITC’s notice of investigation to explicitly identify the accused products subject to investigation.
Clarifying that the ITC may institute multiple investigations based on a single complaint.
Permitting an Administrative Law Judge (ALJ) to sever an investigation on motion or sua sponte to allow efficient adjudication.
Formalizing the ITC’s pilot program for early disposition of investigations in which the ITC (not the assigned ALJ) identifies, at institution, a potentially investigation-dispositive issue that can be resolved in an expedited (100-day) proceeding.
The requirement that the notice of investigation explicitly identify the accused products serves transparency, guides discovery, and frames the scope of relief if a violation is found. The new rules on institution and severance both aim to give the ITC additional tools to manage its increasing docket. The ITC’s pilot program for early disposition also is an important case management tool, and its use has appeared to gain some momentum in 2018 (see our prior post and newly-designated Inv. No. 337-TA-1109 (Notice)). However, the early disposition of cases is more than a management tool: it provides a substantive opportunity for resolution of a Section 337 investigation before proceeding with a costly hearing. Although case-dispositive motions were permitted before the ITC’s pilot program came into existence, many perceived the ability to achieve an early ruling as more theoretical than real. By formalizing the pilot program, the ITC now has an official process to point to that it can use to counter some of the recent criticisms of the Section 337 adjudicative process.
In the third important patent venue decision it has issued in the past week (In re: BigCommerce, No. 2018-122 (May 15, 2018)), the Federal Circuit has clarified the proper location for patent infringement suits against U.S. corporations whose state of incorporation is large enough to have multiple federal judicial districts. According to the Court,
a domestic corporation incorporated in a state having multiple judicial districts ‘resides’ for purposes of the patent-specific venue statute, 28 U.S.C. § 1400(b), only in the single judicial district within that state where it maintains a principal place of business, or failing that, the judicial district in which its registered office is located[.]
The Court’s opinion answers a question left open by the Supreme Court’s landmark decision in TC Heartland, LLC v. Kraft Foods Grp. Brands, LLC, 137 S.Ct. 1517 (2017), which held that a U.S. corporate defendant resides in the state in which it is incorporated (see our prior post), but did not answer the question of where to sue in multi-district states.
The Court’s interpretation of the patent venue statute as restricting venue to a single judicial district was not unexpected (see our prior post), and pointed to “clear support in the statute’s language, history, purpose, and precedent.” The Court’s opinion also, however, provides guidance on how to determine the proper district for patent venue that was not strictly required to resolve the case at hand.
First, it discusses the meaning of “principal place of business.” The Court signals by its quotations from Supreme Court and secondary sources that a corporation’s principal place of business is typically its “nerve center,” where its “corporate business is transacted” or “where a corporation’s officers direct, control, and coordinate the corporation’s activities,” and notes that this “should normally be . . . its headquarters.” The Court further notes that the meaning of principal place of business “is to be distinguished from” a corporation’s “‘regular and established place of business’” that, under the statute, is used to determine proper venue for suits against U.S. corporations in states in which they do not reside (i.e., are not incorporated). Reading between the lines, the Court’s opinion suggests that a “regular and established place of business” has a broader meaning that encompasses more general business activities. These distinctions may be important in future cases in which a corporation has facilities in more than one district that may or may not qualify as a principal place of business. However, because it was undisputed that BigCommerce’s headquarters were in Austin, Texas, which is in the Western District of Texas, the finding that venue was proper only in the Western District of Texas (and not the Eastern District where it was sued) was an easy call.
Second, the Court went on to offer its opinion that if a corporation has no principal place of business at all in its state of incorporation, it can still be sued in the judicial district within that state “in which its registered office is located.” The Court reasoned that a “universally recognized foundational requirement of corporate formation is the designation of a registered office that will serve as a physical presence within the state” and that “[i]n the absence of an actual principal place of business . . . the public is entitled to rely on the designation of the registered office . . . as the place where the corporation resides.”
Takeaway: The Federal Circuit’s three recent venue opinions fill in gaps left by TC Heartland. These decisions — In re: HTC Corporation, No. 2018-130 (May 9, 2018), affirming that a non-U.S. corporation can be sued for patent infringement in any judicial district (see our prior post); In re: ZTE (USA) Inc., No. 2018-113 (May 14, 2018), holding that the plaintiff bears the burden of proving proper venue in patent cases (see our prior post), and now In re: BigCommerce, No. 2018-122 (May 15, 2018), clarifying that a U.S. corporation incorporated in a multi-district state resides, for purposes of venue, in the one judicial district where it has its principal place of business or, alternatively, its registered office — provide a much-needed measure of certainty in this important area for both plaintiffs and defendants alike.
In another important patent venue decision (In re: ZTE (USA) Inc., No. 2018-113 (May 14, 2018)), the Federal Circuit has determined that who bears the burden of establishing proper venue is a question of Federal Circuit law and that it is the plaintiff who bears that burden. According to the Court, although the Federal Circuit itself has never ruled on where to place the burden in its 37-year history, its conclusion is supported by authority among the other circuit courts and by the venue statute’s “intentional narrowness” as “compared with the broad general venue provision.” The Court therefore granted the defendant’s mandamus petition, vacated the district court’s order denying defendant’s motion to dismiss for improper venue, and instructed the district court to place the burden of proof on the plaintiff and to reconsider defendant’s motion, and specifically, whether the nature of the defendant’s relationship to a call center it had contracted with “warrant[s] [the] call center being deemed a regular and established place of business [of the defendant].”
Takeaway: The Court’s decision plugs still another hole left open after the Supreme Court’s landmark patent venue opinion in TC Heartland LLC v. Kraft Foods Grp. Brands LLC , 137 S. Ct. 1514 (2017) and creates a not insignificant, new hurdle for patent plaintiffs. Still more decisions are expected in this area from mandamus petitions that remain pending at the Federal Circuit (see our prior post).
In an important patent venue decision (In re HTC Corporation, No. 2018-130 (May 9, 2018)), the Federal Circuit has denied the mandamus petition of a Taiwanese company challenging the District of Delaware’s finding that that court is a proper venue for patent infringement litigation over the company. Relying on the Supreme Court’s decision in Brunette Machine Works, Ltd. v. Kokcum Industries, Inc., 405 U.S. 706 (1972), the unanimous panel reaffirmed that the rule that non-U.S. resident or “alien” defendants can be sued in any judicial district applies in patent cases.
Although the Supreme Court’s landmark decision in TC Heartland LLC v. Kraft Foods Grp. Brands LLC, 137 S. Ct. 1514 (2017)—which limits venue over U.S. corporations to their state of incorporation or where they have a regular and established place of business—expressly declined to take a position on the Brunette decision, the panel emphatically announces that TC Heartland does not alter the conclusion that venue over non-U.S. resident patent infringement defendants is proper in any judicial district. Among other reasons, the panel notes that any other interpretation could create a “venue gap, where at least some alien defendants would be entirely exempt from patent infringement actions. . . [and] this court–without clear guidance from Congress—will not broadly upend the well-established rule that suits against alien defendants are outside the operation of the federal venue laws.”
Takeaway: This decision addresses an important question left open in TC Heartland in a way that will likely be seen as favorable to patent holders. Mandamus petitions on other important venue issues left open by TC Heartland, however, including whether a corporate defendant can be sued in any federal district in its state of incorporation (see our prior post), still remain to be resolved.
With IPRs here to stay, the USPTO is proposing to drop its BRI standard and interpret claims under the same standards as used by federal courts. Specifically, the USPTO has proposed to change the standard for interpreting claims in inter partes review, post grant review, and covered business method patent proceedings conducted by the PTAB from the “broadest reasonable interpretation” or “BRI” to the “ordinary and customary meaning” standard applied by federal district courts, taking into consideration any prior claim construction determinations by the courts.
The proposal, available here, is open for comments through July 9, 2018.
The proposed change comes on the heels of the US Supreme Court’s April 24th decision in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC et al., that inter partes review proceedings are a constitutional process for addressing a public right (albeit one that pertains to private rights). See our prior post here. The proposal is made despite – or perhaps in light of – the Supreme Court’s decision just two years ago, in Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131, 2142 (2016), that the USPTO has authority to choose the standard it applies, and can use the traditional “broadest reasonable interpretation.”
The USPTO’s re-evaluation and proposed change in the standard that it uses addresses criticisms made in litigation and otherwise. In particular, the proposal addresses criticisms that use of different claim construction standards by the PTAB and the courts creates confusion and inefficiencies. Having different standards may be problematic because there is often a race between the courts and the PTAB to decide the validity of a patent’s claims, and an early decision by one or the other can preclude a later – and potentially different – decision by the other. Having different standards provides an opportunity for strategy and argument, but at the cost of potentially unfair outcomes.
Whether there are differences in the validity determinations made by the PTAB and the courts because they use different standards is an open question. As noted in our prior posting, here, there are instances where differences have resulted. But in most cases, the fact that the standard applied by the PTAB and the courts is slightly different may have little or no impact on the ultimate validity decision.
Nonetheless, the USPTO’s proposal demonstrates a willingness to address public concerns and is expected to garner strong support.
Under 35 U.S.C. § 120, an application claiming benefit to the filing date of an earlier application must include a “specific reference” to the earlier filed application. In Droplets, Inc. v. E*TRADE Bank, No. 2016-2504, 2016-2602 (April 19, 2018), the Federal Circuit considered the use of incorporation by reference when asserting priority claims. The Federal Circuit’s decision highlights the inapplicability of incorporation by reference as a means of asserting priority and the need to maintain vigilance in reviewing the USPTO’s records of priority.
Droplets was issued U.S. Patent Number 8,402,115 on March 19, 2013, which claimed priority to U.S. Patent Number 7,502,838 and U.S. Provisional Application 60/153,917, and incorporated both by reference. However, the ‘917 provisional was already abandoned when the ‘115 patent was filed. In turn, the ‘838 patent claimed priority to U.S. Patent Number 6,687,745, and both the ‘838 patent and ‘745 patent claimed priority to the ‘917 provisional. In addition, Droplets filed a related PCT application (the “Franco PCT”) on September 14, 2000, which published on March 22, 2001. Thus, the ‘115 patent claimed priority to the ‘838 patent, incorporating its disclosure by reference, but omitted any “specific reference” to the ‘745 patent. Meanwhile, the ‘838 patent contained a “specific reference” to the ‘745 patent and ‘917 provisional. In its decision, the Federal Circuit included the timeline below to illustrate the prosecution dates of these applications.
After Droplets filed suit against E*TRADE alleging infringement of its ‘115 patent, E*TRADE filed an IPR petition to challenge the effective filing date of the ‘115 patent. Droplets argued that the ‘115 patent was entitled to the priority date of the ‘917 provisional because the ‘115 patent incorporated the ‘838 patent by reference, which, in turn, claimed priority to the ‘745 patent and ‘917 provisional. However, after reviewing the matter, the PTAB found that the ‘115 patent was only entitled to the priority date of the ‘838 patent, and invalidated all of its claims under 35 U.S.C. § 103 as being obvious over the Franco PCT.
Droplets appealed, and the Federal Circuit affirmed the decision of the PTAB, noting that, under 37 C.F.R. § 1.78, an application must contain a “specific reference” to each prior-filed application to which the application seeks to claim priority. The incorporation of the ’838 patent by reference does not qualify as a “specific reference” with respect to the ‘745 patent nor the ‘917 provisional, as required under 35 U.S.C. § 120, because each of these should have been specifically included. Although Droplets argued that its claims were unfairly invalidated by a “hypertechnical violation” of 37 C.F.R. § 1.78, the Federal Circuit explained that 35 U.S.C. § 120 “places the burden on the patent owner to provide a clear, unbroken chain of priority.” In addition, the Federal Circuit noted that the USPTO had mailed Droplets a corrected filing receipt showing priority only to the ‘838 patent, and that it is the responsibility of the applicant, not the USPTO, to ensure that priority to a previously filed application is properly claimed.
The Federal Circuit also noted that a priority claim under 35 U.S.C. § 120 may not be made using incorporation by reference under 37 C.F.R. § 1.57. Incorporation by reference is intended to satisfy the requirements of 35 U.S.C. § 112(b), as well as to provide background information of the invention. Since priority claims are not part of the written description of the invention, incorporation by reference is not a proper mechanism for asserting a chain of priority.
In light of the Federal Circuit’s application of 37 C.F.R. § 1.78, it remains critical to ensure that patent applications are drafted to correctly describe any and all priority claims. In addition, rather than relying on an abbreviated description of a priority chain, applicants can ensure that applications receive their appropriate priority dates by carefully following the guidance of MPEP § 211 and filing an accurate Application Data Sheet.
In Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, et al the Supreme Court found that inter partes review is constitutional under Article III and the Seventh Amendment of the Constitution in a 7-2 opinion delivered by Justice Thomas.
The Court determined that inter partes review falls “squarely” within the public rights doctrine. In making that determination, the Court compared the grant of a patent to inter partes review, one happening up front, the grant, and the other happening later, inter partes review. The grant of a patent, according to the Court, has been long recognized as a matter involving public, not private, rights. Accordingly, granting patents is one of the constitutional functions that can be carried out by “the executive or legislative departments” without judicial determination. Thus, the powers to grant a patent reside within Article I, not Article III. So when the PTO adjudicates the patentability of inventions, it is exercising the executive power, not the judicial power.
Inter partes review too falls on the public rights side of the line. Inter partes review involves the same basic matter as the grant of a patent but only later in time, a sort of second look at the patent, as it were, and involves the same statutory rights as the grant of a patent. According to the Court, the primary distinction between inter partes review and the initial grant of a patent is that inter partes review occurs after the patent has issued and that temporal distinction is a distinction without a difference. Thus, in an inter partes review, patents remain subject to the Board’s authority to cancel outside of an Article III court.
The magic in the opinion really happens when the Court compares the grant of patents to franchises, a very public feeling term. The Court addressed the argument that patents were a sort of a property right by underscoring the idea that patents convey only a specific type of property right, those of a public franchise, and that patents are entitled to protection as any other property, consisting of a franchise. Thus, Congress can grant a franchise that permits a company to erect a toll bridge, but qualify the grant by reserving its authority to revoke or amend the franchise. Even after the bridge is built, the Government can exercise its reserved authority through legislation or an administrative proceeding. The same is true for franchises that permit companies to build railroads or telegraph lines. The notion that patent rights, such as those encountered in an inter partes review, were only entitled to a franchise-type level of protection guaranteed the result that patent rights in an inter partes review were only entitled to protection under a statutory scheme, that of Article I.
The Court also rejected the argument that inter partes review violated Article III because it shared salient characteristics associated with the exercise of judicial power. According to the Court, discovery, depositions, and cross- examination of witnesses, introduction of evidence and objections based on the Federal Rules of Evidence, an adversarial hearing before the Board and calling the hearing a “trial” and the Board’s final decision a “judgment,” do not necessarily mean that an agency is using Court-like procedures and exercising judicial powers. Nor did the fact that an administrative adjudication was final and binding on an individual act to make it an exercise of the judicial power. A “looks like” test is not necessarily used to determine if an adjudication has improperly occurred outside of an Article III court.
The Court stressed the narrowness of their holding. In particular, the Court noted that they were not addressing whether other matters, such as infringement, required an Article III court. The Court also noted that their decision should not be misconstrued as suggesting that patents are not property for purposes of the Due Process Clause or the Takings Clause.
The Court finally addressed the challenge of inter partes review under the Seventh Amendment. According to the Court, the rejection of the Article III challenge resolves its Seventh Amendment challenge because inter partes review is a matter that Congress can properly assign to the PTO and not necessarily one that requires a jury.
Justice Breyer, Justice Ginsburg, and Justice Sotomayer concurred, noting that neither Article III nor the Seventh Amendment necessarily bar matters involving private rights from being adjudicated in anything other than by Article III courts. The concurrence stressed that sometimes even those rights may be adjudicated by agencies.
Justice Gorsuch and Justice Roberts dissented. According to the dissent, patentees can only be divested of patent rights by Article III judges. Disputing the Court’s equation of grant and revocation, the dissent argued that just because one gives a gift, such as a patent, doesn’t mean one can forever enjoy the right to reclaim it. Such a stance is ultimately a retreat from Article III’s guarantees.
At the time certiorari was granted, we discussed the public versus private nature of patent rights. Based on our previous analysis, it is not surprising that the Court reached this result.
Our Intellectual Property & Technology Practice has been recognized as one of the top ten US law firms for healthcare patent prosecution in an authoritative listing released in March. Now in its eighth year, Intellectual Asset Magazine (IAM) and Ocean Tomo, an IP-focused merchant bank, assess US Patent and Trademark Office data of high-quality patent prosecution. This year, the ranking considered US utility patents over the last three years, broken down by sector. Driving our rankings were patents for clients from leading pharmaceutical and medical companies. Cameron Kerriganleads the Life Sciences Patent Counseling team with Rahul Pathak and Janice Rice in San Francisco and Palo Alto.
The team specializes in intellectual property rights developing patent portfolios of pharmaceuticals, chemicals, biofuels, and biological therapeutics as well as medical and surgical devices and is supported by a full-service intellectual property practice.
U.S. patent law provides that any patent challenger initiating an inter partes review (IPR) proceeding at the United States Patent & Trademark Office (PTO) “may not assert” an invalidity ground in a patent case in U.S. district court or in the U.S. International Trade Commission that it “raised or reasonably could have raised during that inter partes review.” Despite the interpretation of this so-called IPR-estoppel provision by the Federal Circuit in Shaw Indus. Grp., Inc. v. Automated Creel Sys., Inc., 817 F.3d 1293 (Fed. Cir. 2016), which appears to limit the estoppel to grounds that were instituted by the Patent Trial and Appeal Board (PTAB), many district courts have been coalescing around a broader view—that, while IPR estoppel does not cover grounds that were presented in the IPR petition but denied institution, it does cover grounds that could have been raised in the petition had the petitioner been reasonably diligent. (See our prior posts here and here).
A recent decision of the Northern District of Texas adds incrementally to this line of cases by holding that IPR estoppel extends to grounds that could have been raised in a defendant’s petition to join another party’s IPR. The court rejected defendant’s argument that
because the ‘PTAB routinely denies joinder if a second-filed petition might introduce new arguments or grounds into a pending IPR,’ the only grounds that Defendants ‘reasonably could have raised in the [third party] IPR were the same grounds on which the PTAB already instituted the [third party’s] IPR.’
The court reasoned that “the PTAB has consistently emphasized that joinder is discretionary, and whether the petition asserts new grounds is just one of the factors considered.”
The Northern District of Texas decision is yet another data point for litigants attempting to navigate the numerous IPR estoppel decisions and to arrive at the best strategy for their cases. As we previously speculated, however, even though the district courts disagree on the scope of IPR estoppel and the impact of Shaw, it seems unlikely that the Federal Circuit will attempt to address that disagreement while SAS Institute v. Matal, No. 16-969 is pending in the Supreme Court because that case potentially may impact the scope of IPR estoppel directly or by implication based on the Court’s reading of the overall statutory framework for IPRs.
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