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Will Justice Gorsach bite at the new petition in Integrated Tech. Sys. v. First Internet Bank of Ind., Supreme Court Docket No. 17-1590 (2018)?  Petitioner relies heavily on Patently-O writings from Prof. Hricik and myself for its argument that the lack of patent eligibility is not a statutory defense under 35 U.S.C. § 282.

The petition asks the following questions:

  1. Does 35 U.S.C. § 282 allow for challenges to a patent’s validity based on patent eligibility under 35 U.S.C. § 101?
  2. In addition, and in close alignment with the first question, is it proper to find patents invalid under 35 U.S.C. § 101 after full examination before the U.S. Patent and Trademark Office in response to 12(b)(6) challenges when they are presumed valid under 35 U.S.C. § 282?
  3. Is it proper to grant a Rule 12(b)(6) motion to dismiss when the record contains unrebutted factual evidence that the invention is patent-eligible under § 101?

[Case Docket]

The patents here cover systems and methods for person-to-person fund transfers — something like paypal but without any need for a funded account.  United States Patent Nos. 7,912,786 (“the ‘786 patent”), 8,131,643 (“the ‘643 patent”), 8,321,347 (“the ‘643 patent”), and 8,620,809 (“the ‘809 patent”).

Claim 11 of the ‘809 patent reads as follows:

11. A method for automatically transferring funds, comprising:

providing a computer configured to provide a person to person funds transfer system; providing for the computer system to be accessible to a communication medium device that is controlled by a sender, said computer system being accessed by the communication medium device to receive information data related to a debit account of the sender and information data related to a receiving debit accessible escrow account;

receiving account information data and transfer authorization data by the computer system; processing the data in automated modes by the computer system;

transferring funds from the debit account of the sender to the receiving debit-accessible escrow account without requiring a pre-established relationship between the debit account of the sender and the receiving debit-accessible escrow account; and

repeating the above steps by the computer system, thus effecting additional transfers between different sending debit accounts and different receiving debit-accessible escrow accounts to cause fund transfers from the different sending debit accounts to the different receiving debit-accessible escrow accounts.

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by Dennis Crouch

XY, LLC v. Trans Ova Genetics, L.C. (Fed. Cir. 2018).

The split decision here reveals an important dispute between Federal Circuit judges over the impact of AIA trials on pending litigation.  In this case, XY’s six patents in suit relate to the sorting of semen by gender (used for farm animal breeding).  My discussion below focuses on only one of the patents that was first enforced by the district court but later cancelled by a PTAB action.

Background: After their patent license deal went bust, XY sued Trans Ova for infringement and a jury found that the patents were not invalid and also willfully infringed. (The district court also decided contract and antitrust issues).  Following final judgment from the district court siding with the patentee, the Patent Trial and Appeal Board (PTAB) issued its final judgment finding two of the aforementioned infringed claims to be unpatentable. Claims 1 and 3 of U.S. Patent No. 7,195,920.  That PTAB decision was affirmed today without opinion by the same 3-judge panel of Judges Chen, Dyk, and Newman.

On appeal, one question for the court was the impact of the PTAB and Federal Circuit decision invalidating the patent.  The court found it moot — holding that the parallel Federal Circuit invalidation must be given immediate issue preclusive effect. The court writes:

Collateral Estoppel: As a threshold matter, we need not address Trans Ova’s invalidity arguments as to the Freezing Patent claims in view of our affirmance today in a separate appeal invalidating these same claims, which collaterally estops XY from asserting the patent in any further proceedings. . . .

That affirmance renders final a judgment on the invalidity of the Freezing Patent, and has an immediate issue preclusive effect on any pending or co-pending actions involving the patent. . . .

We do not find, as the Dissent states, that “in the event of conflict the administrative agency’s decision ‘moots’ the district court’s decision.” Dissent at 6. Rather, we find that an affirmance of an invalidity finding, whether from a district court or the Board, has a collateral estoppel effect on all pending or co-pending actions. This court has long applied the Supreme Court’s holding in Blonder-Tongue to apply collateral estoppel in mooting pending district court findings of no invalidity based on intervening final decisions of patent invalidity.

Final Decision vs Affirmance of Final Decision: Note here that the final paragraph is somewhat confusing because it appears to state two separate principles – (1) that affirmance of an invalidity finding [by the Federal Circuit] creates collateral estoppel on the issue of validity and also (2) that a final decision of patent invalidity moots pending district court findings of no invalidity.  This begs the question of what would be the proper result if this case had been decided after the IPR decision cancelling the claims but before deciding the outcome of this appeal.  When the court recognizes the potential issue – I expect that in most situations it would coordinate the appeals.

Preserving the Issue for Appeal: In this case, the defendant appealed its invalidity loss — one question is whether the that appeal was necessary to overturn the infringement verdict.  In dicta, the court suggests here that the justification for the decision is that “a defendant should not have to continue defending a suit for infringement of an adjudged invalid patent.”  (Internal quotes of excluded).  For this point, however, the court relied only upon statements from prior non-precedential Federal Circuit decisions. See U.S. Ethernet Innovations, LLC v. Tex. Instruments Inc., 645 F. App’x 1026, 1028–30 (Fed. Cir. 2016) and Translogic Tech., Inc. v. Hitachi, Ltd., 250 F. App’x 988 (Fed. Cir. 2007).

The majority opinion was written by Judge Chen and joined by Judge Dyk.

Writing in partial dissent, Judge Newman argues that collateral estoppel should not apply in this situation.  The dissent explains that collateral estoppel is not automatic, is confused by the various legal standards at play here, should be handled with caution when asserted by a non-mutual party (the defendant here was not part of the IPR), should be applied with caution when operating between an administrative agency and the courts, and certainly should not be decided sua sponte – without request from either party, briefing, or arguments on the subject. “Collateral estoppel is not subject to automatic imposition without affording any opportunity for party discussion.”

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Gilbert P. Hyatt v. USPTO and Iancu (E.D. Va. 2018) (Hyatt – Mandamus Action Complaint)

Hyatt has filed a new mandamus action against the USPTO as the next step in the 40+ year battle over his microcomputer patent applications. Hyatt has over 300 patents applications pending before the USPTO.

According to the complaint, “Most of Mr. Hyatt’s applications have been pending for over 20 years, with about a dozen pending for over 35 years and three applications pending for over 40 years.”  The complaint details:

[In the 1990’s then Commissioner Bruce] Lehman and other PTO officials falsely branded Mr. Hyatt a ‘submariner’ and unlawfully decided that the PTO would never issue him another patent. . . . Having made that decision, the PTO proceeded to carry it out. It acted almost immediately to withdraw from issuance four patents either issued or in the final stages of being issued to Mr. Hyatt—actions in which the PTO has acknowledged the unusual participation of Commissioner Lehman and other senior PTO officials. It applied unlawful secret procedures (since acknowledged  by the PTO) to block the issuance of applications that examiners found patentable. Internal PTO documents reveal that these unlawful procedures prevented issuance of at least several patents to Mr. Hyatt. It put more than 80 of Mr. Hyatt’s pending administrative appeals on ice for up to a decade before terminating them by reopening prosecution and restarting the examination process from scratch. It secretly used what PTO officials called “Shadow Art Units,” “Phantom Art Units,” and “parking lots” to stow Mr. Hyatt’s applications and take them off the books. And it delayed actions across the board, with a degree of creativity that bespeaks the PTO’s enmity for Mr. Hyatt: issuing suspensions amounting to over a millennium of aggregate delay; secretly assigning his applications to management personnel who do not examine applications; dismissing his petitions imploring the agency to act on the false basis that his applications were already being expedited; leaving approximately 100 of Mr. Hyatt’s applications for a single examiner to process in his personal time, without pay; and manipulating its reporting systems to hide its failure to act on Mr. Hyatt’s applications. All the while, PTO officials spread the word high and low throughout the agency that Mr. Hyatt was a “submariner” and that he would never get another patent, poisoning the well against him.

More recently, the PTO created the “Hyatt Unit . . . “for the purpose of miring all of Mr. Hyatt’s applications in administrative purgatory until Mr. Hyatt gives up or dies.”

The Hyatt Unit began its work by restarting prosecution from scratch, throwing out years of work and enormous effort by Mr. Hyatt in the process. It blanketed Mr. Hyatt in what its leader described as a “boatload” of hundreds of burdensome Office Actions in just a few months, forcing him to scramble to make any response. And now it is in the process of systematically abandoning and rejecting his applications, piling on numerous, overlapping rejections on every patent claim and entering frivolous “objections” that take years to correct due to the PTO’s refusal to decide his administrative petitions for relief on a timely basis or at all. . . The Hyatt Unit has never allowed a single one of Mr. Hyatt’s claims in its more than-5 years of existence.

Finally, in an attempt to eliminate all of Hyatt’s claims, the PTO asserted prosecution laches against all of Hyatt’s applications.  That approach has seemingly now failed with a 2017 district court decision rejecting the PTO’s prosecution laches case.

In this action, Hyatt is looking for several forms of relief — perhaps most pointedly is a mandamus action from the court ordering the PTO “expeditiously to conduct a fair, impartial, and timely examination of his applications in accordance with law, to allow patentable subject matter, to issue patents claiming such patentable such subject matter upon payment of the issue fee, to provide timely action on Mr. Hyatt’s petitions, and to permit Mr. Hyatt to obtain timely final agency action on rejections from the Appeal Board.”

In addition, Hyatt is requesting compensation for post-GATT patent applications whose potential term have expired due to PTO delay and issuance of those patents.

= = = = =

The complaint is an interesting read, but was filed partially under seal (based upon a protective order from a prior case), including the following paragraph:

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by Dennis Crouch

D Three Enterprises v. SunModo Corp. (Fed. Cir. 2018)

Reading this decision feels akin to slowly peeling off the layers of an onion – hoping to reach some prize at the core but only reaching a rotten core.

D-Three’s patents in suit are directed to roof-mount sealing assemblies for solar panel installation.  U.S. Patent Nos. 8,689,517; 9,068,339; and 8,707,655.   The district court found the asserted claims invalid as obvious or anticipated.  The basic central dispute, however, was whether the claims could rely upon a 2009 provisional application filing date.  Although the formalities of the priority chain was met — the district court found a substantive problem. In particular, the court ruled that the 2009 provisional did not sufficiently disclose the inventions as claimed — i.e., failure of written description.  Going one layer deeper, it seems that the real dispute is about claim construction — do the claimed assemblies require a “washerless” approach?  The courts found that the claims recite a washerless assembly but that the limitation was not disclosed by the provisional application — so no priority.

Unrecited Recitation: In the appeal, the Federal Circuit’s analysis began with its conclusion on the claims: “All Asserted Claims except [except two] recite washerless assemblies.” The problem with the statement is that the claims don’t expressly recite a washerless assembly.  In its brief, D Three characterized the claims as “not includ[ing] a limitation that would require the presence of a washer. No claim in the Patents-in-Suit states that there cannot be a washer, i.e., no claim requires an assembly be washerless.”  (See claim 1 below).

Unfortunately, the Federal Circuit goes no further in explaining its conclusion that the claims recite washerless assemblies but rather jumped into consideration of whether the priority claim provides a sufficient disclosure.

35 U.S.C. § 120 provides for the right-of-priority from prior U.S. applications.  Under the statute, the priority claim only works if the earlier-filed application sufficiently disclosed the invention being claimed in the later-filed application.  In particular, the statute requires disclosure “in the manner provided by section 112(a).”  In other words, the earlier-filed application’s disclosure must satisfy the enablement and written description requirements to support the claims of the later-filed application. Here, the focus was on written description — the requirement that the disclosure clearly allows a PHOSITA “to recognize that the inventor invented what is claimed” and that the “inventor had possession of the claimed subject matter as of the filing date.” Ariad Pharm., Inc. v. Eli Lilly & Co., 598 F.3d 1336 (Fed. Cir. 2010) (en banc).

Here, the provisional application does actually disclose a washerless assembly, but only one.  However, the appellate court affirmed that that one specific example (using W-shaped prongs) was not sufficient to provide written description support for the claims that were not limited to W-shaped prongs.  According to the court, the result is that we can only “speculate as to the modifications that the inventor might have envisioned, but failed to disclose.” Quoting Lockwood v. Am. Airlines, Inc., 107 F.3d
1565 (Fed. Cir. 1997). At base, this case looks a lot like Gentry Gallery, LizardTech and ICU Medical, although none of these cases were cited.

In the end, we have a failure of written description; failed priority claim; and invalid patents.

= = = = =

Notes:

Claim 1 of the ‘517 patent:

1. A roof standoff device for use in mounting an object to a roof, said standoff device comprising:

a base bracket having at least one mounting hole for receiving an attachment element for attaching the base bracket to a roof surface, said base bracket further including a first threaded attachment element;

a flashing having:

a raised section with an upper surface and an aperture extending through said raised section, wherein said aperture is configured for alignment with said first threaded attachment element of said base bracket;

a flange extending beyond a base of said raised section, wherein, when disposed over said base bracket on the roof surface, an inside surface of said raised section receives and surrounds said base bracket and said flange rests on the roof surface;

a core body having a first end and a second end, said second end having a contact surface;

a second threaded attachment element associated with said second end of said core body, said second threaded attachment element configured to threadably engage said first threaded attachment element, wherein, upon said first and second threaded attachment elements being threadably engaged, said flashing is compressed between said base bracket and said second end of said core body; and

said core body having a third attachment element disposed proximate to said first end for attaching an object to said core body.

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by Dennis Crouch

An interesting new petition before the Supreme Court focuses on international licensing and copyright issues.  What happens when foreign courts give less weight to contracts and copyrights than would a US court? World Programming Ltd. v. SAS Institute, Supreme Court Docket No. 17-1459 (2018). [petition][docket]

Agreeing not to Reverse Engineer, then Reverse Engineering: WPL, a UK software company purchased a copy of SAS’s popular software and began to study its functionality (all in the UK).  As part of the process, WPL clicked “I agree” on the SAS clickwrap licenses. Those licenses included a prohibition on reverse engineering and also limited the software use to “non-production purposes.”  According to the petition, however, “under U.K. and E.U. law, such observation and study is lawful, and contractual terms restricting such acts are null and void. . . .While  WPL was required to agree to that license before installing the SAS System, it also knew that E.U. and U.K. law permitted use of software for observation, study, and testing regardless of contrary contractual restrictions.” Consider Council Directive 2001/29/EEC, ¶ 50, 2001 O.J. (L 167/10) (EC); Council Directive 91/250/EEC, art. 5(3), 1991 O.J. (L 122/42) (EC); Copyright, Designs and Patents Act 1988, c. 48, §§ 50BA(1), 296A(1)(c) (U.K.).

When SAS later sued, the High Court of Justice sided with WPL — rejecting SAS Institute’s copyright infringement claim (functionality of software not protected) and breach of contract claim (contract cannot bar lawful right of study). Thu U.K. Court of Appeal affirmed — finding the contract provision “invalid to the extent that it prohibits the observation, study or testing of the functioning of the program in order to determine the ideas and principles underlying it” and that the software functionality “does not count as a form of [copyrightable] expression.”

After losing in the UK, SAS brought its lawsuit to the USA and won on the same contract claim that was a loser in the UK (but lost on the copyright claim).  The US lawsuit also included a fraudulent inducement and unfair trade practices under N.C. UDTPA.  A jury found WPL liable — although WPL was barred from presenting any evidence regarding its reliance upon the UK and EU safe harbors.  Damages $80 million.

In this process, the district court refused to give any preclusive effect to the UK judgment.

On appeal, the Fourth Circuit held that the UK judgment was properly denied preclusive effect since it was contrary to North Carolina policy.  “North Carolina courts [are] more protective of the sanctity of contracts” than are UK or EU courts.

On the copyright claim, the 4th Circuit declined to resolve the copyright question — finding it moot.  Here, SAS received all of its sought-for damages from its other claims and the 4th Circuit ruled that it could not prove grounds for injunctive relief.  “Thus, the legal resolution of the copyright question would have no effect on the relief afforded the parties” and therefore the issue is moot. “Absent a practical effect on the outcome of this case, the copyright claim is moot.” SAS Inst., Inc. v. World Programming Ltd., 874 F.3d 370 (4th Cir. 2017).

Now, in its petition, WPL asks two questions:

  1. Whether federal or state law governs the respect that must be accorded to the judgment of a foreign court in diversity cases.
  2. Whether a district court’s decision on the merits of a claim becomes moot, and must be vacated, if the court of appeals determines that the plaintiff has not proven entitlement to the only remaining relief sought in connection with that claim.

In its argument, WPL reaches back to Hilton v. Guyot, 159 U.S. 113 (1895) where the Supreme Court spelled-out its jurisprudence for respecting foreign judgments.  Basically – foreign judgments must be respected by U.S. courts “unless they contravene basic principles of decency and morality.”  The difficulty here, though is how a Federal Court should operate when sitting in diversity and weighing the differences between a foreign judgment and the law of a US state’s law.  Basically – state law is regularly “less respectful of foreign judgments.”

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I thought this was interesting.  Magistrate’s daughter will be a summer associate at the patentee’s firm, and so she disclosed it to the parties and invited their views on whether they thought the case should be reassigned. It is Pacific Coast Building Products, Inc. v. Certainteed Gypsum, available here.

When I was clerking for the CAFC a few years ago, as clerks we avoided cases where we had any entanglement as an internal procedure, but I thought this was interesting because obviously the patentee’s firm knew it was going to hire the daughter, and the magistrate thought it wasn’t a conflict, but wanted the facts out there.

This is one of those instances, though, where if I were the patentee I’d be afraid the magistrate would try to be “too fair” to avoid even the appearance of favoritism, but it depends on the facts and relationships.  Interesting rare disclosure issue, though.

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Guest post by Professor Kevin Emerson Collins, Washington University School of Law.

Praxair Distribution, Inc. v. Mallinckrodt Hospital Products IP LTD., 2018 U.S. App. LEXIS 12707 (Fed. Cir. 2018)

In a divided opinion, the Federal Circuit held that all of the claims challenged in an IPR were obvious, upholding the PTAB’s obviousness determination with respect to most of the claims but reversing its nonobviousness determination with respect to a few. Praxair Distribution raises of a number of distinct, yet interrelated, issues concerning the cryptic, yet essential, printed matter doctrine: the opinion addresses the doctrine’s extension to mental steps, its implications for the relationship between sections 101 and 102/103, and the breadth of its functional-relation exception.

U.S. Patent 8,846,112 covers methods of distributing nitric oxide gas cylinders for pharmaceutical applications. Inhaling nitric oxide dilates blood vessels in the lungs and improves blood oxygenation, and it is approved for treating neonates with hypoxic respiratory failure. The prior art taught that inhaled nitric oxide may lead to pulmonary edema, a serious adverse event, in neonates with left ventricular dysfunction. The claims of the ‘112 patent address methods that build on this prior art. Roughly, the claims can be sorted into three groups: the informing claims, the informing-and-evaluating claims, and the informing-and-discontinuing-treatment claims. This commentary addresses each of these three groups of claims in turn.

The Informing Claims: Easy Cases?

In gross, the informing claims recite supplying nitric oxide to a medical provider and providing the medical provider with information relevant to the clinical use of the nitric oxide on neonatal patients. Claim 1, for instance, includes the steps of:

  • “supplying the cylinder containing compressed nitric oxide gas to a medical provider responsible for treating neonates” and
  • “providing to the medical provider (i) information” about the recommended dose for neonates with hypoxic respiratory failure “and (ii) information” about the risk of that dose for neonates with left ventricular dysfunction, wherein “the information of (ii) [is] sufficient to cause a medical provider … to elect to avoid treating one or more” neonates with left ventricular dysfunction in order “to avoid putting [them] at risk of pulmonary edema.”

The PTAB held, and the Federal Circuit affirmed in a majority opinion authored by Judge Lourie and joined by Chief Judge Prost, that the informing claims were unpatentable as obvious under the printed matter doctrine. Under recent Federal Circuit precedent, the informing claims present an easy case of unpatentability. The printed matter doctrine states that “[c]laim limitations directed to printed matter are not entitled to patentable weight unless the printed matter is functionally related to the substrate on which the printed matter is applied.” Opinion at *9. If a limitation is not given patentable weight, it cannot be relied upon to distinguish the claimed invention from the prior art in the novelty or nonobviousness analyses. In claim 1, the limitations apart from the providing-information limitation are obvious in light of the prior art as an ordered combination, and the providing-information limitation cannot be given patentable weight. Federal Circuit precedent clearly establishes that printing information about how to use a product onto that product as a substrate does not create a functional relationship between the printed matter and the substrate. See, e.g., In re Ngai, 367 F.3d 1336 (Fed. Cir. 2004). But see In re Miller, 418 F.2d 1392 (CCPA 1969) (finding a functional relationship between volumetric indicia and the measuring spoons on which they were printed). Importantly, the printed matter doctrine still applies even though the providing-information limitation does not require the information to be in the form of printed matter per se. In King Pharmaceuticals v. Eon Labs and In re Kao, the Federal Circuit had already extended the printed matter doctrine to encompass the conveyance of information in non-printed forms, such as verbal speech or sign language. See, Kevin Emerson Collins, An Initial Comment on King Pharmaceuticals: The Printed Matter Doctrine as a Structural Doctrine and Its Implications for Prometheus Laboratories, 2010 Patently-O Patent L.J. 111.

Not only is the lack of patentable weight for “informing”-type limitations settled law, but it is good policy, as well. As I have repeatedly argued elsewhere, the core of the printed matter doctrine, as well as its expansion to information conveyed through speech and other non-print media, is necessary to ensure that the knowledge disclosed in patent specifications remains free for all to use qua knowledge during the term of the patent. Kevin Emerson Collins, The Structural Implications of Inventors’ Disclosure Obligations, 69 Vand. L. Rev. 1785 (2016); Kevin Emerson Collins, The Knowledge/Embodiment Dichotomy, 47 U.C. Davis L. Rev. 1279 (2014). Claim limitations that read on communicative acts can restrain the diffusion of the teachings contained in patent disclosures, so a broad interpretation of the printed matter doctrine is necessary to ensure that patentee’s exclusive rights to claimed inventions cannot interfere with the free dissemination of the informational content of patent specifications.

The Informing-and-Evaluating Claims: Mental Steps and Patent Eligibility

The informing-and-evaluating claims depend from the informing claims, adding a number of steps to be performed, presumptively, by medical providers who use nitric oxide. (Bracket the divided infringement issue afoot here.) For example, claim 3 adds inter alia the following limitations to claim 1:

  • identifying a neonate with hypoxic respiratory failure,
  • determining whether the neonate has left ventricular dysfunction, and
  • “evaluating the potential benefit of treating” that neonate with nitric oxide “vs. the potential risk” of doing so.

The PTAB and the Federal Circuit both identify the evaluating limitation as a mental step performed in a medical provider’s mind. They then both extend the printed matter doctrine to preclude giving patentable weight to mental steps and, as a result, hold the informing-and-evaluating claims obvious. The Federal Circuit breaks new ground by extending the printed matter doctrine to mental activity in this manner, and Judge Newman’s concurrence argues that the extension is not proper. Simply put, “[m]ental steps are mental, not printed.” Concurrence at *1. (The concurrence may also be read more broadly to suggest that even the extension of the printed matter doctrine to spoken information in King Pharmaceuticals, discussed in the previous section addressing the informing claims, is legal error.)

Given the policy concerns discussed above for extending the printed matter doctrine to speech, however, I believe that its extension to at least some mental steps is a logical and justifiable move. As Judge Louie correctly notes, the evaluating limitation:

requires a medical provider to think about the information claimed in the providing information limitation of claim 1. But adding an ineligible mental process to ineligible information still leaves the claim limitation directed to printed matter. To hold otherwise would make the printed matter doctrine a dead letter, requiring no more than a “think about it” step to give patentable weight to a claim limitation directed to information content. There is no meaningful distinction between claim limitations directed to written information … verbal information … and mentally-processed information.

Opinion at *13. In brief, the extension of the printed matter doctrine to encompass “mentally-processed information” prevents form from trumping substance.

Although Praxair Distribution does not expressly make this point, it seems to revive some variant of the historical mental steps doctrine. In the mid-twentieth century, the mental steps doctrine did for mental steps what the printed matter does today for printed matter: it invalidated claims that relied on the content of mental processes to establish a distinction from the prior art. See, e.g., In re Abrams, 188 F.2d 165, 165 (C.C.P.A. 1951). The PTAB cited to some of these mid-century mental steps cases to support its extension of the printed matter doctrine to mental steps. 2016 WL 3648375 at *10 (2016). The Federal Circuit, however, did not, most likely because the CCPA abandoned the mental steps doctrine decades ago in the course of grappling with the patent eligibility of software, In re Musgrave, 431 F.2d 882, 889 (C.C.P.A. 1970), and the Federal Circuit has refused to reinstate it, Prometheus Labs. v. Mayo Collaborative Servs., 628 F.3d 1347, 1358–59 (Fed. Cir. 2010). Nonetheless, in practice, if not in name, Praxair Distribution plainly reinvigorates some variant of the mental steps doctrine. Technically, the opinion could be read narrowly so that the printed matter doctrine only extends to mental steps when claims recite both a printed matter limitation with certain informational content and a think-about-it limitation to the same informational content. However, the argument that the informational content of an evaluating, think-about-it limitation should be given patentable weight if the informing limitation is removed from the claim is difficult to fathom.

Another interesting aspect of Praxair Distribution is that it opens a new front in the ongoing debate concerning the intermixing of sections 102 and 103, on the one hand, and section 101, on the other hand. The Supreme Court’s opinions on patent eligibility in Mayo and Alice are highly controversial, in part, because their “inventive concept” analysis—i.e., what is now known as Mayo/Alice “step 2″—requires consideration of the advance over the prior art, a factual issue that is usually addressed in the novelty and nonobviousness analyses. Mixing the patentability requirements in the other direction—that is, using 101 concerns to inform 102/103 doctrine—has to date not received much attention. However, the printed matter doctrine has long mixed in this other direction, and Praxair Distribution brings this other-direction mixing into the spotlight:

Claim limitations directed to the content of information and lacking a requisite functional relationship are not entitled to patentable weight because such information is not patent eligible subject matter under 35 U.S.C. § 101. Cf. Mayo Collaborative Servs. v. Prometheus Labs., Inc., 566 U.S. 66, 90 (2012). While the doctrine’s underlying rationale is in subject matter eligibility, its application has been in analyzing other patentability requirements, including novelty … and nonobviousness.

Opinion at *10. (Interestingly, the European Union, too, mixes patent-eligibility concerns into the inventive step analysis with its requirement that that the inventive step reside in a technical effect. European Patent Office, Guidelines for Examination, Part G, Chapter VII.5.2.) The printed matter doctrine reveals that, at least under limited circumstances, what are often conceived of as the rigid statutory silos of patent law must break down. As Judge Newman notes in her concurrence, the printed matter doctrine started out as a prohibition on patenting business forms that was administered as part of the doctrine of patent eligibility. Concurrence at 2–3. However, over time, as patent applicants attempted to claim printed matter in combination with otherwise patent-eligible subject matter, the doctrine developed the two statutory branches that it has today: it is administered via section 101 in cases that involve claims to printed matter per se and via sections 102 and 103 in cases that involve claims to printed matter in combination with statutory processes, machines, manufactures, or compositions of matter. The extension of the printed matter doctrine to mental steps merely further highlights the mixing that is already occurring because mental processes are today, understood, well-understood to be the basis of patent-eligibility rejections. The mental steps doctrine, that the printed matter doctrine now resembles, was administered entirely as a section 101 doctrine, employing the equivalent of a patentable-weight analysis as part of patent eligibility. It never partially migrated from section 101 into sections 102 and 103 like the printed matter doctrine did.

Finally, the dispute underlying the Praxair Distribution opinion also reveals an overlap between sections 102 and 103 and section 101 in yet another way. The parallel district court proceeding invalidated all claims of the ‘112 patent that were at issue for lack of patent eligibility under Mayo, although the representative claim was a more conventional diagnostic claim from a different patent. 2017 WL 387649, *14–*20. The PTAB, of course, could consider this section 101 ground because it is limited in IPRs to 102 and 103 grounds.

The Informing-and-Discontinuing-Treatment Claims: An Expansive Functional-Relation Exception

Like the informing-and-evaluating claims, the final group of claims also depends from an informing claim. Technically, however, these claims depend from a claim that requires slightly different information to be provided to the medical provider with the nitric oxide cylinders, namely information in the form of a “recommendation that, if pulmonary edema occurs in a [neonate] who has pre-existing left ventricular dysfunction … the treatment with … nitric oxide should be discontinued.” Again like the informing-and-evaluating claims, they add further steps presumptively performed by medical providers to the steps performed by nitric oxide distributors. The representative claim here is claim 9. After reciting the limitations of identifying a neonate with hypoxic respiratory failure and determining whether the neonate has left ventricular dysfunction, it adds treatment and treatment-cessation steps:

  • “treating the neonatal patient with left ventricular dysfunction with … nitric oxide, whereupon the [neonate] experiences pulmonary edema; and
  • in accordance with [the information provided], discontinuing the … nitric oxide due to the neonatal patient’s pulmonary edema.”

The PTAB held claim 9 not unpatentable as obvious. It construed the “in accordance with” language to mean that the discontinuation of the treatment was performed “based on, or as a result of” the information/recommendation provided with the nitric oxide cylinders. It then concluded that the fact that the information was the reason or motivation for the medical provider to discontinue treatment created a functional relationship between the information and the discontinuing-treatment step. Opinion at *6. In turn, the PTAB held that the functional-relation exception to the printed matter doctrine applied, that the information provided could be given patentable weight, and that claim 9 was not obvious.

The Federal Circuit approved of the PTAB’s interpretation of the functional-relation exception to the printed matter doctrine as well as its application to claim 9. Opinion at *17. However, the Federal Circuit reversed the PTAB’s ultimate nonobviousness determination, concluding that, even when the content of the information is given patentable weight, the claim is obvious in light of the prior art. The prior art taught that nitric oxide may be given to patients with left ventricular dysfunction as long as those patients are monitored during treatment. The information provided—namely that nitric oxide should be discontinued for patients with left ventricular dysfunction upon pulmonary edema—was too small of an advance over the prior art to render the claim patentable.

The point of agreement between the PTAB and the Federal Circuit on the expansive interpretation of the functional-relation exception raises an interesting—and possibly troubling—precedent for future cases. The logical reason for a real-world, extra-mental action can now distinguish a claim reciting the action from the prior art. That is, the “invention” of a nonobvious mental motivation for a human actor to perform an already-known, real-world (i.e., non-mental) action, like discontinuing treatment, can give rise to a patentable method claim.

Consider a simple hypothetical. Assume that doctors routinely decrease the dosage of a drug when a metabolite of the drug in a patient’s bloodstream exceeds a certain threshold because of a known potential for a serious adverse event, namely liver problems. Now assume that a researcher discovers that, unexpectedly, the same metabolite in a patient’s bloodstream exceeding the same threshold also raises the risk of a different, serious adverse event, namely heart problems. The researcher claims a method of a medical provider: (a) administering a dose of a drug to a patient from a package with a printed indication that a metabolite level exceeding a threshold creates a medically unacceptable risk of heart problems, (b) determining the level of the drug’s metabolite in the patient’s bloodstream, and (c) reducing the dosage of the drug “in accordance with” the printed indication (i.e., due to the risk of heart problems) if the threshold is exceeded. Even though the medical provider infringing the claim performs conduct that, to an external observer, cannot be differentiated from the prior art (except for the printed indication on the drug package), the claim is patentable. The functional-relation exception to the printed matter doctrine allows the content of the printed matter be given patentable weight because the information conveyed motivates the medical provider’s conduct, and the unexpected nature of the connection between high metabolite levels and heart problems strongly supports nonobviousness.

To be clear, even if one finds the patentability of this hypothetical claim to be problematic—and reasonable minds may differ on whether it is problematic—there is no reason to question the Federal Circuit’s actual holding concerning claim 9 in Praxair Distribution. The Federal Circuit held the claim unpatentable for obviousness even when it gave the content of the printed (or spoken or thought) matter patentable weight. By necessity, it therefore would have reached the same holding if it had refused to give that content patentable weight. The expansiveness of the functional-relation exception in Praxair Distribution will only become outcome-determinative in future cases when a claim recites information that provides an unexpected reason or motivation for a real-world, extra-mental action that, standing alone, is known or is merely an obvious departure from the prior art.

Inversely, a narrow interpretation of the functional-relation exception—one that does not label the content of information as functionally related to an action recited as a limitation when the action is performed because of the information—would not widely undermine patentability. In particular, it would not invalidate most claims to actions that are motivated by newly discovered information. For example, consider a researcher who discovers that, unexpectedly, a particular genetic mutation means that a patient should be taking a lower dosage of a drug. The researcher may claim a method of a medical provider: (a) testing a patient for the mutation and (b) administering the lower drug dosage to the patient if the mutation is present. The printed matter doctrine is irrelevant to the nonobviousness of this claim because the claim does not recite the content of printed information (or a mental state of a doctor who thinks about the information) as a limitation. Such an information limitation is not required for validity, and would thus be unnecessary drafting surplusage, because the real-world (non-mental) conduct of testing and administering under the specified conditions is sufficient to distinguish the claim from the prior art. Although it is not recited as a claim limitation, the newly discovered information still provides an explanation for why the claimed invention is useful and why it produces unexpected results. (Further highlighting the interconnection of the printed matter doctrine and patent eligibility, compare the outcome in this hypothetical to the Federal Circuit’s recent holding in Vanda Pharmaceuticals Inc. v. West-Ward Pharms Int’l Ltd., 887 F.3d 1117 (Fed. Cir. 2018), which upheld the patent eligibility of a hybrid diagnostic/treatment claim under Mayo.)

The Federal Circuit’s expansive interpretation of the functional-relation exception to the printed matter doctrine in Praxair Distribution can be traced to a recent shift how the Federal Circuit articulates that exception. Traditionally, the functional-relation exception was applied only when there was a functional relationship between the content of the printed matter “the substrate on which the printed matter is applied.” Opinion at *9 (emphasis added). For example, in one of the few non-software cases in which the Federal Circuit actually held that the functional-relation exception allowed the content of printed matter to receive patentable weight, the content of a series of numbers printed on a loop of paper was held to be functionally related to the substrate/paper because the numbers themselves were a looping series. In re Gulack, 703 F.2d 1381 (Fed. Cir. 1983). In contrast, the PTAB and the Federal Circuit in Praxair Distribution looked for, and found, a functional relationship between the content of the printed matter and a different limitation in the claim other than the printed-matter limitation, namely the discontinuing-treatment limitation. From my quick research, Praxair Distribution appears to be the first case in which the functional-relation exception has been found to apply based on a functional relationship between printed matter and a claim limitation directed to something other than the printed matter’s substrate. Both King Pharms. and Kao use language that suggest the possibility of such a non-substrate relationship satisfying the functional-relation exception, but neither finds that it exists on the facts presented. If the functional-relation exception were limited to claims in which there is a functional relationship between the printed matter and the substrate in particular, then claims to new motivations for already-performed conduct would not be patentable under the printed matter doctrine.

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by Dennis Crouch

In February 2018, I wrote an essay titled Patents and Antitrust: Trump DOJ Sees Little Connection.  USDOJ’s chief antitrust lawyer Makan Delrahim has repeatedly stated his position that patent holders rarely create antitrust concerns — even in the standard setting organization and FRAND framework. Mr. Delrahim explained recently:

By denying injunctive relief to standard essential patent holders except in the rarest circumstances, courts in the U.S. run the risk of turning a FRAND commitment into a compulsory license. As a defender of competitive markets, I am concerned that these patent law developments could have an unintended and harmful effect on dynamic competition by undermining important incentives to innovate, and ultimately, have a detrimental effect on U.S. consumers.

Another advocacy position we have taken relates to how patent holders are held to their commitments to license on FRAND terms. . . [U]nilateral patent hold-up is not an antitrust problem. Where a patent holder has made commitments to license on particular terms, a contract theory is adequate and more appropriate to address disputes that may arise regarding whether the patent holder has honored those commitments. . . . Using the antitrust laws to impugn a patent holder’s efforts to enforce valid IP rights risks undermining the dynamic competition we are charged with fostering. So when it comes to disputes that arise between intellectual property holders and implementers regarding the scope of FRAND commitments, we advocate for the application of more appropriate theories, other than the blunt instrument of antitrust.

A third topic I have addressed recently is the need for balanced patent policies in standard setting organizations. As I and others at the Division have said on many occasions, by allowing products designed and manufactured by many different firms to function together, interoperability standards create enormous value for consumers. But standard setting only works—and consumers only reap the benefits of innovative and interoperable products—when both patent holders and patent implementers have the incentives to participate in the process. To that end, I have encouraged standard setting organizations to think carefully about the patent policies they adopt, so that incentives are not skewed towards one group or the other.

Delrahim Keynote Text.

A large group of leading law professors and former government antitrust enforcement officials have now continued the debate with an eight-point letter explaining the “broad bipartisan legal and economic consensus” on the antitrust concerns of patent holdups and the market benefit of SSOs.  [Read the Full Letter: DOJ patent holdup letter].

The points:

  1. “The anticompetitive harms from patent holdup have been consistently acknowledged by officials in Republican and Democratic administrations,” including in a unanimously adopted 2007 joint agency report.
  2. “The holdup problem has been recognized by courts and standard setting organizations themselves.” This is the reason why SSOs (made-up of industry player patent owners) adopt FRAND practices.
  3. Holdup concerns (by the patentee) “presents the more serious antitrust concern” as compared with Holdout concerns (by infringers who refuse to license).
  4. A patentee who obtains or maintains market power by breaching a FRAND commitment is liable for monopolization.
  5. While “injunctive relief often is appropriate” as a remedy in patent cases, the right to exclude granted by patents does not mean that a patentee’s unilateral refusal to license is ‘per se legal.’  Rather there are many doctrines that the right of a property owner to exclude others whether land, personal property, or intellectual property.
  6. eBay is the law; patent infringement no longer necessarily results in an injunction. “Because there could be thousands of patents in a product today, it is not appropriate uniformly to apply standards from the 18th century.”
  7. Patent rights should be considered for their utilitarian purpose – rather than as primarily a natural property right.
  8. Holding patentees to their own FRAND licensing commitments should not be seen as controversial in any way.

The letter here different from an amicus brief or comments to a notice of proposed rule-making since Delrahim need not respond or even consider the ideas presented.  The reality is that nothing in the letter is ‘new’ information and I am confident that Delrahim has already considered all of these points.  Still, it makes sense to speak the truths that you know. But still I wonder whether there is an intended shadow audience for the letter.

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by Dennis Crouch

Due process ordinarily requires that a court have personal jurisdiction over the parties to a lawsuit.  In its 2016 opinion, the District Court dismissed M-I Drilling’s lawsuit against the Brazilian company Dynamic Air Ltda. (DAL) for lack of personal jurisdiction. M-I Drilling Fluids UK Ltd. v. Dynamic Air Ltda, 2016 U.S. Dist. LEXIS 27357, 2016 WL 829900 (D. Minn. 2016).  On appeal here, the Federal Circuit has reversed. M-I Drilling Fluids UK Ltd. v. Dynamic Air Ltda., 2018 U.S. App. LEXIS 12497 (Fed. Cir. May 14, 2018).

Law of the Flag: The alleged infringement here did not occur within the United States proper, but rather aboard U.S. flagged ships in international waters – the vessels Resolution and Pinnacle.  The district court held that the U.S. Patent Act applies to U.S. flagged ships — “While on the high seas, a vessel is deemed to be part of the territory of the nation to whose citizens it belongs, and under whose flag it sails.” However, the district court then dismissed the case for lack of personal jurisdiction.

Personal Jurisdiction over a Foreign Entity: In most U.S. civil litigation, personal jurisdiction is considered on a state-by-state basis: we ask “does the defendant have sufficient contacts with the state housing the particular court?”  A special rule (R.4(k)(2)) kicks in for foreign entities such as DAL who are not subject to the general jurisdiction of any U.S. State.  Under 4(k)(2), any court across the country will have personal jurisdiction so long as the defendant’s contacts with the United States (as a whole) are sufficient to comport with Constitutional due process and not offend “traditional notions of fair play and substantial justice.”

In finding sufficient minimum contacts with the U.S. here, the Federal Circuit counted contacts with the U.S. flagged ships — finding that DAL’s installation of the accused pneumatic conveyance systems on the HOS Pinnacle and the HOS Resolution created specific jurisdiction over the entity. “Nothing more is required to show that DAL purposefully directed its activities at the United States.”

Judge Hughes wrote the opinion for the court joined by Judges Reyna and Stoll. Judge Reyna also filed a concurring opinion to further discuss the international maritime issues.

Prior to the enactment of the 1952 Act, the only authority speaking on whether U.S. patent laws apply to U.S-flagged ships on the high seas was Gardiner v. Howe, an 1865 case from then-existing Circuit Court of the District of Massachusetts. 9 F. Cas. 1157, F. Cas. No. 5219 (C.C.D. Mass. 1865). In Gardiner, the asserted patent claimed an improvement in the sails of vessels. The accused infringer allegedly used the improvement on the sails of his U.S.-flagged vessel while on the high seas and argued at trial that he could not be held liable for infringement because U.S. patent laws did not apply on the high seas. The court disagreed, stating that the U.S. patent laws “extend[] to the decks of American vessels on the high seas, as much as it does to all the territory of the country, and for many purposes is even more exclusive.” The court reasoned that any contrary ruling would render valueless “patents for improvements in the tackle and machinery of vessels, or in their construction . . . .” Our predecessor court recognized the vitality of Gardiner in Marconi Wireless Telegraph Co. of America v. United States, when it held that U.S. patent laws extend to infringing acts at the American Legation at Peking in China. 99 Ct. Cl. 1 (1942).

Nothing in the legislative history of the 1952 Patent Act evidences congressional intent to narrow the territorial scope of the patent laws from that articulated in Gardiner. . . .

In 1990, Congress applied the logic expressed by the Gardiner court in drafting legislation to extend U.S. patent law to U.S. spaceships. 1990 U.S.C.C.A.N. 4058, 4060-62. . . . Section 105 of Title 35 thus provides that “[a]ny invention made, used or sold in outer space on a space object or component thereof under the jurisdiction or control of the United States shall be considered to be made, used or sold within the United States for the purposes of this title . . . .” Congress’s logic in extending U.S. patent laws to U.S.-spaceships in outer space lends strong support for finding U.S. patent laws extend to U.S.-flagged ship on the high seas. . . .

What is particularly troubling in this case is that if U.S. law does not apply to infringing activity on a U.S.-flagged ship in international water, then it is possible no law applies.

Personal jurisdiction is proper – on remand we’ll see if there was actually any infringement of a valid patent.

A few notes:

  • Although the majority refers to the “high seas” and actions “beyond the territorial boundary” of any nation, Judge Reyna points out that “[t]he alleged infringement in this case occurred in the exclusive economic zone (“EEZ”) of Brazil. The EEZ is “‘an area beyond and adjacent to the territorial sea’ which ‘shall not extend beyond 200 nautical miles from the baselines from which the breadth of the territorial sea is measured.'” Elizabeth I. Winston, Patent Boundaries, 37 Temp. L. Rev. 501, 508 (2015) (quoting the United Nations Convention on the Law of the Sea, Dec. 10, 1982, 1833 U.N.T.S. 397, 418-19 (arts. 55, 57)).
  • One of the most interesting quotes from the article is the following statement: “Our subject matter jurisdiction over this appeal is grounded in the commercial tort of patent infringement.” That phrase has only been used in one other court decision – Judge Newman’s dissent in the damages case of Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538 (Fed. Cir. 1995) (en banc) (“Patent infringement is a commercial tort, and the remedy should compensate for the actual financial injury that was caused by the tort.”) 
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