Inventors’ Agreements will not protect a former employer from the inventors’ future related work
| May 27, 2021
Bio-Rad Laboratories, Inc. v. International Trade Commission, 10X Genomics Inc.
Decided on April 29, 2021
Before Taranto, Chen and Stoll. Opinion by Taranto.
Summary:
Bio-Rad attempted to assert that language in inventors’ agreements which were signed by two of the named inventors in the patents asserted against Bio-Rad made the patents their intellectual property by being subject to assignment. The CAFC disagreed noting that the agreements were too general is scope as asserted and 10X had failed to assert an earlier conception date.
Details
- Background
10X Genomics Inc. filed a complaint against Bio-Rad Laboratories, Inc. with the International Trade Commission, alleging that Bio-Rad’s importation and sale of microfluidic systems and components used for gene sequencing or related analyses violated section 337 of the Tariff Act of 1930, 19 U.S.C. § 1337.
The ITC found that Bio-Rad infringed the patent claims at issue and also that 10X practiced the claims, the latter fact satisfying the requirement of a domestic industry relating to the articles protected by the patent. Bio-Rad argued on appeal that the Commission erred in finding that Bio-Rad infringes the asserted claims of the patents, in finding that 10X’s domestic products practice the asserted claims of the ’530 patent, and in rejecting Bio-Rad’s indefiniteness challenge to the asserted claims of the ’530 patent. The CAFC disagreed and affirmed the Commission. These aspects of the appeal are not the subject of this paper.
In addition, the ITC rejected Bio-Rad’s defense that it could not be liable for infringement because it co-owned the asserted 10X patents under assignment provisions that two of the named inventors signed when they were employees of Bio-Rad (and its predecessor), even though the inventions claimed were not made until after the employment.
Regarding the timeline of invents of the work of the two inventors, around mid-2010, the two named inventors of the 10X patents—Dr. Hindson and Dr. Saxonov—were working for a company called QuantaLife, Inc., which Dr. Hindson had co-founded. Each of them signed an agreement (Dr. Hindson in 2009, Dr. Saxonov in 2010) that provided, as relevant here:
(a) Employee agrees to disclose promptly to the Company the full details of any and all ideas, processes, recipes, trademarks and service marks, works, inventions, discoveries, marketing and business ideas, and improvements or enhancements to any of the foregoing (“IP”), that Employee conceives, develops or creates alone or with the aid of others during the term of Employee’s employment with the Company . . . .
(b) Employee shall assign to the Company, with-out further consideration, Employee’s entire right to any IP described in the preceding subsection, which shall be the sole and exclusive property of the Company whether or not patentable.
In 2011, Bio-Rad acquired QuantaLife, and Drs. Hindson and Saxonov became Bio-Rad employees. In October of that year, they each signed an agreement that provided, as relevant here:
All inventions (including new contributions, improvements, designs, developments, ideas, discoveries, copyrightable material, or trade secrets) which I may solely or jointly conceive, develop or reduce to practice during the period of my employment by Bio-Rad shall be assigned to Bio-Rad.
Drs. Hindson and Saxonov left Bio-Rad in April 2012, and together they formed 10X in July 2012. By August 2012, 10X filed the first of several provisional patent applications that focused on using microcapsules in capsule partitions or droplet partition. By January 2013, the 10X inventors had conceived of a different architecture: “gel bead in emulsion” (GEM). The GEM architecture involves “part-tioning nucleic acids, DNA or RNA, in droplets together with gel beads that are used to deliver the barcodes into the droplet,” where the “barcodes are released from the gel beads using a stimulus.” The asserted 10X patent claims all involve this architecture. The CAFC found that the common core of the inventions in the asserted 10X patents is the use of gel beads with releasably attached oligonucleotide barcode molecules as a system for delivery of barcodes to nucleic acid segments.
After 10X began selling its products, including the GemCode and Chromium products, Bio-Rad released its own ddSEQ™ system, whose ordinary use, 10X alleges, practices its patents. The ddSEQ system uses oligonucleotide molecules that are attached to a gel bead and can be released from the bead via a stimulus.
- Opinion
On appeal, Bio-Rad renewed its argument, made as a defense to infringement, that it co-owns the three assert-ed patents based on the assignment provisions in the employment contracts signed by Drs. Hindson and Sax-onov. The CAFC noted that it is undisputed that, if Bio-Rad is a co-owner, it cannot be an infringer, per 35 U.S.C. § 262 (“[E]ach of the joint owners of a patent may make, use, offer to sell, or sell the patented invention . . . without the consent of and without accounting to the other owners.”). However, co-ownership itself was disputed.
The CAFC first noted that Bio-Rad did not present an alternative conception date (earlier than January 2013), and it lost the opportunity to argue conception of certain claim elements while Drs. Hindson and Saxonov were at QuantaLife.
The Court reasoned that Bio-Rad has furnished no persuasive basis for disturbing the Commission’s conclusion that the assignment provisions do not apply to a signatory’s ideas developed during the employment (with Bio-Rad or QuantaLife) solely because the ideas ended up contributing to a post-employment patentable invention in a way that supports co-inventorship of that eventual invention.
Examining the employee agreements, the CAFC found that the assignment provisions are limited temporally. The assignment provision of the QuantaLife agreement reaches only a “right to any IP described in the preceding section,” and the preceding (disclosure-duty) section is limited to IP “that Employee conceives, develops or creates alone or with the aid of others during the term of Employee’s employment with the Company,” before adding a limitation, stating: “All inventions . . . which I may solely or jointly conceive, develop, or reduce to practice during the period of my employment by Bio-Rad shall be assigned to Bio-Rad.”. Based thereon, the Court concluded that the most straightforward interpretation is that the assignment duty is limited to subject matter that itself could be protected as intellectual property before the termination of employment.
The Court went on to note that Bio-Rad did not argue or demonstrate, that a person’s work, just because it might one day turn out to contribute significantly to a later patentable invention and make the person a co-inventor, is itself protectible intellectual property before the patentable invention is made. Specifically, the CAFC stated:
Such work is merely one component of “possible intellectual property.” Bio-Rad Reply Br. at 3. In the case of a patent, it may be a step toward the potential ultimate existence of the only pertinent intellectual property, namely, a completed “invention,” but the pertinent intellectual property does not exist until at least conception of that invention. See, e.g., REG Synthetic Fuels, LLC v. Neste Oil Oyj, 841 F.3d 954, 958 (Fed. Cir. 2016); Dawson v. Dawson, 710 F.3d 1347, 1353 (Fed. Cir. 2013); Burroughs Wellcome Co. v. Barr Labs., Inc., 40 F.3d 1223, 1227–28 (Fed. Cir. 1994).
The panel reviewed the current fact pattern in light of previous decisions on the issue of inventor’s employment agreements. Of note, regarding the FilmTec case (FilmTec Corp. v Hydranautics, 982 F.2d 1546, 1548 (Fed. Cir. 1992)) cited by Bio-Rad involved language of an agreement, and language of the statutory command embodied in the agreement, that expressly assigned ownership to the United States of certain inventions as long as they were “conceived” during performance of government-supported work under a contract. The panel noted that in the Filmtec case the Court had examined the claimed invention, namely, a composition conceived during the term of the agreement, where conception meant the “‘formation in the mind of the inventor, of a definite and permanent idea of the complete and operative invention, as it is hereafter to be applied in practice.’” Id. at 1551–52 (quoting Hybritech Inc. v. Monoclonal Antibodies, Inc., 802 F.2d 1367, 1376 (Fed. Cir. 1986)).
We noted that the inventor, continuing to work on the invention after the agreement ended, added certain “narrow performance limitations in the claims.” See id. at 1553. But we treated the performance limitations as not adding anything of inventive significance because they were mere “refine[ments]” to the invention already conceived during the term of the agreement. See id. at 1552–53. We held the claimed inventions to have been conceived during the agreement—something that Bio-Rad accepts is not true here. We did not deem a mere joint inventor’s contribution to a post-agreement conception sufficient. (Emphasis added).
The CAFC additionally reviewed the Stanford case (Bd. of Trustees of the Leland Stanford Junior Univ. v. Roche Molecular Sys., Inc., 583 F.3d 832, 837 (Fed. Cir. 2009), aff’d on different grounds, 563 U.S. 776 (2011)), also relied on by Bio-Rad, involved quite different contract language from the language at issue. The case involved a Stanford employee who was spending time at Cetus in order to learn important new research techniques; as part of the arrangement, the Stanford employee signed an agreement with Cetus committing to assign to Cetus his “right, title, and interest” in the ideas, inventions, and improvements he conceived or made “as a consequence of” his work at Cetus. The CAFC noted that the Stanford case was not a former-employee case and the language at issue in Stanford did not contain the temporal limitation set forth in the agreements at issue. The Court concluded by noting that the agreement at issue here did not contain the broad “as a consequence of” language at issue in Stanford.
The Court also examined the relevant aspects of the governing law of California which provides a confirmatory reason not to read the assignment provision at issue here more broadly. California law recognizes significant policy constraints on employer agreements that restrain former employees in the practice of their profession, including agreements that require assignment of rights in post-employment inventions. The Court noted that substantial questions about compliance with that policy would be raised by an employer-employee agreement under which particular subject matter’s coverage by an assignment provision could not be determined at the time of employment, but depended on an unknown range of contingent future work, after the employment ended, to which the subject matter might sufficiently contribute. The reasons behind the policy being that such an agreement might deter a former employee from pursuing future work related to the subject matter and might deter a future employer from hiring that individual to work in the area. The CAFC concluded that the contract language at issue does not demand a reading that would test the California-law constraints and they would not “test those constraints here by adopting a broader reading of the contract language than the straightforward reading we have identified.”
Finally, Bio-Rad had argued that Drs. Hindson and Saxonov conceived of key aspects of the claimed inventions, if not the entirety of the claims, at QuantaLife/Bio-Rad. The Commission had determined that many of these “ideas” are at a level of generality that cannot support joint inventorship or (sometimes and) involve nothing more than elements in the already-published prior art. Specifically, Bio-Rad contended that at least three ideas developed at QuantaLife were not publicly known in the prior art at the time Drs. Hindson and Saxonov were working on them: tagging droplets to track a sample-reagent reaction complex, using double-junction microfluidics to combine sample and reagent, and using oligonucleotides as bar-codes to tag single cells within droplets. After analysis of these concepts, the Court found that these contentions, by their terms, look to a time long before the January 2013 conception date for the inventions at issue and Bio-Rad did not deny that these ideas were in the published prior art by the time of the conception of the inventions at issue or that they were, by then, readily available to the co-inventors on the patents involved. Hence, the Court concluded that the contentions are insufficient to establish co-inventorship.
Specifically, the Court found that to accept Bio-Rad’s contention after giving the required deference to the Commission’s factual (and, in one instance, procedural) rulings would require that they find joint inventorship simply because Drs. Hindson and Saxonov, while at Bio-Rad (or QuantaLife), were working on the overall, known problem—how to tag small DNA segments in microfluidics using droplets—that was the subject of widespread work in the art.
- Decision
The CAFC concluded that Bio-Rad had not demonstrated proper ownership of “ideas” as comported to be assigned to them by the two inventors employment agreements. The general concepts relied upon by Bio-Rad were insufficient as Bio-Rad had failed to assert an earlier conception date. As such, the Court affirmed the Commission’s ruling.
Take away
- Broad language in an employment agreement assigning rights to inventions will not suffice to protect an entity from future work performed by the employees at a different entity.
- Employee agreements assigning rights to inventions conceived while employed need to be structured such that they are clear as to what is conceived is considered the property of the entity. The entity should take steps to clarify “conception” during employment to provide evidence thereof.
An Improvement in Computational Accuracy Is Not a Technological Improvement
| May 20, 2021
In Re: Board of Trustees of the Leland Stanford Junior University
Decided on March 25, 2021
Prost, Lourie and Reyna. Opinion by Reyna.
Summary:
This case is an appeal from a PTAB decision that affirmed the Examiner’s rejection of the claims on the grounds that they involve patent ineligible subject matter. Leland Stanford Junior University’s patent to computerized statistical methods for determining haplotype phase were held by the CAFC to be to an abstract idea directed to the use of mathematical calculations and statistical modeling and that the claims lack an inventive concept that transforms the abstract idea into patent eligible subject matter. Thus, the CAFC affirmed the rejection on the grounds that the claims are to patent ineligible subject matter.
Details:
Leland Stanford Junior University’s (“Stanford”) patent application is to methods for determining haplotype phase which provides an indication of the parent from whom a gene has been inherited. The application discloses methods for inferring haplotype phase in a collection of unrelated individuals. The methods involve using a statistical tool called a hidden Markov model (“HMM”). The application uses a statistical model called PHASE-EM which allegedly operates more efficiently and accurately than the prior art PHASE model. The PHASE-EM uses a particular algorithm to predict haplotype phase.
Representative claim 1 recites:
1. A computerized method for inferring haplotype phase in a collection of unrelated individuals, comprising:
receiving genotype data describing human genotypes for a plurality of individuals and storing the genotype data on a memory of a computer system;
imputing an initial haplotype phase for each individual in the plurality of individuals based on a statistical model and storing the initial haplotype phase for each individual in the plurality of individuals on a computer system comprising a processor a memory;
building a data structure describing a Hidden Markov Model, where the data structure contains:
a set of imputed haplotype phases comprising the imputed initial haplotype phases for each individual in the plurality of individuals;
a set of parameters comprising local recombination rates and mutation rates;
wherein any change to the set of imputed haplotype phases contained within the data structure automatically results in re-computation of the set of parameters comprising local recombination rates and mutation rates contained within the data structure;
repeatedly randomly modifying at least one of the imputed initial haplotype phases in the set of imputed haplotype phases to automatically re-compute a new set of parameters comprising local recombination rates and mutation rates that are stored within the data structure;
automatically replacing an imputed haplotype phase for an individual with a randomly modified haplotype phase within the data structure, when the new set of parameters indicate that the randomly modified haplotype phase is more likely than an existing imputed haplotype phase;
extracting at least one final predicted haplotype phase from the data structure as a phased haplotype for an individual; and
storing the at least one final predicted haplotype phase for the individual on a memory of a computer system.
The PTAB determined that the claim describes receiving genotype data followed by mathematical operations of building a data structure describing an HMM and randomly modifying at least one imputed haplotype to automatically recompute the HMM’s parameters. Thus, the PTAB held that the claim is to patent ineligible abstract ideas such as mathematical relationships, formulas, equations and calculations. The PTAB further found that the additional elements in the claim recite generic steps of receiving and storing genotype data in a computer memory, extracting the predicted haplotype phase from the data structure, and storing it in a computer memory, and that these steps are well-known, routine and conventional. Thus, finding the claim ineligible under steps one and two of Alice, the PTAB affirmed the Examiner’s rejection as being to ineligible subject matter.
On appeal, the CAFC followed the two-step test under Alice for determining patent eligibility.
1. Determine whether the claims at issue are directed to a patent-ineligible concept such as laws of nature, natural phenomena, or abstract ideas. If so, proceed to step 2.
2. Examine the elements of each claim both individually and as an ordered combination to determine whether the claim contains an inventive concept sufficient to transform the nature of the claims into a patent-eligible application. If the claim elements involve well-understood, routine and conventional activity they do not constitute an inventive concept.
Under step one, the CAFC found that the claims are directed to abstract ideas including mathematical calculations and statistical modeling. Citing Parker v. Flook, 437 U.S. 584, 595 (1978), the CAFC stated that mathematical algorithms for performing calculations, without more, are patent ineligible under § 101. The CAFC determined that claim 1 involves “building a data structure describing an HMM,” and then “repeatedly randomly modifying at least one of the imputed haplotype phases” to automatically recompute parameters of the HMM until the parameters indicate that the most likely haplotype is found. The CAFC also found that the steps of receiving genotype data, imputing an initial haplotype phase, extracting the final predicted haplotype phase from the data structure, and storing it in a computer memory do not change claim 1 from an abstract idea to a practical application. The CAFC concluded that “Claim 1 recites no application, concrete or otherwise, beyond storing the haplotype phase.”
Stanford argued that the claim provides an improvement of a technological process because the claimed invention provides greater efficiency in computing haplotype phase. However, the CAFC stated that this argument was forfeited because it was not raised before the PTAB.
Stanford also argued that the claimed invention provides an improvement in the accuracy of haplotype predictions rendering claim 1 a practical application rather than an abstract idea. However, the CAFC stated that “the improvement in computational accuracy alleged here does not qualify as an improvement to a technological process; rather, it is merely an enhancement to the abstract mathematical calculation of haplotype phase itself.” The CAFC concluded that “[t]he different use of a mathematical calculation, even one that yields different or better results, does not render patent eligible subject matter.”
Under step two, the CAFC determined that there is no inventive concept that would transform the use of the claimed algorithms and mathematical calculations from an abstract idea to patent eligible subject matter. The steps of receiving, extracting and storing data are well-known, routine and conventional steps taken when executing a mathematical algorithm on a regular computer. The CAFC further stated that claim 1 does not require or result in a specialized computer or a computer with a specialized memory or processor.
Stanford argued that the PTAB failed to consider all the elements of claim 1 as an ordered combination. Specifically, they stated that it is the specific combination of steps in claim 1 “that makes the process novel” and “that provides the increased accuracy over other methods.” The CAFC did not agree stating that the PTAB was correct in its determination that claim 1 merely “appends the abstract calculations to the well-understood, routine, and conventional steps of receiving and storing data in a computer memory and extracting a predicted haplotype.” The CAFC further stated that even if a specific or different combination of mathematical steps yields more accurate haplotype predictions than previously achievable under the prior art, that is not enough to transform the abstract idea in claim 1 into a patent eligible application.
Comments
A key point from this case is that an improvement in computational accuracy does not qualify as an improvement to a technological process. It is merely considered an enhancement to an abstract mathematical calculation. Also, it seems that Stanford made a mistake by not arguing at the PTAB that the claimed invention provides the technological advance of greater efficiency in computing haplotype phase. The CAFC considered this argument forfeited. It is not clear if this argument would have saved Stanford’s patent application, but it certainly would have helped their case.
If it cannot be made, it does not exist!
| May 11, 2021
Raytheon Technologies Corp. v. General Electric Co. (Fed. Cir. 2021)
Decided on April 16, 2021
Lourie, Hughes, and Chen (author).
Summary:
“A typical obviousness inquiry often turns on whether an asserted prior art reference teaches a particular disputed claim limitation or whether a skilled artisan would have been motivation at the time of the invention to combine the teachings of difference references.” In this case, the court tackled the question of enabling disclosure in the prior art reference, and what is required.
Raytheon owned U.S. Patent 9,695,751 (herein ‘751) directed to gas turbine engines. Raytheon appealed a final inter partes review decision of the Patent Trial and Appeal Board (the Board) finding claims 3 and 16 where unpatentable as obvious in view of the reference Knip. Claims 3 and 16 where the only pending claims after Raytheon disclaimed all other claims cited in the inter partes review.
“[T]he ‘751 patent generally claims a geared gas turbine engine with two turbines and a specific number of fan blades and turbine rotors and/or stages.” Further, the “key distinguishing feature of the claims is the recitation of a power density range that the patent describes as being ‘much higher than in the prior art.'”
Knip is a 1987 NASA technical memorandum that envisions superior performance characteristics for an imagined “advanced [turbofan] engine” “incorporating all composite materials.” Such a construction was undisputedly unattainable at that time, [but] an imagined application of these “revolutionary” composite materials to a turbofan engine allowed the author of Knip to assume aggressive performance parameters for an “advanced” engine including then-unachievable pressure ratios and turbine temperatures.” Although the reference discloses numerous performance parameters, it did not explicitly disclose SLTO thrust, turbine volume or power density as per the ‘751 patent. (SLTO = Sea Level Takeoff).
The Board ultimately found Knip rendered obvious the ‘751 patent because “it provided enough information to allow a skilled artisan to “determine a power density as defined in claim 1, and within the range proscribed in claim 1.” (Claim 3 was a dependent claim incorporating all limitation of claim 1; claim 16 depended on claim 15 which included the same argued limitations as claim 1).
The CAFC found that the PTAB erred by focusing on whether Knip enables a skilled artisan to calculate the power density of Knip’s contemplated “futuristic engine,” rather than considering “whether Knip enabled a skilled artisan to make and use the claimed invention.”
Specifically, “[i]n general, a prior art reference asserted under §103 does not necessarily have to enable its own disclosure, i.e., be ‘self-enabling,’ to be relevant to the obviousness inquiry.” That is, “a reference that does not provide an enabling disclosure for a particular claim limitation may nonetheless furnish the motivation to combine, and be combined with, another reference in which that limitation is enabled.” Thus, “[I]n the absence of such other supporting evidence to enable a skilled artisan to make the claimed invention, a standalone §103 reference must enable the portions of its disclosure being relied upon” This is “the same standard applied to anticipatory references.”
Here, the sole reference was Knip, and so the CAFC emphasized the question as being whether Knip enables the claimed invention not whether a skilled artisan “is provided with sufficient parameters in Knip to determine, without undue experimentation, a power density” as per the Boards focus. That CAFC noted that this position could have carried weight “if GE had presented other evidence to establish that a skilled artisan could have made the claimed turbofan engine with the recited power density. But no such other evidence was presented.”
Therefore, according to the CAFC, “Knip’s self-enablement (or lack thereof) is not only relevant to the enablement analysis, in this case it is dispositive.”
The CAFC discussed GE’s expert testimony finding it to be lacking, because its expert constructed “a computer model simulation of Knip’s imagined engine” rather than “suggesting that a skilled artisan could have actually built such an engine.” In contrast, Raytheon’s expert presented unrebutted evidence of non-enablement… detailing the unavailability of the revolutionary composite material contemplated by Knip.”
Lastly, GE had argued that a skilled artisan could achieve the claimed power density by optimizing Knip’s engine. The Board had affirmed this on the basis of “result-effective variable.” That CAFC rejected this, stating that “[i]f a skilled artisan cannot make Knip’s engine, a skilled artisan necessarily cannot optimize its power density.”
Accordingly, the CAFC reversed the PTAB’s finding.
Take-away:
- “[I]f an obviousness case is based on a non-self-enabled reference, and no other prior art reference or evidence would have enabled a skilled artisan to make the claimed invention, then the invention cannot be said to have been obvious.”
- If a single reference is used in a 103 rejection, and that single reference is non-self enabling, then allegations of optimization by the PTO is improper. That is, “if a skilled artisan cannot make..[it], a skilled artisan necessarily cannot optimize it…”
UNDERSTANDING STANDING IN AN IPR
| May 4, 2021
The enactment of inter partes review (IPR) on September 16, 2012 as part of the America Invents Act has created some interesting issues. IPRs replaced the prior inter partes reexamination process. In an inter partes reexamination, claims of a patent are reexamined (as in a “normal” examination by an examiner) to confirm/determine patentability. In an IPR, however, claims are challenged, i.e., the validity of the claims is determined by the Patent Trial and Appeal Board (PTAB). Such a validity challenge had previously been conducted by a jury in district courts instead of by an administrative agency such as the PTAB.
The use of an administrative agency has raised several issues under the U.S. Constitution. For example, the Supreme Court heard oral argument on March 1, 2021 in Arthrex, Inc. v. Smith & Nephew, Inc. to decide (1) whether, for purposes of the Appointments Clause, U.S. Const. Art. II, § 2, Cl. 2, administrative patent judges of the US Patent and Trademark Office are principal officers who must be appointed by the President with the Senate’s advice and consent, or “inferior officers” whose appointment Congress has permissibly vested in a department head, and (2) Whether, if administrative patent judges are principal officers, the court of appeals properly cured any Appointments Clause defect in the current statutory scheme prospectively by severing the application of 5 U.S.C. 7513(a) to those judges.
Another issue which may find its way to the Supreme Court is standing for a party to appeal a decision in an IPR. The U.S. Constitution limits its grant of the “judicial power” to “Cases” or “Controversies” under Article III, § 2. As such, any party that appeals to the CAFC must have standing under Article III for the CAFC to consider the merits of the case. For a party to have standing, it must show (1) an injury in fact, (2) a casual connection between the injury complained of, and (3) a likelihood that the injury will be redressed by a favorable decision. See Lujan v. Defenders of the Wildlife, 504 U.S. 555, 560-561 (1992). An injury in fact is a legally protected interest which is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical. Id. at 560.
Standing has become an issue in IPRs since any party can file a request for an IPR, but not every party can appeal. A person does not need to have Article III standing to file an IPR petition and obtain a PTAB decision because Article III requirements do not apply to administrative agencies like the PTAB. On the other hand, Article III requirements apply to the CAFC.
The philosophy for the requirement of standing is to ensure “that the plaintiffs have a stake in the fight and will diligently prosecute the case . . . while, at the same time, ensuring that the claim is not abstract or conjectural so that resolution by the judiciary is both manageable and proper.” Canadian Lumber Trade All. V. United States, 517 F.3d 1319, 1333 (FED. Cir. 2008). This philosophy is similar to the duty of disclosure during patent prosecution to ensure that the strongest patent claims issue.
Several recent cases are of interest in that some parties were deemed to have standing whereas others were deemed to lack standing. One of the most recent cases on standing is General Electric Company v. Raytheon Technologies Corporation decided on December 23, 2020 which found that GE did have standing to appeal. What makes this case particularly interesting is another decision earlier that year between the same parties where GE was found to lack standing.
So, what was the difference in these cases?
We need to examine several decisions from the CAFC to have a better understanding of standing in an IPR. All these decisions involve competitors. These cases include:
Phigenix, Inc. v. Immunogen, Inc., 845 F.3d 1168 (Fed. Cir. 2017)
JTEKT Corp. v. GKN Auto. Ltd., 898 F.3d 1217 (Fed. Cir. 2018)
AVX Corporation v. Presidio Components, Inc., 923 F.3d 1357 (Fed. Cir. 2019)
General Electric Company v. United Technologies Corporation, F.3d 1xxx (Fed. Cir. 2020)
General Electric Company v. Raytheon Technologies Corporation, F.3d 1xxx (Fed. Cir. 2020)
Phigenix – No Standing
Phigenix failed to establish that it had suffered an injury in fact. Phigenix argued that the statutory estoppel provision of 35 U.S.C. 315(e) was an injury in that it would be prevented from asserting the same challenges if Immunogen asserted the claims against Phigenix in the future. The CAFC held that such would not be an injury in fact when Phigenix is not engaged in any activity that would give rise to a possible infringement suit. Phigenix did not manufacture any products that could be considered to infringe the patent in question. Phigenix argued that the mere existence of the patent in question encumbered its efforts to license its own patent directed to similar cancer treatments. Phigenix argued it suffered an economic injury in the form of lost licensing revenue due to competition presented by the existence of the patent involved in the IPR. The CAFC found such to be hypothetical and only supported by conclusory statements in the submitted declarations. There was no evidence of the risk of infringement.
JTEKT – No Standing
In JTEKT, the record was not sufficient to establish standing. JTEKT had argued competitive harm. JTEKT had not admitted to engaging in infringing activity because its product had not yet been finalized. The CAFC held that JTEKT had failed to show concrete plans for future potentially infringing activity, and therefore lacked standing to appeal (noting that “typically in order to demonstrate the requisite injury in an IPR appeal, the appellant/petitioner must show that it is engaged or will likely engage ‘in an[] activity that would give rise to a possible infringement suit,’. . . or has contractual rights that are affected by a determination of patent validity” (quoting Consumer Watchdog v. Wis. Alumni Research Found., 753 F.3d 1258, 1262 (Fed. Cir. 2014)).
AVX – No Standing
AVX addressed the “competitor standing doctrine” in IPR appeals. This doctrine, in non-patent contexts, recognized that government actions that “alter competitive conditions” may give rise to injuries that suffice for standing. Clinton v. City of New York, 524 U.S. 417, 433 (1998). AVX argued that the PTAB’s decision upholding claims in a patent injures AVX because the decision reduces AVX’s ability to compete with Presidio. The panel of the CAFC (Newman, O’Malley and Taranto, opinion by Taranto) rejected this argument, holding that “the rationale for finding standing in those cases does not carry over to support standing in the present context, where AVX has no present or nonspeculative interest in engaging in conduct even arguably covered by the patent claims at issue.”
The panel in AVX found that the government action of upholding specific patent claims is different in that they “do not address prices or introduce new competitors, but rather give exclusionary rights over precisely defined product features.”
General Electric Company (I) – No Standing
The first GE case held that the evidence of record did not support standing. In the decision before the panel of Reyna, Taranto and Hughes, the CAFC noted that the two declarations of record were the only evidence of standing before the court, but each declaration failed to show “a concrete and imminent injury to GE related to the ‘605 patent.”
The concurring opinion by Hughes is interesting in that he believed that AVX was incorrectly decided. Hughes stated that he does
“not believe that a Board decision erroneously upholding a competitor’s patent in an IPR is meaningfully different from the type of government actions held to invoke competitor standing in those cases. Thus, absent our holding in AVX Corp., I would conclude that GE possesses Article III standing in this appeal.”
Although Hughes believed that GE should be considered to have standing to appeal, he was bound by the precedent of the AVX decision indicating that the competitor standing doctrine does not apply in the patent context. Even when parties are direct competitors, Hughes noted that decisions of the CAFC have required an unsuccessful IPR appellant/petitioner to show concrete current or future plans to infringe the challenged patent. Hughes’ concurring opinion may have been instructive to GE in what is needed to show that it has suffered an injury-in-fact.
General Electric Company (II) –Standing
In the second GE decision (panel[1] of Lourie, Reyna and Hughes), GE was found to have standing. The decision specifically noted that GE had remedied the deficiencies in GE I. More specifically, the evidence submitted by GE has shown concrete plans raising a substantial risk of future infringement. In GE I, the CAFC had faulted GE for contending only that some unspecified amount of time and money was expended to consider engine designs that could potentially implicate the patent at issue in that case.GE also did not provide any evidence that it had designed a geared-fan engine covered by the patent at issue. Considered as a whole, the allegations “were not just speculative, but overtly theoretical.”
In GE II, however, these deficiencies were addressed and remedied in that:
(1) GE has alleged that it has conceived a geared turbofan engine design that Raytheon would likely argue falls within the scope of the asserted claims.
(2) GE has alleged specific ongoing expenditures to continue to develop and refine that design.
(3) GE provides that this geared turbofan engine design is its preferred design to offer its customers for the next-generation narrow body market segment.
(4) GE identifies an Airbus aircraft program where it intends to offer this design for sale to Airbus.
(5) GE supports the concreteness of its plans by showing that it in fact submitted the design to Airbus for the preliminary stage of the bidding process, and it has not yet submitted any other design.
(6) GE alleges that it believes Raytheon would accuse this specific design of infringement.
Where do we now stand on standing?
As can be seen, the current status for establishing standing in an IPR appeal is to almost admit to infringement. Of course, a competitor does not typically want to make such an admission. It remains to be seen whether there is any movement away from the rigid precedent set in AVX toward a recognition of the competitor standing doctrine in patent cases. This issue could quite possibly make its way to the Supreme Court.
[1] Note that Taranto, the author of the AVX decision, and a panel member of GE I was not on this panel.
