Authentication method held patent-eligible at Alice Step Two
| October 14, 2021
CosmoKey Solutions GmbH & Co. v. Duo Security LLC
Decided on October 4, 2021
O’Malley, Reyna, and Stoll. Court opinion by Stoll. Concurring opinion by Reyna.
Summary
The United States District Court for the District of Delaware granted Duo’s motion for judgment on the pleadings under Rule 12(c), arguing that all claims of the patent in dispute are ineligible under 35 U.S.C. 101 as the claims are directed to the abstract idea of authentication and do not recite any patent-eligible inventive concept. On appeal, the Federal Circuit unanimously revered the district court decision, holding that the claims of the patent are patent-eligible under Alice Step Two because they recite a specific improvement to a particular computer-implemented authentication technique. Reyna concurred, arguing that he would resolve the dispute at Alice Step One, not Step Two.
Details
I. Background
(1) Patent in Dispute
CosmoKey Solutions GmbH & Co. (“CosmoKey’s”) owns U.S. Patent No. 9,246,903 (“the ’903 patent”), titled “Authentication Method” and purported to disclose an authentication method that is both low in complexity and high in security.
Claim 1 is the only independent claim of the ’903 patent and reads:
1. A method of authenticating a user to a transaction at a terminal, comprising the steps of:
transmitting a user identification from the terminal to a transaction partner via a first communication channel,
providing an authentication step in which an authentication device uses a second communication channel for checking an authentication function that is implemented in a mobile device of the user, as a criterion for deciding whether the authentication to the transaction shall be granted or denied, having the authentication device check whether a predetermined time relation exists between the transmission of the user identification and a response from the second communication channel,
ensuring that the authentication function is normally inactive and is activated by the user only preliminarily for the transaction,
ensuring that said response from the second communication channel includes information that the authentication function is active, and
thereafter ensuring that the authentication function is automatically deactivated.
(2) The District Court
CosmoKey brought a civil lawsuit against Duo Security, Inc. (“Duo”) for infringement of the ’903 patent at the United States District Court for the District of Delaware (“the district court”). Duo moved for judgment on the pleadings pursuant to Rule 12(c) of the Federal Rules of Civil Procedure, arguing that the claims of the ’903 patent are ineligible under 35 U.S.C. 101.
The district court agreed with Duo, holding that the patent claims were invalid. The district court reasoned that the claims “are directed to the abstract idea of authentication—that is, the verification of identity to permit access to transactions” at Alice Step One, and that “the [’]903 patent merely teaches generic computer functionality to perform the abstract concept of authentication; and it therefore fails Alice’s step two inquiry.” In so holding, the district court determined that the patent itself admits that “the detection of an authentication function’s activity and the activation by users of an authentication function within a predetermined time relation were well-understood and routine, conventional activities previously known in the authentication technology field.”
CosmoKey appealed the district court’s judgment.
II. The Federal Circuit
The Federal Circuit (“the Court”) unanimously revered the district court decision, holding that the claims of the patent are patent-eligible under Alice step two.
Before discussing Alice Steps One and Two, the Court referred to several cases in which the Court has previously considered the eligibility of various claims generally directed to authentication and verification under § 101. However, the Court compared the claims of the ’903 patent with none of those claims held patent-eligible or patent-ineligible. See Enfish, LLC v. Microsoft Corp., 822 F.3d 1327, 1334 (Fed. Cir. 2016) (“The Supreme Court has not established a definitive rule to determine what constitutes an “abstract idea” sufficient to satisfy the first step of the Mayo/Alice inquiry. … Rather, both this court and the Supreme Court have found it sufficient to compare claims at issue to those claims already found to be directed to an abstract idea in previous cases.”).
(1) Alice Step One
The Court stated that the critical question at Alice Step One for this case is whether the correct characterization of what the claims are directed to is either an abstract idea or a specific improvement in computer verification and authentication techniques.
Interestingly however, the Court stated that it needs not answer this question because even if the Court accepts the district court’s narrow characterization of the ’903 patent claims, the claims satisfy Alice step two.
The Court noted in footnote 3 that this very approach was followed in Amdocs (Israel) Ltd. v. Openet Telecom, Inc., 841 F.3d 1288, 1303 (Fed. Cir. 2016) (explaining that “even if [the claim] were directed to an abstract idea under step one, the claim is eligible under step two”).
(2) Alice Step Two
The district court recognized that the specification indicates that the “difference between [the] prior art methods and the claimed invention is that the [’]903 patent’s method ‘can be carried out with mobile devices of low complexity’ so that ‘all that has to be required from the authentication device function is to detect whether or not this function is active’” and that “the only activity that is required from the user for authentication purposes is to activate the authentication function at a suitable timing for the transaction.” But the district court cited column 1, lines 15–53 of the specification as purportedly admitting that detection of activation of an authentication function’s activity and the activation by users of an authentication function within a pre-determined time relation were “well-understood and routine, conventional activities previously known in the authentication technology field” (emphasis added).
The Court criticized the district court’s reliance on column 1, lines 15–53 as misplaced. The Court stated that, while column 1, lines 30–46 describes three prior art references, none teach the recited claim steps, and read in context, the rest of the passage cited by the district court makes clear that the claimed steps were developed by the inventors, are not admitted prior art, and yield certain advantages over the described prior art (emphasis added).
Duo also argued that using a second communication channel in a timing mechanism and an authentication function that is normally inactive, activated only preliminarily, and automatically deactivated is itself an abstract idea and thus cannot contribute to an inventive concept, and far from concrete (emphasis added). The Court disagreed, stating that the claim limitations are more specific and recite an improved method for overcoming hacking by ensuring that the authentication function is normally inactive, activating only for a transaction, communicating the activation within a certain time window, and thereafter ensuring that the authentication function is automatically deactivated (emphasis added). Referring to the Court’s recognition in Ancora Techs., Inc. v. HTC Am., Inc., 908 F.3d 1343 (Fed. Cir. 2018) that improving computer or network security can constitute “a non-abstract computer-functionality improvement if done by a specific technique that departs from earlier approaches to solve a specific computer problem,” the Court emphasized that, as the specification itself makes clear, the claims recite an inventive concept by requiring a specific set of ordered steps that go beyond the abstract idea identified by the district court and improve upon the prior art by providing a simple method that yields higher security (emphasis added).
II. Concurring Opinion
Judge Reyna’s concurrence challenged the Court’s approach of accepting the district court’s analysis under Alice step one and resolving the case under Alice step two. Judge Reyna argues that Alice Step two comes into play only when a claim has been found to be directed to patent-ineligible subject matter. He concluded that, employing step one, the claims at issue are directed to patent-eligible subject matter because, as the Court opinion stated, “[t]he ’903 Patent claims and specification recite a specific improvement to authentication that increases security, prevents unauthorized access by a third party, is easily implemented, and can advantageously be carried out with mobile devices of low complexity,” which is a step-one rationale.
Takeaway
· In the Alice inquiry, courts may assume that the claim in question does not pass Alice Step One without detailed analysis, and immediately move on to Alice Step Two.
· At both Alice Steps One and Two, the Court almost always inquires about improvements, i.e., the claimed advance over the prior art (“Under Alice step one, we consider “what the patent asserts to be the ‘focus of the claimed advance over the prior art.’”; “Turning then to Alice step two, we “consider the elements of each claim both individually and ‘as an ordered combination’ to determine whether the additional elements ‘transform the nature of the claim’ into a patent-eligible ap- plication.” … In computer-implemented inventions, the computer must perform more than “well-understood, routine, conventional activities previously known to the industry.””) (emphasis added). This approach may appear different from the views of the Supreme Court and the USPTO. See Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S.Ct. 1289, 1304 (2012) (“We recognize that, in evaluating the significance of additional steps, the § 101 patent-eligibility inquiry and, say, the § 102 novelty inquiry might sometimes overlap. But that need not always be so.””); MPEP 2106.04(d)(1) (“[T]he improvement analysis at Step 2A [(Alice Step One)] Prong Two differs in some respects from the improvements analysis at Step 2B [(Alice Step Two)]. Specifically, the “improvements” analysis in Step 2A determines whether the claim pertains to an improvement to the functioning of a computer or to another technology without reference to what is well-understood, routine, conventional activity.”) (emphasis added).
Prosecution Refreshers – Incorporating Foreign Priority Application by Reference, Translations, Means-Plus-Function
| October 7, 2021
Team Worldwide Corp. v. Intex Recreation Corp.
Decided September 9, 2021
Opinion by: Chen, Newman, and Taranto
Summary:
The claimed “pressure controlling assembly” was found to be a means-plus-function claim element. Because the specification did not disclose any corresponding structure to perform at least one of the associated functions for this pressure controlling assembly, the claim was held to be indefinite. The specification did not disclose any corresponding structure because the portions of the foreign priority application (that disclosed corresponding structure) were omitted in the US application, and there was no incorporation by reference of the foreign priority application.
Procedural History:
This is a non-precedential Federal Circuit decision for an appeal from a PTAB post-grant review (PGR) decision. Intex petitioned for a PGR on Team Worldwide’s USP 9,989,979 patent (filed Aug. 29, 2014). The ‘979 patent is a divisional application of an earlier pre-AIA application. The ‘979 patent, filed after the March 16, 2013 effective date for AIA, is subject to AIA’s PGR unless each claim is supported in its pre-AIA parent application under 35 USC §112(a) for written description support and enablement. However, the earlier pre-AIA application at least did not have written description support for the claimed “pressure controlling assembly.” Thus, the ‘979 patent was subject to AIA’s post-grant review. The PTAB held that “pressure controlling assembly” is a means-plus-function (MPF) claim element subject to interpretation under 35 USC §112(f) and the ‘979 claims are invalid as indefinite under 35 USC §112(b) because there is no corresponding structure disclosed in the specification for at least one of the claimed functions thereof. The Federal Circuit affirmed.
Background:
The ‘979 patent relates to an inflator for an air mattress. Representative claim 1:
1. An inflating module adapted to an inflatable object comprising an inflatable body, the inflating module used in conjunction with a pump that provides primary air pressure and comprising:
a pressure controlling assembly configured to monitor air pressure in the inflatable object after the inflatable body has been inflated by the pump; and
a supplemental air pressure providing device,
wherein the pressure controlling assembly is configured to automatically activate the supplemental air pressure providing device when the pressure controlling assembly detects that the air pressure inside the inflatable object decreases below a predetermined threshold after inflation by the pump, and to control the supplemental air pressure providing device to provide supplemental air pressure to the inflatable object so as to maintain the air pressure of the inflatable object within a predetermined range.
The ‘979 patent describes the pressure controlling assembly almost exclusively in functional terms, including the functions recited in claim 1. There is one sentence that states “[a]fter the supplemental air pressure providing device is in a standby mode, a pressure controlling assembly 121/122 as described starts monitoring air pressure in the inflatable object” (col. 4, lines 48-51). No explanation is provided about elements 121/122 shown in Fig. 2a:
Both the ‘979 and its parent application (having the same specification) claim foreign priority from CN 201010186302. However, neither US application incorporates the CN ‘302 application by reference.
According to a translation of CN ‘302 application, CN ‘302 does describe an “air pressure control mechanism” that includes “air valve plate 121” and “chamber 122” which move in response to changing air pressure within the attached inflatable device. CN ‘302 further describes a switch 13, see Fig. 1 (same drawings in both CN ‘302 and the ‘979 patent and its parent):
According to CN ’302, as translated, “[w]hen the air pressure value inside the inflatable product is greater than the reset mechanism’s preset value, the air pressure control mechanism shifts upward, the second switch 13 is closed by the projection pressing against it, and the automatic reinflation mechanism halts reinflation” and “[w]hen the air pressure value inside the inflatable product is less than the reset mechanism’s preset value, the air pressure control mechanism shifts downward, the projection is removed from second switch 13 causing it to disconnect, and the automatic reinflation mechanism starts reinflation.”
Neither the ‘979 patent, nor its parent application, includes the above-noted structures of an air valve plate for reference number 121 nor the chamber for reference number 122. Neither US applications mention any switch 13 nor the above-noted operations involving the switch 13 for starting or stopping reinflation. Reference number 13 is not at all described in the ‘979 specification, nor in its parent’s specification.
The court also noted that the original specification in both the ‘979 patent and its parent application did not even mention reference numbers 121 and 122. It was added to the specification during prosecution to overcome an Examiner’s drawing objection for including those reference numbers in a drawing that were not described in the specification.
MPF Primers:
- If a claim does not recite the word “means,” it creates a rebuttable presumption that §112(f) does not apply.
- A presumption against applying §112(f) is overcome “if the challenger demonstrates that the claim term fails to recite sufficiently definite structure or else recites function without reciting sufficient structure for performing that function.” Williamson v. Citrix Online, LLC, 792 F.3d 1339, 1348 (Fed. Cir. 2015) (en banc).
Decision:
Claim construction is reviewed de novo, considering the intrinsic record, i.e., the claims, specification, and prosecution history, and any extrinsic evidence.
For the claim itself, like the word “means,” the word “assembly” is a generic nonce word. “Like the claim term ‘mechanical control assembly’ in MTD Products, ‘the claim language reciting what the [pressure] control[ing] assembly is ‘configured to” do is functional,’ and thus the claim format supports applicability of §112(f).”
As for the specification, the court agrees with the PTAB that the specification’s “mere reference to items 121 and 122, without further description, does not convey that the term ‘pressure controlling assembly’ itself connotes sufficient structure.” The court also noted that the specification does not indicate that the patentee acted as his own lexicographer to define the “pressure controlling assembly” to be a structural term.
As for the prosecution history, the fact that the examiner cited prior art pressure sensors as disclosing the claimed “pressure controlling assembly” does not establish that the term itself connotes structure. While a pressure sensor may perform some of the functions of the “pressure controlling assembly,” the examiner’s reliance on a pressure sensor says nothing about the term itself connoting structure. The court also rejected giving weight to the fact that the examiner did not apply §112(f) for interpreting the subject term.
As for extrinsic evidence, Team’s expert testimony was deemed conclusory and unsupported by evidence. Team’s expert relied on a dictionary definition of “pressure control” – any device or system able to maintain, raise, or lower pressure in a vessel or processing system. However, such a definition sheds no light on “pressure controlling assembly” being used in common parlance to connote structure. Even the purported admissions by Intex’s expert (i.e., that the term controls pressure and is an assembly, that devices exist that sense or control pressure, and that a cited prior art reference depicted “an apparatus that controls the pressure”) merely indicates that devices existed that can perform some of the functions of the “pressure controlling assembly.” However, none of the experts’ testimony establish that “pressure controlling assembly” is “used in common parlance or by [skilled artisans] to designate a particular structure or class of structures.”
As for prior art references that refer to a “pressure controlling assembly,” the court agreed with the PTAB’s assessment that such extrinsic evidence “demonstrates, at best, that the term is used as a descriptive term across a broad spectrum of industries, having a broad range of structures. The record does not include sufficient evidence to demonstrate that the term ‘pressure controlling assembly’ is used in common parlance or used to designate a particular structure by [the skilled artisan].”
As for the functions claimed for the “pressure controlling assembly,” there was no dispute:
- monitoring air pressure in the inflatable object after the inflatable body has been inflated by the pump;
- detecting that the air pressure inside the inflatable object decreases below a predetermined threshold after inflation by the pump;
- automatically activating the supplemental air pressure providing device when the pressure controlling assembly detects that the air pressure inside the inflatable object decreases below the predetermined threshold after inflation by the pump; and
- controlling the supplemental air pressure providing device to provide supplemental air pressure to the inflatable object so as to maintain the air pressure of the inflatable object within a predetermined range.
The court agrees with the PTAB that the patent fails to disclose any corresponding structure for at least #3. Team’s expert’s conclusory testimony that a skilled artisan would recognize that 121 and 122 in Fig. 2a interacts with element 13 in Fig. 1 to activate the supplemental air pressure providing device is not supported by any evidence. Nothing in the patent describes 13 to be a switch, much less how it interacts with 121 and 122, whatever those are.
As for the fact that CN ‘302 is part of the prosecution history, the court noted that the content of any document or reference submitted during prosecution by itself is not sufficient to remedy this missing disclosure of corresponding structure. In reference to B. Braun Medical, Inc. v. Abbott Lab., 124 F.3d 1419, 1424 (Fed. Cir. 1997), Braun’s reference to the “prosecution history” is in reference to affirmative statements made by the applicant during prosecution (such as in an Amendment or in a sworn declaration regarding the relationship between something in a drawing and a claimed MPF claim element) linking or associating corresponding structure with a claimed function. “[W]e decline to hold that a Chinese-language priority document, whose potentially relevant disclosure was omitted from the United States patent application family, provides a clear link or association between the claimed ‘pressure controlling assembly’ and any structure recited or disclosed in the ‘979 patent.”
Takeaways:
- This case is a good refresher for MPF interpretation.
- 37 CFR 1.57 addresses the situation where there is an inadvertent omission of a portion of the specification or drawings, by allowing a claim for foreign priority to be considered an incorporation by reference as to any inadvertently omitted portion of the specification or drawings from that foreign priority application. 37 CFR 1.57(a) (pre-AIA) would apply to the parent application of the ‘979 patent. 37 CFR 1.57(b) (AIA) would apply to the application leading to the ‘979 patent. However, any amendment made pursuant to 37 CFR 1.57 must be made before the close of prosecution. It is unclear why the applicant did not use the provisions of 37 CFR 1.57 in this case. Once the application is issued into a patent, as was the case here, the incorporation by reference provisions of 37 CFR 1.57 no longer apply. As noted in MPEP 217(II)(E), “In order for the omitted material to be included in the application, and hence considered to be part of the disclosure, the application must be amended to include the omitted portion. Therefore, applicants can still intentionally omit material contained in the prior-filed application from the application containing the priority or benefit claim without the material coming back in by virtue of the incorporation by reference of 37 CFR 1.57(b). Applicants can maintain their intent by simply not amending the application to include the intentionally omitted material.” Presumably, because the applicant for the ‘979 patent and its parent never took advantage of 37 CFR 1.57 during prosecution, the missing subject matter was treated as “intentionally omitted material” and does not come back into the patent by virtue of 37 CFR 1.57.
- The specification of the ‘979 patent and of its parent did not include any incorporation by reference of its foreign priority application. The applicant also did not take advantage of 37 CFR 1.57 during prosecution (see above). Accordingly, the foreign priority application was deemed “omitted from the United States patent application family.” And, just having it in the file wrapper at the USPTO is still not enough. The applicant, during prosecution, must correct any missing link between any MPF claim elements and its corresponding structure in the specification. Here, IF the Chinese priority application had been incorporated by reference or IF 37 CFR 1.57(a) (pre-AIA) and 37 CFR 1.57(b) (AIA) were used, an amendment to the specification to ADD inadvertently omitted English language translations of the corresponding structure from the priority application could have been submitted. Such amendments to the specification would not be deemed “new matter” because of the incorporation by reference of the foreign priority application.
- Always check the English language translation. It seems odd that no one noticed the omission of any description of the elements 121, 122, and 13 from the Chinese priority application. During the prosecution of the parent and the ‘979 patent, the Examiner identified at least a dozen different reference numbers that were not described in the specification. When preparing an application, or translating one, the specification should be checked for a description for each and every reference number used in the drawings.
Tags: Foreign Priority > Incorporation by reference > means-plus-function > translation
CLAIMS SHOULD PROVIDE SUFFICIENT SPECIFICITY TO IMPROVE THE UNDERLYING TECHNOLOGY
| September 30, 2021
Universal Secure Registry LLC, v. Apple Inc., Visa Inc., Visa U.S.A. Inc.
Before TARANTO, WALLACH, and STOLL, Circuit Judges. STOLL
Summary
The Federal Circuit upheld a decision that all claims of the asserted patents are directed to an abstract idea and that the claims contain no additional elements that transform them into a patent-eligible application of the abstract idea.
Background
USR sued Apple for allegedly infringing U.S. Patent Nos. 8,856,539; 8,577,813; 9,100,826; and 9,530,137 that are directed to secure payment technology for electronic payment transactions. The four patents involve different authentication technology to allow customers to make credit card transactions “without a magnetic-stripe reader and with a high degree of security.”
The magistrate judge determined that all the representative claims were not directed to an abstract idea. Particularly it was concluded that the claimed invention provided a more secure authentication system. The magistrate judge also explained that the non-abstract idea determination is based on that “the plain focus of the claims is on an improvement to computer functionality itself, not on economic or other tasks for which a computer is used in its ordinary capacity.” However, the district court judge disagreed and concluded that the asserted claims failed at both Alice steps and the claimed invention was directed to the abstract idea of “the secure verification of a person’s identity.” The district court explained that the patents did not disclose an inventive concept—including an improvement in computer functionality—that transformed the abstract idea into a patent-eligible application.
The Federal Circuit concluded that the asserted patents claim unpatentable subject matter and thus upheld the district court’s decision.
Discussion
The Federal Circuit addressed all asserted patents. The claims in the four patents have fared similarly. The discussion here is focused on the ‘137 patent. The ’137 patent is a continuation of the ’826 patent and discloses a system for authenticating the identities of users. Claim 12 is representative of the ’137 patent claims at issue, reciting
12. A system for authenticating a user for enabling a transaction, the system comprising:
a first device including:
a biometric sensor configured to capture a first biometric information of the user;
a first processor programmed to: 1) authenticate a user of the first device based on secret information, 2) retrieve or receive first biometric information of the user of the first device, 3) authenticate the user of the first device based on the first biometric, and 4) generate one or more signals including first authentication information, an indicator of biometric authentication of the user of the first device, and a time varying value; and
a first wireless transceiver coupled to the first processor and programmed to wirelessly transmit the one or more signals to a second device for processing;
wherein generating the one or more signals occurs responsive to valid authentication of the first biometric information; and
wherein the first processor is further programmed to receive an enablement signal indicating an approved transaction from the second device, wherein the enablement signal is provided from the second device based on acceptance of the indicator of biometric authentication and use of the first authentication information and use of second authentication information to enable the transaction.
Claim 12 recites a system for authenticating the identities of users, including a first device. The first device can include a biometric sensor, a first processor, and a first wireless transceiver, where the device utilizes authentication of a user’s identity to enable a transaction.
The district court emphasized that the claims recite, and the specification discloses, generic well-known components—“a device, a biometric sensor, a processor, and a transceiver—performing routine functions—retrieving, receiving, sending, authenticating—in a customary order.”
The Federal Circuit agreed with the district court and found that the claims of ‘137 patent include some limitations but still are not sufficiently specific. The Federal Circuit cited their previous decision, Solutran, Inc. v. Elavon, Inc (Fed. Cir. 2019) that held claims abstract “where the claims simply recite conventional actions in a generic way” without purporting to improve the underlying technology. The Court explained that claim 12 does not tell a person of ordinary skill what comprises the secret information, first authentication information, and second authentication information.
USR cited Finjan, Inc. v. Blue Coat Systems, Inc (Fed. Cir. 2018), arguing that the claim is akin to the claim in Finjan whose claims are directed to a method of providing computer security by scanning a downloadable file and attaching the scanned results to the downloadable file in the form of a “security profile.” However, the Court differentiated Finjan, explaining that Finjan employed a new kind of file enabling a computer system to do things it could not do before, namely “behavior-based” virus scans. In contrast, the claimed invention combines conventional authentication techniques to achieve an expected cumulative higher degree of authentication integrity. The claimed idea of using three or more conventional authentication techniques to achieve a higher degree of security is abstract without some unexpected result or improvement. The Court also acknowledged that some of the dependent claims provide more specificity on these aspects, but still concluded the claimed is still merely conventional and the specification discloses that each authentication technique is conventional.
The district court also turned to Alice step two to determine that claim 12 “lacks the inventive concept necessary to convert the claimed system into patentable subject matter.” USR asserted that the use of a time-varying value, a biometric authentication indicator, and authentication information that can be sent from the first device to the second device form an inventive concept. The Federal Circuit rejected this argument, explaining that the specification makes clear that each of these devices and functions is conventional because the patent acknowledged that the step of generating time-varying codes for authentication of a user is conventional and long-standing. USR further argued that authenticating a user at two locations constitutes an inventive concept because it is locating the authentication functionality at a specific, unconventional location within the network. However, the Court found that the specification of the patent suggests that the claims only recite a conventional location for the authentication functionality and thus rejected the argument. The court further stated that there is nothing in the specification suggesting, or any other factual basis for a plausible inference (as needed to avoid dismissal), that the combination of these conventional authentication techniques results in an unexpected improvement beyond the expected sum of the security benefits of each individual authentication technique.
The Federal Circuit ruled that all the patents simply described well-known and conventional ways to perform authentication and did not include any technological improvements that transformed those abstract ideas into patent-eligible inventions. The Court also cited several of its previous decisions related to patent invalidity under Alice, noting that “patent eligibility often turns on whether the claims provide sufficient specificity to constitute an improvement to computer functionality itself.”
Takeaway
- An abstract idea is not patentable if it does not provide an inventive solution to a problem in implementing the idea.
- Claims may be abstract even when they are directed to physical devices but include generic well-known components that perform conventional actions in a generic way without improving the underlying technology or only to achieve an expected cumulative improvement.
PATENT CLAIMS CANNOT BE CONSTRUED ONE WAY FOR ELIGIBILITY AND ANOTHER WAY FOR INFRINGEMENT
| September 17, 2021
Data Engine Technologies LLC v. Google LLC
Decided on August 26, 2021
Reyna, Hughes, Stoll. Opinion by Stoll.
Summary:
This case is a second appeal to the CAFC. In the first appeal, the CAFC reversed the district court and determined that certain claims of patents owned by Data Engine Technologies LLC (DET) directed to spreadsheet technologies are patent eligible subject matter. In arguing patent eligible subject matter, DET emphasized the claimed improvement as being unique to three-dimensional spreadsheets. On remand, the district court construed the preamble of the claims having the phrase “three-dimensional spreadsheet” as limiting, and based on this claim construction, granted Google’s motion for summary judgment of noninfringement. In this appeal, the CAFC affirmed the district court’s determination that the preamble of the claims is limiting and that the district court’s construction of the term “three-dimensional spreadsheet” is correct. Thus, the CAFC affirmed the district court’s summary judgment of noninfringement.
Details:
DET’s patents at issue in this case are U.S. Patent Nos. 5,590,259; 5,784,545; and 6,282,551 directed to systems and methods for displaying and navigating three-dimensional electronic spreadsheets. They describe providing “an electronic spreadsheet system including a notebook interface having a plurality of notebook pages, each of which contains a spread of information cells, or other desired page type.” Figs. 2A and 2D of the ‘259 patent are shown below. Fig. 2A shows a spreadsheet page having notebook tabs along the bottom edge. Fig. 2D shows just the notebook tabs of the spreadsheet.
Claim 12 of the ‘259 patent is a representative claim and is provided below:
12. In an electronic spreadsheet system for storing and manipulating information, a computer-implemented method of representing a three-dimensional spreadsheet on a screen display, the method comprising:
displaying on said screen display a first spreadsheet page from a plurality of spreadsheet pages, each of said spreadsheet pages comprising an array of information cells arranged in row and column format, at least some of said information cells storing user-supplied information and formulas operative on said user-supplied information, each of said information cells being uniquely identified by a spreadsheet page identifier, a column identifier, and a row identifier;
while displaying said first spreadsheet page, displaying a row of spreadsheet page identifiers along one side of said first spreadsheet page, each said spreadsheet page identifier being displayed as an image of a notebook tab on said screen display and indicating a single respective spreadsheet page, wherein at least one spreadsheet page identifier of said displayed row of spreadsheet page identifiers comprises at least one user-settable identifying character;
receiving user input for requesting display of a second spreadsheet page in response to selection with an input device of a spreadsheet page identifier for said second spreadsheet page;
in response to said receiving user input step, displaying said second spreadsheet page on said screen display in a manner so as to obscure said first spreadsheet page from display while continuing to display at least a portion of said row of spreadsheet page identifiers; and
receiving user input for entering a formula in a cell on said second spreadsheet page, said formula including a cell reference to a particular cell on another of said spreadsheet pages having a particular spreadsheet page identifier comprising at least one user-supplied identifying character, said cell reference comprising said at least one user-supplied identifying character for said particular spreadsheet page identifier together with said column identifier and said row identifier for said particular cell.
In the first appeal regarding patent eligibility, DET argued that a key aspect of the patents “was to improve the user interface by reimagining the three-dimensional electronic spreadsheet using a notebook metaphor.” DET argued that claim 12 is directed to patent-eligible subject matter because it is to a concept that solves “a problem that is unique to not only computer spreadsheet applications …., but specifically three-dimensional electronic spreadsheets.” In that appeal, the CAFC agreed that claim 12 is to patent eligible subject matter and remanded to the district court.
On remand, during claim construction, a dispute arose over whether the preamble is a limitation of the claims requiring construction, and if so, what is the proper construction of the term. The district court determined that the preamble is limiting and determined that the term “three-dimensional spreadsheet” means a “spreadsheet that defines a mathematical relation among cells on different spreadsheet pages, such that cells are arranged in a 3-D grid.” Based on this interpretation, Google moved for summary judgment of noninfringement because Google Sheets is not a “three-dimensional spreadsheet” as required by the claims. The district court granted the motion because “Google Sheets does not allow a user to define the relative position of cells in all three dimensions and is, therefore, incapable of infringing” the claims.
In this appeal, DET argued that the preamble term “three-dimensional spreadsheet” is not limiting and thus does not have patentable weight. The CAFC disagreed stating that a patentee cannot rely on language found in the preamble of the claim to successfully argue patent eligible subject matter, and then later assert that the preamble term has no patentable weight for purposes of showing infringement. The CAFC stated that “[w]e have repeatedly rejected efforts to twist claims, ‘like a nose of wax,’ in ‘one way to avoid [invalidity] and another to find infringement.’” In citing an analogous case, the CAFC stated that it cannot be argued that the preamble has no weight when the preamble was used in prosecution to distinguish prior art. In re Cruciferous Sprout Litig., 301 F.3d 1343, 1347–48 (Fed. Cir. 2002). The CAFC concluded that because DET emphasized the preamble term to support patent eligibility, the preamble term “three-dimensional spreadsheet” is limiting.
DET next argued that the construction of “three-dimensional spreadsheet” does not require “a mathematical relation among cells on different spreadsheet pages” as required by the district court’s construction. The CAFC stated that the claim language and the specification do not provide guidance on whether the mathematical relation is required. However, the CAFC looked to the prosecution history. To overcome a rejection based on a prior art reference, the applicant provided a definition of a “true” three-dimensional spreadsheet and stated that the prior art does not provide a true 3D spreadsheet. According to the applicant, a “true” three-dimensional spreadsheet “defines a mathematical relation among cells on the different pages so that operations such as grouping pages and establishing 3D ranges have meaning.” Based on this definition provided in the prosecution history, the CAFC stated that the district court properly interpreted “three-dimensional spreadsheet” as requiring a mathematical relation among cells on different spreadsheet pages.
DET argued that the definition provided in the prosecution history does not rise to the level of “clear and unmistakable” disclaimer when read in context. Specifically, DET stated in the same remarks that the prior art reference is a three-dimensional spreadsheet, and thus, could not have been distinguishing the prior art based on the three-dimensional spreadsheet feature. DET stated that they distinguished the prior art on the basis that the prior art linked different user-named spreadsheet files and that this is not the same as the claimed “user-named pages in a 3D spreadsheet.” Thus, DET argued that the statements defining a “true” 3D spreadsheet are irrelevant. However, the CAFC stated that they have held patentees to distinguishing statements made during prosecution even if they said more than needed to overcome a prior art rejection citing Saffran v. Johnson & Johnson, 712 F.3d 549, 559 (Fed. Cir. 2013). Thus, the CAFC concluded that even if the specific definition of a “true” 3D spreadsheet was not necessary to overcome the rejection, the express definition was provided, and DET cannot escape the effect of this statement made to the USPTO by suggesting that the statement was not needed to overcome the rejection. The CAFC affirmed the district court’s claim construction and its summary judgment of noninfringement.
Comments
In litigation, you will not be able to vary the construction of claims one way for validity and another way for infringement. Also, if you rely on features in the preamble of a claim for validity, the preamble will be considered as limiting and having patentable weight for infringement purposes.
Another key point from this case is that during prosecution of a patent application, you should say as little as possible to distinguish the prior art. Distinguishing statements in the prosecution history, even if not necessary to overcome the prior art, can be used to limit your claims.
CLAIM CONSTRUCTION – WHEN THE MEANING IS CLEAR FROM INTRINSIC EVIDENCE, THERE IS NO REASON TO RESORT TO EXTRINSIC EVIDENCE
| September 8, 2021
Seabed Geosolutions (US) Inc., v. Magseis FF LLC
Decided August 11, 2021
Before Moore, Linn and Chen
Summary
This precedential opinion reminds us of when it is proper to rely on extrinsic evidence when construing the meaning of claim terms. Claim construction begins with the intrinsic evidence, which includes the claims, written description, and prosecution history. If the meaning of a claim term is clear from the intrinsic evidence, there is no reason to resort to extrinsic evidence.
Background
Fairfield Industries Inc. (the predecessor to Magseis) had sued Seabed Geosolutions for infringement of U.S. Reissue Patent No. RE45,268 directed to seismometers. Seabed Geosolutions petitioned for inter partes review which was instituted by the Board. Interestingly, although not in the opinion, the Board’s institution decision had commented on the meaning of the claim term at issue, “internally fixed.” The institution decision specifically noted that there was nothing in the specification to suggest an intent for “internally fixed” to exclude gimbaled, specifically quoting Phillips v. AWH Corp., 415 F.3d 1303, 1315 (Fed. Cir. 2005) that the specification “is the single best guide to the meaning of a disputed term” and is usually “dispositive.” The institution decision went on to conclude that the specification does not appear to limit “internally fixed” and instead appears to contemplate a broad meaning.
During the IPR proceeding, however, extrinsic evidence had been presented, causing the Board to find that the specification was not dispositive one way or the other as to the meaning of “internally fixed.” Nine pages of the Board’s decision (also not specifically discussed by the CAFC) was dedicated to a discussion of “internally fixed.” The Board, looking at the extrinsic evidence, thus concluded that in the context of the field of art, one of ordinary skill would understand that the term “fixed” indicates that the geophone is not gimbaled.
Discussion
Every independent claim of the ‘268 patent recites “a geophone internally fixed within” either a housing or an internal compartment. Geophones are used to detect seismic reflections from subsurface structures. The Board concluded that the prior art cited in the IPR failed to disclose the geophone limitation. Seabed appealed by arguing that the Board erred in it claim construction of the geophone limitation.
The CAFC reviews the Board’s claim construction and any supporting determinations based on intrinsic evidence de novo, while subsidiary fact findings involving extrinsic evidence are reviewed for substantial evidence. The CAFC emphasized prior precedent indicating:
For inter partes review petitions filed before November 13, 2018, the Board uses the broadest reasonable interpretation (BRI) standard to construe claim terms. See 37 C.F.R. § 42.100(b) (2017). Under that standard, “claims are given their broadest reasonable interpretation consistent with the specification, not necessarily the correct construction under the framework laid out in Phillips.” PPC Broadband, Inc. v. Corning Optical Commc’ns RF, LLC, 815 F.3d 734, 742 (Fed. Cir. 2016) (citing Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (en banc)). But we still “give[] primacy” to intrinsic evidence, and we resort to extrinsic evidence to construe claims only if it is consistent with the intrinsic evidence. Tempo Lighting, Inc. v. Tivoli, LLC, 742 F.3d 973, 977 (Fed. Cir. 2014); see also Phillips, 415 F.3d at 1318 (“[A] court should discount any expert testimony ‘that is clearly at odds with the claim construction mandated by the claims themselves, the written description, and the prosecution history.’” (quoting Key Pharms. v. Hercon Labs. Corp., 161 F.3d 709, 716 (Fed. Cir. 1998))).
Based on the given standard, the CAFC reviewed the Board’s construction that “geophone internally fixed within [the] housing” requires a non-gimbaled geophone. The CAFC had noted that the Board’s construction was based entirely on extrinsic evidence. This was an error because claim construction begins with examining the intrinsic evidence (claims, written description and prosecution history). Of note, if the meaning of a claim term is clear from the intrinsic evidence, there is no reason to resort to extrinsic evidence (citing Profectus Tech. LLC v. Huawei Techs. Co., 823 F.3d 1375, 1380 (Fed. Cir. 2016)(“Extrinsic evidence may not be used ‘to contradict claimmeaning that is unambiguous in light of the intrinsic evidence.’”(quoting Phillips, 415 F.3d at 1324)).
Based upon the intrinsic evidence, “fixed” carries its ordinary meaning of attached or fastened. The adverb “internally” with “fixed” specifies the geophone’s relationship with the housing, not the type of geophone, which is consistent with the specification. The specification describes mounting the geophone inside the housing as a key feature and says nothing about the geophone being gimbaled or non-gimbaled. The specification touted the “self-contained” approach 18 times and never mentions gimbaled or non-gimbaled, nor providing a reason to exclude gimbals.
Magseis had attempted to argue that Fig. 1 limits the claims to a non-gimbaled geophone, but this was not persuasive. Fig. 1 merely disclosed geophone 18 as a black box.
The prosecution history also suggests the construction of the word fixed as meaning mounted or fastened. Each time the word came up, the applicant and examiner understood it in its ordinary sense to mean mounted or fastened. Since the intrinsic evidence consistently informed a skilled artisan that fixed means mounted or fastened, “resort to extrinsic evidence is unnecessary.” As such, the Board erred in reaching a narrower interpretation.
Takeaways
If the meaning of a claim term is clear from the intrinsic evidence, there is no reason to resort to extrinsic evidence.
Extrinsic evidence may not be used to contradict claim meaning which is unambiguous in light of the intrinsic evidence.
PTAB’s sua sponte claim construction without adequate notice and opportunity to respond violates patent owner’s procedural rights under APA
| August 26, 2021
Qualcomm Inc. v. Intel Co.
Decided on July 27, 2021
Moore, Reyna, and Stoll. Opinion by Moore.
Summary
The Federal Circuit vacated and remanded inter partes review (IPR) final written decisions from the Patent Trial and Appeal Board, holding that the Board violated the patent owner’s rights to notice and opportunity under Administrative Procedure Act (APA) to respond to the Board’s sua sponte construction of an undisputed claim term.
Details
The appeal stems from six IPR proceedings before the Board where Intel challenged certain claims of U.S. Patent No. 9,608,675 (“the ‘675 Patent”) owned by Qualcomm.
The ‘675 patent relates to power tracking for generating a power supply voltage for a circuit that processes multiple transmit signals sent simultaneously. One of various claim terms at issue in the IPR is “plurality of carrier aggregated transmit signals,” which appears in representative claim 1, among other challenged claims:
1. An apparatus comprising:
a power tracker configured to determine a single power tracking signal based on a plurality of inphase (I) and quadrature (Q) components of a plurality of carrier aggregated transmit signals being sent simultaneously, wherein the power tracker receives the plurality of I and Q components corresponding to the plurality of carrier aggregated transmit signals and generates the single power tracking signal based on a combination of the plurality of I and Q components, wherein the plurality of carrier aggregated transmit signals comprise Orthogonal Frequency Division Multiplexing (OFDM) or Single Carrier Frequency Division Multiple Access (SC-FDMA) signals;
a power supply generator configured to generate a single power supply voltage based on the single power tracking signal; and
a power amplifier configured to receive the single power supply voltage and the plurality of carrier aggregated transmit signals being sent simultaneously to produce a single output radio frequency (RF) signal.
(Emphasis added.)
Intel’s proposed interpretation of the term was:
“signals for transmission on multiple carriers at the same time to increase the bandwidth for a user.”
Qualcomm’s version was:
“signals from a single terminal utilizing multiple component carriers which provide extended transmission bandwidth for a user transmission from the single terminal.”
The increased bandwidth requirement, included in both parties’ interpretations despite a slight difference in wording, is not explicitly recited in the patent claims although the specification indicates that the invention may enable increased bandwidth among other advantages. Unlike other parts of claim interpretations, the requirement was not extensively discussed over the course of an oral hearing held after the briefing. The parties appeared to have agreed upon this issue.
The Board found that all the challenged claims were unpatentable in its final written decisions, construing the term to simply mean “signals for transmission on multiple carriers.” Without the increased bandwidth requirement, the broader scope of the claim term was found obvious over the asserted prior art. Qualcomm appealed, arguing that the Board’s construction of the claim term was made without notice or opportunity to respond.[1]
On appeal, the Federal Circuit found that the Board violated Qualcomm’s rights to notice and a fair opportunity to be heard mandated by due process and the APA. The relevant APA provisions require that the PTO in an IPR proceeding:
- timely inform the patent owner of the matters of fact and law asserted;
- provide all interested parties opportunity for the submission and consideration of facts and arguments and hearing and decision on notice; and
- allow a party to submit rebuttal evidence as may be required for a full and true disclosure of the facts.
(Alterations and citation omitted.)
The Federal Circuit distinguished cases where the Board adopted its own claim construction as to a disputed term. Because the inclusion of the increased bandwidth requirement was not disputed, the present case is governed by SAS Institute, Inc. v. ComplementSoft, LLC, where the Federal Circuit set aside the Board’s final decision deviating from its previously adopted, agreed-upon claim construction for want of a notice and opportunity to respond, because neither party could possibly have imagined that undisputed claim terms were actually “moving targets,” such that the parties had no reason to set forth alternative arguments as to hypothetical constructions not asserted by their opponent.
Intel’s counterarguments were: (1) Qualcomm did not show prejudice; (2) the oral hearing provided Qualcomm notice and an opportunity to respond; and (3) Qualcomm had an option to move for rehearing which would be an adequate opportunity to respond. The Federal Circuit rejected all of them, finding:
(1) Qualcomm was prejudiced.
Qualcomm consistently argued throughout the proceeding that the increased bandwidth requirement was missing in the prior art. Removal of that requirement from the claim construction released Intel from its burden of proof. Also, without notice of the Board’s omission of the requirement in reaching the final decision, Qualcomm was deprived of the opportunity to provide further brief or evidence in support of its claim interpretation.
(2) The oral hearing did not provide Qualcomm notice and opportunity to respond.
During the oral hearing, the increased bandwidth requirement was only mentioned in a single question directed to Intel, whereas Qualcomm was never asked about the requirement. No announcement of the Board’s construction or criticism of the parties’ agreed-upon requirement was presented. Further, the requirement was not included in a sua sponte order made after the hearing, where the Board requested additional briefing on a completely separate claim term.
(3) Qualcomm does not need to seek rehearing before appealing the Board’s decision lacking a requisite notice and opportunity to respond.
The general principle is that a party has the right to appeal a final written decision in an IPR without first requesting a rehearing before the Board. Moreover, an exhaustion requirement should not be imposed where finality of the agency action, such as the final written decision, already exists under the APA. As such, even though rehearing would allow for a more efficient use of judicial resources, it is not a requirement before appealing the final written decision.
Takeaway
- In an IPR, the Board may sua sponte enter its own construction of an undisputed claim term different from those agreed upon by the litigating parties if they are afforded a fair notice and opportunity to respond.
- A litigant in an IPR should be cautious of a potential “moving target” even if there has been an agreement on claim construction with an opposing party.
- Why did Intel not dispute the increased bandwidth requirement in the IPR? Before the IPR institution, the parties had been litigating the same patent in other venues, including an International Trade Commission (“ITC”) investigation. Intel’s version of the claim interpretation in the IPR is actually the same construction which Qualcomm had offered and the ALJ had adopted in the ITC investigation. Intel once asserted the ITC interpretation as “overbroad” under Phillips but nevertheless chose to prove the claim invalidity under broadest reasonable interpretation (applied in the IPR where the petition was filed before the changes to the claim construction standard). The increased bandwidth requirement also appeared in extrinsic evidence cited by Intel. The parallel litigation situation apparently led to the parties’ agreement on the narrower claim interpretation.
[1] Qualcomm also challenged, and the Federal Circuit affirmed, the Board’s construction of a means-plus-function claim term, which is not discussed in this report.
Tags: Administrative Procedure Act > Notice and Opportunity to Respond > PTAB's sua sponte claim construction
Anything Under §101 Can be Patent Ineligible Subject Matter
| August 16, 2021
Yanbin Yu, Zhongxuan Zhang v. Apple Inc., Fed. Cir. 2020-1760Yanbin Yu, Zhongxuan Zhang v. Samsung Electronics Co., Ltd., Samsung Electronics America, Inc., Fed. Cir. 2020-1803
Decided on June 11, 2021
Before Newman, Prost, and Taranto (Opinion by Prost, Dissenting opinion by Newman)
Summary
Yu had ’289 patent which is titled “Digital Cameras Using Multiple Sensors with Multiple Lenses” and sued Apple and Samsung at District Court for infringement. The District Court found that the ’289 patent is directed towards an abstract idea and does not include an inventive concept. The District Court held the patent was invalid under §101 and granted the defendant’s motion to dismiss. Yu appealed to the CAFC. The majority panel affirmed the District Court’s decision. However, Judge Newman dissented and wrote that the disputed patent is directed towards a mechanical and electronic device and not an abstract idea. The Judge also pointed out that neither the majority panel nor the District Court decided patentability under §102 or 103.
Details
Background
According to Yu, early digital camera technologies were starting to flourish in the 1990s. However, before the ’289 patent, “the technological limitations of then-existing image sensors—used as the capture mechanism—caused digital cameras to produce lower quality images compared with those produced by traditional film cameras.” The’289 patent was applied in 1999 and issued in 2003. Yu believed that “the ’289 patent solved the technological problems associated with prior digital cameras by providing an improved digital camera having multiple image sensors and multiple lenses.[1]” Yu also explained that “all dual-lens cameras on the market today use the techniques claimed in the ’289 Patent[2]” and therefore, sued Apple and Samsung (“the Defendants”) for infringement of claims 1, 2, and 4 of the ’289 patent in October 2018 (before the ’289 patent expires in 2019). In response, the Defendants filed a Rule 12(b)(6) motion to dismiss, asserting that the claims are directed towards an abstract idea under §101.
Claim 1 of the ’289 patent
1. An improved digital camera comprising:
a first and a second image sensor closely positioned with respect to a common plane, said second image sensor sensitive to a full region of visible color spectrum;
two lenses, each being mounted in front of one of said two image sensors;
said first image sensor producing a first image and said second image sensor producing a second image;
an analog-to-digital converting circuitry coupled to said first and said second image sensor and digitizing said first and said second intensity images to produce correspondingly a first digital image and a second digital image;
an image memory, coupled to said analog-to-digital converting circuitry, for storing said first digital image and said second digital image; and
a digital image processor, coupled to said image memory and receiving said first digital image and said second digital image, producing a resultant digital image from said first digital image enhanced with said second digital image.
The District Court held that the ’289 patent was directed to “the abstract idea of taking two pictures and using those pictures to enhance each other in some way” and “the asserted claims lack an inventive concept, noting “the complete absence of any facts showing that the claimed elements were not well-known, routine, and conventional.” Therefore, the District Court concluded that the ’289 patent was directed to an ineligible subject matter and entered judgment for Defendants. Yu appealed to the CAFC.
Majority Opinion
At the CAFC, as we have seen in the various other §101 precedents, the panel applied the two-step Mayo/Alice framework.
Step 1: “Whether a patent claim is directed to an unpatentable law of nature, natural phenomenon, or abstract idea. Alice, 573 U.S. at 217.”
Step 2: If Step 1 is Yes, “Whether the claim nonetheless includes an “inventive concept” sufficient to “‘transform the nature of the claim’ into a patent-eligible application. Id.”
(If Step 2’s answer is No, the invention is not a patent-eligible subject matter.)
In the majority opinion filed by Judge Prost, as to Step 1, the court applied the approach to the Step 1 inquiry “by asking what the patent asserts to be the focus of the claimed advance over the prior art” and concluded that “claim 1 is “directed to a result or effect that itself is the abstract idea and merely invoke[s] generic processes and machinery” rather than “a specific means or method that improves the relevant technology.” The majority opinion also mentioned that “Yu does not dispute that, as the district court observed, the idea and practice of using multiple pictures to enhance each other has been known by photographers for over a century.” The majority opinion also noted that although, “Yu’s claimed invention is couched as an improved machine (an “improved digital camera”), … “whether a device is “a tangible system (in § 101 terms, a ‘machine’)” is not dispositive”. Thus, the majority panel concluded that “the focus of claim 1 is the abstract idea.”
As to Step 2, the majority opinion concludes that claim 1 does not include an inventive concept sufficient to transform the claimed abstract idea into a patent-eligible invention because “claim 1 is recited at a high level of generality and merely invokes well-understood, routine, conventional components to apply the abstract idea” discussed in Step 1. Yu raised the prosecution history to prove that “the ’289 patent were allowed over multiple prior art references.” Also, Yu argued that the claimed limitations are “unconventional” because “the claimed “hardware configuration is vital to performing the claimed image enhancement.” However, the court was not convinced with this argument and conclude that “the claimedhardware configuration itself is not an advance and does not itself produce the asserted advance of enhancement of one image by another, which, as explained, is an abstract idea.”
Thus, the majority of the court concluded that the ‘’289 patent is not patent-eligible subject matter under §101. Therefore, the court hold for the Defendants.
Dissenting Opinion
In the dissenting opinion, Judge Newman said that “this camera is a mechanical and electronic device of defined structure and mechanism; it is not an “abstract idea” and “a statement of purpose or advantage does not convert a device into an abstract idea.”
The judge explained that “claim 1 is not for the general idea of enhancing camera image”, but “for a digital camera having a designated structure and mechanism that perform specified functions.” The Judge further mentioned, “the ‘abstract idea’ concept with respect to patent-eligibility is founded in the distinction between general principle and specific application.” The Judge quoted Diamond v. Chakrabarty and emphasized that “Congress intended statutory subject matter to ‘include anything under the sun that is made by man.’”
Judge Newman noted that “the ’289 patent may or may not ultimately satisfy all the substantive requirements of patentability”, and noted that neither the majority opinion and the district court discussed §102 and §103.
Takeaway
- After 7 years from Alice, we are still witnessing the profound impact that Alice has on §101 jurisprudence, and waiting for further judicial, legislative, and/or administrative clarity.
- In a previous §101 decision in American Axel (previously reported by John P. Kong), the dissenting opinion by Judges Chen and Wallach criticized that §101 swallowed §112. Now, Judge Newman criticized that §101 swallowed §102 and §103. The dire warning by the Supreme Court about §101 swallowing all of patent law seems to have come full circle.
- Judge Newman’s criticism of §101 swallowing §102 and §103 can be an added argument for appeal for another case and may help get these issues before the Supreme Court.
- John P. Kong said that The approach for determining the Step 1 inquiry, i.e., “by asking what the patent asserts to be the focus of the claimed advance over the prior art” is the source of much of the court’s criticisms. This approach was never vetted, and it conflates §101 with §102 and §103 issues. First, this “focus” is just another name for deriving the “point of novelty,” “gist,” “heart,” or “thrust” of the invention, which had previously been discredited by Supreme Court and Federal Circuit decisions relating to §102 and §103 issues. The problem with tests such as these is that it subtracts out various “conventional” features of the claimed invention (like what is done for the “claimed advance over the prior art”), and thus violates the Supreme Court requirement to consider the claim “as a whole.” If the point of novelty, gist, or heart of the invention contravenes the requirement to consider the claim “as a whole” in the §102 and §103 contexts, then it should likewise contravene the same Supreme Court requirement to consider the claim “as a whole” in the §101 context (as noted in John P. Kong’ “Today’s Problems with §101 and the Latest Federal Circuit Spin in American Axle v. Neapco” powerpoint, Dec. 2020). Judge Newman’s dissent echoes the same.
- John P. Kong also said that Enfish moved up into Step 1 the “improvement in technology” comment in Alice regarding the inventive concept consideration under Step 2 because some computer technology isn’t inherently abstract and thus should not be automatically subject to Alice’s Step 2 and its inventive-concept test. Enfish only had a passing reference to “inquiring into the focus of the claimed advance over the prior art” citing Genetic Techs v. Merial (Fed. Cir. 2016), as support for considering the “improvement in technology” in Alice Step 1. Herein lies the problem. The “improvement in technology” concept pertains to whether the claims are directed to a practical application, instead of an abstract idea. The “claimed advance over prior art” is not a substitute for, and not the same as, determining whether there is a practical application reflected in an improvement in technology. Stated differently, there can still be a practical application (and therefore not an abstract idea) even without checking the prior art and subtracting out “conventional” elements from the claim to discern a “claimed advance over the prior art.” While a positive answer to the “claimed advance over the prior art” would satisfy the “improvement in technology” point as being a practical application justifying eligibility, a negative answer to the “claimed advance over the prior art” does not diminish the claim being directed to a practical application (such as for an electric vehicle charging system, a garage door opener, a manufacturing method for a car’s driveshaft, or for a camera). But, in Electric Power Group v Alstom (Fed. Cir. 2016), the Fed. Cir. considered whether the “advance” is an abstract idea using a computer as a tool or a technological improvement in the computer or computer functionality (in an “improvement in technology” inquiry). And then, in Affinity Labs of Texas LLC v. DirecTV LLC, the Fed Cir cemented the “claimed advance” spin into Step 1, subtracting out “general components such as a cellular telephone, a graphical user interface, and a downloadable application” to arrive at a purely functional remainder that constituted an abstract idea of out-of-region delivery of broadcast content, without offering any technological means of effecting that concept (the 1-2 knockout of: subtract generic elements, and no “how-to” for the remainder). This laid the groundwork for §101 swallowing §§112, 102 and 103.
[1] See Brief, USDC ND of Ca Appeal Nos. 20-1760, -1803.
[2] See Yu v. Apple, United States District Court for the Northern District of California in No. 3:18-cv-06181-JD
A small increase in a Prior Art’s taught range needs to have sufficient reason for the modification to establish obviousness under 35 U.S.C. §103
| August 6, 2021
Chemours Co. FC, LLC vs Daikin Ind., LTD
Decided on July 22, 2021
NEWMAN, DYK, and REYNA. Opinion by Reyna. Concurring and Dissenting in part by Dyk.
Summary:
Chemours Company FC, LLC, appealed the final written decisions of the Patent Trial and Appeal Board from two inter partes reviews brought by Daikan Industries, Ltd. Chemours argued on appeal that the Board erred in its obviousness factual findings and did not provide adequate support for its analysis of objective indicia of nonobviousness. The CAFC found that the Board’s decision on obviousness was not supported by substantial evidence and that the Board erred in its analysis of objective indicia of nonobviousness. Consequently, they reversed the Board’s decision.
Background:
Chemours Company FC, LLC, appealed the final written decisions of the Patent Trial and Appeal Board from two inter partes reviews brought by Daikan Industries, Ltd., et al. Chemours argues on appeal that the Board erred in its obviousness factual findings and did not provide adequate support for its analysis of objective indicia of nonobviousness.
Two patents were at issue. U.S. Patent No. 7,122,609 (the “’609 patent) and U.S. Patent No. 8,076,4312 (the “’431 patent”). The representative ’609 patent relates to a unique polymer for insulating communication cables formed by pulling wires through melted polymer to coat and insulate the wires, a process known as “extrusion.”
Claim 1 of the ’609 patent is representative of the issues on appeal:
1. A partially-crystalline copolymer comprising tetrafluoroethylene, hexafluoropropylene in an amount corresponding to a hexafluoropropylene index (HFPl) of from about 2.8 to 5.3, said copolymer being polymerized and isolated in the absence of added alkali metal salt, having a melt flow rate of within the range of about 30±3 g/10 min, and having no more than about 50 unstable end groups/106 carbon atoms.
The Board found all challenged claims of the ’609 patent and the ’431 patent to be unpatentable as obvious in view of U.S. Patent No. 6,541,588 (“Kaulbach”).
On appeal, Chemours argued that Daikin did not meet its burden of proof because it failed to show that a person of ordinary skill in the art (“POSA”) would modify Kaulbach’s polymer to achieve the claimed invention.
The Kaulbach reference teaches a polymer for wire and cable coatings that can be processed at higher speeds and at higher temperatures. Kaulbach highlights that the polymer of the invention has a “very narrow molecular weight distribution.” Kaulbach discovered that prior beliefs that polymers in high-speed extrusion application needed broad molecular weight distributions were incorrect because “a narrow molecular weight distribution performs better.” In order to achieve a narrower range, Kaulbach reduced the concentration of heavy metals such as iron, nickel and chromium in the polymer.
In the Kaulbach example relied on by the Board, Sample A11, Kaulbach’s melt flow rate is 24 g/10 min, while the claimed rate of Claim 1 of the ‘609 patent is 30±3 g/10 min.
The Board found that Kaulbach’s melt flow rate range fully encompassed the claimed range, and that a skilled artisan would have been motivated to increase the melt flow rate of Kaulbach’s preferred embodiment to within the claimed range to coat wires faster. Specifically, the Board found:
We also are persuaded that the skilled artisan would have been motivated to increase the [melt flow rate] of Kaulbach’s Sample A11 to be within the recited range in order to achieve higher processing speeds, because the evidence of record teaches that achieving such speeds may be possible by increasing a [polymer’s] [melt flow rate].
In addition, the Board found that the portions of Kaulbach’s disclosure lacked specificity regarding what is deemed “narrow” and “broad,” and that it would have been obvious to “broaden” the molecular weight distribution of the claimed polymer.
Second, Chemours argued that the Board legally erred in its analysis of objective indicia of nonobviousness by showings of commercial success finding an insufficient nexus between the claimed invention and Chemours’s commercial polymer, as the Board required market share evidence to show commercial success.
CAFC Decision:
- Obviousness and teaching away
The CAFC found that the Board ignored the express disclosure in Kaulbach that teaches away from the claimed invention and relied on teachings from other references that were not concerned with the particular problems Kaulbach sought to solve. In other words, the Board did not adequately grapple with why a skilled artisan would find it obvious to increase Kaulbach’s melt flow rate to the claimed range while retaining its critical “very narrow molecular-weight distribution.”
The Court maintained that the Board’s reasoning does not explain why a POSA would be motivated to increase Kaulbach’s melt flow rate to the claimed range, when doing so would necessarily involve altering the inventive concept of a narrow molecular weight distribution polymer. The Court held that this is particularly true in light of the fact that the Kaulbach reference appears to teach away from broadening molecular weight distribution and the known methods for increasing melt flow rate.
Specifically, Kaulbach includes numerous examples of processing techniques that are typically used to increase melt flow rate, which Kaulbach cautions should not be used due to the risk of obtaining a broader molecular weight distribution.
These factors do not demonstrate that a POSA would have had a “reason to attempt” to get within the claimed range, as is required to make such an obviousness finding.
As Chemours persuasively argues, the Board needed competent proof showing a skilled artisan would have been motivated to, and reasonably expected to be able to, increase the melt flow rate of Kaulbach’s polymer to the claimed range when all known methods for doing so would go against Kaulbach’s invention by broadening molecular weight distribution.
The CAFC therefore held that the Board relied on an inadequate evidentiary basis and failed to articulate a satisfactory explanation that is based on substantial evidence for why a POSA would have been motivated to increase Kaulbach’s melt flow rate to the claimed range, when doing so would necessarily involve altering the inventive concept of a narrow molecular weight distribution polymer.
- Commercial success
In addition, Chemours argued that the Board legally erred in its analysis of objective indicia of nonobviousness finding an insufficient nexus between the claimed invention and Chemours’s commercial polymer, and its requirement of market share evidence to show commercial success.
Specifically, Chemours argued that the Board improperly rejected an extensive showing of commercial success by finding no nexus on a limitation-by-limitation basis, rather than the invention as a whole. Chemours contended that the novel combination of these properties drove the commercial success of Chemours’s commercial polymer. Second, Chemours argued the Board improperly required Chemours to proffer market share data to show commercial success.
The CAFC held that contrary to the Board’s decision, the separate disclosure of individual limitations, where the invention is a unique combination of three interdependent properties, does not negate a nexus. The Court recognized that concluding otherwise would mean that nexus could never exist where the claimed invention is a unique combination of known elements from the prior art.
Further, the Court held, quoting prior caselaw, that the Board, erred in its analysis that gross sales figures, absent market share data, “are inadequate to establish commercial success.”
“When a patentee can demonstrate commercial success, usually shown by significant sales in a relevant market, and that the successful product is the invention disclosed and claimed in the patent, it is presumed that the commercial success is due to the patented invention.” J.T. Eaton & Co. v. Atl. Paste & Glue Co., 106 F.3d 1563, 1571 (Fed. Cir. 1997); WBIP, 829 F.3d at 1329. However, market share data, though potentially useful, is not required to show commercial success. See Tec Air, Inc. v. Denso Mfg. Mich. Inc., 192 F.3d 1353, 1360–61 (Fed. Cir. 1999).
The CAFC therefore reversed the Board’s finding of obviousness of the ‘609 and ‘431 claims at issue.
- Dissent
Judge Dyk dissented in part as to the strength of the teaching away by Kaulback. Specifically, he noted that Kaulbach’s copolymer is nearly identical to the polymer disclosed by claim 1 of the ’609 patent. The only material difference between claim 1 and Kaulbach is that Kaulbach discloses (in Sample A11) a melt flow rate of 24 g/10 min, slightly lower than 27 g/10 min, the lower bound of the 30 ± 3 g/10 min rate claimed in claim 1 of the ’609 patent.
As to the teachings of Kaulbach, he went on to note that even though Kaulbach determined that “a narrow molecular weight distribution performs better,” it expressly acknowledged the feasibility of using a broad molecular weight distribution to create polymers for high speed extrusion coating of wires. Hence, Judge Dyk concluded that this is not a teaching away from the use of a higher molecular weight distribution polymer.
Contrary to the majority’s assertion, modifying the molecular weight distribution of Kaulbach’s disclosure of a 24 g/10 min melt flow rate to achieve the 27 g/10 min melt flow rate of claim 1 would hardly “destroy the basic objective” of Kaulbach as the majority claims.
Take away
- There must be clear motivation for a POSA to modify a claimed range even to a small extent. Evidence within the prior art that such a modification would not be beneficial maybe a sufficient teaching away and can negate a finding of increasing the range as an obvious modification. Patent prosecutors should be more assertive in requiring a clear showing of reasons to make a modification of increasing a range outside of a prior art’s taught range.
Note Quite Game Over as Bot M8 Receive a 1-Up from the CAFC
| July 23, 2021
Bot M8 LLC., v. Sony Corporation of American, Sony Corporation, Cony Interactive Entertainment LLC.
Decided on July 13, 2021
Before Dyk, Linn and O’malley, Circuit Judges.
Opinion by Circuit Judge O’malley.
SUMMARY
Briefly, the CAFC addresses the stringency of pleading requirements in cases alleging patent infringement, and that patentees need not prove their case at the pleading stage. Further that “a patentee may subject its claims to early dismissal by pleading facts that are inconsistent with the requirements of its claims” Col. 2, L., 1 to 13.
DETAIL
Bot M8 LLC (herein Bot M8) filed suit against Sony et al (herein Sony) alleging infringement of six patents, five of which remain at issue. U.S. Patent Nos., 8,078,540, 8,095,990, 7,664,988, 8,112,670 and 7,338,363. The asserted patents relate to gaming machines. Bot M8 accused Sony’s PlayStation 4 (PS4) consoles and aspects of Sony’s network of infringing the ‘540, ‘990, ‘998 and ‘670 Patents, while certain PS4 videogames of infringing the ‘363 patent.
- Procedural History
Bot M8 initially sued Sony in the United States District Court for the Southern District of NY, Sony filed an answer, asserting non-infringement and arguing that “the Complaint fails to identify legitimate theories for how the claim limitations of the patent-in-suit are all allegedly satisfied,” along with a motion to transfer the case to California. Col 6, L., 1 to 6. Sony did not move to dismiss the complaint for failure to state a claim.
After the case was transferred, the district court held a case management conference, and the court directed Bot M8 to file an amended complaint specifying “every element of every claim that you say is infringed and/or explain why it can’t be done.” The court instructed Bot M8 that, “if this is a product you can buy on the market and reverse engineer, you have got to do that.” Id. Counsel for Bot M8 responded that they “would be happy to…” and that reverse engineering would not be a problem because it had already “torn down the Sony PlayStation.”
— First Amended Complaint (FAC)
Bot M8 timely filed a FAC, and Sony moved to dismiss. The district court held oral argument on Sony’s motion and at the hearing questioned why Bot M8 had not cited to Sony’s source code in the FAC, a failing Sony did not identify in its motion to dismiss. The Court specifically asked “Why can’t you buy one of these products and take whatever code is on there off and analyze it?” Bot M8 indicated that the PS4 source code is not publicly available.
Consequently, the district court granted Sony’s motion to dismiss as to the ’540, ’990, ’988 and ’670 patents.
Briefly, the district court held the following:
- For the ’990 patent—which describes a mutual authentication mechanism for video games—the court found that “the complaint fails to allege when or where the game program and mutual authentication program are stored together.”
- For the ‘540 patent—which describes an authentication mechanism for video games—the district court found that “the complaint fails to allege when or where the game program and authentication program are stored together on the same memory board.” Because the allegations “do not address where the game program is stored,” the court found them insufficient.
- For the ’988 and ’670 patents—which describe computer program fault inspection—the court found that “the complaint provides no basis to infer the proper timing of the inspection”—i.e., whether a “fault inspection program” is “completed before the game starts.” That Bot M8’s “allegation too closely tracks the claim language to be entitled to the presumption of truth,” and “[n]o underlying allegations of fact are offered.”
The district court explained that Bot M8 “already enjoyed its one free amendment under the rules” and was instructed to “plead well, element-by-element.” The court stated that Bot M8 “does not deserve yet another chance to re-plead,” but nevertheless gave Bot M8 another chance to do so. But added that, if Bot M8 “move[d] for leave to file yet another amended complaint, it should be sure to plead its best case.”
Next, during a discovery hearing, Bot M8 raised, for the first time, concerns about the legality of reverse engineering the PS4’s software, otherwise known as “jailbreaking,” under the Digital Millennium Copyright Act (“DMCA”) and other anti-hacking statutes. The District Court asked Sony to give Bot M8 permission, and Sony agreed.
— Motion for Leave to Amend (Second Amended Complaint – SAC)
Bot M8 filed a motion for leave to amend its complaint and attached a redlined version of its proposed Second Amended Complaint (“SAC”). Bot M8 explained that the SAC was based on new evidence obtained only after Sony gave them permission to “jailbreak” the PS4.
Though Bot M8 moved for leave to file the SAC within the time frame authorized by the district court, the court still denied Bot M8’s motion for lack of diligence. Specifically, the court found that Bot M8 should have done the so-called “jailbreak” early in the proceedings and included the evidence in the FAC. The court explained that Bot M8’s motion was governed by FRCP 16, which authorized modifications “only for good cause.”
The district court found that Bot M8 “could have, and should have” included this evidence early because the issue of reverse engineering was brought up at the case management conference during which they failed to raise on concerns about the legality thereof. In fact, Bot M8’s counsel indicated they had already done it.
Consequently, the proposed amendment was deemed untimely.
—Motion to Reconsider
Bot M8 sought leave to move for reconsideration of the court’s order denying leave to amend, arguing that it could not have reverse engineered the PS4 before obtaining permission to disable the PS4’s access control technology in light of the DMCA.
The district court denied the motion, finding that Bot M8’s “theory of the [DMCA] crossing paths with patent rights remain[ed] unsupported by caselaw,” and Bot M8 “offer[ed] no binding decision directing a different pleading or amendment standard.”
—Summary Judgement under 35 U.S.C. §101
Sony moved for summary judgment of non-infringement and patent ineligibility under 35 U.S.C. § 101 against the ‘363 patent. In applying the two-part test set forth in Alice (Alice Corp. v. CLS Bank International, 573 U.S. 208, 217– 18 (2014)) the district court found claim 1 of the ’363 patent ineligible.
At Alice step one, the court found that claim 1 recites “the abstract idea of increasing or decreasing the risk-to-reward ratio, or more broadly the difficulty, of a multiplayer game based upon previous aggregate results.” At Alice step two, the court concluded that “claim 1 offers no inventive concept.” That, “[t]hough given special names, each part remains a generic computer part invoked to effect the conventional computer task of gathering, manipulating, transmitting, and using data.”
Bot M8 has submitted two expert declarations to establish inventive step, but the court concluded that Bot M8’s expert testimony was insufficient “to forestall summary judgment,” because, for example, the experts failed to articulate any “specific inventive concept in claim 1… other than [a generic reference to] ‘the totality’” based expert report.
- CAFC
- Amending the Original Complaint: Bot M8 argued that the district court erred by “forcing” them to replace their original complaint. The CAFC disagreed, holding that the court merely gave Bot M8 a chance to amend, and Bot M8 chose to file an amended complaint rather than defend the original.
- Dismissal of the FAC: As per FRCP 8(a)(2) “generally requires only a plausible ‘short and plain’ statement of the plaintiff’s claim,” showing that the plaintiff is entitled to relief. Skinner, 562 U.S. at 530. To survive a motion to dismiss under Rule 12(b)(6), a complaint must “contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. (citing Twombly, 550 U.S. at 555).
Initially, the CAFC disagreed with the districts approach of instructing Bot M8 that it must “explain in [the] complaint every element of every claim that you say is infringed and/or explain why it can’t be done.” The CAFC reiterated that a plaintiff “need not ‘prove its case at the pleading stage.’” That, a plaintiff is not required to plead infringement on an element-by-element basis.
Instead, it is enough “that a complaint place the alleged infringer ‘on notice of what activity . . . is being accused of infringement.’” Lifetime Indus., Inc. v. Trim-Lok, Inc., 869 F.3d 1372, 1379 (Fed. Cir. 2017) (quoting K-Tech Telecomms., Inc. v. Time Warner Cable, Inc., 714 F.3d 1277, 1284 (Fed. Cir. 2013)). See Twombly, 550 U.S. at 556 (“[A] well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and that a recovery is very remote and unlikely.”)
Thus, “The relevant inquiry under Iqbal/Twombly is whether the factual allegations in the complaint are sufficient to show that the plaintiff has a plausible claim for relief. Iqbal, 556 U.S. at 679. “The plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. at 678. In other words, a plausible claim must do more than merely allege entitlement to relief; it must support the grounds for that entitlement with sufficient factual content. Id.” Col. 14, L., 4 to 13.
As such, the Plaintiff “cannot assert a plausible claim for infringement under the Iqbal/Twombly standard by reciting the claim elements and merely concluding that the accused product has those elements. There must be some factual allegations that, when taken as true, articulate why it is plausible that the accused product infringes the patent claim.” Col. 14, L 22 to 28. That is, a Plaintiff is to “give the defendant fair notice of what the . . . claim is and the grounds upon which it rests,” Erickson v. Pardus, 551 U.S. 89, 93 (2007) (quoting Twombly, 550 U.S. at 555).
Having clarified the standard, the CAFC concluded that they agreed with the district court that the allegations as to the ‘540 and ‘990 patents were conclusory, and at times contradictory but disagreed with the dismissal of the ‘988 and ‘670 patents. Here, the CAFC emphasized that the “court simply required too much.”
Briefly, the CAFC held the following:
- For the ’990 patent—which describes a mutual authentication mechanism for video games—the CAFC agreed with the district counts analyzing that found “the complaint fails to allege when or where the game program and mutual authentication program are stored together.”
- For the ‘540 patent—which describes an authentication mechanism for video games—the CAFC agreed with Sony that the FAC actually alleges away from infringement by asserting that the purported “authentication program” is stored on the PS4 motherboard—an allegation that is inconsistent with Bot M8’s infringement theory. That CAFC noted that Bot M8 had taken a “kitchen sink” approach in their complaint, revealing inconsistencies that ended up being fatal.
- For the ’988 and ’670 patents—which describe computer program fault inspection—and completed the inspection before the game starts. Here, the CAFC differed with the district court. Bot M8 argued on appeal that the district court erred in its dismissal because the FAC “includes specific evidence demonstrating that the PS4 includes a fault inspection program that concludes prior to the game starting.” That is, the PS4 displays error codes upon boot up and prior to a game starting, and the CAFC agreed this supports a plausible inference that the PS4’s fault inspection program concluded prior to the start of a game. Sony argued, and the district court agreed, that these passages failed to allege that execution of a fault inspection program completes before a game start, only that they commence during start-up. That CAFC held that Sony, like the district court, “demands too much as this stage of proceedings.”
- Denial of Leave to Amend the FAC: The CAFC ultimately determined that the denial was proper, because Bot M8 did not raise any concerns about its ability to reverse engineer the PS4 until after the district court issued its decision on Sony’s motion to dismiss, thus Bot M8 was not diligent.
Of note, the CAFC stated that while the district court perhaps should not have required reverse engineering of Sony’s products as a prerequisite to pleading claims of infringement, Bot M8 ultimately waived its objection to that obligation when it told the court it was happy to undertake that exercise.
- The ‘363 Patent: After consideration, the CAFC found no error in the districts 101 analysis.
CONCLUSION: Affirmed in part, reversed in part and remanded to the district court for further proceedings regarding infringement of the ’988 and ’670 patents.
- Take-Aways:
- Patentees need not prove their case as the pleading stage. But there must be some factual allegations that, when taken as true, articulate why it is plausible that the accused product infringes the patent claim.
- A patentee may subject its claims to early dismissal by pleading fats that are inconsistent with the requirements of its claims. As here, be mindful of “kitchen sink” approached, that arguments do not end up inconsistent.
- Be mindful of comments made during pre-trail procedures and always strive to be timely. Here, Bot M8’s counsel stated during the case management conference that their client was happy to reverse engineer the PS4 and had already done it, which turned out to be untrue and thus their wait of around 9 weeks to seek authorization to reverse engineer the product provide fatal for a lack of diligence. This ultimately lead to Bot M8 waiving its objection to this obligation.
The “inferior” Board: Supreme Court preserves the Patent Trial and Appeal Board, but empowers the PTO Director with final decision-making authority over Board proceedings
| July 13, 2021
United States v. Arthrex, Inc. (also, Smith & Nephew, Inc. v. Arthrex, Inc., Arthrex, Inc. v. Smith & Nephew, Inc.) (Supreme Court)
Decided on June 21, 2021
Chief Justice Roberts wrote the opinion of the Court, with Justices Alito, Thomas, Breyer, Sotomayor, Kagan, Gorsuch, Kavanaugh, and Barrett variously concurring and dissenting.[1]
Summary
In U.S. v. Arthrex, the U.S. Supreme Court confirmed that the Administrative Patent Judges (APJs) of the Patent Trial and Appeal Board are improperly appointed in violation of the Appointments Clause of the Constitution. The Court held that 35 U.S.C. §6(c), which provided that only the Board may grant a rehearing of a final decision arising out of an inter partes review proceeding, was unenforceable insofar as the provision denied the Director the power to review the Board’s decision. To cure the constitutional infirmity, the Court held that the correct remedy was to require that the Director review decisions by APJs.
Details
When Arthrex, Inc. saw their U.S. Patent No. 9,179,907 being invalidated by the Patent Trial and Appeal Board, in an inter partes review brought by Smith & Nephew, Inc., they appealed to the Federal Circuit, challenging not only the substance of the Board’s Final Written Decision, but also the constitutionality of the Board. Arthrex argued that the appointment of the Administrative Patent Judges (APJs) violated the Appointments Clause of the Constitution. And being unconstitutionally appointed, the APJs had no authority to deprive Arthrex of their rights in their patent.
Arthrex’s constitutionality argument might have started out as a long-shot. It was the last of their four arguments on appeal, and occupied only 7 of their 149-page opening brief. Remarkably, it was the one that brought Arthrex the most success.
The Appointments Clause (Art. II, §2, cl. 2) of the Constitution provides that principal officers in the U.S. government must be appointed by the President “and by and with the Advice and Consent of the Senate”. But the Appointments Clause also provides that inferior officers may be appointed by “the President alone, in the Courts of Law, or in the Heads of Departments.”
The America Invents Act of 2011 established the Patent and Trial Appeal Board as a tribunal within the Executive Branch. The Board sits in panels of at least three members drawn from the PTO Director, PTO Deputy Director, the Commissioner for Patents, the Commissioner for Trademarks, and APJs. The Secretary of Commerce appoints the members of the Board, except for the Director, who is appointed by the President.
On appeal at the Federal Circuit, the principal question was whether APJs were principal officers or inferior officers, the former requiring appointment by the President as opposed to the Secretary of Commerce.
To answer the question, the Federal Circuit looked mainly to Edmonds v. United States, 520 U.S. 651 (1997).
In Edmonds, the Supreme Court explained that “[w]hether one is an ‘inferior’ officer depends on whether he has a superior”, and “‘inferior officers’ are officers whose work is directed and supervised at some level by others who were appointed by Presidential nomination with the advice and consent of the Senate”. Edmonds, 520 U.S. at 662-63. The Supreme Court in Edmonds articulated three factors that aided in distinguishing between principal and inferior officers: (1) whether an appointed official has the power to review and reverse the officers’ decision; (2) the level of supervision and oversight an appointed official has over the officers; and (3) the appointed official’s power to remove the officers. Id. at 664-65. The central consideration was the “extent of direction or control” that the appointed officials had over the officers, because the objective was to preserve the chain of command down from the President, so that “political accountability” may be preserved. Id. at 663.
Following Edmonds,the Federal Circuit found that APJs were principal officers due to the lack of any presidentially appointed officials who could review decisions by APJs, as well as the lack of unfettered authority on the part of the Secretary of Commerce and Director to remove APJs at will. Because APJs were found to be principal officers, their appointments by the Secretary of Commerce, instead of the President, violated the Appointments Clause.
Having found a constitutional violation, the Federal Circuit then fashioned a remedy that severed and invalidated the statutory limitations on the removal of APJs. The Federal Circuit reasoned that making APJs removable at will would render them inferior officers. The Federal Circuit also determined that, because the invalidity decision against Arthrex’s patent was issued by an unconstitutionally appointed Board, the decision must be vacated and remanded to the Board for a fresh hearing before a panel of new, constitutionally appointed APJs.
“This satisfied no one”, as the Supreme Court reflected in U.S. v. Arthrex.
All the parties involved in the Federal Circuit appeal—the government, Arthrex, Smith & Nephew—requested the Court’s review of different aspects of the Federal Circuit’s decision.
Nevertheless, the question before the Court was the same one that faced the Federal Circuit: “[W]hether the PTAB’s structure is consistent with the Appointments Clause, and the appropriate remedy if it is not.”
In a divided 5-4 decision, the Court agreed with the Federal Circuit that APJs were unconstitutionally appointed, but disagreed with the Federal Circuit on the appropriate remedy.
The Court began with the premise that “Congress provided that APJs would be appointed as inferior officers, by the Secretary of Commerce as head of a department”. However, the nature of the APJs’ authority was such that they were really acting as principal officers.
The problem was the lack of supervision over the APJs’ decision-making:
What was “significant” to the outcome [in Edmonds]—review by a superior executive office—is absent here: APJs have the “power to render a final decision on behalf of the United States” without any such review by their nominal superior or any other principal officer in the Executive Branch. The only possibility of review is a petition for rehearing, but Congress unambiguously specified that “[o]nly the Patent and Trial Appeal board may grant rehearings.” [35 U.S.C. § 6(c)]. Such review simply repeats the arrangement challenged as unconstitutional in this suit.
The current setup “diffuses” accountability. The Court recognized that “[he, the Director] is the boss” of APJs in most ways, but the Court was troubled by the Director’s powerlessness over the one source of APJs’ “significant authority”—their power to issue decisions on patentability. In that regard, the Director is relegated to the ministerial duty of issuing a certificate canceling or confirming patent claims. As the Court noted, “[t]he chain of command runs not from the Director to his subordinates, but from the APJs to the Director”.
The government attempted to drum up the Director’s influence over the Board’s decision-making. The government argued that it was the Director who decided whether to initiate inter partes reviews, who could designate APJs predisposed to his views to hear a case, who could vacate an institution decision “if he catches wind of an unfavorable ruling on the way” as long as he intervened before a final written decision, who could “manipulate the composition of the PTAB panel that acts on the rehearing petition”, who could “‘stack’ the panel at rehearing, and who could appoint himself to a panel to reverse a decision at rehearing.
Putting aside the troubling due process and fairness concerns raised by the alleged influences of the Director, the Court criticized the government for creating “a roadmap for the Director to evade a statutory prohibition on review [i.e., 35 U.S.C. § 6(c)] without having him take responsibility for the ultimate decision”:
Even if the Director succeeds in procuring his preferred outcome, such machinations blur the lines of accountability demanded by the Appointments Clause. The parties are left with neither an impartial decision by a panel of experts nor a transparent decision for which a politically accountable officer must take responsibility. And the public can only wonder “on whom the blame or the punishment of a pernicious measure, or series of pernicious measures ought really to fall.”
All this led to the Court’s conclusion that “the unreviewable authority wielded by the APJs during inter partes review is incompatible with their appointment by the Secretary to an inferior office”.
For a solution, the Court disagreed with the Federal Circuit that at-will removal of APJs was the answer. The unconstitutionality of the APJs’ appointments lay in the unreviewability of their decisions, and the Federal Circuit’s proposed solution did not adequately address that problem. The solution must instead empower the Director to review Board decisions:
In our view, however, the structure of the PTO and the governing constitutional principles chart a clear course: Decisions by APJs must be subject to review by the Director.
More particularly, the Court explained that:
The upshot is that the Director cannot rehear and reverse a final decision issued by APJs. If the Director were to have the “authority to take control” of a PTAB proceeding, APJs would properly function as inferior officers.
We conclude that a tailored approach is the appropriate one: Section 6(c) cannot constitutionally be enforced to the extent that its requirements prevent the Director from reviewing final decisions rendered by APJs….The Director may accordingly review final PTAB decisions and, upon review, may issue decisions himself on behalf of the Board. Section 6(c) otherwise remains operative as to the other members of the PTAB.
The Director’s decision is then subject to judicial review:
When reviewing such a decision by the Director, a court must decide the case “conformably to the constitution, disregarding the law” placing restrictions on his review authority in violation of Article II.
Finally, the Court vacated the Federal Circuit’s decision to grant Arthrex a hearing before a new panel of APJs. The Court found sufficient their remedy of a limited remand to the Director to determine whether to rehear Smith & Nephew’s inter partes review petition.
There are few interesting aspects to the Court’s Arthrex opinion.
The Court’s holding is narrow. It applies only to 35 U.S.C. §6(c), which currently provides that “[o]nly the Patent Trial and Appeal Board may grant rehearings”, and only to the extent that section 6(c) prohibits the Director from reviewing the Board’s decisions. The holding also applies only to inter partes reviews—the Court is explicit that “[w]e do not address the Director’s supervision over other types of adjudications conducted by the PTAB, such as the examination process for which the Director has claimed unilateral authority to issue a patent”.
In other words, the Court’s decision is unlikely to bring any radical changes to the Board.
It is also notable that Chief Justice Roberts wrote the majority opinion in Arthrex. In Oil State energy Services, LLC v. Greene’s Energy Group, LLC, 138 S.Ct. 1365 (2018), the Supreme Court held that patent grants involved public rights and the Board’s adjudication of patents without a jury, despite not being an Article III tribunal, was constitutionally permissible. But Chief Justice Roberts joined in the dissenting opinion in that case. The dissent was resolute that the Director and the Board, that is, “a politically appointee and his administrative agents, instead of an independent judge”, should not be permitted to adjudicate patents. Id. at 1380. That is, patent adjudication should be insulated from politics. During the oral argument in Oil State, Chief Justice Roberts raised due process concerns over the Director’s ability to influence Board decisions through panel stacking.
Yet, in Arthrex, Chief Justice Roberts would give the politically appointed Director plenary power to review, modify, and even nullify a Board decision, potentially making the Board vulnerable to political influences. How can Chief Justice Roberts’ positions in Oil State and Arthrex be reconciled?
The Court’s decision in Arthrex also touches on the complex relationship between the PTO, which is an agency, the Board, which is an adjudicatory within the agency, and the Administrative Procedure Act (APA) that is supposed to govern their actions.
The Federal Circuit has suggested in the past that proceedings before the Board are APA-governed formal adjudication subject to the formal adjudication procedures set forth in 5 U.S.C. §§556-557. However, the Court in Arthrex suggested that Board proceedings were actually “adjudication that takes place outside the confines of §557(b)”. If Board proceedings are not subject to the APA, then what, if any, regulatory scheme governs Board proceedings to ensure procedural fairness?
In addition, the plain language of the statutes seems to already authorize the Director to grant rehearings. Section 6(a) provides that “[t]he Director, the Deputy Director, the Commissioner for Patents, the Commissioner for Trademarks, and the administrative patent judges shall constitute the Patent Trial and Appeal Board”, and section 6(c) provides that “[o]nly the Patent Trial and Appeal Board may grant rehearings”. Is the Court really rewriting the statute by giving the Director reviewing powers? Or is the Court merely making explicit what Congress had already intended?
Interestingly, the Court’s opinion referred to the Trademark Modernization Act of 2020, which makes explicit that “the authority of the Director…includes the authority to reconsider, and modify or set aside, a decision of the Trademark Trial and Appeal Board”. The Trademark Modernization Act of 2020 thus shields the Trademark Trial and Appeal Board from copycat constitutional challenges.
What now?
The PTO will now need to issue guidance on how the Court’s holding will be implemented. The PTO’s existing Standard Operating Procedure 2[2] appears to provide a procedural framework for requesting rehearing by the Director, as the SOP2 already establishes the Director’s authority to convene a “Precedential Opinion Panel” to review decisions in cases before the Board and determine, in the Director’s sole discretion, whether to order sua sponte rehearing.
The PTO has its work cut out. Following the Federal Circuit’s decision in Arthrex, Inc. v. Smith & Nephew, Inc., the Chief Administrative Patent Judge of the Board issued a general order holding in abeyance more than 100 Board decisions from post-grant proceedings, which were remanded as a result of the Federal Circuit’s Arthrex decision. See General Order in Cases Remanded under Arthrex, Inc. v. Smith & Nephew, Inc., 941 F.3d 1320 (Fed. Cir. 2019) (Boalick, Chief APJ, PTAB, May 2020).
Also complicating the situation is the current absence of a Director at the PTO. Is a Commissioner of Patent, serving as an Acting Director, constitutionally authorized to review and potentially modify Board decisions? Can the Secretary of Commerce step in while the PTO awaits a new Director?
[1] This review will focus only on the majority opinion.
[2] https://www.uspto.gov/sites/default/files/documents/SOP2%20R10%20FINAL.pdf.
Tags: administrative patent judge > Administrative Procedure Act > Constitutional Law > Patent Trial and Appeal Board (PTAB) > Supreme Court
