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
DOCTRINE OF PROSECUTION DISCLAIMER ENSURES THAT CLAIMS ARE NOT CONSTRUED ONE WAY TO GET ALLOWANCE AND IN A DIFFERENT WAY TO AGAINST ACCUSED INFRINGERS
| July 8, 2021
SpeedTrack, Inc. v. Amazon.com, Inc. et al.
Decided on June 3, 2021
Prost (author), Bryson, and Reyna
Summary:
The Federal Circuit affirmed the district court’s claim construction orders regarding the hierarchical limitations recited in the SpeedTrack’s ’360 patent based on Applicants’ arguments and claim amendments made during the prosecution of the ’360 patent.
Details:
The ’360 patent
SpeedTrack owns U.S. Patent No. 5,544,360 (“the ’360 patent), which is directed to providing “a computer filing system for accessing files and data according to user-designated criteria.” The ’360 patent discusses that prior-art systems “employ a hierarchical filing structure” which could be very cumbersome when the number of files are large or file categories are not well-defined. In addition, the ’360 patent discusses that some prior-art systems are subject to errors when search queries are mistyped and restricted by the field of each data element and the contents of each field.
However, the ’360 patent discloses a method that uses “hybrid” folders, which “contain those files whose content overlaps more than one physical directory,” for providing freedom from the restrictions caused by hierarchical and other computer filing systems.
Representative claim 1 recites a three-step method: (1) creating a category description table containing category descriptions (having no predefined hierarchical relationship with such list or each other); (2) creating a file information directory as the category descriptions are associated with files; and (3) creating a search filter for searching for files using their associated category descriptions.
1. A method for accessing files in a data storage system of a computer system having means for reading and writing data from the data storage system, displaying information, and accepting user input, the method comprising the steps of:
(a) initially creating in the computer system a category description table containing a plurality of category descriptions, each category description comprising a descriptive name, the category descriptions having no predefined hierarchical relationship with such list or each other;
(b) thereafter creating in the computer system a file information directory comprising at least one entry corresponding to a file on the data storage system, each entry comprising at least a unique file identifier for the corresponding file, and a set of category descriptions selected from the category description table; and
(c) thereafter creating in the computer system a search filter comprising a set of category descriptions, wherein for each category description in the search filter there is guaranteed to be at least one entry in the file information directory having a set of category descriptions matching the set of category descriptions of the search filter.
District Court
In September of 2009, SpeedTrack sued retail website operations for infringement of the ’360 patent. The Northern District construed the hierarchical limitation with the below construction (relied in part on disclaimers made during prosecution):
The category descriptions have no predefined hierarchical relationship. A hierarchical relationship is a relationship that pertains to hierarchy. A hierarchy is a structure in which components are ranked into levels of subordination; each component has zero, one, or more subordinates; and no component has more than one superordinate component.
After that, SpeedTrack moved to clarify the district court’s construction regarding prosecution-history disclaimer.
Subsequently, the district court issued a second claim construction order by adding the following clarification in its first order:
Category descriptions based on predefined hierarchical field-and-value relationships are disclaimed. “Predefined” means that a field is defined as a first step and a value associated with data files is entered into the field as a second step. “Hierarchical relationship” has the meaning stated above. A field and value are ranked into levels of subordination if the field is a higher-order description that restricts the possible meaning of the value, such that the value must refer to the field. To be hierarchical, each field must have zero, one, or more associated values, and each value must have at most one associated field.
In order to support its second claim construction order, the district court analyzed SpeedTrack’s prosecution statements (for their clear disavowal of category descriptions based on hierarchical field-and-value relationships).
The Federal Circuit
The CAFC handled the issue of claim construction.
SpeedTrack acknowledged that the hierarchical limitation was added during the prosecution of the ’360 patent to overcome the Schwartz reference.
During the prosecution, Applicants distinguished their invention from Schwartz by arguing that “unlike prior art hierarchical filing systems, the present invention does not require the 2-part hierarchical relationship between fields or attributes, and associated values for such fields or attributes.”
In addition, Applicants argued that “the present invention is a non-hierarchical filing system that allows essentially ‘free-form’ association of category descriptions to files without regard to rigid definitions of distinct fields containing values.”
Finally, Applicants argued that “this distinction has been clarified in the claims as amended by the addition of the following language in all of the claims: ‘each category description comprising a descriptive name, the category descriptions having no predefined hierarchical relationships with such list or each other.’”).
The CAFC agreed with the district court’s assessment that predefined field-and-value relationships are excluded from the claims.
The CAFC disagreed with SpeedTrack’s argument that the “category descriptions” of the ’360 patent are not the fields of Schwartz and that the hierarchical limitation precludes predefined hierarchical relationships only among category descriptions.
SpeedTrack argued that Applicants distinguished Schwartz on other grounds. However, the CAFC did not agree with this argument.
In addition, the CAFC noted that SpeedTrack’s position contradicts its other litigation statements. “Ultimately, the doctrine of prosecution disclaimer ensures that claims are not ‘construed one way in order to obtain their allowance and in a different way against accused infringers.’” Aylus Networks, Inc. v. Apple Inc., 856 F.3d 1353, 1360 (Fed. Cir. 2017) (quoting Southwall Techs., Inc. v. Cardinal IG Co., 54 F.3d 1570, 1576 (Fed. Cir. 1995)).
Finally, the CAFC noted that both of the first and second construction orders acknowledged the disclaimer.
Therefore, the CAFC affirmed the district court’s final judgement of noninfringement.
Takeaway:
- Applicants need to be careful about claim amendments and arguments made during the prosecution of their patents.
- Litigation statements, while not inventors’ prosecution statements and do not demonstrate prosecution-history disclaimer, can strengthen the court’s reasonings on the prosecution history.
Revisiting KSR: “A person of ordinary skill is also a person of ordinary creativity, not an automaton.”
| June 29, 2021
Becton, Dickinson and Company v. Baxter Corporation Englewood
Decided on May 28, 2021
Prost*, Clevenger, and Dyk. Court opinion by Dyk. (*Sharon Prost vacated the position of Chief Judge on May 21, 2021, and Kimberly A. Moore assumed the position of Chief Judge on May 22, 2021.)
Summary
On appeals from the United States Patent and Trademark Office, Patent Trial and Appeal Board in an inter partes review, the Federal Circuit unanimously revered the Board’s conclusion of non-obviousness of an asserted patent, directed to a “method for performing telepharmacy,” and a “system for preparing and managing patient-specific dose orders that have been entered into a first system.” The Federal Circuit stated that, in analysis of obviousness, a person of ordinary skill would also consider a source other than cited prior art references, and established that cancellation of all the claims of a patent does not affect the status of the patent as pre-AIA Section 102(e)(2) reference.
Details
I. Background
Becton, Dickinson and Company (“Becton”) petitioned for inter partes review of claims 1– 13 and 22 of U.S. Patent No. 8,554,579 (“the ’579 patent”), owned by Baxter Corporation Englewood (“Baxter”).
Becton asserted invalidity of the challenged claims primarily based on three prior art references: U.S. Patent No. 8,374,887 (“Alexander”), U.S. Patent No. 6,581,798 (“Liff”), and U.S. Patent Publication No. 2005/0080651 (“Morrison”).
Claims 1 and 8 are illustrative of the ’579 patent, as agreed by the parties. Claim 1 is directed to a “method for performing telepharmacy,” and claim 8 is directed to a “system for preparing and managing patient-specific dose orders that have been entered into a first system.”
There are two contested limitations on appeal: the “verification” limitation in claim 8, and the “highlighting” limitation in claims 1 and 8. Claim 8 recites three elements, an order processing server, a dose preparation station, and a display. The relevant portion of the dose preparation station in claim 8, containing both limitations, reads:
8. A system for preparing and managing patient-specific dose orders that have been entered into a first system, comprising:
a dose preparation station for preparing a plurality of doses based on received dose orders, the dose preparation station being in bi-directional communication with the order processing server and having an interface for providing an operator with a protocol associated with each received drug order and specifying a set of drug preparation steps to fill the drug order, the dose preparation station including an interactive screen that includes prompts that can be highlighted by an operator to receive additional information relative to one particular step and includes areas for entering an input;
. . . and wherein each of the steps must be verified as being properly completed before the operator can continue with the other steps of drug preparation process, the captured image displaying a result of a discrete isolated event performed in accordance with one drug preparation step, wherein verifying the steps includes reviewing all of the discrete images in the data record . . . .
The Patent Trial and Appeal Board (“Board”) determined that asserted claims were not invalid as obvious. While the Board found that Becton had established that one of ordinary skill in the art would have been motivated to combine Alexander and Liff, as well as Alexander, Liff, and Morrison, and that Baxter’s evidence of secondary considerations was weak, the Board nevertheless determined that Alexander did not teach or render obvious the verification limitation and that combinations of Alexander, Liff, and Morrison did not teach or render obvious the highlighting limitation.
Becton appealed.
II. The Federal Circuit
The Federal Circuit (“the Court”) unanimously revered the Board’s conclusion of non-obviousness because the determination regarding the verification and highlighting limitations is not supported by substantial evidence.
(i) The Verification Limitation
Alexander discloses in a relevant part: “[I]n some embodiments, a remote pharmacist may supervise pharmacy work as it is being performed. For example, in one embodiment, a remote pharmacist may verify each step as it is performed and may provide an indication to a non-pharmacist per- forming the pharmacy that the step was performed correctly. In such an example, the remote pharmacist may provide verification feedback via the same collaboration software, or via another method, such as by telephone.” Alexander, col. 9 ll. 47–54 (emphasis added).
Relying on the above-cited portion of Alexander, the Board found persuasive Baxter’s argument that Alexander “only discusses that ‘a remote pharmacist may verify each step’; not that the remote pharmacist must verify each and every step before the operator is allowed to proceed” (emphasis added).
The Court concluded that the Board’s determination that Alexander does not teach the verification limitation is not supported by substantial evidence because, among other things, the Court found it quite clear that “[i]n the context of Alexander, “may” does not mean “occasionally,” but rather that one “may” choose to systematically check each step.”
(ii) The Highlighting Limitation
Becton did not argue that Liff “directly discloses highlighting to receive additional language about a drug preparation step.” Instead, Becton argued that “Liff discloses basic computer functionality—i.e., using prompts that can be highlighted by the operator to receive additional information—that would render the highlighting limitation obvious when applied in combination with other references,” primarily Alexander.
In support of petition for inter partes review, Dr. Young testified in his declaration that Liff “teaches that the user can highlight various inputs and information displayed on the screen, as illustrated in Figure 14F.”
The Board found that Liff taught “highlight[ing] patient characteristics when dispensing a prepackaged medication.” Baxter did not contend that this aspect of the Board’s decision was erroneous.
Nevertheless, while finding that “this present[ed] a close case,” the Board determined, that “Dr. Young fail[ed] to explain why Liff’s teaching to highlight patient characteristics when dispensing a prepackaged medication would lead one of ordinary skill to highlight prompts in a drug formulation context to receive additional information relative to one particular step in that process, or even what additional information might be relevant.” In addition, the Board found that Becton’s arguments with respect to Morrison did not address the deficiency in its position based on Alexander and Liff.
In contrast, citing KSR (“[a] person of ordinary skill is also a person of ordinary creativity, not an automaton”), the Court concluded that the Board erred in looking to Liff as the only source a person of ordinary skill would consider for what “additional information might be relevant.” The Court reached an opposite conclusion by citing following Dr. Young’s testimony:
“[a] person of ordinary skill in the art would have understood that additional information could be displayed on the tabs taught by Liff” and that “such information could have included the text of the order itself, information relating to who or how the order should be prepared, or where the or- der should be dispensed.”
“[a] medication dose order for compounding a pharmaceutical would have been accompanied by directions for how the dose should be prepared, including step-by-step directions for preparing the dose.”
(iii) An Alternative Ground
As an alternative ground to affirm the Board’s determination of non-obviousness, Baxter argues that the Board erred in determining that Alexander is prior art under 35 U.S.C. § 102(e)(2) (pre-AIA).
It is undisputed that the filing date of the application for Alexander is February 11, 2005, which is before the earliest filing date of the application for the ’579 patent, October 13, 2008; that the Alexander claims were granted; and that the application for Alexander was filed by another.
However, based on the fact that all claims in Alexander (granted on February 12, 2013) were cancelled on February 15, 2018, following inter partes review, Baxter argued that “because the Alexander ‘grant’ had been revoked, it can no longer qualify as a patent ‘granted’ as required for prior art status under Section 102(e)(2).”
The Court rejected Baxter’s argument because “[t]he text of the statute requires only that the patent be “granted,” meaning the “grant[]” has occurred. 35 U.S.C. § 102(e)(2) (pre-AIA)” and “[t]he statute [thus] does not require that the patent be currently valid.”
(iv) Secondary Considerations
The Court rejected Baxter’s argument because “Baxter does not meaningfully argue that the weak showing of secondary considerations here could overcome the showing of obviousness based on the prior art.”
Takeaway
· In analysis of obviousness, a person of ordinary skill would also consider a source other than cited prior art references (petitioner’s testimony in this case).
· Cancellation of all the claims of a patent does not affect the status of the patent as pre-AIA Section 102(e)(2) reference.
No likelihood of confusion with the mark BLUE INDUSTRY and opposer’s numerous marks having INDUSTRY as an element
| June 25, 2021
Pure & Simple Concepts, Inc. v. I H W Management Limited, DBA Finchley Group (non-precedential)
Decided on May 24, 2021
Moore, Reyna, Chen (opinion by Reyna)
Summary
The Court of Appeals for the Federal Circuit (“the CAFC”) affirmed the Board’s determination of no likelihood of confusion or dilution between numerous marks of Pure & Simple Concepts, Inc. (hereinafter “P&S”) having the shared term “INDUSTRY” and “BLUE INDUSTRY” mark of I H W Management Limited, d/b/a The Finchley Group (hereinafter “Fincley”).
Details
P&S owns eight registered trademarks which all use the word “INDUSTRY” and licenses the use of these marks in connection with apparel items. On April 30, 2015, Finchley filed an application to register the mark BLUE INDUSTRY for various clothing items. P&S opposed registration of Finchley’s mark under Section 2(d) and 43(c) of the Lanham Act on the grounds of likelihood of confusion and likelihood of dilution by blurring based on P&S’s previous use and registration of its numerous INDUSTRY marks. The Board dismissed the opposition, finding that P&S failed to prove a likelihood of confusion, and that P&S failed to establish the critical element of fame for dilution.
P&S appealed to the CAFC, contending that the Board erred by (1) not considering all relevant DuPont factors; (2) determining the word “BLUE” to be the dominant term in Finchley’s mark; (3) relying heavily on third-party registrations; and (4) failing to find P&S’s family of marks as being famous.
First, in arguing that the Board erred by not considering all relevant DuPont factors, P&S contended that the Board did not consider that clothing items are more likely to be purchased on an impulse, and therefore, consumers are more likely to be confused. Finchley argued that this argument concerns the DuPont factor 4, which P&S presented no evidence before the Board. The CAFC agreed with Finchley, finding that P&S failed to present the evidence, and accordingly, P&S forfeited argument as to this factor.
Next, P&S contended that the Board erred in concluding that “BLUE” is the dominant term in the commercial impression created by Finchley’s mark. While it is not proper to dissect a mark, “one feature of a mark may be more significant than other features, and [thus] it is proper to give greater force and effect to that dominant feature.” Giant Food, Inc. v. Nation’s Foodservice, Inc., 710 F.2d 1565, 1570 (Fed. Cir. 1983). P&S cited as an example, Trump v. Caesars World, Inc., 645 F. Supp. 1015, 1019 (D.N.J. 1986), where the second word, “Palace,” was found to be dominant in the marks TRUMP PALACE and CEASER’S PALACE. However, the CAFC determined that the Board’s finding that BLUE to be the lead term in Finchley’s mark, and that the term BLUE is most likely to be impressed upon the minds of the purchasers and be remembered was supported by substantial evidence.
Third, P&S argued that the Board erred by heavily relying on third-party registrations. P&S argued that some of these third-party registrations were listed twice, some were canceled, some had no evidence of use, and some listed different goods. Nevertheless, the CAFC affirmed that the term “INDUSTRY,” or the plural thereof, has been registered by numerous third parties to identify clothing and apparel items, and therefore, the term is weak, and the scope is limited as applied to clothing items.
Finally, as to P&S’s dilution claim, the Board determined that the number of registered marks by third parties having the INDUSTRY element precluded a finding that P&S owns a family of marks for the shared INDUSTRY element. In addition, the evidence presented by P&S was insufficient to prove that the marks were famous. The CAFC agreed with the Board’s finding of P&S’s dilution claim.
The CAFC found the Board’s findings are supported by substantial evidence, and the Board correctly found there was no likelihood of confusion of dilution.
Takeaway
- Certain portions of a mark can be determined as being dominant.
- Third party registrations are relevant in proving weakness of certain portions of a mark.
Tags: Dilution > Likelihood of Confusion under 15 U.S.C. § 1052(d) > Trademark
Making DJ Jurisdiction Easier to Maintain
| June 22, 2021
Trimble Inc. v. PerDiemCo LLC
Decided on May 12, 2021
Opinion by: Dyk, Newman, and Hughes
Summary:
How many letters, emails, and/or telephone calls from an out-of-state patent owner to an alleged patent infringer does it take to establish specific personal jurisdiction over that out-of-state patent owner in the alleged infringer’s home state? Somewhere between 3 and 22, depending on the nature of those communications.
Procedural History:
Trimble and Innovative Software Engineering (ISE) filed a lawsuit in its home state (California), seeking declaratory judgment that it doesn’t infringe out-of-state (Texas) PerDiemCo’s patents. The district court dismissed the case for lack of specific personal jurisdiction over PerDiemCo, relying on Red Wing Shoe Co. v. Hockerson-Halberstadt, Inc., 148 F.3d 1355, 1361 (Fed. Cir. 1998) (“[a] patentee should not subject itself to personal jurisdiction in a forum solely by informing a party who happens to be located there of suspected infringement” because “[g]rounding personal jurisdiction on such contacts alone would not comport with principles of fairness.”). The Federal Circuit reversed, finding specific personal jurisdiction.
Background:
PerDiemCo is a Texas LLC owning eleven geofencing patents monitoring a vehicle’s entry or exit from a preset area, electronically logging hours and activities of the vehicle’s driver. PerDiemCo’s sole owner, officer, and employee is Robert Babayi, a patent attorney living and working in Washington, DC, who rents office space in Marshall, Texas, that had never been visited.
Trimble is incorporated in Delaware and headquartered in Sunnyvale, CA. ISE is a wholly owned subsidiary LLC of Trimble, headquartered in Iowa.
Mr. Babayi sent a letter to ISE in Iowa offering a nonexclusive license and including an unfiled patent infringement complaint for the Northern District of Iowa and a claim chart detailing the alleged infringement. ISE forwarded that letter to Trimble’s Chief IP Counsel in Colorado, who was the point of contact for this matter. Mr. Babayi communicated “at least twenty-two times” by letter, email, and telephone calls with Trimble’s IP Counsel in Colorado, to negotiate and to further substantiate infringement allegations, including Trimble’s products, more patents, and more claim charts. PerDiemCo also threatened to sue in the Eastern District of Texas, identifying local counsel.
Personal Jurisdiction Primers:
- PerDiemCo’s communications with Trimble’s IP Counsel in Colorado are considered, for personal jurisdiction, purposefully directed to the company at its headquarters (in California), not to the location of counsel. See, Maxchief Investments Ltd. v. Wok & Pan, Ind., Inc., 909 F.3d 1134, 1139 (Fed. Cir. 2018).
- “[A] tribunal’s authority [to exercise personal jurisdiction over a defendant] depends on the defendant’s having such ‘contacts’ with the forum State that ‘the maintenance of the suit’ is ‘reasonable, in the context of our federal system of government,’ and ‘does not offend traditional notions of fair play and substantial justice.’” “The contacts needed for [specific] jurisdiction often go by the name ‘purposeful availment.’” Ford Motor Co. v. Mont. Eighth Jud. Dist. Ct., 141 S. Ct. 1017, 1024 (2021) (quoting Int’l Shoe Co. v. Washington, 326 U.S. 310, 316-317 (1945)).
- From Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985) and World-Wide Volkswagon Corp. v. Woodson, 444 U.S. 286 (1980), courts determine whether the exercise of jurisdiction would “comport with fair play and substantial justice” by considering five factors: (1) the burden on the defendant; (2) the forum State’s interest in adjudicating the dispute; (3) the plaintiff’s interest in obtaining convenient and effective relief; (4) the interstate judicial system’s interest in obtaining the most efficient resolution of controversies; and (5) the shared interest of the several States in furthering fundamental substantive social policies.
Decision:
In Red Wing, a cease-and-desist letter was deemed “more closely akin to an offer for settlement of a disputed claim rather than an arms-length negotiation in anticipation of a long-term continuing business relationship.” Accordingly, in Red Wing, this court held that “[p]rinciples of fair play and substantial justice afford a patentee sufficient latitude to inform others of its patent rights without subjecting itself to jurisdiction in a foreign forum.” However, this year’s Supreme Court Ford decision and other post-Red Wing Supreme Court decisions have emphasized that “analysis of personal jurisdiction cannot rest on special patent policies.”
Repeated communications stent into a state may create specific personal jurisdiction, depending on the nature and scope of such communications. Quill Corp. v. North Dakota, 504 U.S 298, 308 (1992). And, the out-of-state defendant’s “negotiation efforts, although accomplished through telephone and mail, can still be considered as activities ‘purposefully directed’ at residents of [the forum].” Inamed Corp. v. Kuzmak, 249 F.3d 1356, 1362 (Fed. Cir. 2001) (applying Quill). Personal jurisdiction was held to be reasonable after the out-of-state defendant sent communications to eleven banks located in the forum state identifying patents, alleging infringement, and offering non-exclusive licenses, rejecting Red Wing and its progeny as having created a rule that “the proposition that patent enforcement letters can never provide the basis for jurisdiction in a declaratory judgment action.” Jack Henry & Associates, Inc. v. Plano Encryption Technologies LLC, 910 F.3d 1199, 1201, 1206 (Fed. Cir. 2018); see also, Genetic Veterinary Sciences, Inc. v. Laboklin, GmbH & Co. KG, 933 F.3d 1302, 1312 (Fed. Cir. 2019).
Beyond the sending of communications into a forum, DJ jurisdiction can also be premised on other contacts, such as “hiring an attorney or patent agent in the forum state to prosecute a patent application that leads to the asserted patent, see Elecs. for Imaging, Inc. v. Coyle, 340 F.3d 1344, 1351 (Fed. Cir. 2003); physically entering the forum to demonstrate the technology underlying the patent to the eventual plaintiff, id., or to discuss infringement contentions with the eventual plaintiff, Xilinx, Inc. v. Papst Licensing GmbH & Co. KG, 848 F.3d 1346, 1357 (Fed. Cir. 2017); the presence of ‘an exclusive licensee … doing business in the forum state,’ Brekenridge Pharm., Inc. v. Metabolite Labs., Inc., 444 F.3d 1356, 1366-67 (Fed. Cir. 2006); and ‘extra-judicial patent enforcement’ targeting business activities in the forum state, Campbell Pet Co. v. Miale, 542 F.3d 879, 886 (Fed. Cir. 2008).”
The Supreme Court’s recent Ford decision reinforces “that a broad set of a defendant’s contacts with a forum are relevant to the minimum contacts analysis.” In Ford, personal jurisdiction could be exercised over Ford even though the two types of vehicles involved in the accident were not sold in the forum states. Specific personal jurisdiction simply “demands that the suit ‘arise out of or relate to the defendant’s contacts with the forum.’” So, the broader efforts by Ford in selling similar vehicles and having dealerships in the forum states established specific personal jurisdiction.
Unlike Red Wing, which involved a total of three letters (asserting patent infringement and offering a nonexclusive license), this case involved twenty-two communications, “an extensive number of contacts with the forum in a short period of time [three months].” And unlike Red Wing “solely…informing a party who happens to be located [in the forum state] of suspected infringement,” this case’s communications continually amplified threats of infringement, including continually adding more patents, more products, suggesting mediation to reach a settlement on infringement allegations, and threat of suit in EDTx, identifying counsel that PerDiemCo planned to use. As such, “PerDiemCo’s attempts to extract a license in this case are much more akin to ‘an arms-length negotiation in anticipation of a long-term continuing business relationship’ over which a district court may exercise jurisdiction.”
As for whether specific personal jurisdiction would comport with fair play and substantial justice, the court found no fairness concerns as follows:
- Burden on the defendant: PerDiemCo’s office in Texas is “pretextual” (not an operating company, but merely an IP portfolio owner, with no employees in Texas) and is far from Washington, DC where Mr. Babayi lives and works. So, if Texas is ok, so is California.
- Forum state’s interest in adjudicating the dispute: ND Cal. has significant interest since Trimble is a resident there.
- Plaintiff’s interest in obtaining convenient and effective relief: Trimble is near the federal district court.
- Interstate judicial system’s interest in obtaining the most efficient resolution of controversies: no favor either way.
- The shared interest of the several states in furthering fundamental substantive social polices: not applicable.
Takeaways:
- This case is a good refresher for specific personal jurisdiction in the DJ action arena for patent owners and accused infringers.
- Red Wing is NOT overturned. Quite the contrary, the court quotes from the Supreme Court’s recent Ford decision that treats “isolated or sporadic [contacts] differently from continuous ones,” and confirms that “Red Wing remains correctly decided with respect to the limited number of communications involved in that case.” The court only emphasizes that “there is no general rule that demand letters can never create specific personal jurisdiction.”
- In Red Wing, the patentee’s first letter asserted patent infringement and offered a nonexclusive license. The second letter granted an extension of time for a response and asserted more products as infringing the patent. The third letter rebutted Red Wing’s noninfringement analysis and continued to offer to negotiate a nonexclusive license. So, there was some “amplification” in the second letter, just like in this case. But, the continued back and forth negotiations in Red Wing was much more limited than in this case. Where do we cross the Red Wing threshold and enter into specific personal jurisdiction for a DJ action? It is not as simple as somewhere between 3 and 22. It is the nature of the communications – the continuing of negotiations “to extract a license” that likens the behavior/communications to “an arms-length negotiation in anticipation of a long-term continuing business relationship.”
- From this case, patent owners must be careful to avoid continued communications, whether by letter, email, or telephone, that as a whole can be construed to be a continuation of negotiations to extract a license or “an arms-length negotiation in anticipation of a long-term continuing business relationship.” If the desired nonexclusive license doesn’t look promising after just a handful of contacts, this case suggests that it is safer for the patent owner to hold off further back and forth negotiations and file a complaint in the patent owner’s preferred forum state, otherwise risk a DJ action in the accused infringer’s home court. For the accused infringer, this case suggests that stringing the patent owner out and creating more back and forth communications would help secure specific personal jurisdiction for a DJ action in the accused infringer’s home court.
Lying in a Deposition – Never a Good Policy
| June 2, 2021
Cap Export, LLC v. Zinus, Inc.
Decided on May 5, 2021
Summary
Rule 60(b)(3) relieves a patent challenger of a final judgment entered in favor of a patentee where the patent challenger with due diligence could not discover a later-revealed fraud committed by the patentee during the underlying litigation in which the deposed patentee’s witness lied to conceal his knowledge of on-sale prior art determined to be highly material to the validity of the patent.
Details
Zinus owns U.S. Patent No. 8,931,123 (“the ’123 patent”) entitled “Assemblable mattress support whose components fit inside the headboard.” The invention allows for packing various components of a bed into its headboard compartment for easy shipping in a compact state. The concept may be seen in one of the ‘123 patent figures:
The application that resulted in the ‘123 patent was filed in September 2013.
In 2016, Cap Export, LLC (“Cap Export”) sought declaratory judgment of invalidity and noninfringement of the ‘123 patent in the Central District of California. The lawsuit eventually resulted in the district court upholding the validity of the ‘123 patent claims as not anticipated or obvious over all prior art references considered. The final judgment stipulated and entered in favor of Zinus included payment of $1.1 million in damages to Zinus, and a permanent injunction against Cap Export[1]. Particularly relevant to the present case is the fact that in the course of the lawsuit, Cap Export deposed Colin Lawrie, Zinus’s president and expert witness, as to his knowledge of various prior art items.
In 2019, Zinus sued another company for infringement of the ‘123 patent. This second lawsuit prompted Cap Export to learn that Zinus’s group company had bought hundreds of beds manufactured by a foreign company which apparently had a bed-in-a-headboard feature, before the filing date of the ‘123 patent. Colin Lawrie, the aforementioned Zinus’s president, appears to be involved in this transaction as the purchase invoice was signed by Lawrie himself.
Cap Export then timely filed a Rule 60(b)(3) motion for relief from the final judgment, alleging that Lawrie during the previous deposition lied to Cap Export’s counsel. Some questions and answers highlighted in the case include:
Q. Prior to September 2013 had you ever seen a bed that was shipped disassembled in one box?
A. No.
Q. Not even—I’m not talking about everything stored in the headboard, I’m just saying one box.
A. No, I don’t think I have.
In the Rule 60(b)(3) proceeding, Lawrie admitted that his deposition testimony was “literally incorrect” while denying intentional falsity because he had misunderstood the question to refer to a bed contained “in one box with all of the components in the headboard,” rather than a bed contained “in one box” (where most laypersons should know of the latter, if not the former).
The district court was not convinced, pointing to the fact that Cap Export’s counsel had rephrased the question to distinguish the two concepts. Also, emails were discovered showing repeated sales of the beds at issue to Zinus’s family companies, the record which Zinus admitted had been in its possession throughout the underlying litigation.
The district court set aside the final judgement under Rule 60(b)(3), finding that the purchased beds were “functionally identical in design” to the ’123 patent claims, and that Lawrie’s repeated denials of his knowledge of such beds amounted to affirmative misrepresentations. Zinus appealed.
On appeal, the Federal Circuit affirmed.
FRCP Rule 60(b)(3)
Rule 60(b)(3) relieves a losing party of a final judgment where an opposing party commits “fraud … , misrepresentation, or misconduct.” The Ninth Circuit applies an additional requirement that the fraud not be discoverable through “due diligence”[2]. A movant must prove by clear and convincing evidence that the opposing party has obtained the verdict in its favor through fraudulent conduct which “prevented the losing party from fully and fairly presenting the defense.” Since the issue is procedural, the Federal Circuit follows regional circuit law and reviews the district court decision for abuse of discretion.
Due Diligence in Discovering Fraud
Zinus’s main contention was that the due diligence requirement is not satisfied, arguing that the key evidence would have been discovered had Cap Export’s counsel taken more rigorous discovery measures[3] specific to patent litigation.
The Federal Circuit disagreed, finding that due diligence in discovering fraud is not about the lawyers’ lacking a requisite standard of care, but rather, the question is “whether a reasonable company in Cap Export’s position should have had reason to suspect the fraud … and, if so, took reasonable steps to investigate the fraud.”
Here, Cap Export met the requirement because there was no reason to suspect the fraud in the first place. Lawrie’s repeated denials in the deposition testimony, combined with the impossibility to reach the concealed evidence despite numerous search efforts by Cap Export and the general unavailability of such evidence, forestalled an initial suspicion of fraud which would otherwise call for further inquiry into the possible misconduct.
Opponent’s Fraud Preventing Fair and Full Defense
The Federal Circuit also found that the district court had not abuse its discretion in judging other parts of Rule 60(b)(3) jurisprudence.
As to the existence of fraud, the Federal Circuit approved the district court’s finding of affirmative misrepresentations. There is no clear error where the district court rejected Lawrie’s explanation that the false testimony arose from misunderstanding and was unintentional, which lacks credibility given the fact that the deposition occurred within a few years from the sales at issue.
As to the frustration of fairness and fullness, the Federal Circuit noted that Rule 60(b)(3) standard does not require showing that the result would have been different but for the fraudulently withheld information, but showing the evidence’s “likely worth” is sufficient to establish the harm. As such, the concealed prior art does not have to “qualify as invalidating prior art,” but being “highly material” suffices.
The Federal Circuit endorsed the district court’s judgment that the concealed evidence “would have been material” and its unavailability to Cap Export prevented it from fully and fairly presenting its case. The determination rests on the underlying factual findings that the on-sale prior art is “functionally identical in design” to the ‘123 patent claims, and that without the misrepresentations, the evidence would have been considered by the court in its obvious and anticipation analysis.
The Opinion’s closing remarks appear to suggest an implication of the procedural rules such as Rule 60(b)(3) in allowing the patent system to achieve its core purpose of serving the public interest. Legitimacy of patents is preserved by warding off fraudulent conduct in proceedings before the court, the establishment which works only where parties give entire information for a full and fair determination of their controversy.
Takeaway
- A favorable verdict procured through fraud will be vacated under Rule 60(b)(3).
- Due diligence requirement under Rule 60(b)(3) is unique to the Ninth Circuit. In cases involving the patentee’s knowledge about prior art, reasonableness in the patent challenger’s discovery and investigation tactics, even if they didn’t expose a lie, likely satisfies this additional requirement.
- To establish the evidentiary value of the concealed prior art in a Rule 60(b)(3) motion, a showing that the information is “highly material” to presenting the movant’s case, if not “invalidating” the patent, would be sufficient.
- In the present case, the second lawsuit filed by the patentee (i.e., the lying party) led to the discovery of its own fraud. What could the patent challenger have done to safeguard against the patentee’s lies in the first lawsuit? Perhaps taking patent-specific standard discovery measures such as those noted at footnote 3 might help. Watch out for a patentee’s past transactions involving products manufactured by a third party, which might be “highly material” on-sale prior art simply because of its functional or design similarity to the patent claims.
- After a final judgment is entered, a losing party may benefit from monitoring the opponent’s litigation activity involving the patent at issue, which might lead to discovery of previously unknown information, allowing for a potential Rule 60(b)(3) relief.
[1] And a third-party defendant added during the litigation. The parties on Cap Export’s side are referred to collectively as Cap Export.
[2] The Federal Circuit notes that the diligence requirement is at odds with the plain text of Rule 60(b)(3) and does not appear to be adopted in other regional courts of appeals. Compare Rule 60(b)(2), which states that “newly discovered evidence that, with reasonable diligence, could not have been discovered in time to move for a new trial.”
[3] Such as “[to] specifically seek prior art [in a written discovery request]; … [to] depose the inventor of the ’123 patent; and [to take] a deposition of Lawrie … [specifically] under Federal Rule of Civil Procedure 30(b)(6).”
Inventors’ Agreements will not protect a former employer from the inventors’ future related work
| May 27, 2021
Bio-Rad Laboratories, Inc. v. International Trade Commission, 10X Genomics Inc.
Decided on April 29, 2021
Before Taranto, Chen and Stoll. Opinion by Taranto.
Summary:
Bio-Rad attempted to assert that language in inventors’ agreements which were signed by two of the named inventors in the patents asserted against Bio-Rad made the patents their intellectual property by being subject to assignment. The CAFC disagreed noting that the agreements were too general is scope as asserted and 10X had failed to assert an earlier conception date.
Details
- Background
10X Genomics Inc. filed a complaint against Bio-Rad Laboratories, Inc. with the International Trade Commission, alleging that Bio-Rad’s importation and sale of microfluidic systems and components used for gene sequencing or related analyses violated section 337 of the Tariff Act of 1930, 19 U.S.C. § 1337.
The ITC found that Bio-Rad infringed the patent claims at issue and also that 10X practiced the claims, the latter fact satisfying the requirement of a domestic industry relating to the articles protected by the patent. Bio-Rad argued on appeal that the Commission erred in finding that Bio-Rad infringes the asserted claims of the patents, in finding that 10X’s domestic products practice the asserted claims of the ’530 patent, and in rejecting Bio-Rad’s indefiniteness challenge to the asserted claims of the ’530 patent. The CAFC disagreed and affirmed the Commission. These aspects of the appeal are not the subject of this paper.
In addition, the ITC rejected Bio-Rad’s defense that it could not be liable for infringement because it co-owned the asserted 10X patents under assignment provisions that two of the named inventors signed when they were employees of Bio-Rad (and its predecessor), even though the inventions claimed were not made until after the employment.
Regarding the timeline of invents of the work of the two inventors, around mid-2010, the two named inventors of the 10X patents—Dr. Hindson and Dr. Saxonov—were working for a company called QuantaLife, Inc., which Dr. Hindson had co-founded. Each of them signed an agreement (Dr. Hindson in 2009, Dr. Saxonov in 2010) that provided, as relevant here:
(a) Employee agrees to disclose promptly to the Company the full details of any and all ideas, processes, recipes, trademarks and service marks, works, inventions, discoveries, marketing and business ideas, and improvements or enhancements to any of the foregoing (“IP”), that Employee conceives, develops or creates alone or with the aid of others during the term of Employee’s employment with the Company . . . .
(b) Employee shall assign to the Company, with-out further consideration, Employee’s entire right to any IP described in the preceding subsection, which shall be the sole and exclusive property of the Company whether or not patentable.
In 2011, Bio-Rad acquired QuantaLife, and Drs. Hindson and Saxonov became Bio-Rad employees. In October of that year, they each signed an agreement that provided, as relevant here:
All inventions (including new contributions, improvements, designs, developments, ideas, discoveries, copyrightable material, or trade secrets) which I may solely or jointly conceive, develop or reduce to practice during the period of my employment by Bio-Rad shall be assigned to Bio-Rad.
Drs. Hindson and Saxonov left Bio-Rad in April 2012, and together they formed 10X in July 2012. By August 2012, 10X filed the first of several provisional patent applications that focused on using microcapsules in capsule partitions or droplet partition. By January 2013, the 10X inventors had conceived of a different architecture: “gel bead in emulsion” (GEM). The GEM architecture involves “part-tioning nucleic acids, DNA or RNA, in droplets together with gel beads that are used to deliver the barcodes into the droplet,” where the “barcodes are released from the gel beads using a stimulus.” The asserted 10X patent claims all involve this architecture. The CAFC found that the common core of the inventions in the asserted 10X patents is the use of gel beads with releasably attached oligonucleotide barcode molecules as a system for delivery of barcodes to nucleic acid segments.
After 10X began selling its products, including the GemCode and Chromium products, Bio-Rad released its own ddSEQ™ system, whose ordinary use, 10X alleges, practices its patents. The ddSEQ system uses oligonucleotide molecules that are attached to a gel bead and can be released from the bead via a stimulus.
- Opinion
On appeal, Bio-Rad renewed its argument, made as a defense to infringement, that it co-owns the three assert-ed patents based on the assignment provisions in the employment contracts signed by Drs. Hindson and Sax-onov. The CAFC noted that it is undisputed that, if Bio-Rad is a co-owner, it cannot be an infringer, per 35 U.S.C. § 262 (“[E]ach of the joint owners of a patent may make, use, offer to sell, or sell the patented invention . . . without the consent of and without accounting to the other owners.”). However, co-ownership itself was disputed.
The CAFC first noted that Bio-Rad did not present an alternative conception date (earlier than January 2013), and it lost the opportunity to argue conception of certain claim elements while Drs. Hindson and Saxonov were at QuantaLife.
The Court reasoned that Bio-Rad has furnished no persuasive basis for disturbing the Commission’s conclusion that the assignment provisions do not apply to a signatory’s ideas developed during the employment (with Bio-Rad or QuantaLife) solely because the ideas ended up contributing to a post-employment patentable invention in a way that supports co-inventorship of that eventual invention.
Examining the employee agreements, the CAFC found that the assignment provisions are limited temporally. The assignment provision of the QuantaLife agreement reaches only a “right to any IP described in the preceding section,” and the preceding (disclosure-duty) section is limited to IP “that Employee conceives, develops or creates alone or with the aid of others during the term of Employee’s employment with the Company,” before adding a limitation, stating: “All inventions . . . which I may solely or jointly conceive, develop, or reduce to practice during the period of my employment by Bio-Rad shall be assigned to Bio-Rad.”. Based thereon, the Court concluded that the most straightforward interpretation is that the assignment duty is limited to subject matter that itself could be protected as intellectual property before the termination of employment.
The Court went on to note that Bio-Rad did not argue or demonstrate, that a person’s work, just because it might one day turn out to contribute significantly to a later patentable invention and make the person a co-inventor, is itself protectible intellectual property before the patentable invention is made. Specifically, the CAFC stated:
Such work is merely one component of “possible intellectual property.” Bio-Rad Reply Br. at 3. In the case of a patent, it may be a step toward the potential ultimate existence of the only pertinent intellectual property, namely, a completed “invention,” but the pertinent intellectual property does not exist until at least conception of that invention. See, e.g., REG Synthetic Fuels, LLC v. Neste Oil Oyj, 841 F.3d 954, 958 (Fed. Cir. 2016); Dawson v. Dawson, 710 F.3d 1347, 1353 (Fed. Cir. 2013); Burroughs Wellcome Co. v. Barr Labs., Inc., 40 F.3d 1223, 1227–28 (Fed. Cir. 1994).
The panel reviewed the current fact pattern in light of previous decisions on the issue of inventor’s employment agreements. Of note, regarding the FilmTec case (FilmTec Corp. v Hydranautics, 982 F.2d 1546, 1548 (Fed. Cir. 1992)) cited by Bio-Rad involved language of an agreement, and language of the statutory command embodied in the agreement, that expressly assigned ownership to the United States of certain inventions as long as they were “conceived” during performance of government-supported work under a contract. The panel noted that in the Filmtec case the Court had examined the claimed invention, namely, a composition conceived during the term of the agreement, where conception meant the “‘formation in the mind of the inventor, of a definite and permanent idea of the complete and operative invention, as it is hereafter to be applied in practice.’” Id. at 1551–52 (quoting Hybritech Inc. v. Monoclonal Antibodies, Inc., 802 F.2d 1367, 1376 (Fed. Cir. 1986)).
We noted that the inventor, continuing to work on the invention after the agreement ended, added certain “narrow performance limitations in the claims.” See id. at 1553. But we treated the performance limitations as not adding anything of inventive significance because they were mere “refine[ments]” to the invention already conceived during the term of the agreement. See id. at 1552–53. We held the claimed inventions to have been conceived during the agreement—something that Bio-Rad accepts is not true here. We did not deem a mere joint inventor’s contribution to a post-agreement conception sufficient. (Emphasis added).
The CAFC additionally reviewed the Stanford case (Bd. of Trustees of the Leland Stanford Junior Univ. v. Roche Molecular Sys., Inc., 583 F.3d 832, 837 (Fed. Cir. 2009), aff’d on different grounds, 563 U.S. 776 (2011)), also relied on by Bio-Rad, involved quite different contract language from the language at issue. The case involved a Stanford employee who was spending time at Cetus in order to learn important new research techniques; as part of the arrangement, the Stanford employee signed an agreement with Cetus committing to assign to Cetus his “right, title, and interest” in the ideas, inventions, and improvements he conceived or made “as a consequence of” his work at Cetus. The CAFC noted that the Stanford case was not a former-employee case and the language at issue in Stanford did not contain the temporal limitation set forth in the agreements at issue. The Court concluded by noting that the agreement at issue here did not contain the broad “as a consequence of” language at issue in Stanford.
The Court also examined the relevant aspects of the governing law of California which provides a confirmatory reason not to read the assignment provision at issue here more broadly. California law recognizes significant policy constraints on employer agreements that restrain former employees in the practice of their profession, including agreements that require assignment of rights in post-employment inventions. The Court noted that substantial questions about compliance with that policy would be raised by an employer-employee agreement under which particular subject matter’s coverage by an assignment provision could not be determined at the time of employment, but depended on an unknown range of contingent future work, after the employment ended, to which the subject matter might sufficiently contribute. The reasons behind the policy being that such an agreement might deter a former employee from pursuing future work related to the subject matter and might deter a future employer from hiring that individual to work in the area. The CAFC concluded that the contract language at issue does not demand a reading that would test the California-law constraints and they would not “test those constraints here by adopting a broader reading of the contract language than the straightforward reading we have identified.”
Finally, Bio-Rad had argued that Drs. Hindson and Saxonov conceived of key aspects of the claimed inventions, if not the entirety of the claims, at QuantaLife/Bio-Rad. The Commission had determined that many of these “ideas” are at a level of generality that cannot support joint inventorship or (sometimes and) involve nothing more than elements in the already-published prior art. Specifically, Bio-Rad contended that at least three ideas developed at QuantaLife were not publicly known in the prior art at the time Drs. Hindson and Saxonov were working on them: tagging droplets to track a sample-reagent reaction complex, using double-junction microfluidics to combine sample and reagent, and using oligonucleotides as bar-codes to tag single cells within droplets. After analysis of these concepts, the Court found that these contentions, by their terms, look to a time long before the January 2013 conception date for the inventions at issue and Bio-Rad did not deny that these ideas were in the published prior art by the time of the conception of the inventions at issue or that they were, by then, readily available to the co-inventors on the patents involved. Hence, the Court concluded that the contentions are insufficient to establish co-inventorship.
Specifically, the Court found that to accept Bio-Rad’s contention after giving the required deference to the Commission’s factual (and, in one instance, procedural) rulings would require that they find joint inventorship simply because Drs. Hindson and Saxonov, while at Bio-Rad (or QuantaLife), were working on the overall, known problem—how to tag small DNA segments in microfluidics using droplets—that was the subject of widespread work in the art.
- Decision
The CAFC concluded that Bio-Rad had not demonstrated proper ownership of “ideas” as comported to be assigned to them by the two inventors employment agreements. The general concepts relied upon by Bio-Rad were insufficient as Bio-Rad had failed to assert an earlier conception date. As such, the Court affirmed the Commission’s ruling.
Take away
- Broad language in an employment agreement assigning rights to inventions will not suffice to protect an entity from future work performed by the employees at a different entity.
- Employee agreements assigning rights to inventions conceived while employed need to be structured such that they are clear as to what is conceived is considered the property of the entity. The entity should take steps to clarify “conception” during employment to provide evidence thereof.
An Improvement in Computational Accuracy Is Not a Technological Improvement
| May 20, 2021
In Re: Board of Trustees of the Leland Stanford Junior University
Decided on March 25, 2021
Prost, Lourie and Reyna. Opinion by Reyna.
Summary:
This case is an appeal from a PTAB decision that affirmed the Examiner’s rejection of the claims on the grounds that they involve patent ineligible subject matter. Leland Stanford Junior University’s patent to computerized statistical methods for determining haplotype phase were held by the CAFC to be to an abstract idea directed to the use of mathematical calculations and statistical modeling and that the claims lack an inventive concept that transforms the abstract idea into patent eligible subject matter. Thus, the CAFC affirmed the rejection on the grounds that the claims are to patent ineligible subject matter.
Details:
Leland Stanford Junior University’s (“Stanford”) patent application is to methods for determining haplotype phase which provides an indication of the parent from whom a gene has been inherited. The application discloses methods for inferring haplotype phase in a collection of unrelated individuals. The methods involve using a statistical tool called a hidden Markov model (“HMM”). The application uses a statistical model called PHASE-EM which allegedly operates more efficiently and accurately than the prior art PHASE model. The PHASE-EM uses a particular algorithm to predict haplotype phase.
Representative claim 1 recites:
1. A computerized method for inferring haplotype phase in a collection of unrelated individuals, comprising:
receiving genotype data describing human genotypes for a plurality of individuals and storing the genotype data on a memory of a computer system;
imputing an initial haplotype phase for each individual in the plurality of individuals based on a statistical model and storing the initial haplotype phase for each individual in the plurality of individuals on a computer system comprising a processor a memory;
building a data structure describing a Hidden Markov Model, where the data structure contains:
a set of imputed haplotype phases comprising the imputed initial haplotype phases for each individual in the plurality of individuals;
a set of parameters comprising local recombination rates and mutation rates;
wherein any change to the set of imputed haplotype phases contained within the data structure automatically results in re-computation of the set of parameters comprising local recombination rates and mutation rates contained within the data structure;
repeatedly randomly modifying at least one of the imputed initial haplotype phases in the set of imputed haplotype phases to automatically re-compute a new set of parameters comprising local recombination rates and mutation rates that are stored within the data structure;
automatically replacing an imputed haplotype phase for an individual with a randomly modified haplotype phase within the data structure, when the new set of parameters indicate that the randomly modified haplotype phase is more likely than an existing imputed haplotype phase;
extracting at least one final predicted haplotype phase from the data structure as a phased haplotype for an individual; and
storing the at least one final predicted haplotype phase for the individual on a memory of a computer system.
The PTAB determined that the claim describes receiving genotype data followed by mathematical operations of building a data structure describing an HMM and randomly modifying at least one imputed haplotype to automatically recompute the HMM’s parameters. Thus, the PTAB held that the claim is to patent ineligible abstract ideas such as mathematical relationships, formulas, equations and calculations. The PTAB further found that the additional elements in the claim recite generic steps of receiving and storing genotype data in a computer memory, extracting the predicted haplotype phase from the data structure, and storing it in a computer memory, and that these steps are well-known, routine and conventional. Thus, finding the claim ineligible under steps one and two of Alice, the PTAB affirmed the Examiner’s rejection as being to ineligible subject matter.
On appeal, the CAFC followed the two-step test under Alice for determining patent eligibility.
1. Determine whether the claims at issue are directed to a patent-ineligible concept such as laws of nature, natural phenomena, or abstract ideas. If so, proceed to step 2.
2. Examine the elements of each claim both individually and as an ordered combination to determine whether the claim contains an inventive concept sufficient to transform the nature of the claims into a patent-eligible application. If the claim elements involve well-understood, routine and conventional activity they do not constitute an inventive concept.
Under step one, the CAFC found that the claims are directed to abstract ideas including mathematical calculations and statistical modeling. Citing Parker v. Flook, 437 U.S. 584, 595 (1978), the CAFC stated that mathematical algorithms for performing calculations, without more, are patent ineligible under § 101. The CAFC determined that claim 1 involves “building a data structure describing an HMM,” and then “repeatedly randomly modifying at least one of the imputed haplotype phases” to automatically recompute parameters of the HMM until the parameters indicate that the most likely haplotype is found. The CAFC also found that the steps of receiving genotype data, imputing an initial haplotype phase, extracting the final predicted haplotype phase from the data structure, and storing it in a computer memory do not change claim 1 from an abstract idea to a practical application. The CAFC concluded that “Claim 1 recites no application, concrete or otherwise, beyond storing the haplotype phase.”
Stanford argued that the claim provides an improvement of a technological process because the claimed invention provides greater efficiency in computing haplotype phase. However, the CAFC stated that this argument was forfeited because it was not raised before the PTAB.
Stanford also argued that the claimed invention provides an improvement in the accuracy of haplotype predictions rendering claim 1 a practical application rather than an abstract idea. However, the CAFC stated that “the improvement in computational accuracy alleged here does not qualify as an improvement to a technological process; rather, it is merely an enhancement to the abstract mathematical calculation of haplotype phase itself.” The CAFC concluded that “[t]he different use of a mathematical calculation, even one that yields different or better results, does not render patent eligible subject matter.”
Under step two, the CAFC determined that there is no inventive concept that would transform the use of the claimed algorithms and mathematical calculations from an abstract idea to patent eligible subject matter. The steps of receiving, extracting and storing data are well-known, routine and conventional steps taken when executing a mathematical algorithm on a regular computer. The CAFC further stated that claim 1 does not require or result in a specialized computer or a computer with a specialized memory or processor.
Stanford argued that the PTAB failed to consider all the elements of claim 1 as an ordered combination. Specifically, they stated that it is the specific combination of steps in claim 1 “that makes the process novel” and “that provides the increased accuracy over other methods.” The CAFC did not agree stating that the PTAB was correct in its determination that claim 1 merely “appends the abstract calculations to the well-understood, routine, and conventional steps of receiving and storing data in a computer memory and extracting a predicted haplotype.” The CAFC further stated that even if a specific or different combination of mathematical steps yields more accurate haplotype predictions than previously achievable under the prior art, that is not enough to transform the abstract idea in claim 1 into a patent eligible application.
Comments
A key point from this case is that an improvement in computational accuracy does not qualify as an improvement to a technological process. It is merely considered an enhancement to an abstract mathematical calculation. Also, it seems that Stanford made a mistake by not arguing at the PTAB that the claimed invention provides the technological advance of greater efficiency in computing haplotype phase. The CAFC considered this argument forfeited. It is not clear if this argument would have saved Stanford’s patent application, but it certainly would have helped their case.
If it cannot be made, it does not exist!
| May 11, 2021
Raytheon Technologies Corp. v. General Electric Co. (Fed. Cir. 2021)
Decided on April 16, 2021
Lourie, Hughes, and Chen (author).
Summary:
“A typical obviousness inquiry often turns on whether an asserted prior art reference teaches a particular disputed claim limitation or whether a skilled artisan would have been motivation at the time of the invention to combine the teachings of difference references.” In this case, the court tackled the question of enabling disclosure in the prior art reference, and what is required.
Raytheon owned U.S. Patent 9,695,751 (herein ‘751) directed to gas turbine engines. Raytheon appealed a final inter partes review decision of the Patent Trial and Appeal Board (the Board) finding claims 3 and 16 where unpatentable as obvious in view of the reference Knip. Claims 3 and 16 where the only pending claims after Raytheon disclaimed all other claims cited in the inter partes review.
“[T]he ‘751 patent generally claims a geared gas turbine engine with two turbines and a specific number of fan blades and turbine rotors and/or stages.” Further, the “key distinguishing feature of the claims is the recitation of a power density range that the patent describes as being ‘much higher than in the prior art.'”
Knip is a 1987 NASA technical memorandum that envisions superior performance characteristics for an imagined “advanced [turbofan] engine” “incorporating all composite materials.” Such a construction was undisputedly unattainable at that time, [but] an imagined application of these “revolutionary” composite materials to a turbofan engine allowed the author of Knip to assume aggressive performance parameters for an “advanced” engine including then-unachievable pressure ratios and turbine temperatures.” Although the reference discloses numerous performance parameters, it did not explicitly disclose SLTO thrust, turbine volume or power density as per the ‘751 patent. (SLTO = Sea Level Takeoff).
The Board ultimately found Knip rendered obvious the ‘751 patent because “it provided enough information to allow a skilled artisan to “determine a power density as defined in claim 1, and within the range proscribed in claim 1.” (Claim 3 was a dependent claim incorporating all limitation of claim 1; claim 16 depended on claim 15 which included the same argued limitations as claim 1).
The CAFC found that the PTAB erred by focusing on whether Knip enables a skilled artisan to calculate the power density of Knip’s contemplated “futuristic engine,” rather than considering “whether Knip enabled a skilled artisan to make and use the claimed invention.”
Specifically, “[i]n general, a prior art reference asserted under §103 does not necessarily have to enable its own disclosure, i.e., be ‘self-enabling,’ to be relevant to the obviousness inquiry.” That is, “a reference that does not provide an enabling disclosure for a particular claim limitation may nonetheless furnish the motivation to combine, and be combined with, another reference in which that limitation is enabled.” Thus, “[I]n the absence of such other supporting evidence to enable a skilled artisan to make the claimed invention, a standalone §103 reference must enable the portions of its disclosure being relied upon” This is “the same standard applied to anticipatory references.”
Here, the sole reference was Knip, and so the CAFC emphasized the question as being whether Knip enables the claimed invention not whether a skilled artisan “is provided with sufficient parameters in Knip to determine, without undue experimentation, a power density” as per the Boards focus. That CAFC noted that this position could have carried weight “if GE had presented other evidence to establish that a skilled artisan could have made the claimed turbofan engine with the recited power density. But no such other evidence was presented.”
Therefore, according to the CAFC, “Knip’s self-enablement (or lack thereof) is not only relevant to the enablement analysis, in this case it is dispositive.”
The CAFC discussed GE’s expert testimony finding it to be lacking, because its expert constructed “a computer model simulation of Knip’s imagined engine” rather than “suggesting that a skilled artisan could have actually built such an engine.” In contrast, Raytheon’s expert presented unrebutted evidence of non-enablement… detailing the unavailability of the revolutionary composite material contemplated by Knip.”
Lastly, GE had argued that a skilled artisan could achieve the claimed power density by optimizing Knip’s engine. The Board had affirmed this on the basis of “result-effective variable.” That CAFC rejected this, stating that “[i]f a skilled artisan cannot make Knip’s engine, a skilled artisan necessarily cannot optimize its power density.”
Accordingly, the CAFC reversed the PTAB’s finding.
Take-away:
- “[I]f an obviousness case is based on a non-self-enabled reference, and no other prior art reference or evidence would have enabled a skilled artisan to make the claimed invention, then the invention cannot be said to have been obvious.”
- If a single reference is used in a 103 rejection, and that single reference is non-self enabling, then allegations of optimization by the PTO is improper. That is, “if a skilled artisan cannot make..[it], a skilled artisan necessarily cannot optimize it…”
