CAFC Corrects PTAB’s Inventorship Analysis in First Appeal of AIA Derivation Proceeding

Yesterday, the U.S. Court of Appeals for the Federal Circuit issued a precedential decision in Global Health Solutions LLC v. Selner affirming the Patent Trial and Appeal Board (PTAB) in the first appeal of a derivation proceeding under the America Invents Act (AIA) litigated at the Board. Although the Federal Circuit corrected the PTAB on the proper analysis for derivation proceedings in light of the AIA’s related first-to-file provisions, the appellate court found no reversible error in the Board’s determination that Marc Selner could not have derived the invention at issue from GHS’ inventor because Selner proved an earlier conception of the invention.

Derivation Elements Unchanged Except to Reflect Change to First-to-File System

Selner and Bradley Burnham, the latter listed as the inventor on GHS’ competing patent application, collaborated on the development of a wound treatment ointment comprising polyhexamethylene biguanide (PHMB), an aqueous biocide, permanently suspended in petrolatum jelly without the use of skin-irritating emulsifiers. In the derivation proceeding, the dispute centered on which inventor conceived of heating the petrolatum and PHMB separately to different temperatures to render nanodroplets of the aqueous biocide polar, mutually repelling each other such that the PHMB nanodroplets remain permanently suspended without an emulsifier.

The Board ultimately found that, while both Selner and Burnham proved they conceived of the invention on the same day, timestamps on emails from Selner’s AOL account entered into evidence showed that he conceived of the inventive manufacturing method about three hours before Burnham proved conception. Because Selner showed an earlier time of conception, the Board ruled that GHS failed to prove that Selner derived the subject matter of his patent application from Burnham.

The Federal Circuit’s ruling began with a discussion of changes to derivation proceedings wrought by the AIA, which eliminated interference proceedings determining inventorship issues under the pre-AIA first-to-invent system. Whereas interference proceedings focused on the first party to invent, derivation proceedings ask whether an earlier filer derived the claimed invention from a party filing later. With Congress replacing interference with derivation proceedings without describing with any specificity what must be shown to prove derivation, the Federal Circuit concluded that “the required elements of a derivation claim have not changed other than to the extent necessary to reflect the transition from a first-to-invent to a first-to-file system of patent administration.”

Both pre-AIA interference and AIA derivation proceedings require the party asserting derivation to prove conception of the claimed subject matter prior to the adverse claimant’s conception, and then communication of that conception to the adverse claimant. Because the AIA changed the focus of inventorship from first-to-invent to first-to-file, petitioners claiming derivation must make the prima facie two-step showing of conception and communication of that conception prior to the respondent filing a patent application claiming the invention at issue, the Federal Circuit held. While pre-AIA interferences can provide helpful guidance, “[j]udges must take care not to allow interference proceedings to be inadvertently revived through AIA derivation proceedings,” the appellate court wrote.

Inventor Testimony Was Properly Corroborated by Email Language, Metadata

Although the Board erred in focusing on whether Selner or Burnham was the first to invent, the Federal Circuit found this error to be harmless. Selner needed only show that his conception was independent, which he proved by showing conception before Burnham. Thus the Board indirectly determined that Selner’s conception was independent such that the invention on his patent application could not have been derived from the inventor on GHS’ patent application.

With this correct standard in mind, the Federal Circuit proceeded to reject GHS’ series of arguments for reversing the PTAB’s determination of no derivation. First, the appellate court found that Selner’s testimony regarding independent conception was adequately corroborated by Selner’s emails, which were retrieved by a law clerk for Selner’s attorney before being proffered as evidence. While inventor testimony must be corroborated, previous Federal Circuit case law has stated that documentary evidence made contemporaneously with the inventive process provides the most reliable proof that the inventor’s testimony has been corroborated.

The PTAB did not err by placing substantial weight on Selner’s emails as corroborating evidence, the Federal Circuit held. GHS did not challenge the authenticity of the emails and the Board’s analysis of circumstantial evidence, including similarities in language in Burnham’s later email to Selner, led to findings of fact supported by substantial evidence. Further, email metadata including timestamps and email addresses were independent of any statements or documents produced by Selner.

The Federal Circuit rejected GHS’ arguments that the PTAB improperly shifted burdens, finding that the Board found Selner proved conception and not merely possession after careful evidentiary analysis. The Federal Circuit also agreed with the PTAB that Selner was not required to show reduction to practice in order to have fully conceived of an invention occurring in an unpredictable field such as PHMB-petrolatum jellies. GHS had argued in the alternative that Burnham should be listed as a co-inventor on Selner’s patent application, but the Federal Circuit found that GHS failed to preserve this argument by making a separation motion on joint inventorship before the Board complying with the motion requirements of 37 CFR § 42.22.

Finding that GHS’ remaining arguments lacked merit, the Federal Circuit affirmed the PTAB’s judgment for Selner and ordered that each party bear its own costs.

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