Earlier today, the United States Court of Appeals for the Federal Circuit overruled the determination of the Patent Trial and Appeal Board (PTAB) in three separate IPR proceedings. The Federal Circuit found the claims of U.S. Patent Nos. 7,742,053, 6,897,871, and 7,327,369 (i.e., the Unified Shader Patents) patentable on appeal. ATI Technologies ULC v. Iancu (Fed. Cir. April 11, 2019). The question at issue was whether ATI Technologies was diligent from the moment of conception through to the constructive reduction to practice. There was no question that ATI’s conception had pre-dated the prior art of concern. Upon reading this decision, it is difficult to understand exactly why or how the PTAB could get this issue so wrong. Indeed, this decision exemplifies why many criticize the PTAB as an institution.
Patents are often referred to as monopolies. But that is a fundamental misunderstanding of how patents work to enhance competition. The truth is that a patent is a natural anti-monopoly. In a functioning patent system, inventions become investible assets when they are patented, and the value of the invention increases as market demand increases. Because of the direct relationship between market demand and patent value, a patented invention can attract enough investment to compete with entrenched incumbents in the market for the invention. This effect introduces new competitors into the market who are protected against incumbents for a long enough period that they can survive after the patent expires. Thus, patents act to increase competition by introducing new competitors into the market and thereby create competitive markets. But perhaps even more important, some inventions deliver a strong dose of creative destruction to monopolistic incumbents who did not innovate fast enough, causing those companies to fail and clearing the market of dead weight, thus opening the market to innovative new companies. Patents are the ultimate anti-monopoly in a free market. But for this to work, the market must function undisturbed by crony laws and regulations. A patent must be a presumed valid “exclusive Right.”
Recently, I’ve written several articles laying the blame for the patent eligibility crisis squarely on the Federal Circuit. Yes, we all know the Supreme Court is obviously to blame. They are the court with primary national jurisdiction, and there can be no doubt that the Mayo v. Prometheus decision is the root of the patent eligibility problem because it intentionally conflates novelty and obviousness with patent eligibility. In my recent writings, and in a variety or presentations and speeches I have been giving across the country—from Utah to Orlando to Charlotte—I’ve criticized the Federal Circuit for not distinguishing Mayo and Alice on the facts. If we listen to the Supreme Court at least, at issue in both Mayo and Alice were unusually simple “inventions” that are really not innovations at all. As I filed my latest article, Eileen said that she thought it was good because it would provoke discussion since I disagreed with Judge Michel’s view in the interview with him she had just published. There was a long pause in our conversation. “Am I really disagreeing with Judge Michel?” I asked. Whenever I disagree with Judge Michel, I pause. It isn’t that I am unwilling to disagree with him, but, over the years, I have come to learn that, when one is going to disagree with Judge Michel, prudence dictates reevaluating your position.
Scott Elmer is Director, Office of Technology Licensing, at St. Jude Children’s Research Hospital, one of the leading pediatric cancer hospitals in the country. The institution is focused on treatment of and research on children’s catastrophic diseases, particularly leukemia and other cancers. The hospital costs about $2.8 million a day to run and is 100% free to patients. St. Jude and more than 46 of its staff have been the recipients of prestigious awards and achievements, including the 1996 Nobel Prize in Physiology or Medicine, which went to St. Jude faculty member, Peter C. Doherty. Recently, Elmer read Sherry Knowles’ John Marshall Intellectual Property Law Review article, Unconstitutional Application of 35 U.S.C. §101 by the U.S. Supreme Court and was inspired to write her in support of her argument that the Supreme Court’s misreading of the patent statute is causing real harm to inventors and industry on the ground. “I reached out to Sherry because I thought her article was well written and took a different approach to something that’s been a concern for a long time,” Elmer told IPWatchdog. “Sherry made the point that the Supreme Court’s more recent patent eligibility decisions have failed to recognize the patent statute’s reference to the term ‘discovery’ as a basis for the generation of patent-eligible subject matter, which particularly impacts diagnostics.”
On Monday, April 1, the Court of Appeals for the Federal Circuit issued a decision in Cleveland Clinic Foundation v. True Health Diagnostics affirming the invalidity of patents covering medical diagnostic tests for determining a patient’s risk for cardiovascular disease. The decision, which is nonprecedential and was decided along similar lines to another 2017 decision between the two parties, is yet another depressing sign that U.S. patent law is woefully inadequate when it comes to supporting important innovations in the biotech fields. Of particular note is the Federal Circuit’s finding against Cleveland Clinic’s argument that the district court didn’t give appropriate deference to subject matter eligibility guidance published by the U.S. Patent and Trademark Office (USPTO) as required by the U.S. Supreme Court’s 1944 decision in Skidmore v. Swift & Co. Although this argument related to USPTO guidelines published in 2016, it would seem to call into question the USPTO’s more recent revised subject matter eligibility guidance issued earlier this year by USPTO Director Andrei Iancu. This gives voice to fears that the “Iancu Effect” on subject matter eligibility won’t matter much if the Federal Circuit and other courts don’t adhere to the USPTO’s views on patent eligibility under Section 101.
This week in Other Barks & Bites: a trio of U.S. Senators introduce a bill for countries and municipal governments that want to register trademarks; Williams-Sonoma and Amazon go to court in trademark case over rights to resell merchandise; Apple wins a ruling that ends a seven-year long dispute over the iPad trademark; Prenda Law attorney at the center of a copyright settlement mill scheme could receive a prison term of 12.5 years; the Kardashians avoid an adverse ruling in a trademark case over the Khroma cosmetic line; the World Intellectual Property Organization unveils new AI-powered tools for trademark searches; and Poland’s ruling conservative party indicates freedom of speech concerns over the new EU copyright reforms.
During a break at IPWatchdog’s recent Patent Masters™ Symposium, former Federal Circuit Chief Judge Paul Michel went on record to express his grave concerns about the U.S. patent system and where he believes it’s headed. Like many of the Patent Masters, Michel’s view was decidedly grim, but he did express optimism about the new IP leadership in Congress. Following are Judge Michel’s remarks in full.
The Federal Circuit recently vacated a district court decision which found a patent for the antipsychotic drug “Saphris,” belonging to Forest Laboratories (Forest), valid as nonobvious, but not infringed by ANDA filers Alembic Pharmaceuticals Ltd. (Alembic) and Breckenridge Pharmaceuticals, Inc. (Breckenridge). See Forest Labs., LLC v. Sigmapharm Labs., LLC, Nos. 2017-2369, 2017-2370, 2017-2372, 2017-2373, 2017-2374, 2017-2375, 2017-2376, 2017-2389, 2017-2412, 2017-2436, 2017-2438, 2017-2440, 2017-2441, 2019 U.S. App. LEXIS 7485 (Fed. Cir. Mar. 14, 2019) (Before Prost, Dyk, and Moore, J.) (Opinion for the court, Moore, J.). The Court highlighted an unanswered question that the district court skimmed over at trial and took issue with a claim construction. The Court vacated and remanded for further proceedings on this basis. Alembic and Breckenridge were among a number of drug manufacturers that filed Abbreviated New Drug Applications (ANDA) to market generic versions of Saphris. Saphris is an antipsychotic containing asenapine maleate. Saphris is administered sublingually, meaning under the tongue. Forest sued the ANDA filers for patent infringement. At trial, the district court held that the relevant claims of asserted Patent No. 5,763,476 (“the ’476 patent”) were not invalid as obvious, and that Forest had not established infringement by Alembic or Breckenridge. Alembic and Breckenridge appealed the invalidity determination, and Forest cross-appealed the non-infringement decision as clearly erroneous. On appeal, the Federal Circuit vacated and remanded both the validity and infringement determinations for reconsideration under a correct claim construction of the term “excitation.”
Inequitable conduct remains the most powerful defense to patent infringement. In contrast to other defenses to patent infringement that require a claim-by-claim analysis, the defense of inequitable conduct is global. A finding of inequitable conduct renders the entire patent unenforceable. For this reason, the U.S. Court of Appeals for the Federal Circuit has referred to the defense of inequitable conduct as the “atom bomb of patent law” Aventis Pharma S.A. v. Amphastar Pharmaceutical, Inc., 525 F.3d 1334, 1349 (Fed.Cir.2008). Given the tremendous impact of the inequitable conduct defense, the Federal Circuit, in Therasense, Inc. v. Becton, Dickinson and Co., 649 F. 3d 1276 (Fed. Cir., 2011), has significantly increased the burden on patent infringers who assert this defense. Rather than needing to prove materiality in the context of 37 C.F.R. § 1.56 and intent to deceive, Therasense now requires an infringer prove “but for” materiality and a specific intent to deceive—a much higher burden than before. To the disappointment of those who believed that Therasense would spell the demise of inequitable conduct, this defense to patent infringement remains alive and well, although less prevalent than before. See Energy Heating, LLC v. Heat On-The-Fly LLC, 889. F.3d 1291 (Fed. Cir. 2018). Moreover, the Federal Circuit, in Gilead Sciences, Inc. v. Merck & Co. 890 F.3d 1231(Fed. Cir 2018), now seems to recognize an equitable defense (“business misconduct”) separate from inequitable conduct to penalize patentees for unethical behavior committed outside of the confines of patent prosecution before the United States Patent and Trademark Office (USPTO).
In ChargePoint Inc. v. SemaConnect, Inc., (2018-1739) the Federal Circuit inexplicably stated in its opinion that “[i]t is clear from the language of claim 1 that the claim involves an abstract idea—namely, the abstract idea of communicating requests to a remote server and receiving communications from that server, i.e., communication over a network.” The Court further stated, “[w]e therefore continue our analysis to determine whether the focus of claim 1, as a whole, is the abstract idea. As explained below, we conclude that it is.” In reaching this conclusion, the panel rationalized that “the broad claim language would cover any mechanism for implementing network communication on a charging station, thus preempting the entire industry’s ability to use networked charging stations. This confirms that claim 1 is indeed “directed to” the abstract idea of communication over a network to interact with network-attached devices.” As an electrical engineer and patent attorney, I am truly perplexed by this statement. Claim 1 recites numerous physical electrical components, a control device (on/off switch), transceiver to communicate with a remote server and a controller to activate the on/off switch based on communications from the server. The configuration of the components may be anticipated or obvious under the patent statute based on prior art, but they are anything but abstract and do not preempt all ways of charging a vehicle using a network. Congress specifically stated in 35 U.S.C. 101 that there are four statutory categories of patentable subject matter: process, machine, manufacture, or composition of matter. If claim 1 is not a machine, I don’t know what is.
On March 8, Foster Pepper filed a petition for certiorari with the Supreme Court, case number 18-1199, challenging the Federal Circuit’s emerging “physical realm” test as part of its Alice/Section 101 analysis. Amicus briefs in support of our cert petition are most welcome to assist the Court’s understanding of why it is important to grant cert and clarify the correct patent eligibility test for computer-implemented inventions. We are also seeking amicus brief writers for the many amici we have already secured. These efforts will help clear up the uncertainty innovators and patent holders face in cutting-edge fields of our modern economy and, as a result, help drive innovation forward.
In one of its latest opinions attempting to parse precedent on the subject matter eligibility of software, method of use, and business method patents that arguably involve application of laws of nature or recitations of well-known, conventional methods and techniques, the U.S. Court of Appeals for the Federal Circuit found that a patent directed to a method for administering a naturally occurring beta amino acid to cause an increase in the concentration of a naturally occurring amino acid combination in muscle and brain tissues was subject matter eligible for patent protection (Natural Alternatives Int’l, Inc. v. Creative Compounds, LLC, No. 18-1295, 2019 U.S. App. LEXIS 7647 (Fed Cir. March 15, 2019). The panel’s 2-1 majority decision conceded that the claims at issue involved laws of nature and had similarities to claims the U.S. Supreme Court had found subject matter ineligible but found that the claims possessed sufficient inventiveness beyond natural phenomenon and conventional methods to make them subject matter eligible for patent protection. Since Alice, the Federal Circuit and the federal district courts have been striving to implement and apply the Alice test to methods of use, software, and business method inventions that arguably involve applications of laws of nature and conventional methods. The challenge for the court in these cases has been to determine whether the claims sufficiently go beyond applications of laws of nature and known conventions to qualify as subject matter eligible for patent protection under Section 101. The Federal Circuit has found an inventive concept in several such cases.
Fromageries Bel, owners of cheese brands including Boursin, Leerdammer and The Laughing Cow, have been dealt a blow by the UK Intellectual Property Office (UKIPO), with their UK trademark registration for the shape of the company’s popular Babybel cheese having been declared invalid. It has been possible to register non-traditional trademarks, including colors and 3D shapes, for many years. However, the requirements for registration of these types of marks have changed substantially since they were first introduced, with significant attention currently being paid to the precise way in which the marks are defined. As a result, an increasing number of non-traditional trademarks previously considered valid and accepted for registration are being declared invalid when challenged by competitors.
This week in Other Barks & Bites: Karyn Temple is appointed Register of Copyrights; the International Trade Commission recommends excluding certain iPhone models for infringing Qualcomm patent claims; the EU approves new copyright rules which will affect online media platforms; Senators Tillis and Coons move forward with stakeholder discussions on a legislative fix to Section 101 of patent law; Peloton responds to copyright infringement suit by dropping online cycling classes; Amazon adds nearly 1,000 jobs in Austin, TX; the District of Delaware tosses out willful infringement claims against Intel; and Oracle files opposition asking Supreme Court to deny a petition for writ filed by Google.
Over the last 15 years, Congress, the courts and the USPTO have gutted the patent system. Fortunately, USPTO Director Andrei Iancu has been taking important steps to reverse some of the damage, with revised 101 guidance and changes in the Patent Trial and Appeal Board (PTAB). But the most important thing Iancu is doing is silencing the big tech “patent troll” narrative. False political narratives condense complicated issues into an object and then villainize the object. Once a villain is created, its evil can be expanded to encompass anything you don’t like. When you have pushed enough bad stuff into the moniker, you can simply state its evil name, add a few campaign contributions, and Congress will magically pass laws in your favor to kill the villain. The “patent troll” narrative has been valuable to big tech. It bought the laws they needed to perpetuate their monopolies. With Iancu silencing the “patent troll” narrative, big tech created a new one: “bad patents”.