SCOTUS Watch: Oral Arguments in Oil States

On November 27, 2017, the U.S. Supreme Court heard oral arguments in the Oil States Energy Services, LLC v. Greene’s Energy Group, LLC.[1]  This case is discussed in a previous blog posting, but as a recap, the two parties in the litigation are both oil & gas companies, in which Oil States owned a patent for protecting wellheads during the oil fracking process.  Greene’s petitioned for inter partes review (IPR) before the PTAB, which invalidated Oil States’ patent.  Upon appeal, the Federal Circuit rejected Oil States’ arguments and affirmed the PTAB’s invalidation.  Upon grant of certiorari, Oil States argued that the IPR system acted to deprive it of its private property since patents, it argued, is private right and not a public right.

From the get-go, Justice Ginsburg, outlined her position clearly and succintly:

Ms. Ho [Oil States counsel], you outlined your position, but there must be some means by which the Patent Office can correct the errors that it’s made, like missing prior art that would be preclusive.[2]

Justice Ginsburg’s exchange with Allyson Ho discussed the ex parte and inter partes reexamination processes, in which Ho argued there was a fundamental difference between examinational and adjudicational processes, where examinational were allowed under Article III but adjudicational would not.

Justice Kagan interjected with inter partes reexamination, and Ho responded:

I think inter partes reexamination presents a closer case, but it is still fundamentally examinational.[3]

Both Justices Ginsburg and Kagan, based on their questions, seemed inclined to retain the IPR system, as both were forceful in their inquiry about why the IPR system is unconstitutional.  Justice Kagan further opined:

It’s the government trying to figure out whether it made a mistake by granting the patent, which the government sometimes does and knows it sometimes does, but the government wants to put in place a set of procedures that will actually increase the government’s accuracy in figuring out whether it made a mistake.

And that involves listening to a third party that has some interest in the proceeding.  So it seems a bit odd to say, sure, the government can reexamine this, the government can allow a third party to request it, can allow the third party to do some things, but there’s some line that falls short of what the government thinks of the procedures that enable the greatest accuracy.[4]

Justice Breyer also tipped his hand by saying:

. . . I thought it’s the most common thing in the world that agencies decide all kinds of matters through adjudicatory-type procedures often involving private parties.  So what’s special about this one, or do you want to say it isn’t special and all agency proceedings are unlawful?  Because a lot of them would fit the definition, I think, that you propose.[5]

And, when Ho tried to argue the rarity of administrative adjudications where the government was not acting in the position of “enforcer,” Justice Breyer countered:

. . . if the airlines loses your umbrella, for example, and the CAB used to say, you go to the CAB, you complain, they lost my umbrella.  The airline says, no, we didn’t.  Oh, that was unconstitutional?  . . . And, by the way, it didn’t say that your rights, when you fly on an airplane or truck or some other thing regulated, it didn’t say as it does here, subject to the provisions of this title, the matter, your umbrella, or in this case patents, shall be private property.  Uh-huh.  So you have a statute that says you only get the private property if, in fact, you survive the provisions of the title, of which this is one.[6]

Justice Sotomayor also mentioned, regarding the common law Privy Councils which was the historical predecessor of the PTAB:

. . . But in fact that it waned didn’t mean it was eliminated, and it didn’t mean that the Privy Council or the crown though that it no longer had those rights.[7]

And further inquired to Chris Kise, counsel for Greene’s Energy:

. . . I mean, for me, this – what saves this, even a patent invalidity finding, can be appealed to a court.  There’s deference with respect to factual matters, but there is de novo review as to legal matters.  So how can you argue the – the crown, the executive, the PTO, here has unfettered discretion to take away that which it’s granted?[8]

Justice Kennedy weighed in, questioning of Ho that the Patent Clause in the U.S. Constitution grants patents for “limited times”:

. . . [D]oesn’t that show that the patent owner has limited expectations as to the scope and the validity of the property right that he holds?[9]

However, Justice Kennedy also queried of Kise about the Patent Clause, and his argument that IPRs implicate a public purpose:

Securing for limited times authors and inventors the exclusive right, securing to them, not to the [general public].[10]

It appears from his questioning that Justice Kennedy may be the swing vote, as usual.

On the other side, Chief Justice Roberts and Justice Gorsuch vehemently argued that issued patents were private property and generally antagonistic about IPRs.  Chief Justice Roberts noted to Kise:

. . . it strikes me, is simply that you’ve got to take the bitter with the sweet.  If you want the sweet of having a patent, you’ve got to take the bitter that the government might reevaluate it at some subsequent point . . . [H]aven’t our cases rejected that . . . proposition?  We’ve said you . . . cannot put someone in that position.  You cannot say, if you take public employment, we can terminate you in a way that’s inconsistent with due process. [11]

Chief Justice Roberts made this point when Kise tried to argue that Congressional authority gave the USPTO the almost absolute authority to determine the outer limits of patent protection.

Justice Gorsuch tried to make the analogy to land patents (that is, property is deeded by the sovereign (e.g., U.S. government) to a private entity, and it is published for all the world to know) to argue his point that invention patents are private property, by stating:

Do you think it would work if  — if we had land patents subject to the same circumstances, that they could be reexamined at any time over hundreds of years, even after the farmer had sold the land to the developer who built the houses and that the land patent could be revoked by the government by bureaucracy . . . [which amounts to ] [a] monopoly in the use of land.  What’s – what’s the difference between – operative difference, other than obviously one isn’t land?[12]

Needless to say, it was a rather clumsy attempt to equate Fuji apples to Granny Smith apples.

Justice Alito spoke very little, except to pointedly query the historical aspects of whether a patent right was a private right.[13]  All three would appear to be a part of a very rambunctious minority opinion. [14]

The session ended after an hour of arguments.

I do not believe the Court will find IPRs unconstitutional, partly because the Court has already found IPRs, at least in dicta, to be valid extensions of the executive branch, proper delegations by the legislative branch, and therefore, constitutional.  In the recently-decided Cuozzo case, the Count found:

Although Congress changed the name from “reexamination” to “review,” nothing convinces us that, in doing so, Congress wanted to change its basic purposes, namely, to reexamine an earlier agency decision.  Thus, in addition to helping resolve concrete patent-related disputes among parties, inter partes review helps protec the public’s “paramount interest in seeing that patent monopolies . . . are kept within their legitimate scope.”  (citations omitted.)[15]

Coupled with the questioning from the justices, it seems unlikely that the PTAB “death squads” will meet their end.  Rather, there may be some tweaking of the IPR system.  After all, it has worked very well in controlling the patent trolls which was the original aim when the IPR system was started in the AIA.  However, the system may have worked too well.  All new legislation must be tweaked to improve its process.  Five years after its enactment, it may well be time for the IPR process to make some fine-tuning changes.

A decision should be rendered by June 2018.

[1] 639 Fed. App’x 639 (Fed. Cir. 2016), cert. granted, 198 L. Ed. 2d 677 (U.S. Jun. 12, 2017) (No. 16-712).

[2] Oral arguments at 3-4, Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, 198 L. Ed. 2d 677 (2017) (No. 16-712).

[3] Id. at 5.

[4] Id. at 21-22.

[5] Id. at 20-21.

[6] Id. at 19-20.

[7] Id. at 26.

[8] Id. at 34.

[9] Id. at 11.

[10] Id. at 38-39.

[11] Id. at 32.

[12] Id. at 36-37.

[13] Id. at 24-25.

[14] No discussion is made on Justice Thomas’ comments, only because, characteristically, he does not usually say anything during oral arguments, although given his jurisprudential ideology, it would be logical to conclude that he would side with C.J. Roberts and Justices Gorsuch and Alito on this case.

[15] Cuozzo Speed Technologies, LLC v. Lee, 579 U.S.___, 136 S.Ct. 890 (2016) (slip op. at 16).

Advertisements

SCOTUS Watch: Oil States Oral Hearing Preview

On November 27, 2017, the U.S. Supreme Court will hear oral arguments in the appeal from the Court of Appeals for the Federal Circuit, Oil States Energy Services v. Greene’s Energy Group.[1]  Certiorari was granted earlier this year.  The sole question presented is whether the inter partes reviews – adversarial proceedings held before the United States Patent and Trademark Office’s Patent Trial and Appeal Board (PTAB) and enacted as part of the AIA in 2012 – violates the Seventh Amendment of the U.S. Constitution by terminating a private property right through a non-Article III forum without a jury.

Inter partes proceedings – collectively, inter partes reviews, post-grant reviews, covered business method reviews – and ex parte reexaminations have become important tools utilized by patent owners to combat overly broad issued patents owned by so-called “patent trolls.”  Inter partes proceedings, while expensive, are nothing compared to the costs of a full-blown litigation in the federal courts, which is part of the reason this mechanism has been popular since its enactment almost four years ago.

There is also a large vocal chorus on the other side which finds that inter partes proceedings and the PTAB’s entire post-grant challenge process to be a thorn in the side of strong patent rights.  The high challenge rate at the PTAB, as well as the high invalidity rate, were reasons for the U.S. to drop to tenth in the world in protection of IP rights.

The Federal Circuit already has long held that ex parte reexams do not violate Article III or the Seventh Amendment.[2]  After enactment of the AIA’s post-grant procedures in 2012, the Federal Circuit held the same for inter partes proceedings.[3]  However, neither case made its way to the Supreme Court until Oil States was granted certiorari.

If the Supreme Court finds that patents are, indeed, private property rights, and in doing so, reverses the Federal Circuit and hold inter partes reviews unconstitutional.  However, if it finds patents are public rights (i.e., being issued by a public agency for the betterment of the public as a whole), the Federal Circuit’s decision would be affirmed, and inter partes reviews found constitutional.  Perhaps a possible hint of how the Supreme Court might rule came in a recent trademark case, B&B Hardware, Inc. v. Hargis Indus.[4]  In the majority opinion, Justice Samuel Alito wrote:

The likely reason that Hargis did not directly advance a constitutional argument is that, at least as to a jury trial right, Hardis did not even list the Seventh Amendment as an authority in its appellee brief . . . . To the extent, if any, that there could be a meritorious constitutional objection, it is not before us.[5]

One interesting dicta is what another commentator[6] noted:

It would . . . be desirable if all [patent] cases of this sort could be referred to a commision of intelligent experts and practical men to report their opinion thereon, with their reasons, for the final action of the court . . . . Neither courts nor ordinary juries are perfectly adapted to the investigation of mechanical and scientific questions . . . .[7]

More information will follow after oral arguments.

[1] 639 Fed. App’x 639 (Fed. Cir. 2016), cert. granted, 198 L. Ed. 2d 677 (U.S. Jun. 12, 2017) (No. 16-712).

[2] See Patlex Corp. v. Mossinghoff, 758 F.2d 594, modif’d on rehearing, 771 F.2d 480 (Fed. Cir. 1985).

[3] See MCM Portfolio LLC v. Hewlett-Packard Co., 812 F.3d 1284 (Fed. Cir. 2015).

[4] 575 U.S___; 135 S. Ct. 1293 (2014).

[5] Id. at 1304.

[6] See Dennis Crouch, 1877 Supreme Court Thought’s on Oil States?, Patently-O Blog (Nov. 20, 2017), at https://patentlyo.com/patent/2017/11/supreme-thoughts-states.html.

[7] Quoting Cochrane v. Deener, 94 U.S. 780 (1877).

PTAB Releases Revision to Operating Procedures for Cases Remanded from Federal Circuit

On November 16, 2017, the Patent Trial and Appeal Board (PTAB) revised its Standard Operating Procedures 9 (SOP9) involving cases remanded for further review from the Federal Circuit.  These standard operating procedures are administrative rules governing cases as they wind their way through the appeal or trial processes before the Board, and are designed to effect efficiency and consistency between the administrative functions of cases.

Highlights of the 17-page SOP9 include:

  • PTAB will internally render a decision within 6 months of a Federal Circuit remand.
  • Meetings between PTAB panel of judges and the Chief Administrative Patent Judge, Deputy Chief Administrative Patent Judge and/or any Vice Chief Judge so designated, will convene to discuss issues presented in the remanded case prior to a decision being made.
  • Default procedures for both trials and appeals are explicitly written detailing additional briefing schedules, evidentiary support or oral hearings required, or if prosecution will be reopened in that particular case.

The new SOP9 takes effect immediately.

USPTO Finalizes New Patent Fee Schedule

On November 14, 2017, the USPTO issued its final rule on new fees for Fiscal Year 2017.[1]  There are some marked increases, several moderate increases, some nominal increases, a few new fees, and some fees which have been eliminated altogether.  The new fee schedule reflects a strategic goal for aligning fees to their associated costs for administration at the USPTO.

One set of significantly higher fees involves fees for inter partes reviews.  Rationale for the marked increase in the Patent Trial and Appeal Board (PTAB) proceeding fees are to align the USPTO costs of administering the PTAB trial processes with the AIA statutory requirements.  Specific fee increases include:

  • Inter Partes Review Request (up to 20 claims): $15,500, or a 72% increase.
  • Inter Partes Review Post-Institution Fee (up to 15 claims): $15,000, or a 7% increase.
  • Inter Partes Review Request, excess claims over 20: $300, or a 50% increase.
  • Inter Partes Post-Institution Request, excess claims over 15: $600, or a 50% increase.
  • Post-Grant or Covered Business Method Review Request: $22,000, or a 33% increase.
  • Post-Grant or Covered Business Method Review Post-Institution Fee: $22,000, or a 22% increase.
  • Post-Grant or Covered Business Method Review Request, excess claims over 20: $375, or a 50% increase.
  • Post-Grant or Covered Business Method Review Post-Institution Request, excess claims over 15: $825, or a 50% increase.

None of these higher fees have an adjustment for different entity sizes, so small and micro entities must pay the same amounts as large entitites.[2]

Another set of significantly high fees affects biotech applications, specifically those that file sequence listings.  New fees for mega-sequence listings between 300 and 800 MB of data are $1,000/$500/$250 at large entity/small entity/micro entity rates.  New fees for sequence listings over 800 MB of data are $10,000/$5,000/$2,500 at at large entity/small entity/micro entity rates.  The USPTO points out that the vast majority of sequence listings fall below the 300 MB threshold, and there are additional burdens on administrative storage and handling of sequence listings over 300 MB.[3]

Design and plant prosecution fees have also increased moderately.  Design search fees are up 33%, at $160/$80/$40 at large entity/small entity/micro entity rates, while design examination fees are up 11%, at $600/$300/$150 at large entity/small entity/micro entity rates.  Plant search fees are up 11%, at $420/$210/$105 at large entity/small entity/micro entity rates.  Finally, design issue fees are up 25%, at $700/$350/$175 at large entity/small entity/micro entity rates, while plant issue fees are up 5%, at $800/$400/$200 at large entity/small entity/micro entity rates.  Rationale for these moderate increases is a balance between maintaining a relatively stable fee structure for design and plant applications, while at the same time recovering USPTO costs for prosecution, especially given the fact designs and plants do not have to pay maintenance fees upon issuance.[4]  While the fees have increased, the overall effect on SMEs and startups should be minimal.

Information disclosure statements (IDSs) are not immune from fee increases.  Rationale for these new fees are meant to encourage earlier disclosure of IDSs in prosecution, complying with 1.97(b).  The increased fees for filing an IDS outside of 1.97(b) are $240/$120/$60 at large entity/small entity/micro entity rates.  This represents a 33% increase.[5]

A new fee for a petition for ex parte reexamination under §1.510 has been introduced.  The fees are $6,000/$3,000/$1,500 at large entity/small entity/micro entity rates.[6]

Office of Enrollment and Discipline (OED) fees have also increased between 100% – 300%.[7]

On the upside for SMEs and startups with limited budgets, new small entity and micro entity rates were established for the following:

  • Petition for Delayed Payment of Maintenance Fee: $1,000/$500, at small entity/micro entity rates.
  • Petition for Revival of an Abandoned Application: $1,000/$500, at small entity/micro entity rates.
  • Petition for Delayed Submission of a Priority Claim: $1,000/$500, at small entity/micro entity rates.
  • Hague International Design Application Transmittal Fee: $60/$30, at small entity/micro entity rates.[8]

The new patent fee schedule takes effect January 16, 2018.

[1] 82 Fed. Reg. 52780 (Nov. 14, 2017).

[2] Id. at 52790.

[3] Id. at 52787.

[4] Id. at 52787-88.

[5] Id. at 52788.

[6] Id. at 52789.

[7] Id. at 52791.

[8] Id. at 52793.

The Slants’ Saga Ends: USPTO Registers Service Mark

On November 14, 2017, six years to the day after the application was first filed with the USPTO which precipitated the landmark U.S. Supreme Court ruling in Matal v. Tam[1] striking down the disparagement clause of Section 2(a) of the Lanham Act, the USPTO has registered THE SLANTS service mark in International Class 41 for entertainment services.  So ends the tale of one Asian-American band trying to register a federally-protected mark for its band’s work, and the dismantling of one of the more controversial provisions of the Lanham Act when it was first enacted in 1946.  Our previous blog post discussed the Tam ruling.

[1] 582 U.S.___ (2017).

USPTO Issues Final Rule on Patent-Agent Privilege

On November 7, 2017, the USPTO issued its long-awaited new rule extending the USPTO’s attorney-client privilege to registered U.S. patent agents.  The final rule can be found here.[1]  This new rule has long been wanted by patent practitioners because, up until now, there existed a gray area of the practice which potentially prevented clients from properly communicating with their agents about patent filing strategies because of the possibility that their correspondence would be subject to discovery in a litigation.  Some firms worked around this problem by having a patent attorney “supervise” the work of the patent agent, but even in these situations, there remained the possibility that the privilege did not attach to the agent’s communications with the client.  Furthermore, the boutique firm or patent agency remained under non-privileged cloud.  As a result, the new rule provides a measured level of clarity to the patent practice.

The scope of the new privilege covers all patent prosecution-related communications between a client and an agent, including prosecution of patent applications, development of patent strategies, and the agent’s communications with foreign IP offices related to the client’s U.S. patent application.  Discovery in Patent Trial and Appeal Board (PTAB) proceedings usually implicates prosecution work, and, as a result, the scope of the patent agent privilege covers both the communications about the prosecution and the PTAB proceedings.

The rulemaking acquired some urgency after the Federal Circuit found a patent agent privilege in In re Queen’s University at Kingston.[2]  In Queen’s University, the Federal Circuit held, in finding a patent agent privilege, that the patent practice was not just a “law-like activity” but an actual “congressionally-authorized practice of law.”  The Federal Circuit further noted that: “[w]hether those communications are directed to an attorney or his or her legally equivalent patent agent should be of no moment.  Indeed, if we hold otherwise, we frustrate the very purpose of Congress’ design; namely, to afford clients to freedom to choose between an attorney and a patent agent for representation before the Patent Office.”[3]

The final rule codifies the patent-agent privilege as 37 C.F.R. § 42.57, as follows:

(a) Privileged communications.  A communication between a client and a USPTO patent practictioner or a foreign patent practitioner that is reasonably necessary and incident ot the scope of the patent practitioner’s authority shall receive the same protections of privilege under Federal law as if that communication were between a client and an attorney authorized to practice in the United States, including all limitations and exceptions.

(b) Definitions.  The term “USPTO patent practitioner” means a person who has fulfilled the requirements to practice patent matters before the United States Patent and Trademark Office under § 11.7 of this chapter.  “Foreign jurisdiction patent practitioner” means a person who is authorized to provide legal advice on patent matters in a foreign jurisdiction, provided that the jurisdiction establishes professional qualifications and the practitioner satisfies them.  For foreign jurisdiction patent practitioners, this rule applies regardless of whether that jurisdiction provides privilege or an equivalent under its laws.

(c) Scope of coverage.  USPTO patent practitioners and foreign jurisdiction patent practitioners shall receive the same treatment as attorneys on all issues affecting privilege or waiver, such as communications with employees or assistants of the practitioner and communications between multiple practitioners.

The provisions of 37 C.F.R. § 42.57 take effect on December 7, 2017.

[1] 82 Fed. Reg. 51570-75 (Nov. 7, 2017).

[2] 820 F.3d 1287 (Fed. Cir. 2016).

[3] Id. at 1298.

 

USPTO Designates Assignor Estoppel Case as Precedential Authority

On August 1, 2017, the USPTO designated a Patent Trial and Appeal Board case as precedential authority.  This case was decided four years ago, on October 25, 2013.  That case, Athena Automation Ltd. v. Husky Injection Molding System Ltd.[1], held that the doctrine of assignor estoppel is not an exception to inter partes review (IPR).[2]

The issue of assignor estoppel arises in this case because the co-inventor of the patent-at-issue, Patent No. 7,670,536, for “Molding System Clamp,” is Robert Dietrich Schad, who is also the founder and former CEO of Husky Injection.  Schad then sold Husky to a private equity firm in 2007, and subsequently founded Athena in 2008.[3]  Husky is the original assignee of the ‘536 patent.  Husky argued that an IPR institution was improper because Schad and Athen were in privity with each other, i.e., both were parties-in-interest who owned the ‘536 patent, of which the interest was later acquired by Husky.

In the PTAB case, the PTAB noted that the AIA only allows “a person who is not the owner of a patent may file with the Office a petition to institute an inter partest review.”[4]  The PTAB determined that since an assignor, by its definition, is no longer an owner of the patent once it has been assigned to another party.  Therefore, the original assignor could file an IPR petition.[5]

The doctrine of assignor estoppel is one of those judicially-mandated equitable mechanisms that prevents the assignor, who in most cases is the inventor of a patent, who has already assigned the rights to a patent or patent application, from later asserting the patent or application has no value.[6]  Therefore, assignor estoppel is a defense to a patent infringement suit.[7]

The case found its way to the Court of Appeals for the Federal Circuit, and became the subject of a fairly recent Federal Circuit decision, Husky Injection Molding Sys. Ltd. v. Athena Automation Ltd.[8]  In that case, Husky appealed the PTAB decision to institute the IPR proceeding and invalidate the ‘536 claims.

As to procedural grounds, the Federal Circuit dismissed Husky’s appeal for lack of jurisdiction because no grounds for review could be established.  The Federal Circuit opinion spent a lot of time getting to how it lacked jurisdiction to hear the Husky appeal, but focused on the Cuozzo standard for determining whether the Federal Circuit could take up an appeal of a PTAB IPR institution decision.[9]  Under Cuozzo, the Federal Circuit could review a decision to institute an IPR if 1) there were constitutional issues presented; or 2) the IPR depended on less closely related statutes, or 3) presented other questions interpretation that go beyond the statute’s section.[10]  The Federal Circuit found that none of these three conditions applied, so it therefore had no jurisdiction to take up the case.

The case is helpful in illustrating a strategic tool for assignors (and inventors) who are hauled to court for infringement of a patent which the inventor conceived before assigning the rights away.  Although the inventor would not be able to question the patent’s validity in court under the doctrine of assignor estoppel, that inventor could still seek invalidation of the patent’s claims before the PTAB.

Outside of the substantive patent law issue of assignor estoppel, the other takeaway from this case is that it is an example of a much smaller company (Athena Automation) filing suit against a much larger one (Husky) and winning.[11]  Of course, the process was lengthy and expensive, but in the end, the small company could claim the victory.

The case will be useful precedent for patent practitioners because Athena Automation is a primer for how the Federal Circuit will deal with PTAB’s IPR decisions.  Further, although assignor estoppel is rarity, the idea of a founder/CEO of Company A who then sells that company and then creates Company B is very common among the startup world, and this issue may arise several more times in the future.

One further side note is that the IPR aspect in Athena Automation is moot, of course, if the Supreme Court rules in favor of the petitioner in Oil States.  The Supreme Court is expected to decide sometime in late 2017.

[1] IPR2013-00290, Paper 18 (PTAB Oct. 25, 2013), Sec. II.A.

[2] See 35 U.S.C. §311(a).

[3] See John Clark, Athena: Robert Schad returns to inejction molding, Plastics Today (June 4, 2013), available at: https://www.plasticstoday.com/content/athena-robert-schad-returns-injection-molding/10803763918936; see also Brian Mudge, Federal Circuit Declines Review of PTAB Assignor Estoppel Ruling, IPR Blog (Oct. 4, 2016), available at: http://interpartesreviewblog.com/federal-circuit-declines-review-ptab-assignor-estoppel-ruling/.

[4] Athena Automation, supra at 12 (quoting 35 U.S.C. §311(a)); see also 37 C.F.R. §42.101.

[5] Id.

[6] See Diamond Scientific Co. v. Ambico, Inc., 848 F.2d 1220, 1224 (Fed. Cir. 1988).

[7] See Semiconductor Energy Laboratory Co., Ltd. v. Nagata, 706 F.3d 1365, 1369 (Fed. Cir. 2013).

[8] 838 F.3d 1236, 2016 WL 5335500 (Fed. Cir. Sept. 23, 2016).

[9] See Cuozzo Speed Technologies LLC v. Lee, 579 U.S.___, 136 S. Ct. 2131 (2016)

[10] See Husky (slip op. at 14 (quoting Cuozzo, supra, 136 S. Ct. at 2141)).

[11] According to their LinkedIn pages, Athena Automation is under 200 employees, while Husky has nearly 4,000.

USPTO Issues Exam Guideline on Merely Informational Matter

On July 30, 2017, the USPTO issued an Examination Guideline 2-17 on Merely Informational Matter.  The Guideline is meant to assist Trademark Examining Attorney on case law relevant to trademarks and service marks which can merely be considered informational in nature only, and do not function as a source identifier for a particular good or service.  Because the nature of what constitutes informational matter is a moving target, the Examining Attorney will have further guidance in the Guidelines as to what may or may not be a registrable mark.  See TMEP 1202.04.

Informational matter in a mark is “[s]logans and other terms that are merely informational in nature, or common laudatory phrases or statements that would ordinarily be used in business or in the particular trade or industry.”  TMEP 1202.04.

If a mark consists entirely of merely informational matter, the mark must be refused because it fails to function as a mark by conveying the indicia of source.  Further, a merely informational refusal cannot be overcome by amending the application to have the mark registered on the Supplemental Register, by acquiring distinctiveness, or by submission of substitute specimens.

In general, widely-used messages or everyday, ordinary messaging, in addition to messages with a social or political undertone, would qualify as being merely informational.  The Examining Attorney must document evidence to support the conclusion of a merely informational refusal.

For example, in In re Eagle Crest, Inc.,[1] Applicant sought ONCE A MARINE, ALWAYS A MARINE as a trademark in Class 25 for use on various clothing items.  However, the application was refused because the mark failed to function as a mark because a consumer could not readily identify it as the source of applicant’s clothing line.  The slogan is a very familiar Marine expression, and evidence to support this assertion was that a search engine revealed nearly 3 million hits.[2]

Another example was the well-used BOSTON STRONG mark, filed by several Boston-area companies[3] in a variety of goods and services in Classes 14, 25, 28, 30, 35, 40 and 41.  All were refused registration because they all failed to function as trademarks or service marks since all were based on a merely informational and commonplace slogan widely used in the media following the Boston Marathon bombing on April 15, 2013.[4]

All Examining Attorneys will now be expected to follow these Guidelines on merely informational marks when examining trademark/service mark applications.

[1] 96 USPQ2d 1227 (TTAB 2010).

[2] Id. at 1230.

[3] 10 applications were filed by these various companies in 2013, with Serial Nos. 86007909, 85926320, 85910709, 85911532, 85910589, 85910126, 85910031, 85909994, 85906569, and 85906495.  All were abandoned due to the merely informational rejections by the Examining Attorney.

[4] See Exam Guidelines 02-17, at A-16 – A-17.

USPTO Issues Public Comments for §101 Subject Matter Eligibility

By Brent T. Yonehara

On July 30, 2017, the USPTO released its §101 report, Patent Eligible Subject Matter: Report on Views and Recommendations From the Public.   The report is a rather dry recitation of the §101 legal framework better suited for a Patent Bar Exam prep course.  However, there is an interesting comparative overlay of the patent subject matter eligibility requirements in other jurisdictions around the world, including China, the EPO, Japan, and Korea.

The public comments are rather straightforward, with some saying the Mayo/Alice restrictions on subject matter (PSM) eligibility, and especially the two-step test, are “overly broad” by “devaluing entire patent portfolios,”[1] and “unclear” by creating “unpredictability in the issuance and enforcement of patents.”[2]  Another common criticism of the PSM eligibility was that the Alice test stifles innovative activity and ultimately hurts U.S. businesses by tilting patent protection to large companies and away from startups where new innovations in software need patent protection the most.[3]

On the other hand, the new PSM regime had its supporters.  One supportive comment was that the new Alice regime weeded out overly broad patents, eliminating “low-quality patents” out of the patent ecosystem (i.e., preemption).[4]  Others lauded the new Alice regime as a powerful weapon against patent trolls.[5]  A further, and insightful, supporting comment was that foreign companies have a major stake in the U.S. patent system, and that Mayo/Alice is actually favored by these “geopolitical considerations.”  Along that same line, if a foreign inventor creating innovations overseas gets that patent protection in, say, Europe, but not here in the U.S. due to the Mayo/Alice regime, that innovation still exists; just the patent protection is not available for it on our shores.  This would have the benefit of lowering prices for U.S. consumers since lack of patent protection would open up markets to newer products, thus lowering prices.[6]

The Report ended with legislative recommendations for Congressional action, including proposed §101 amendments from the Intellectual Property Owners Association (IPOA) and the AIPLA.

(Disclaimer: the author is a member of the IPOA)

[1] See Patent Eligible Subject Matter: Report on Views and Recommendations From the Public (“Report”), United States Patent and Trademark Office, July 2017, at 29.

[2] Id. at 29-30.

[3] Id. at 32.

[4] Id. at 24.

[5] Id. at 25.

[6] Id. at 27.

 

Fed Circuit Watch: Litigation Misconduct and Inequitable Conduct

By Brent T. Yonehara

On July 27, 2017, the Court of Appeals for the Federal Circuit decided Regeneron Pharmaceuticals, Inc. v. Merus B.V.  In Regeneron, the Federal Circuit affirmed a district court’s finding that Regeneron’s patent 8,502,018 was unenforceable due to inequitable conduct.[1]  This case brings up the Therasense New Order of Inequitable Conduct in patent cases.

The law of inequitable conduct has slowly begun to take shape seven years after Therasense[2] was decided by the Federal Circuit.  In Therasense, the Federal Circuit enunciated the elements for determining an inequitable conduct defense.  First, there must be materiality.  Second, there must be intent to deceive the USPTO. [3]

To start with, the duty to disclose and deal in good faith with the USPTO in patent applications extends to the patent applicants, owners, inventors, and patent practitioners of the application.[4]  All of these individuals must disclose information material to patentability (emphasis added).[5]  A prima facie case of unpatentability is established when the information demonstrates that a claim is unpatentable under the preponderance of evidence, with each claim term given its broadest reasonable interpretation consistent with the specification.[6]  Also, information is not considered material if it is cumulative to information already of record.[7]

Further, these individuals must also have a specific intent to deceive the USPTO by failing to disclose information as to the patentability of the claim in question; this must be proved by a much higher clear and convincing evidence standard.[8]  While a direct intent is rarely proven, an inferred intent can be made from indirect and circumstantial evidence which must be the “single most reasonable inference able to be drawn from the evidence.”[9]

In Regeneron, the patent practitioners failed to disclose four prior art references cited by third parties in related U.S. and foreign prosecutions.  The Regeneron practitioners alleged that while the references withheld is not in dispute, the references themselves were merely cumulative of what was already in the file wrapper.  The subject matter of the ‘018 patent in question was the mouse-human chimera, or genetically modified mouse, for purposes of developing genetically modified mouse antibodies to be used in humans to combat certain bacteria or viruses.  Claim 1 recited:

  1. A genetically modified mouse, comprising in its germline human unrearranged variable region gene segments inserted at an endogenous mouse immunoglobulin locus.

Regeneron had argued that under the broadest reasonable interpretation, Claim 1 was limited to a reverse chimeric mouse.  In other words, Regeneron argued for a much narrower construction.  However, Merus argued that constant region of the gene segments in the claimed mouse contained either mouse or human genes, and could be reverse chimeric, humanized, or fully human.  Thus, Merus argued a broader construction of Claim 1.

Regeneron-Claim1-murine-Ig

The court found that the transitional phrase “comprising” was an open-ended term, use of the term did not exclude unrecited elements.[10]  Therefore, the germline was not just limited to mouse and also included human, which further meant the claim language included reverse chimeric, human and fully human genes.[11]

On the intent requirement, inferred intent to deceive was demonstrated by Regeneron’s in-house patent practitioner’s failure to produce discovery documents relevant to the prosecution of the ‘018 patent.  This was deemed the litigation misconduct.  Further, Regeneron had an intent to deceive because their in-house counsel failed to submit the four prior art references during the prosecution of the ‘018 patent, as it was in the belief of the in-house counsel that the references were not material to patentability.   The Federal Circuit pointed out that “Regeneron’s litigation misconduct [] obfuscated its prosecution misconduct.”[12]  Thus, the Federal Circuit held the district court did not abuse its discretion by drawing an “adverse inference of specific intent to deceive”[13] on the part of Regeneron.

Inequitable conduct is a serious issue in prosecution because, as a defense, and if used successfully, it could not only invalidate one claim of a patent but also the entire patent is found unenforceable, which cannot be cured by a reissue.[14]  This may be the reason why these cases have convoluted and lengthy histories because these issues could not be resolved back in the PTAB.

Another post-Therasense case, American Calcar v. American Honda Motor Co., [15]  also went through the numerous machinations of the federal court system, and also turned out badly for the plaintiff.  In that case, a car guidance system patent were at issue.  The Federal Circuit affirmed the district court’s ruling that the patent was invalid under §§102 and 103, and unenforceable due to inequitable conduct due to inventor’s failure to submit prior art.

As for the intent requirement, the court determined that the Calcar inventor knew that his photos of the Honda Acura car were material to patentability, and therefore, withheld them from the Examiner.  In doing so, the Calcar inventor had the specific intent to deceive the USPTO because there was an inference the inventor had undisclosed information about the Honda Acura car system (i.e., the prior art), he knew it was material, and, further, he deliberately withheld it from disclosure as required under 1.56.

These line of cases show that the there are ramifications post-prosecution, and that intent to deceive is not just limited to strictly those required under their 1.56 duty (i.e., the litigation counsel further downstream).  Further, as shown with Regeneron, intent to deceive can go back upstream to the original patent prosecutor when the litigation counsel way down the river engages in litigation misconduct (i.e., it could lead to disciplinary action before the OED).  Based just on this most recent case, the case law is beginning to show a trend of broad interpretation of intent to deceive and materiality required to show inequitable conduct.  As such, this case should be of deep concern for all patent practitioners.

[1] 144 F. Supp. 3d 530 (S.D.N.Y. 2015) (District Court found materiality of the prior art references), aff’d in divided Court, ___Fed. Appx.___ (Fed. Cir. 2017), CAFC No. 16-1346.

[2] Therasense, Inc. v. Becton Dickinson & Co., summ. j. granted, 560 F. Supp. 2d 835, 854, aff’d, 565 F. Supp. 2d 1088, 1127 (N.D. Cal. 2008), aff’d, 593 F.3d 1289, 1311 (Fed. Cir. 2010), reh’g granted, vacated & remanded, 649 F.3d 1276 (Fed. Cir. 2011) (en banc), aff’d upon remand, 864 F. Supp. 2d 856, 858 (N.D. Cal. 2012), aff’d on other grounds, 745 F.3d 513 (Fed. Cir. 2014).

[3] Id., 649 F.3d at 1290-91.

[4] See 37 C.F.R. §1.56(c); MPEP 2001.01.

[5] See 37 C.F.R. §1.56(b); MPEP 2001.05.

[6] See MPEP 2001.05.

[7] See 37 C.F.R. §1.56(b).

[8] See Therasense, supra, 649 F.3d at 1287, 1290.

[9] Id. (citing Star Scient. Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357, 1366 (Fed. Cir. 2008).  See also Regeneron, supra (slip op. at 40) (Newman, J., dissenting) (noting that inferred intent must still be proven, and “absence of trial findings cannot be substituted by inference.”).

[10] See MPEP 2111.03 (“[t]he transitional term ‘comprising,’ . . . is inclusive or open-ended and does not exclude additional, unrecited elements or method steps.”)

[11] See Regeneron, supra (slip op. at 5-6, 13-14).

[12] Id. (slip op. at 37).

[13] Id. (slip op. at 38).

[14] See MPEP 2016 (“once a court concludes that inequitable conduct occurred, all the claims … are unenforceable.”); MPEP 2012 (“both 35 USC 251 and 37 CFR 1.175 . . . require that the error must have arisen ‘without any deceptive intention.’”).

[15] Am. Calcar, Inc. v. Am. Honda Motor Co., Inc., Case No. 06-cv-02433, 2008 WL 8990987 (S.D.Cal. Nov. 3, 2008), vacated and remanded in part, 651 F.3d 1318 (Fed. Cir. 2011), aff’d upon remand, Case No. 06-cv-0233, 2012 WL 1328640 (S.D.Cal. Apr. 17, 2012), aff’d, 768 F.3d 1185 (Fed. Cir 2014).