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).

USPTO Issues Exam Guidelines Consistent with Tam Decision

On June 26, 2017, the United States Patent and Trademark Office issued an updated Examination Guideline 01-17, consistent with the recent Matal v. Tam, 582 U.S.___ (2017), ruling by the United States Supreme Court, and for which our analysis was the subject of a previous post.  In that decision, the Supreme Court held that the disparagement clause of §2(a) of the Lanham Act violates the First Amendment of the U.S. Constitution by prohibiting registration of trademarks that may disparage persons, institutions, beliefs, or national symbols.

Going forward, the Trademark Examiners will not refuse trademark registration based on this provision of §2(a).  Any currently suspended application will proceed to examination under other aspects of the TMEP.  An application which was abandoned due to a §2(a) refusal, but is within the timeframe for filing a petition to revive, may be revived through such mechanism.  See TMEP 1714.01.  However, the subject matter of an abandoned application with is beyond the timeframe for filing a petition to revive can only be re-examined through the filing of a new application.

A caveat to the Guideline is that constitutionality of the companion clause to disparagement, the scandalousness clause, is still awaiting decision before the Court of Appeals for the Federal Circuit with the In re Brunetti case.  Any suspended application will remain suspended until Brunetti is decided.  It is expected that the scandalousness clause, like the disparagement clause, will be struck down.

SCOTUS Watch: Lanham Act’s §2(a) Disparagement Clause Struck Down

By Brent T. Yonehara

On June 19, 2017, the U.S. Supreme Court finally, and somewhat as expected, handed down its ruling in Matal v. Tam (formerly Lee v. Tam).[1]  By a unanimous vote, the Supreme Court struck down the Lanham Act’s §2(a) prohibition on registration of disparaging trademarks as a violation of the First Amendment’s Free Speech Clause.

The Lanham Act’s §2(a) reads, in full:

No trademark by which the goods of the applicant may be distinguished from the goods of others shall be refused registration on the principal register on account of its nature unless it –

(a) Consists of or comprises immoral, deceptive, or scandalous matter; or matter which may disparage or falsely suggest a connection with persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt, or disrepute; or a geographical indication which, used on or in connection with wines or spirits, identifies a place other than the origin of the goods and is first used on or in connection with wines or spirits by the applicant on or after one year after the date on which the WTO Agreement (as defined in section 3501(9) of title 19) enters into force with respect to the United States.[2]

(emphasis added.)

The purpose of the disparagement clause of §2(a) is to bar registration, on either the Principal or Supplemental Register, of a mark that may show a particular person, institution, belief, or national symbol to disparagement, false connection, contempt, or disrepute.[3]

In writing for the Court, Justice Samuel Alito began the opinion by stating that [§2(a)] “offends a bedrock First Amendment principle: [s]peech may not be banned on the ground that it expresses ideas that offend.”[4]  He noted that in rejecting Tam’s trademark application for THE SLANTS, the Examining Attorney specifically cited dictionary definitions of “slant” and “slant eyes” as a derogatory or offensive term against Asian-Americans.[5]  However, the mark was not being used as a statement against Asian-Americans.  Rather, when the band, The Slants, filed its trademark application for THE SLANTS, the band’s lead singer (and plaintiff in the original action), Simon Tam, sought to “reclaim” its derogatory nature and use the term as a source of empowerment for Asian-Americans.  Indeed, several of the band’s songs sought to address the offensive slurs and statement made against Asian-Americans.[6]

Justice Alito swept away the USPTO’s arguments that trademarks were not subject to First Amendment protection or subject to rational basis review.  Specifically, the USPTO raised the arguments that trademarks are government speech and not private speech, that trademarks are a form of government subsidy, and that trademarks were a government program.

First, Alito disputed the contention that trademarks are government speech because an Examining Atttorney does not have latitude to reject a trademark application merely based on the viewpoint expressed by the trademark.  Further, the Examining Attorney does not inquire in any office action about conformity to Government policy or another registered mark’s viewpoint.  And, finally, the USPTO cannot merely remove a registered mark from the Principal Register, unless through another’s petition for cancellation, expiration of the mark (i.e., for failure to renew or file the appropriate post-registration documents), or through FTC proceedings.[7]  Alito concluded forcefully that “trademarks are private, not government, speech.”[8]

Second, Alito rejected the notion that trademarks are a government subsidy.  Citing a litany of cases where the government paid a cash grant or subsidy to private citizens, Alito noted that the USPTO does not pay private parties to register a trademark.  Rather, it is the exact opposite.[9]

Third, Alito rejected the USPTO’s contention that §2(a)’s disparagement clause was a protected doctrine for government programs.  In what seemed a far-fetched argument by the USPTO, Alito pointedly noted that trademark registration has nothing to do with these line of government program-type of cases, which focused on the Government conferring some benefit to a private party to further some activity the Government was promoting.  These cases, Alito demurred, had no relevance to the current case of trademarks.[10]

All of this amounts in the Court’s opinion to viewpoint discrimination on the part of the Government against a private citizen related to freedom of speech when it comes to registering a trademark.[11]  “Giving offense is a viewpoint,” noted Alito.[12]  §2(a)’s disparagement clause discriminates against speech on the basis of a viewpoint.  Although even-handed in its viewpoint discrimination, the disparagement clause prohibits “public expression of ideas . . . merely because the ideas themselves [are] offensive to some of the hearers.”[13]

The Court further noted the vagueness of determining disparagement while undergoing prosecution before the USPTO, and that there currently exists an unequal level of enforcement of the statute against allegedly disparaging marks, citing the high number of registered marks on the Principal Register that §2(a)’s disparagement clause would likely disparage a racial or ethnic group.[14]  Alito further asserted that §2(a)’s disparagement clause was too broadly drafted and not narrowly tailored to serve the interest of preventing trademarks that supported invidious discrimination against one particular person, ethnicity or racial group.[15]

The case is far-reaching, and perhaps the most immediate beneficiary of the Tam case is the Washington Redskins, who were embroiled in their own trademark cancellation proceeding before the USPTO when a group of Native Americans challenged six trademark registrations for WASHINGTON REDSKINS under §2(a)’s disparagement clause, and which the Federal appellate action is stayed pending the outcome of the Tam case.[16]  (We discussed this case in an earlier post on this blog, here).  Other parts of §2(a), including the prohibition on registration of immoral or scandalous marks, could be ripe for judicial review, and could be struck down in similar fashion as the disparagement clause.  Indeed, in a letter from the USPTO to the Court of Appeals for the Federal Circuit, the Director requested that the In re Brunetti case be remanded back to the USPTO because, in light of the Tam decision before the Federal Circuit in 2015, the USPTO did not believe that “Section 2(a)’s prohibition on registration of scandalous and immoral marks can withstand challenge under the current law.”[17]

It will be a while until the USPTO revises the TMEP and releases an Examination Guideline consistent with the Tam ruling.  It is curious that §2(a) was drafted with the Lanham Act’s enactment in 1947,[18] and it took seventy years for one of its provisions to be struck down as unconstitutional.  Notwithstanding, without a doubt, more trademark applications will be filed containing objectionable or arguably offensive material.

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

[2] 15 U.S.C. 1052(a).

[3] See TMEP 1203.03, Matter That May Disparage, Falsely Suggest a Connection, or Bring Contempt or Disrepute (Apr. 2017).

[4] 582 U.S. at ___, supra (slip op. at 1-2).

[5] Id. (slip op. at 7).

[6] Id.

[7] Id. (slip op. at 14).

[8] Id. (slip op. at 18).

[9] Id. (slip op. at 18-19).

[10] Id. (slip op. at 21-22).

[11] Id. (slip op. at 7).

[12] Id. (slip op. at 22).

[13] Id. (slip op. at 23) (citing Texas v. Johnson, 491 U.S. 397, 414 (1989); Hustler Magazine Inc. v. Falwell, 485 U.S. 46, 55-56 (1988); Tinker v. Des Moines Independent Community School Dist., 393 U.S. 503, 509-514 (1969)).

[14] Id. (slip op. at 11-12).  Although, it is interesting Justice Alito does not produce a single registered trademark or service mark that he would consider to be a disparaging mark; he does, however, cite the Washington Redskin’s parent company’s amicus curiae brief as authority for this statement.  See id. (slip op. at 12, fn. 6).

[15] Id. (slip op. at 25).

[16] See Pro-Football, Inc. v. Blackhorse, 112 F.Supp.3d 439 (E.D.Va. 2015).

[17] See Letter of January 21, 2016, to Clerk of Federal Circuit Court of Appeals, from Director, USPTO.

[18] See, e.g., Theodore H. Davis, Jr., Registration of Scandalous, Immoral, and Disparaging Matter Under Section 2(a) of the Lanham Act: Can One Man’s Vulgarity Be Another’s Registered Trademark?, 54 Ohio State L.J. 331-401 (1993).

SCOTUS Watch: Cert Granted in Oil States: the Constitutionality of IPR Proceedings

By Brent T. Yonehara

On June 12, 2017, the U.S. Supreme Court granted the petition for certiorari in Oil States Energy Services v. Greene’s Energy Group, LLC.[1]  Of the three issues presented by petitioner Oil States, only one will be heard before the Supreme Court, namely:

Whether inter partes review – an adversarial process used by the Patent and Trademark Office (PTO) to analyze the validity of existing patents – violates the Constitution by extinguishing private property rights through a non-Article III forum without a jury.

(for the granted petition, see here.)

The other two issues requested by Oil States will not be addressed before the Court.

Inter partes reviews (IPRs) were one of the adversarial proceedings created by the America Invents Act (AIA) in 2012.  IPRs replaced the inter partes reexamination proceedings following enactment of AIA on September 16, 2012.[2]

The immediate question is whether patents, once issued, are either a private right (i.e., a private property right) or a public right, where the validity or invalidity can be determined by a government agency regulating the issuance of patents.  The Court of Appeal for the Federal Circuit, from where this case was last heard, ruled against Oil States’ contention that patent rights are private rights, not public rights, and are not subject to Article III treatment.  To quote Oil States, “ . . . patent rights are property rights, and property rights are pivate rights – not ‘public rights’.”[3]  There are some commentators who believe the Supreme Court will overturn the decision of the Federal Circuit, as it has been apt to do of late.  However, in the very recent B&B Hardware case, the Supreme Court held that TTAB’s decisions received preclusive effect, essentially holding that TTAB was an Article III court.[4]  While B&B Hardware dealt with issue preclusion and trademarks, it could be seen as a corollary to Oil States and patents in that the the Supreme Court might, consistent with its holding in B&B Hardware, extend this concept of Article III treatment to the patent side of the USPTO.  If it does, the Supreme Court will have the permitted the rare act of affirming a Federal Circuit decision.

Depending on the outcome, this case could demolish the entire AIA review adjudication process within the USPTO.

The case should be heard sometime in Fall 2017, with a ruling delivered sometime in early 2018.

[1] 639 F.App’x 639 (Fed. Cir. 2016), cert granted, ___U.S.L.W.___ (June 12, 2017) (No. 16-712).

[2] MPEP 2601.

[3] See Reply Brief for the Petitioner, at 9.

[4] B&B Hardware, Inc. v. Hargis Industries Inc., 575 U.S.___ (2015) (slip op. at 14-15).

SCOTUS Watch: Supreme Court Redefines the Patent Exhaustion Doctrine

By Brent T. Yonehara

On May 30, 2017, the U.S. Supreme Court decided Impression Products, Inc. v. Lexmark International, Inc.[1], reversing the Court of Appeals for the Federal Circuit on the scope of the patent exhaustion doctrine, also known as the first sale doctrine, and unequivocably stated in its opinion that “a patentee’s decision to sell a product exhausts all of its patent rights in that item, regardless of any restrictions the patentee purports to impose or the location of the sale.”[2]  This will greatly expand the definition of patent exhaustion.

The Court stated in its analysis by explaining that the Patent Act grants patent holders the right to exclude others from making, offering for sale or selling of the invention (emphasis added).[3]  However, this right to exclude has, at least, one limitation, namely the patent exhaustion doctrine.  When the patentee sells a product, that product no longer is a vestige of the patent monopoly, but rather the private property of the buyer.[4]  Consequently, patent rights are superseded by the principle against restraints on alienation.  The Court noted that while the Patent Act “promotes the progress of . . . the useful arts [] by granting to [inventors] a limited monopoly” to allow inventors to reap the windfall of that monopoly on their inventions.[5]

However, once the windfall of patent law is achieved, the law does not extend any restraint on the “use and enjoyment of the thing sold.”[6]  In other words, while a patentee can control price, negotiations, and sale terms of a product, the patentee cannot control the “use or disposition” of that product after it is sold to the buyer.[7]  Essentially, the sale “terminates all patent rights to the item.”[8]

Further, a contractual restriction will not extend the patentee’s patent rights to the product sold.  Once a patentee “sells a product, under an express restriction, the patentee does not retain patent rights in that product.”[9]

“Patent exhaustion reflects the principle that, when an item passes into commerce, it should not be shaded by a legal cloud on title as it moves through the marketplace.”[10]

With this ruling, Impression Products will bring a level of consistency across other intellectual properties, most notably copyrights, where the Court recently held in favor of international exhaustion in the copyright first sale doctrine in its Kirtsaeng v. John Wiley & Sons, Inc.[11] case.  With these cases, the two intellectual properties described in the Patent and Copyright Clause of the U.S. Constitution[12] will have the first sale doctrine applied uniformly to both patent and copyright licensing.  The Court elucidated that the Patent Act, like the Copyright Act, allows for a state-sanctioned monopoly to inventors (and authors) for a limited period of time, and to recoop their investment in those intellectual and creative endeavors.  However, there are limits to that state-sanctioned right, and once a patentee has sold its first product based on its patent, the legal protections fall outside of the Patent Act and into other areas of law, like contracts or torts.[13]  Indeed, the Court further made clear that:

differentiating the patent exhaustion and copyright first sale doctrines would make little theoretical or practical sense [because] there is a ‘historic kinship between patent law and copyright law’,” and the bond between the two leaves no room for a rift on the question of international exhaustion.”[14]

The decision was unanimous as to domestic patent exhaustion, and 7-1 as to international patent exhaustion, with only Justice Ruth Bader Ginsburg as the lone dissenter.  Impression Products will have a major impact on the patent licensing industry.  Specifically, licensing terms may need to be redefined, and could also severely impact licensing of pharmaceutical or medical device products which have extensive post-sale limitations built into the agreements.

[1] 581 U.S.___ (2017).

[2] Id., slip op. at 13.

[3] Id. at 5.

[4] Id. at 6.

[5] Id.

[6] Id. at 6 (citing United States v. Univis Lens Co., 316 U.S. 241, 251 (1942)).

[7] Id. (citing Univis, supra, at 250).

[8] Id. (citing Quanta Computers, Inc. v. LG Electronics, Inc., 553 U.S. 617, 625 (2008)).

[9] Id. at 8 (citing Boston Store of Chicago v. American Graphophone Co., 246 U.S. 8, 17-18 (1918)).

[10] Id. at 11 (citing United States v. General Electric Co., 272 U.S. 476, 489-490 (1926)).

[11] 568 U.S.___, 133 S. Ct. 1351 (2013).

[12] U.S. Const., Art. I, Sec. 8, Cl. 8: “. . . To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.”

[13] See Florian Mueller, Supreme Court rules against Lexmark on patent exhaustion, strengthening FTC/Apple cases against Qualcomm, Foss Patents, May 30, 2017 (“No overcompensation.  No overleveraging.  No double-dipping.  No restrictions that go beyond what the Patent Act allows.  That’s the message here.”).

[14] 581 U.S.___, supra, at___ (slip op. at 14-15) (citing Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417, 439 (1984)).

Fed Circuit Watch: Helsinn and the On-Sale Bar

By Brent T. Yonehara

On May 1, 2017, the Federal Circuit Court of Appeals decided Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc., 2016-1284, 2016-1787 (Fed. Cir. 2017), holding that the on-sale bar of pre-AIA 35 U.S.C. § 102(b) invalidated four patents held by Helsinn, for treatment of chemotherapy-induced nausea and vomiting (CINV).

The patents at issue were, 7,947,724, 7,947,725, 7,960,424, and 8,598,219.  All of these patents shared a priority date of January 30, 2003, and a critical date of January 30, 2002 for purposes of pre-AIA 35 U.S.C. § 102(b).  Helsinn and MGI Pharma, Inc. entered into a sales agreement which was signed on April 6, 2001.  This agreement was then announced in a press release and in an SEC filing with a copy of the agreement, albeit in redacted form, on April 25, 2001.  This April 25, 2001 date would, therefore, represent a public disclosure of the invention’s subject matter prior to the critical date of January 30, 2002.

Claim 2 of the ‘724 patent and Claim 1 of the ‘219 patent were deemed representative of the asserted claims:

2.  A pharmaceutically stable solution for reducing emesis or reducing the likelihood of emesis comprising:

a) 5 mg/mL palonosetron hydrochloride, based on the weight of the free base, in a sterile injectable aqueous carrier at a pH of from 4.5 to 5.5;

b) from 0.005 mg/mL to 1.0 mg/mL EDTA; and

c) mannitol in an amount sufficient to tonicify said solution, in a concentration of from about 10 mg/ml to about 80 mg/ml.

  1. A pharmaceutical single-use, unit-dose formulation for intravenous administration to a human to reduce the likelihood of cancer chemotherapy-induced nausea and vomiting, comprising a 5 mL sterile aqueous isotonic solution, said solution comprising:

palonosetron hydrochloride in an amount of 0.25 mg based on the weight of its free base;

from 0.005 mg/mL EDTA; and

from 10 mg/mL to about 80 mg/mL mannitol,

wherein said formulation is stable at 24 months when stored at room temperature.[1]

The on-sale bar invalidates a patent if the patented subject matter is (i) subject of a commercial sael or offer for sale prior to the critical date of the patent, and (ii) ready for patenting.[2]  Both pre-AIA and post-AIA treatments of § 102 utilize the Pfaff steps of  the on-sale bar.

Pre-AIA 35 U.S.C. § 102(b) barred a patent if: “…(b) the invention was patented or described in a printed publication in this or a foreign country or in public use or on sale in this country, more than one year prior to the date of application for patent in the United States.”[3]

AIA 35 U.S.C. § 102(a)(1) barred a patent if: “…the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention.”[4]

(Emphasis added.)

The Federal Circuit held that sale agreement between Helsinn and MGI constituted a commercial sale for purposes of 35 U.S.C. § 102(b) on-sale bar because the facts met the definition of the on-sales bar of § 102(b).  As noted by the Federal Circuit, Helsinn did not require confidentiality with its execution of the sales agreement, and was an unambiguous contemplation of a sale between Helsinn and MGI.[5]

The Federal Circuit also held that, for purposes of an on-sale bar under AIA 35 U.S.C. § 102(a)(1), “ after AIA, if the existence of the sale is public, the details of the invention need not be publicly diclosed in the term of sale.”[6]  Helsinn had argued that for AIA purposes, the on-sale bar did not apply until the sale disclosed the subject matter of the invention to the public.  The Federal Circuit disagreed, rationalizing that preventing such a bar would be “a foundational change in the theory of the statutory on-sale bar.”[7]  Rather, all that is required is if there is a sale or offer to sell which embodies the invention, and that sale is then made public.[8]

As for whether the claims were “ready for patenting,” the Federal Circuit found that the 0.25 mg of palonosetron formulation met the burden, and that evidence was “overwhelming” that the formulation was properly reduced to practice work for its intended purposes for limiting the likelihood of emesis.[9]

The implications of this case could be quite profound.  For purposes of the AIA 35 U.S.C. § 102(a)(1) on-sale bar, public disclosure of a sale of a patented invention could effectively invalidate that patent even though the invention’s specifics were not disclosed in the public disclosure of that sale.

[1] Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc., 2016-1284, 2016-1787 (Fed. Cir. 2017), slip op. at 5.

[2] Pfaff v. Wells Elecs., Inc., 525 U.S. 55, 67 (1998).

[3] 35 U.S.C. § 102(b) (pre-AIA); MPEP 2133.

[4] 35 U.S.C. § 102(a)(1) (AIA); MPEP 2152.

[5] Helsinn, slip op. at 16-17.

[6] Id. at 27.

[7] Id. at 22.

[8] Id. at 23.

[9] Id. at 30.

SCOTUS Watch: TC Heartland LLC v. Kraft Foods Group Brands LLC

By Brent T. Yonehara

On May 22, 2017, the U.S. Supreme Court handed down an important ruling, TC Heartland LLC v. Kraft Foods Group Brands LLC, 581 U.S.___ (2017), in patent venue, and specifically limited the ability of patent litigation plaintiffs to file in nearly any U.S. District Court in the country, and held a defendant domestic corporation can only be sued for patent infringement only in its state of incorporation.

Venue for patent cases is delineated by 28 U.S.C. § 1400(b): “any civil action for patent infringement may be brought in the judicial district where the defendant resides, or where defendant has committed acts of infringement and has a regular and established place of business.”[1]  Note that for purposes of the TC Heartland case, the Court only addressed the defendant’s “residence,” and not “place of infringement.”

Also, and more importantly,  § 1400(b) differs from the general venue statute, 28 U.S.C. § 1391(c): …(2) an entity with the capacity to sue and be sued in its common name under applicable law, whether or not incorporated, shall be deemed to reside, if a defendant, in any judicial district in which such defendant is subject to the court’s personal jurisdiction with respect to the civil action in question and, if a plaintiff, only in the judicial district in which it maintains its principal place of business. [2]

(Emphasis added).

The Court analyzed Congressional enactment of both venue statutes, as well as the Court’s own decision in Fourco Glass Co v. Transmirra Prods. Corp., 353 U.S. 222 (1957), noting that § 1400(b) is the “sole and exclusive provision controlling venue in patent infringement actions, and . . . is not supplemented by [] § 1391(c).”[3]  In other words, the general venue statute does not override the patent venue statute.  The Court decidedly overruled the Federal Circuit’s 25 year expansive patent venue.

This ruling will have an emasculation effect on the Non-Practicing Entities (NPEs, or “patent trolls”)’s ability to control patent infringement cases especially if they are not able to file their complaint in their choice of district court.  Some commentators have been quite harsh about reigning in the patent trolls’ venue selection.  The biggest patent litigation venue, by far, has been the Eastern District of Texas, a rural district known to be pro-plaintiff.  Patent trolls flocked to the E.D. Texas with 87% filing their patent infringement suits in that district.  The District of Delaware, Northern District of California, Central District of California, and Northern District of Illinois were far behind.  These latter four districts appear to be the heavy beneficiaries of TC Heartland, as many companies are either incorporated in Delaware, or headquartered in Silicon Valley or San Francisco.

While this ruling will not end the patent troll phenomenon, it will place hindrances on this type of litigant.

[1] 28 U.S.C. § 1400(b).

[2] 28 U.S.C. § 1391(c).

[3] 581 U.S.___ (2017) (slip op. at 5, citing Fourco Glass Co. v. Transmirra Prods. Corp., 353 U.S. at 229).