June 14, 2018, is Flag Day

Americans are proud of our flag, and the records of the U.S. Patent and Trademark Office, document a wide array of creative ways we Americans have found to display the flag, including on decorative displays (U.S. Patent No. 89,270): on parking meters (U.S. Patent No. 2,686,029):on our SUV’s (U.S. Patent No. 6,860,047):

on our mailboxes (U.S. Patent No. 6,929,173):

on our beverages (U.S. Patent No. D695626):

and even on our bandages (U.S. Patent No. D516730):

Salute the flag, where ever you find it!


The Novelty of an Optical Isomer is not Negated by the Prior Art Disclosure of its Racemate

In UCB, Inc. v. Accord Healthcare, Inc., [2016-2610, 2016-2683, 2016-2685, 2016-2698, 2016-2710, 2017-1001] (May 23 2018), the Federal Circuit affirmed the district court’s determination that UCB’s patents on lacosamide, an anti-epileptic drug, were not invalid for obviousness-type double patenting, obviousness, and anticipation.

On the issue of double patenting, the Federal Circuit noted that in chemical cases, the double patenting inquiry is not whether a person of ordinary skill in the art would select the earlier compound as a lead compound, but rather whether the later compound would have been
an obvious or anticipated modification of the earlier compound — the underlying patent in the double patenting analysis need not be prior art to the later claim.  The Federal Circuit found that the district court did not err by focusing its double patenting analysis on the claims’ differences, as well as the claims as a whole.  The Federal Circuit said that proving that a claim is invalid for obviousness-type double patenting “requires identifying some reason that would have led a chemist to modify the earlier compound to make the later compound with a reasonable expectation of success.  Acknowledging that it was a close case, because it discerned no clear error in the district court’s underlying fact finding that there would have been no reasonable expectation of success in making the modifications needed to make the claimed combination, the Federal Circuit agreed with the district court that the asserted claims of the ‘551 patent were patentably distinct from the ’301 patent.

With respect to obviousness, the Federal Circuit applied a lead compound analysis, rejecting the proposition that the test does not apply in purification cases.  The lead compound analysis first determines whether a chemist of ordinary skill would have selected the asserted prior art compounds as lead compounds, or starting points, for further development efforts, and then determines “whether the prior art would have supplied one of ordinary skill in the art with a reason or motivation to modify a lead compound to make the claimed compound with a reasonable expectation of success.  The Federal Circuit found substantial evidence supported the district court’s conclusion that a person of ordinary skill in the art would not have selected either of the proferred lead compounds.

On anticipation, appellants argued that because the prior art disclosed the chemical structure, it it necessarily disclosed the R-enantiomer (lacosamide) recited in claim 9 of the ’551 patent.  The district court concluded that the prior art disclosed neither the R-enantiomer, nor any of its characteristics.  The Federal Circuit noted that the novelty of an optical isomer is not negated by the prior art disclosure of its racemate, and that the references specifically stated that it prepared the racemic amino acid derivatives rather than the individual enantiomers.  Thus, the Federal Circuit found no clear error in the finding of no anticipation.

On-Going Royalty Should Consider the Fact that Patentee Won

In XY, LLC v. Trans Ova Genetics, L.C., [2016-2054, 2016-2136] (May 23, 2018), the Federal Circuit affirmed the district court on all issues except the ongoing royalty rate, which the court vacated and remanded for recalculation in accordance with its opinion.

XY’s patents relate to the sorting of X- and Y- chromosome-
bearing sperm cells for selective breeding purposes.  XY licensed Trans Ova under these patents, but purported to terminate the licenses for breach.  XY then sued Trans Ova for patent infringement, later adding counts for breach of contract  and unjust enrichment.  Trans Ova counter claimed for invalidity, monopolization, and breach of contract.

The Federal Circuit affirmed summary judgment on Trans Ova’s antitrust counterclaims, and the denial of post trial motions on the breach of contract issues. The Federal Circuit found no abuse of discretion in the in
denying Trans Ova’s motion for a new trial on the issue of patent invalidity,finding the issue as to one patent mooted by its concurrent affirmance of a PTAB decision invalidating the patent.  Because XY did not appeal the failure to award damages, the Federal Circuit dismissed as moot, Trans Ova’s appeal of the finding of willfulness.

The district court calculated an ongoing royalty rate for gross sales by averaging the jury’s 15% rate with the 10% rate in XY’s prior licenses to
arrive at a rate of 12.5%. For reverse sorting services, the district court awarded an ongoing royalty rate of 2%, half of the jury’s rate for those services.  A district court’s methodology for calculating an ongoing royalty  is reviewed under the abuse of discretion standard. See ActiveVideo Networks, Inc. v. Verizon Commc’ns, Inc., 694 F.3d 1312, 1332 (Fed. Cir. 2012).

In Amado v. Microsoft Corp., the Federal Circuit held that there is a “fundamental difference” between “a reasonable royalty for pre-verdict infringement and damages for post-verdict infringement.” When calculating an ongoing royalty rate, the district court should consider the change in the parties’ bargaining positions, and the resulting change in economic circumstances, resulting from the determination of liability.  When patent claims are held to be not invalid and infringed, this amounts to a “substantial shift in the bargaining position of the parties.  District courts to consider changed economic circumstances, such as changes related to the market for the patented products.

The Federal Circuit found that the district court focused on pre-verdict factors that were either irrelevant or less relevant than post-verdict  factors. In particular, the district court awarded an ongoing royalty based on an average between the jury’s reasonable royalty for past infringement (15%) and the rate established in the parties’ pre-suit license Agreement (10%).  The Federal Circuited noted that the jury considered and rejected the 10% pre-suit license rate.  The Federal Circuit said that the district court’s focus should have been on XY’s improved bargaining position and any other changed economic factors, rather than XY’s behavior in the past.  Instead, the district court identified
no economic factors that would justify the imposition of rates that were lower than the jury’s.

Patent Owner Could Not Claim Priority to Provisional Application That Only Disclosed Species of Claimed Genus

D Three Enterprises, LLC v. Sunmodo Corporation, [2017-1909, 2017-1910](May 21, 2018), the Federal Circuit affirmed the district court’s grant of summary judgment of invalidity of U.S. Patent Nos. 8,689,517, 9,068,339, and 8,707,655, based upon a determination that they could not claim priority to provisional application no. 61/150,301.

The patents-in-suit are directed to roof mount sealing assemblies, which allow users to mount objects on a roof and seal the mounting location against water.  The District Court determined that the patents-in-suit could not claim priority from the provisional application because the claims were broader than the invention disclosed in the provisional application, and thus the written description requirement pursuant to 35 U.S.C. §112(a).

The Federal Circuit noted that to claim a genus, a patentee must disclose a representative number of species falling within the scope of the genus or structural features common to the members of the genus so that a PHOSITA can visualize or recognize the members of the genus.  All of the asserted claims save one recite washerless assemblies.  The provisional application disclosed one washerless assembly, depicted in Figures 27−33 and 41, showing an an attachment bracket with W-shaped prongs.  The district court noted that all of the applications disclosed this attachment bracket, such that a PHOSITA would not understand the attachment bracket to be an “optional feature.”  However, the claims to the washerless version were not limited to attachment brackets with the W-shaped prongs.

The Federal Circuit first considered with summary judgement on the issue was appropriate, finding that the patent owner had sufficient notice, so that it was.   The Federal Circuit then turned to the merits, agreeing with the district court that washerless assemblies using attachments other than attachment bracket with the W-shaped prongs were not adequately disclosed in the provisional application, which in no way contemplated the use of other types of attachment brackets in a washerless assembly.  The Federal Circuit added that it was not sufficient for purposes of the written description requirement of § 112
that the disclosure, when combined with the knowledge in the art, would lead one to speculate as to the modifications that the inventor might have envisioned, but failed to disclose.

D Three argued that boilerplate language in the provisional application disclosed alternative attachment brackets:

[PHOSITAs] will recognize certain modifications, permutations, additions and sub-combinations therefore. It is therefore intended that the following appended claims hereinafter introduced are interpreted to include all such modifications, permutations, additions and subcombinations are within their true sprit [sic] and scope.

But the Federal Circuit found that this boilerplate language at the end of the provisional application was not sufficient to show adequate
disclosure of the actual combinations and attachments used in the Washerless Claims. The Federal Circuit noted that adequate written description does not ask what is permissible in view of the disclosure, rather, it asks what is disclosed.

The Federal affirmed that the provisional application lacked adequate written description of what was claimed, and thus did not support a claim of priority.


Printed Matter Cannot Be a Patentable Limitation Unless it is Functionally Related to the Claim Elements

In Praxair Distribution, Inc. v. Mallinckrodt Hospital Products IP Ltd., [2016-2616, 2016-2656](May 16, 2018), the Federal Circuit affirmed the PTAB decision that claims 1–8 and 10–11 of U.S. Patent 8,846,112 directed to methods of distributing nitric oxide gas cylinders for pharmaceutical applications were unpatentable as obvious, and reversed the decision that claim 9 was not unpatentable.

In construing the claims, the Board applied the printed matter doctrine. The Board interpreted the providing information, evaluating, and recommendation claim limitations to be either printed matter or purely
mental steps not entitled to patentable weight, as those limitations lacked a functional relationship to the other claim limitations except in claim 9.  With respect to claim 9, however, the Board interpreted “in accordance with” to mean “based on, or as a result of” the recommendation to discontinue nitric oxide treatment from claim 7,
thereby establishing a functional relationship to the recommendation limitation.  The Board found that the cited prior art collectively taught each limitation of claims 1–8 and 10–19 that did have patentable weight, and held they were obvious.

The Federal Circuit began with the printed matter doctrine, applied by the PTAB.  The Federal Circuit explained that claim limitations directed to printed matter are not entitled to patentable weight unless the printed matter is functionally related to the substrate on which the printed
matter is applied.  However the printed matter doctrine is not limited to printed materials, and applies if the claims are directed to the content of information.

If a claim limitation is directed to printed matter, then the next step is to ascertain whether the printed matter is functionally related to its “substrate.” Printed matter that is functionally related to its substrate is given patentable weight, while where the printed matter is not functionally related to the substrate, the printed matter will not distinguish the
invention from the prior art in terms of patentability.  In in Ngai, there was no functional relationship between claimed instructions and a diagnostic kit, as the instructions “in no way depended on the kit, and the kit did not dependon the” instructions. However, Ngai distinguished Gulack, where
there was a functional relationship between printed digits on a circular band because “the printed matter and the circularity of the band were interrelated, so as to produce a new product useful for educational and recreational mathematical purposes.”

The Federal Circuit agreed that the Board properly addressed the printed matter doctrine during claim construction.  The Federal Circuit rejected Mallinckrodt’s argument that the printed matter/mental steps doctrines only apply to patent eligibility, noted that the printed matter doctrine raises an issue where the § 101 patent-eligibility inquiry and the
§ 102 and § 103 novelty and nonobviousness inquiries overlap.  The Federal Circuit explained because claim limitations directed to mental steps may attempt to capture informational content, they may be considered printed matter lacking patentable weight in an obviousness
analysis. Accordingly, a limitation that merely claims information by incorporating that information into a mental step will receive patentable weight only if the limitation is functionally related to the substrate.

The Federal Circuit noted that claim 3’s requirement that the medical provider weigh “the potential benefit of treating the [neonatal patient]
with 20 ppm inhaled nitric oxide vs. the potential risk that inhaled nitric oxide could cause an increase in PCWP” merely requires a medical provider to think about the information claimed in the providing information limitation of claim 1.  The Federal Circuit said that adding an ineligible mental process to ineligible information still leaves the claim limitation directed to printed matter. To hold otherwise would make
the printed matter doctrine a dead letter, requiring no more than a “think about it” step to give patentable weight to a claim limitation directed to information content.

The Federal Circuit found that the reference to “pharmaceutically acceptable” referred to the nature of the nitric acid gas, not the prescribing information that may accompany it, and thus there was no functional relationship between the information and methods of providing and potentially administering the drug.  Since no other functional relationship was asserted, the Federal Circuit held that the printed matter in claims 1–8 and 10 lacks a functional relationship to its substrate, and thus cannot be the basis of patentability.

The Federal Circuit then turned to claim 9, which survived the IPR, summarizing it as: (1) determining that a neonatal patient has preexisting LVD; (2) treating that neonate with nitric oxide, whereupon
the neonate experiences pulmonary edema; (3) providing information and a recommendation to the medical provider to discontinue nitric oxide treatment for a patient with preexisting LVD who experiences a pulmonary edema; and (4) “based on” the  recommendation,  discontinuing nitric oxide treatment due to the pulmonary edema. The Federal Circuit noted that claim 9 requires a medical provider to take a specific action, discontinuing treatment, as a result of the  recommendation limitation, and agreed that this creates the required functional relationship with the rest of the claim.  However the Federal Circuit disagreed with the Board that claim 9 as a whole would not have been obvious.

The Federal Circuit found the Board improperly construed claim 9 as requiring the exclusion of persons from the treatment, rather than discontinuing persons from treatment if edema occurs, and thus the prior art teaching of treatment with monitoring  made the claimed invention obvious.

There Can Be Only One (District for Venue Purposes)

In In re Bigcommerce, Inc., [2018-122] (May 15, 2018), the Federal Circuit granted petitions for mandamus, requiring that transfer of cases from the Eastern District of Texas.

The Federal Circuit held that a domestic corporation incorporated in a state having multiple judicial districts “resides” for purposes of the patent-specific venue statute, 28 U.S.C. § 1400(b), only in the single judicial district within that state where it maintains a principal place of business, or failing that, the judicial district in which its registered office is located.  Because the petitioner did not “reside” in the Eastern District of Texas under this interpretation, the Federal Circuit granted the petitions for mandamus.

The Old “Practicing the Prior Art” Defense

In 01 Communique Laboratory, Inc. v. Citrix Systems, Inc., [2017-1869] (April 26, 2018), the Federal Circuit affirmed the district court’s Order denying 01 Communique a new trial on the issue of infringement.

The case involved U.S. Patent No. 6,928,479 on a System Computer Product and Method for Providing a Private Communication Portal.  The jury returned a split verdict.
It concluded that Citrix had not established that claims 24 and 45 were invalid, but that Communique had not established that Citrix’s GoToMyPC product infringed those claims.  01 Communique’s moved for a new trial because Citrix resorted to “a well-known defendant’s trick,” known as the “practicing the prior art defense.” which “was improper, misleading, and devastatingly prejudicial to the integrity of the trial.”

The Federal Circuit found that Citrix’s infringement defense was firmly rooted in a
limitation by limitation comparison between the asserted claims and the GoToMyPC product.  The Federal Circuit found that Citrix did argued that under the trial court’s claim construction claims 24 and 45 were valid, but not infringed, but that if Communique attempted to expand the scope of its claims to include Citrix’s systems, then the claims would be invalid in light of the prior art.  The Federal Circuit has previously stated that “there is no ‘practicing the prior art’ defense to literal infringement.  The problem with such a defense is that it can potentially allow a defendant to skirt evidentiary hurdles and conflate the infringement and invalidity inquiries.  While the issue of whether asserted claims read on the prior art is relevant to the question of invalidity, “accused infringers are not free to flout the requirement of proving invalidity by clear and convincing evidence by asserting a practicing prior art defense to literal infringement under the less stringent preponderance of the evidence standard.


While it is clear that an accused infringer cannot defeat a claim of literal infringement or establish invalidity merely by pointing to similarities between an accused product and the prior art, this does not preclude a litigant from arguing that if a claim term must be broadly interpreted to read on an accused device, then this same broad construction will read on the prior art.  The Federal Circuit found that Citrix did not rest on an improper “practicing the prior art” defense, but instead correctly recognized that claim terms must be construed the same way for both invalidity and infringement.

The Federal Circuit rejected the argument that comparisons between the accused device and the prior art is improper, and noted that any prejudice would be cured by the district court’s jury instructions.

The Federal Circuit affirmed the denial of a new trial.


Wash Your Hands Before Meals and Before Going to Court; Unclean Hands Wipe out Recover for Valid and Infringed Patents

In Gilead Sciences, Inc. v. Merck & Co., [2016-2302, 2016-2615] (April 25, 2018), the Federal Circuit affirmed the district court’s determination that the claims the jury found to be valid and infringed were unenforceable because of pre-litigation business misconduct and litigation misconduct attributable to Merck.

The Federal Circuit looked the the Supreme Court’s decision in Keystone Driller Co. v. General Excavator Co., for an explanation of unclean hands — there the Court held that a determination of unclean hands may be reached when “misconduct” of a party seeking relief “has immediate and necessary relation to the equity that he seeks in respect of the matter in litigation,” i.e., “for such violations of conscience as in some measure affect the equitable relations between the parties in respect of something brought before the court.”  The Federal Circuit noted that Merck argued that the connection between the misconduct and the litigation must be “material,” but failed to make clear to the Federal Circuit had that requirement affected the case.  The Federal Circuit noted that in the present case which involves clear misconduct in breaching commitments to a third party and clear misconduct in litigation, the “immediate and necessary relation” standard, in its natural meaning, is met if the conduct normally would enhance the claimant’s position regarding legal rights that are important to the litigation if the impropriety is not discovered and corrected.  The Federal Circuit found that considering the conduct as a whole the district court’s determination of unclean hands was adequately supported.

Specifically, the district court found that Merck violated the “firewall” understanding between Merck and Pharmasset, when at least one person involved in a conference call with Pharmasset was involved, and continued to be involved in Merck related patent prosecution, which the Federal Circuit characterized as “serious misconduct,
violating clear standards of probity in the circumstances.”  The improperly acquired knowledge influenced Merck’s filing of narrowed claims, a filing that held the potential for expediting patent issuance and for lowering certain invalidity risks.

The district court also found litigation misconduct, first in giving knowing false deposition testimony (presumably to hide the business misconduct) and false trial testimony. The Federal Circuit agreed with the district court that Merck’s litigation misconduct infects
the entire lawsuit, including the enforceability of the other patents in the suit.

Because the district court did not abuse its discretion in applying the doctrine of unclean hands, the Federal Circuit affirmed.

Inter Partes Review — If We’re Going to Have Them Then It’s All or Nothing

In SAS Institute Inc. v. Iancu, the Supreme Court held that the when USPTO institutes inter partes review, it must all the grounds in the Petition, and cannot choose to limit its review to only some of the grounds.

The opinion was written by Justice Gorsuch, who if he had his druthers in Oils States (issued the same day) would have thrown out inter partes review altogether.  SAS petitioned for review of ComplementSoft’s software patent, but the USPTO, relying upon 37 CFR §42.108(a) only instituted inter partes review as to some of the challenged claims.  SAS unsuccessfully argued before the Federal Circuit that 35 USC §318(a), required the Board to decide the patentability of every claim.

Justice Gorsuch found that 35 USC §318(a) “provides a ready answer.”  He points out that §318(a) directs that if an inter partes review is instituted and not dismissed under this chapter, the Board “shall issue a final written decision with respect to the
patentability of any patent claim challenged by the petitioner. . ..”  He said “[t]his directive is both mandatory and comprehensive.”  After a brief analysis of the grammar, he concludes:

when §318(a) says the Board’s final written decision “shall” resolve the patentability of “any patent claim challenged by the petitioner,” it means the Board must address every claim the petitioner has challenged.

Judge Gorsuch said it would seem to be an easy case,

Where a statute’s language carries a plain meaning, the duty of an administrative agency is to follow its commands as written, not to supplant those commands with others it may prefer.

The USPTO Director’s argued that while every claim instituted must be decided, not every claim has to be instituted.  However, Justice Gorsuch dismissed this  because “partial institution” power appears nowhere in the text of §318, or anywhere else in the statute, and what can be found in the statutory text and context strongly counsels against the Director’s argument.

Justice Gorsuch examined the statutory scheme for inter partes review, noting that it it a petitioner-driven process, not a PTO drive process.  Moreover while the Director is given discretion whether to institute, nothing suggests the Director enjoys a license to depart from the petition and institute a different inter partes review of his own design.  While §314 gives the Director discretion to institute if there is a reasonable likelihood the petitioner will prevail on at least one of the claims challenged in the petition, Judge Gorsuch explained that rather than contemplate claim-by-claim institution, this language anticipates a regime where a reasonable prospect of success on a single claim justifies review of all.

Justice Gorsuch also pointed that that §318’s requirement that the Final Written Decision address “any patent claim challenged by the petitioner.” and rejected that any grammatical discrepancy between §314’s reference to claims found in the petition, and §318’s reference to claims challenged by the petitioner, makes any difference.

Justice Gorsuch also rejected the Director’s argument for efficiency, finding each side offers plausible reasons why its approach might make for the more efficient policy, but ultimately pointing out that policy arguments are properly addressed to Congress, not the Supreme Court.

Justice Gorsuch also rejected the Director’s argument for Chevron deference, which if still valid, only applies where the Court is unable to discern’s the Congress’ meaning.  Justice Gorsuch had no uncertainty about the statutes’ “unmistakable commands.”

The final issue raised by the Director was whether partial institution was even reviewable, given the unappealability of institution decisions.  He pointed out that after Cuozzo, if a party believes the Patent Office has engaged in “shenanigans” by exceeding its statutory bounds, judicial review remains available consistent with the Administrative Procedure Act, which directs courts to set aside agency action “not in
accordance with law” or “in excess of statutory jurisdiction, authority, or limitations.”  Justice Gorsuch said that was precisely the sort of question before the court.

Because everything in the statute before it confirmed that SAS is entitled to a final written decision addressing all of the claims it has challenged, and nothing suggested the Court lacks the power to do so, the Supreme Court reversed the judgment of the Federal Circuit, and remanded the case for further proceedings consistent with this opinion.

Overall a banner day for the Federal Circuit — its a rare day that they bat .500 at 1 First St NE.


What the PTO Giveth, the PTO Can Taketh Away. IPRs are Constitutional. Get Back to Work.

The Supreme Court has finally issued its opinion in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, holding that inter partes review does not violate the Constitution.  The majority opinion written by Justice Thomas states that reconsideration of the Government’s decision to grant a public franchise “falls squarely within the public rights doctrine, and Congress has “permissably reserved the the PTO’s authority to conduct that reconsideration,” and thus the PTO can do so without violating Article III of the Constitution.

The Opinion goes on to explain that the courts have long recognized that the grant of a patent is a matter involving public rights.  The Opinion notes that the determination of patentability is exercising an executive function, and need not be adjudicated in an Article III Court, and because inter partes review involves the same basic matter as the grant of a patent, it too falls on the public-rights side of the line.

Justice Thomas points out that the only difference between Inter partes review and the initial grant of a patent is that Inter partes review occurs after the issuance, but said that distinction doe snot make a difference.

On the issue of whether patents are private property, Justice Thomas agrees that they are, and are entitled to the same protection as any other property right that consists of a franchise.  Adding that as a franchise the patent can confer only the rights that the statute prescribes, and that statute provides for inter partes review.

Justice Thomas went on to dismiss the arguments based upon the historic role of courts in deciding patent matters, citing non-judicial validity determination by the the privy Council under English Law.  He also dismissed cases that appear to suggest that courts were the only authority to set a patent aside, noting that under the statutes at the time, this were true statements, but they do not address Congress’ authority to establish a different scheme.

Justice Thomas rejected the the argument that inter partes review was a judicial proceeding exercising judicial authority, noting that the Court has never adopted a “looks like” test, and stating that the fact that an agency uses court-like procedures does not necessarily mean that it is exercising judicial power.

Justice Thomas was careful to emphasize the narrowness of the holding.  He pointed out that Oil States did not challenge the retroactive application of inter partes review, nor did it raise a due process challenge. Finally, Justice Thomas cautioned that the decision should not be misconstrued as suggesting that patents are not property for purposes of the Due Process Clause or the Takings Clause.

In closing, Justice Thomas noted that the disposition of the Article III issue, disposed of the Seventh Amendment issue, and concluded that because inter partes review does not violate Article III or the Seventh Amendment, the judgment of the Court of Appeals was confirmed.

Justice Gorsuch penned an interesting dissent joined by Chief Justice Roberts, but in the end what matters is inter partes reviews don’t violate Article III. So get back to work.







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