MVS Filewrapper® Blog: USPTO Patent Invalidation Precludes Judicial Equitable Remedies and Sanctions

The U.S. Court of Appeals for the Federal Circuit has issued a decision in ePlus, Inc. v. Lawson.  ePlus sued Lawson asserting infringement of two patents—U.S. Patent Nos. 6,023,683 ("the '683 patent") and 6,505,172 ("the '172 patent").  At trial, the district court held two of ePlus's asserted system claims and three of ePlus's asserted method claims not invalid, and the jury found those same claims infringed by Lawson. 

 

The district court entered an injunction against Lawson, precluding Lawson from "directly or indirectly making, using, offering to sell, or selling within the United States or importing into the United States any of the [adjudged infringing] product configurations and/or installation, implementation, design, configuration, consulting, upgrade, maintenance and support and training and other related and associated services and any colorable variations thereof (the “Infringing Products and Services”)." Lawson appealed, and the Federal Circuit reversed in part, holding the system claims invalid and two of three method claims not infringed.  The Federal Circuit remanded the case to district court to modify the injunction accordingly.

 

On remand the district court modified the injunction so that it only applied to infringement of claim 26 of the '683 patent—the sole remaining method claim.  Further, the district court found Lawson in civil contempt for violating the injunction.  Lawson appealed both the injunction and the contempt order.  While the appeal was pended, the United States Patent and Trademark Office ("USPTO") completed a reexamination of the '683 patent and determined that the sole remaining claim from the litigation—method claim 26—was invalid and cancelled.  In a separate appeal, the Federal Circuit affirmed the USPTO's invalidity determination.  Thus, the present appeal presented two questions:  (1) whether the district court’s modified injunction against Lawson should be set aside in light of the PTO's cancellation of the patent claim on which it was based; and (2) whether the civil contempt sanctions should be set aside. 

 

The Federal Circuit held there was no sufficient legal basis to maintain the injunction and that it must be set aside.  In support of this holding, the Federal Circuit noted, "It is well established that an injunction must be set aside when the legal basis for it has ceased to exist. . . .  Our court has applied these principles to an injunction barring infringement of patents later found to be invalid."  Because the sole remaining claim upon which the injunction was based had been invalidated—by the PTO; affirmed by the Federal Circuit—there was no legal basis for maintaining the injunction.

 

The Federal Circuit also held that the civil contempt sanctions should be set aside.  This was, in part, due to the fact that the injunction was not final and because it was a civil contempt order that was meant to compensate the ePlus for injury suffered as a result of the Lawson's infringing activity.  However, as the only remaining claim upon which the injunction was based was found invalid, the Federal Circuit concluded that "the compensatory award for the violation of the injunction must be set aside in light of the cancellation of claim 26."

 

The full opinion is available here.  

MVS Filewrapper® Blog: USPTO Issues Preliminary Guidance on Patentability Based on Alice Corp.

On June 25, 2014 the USPTO Deputy Commissioner for Patent Examination Policy released a Memorandum to the Patent Examining Corps that provides examiners with preliminary instructions related to subject matter eligibility of claims involving abstract ideas under 35 U.S.C. § 101 in view of the Supreme Court Decision in Alice Corporation Pty. Ltd. v. CLS Bank International.  The memo provides the following guidance with respect to the application of the Mayo framework to the examination of claims involving abstract ideas in light of the Alice decision:

 

(1)  Alice Corp. establishes that the same analysis should be used for all types of judicial exceptions, whereas prior USPTO guidance applied a different analysis to claims with abstract ideas (Bilski guidance in MPEP 2106(II)(B)) than to claims with laws of nature (Mayo guidance in MPEP 2106.01).

 

(2)  Alice Corp. also establishes that the same analysis should be used for all categories of claims (e.g., product and process claims), whereas prior guidance applied a different analysis to product claims involving abstract ideas (relying on tangibility in MPEP 2106(II)(A)) than to process claims (Bilski guidance).

 

The memo then explains that, despite these changes, the basic inquiries and examination procedures as to subject matter eligibility remain the same after the Alice decision. 

 

The instructions also set out a "Two-Part Analysis for Abstract Ideas."  First, the examiner is to determine whether the claim is directed to an abstract idea such as "fundamental economic practices," "certain methods of organizing human activities," "an idea of itself," or "mathematical relationships/formulas."   If the examiner concludes that the claim is directed to an abstract idea, the examiner must then determine "whether any element, or combination of elements, in the claim is sufficient to ensure that the claim amounts to significantly more than the abstract idea itself."  The instructions provide examples of what would qualify and what would not qualify as "significantly more" as referenced in the Alice decision: 

 

Would qualify: Improvement to technology or technical field, improvements to functioning of computer itself, and "meaningful limitations."

 

Would not qualify:  Adding the words "apply it," and requiring no more than a generic computer to perform generic computer functions.

 

The instructions direct examiners to reject claims under 35 U.S.C. § 101 as being directed to non-statutory subject matter if they do not amount to "significantly more" than the abstract idea. 

 

These examination instructions are only initial guidelines, and will be updated and modified as needed after additional consideration of the decision and public feedback.  Accordingly, the USPTO has issued a Request for Comments and Extension of Comment Period on Examination Instruction and Guidance Pertaining to Patent-Eligible Subject Matter that is open through July 31, 2014. 

MVS Filewrapper® Blog: Federal Circuit Weighs in on Stays for Post-Grant Review

The Federal Circuit has issued an opinion in VirtualAgility Inc. v. Salesforce.com, Inc., providing clarification regarding how court should properly determine whether to stay litigation during later-requested post-grant PTO proceedings.  Under the America Invents Act, a district court is permitted, but not required, to grant such a stay.  The statute also provides a list of four factors that the district court is to consider when deciding whether to grant a stay of litigation:

 

(A) whether a stay, or the denial thereof, will simplify the issues in question and streamline the trial;

(B) whether discovery is complete and whether a trial date has been set;

(C) whether a stay, or the denial thereof, would unduly prejudice the nonmoving party or present a clear tactical advantage for the moving party; and

(D) whether a stay, or the denial thereof, will reduce the burden of litigation on the parties and on the court.

 

In January 2013 VirtualAgility Inc. ("VA") sued Salesforce.com, Inc. and a group of other businesses for infringement of U.S. Patent No. 8,095,413.  Salesforce then filed a petition with the Patent Trial and Appeal Board (PTAB) for a post-grant review of the patent under the Transitional Program for Covered Business Method Patents (CBM Program), asserting that all of the claims were patent-ineligible.

 

In May of 2013, Salesforce and the other defendants filed a motion to stay district court proceedings in accordance with AIA Section 18(b)(1).  In denying the motion, the District Court took into account the four factors provided by statute.  The District Court conducted its own
review of the file history, and determined that the PTAB would not likely cancel some or all of the claims, despite the he PTAB’s determination that the claims of the ’413 patent are more likely than not invalid.  The district court therefore determined that the first factor, simplification of the issues, was either neutral or slightly against a stay.  The district court also determined that the fourth factor, burden of litigation, had substantial overlap with the first and would only slightly favor a stay.  The court decided the second factor favored a stay because it was early on in the litigation, and the third factor weighed against a stay because VirtualAgility would suffer from lost market share and consumer goodwill, in addition to the fact that "VA would be unduly prejudiced 'because certain witnesses are of an advanced age.'"

 

The Defendants appealed the denial of the motion to stay to the Federal Circuit, which reversed the district court and concluded that the balance of the factors favored a stay pending the outcome of the CBM review.  The court held that the district court's review the PTAB's determination that the claims of the ’413 patent are more likely than not invalid was an error as a matter of law because under the statutory scheme district courts have no role in reviewing the PTAB’s determinations regarding the patentability of claims that are subject to CBM proceedings.  

 

The Federal Circuit agreed with the district court's determination that the second factor weighed in favor of a stay, but disagreed with the district court's determination that the third factor weighed heavily against a stay.  In concluding that the undue prejudice factor weighed only slightly against a stay, the Federal Circuit held that the district court erred in failing to take into account the fact that VA did not move for a preliminary injunction, and that if VA needed injunctive relief as soon as possible it would have pursued a preliminary injunction, or filed suit earlier. 

 

Ultimately, with three factors heavily favoring a stay and one slightly against a stay, the Federal Circuit Court of Appeals reversed district court and remanded the case with instructions to grant the motion to stay the litigation pending CBM review at the PTO.

 

The full opinion is available here.

MVS Filewrapper® Blog: PTO Interference Decisions do not Preclude Invalidity Defenses in Court

The Federal Circuit has issued a decision in AbbVie v. Janssen Biotech and Centocor Biologics, which relates to patents that broadly cover antibodies which can neutralize activity of human interleukin 12 (IL-12) and have useful application in the treatment of autoimmune disorders. The patent owner, AbbVie, sued Janssen and Centocor for infringement of the patents at issue.  At trial, the jury found that all of the asserted claims were invalid on the grounds of lack of written lack of description, enablement, and obviousness.  AbbVie appealed the district court's decision. 

 

On appeal, AbbVie asserted that the denial of its summary judgment was improper, because the district court erroneously held that Centocor was not collaterally estopped from raising invalidity defenses in the infringement action after the interference proceeding at the Patent and Trademark Office.  Collateral estoppel or issue preclusion can be invoked when the issue sought to be precluded was involved in an earlier matter, has actually been litigated, the issue was determined by final and binding judgment, and the determination of the issue was essential to the judgment. The court here reasoned that the proceedings and judgment from the Patent and Trial Appeal Board was not final as an action for interference was still pending at the district court level. Also, §146 of the Patent statute provides in relevant part that "[a]ny party to an interference dissatisfied with the decision of the [Board] on the interference, may have remedy by civil action, if commenced within such time after decision, not less than sixty days. . . ." Further, there is language in the statute which allows the district court to make a de novo review of findings of fact in situations where new evidence is presented following the Board's review. Because procedures are provided in the patent statute that allows for additional judicial remedies if a party to an interference action is not satisfied, the court held that Centocor was not collaterally estopped in this case from raising invalidity defenses in the infringement action.  However, the Federal Circuit's discussion also left open the possibility that collateral estoppel may have applied had Centocor appealed under §141 instead of bringing a civil action. 

 

The Court also discussed the written description requirement and acknowledged that in light of Ariad this requirement is separate from the concept of enablement. While AbbVie classified its claims as a set of human antibodies, they did not disclose any structural features to indicate a commonality within the genus.  The Federal Circuit found the claims to be invalid in view of Ariad's holding that "merely drawing a fence around a perceived genus is not a description of the genus" and the fact that the jury heard substantial evidence that AbbVie's patents described only one type of structurally similar antibodies which are not representative of the full variety of scope of the genus.  The court also emphasized the inherent vulnerability of patents to invalidity challenges based on lack of written description, where the areas of technology are unpredictable and difficult to prove a correlation between function and structures found within the genus. 

 

The court ultimately affirmed the district court's judgments in both the infringement action and the interference action. 

 

The full opinion can be found here.

MVS Filewrapper® Blog: Generic Computer Implementation Cannot Save Patent-Ineligible Abstract Idea

On June 19, 2014, the Supreme Court issued its much-anticipated opinion in Alice Corp. v. CLS Bank Int'l.  The Petitioner, Alice Corporation ("Alice Corp.") is the assignee of the four patents at issue which disclose method, system, and media claims related to a computerized scheme for mitigating "settlement risk."  Respondents CLS Bank International and CLS Services Ltd. ("CLS") operate a network that facilitates currency transactions.  In 2007, CLS filed claims against Alice Corp. seeking a declaratory judgment that the claims at issue were invalid, unenforceable, and not infringed.  The parties filed cross-motions for summary judgment as to whether the asserted claims were patent-eligible subject matter under 35 U.S.C. § 101.  The District Court held that the claims were patent ineligible for failing to meet the requirements of section 101.  On appeal, a divided panel of the Court of Appeals for the Federal Circuit originally reversed the decision of the District Court however, after a rehearing en banc, the Federal Circuit affirmed the opinion of the District Court.

 

Alice Corp. appealed the decision of the en banc panel of the Federal Circuit to the Supreme Court.  The Supreme Court utilized the two-step framework set forth in Mayo Collaborative Servs. v. Prometheus Laboratories, Inc. in order to determine whether (1) the claims at issue are directed to a law of nature, natural phenomenon, abstract idea, or otherwise patent ineligible concept and (2) if so, the elements of the claim both individually and "as an ordered combination" add elements such that the patent ineligible concept was "transformed" into a patent-eligible application.

 

At the first step, the Supreme Court cited its precedent in Bilski v. Kappos in analyzing the claims at issue.  The Court wrote, "Petitioner's claims involve a method of exchanging financial obligations between two parties using a third-party intermediary to mitigate settlement risk. . . . On their face, the claims before us are drawn to the concept of intermediated settlement, i.e., the use of a third party to mitigate settlement risk."  The Court then compared these claims to the "risk hedging" in Bilski in determining that "intermediated settlement, like hedging, is an 'abstract idea' beyond the scope of § 101."   Citing Bilski, the Court rejected Alice Corp.'s argument that the abstract idea category is confined to "'preexisting, fundamental truth[s]' that '"exis[t] in principle apart from any human action.'"  As such, the Court held that the claims are "squarely within" the realm of abstract ideas and, thus, directed at patent-ineligible subject matter.

 

At the second step of the Mayo analysis, the Court reviewed its decisions in Gottschalk v. Benson, Diamond v. Diehr, Parker v. Flook, and Mayo in once again confirming that the "mere recitation of a generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention."  The Court found the use of the computer in the claim elements was "purely conventional" and amounted to nothing more than "an instruction to apply the abstract idea of intermediated settlement using some unspecified, generic computer." The Court further found that neither the system nor the media claims were different in substance and simply "recite a handful of generic computer components configured to implement the same idea."

 

Accordingly, the Supreme Court affirmed the decision of the Federal Circuit, finding the method claims to be patent ineligible and "[b]ecause petitioner's system and media claims add nothing of substance to the underlying abstract idea, we hold they too are patent ineligible under § 101."

MVS Filewrapper® Blog: USPTO Glossary Pilot Program

The USPTO has instituted a new program, the Glossary Pilot Program, which began June 2, 2014. The program will allow applicants for computer-related inventions to petition to make special entry into the Glossary Pilot Program with the filing of an application. Applications accepted into this pilot program will receive expedited processing and be placed on an examiner’s special docket prior to the first office action, with special status up to the issuance of the first Office action.

This program is set to run for six (6) moths through December 31, 2014, but may be cut off once the USPTO accepts 200 grantable petitions.  The program is intended to encourage the use of a glossary that provides clear definitions for some terms used in the claims in order to help the reader understand the disclosed invention with a higher level of clarity.

In order to qualify for the Glossary Pilot Program, all of the conditions set forth in the Federal Register Notice, must be met. Specifically:

(1)   The application must be an original, non-reissue, non-provisional utility application that does not claim benefit of a prior filed non-provisional U.S. application, unless the application is a continuation-in-part application filed for the purposes of providing a glossary.

(2)   The application and petition must use Form PTO/SB/436 and must be filed after June 2, 2014 and before the pilot deadline expires.

(3)   The claimed invention must be classified in one of the Art Areas related to computer-related and business method inventions, including those involving Computer Architecture Software and Information Security (Technology Center 2100); Computer Networks, Multiplex, Cable and Cryptography/Security (Technology Center 2400); Communications (Technology Center 2600); and Transportation, Electronic Commerce, Construction, Agriculture, Licensing and Review (Technology Center 3600).  The complete list of qualifying Art Areas is available here.

(4)   The glossary must be placed at the beginning of the detailed description portion of the original specification of the application, identified with a heading, and presented on filing of the application. Definitions for key terminology found in the claims, terms with special definitions, abbreviations, relative terms, terms of degree and functional terminology should be provided, but cannot rely on other parts of the application for completeness, cannot consist of what the term does not mean, cannot be open-ended, cannot consist solely of examples and synonyms, and cannot be disavowed elsewhere in the specifications.

(5)   Filing must be done via EFS-Web.

(6)   The application must contain at least one claim, but no more than four independent claims, and no more than 30 claims total.

 

Status of the petition will be available via Private PAIR. If a dismissal decision is received, the applicant can file a petition if it is believed that the dismissal is not proper. Also, any preliminary amendment filed after the application has entered the pilot program but before the issuance of the first Office Action will be entered unless the amendment causes the application to be non-compliant with the requirements of the program. More information can be found at the USPTO's website.

MVS Filewrapper® Blog: Federal Circuit Holds Common Sense Cannot Establish Presence of an Element

The Federal Circuit's recent decision in K/S HIMPP v. Hear-Wear Technologies presents an interesting development in the law of obviousness.  In affirming a finding of non-obviousness by the PTO Board of Patent Appeals and Interferences ("BPAI"), the Federal Circuit held that while common sense or basic knowledge may provide a reason to combine elements present in the prior art, it cannot establish the presence of an element itself.

 

Hear-Wear Technologies ("Hear-Wear") owns U.S. Patent No. 7,016,512 ("the '512 patent"), relating to a hearing aid that has three components.  The components that make up the hearing aid are a behind the ear audio processing module, an in-the-canal module, and a connector between the two.  Initially, during prosecution, the examiner rejected dependent claims 3 and 9 for obviousness, but ultimately allowed all claims.

 

K/S HIMPP ("HIMPP") filed an inter partes re-examination of the '512 patent, arguing that claims 3 and 9 were obvious for the same reasons supplied by the Examiner during the original prosecution.  The re-examination examiner rejected HIMPP's arguments due to lack of evidence and ultimately maintained the patentability of claims 3 and 9. HIMPP appealed the examiner's decision to the BPAI, which found that although HIMPP argued that the content of claims 3 and 9 was “well known,” HIMPP failed to direct the Board to any portion of the record for underlying factual support for its arguments for obviousness, and therefore affirmed the Examiner.

 

On appeal to the Federal Circuit, HIMPP argued that the detachable connection was already known, and that adding the detachable connection was a natural combination of prior art.  The majority of the panel (Judges Lourie and Wallach) affirmed the BPAI, holding that record evidence was required to support an assertion that the structural features of claims 3 and 9 of the ’512 patent were known prior art elements. Because HIMPP did not provide any evidence, and the Board cannot accept general conclusions about what is “basic knowledge” or “common sense” as a replacement for documentary evidence for core factual findings in a determination of patentability, there was no support for HIMPP's position. 

 

MVS Filewrapper® Blog: Internet Discussion Systems as Prior Art

The Federal Circuit's recent decision in Suffolk Technologies, LLC, v. AOL Inc., and Google Inc., adds another item to the list of "printed publications" that may preclude patenting of a claimed invention:  posts on internet newsgroups. 

 

In June 2012 Suffolk Technologies, LLC sued Google Inc. for infringement of U.S. Patent No. 6,081,835 ("the '835 patent"), related to "methods and systems for controlling a server that supplies files to computers rendering web pages."  Google argued that a newsgroup post—made nine months before the priority date of the '835 patent by a college student in response to a question posed in a discussion of common gateway interface—anticipated the claims at issue. 

The district court agreed with Google and granted summary judgment of invalidity.

 

Suffolk appealed the district court's decision, arguing that the court improperly construed the claim term "generating said supplied field," and that the newsgroup post should not be considered a printed publication under 35 U.S.C. § 102.  The Federal Circuit affirmed the district court on both counts.

 

Suffolk argued that the district court erred by deciding that the newsgroup post was prior art, deciding that the post was accurate and reliable, omitting the testimony of their validity expert, and ultimately granting summary judgment.  Suffolk asserted that the post was not made publically accessible because locating it would be too difficult, and the audience was mostly "beginners" and therefore not those of ordinary skill in the art.  Suffold also asserted that, if presented to a jury, a "'second-hand reproduction of an old Usenet post'" would be discredited and that the testimony of their validity expert was crucial to the decision, and as a result summary judgment was inappropriate.  The Federal Circuit was unpersuaded by any of Suffolk's arguments.

 

Of particular note, while the post in question was non-indexed and non-searchable, the Federal Circuit held that is was nonetheless sufficiently publically accessible to be considered a printed publication because someone interested in the topic could easily locate a list of posts in the newsgroup based on its hierarchical organization.  Further, the court held that the post in question was sufficiently disseminated because dialogue with the intended audience was the entire purpose of the newsgroup posting; the post elicited a number of responses; and many more people may have viewed the post.

 

While the decision deals with printed publications and public disclosure under pre-AIA § 102, the analysis is unlikely to be any different under the AIA. 

 

The full decision is available here.

 

MVS Filewrapper® Blog: Supreme Court Holds Induced Infringement Requires Direct Infringement

This week the U.S. Supreme Court issued its decision in Limelight Networks, Inc. v. Akamai Technologies, concluding that an act of direct patent infringement must be present for a claim of inducement of infringement. The decision unanimously held that a defendant may not be liable for inducing infringement of a patent under 35 U.S.C. Section 27(b) when no one has directly infringed the patent under Section 271(a) or any other statutory provision. 

 

The dispute between the parties arose over a patent assigned to the Massachusetts Institute of Technology, claiming a method of using a "content delivery network" (CDN) for the delivery of electronic data, of which Akamai is the exclusive licensee. Akamai, using a CDN, allows its clients to store on its servers certain components of their website, which are designated through a "tagging" process. Limelight also operates a CDN and carries out several steps of the patent in question, but requires their users to do their own tagging process. Initially, Akamai won the suit in District Court, however after the jury returned its verdict, the Federal Circuit decided Muniauction, Inc. v. Thomson Corp. which held that "direct infringement requires a single party to perform every step of a claimed method" but is satisfied if a single defendant exercise control or direction over the entire process. In light of this decision, Limelight moved for reconsideration of its motion for judgment as a matter of law, which the District Court then granted. The Federal Circuit granted en banc review and reversed. The Federal Circuit held that steps taken by multiple parties can result in induced infringement, but expound on its decision stating, “To be clear, we hold that all the steps of a claimed method must be performed in order to find induced infringement, but that it is not necessary to prove that all the steps were committed by a single entity.”

 

The Supreme Court reversed the Federal Circuit, holding that a defendant may not be liable for inducing infringement unless there is at least one underlying instance of direct infringement. The Court concluded that all of the claimed steps would have to be attributed for a single actor for direct infringement to occur under the Muniauction decision, but because Limelight did not undertake all of the steps claimed in the patent and cannot be held responsible for all those steps, there was no infringement.

  

The complete opinion can be found here.

MVS Filewrapper® Blog: Supreme Court Defines Scope of Definiteness Required in Patent Claims

Today the U.S. Supreme Court issued its decision in Nautilus, Inc. v. Biosig Instruments, Inc. defining the standard for definiteness necessary to meet the requirements of 35 U.S.C. Section 112, second paragraph.  The decision unanimously rejected the "insolubly ambiguous" standard previously employed by the Federal Circuit to determine whether patent claims meet the statutory requirement to "particularly point out and distinctly claim the subject matter which the applicant regards as the invention."

The dispute between the two exercise equipment manufacturers Nautilus Inc. and Biosig Instruments Inc. related to heart rate monitors patented by Biosig in 1994. Biosig accused Nautilus of infringing its patented heart rate monitors in exercise equipment (such as treadmills). Nautilus alleged the Biosig patent was invalid due to "indefiniteness" of its claims. The U.S. Court of Appeals for the Federal Circuit ruled in favor of Biosig finding its patent to be valid, concluding the claimed term "spaced relationship" of electrodes measuring a user's heart rate was sufficiently described as to be understood by a person of ordinary skill in the art to which the invention pertains. The U.S. Supreme Court reversed this decision, finding the Federal Circuit's standard for permitting vaguely written claims—so long as they are not "insolubly ambiguous"to be insufficient for informing skilled artisans about the scope of an invention when reviewing claim language. The dispute between the companies has now been remanded back to the Federal Circuit for reconsideration; however, it is unclear whether the outcome of the infringement decision will ultimately change upon application of the definiteness standard set forth by the Court. 

The test set forth by the Court to determine whether a patent is invalid for indefiniteness is as follows: a claim is indefinite if, when read in light of the specification of the patent (and the prosecution history) "fails to inform, with reasonable certainty, those skilled in the art about the scope of the invention." (Emphasis added). Therefore, the standard for meeting the written description requirement mandates that claims provide "reasonable certainty" to skilled artisans. This overturns the standard previously employed by the Federal Circuit which only required that a claim is "amenable to construction" and is not "insolubly ambiguous."

The decision provides clear incentive for patent drafters to eliminate 'zones of uncertainty' or ambiguity from patent claims. Such incentive is provided in the form of the Court's criticism of drafting and patent examination that results in ambiguity relating to claim terms or scope.

A complete copy of the opinion can be found here.

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