Patent Docs

ACLU (Predictably) Opposes Patent Subject Matter Eligibility Proposal

June 3, 2019

By Kevin E. Noonan —

It is perhaps not surprising that several medical groups, as well as other organizations with little regard for the patent system, and their legal accomplice, the American Civil Liberties Union, would oppose the recent efforts to amend the subject matter eligibility section of the statute (35 U.S.C. § 101) to correct the imbalances caused by recent U.S. Supreme Court jurisprudence on the matter. After all, one of the pillars of the current standard for (in)eligibility was the Court's decision in AMP v. Myriad Genetics, championed by the ACLU beginning with the District Court case challenging "gene patenting" (an effort, not inconsequentially, that has taken the place of Nazis marching through the predominantly Jewish suburb of Skokie, IL in the group's fundraising efforts). This opposition has taken the form of a letter to Senators Coons (D-DE) and Tillis (R-NC) as well as Representatives Collins, Johnson, and Stivers setting forth these groups' views.

Before getting into the substance of their allegations of the sky-falling effects of enactment of any revisions to the statutory status quo, two important realities need to be understood. First, despite all the trumpeting and bally-hoo that ensued after the Supreme Court's Myriad decision was handed down, human genes remain patent-eligible. Admittedly, the species of genes that can be patented has been limited, from genes isolated as they exist in the chromosome to a particular, processed form of the gene called "complementary DNA" or cDNA. While this limitation can restrict the capacity for a small subset of human genes to be patented, the overwhelming majority of the ~30,000 genes present in the human genome remain patent eligible in the cDNA form.

The second important (overlooked) fact is that most human genes are not patentable. The reason for the distinction is that patent-eligibility is a categorical criterion, while patentability depends on the circumstances of the invention in light of the prior art. The genomic sequence of the totality of human genes (as well as the ~80% of the genome that does not encode proteins) has been publicly available since the turn of the 21st Century, due in large part to such luminaries as Sir John Shulston who were motivated precisely to prevent (or forestall or at least retard) patenting of human genes. And for those human genes for which patent applications were filed at that time, the statutory limit of patent term as 20 years from filing ensures that there are very few such patents that have not expired (or been abandoned); Myriad's BRCA gene patents, for example, are almost all expired or will be in short order.

Thus, no matter what Congress may do, the historical fact is that the "gene age" is over and if there was ever a diminution of innovation, medical progress, or benefit to humanity occasioned by these patents, that time is truly past.

This is not to say that the Supreme Court's precedent has not made mischief with regard to patenting "natural products" (see "Sherry Knowles Addresses Real World Impact of Myriad-Mayo Guidance at BIO Symposium"); how the Court's Myriad precedent has been interpreted, by both the Patent Office and the lower courts is a source of concern that is blithely ignored by the ACLU and their clients.

Turning to the ACLU's letter, it is clear from the introductory sentence, stating that the signatories are "civil rights, medical, scientific, patient advocacy, and women's health organizations," that the ACLU turned its Rolodex to the groups it assembled for the Myriad case to once again raise an alarm over ephemeral consequences (and, sadly resulting in consequences these groups or at least their members would not have envisioned with approval; see "The ACLU, Working for the Man") that could result by enactment of the revisions suggested in the latest proposal. The letter states that the proposed revisions to patent subject matter eligibility standards would "authorize patenting products and laws of nature, abstract ideas, and other general fields of knowledge" (they wouldn't, of course; they would just substitute per se, categorical standards to ones better suited to identifying that subject matter whose patenting would not "promote progress of the useful arts").

But the ACLU and friends have expanded the litany of their worries from the Myriad days — the letter announces that they consider "[m]ost troubling[]" the prospect of "patenting of human genes and naturally-occurring associations between genes and diseases," which they claim "will prevent the discovery of novel treatments for diseases including cancer, muscular dystrophy, Alzheimer's disease, heart disease, and other rare and common diseases." It would be understandable to think from this rhetoric that, before the Myriad decision no one ever discovered "novel treatments for diseases including cancer, muscular dystrophy, Alzheimer's disease, heart disease, and other rare and common diseases," when the truth of the matter is that, perhaps with the exception of Alzheimer's disease, the history of the past thirty years has been the discovery of treatments for such diseases, supported by the patent system to permit these treatments to come to market. In addition, the letter claims, revising patent law as proposed would "create barriers to patients' access to potentially lifesaving genomic tests, eliminate access to confirmatory testing and dramatically increase the cost of tests that have benefited from innovation that led to reduced costs of DNA sequencing technology." Sadly, of course, the true sequellae of the Myriad decision has been to permit corporate testing labs to expropriate the scientific advances which, as in Myriad, tend to come from academia and startup biotechnology companies; the even sadder reality is that access to medicine and diagnostic testing is thwarted by insufficient insurance coverage not patents. Indeed, one of the reasons genetic diagnostic testing is (relatively) widely accepted (and reimbursed) is due to the success Myriad had in convincing skeptical insurance providers (public and private) in the late 1990's that something as frightening and serendipitous as cancer could be predicted with reliability at all (see "In Defense of Patenting"). And as for the letter's further allegation that the proposed revisions to statutory patent eligibility would "stymie competition for developing and improving diagnostic and medical tests, and increase the cost and hinder advancement of targeted therapeutics involving genomic markers" that would result in "higher costs for patients, payers, and the healthcare system overall," what will be stymied would be investment in such new technologies (except for those established businesses for whom innovation upsets their established channels of commerce and thus tend to avoid truly groundbreaking inventions).

The letter goes on to provide an encomium for recent patent eligibility jurisprudence, highlighting the signal victory for the ACLU in Myriad and particularly noting the unanimity of the Supreme Court's decisions (which paradoxically does not necessarily demonstrate their correctness, erudition, or deep and penetrating thought concerning the patent issues at bar). More troubling is the unsupported allegations that follow, that these decisions "have created a legal foundation that is promoting innovation across numerous sectors." (It is worth noting that the only support for the assertion that human gene patent ineligibility should lead to lower cost diagnostic tests cited in the letter is an article by a journalist, written the day the Supreme Court handed down its Myriad decision. One would think that the experience, putatively represented by the co-signers of the letter, six years after the Myriad decision, would yield ample, real-world evidence of this speculation but it's nowhere to be found in the letter.)

In something of a factual (but not emotional or rhetorical) nonsequitur, the letter then recites the purported sins of Myriad, backed not by court findings but by allegations from an amicus brief from the American Medical Association and other medical groups. (It is significant that plaintiffs and their ACLU counsel did not attempt to invalidate Myriad's patents for misuse or other misbehavior, but used allegations of misbehavior to drum up support for invalidating the patents on categorical grounds.) Included in these allegations in the letter is the slander that "[t]he patents authorized Myriad to block all manner of scientific inquiry into the genes shutting down research at academic medical centers throughout the country," a statement belied by the more than 10,000 academic research papers that could be found in Medline and other databases having been published between 1997 (when the University of Utah or its licensee Myriad was granted the patents) and 2013 (when the Supreme Court invalidated a small subset of those patent claims).

This false litany leads to a reiteration of the ACLU's Myriad rhetoric: that there is a "fundamental truth" that "genes and other naturally occurring matter and relationships should never be granted to anyone as intellectual property." But the consequence of taking that "truth" to its logical extreme is that nothing in the natural world, no matter how changed by human intervention, could be patented. It is nothing less than hubris (and like much hubris, arising from ignorance) to think that only that which arises solely without reliance on the natural world deserves patent protection. And the further roll call of intellectual luminaries and medical, religious, and interest groups recited as supporting the Myriad decision just shows that excellence and achievement in one field does not lead to wisdom is another (see William Shockley and Peter Duesberg as illustrative examples).

As might have been expected, the ACLU's concern has been inflamed by language in the draft proposed legislation that the judicial exceptions (laws of nature, natural phenomena, and abstract ideas) and case law supporting them would be abrogated. This tactic raises many more concerns that importuning the ACLU and its friends and supporters, the most worrisome of which being that the Supreme Court would, at best, decide that such abrogation was unconstitutional for being beyond the patenting powers granted to Congress in Article I and, at worst, give rise to even more stringent limitations on patent eligibility (no doubt applauded by the ACLU and their co-signers of this letter). The reality is, of course, more measured and reasoned than that: what is proposed is replacing the poorly defined, inconsistently applied, subjective, per se judicial (instead of statutory) "exceptions" with legislation, vetted through the political process and (with luck) capable of consistent, predictable application in ways that do not turn patenting into a lottery dependent on the whims of district court or appellate judges or, indeed, the Supreme Court. (It is ironic that the letter casts the consequences of this legislation as creating uncertainty, when even the casual observer will find plainly evident that it has been the Supreme Court's recent decisions, and its unwillingness to revisit them, that has caused the greatest uncertainty that the legislation proposes to correct.) The ACLU's letter castigates the proposed legislation for wiping out "one hundred and fifty years of case law" but of course that's the point; said more properly the legislation will remove the uncertainties created by this case law.

The letter ends with the disingenuous suggestion that "[t]o the extent that there are problems with the current application of the law that must be solved, narrower paths to addressing them are preferable to rewriting current 101 standards and overturning over a century of precedent." Not only does the letter contain no hint regarding what those "narrow paths" might be, it is unlikely that any such path would be acceptable to the ACLU and their supporters.

One thing is certain: there are competing memes involved in the patent subject matter eligibility debate, and for the pro-patent proponents to prevail this time it will take more political savvy than was exhibited during the Myriad case.
News from Abroad — Double Patenting: Will Prohibition End at Last?

June 2, 2019

By Hanns-Juergen Grosse* —

The approach of the European Patent Office (EPO) to prohibition of double patenting is well established and may, at a first glance, also seem well founded.

Broadly speaking, the prohibition of double patenting is meant to mean that two patents cannot be granted to the same applicant for one invention (in the same jurisdiction). At a closer look, there is a plurality of facets, layers and aspects, producing an exhilarating spectrum of double patenting.

Thus, double patenting may arise in three situations where European patent applications are filed by the same applicant:

• Europeans patent applications filed on the same day;

• Divisional and parent patent applications; or

• A European patent application claiming priority in respect of another European patent application (internal priority).

However, commentators on European patent practice have never stopped to stress that the European Patent Convention (EPC) does not prohibit double patenting.

After the Examining Division decided to refuse European patent application EP 10 718 590.2 in accordance with the applicable Guidelines for Examination at the EPO (Guidelines), G IV, 5.4 under Art. 97(2) EPC in conjunction with Art. 125 EPC, allowing subordinate application of principles of procedural law generally recognised in the contracting states of the EPC, the applicant appealed the decision and auxiliary requested, as occasionally done, that the responsible Board of Appeal (BoA) refers a pivotal question to the Enlarged Board of Appeal (EBoA).

The BoA did not, as usually done, discard the idea of referring the question to the EBoA, but also helped to develop the applicant's question into a two-tier question, and decided at the end of oral proceedings held on 07 February 2019 in appeal case T 318/14 to refer a detailed set of questions to the EBoA.

What has happened?

In earlier leading decisions G 1/05 and G 1/06, both relating to divisional patent applications, the EBoA said in passing that the principle of the prohibition on double patenting is based on the notion that an applicant has no legitimate interest in proceedings leading to the grant of a second patent for the same subject-matter if the applicant already possesses one granted patent for that subject-matter. The Guidelines extrapolated therefrom that in case that two or more European applications from the same applicant designate the same state or states and the claims of those applications have the same filing date or priority date and relate to the same invention only one of the applications can be granted.

However, for the present European patent application EP 10 718 590.2 claiming the internal priority of, and claiming the same subject matter as, an earlier European patent application, the applicant has a clear legitimate interest, as it is the filing date and not the priority date that is the relevant date for calculating the 20-year term of a patent. Of course, it is common practise to file a European patent application establishing a priority date for a new invention, towards the end of one year after the priority date to file a PCT application claiming the priority in respect of the European patent application, and towards 31 months after the priority date to enter the regional phase of the PCT application before the EPO.

The BoA agreed with the applicant that there is no uniform practice and even conflicting case law, and referred the following questions to the EBoA:

1. Can a European patent application be refused under Art. 97(2) EPC if it claims the same subject-matter as a European patent granted to the same applicant which does not form part of the state of the art pursuant to Art. 54(2) and (3) EPC?

2.1 If the answer to the first question is yes, what are the conditions for such a refusal and are different conditions to be applied where the European patent application under examination was filed

a) on the same date as, or

b) as a European divisional application (Art. 76(1) EPC) in respect of, or

c) claiming the priority (Art. 88 EPC) in respect of a European patent application on the basis of which a European patent was granted to the same applicant?

2.2 In particular, in the latter case, does an applicant have a legitimate interest in the grant of the (subsequent) European patent application in view of the fact that the filing date and not the priority date is the relevant date for calculating the term of the European patent under Art. 63(1) EPC?

For answers to the questions raised in T 318 /14, the EBoA may have to probe the real intentions of the legislators by going back to the archives and interpreting the Traveaux Préparatoires, the draft documents and minutes produced when the EPC was conceived back in the early 1970s.

There will be plenty of fragments in need of attention, and plenty of leeway for interpretation. However, it will be worth the efforts.

* Dr. Grosse is a partner with D Young & Co

This article was reprinted with permission from D Young & Co.
Conference & CLE Calendar

June 2, 2019

June 3-6, 2019 – BIO International Convention (Biotechnology Innovation Organization) – Philadelphia, PA

June 7, 2019 – Program on Ethics in the Practice of Intellectual Property Law (John Marshall Law School Center for Intellectual Property, Information & Privacy Law) – 12:40 to 5:00 pm, Chicago, IL

June 12-14, 2019 – Patent Fundamentals Bootcamp 2019: An Introduction to Patent Drafting, Prosecution, and Litigation (Practising Law Institute) – Chicago, IL

July 17-19, 2019 – Patent Fundamentals Bootcamp 2019: An Introduction to Patent Drafting, Prosecution, and Litigation (Practising Law Institute) – San Francisco, CA
Program on Ethics in the Practice of Intellectual Property Law

June 1, 2019

The John Marshall Law School Center for Intellectual Property, Information & Privacy Law will be holding its 10th Annual Program on Ethics in the Practice of Intellectual Property Law from 12:40 to 5:00 pm on June 7, 2019 in Chicago, IL. The conference will consist of the following sessions:

• What IP Lawyers Should Know About ARDC Proceedings and Client Complaints
• Ethical Considerations for In-House Counsel
• Ethical Issues in Patent Litigation
• Developments in Malpractice for the IP Lawyer
• Implicit Bias and the Legal Profession

Additional information about the program can be found here. Those interested in registering for the conference online can do so here; the registration fee is $195 (general registration); students, staff, and faculty can register for free.
Tangelo IP, LLC v. Tupperware Brands Corp. (D. Del. 2019)

May 30, 2019

By Donald Zuhn —

Last week, in Tangelo IP, LLC v. Tupperware Brands Corp., District Judge Richard G. Andrews of the U.S. District Court for the District of Delaware denied a motion for exceptional case filed by Defendant Tupperware Brands Corp., finding that Tupperware Brands had failed to establish that the case was exceptional under 35 U.S.C. § 285. Plaintiff Tangelo IP, LLC had filed suit against Tupperware Brands, alleging infringement of U.S. Patent No. 8,429,005. Tupperware Brands responded by filing a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), arguing that the '005 patent was invalid under 35 U.S.C. § 101. The District Court granted the motion, and Tupperware Brands then moved for a finding of exceptional case and requested attorneys' fees under § 285.

In determining that the case was not exceptional, the District Court noted that although it had found the '005 patent to be invalid under § 101, "that does not mean Plaintiff's contrary position was unreasonable." In support, the Court cited SFA Sys., LLC v. Newegg Inc., 793 F.3d 1344, 1348 (Fed. Cir. 2015), for the proposition that "it is the substantive strength of the party's litigating position that is relevant to an exceptional case determination, not the correctness or eventual success of that position" (emphasis in opinion).

In response to Tupperware Brands' argument that Tangelo had "ignored substantial precedent dismissing analogous claims directed to concepts long-practiced in society," the Court noted that Tupperware Brands had "identifie[d] no precedent addressing claims analogous to those in the '005 patent, at least beyond the broad category of claims directed to 'concepts long-practiced in society.'" Judge Andrews also noted that he had not identified any cases in which analogous claims had been found to be patent ineligible.

Judge Andrews concluded the opinion by distinguishing the instant case from his decision in Finnavations LLC v. Payoneer, Inc., 2019 WL 1236358 (D. Del. Mar. 18, 2019). In Finnavations, Judge Andrews had granted motions for exceptional case and attorneys' fees based on claims that were "plainly directed at a patent ineligible concept," where there was "no question" that the patent at issue was invalid because the claims were analogous to those struck down in Alice. Judge Andrews found the instant case to be "clearly a different situation," explaining that while he ultimately agreed with Tupperware Brands regarding the validity of the '005 patent, "there is room for argument." Judge Andrews also pointed out that he was not aware of any precedent that leaves "no question" as to the validity of the '005 patent, "particularly in view of the somewhat opaque nature of § 101." The Court therefore denied Tupperware Brands' motion for a finding of exceptional case.

Tangelo IP, LLC v. Tupperware Brands Corp. (D. Del. 2019)
Memorandum Order by District Judge Andrews
USPTO Issues Notice on Impact of Federal Circuit’s Supernus Decision on PTA Procedures

May 29, 2019

By Donald Zuhn —

In January, the Federal Circuit determined in Supernus Pharmaceuticals, Inc. v. Iancu that the U.S. Patent and Trademark Office had erred in calculating the Patent Term Adjustment for Supernus' U.S. Patent No. 8,747,897. In particular, the Court found that because there were "no identifiable efforts" that Supernus could have undertaken in the time period between the filing of an RCE during prosecution of the application that issued as the '897 patent and the mailing of an EPO notification of opposition for a European counterpart patent (which resulted in Supernus filing a supplemental Information Disclosure Statement during prosecution of the '897 patent), Supernus had not failed to engage in reasonable efforts to conclude prosecution during that time period.

In response to the Federal Circuit's decision in Supernus, the USPTO issued a Federal Register notice (84 Fed. Reg. 20343) earlier this month notifying stakeholders of the impact of the decision on its PTA determinations. In the notice, entitled "Patent Term Adjustment Procedures in View of the Federal Circuit Decision in Supernus Pharm., Inc. v. Iancu," the Office indicates that it is "modifying its patent term adjustment procedures in view of the decision." However, the notice states that "the USPTO will continue to make the patent term adjustment determinations indicated in patents under the existing regulations using information recorded in its PALM [Patent Application Locating and Monitoring] system," and that a patentee who believes there were no identifiable efforts it could have undertaken to conclude prosecution of an application (as Supernus argued with respect to the '897 patent) "may raise the issue in a timely request for reconsideration of the patent term adjustment, providing any relevant information that is not recorded in the USPTO's PALM system."

The Office did note — in support of essentially maintaining the status quo on PTA determinations and challenges to those determinations — that "[t]he event from which the Federal Circuit measured the beginning of the patent term adjustment reduction in Supernus (the EPO's notice to Supernus of the opposition on August 21, 2012) is an event external to the USPTO and is thus not an event that is recorded in the USPTO's PALM system." Therefore, until the Office is better able to track actions in foreign counterpart applications and patents (using, for example, the Citation List of its Global Dossier Initiative; see "USPTO News Briefs," October 25, 2017), it is hard to see what additional modifications the Office could make to its PTA procedures.

The notice also points out that "the USPTO expects that the situation in Supernus should arise infrequently," explaining that:

An extended delay between the filing of a request for continued examination and the subsequent Office action (932 days in Supernus) should be a rare occurrence now, as the average time between the filing of a request for continued examination and the subsequent Office action is currently only 79 days.

In addition, the Office reminds stakeholders in a footnote that:

The patent term adjustment reduction at issue in Supernus can be avoided by the prompt submission of the information disclosure statement. Specifically, 37 CFR 1.704(d) provides a "safe harbor" in that a paper containing only an information disclosure statement in compliance with 37 CFR 1.97 and 1.98 will not be considered [a] failure to engage in reasonable efforts to conclude prosecution (processing or examination) of the application under 37 CFR 1.704(c)(6), (c)(8), (c)(9), or (c)(10) if the information disclosure statement is accompanied by one of the statements set forth in 37 CFR 1.704(d)(1)(i) or (d)(1)(ii).

Noting that the Office has "adopted ad hoc procedures for seeking reconsideration of the patent term adjustment determination in the past when there have been changes to the interpretation of the provisions of 35 U.S.C. 154(b) as a result of court decisions," the notice indicates that such ad hoc procedures were necessary because former provisions of 35 U.S.C. § 154(b)(4) "provided a time period for seeking judicial review that was not related to the filing of a request for reconsideration of the USPTO's patent term adjustment determination or the date of the USPTO's decision on any request for reconsideration of the USPTO’s patent term adjustment determination." The Office therefore determined that no such ad hoc procedures were required in response to the Supernus decision because 37 C.F.R. § 1.705 allows patentees to file a request for reconsideration up to seven months after a patent is issued and to wait until after the Office reaches a final PTA determination before seeking judicial review of that determination.
A Comparison of U.S. and Japanese Patent Subject Matter Eligibility

May 28, 2019

By James Korenchan, Michael Anderson, and Yukio Oishi —

Patent practitioners who focus their practice in the high-tech sector have most likely encountered Japanese patent law in one form or another. More often than not, companies at the forefront of technological advancement make, use, and sell products in Japan, or have competitors who do the same. This alone can make Japan an attractive place for obtaining patent protection in high-tech fields. Additionally, Japan is often viewed as having a very pro-patent (and thus, pro-patentee) court system, especially over the last ten or more years. In April of 2015, the Japan Patent Office (JPO) implemented a new opposition system to invalidate patents as part of the Japanese Patent Act of 2014.^[1] This new system has greatly reduced the number of patents found invalid. For instance, between 2008 and 2017 the number of Requests for Trial for Invalidation in Japan fell by 40%.^[2] Moreover, between 2008 and 2017 the percentage of patents found to be invalid fell from 59% to 21%.^[3]

Despite a growing interest in pursuing Japanese patent protection, many U.S. practitioners have a limited understanding of Japanese patent law and limited interactions with Japanese firms. While having an extensive knowledge of Japanese patent law is not always necessary for U.S. practitioners to provide sound legal counsel, an appreciation of the differences between U.S. and Japanese patent prosecution can improve the quality of representation that practitioners provide. Of the various patent prosecution issues faced in the high-tech space, subject matter eligibility is a common hurdle. Thus, the focus of this article is the differences in subject matter eligibility analysis in the U.S. and Japan as it pertains to high-tech patent applications, particularly for computer-implemented inventions involving software or business methods.

By now, U.S. practitioners are all-too-familiar with the two-part Alice Corp. test for determining the patent eligibility of claims under 35 U.S.C. § 101. In part one of this test, one must first determine whether the claimed subject matter as a whole is directed to a judicial exception. Further, under Alice Corp. and its progeny, the judicial exception that high-tech claims typically face is whether the claims recite an "abstract idea." If the claim is found to be directed to something other than a judicial exception, then the claim is patent-eligible. But if the claim is found to be directed to a judicial exception, then part two of the test is applied. In part two of the test, one must determine whether any element or combination of elements in the claim is sufficient to ensure that the claim recites "significantly more" than the judicial exception.

To call the recent history of patent eligibility in the U.S. tumultuous might be an understatement. The U.S. Patent and Trademark Office (USPTO) and the courts have wrestled for years over how to guide examination of claims under § 101. Court cases — particularly, those from the Federal Circuit — have provided differently-nuanced interpretations as to what constitutes an abstract idea and what elevates a claim to the realm of "significantly more." The USPTO typically then follows suit by periodically updating its subject matter eligibility guidance. However, in practice, the manner in which examiners apply the case law of the courts and the guidance issued by the USPTO can be a mixed bag, often to the chagrin of practitioners.

Under the most recent subject matter eligibility guidance issued by the USPTO on January 7, 2019, the USPTO attempted to clarify part two of the Alice Corp. test.^[4] According to the guidance, "a claim is not 'directed to' a judicial exception if the judicial exception is integrated into a practical application of that exception." Thus, the guidance provides clarification to the previous test on step two of the Alice Corp. test as to what constitutes "significantly more" than the judicial exception.

The new guidance is based in part on the Federal Circuit decisions in BASCOM Glob. Internet Servs., Inc. v. AT&T Mobility LLC ^[5] and Arrhythmia Research Tech., Inc. v. Corazonix Corp.^[6] In BASCOM, the Court concluded "that claims could be eligible if ordered combination of limitations 'transform the abstract idea . . . into a particular, practical application of that abstract idea.'"[7] Additionally, in Arrhythmia, the claims were found patent eligible because "inventions that were implemented by the mathematically-directed performance of computers were viewed in the context of the practical application to which the computer-generated data were put."[8]

In practice, the new guidance is a powerful tool for patent practitioners. For example, before the guidance, many software-based patent applications were faced with arguing there was "significantly more" than algorithms and computer hardware in the claims. However, the new guidance obviates the previously opaque requirements. Now, rather than advocate for "significantly more," practitioners can argue that their claim is a practical application of something that could be a judicial exception. One manner to do this can be to argue that additional elements in the claims improve the functioning of a computer or provide an improvement to other technological areas. Notably, the new guidance also does not involve a consideration as to whether such additional elements are merely conventional. Thus, a claim with conventional elements can still be patent eligible as long as it integrates a judicial exception into a practical application.

While the new USPTO guidance attempts to bring some clarity and consistency to patent eligibility, the interplay between the courts and the patent office remains uncertain. Thankfully for patentees seeking protection in Japan, the bar for patent eligibility appears to be lower and more clearly defined. In contrast to the U.S., the hurdle for patent eligibility in Japan is lower. For example, in Japan, an examiner must determine whether a claimed invention as a whole involves the "creation of a technical idea utilizing the laws of nature."^[9] But similar to the U.S., examples of inventions typically deemed patent ineligible under this Japanese standard include those that are directed to economic laws, rules for playing a game, mental activities, mathematical formulas, or the mere presentation of information (e.g., image data taken with a digital camera).^[10]

When claims are deemed "software-related," the determination takes a slightly different form and involves a two-part inquiry.^[11] First, the examiner evaluates the claimed invention from a non-software focused standpoint. In other words, the patent eligibility of a software-related invention evaluated using this standpoint should not rest on the fact that the invention involves software. Thus, the examiner first determines whether the invention stands on its own, and is patent eligible notwithstanding the software aspect. But if the examiner is unable to make this first determination, the examiner then evaluates the invention with a heavier emphasis on the software aspects of the claim.

From a non-software focused standpoint, a software-related invention is likely to be found to be patent-eligible when it involves (i) "concretely performing control of an apparatus (e.g., an engine, a washing machine, a disk drive), or processing with respect to the control" or (ii) concretely performing information processing based on the technical properties of an object (e.g., physical, chemical, or electrical properties).^[12] Interestingly, even claims that involve "software for causing a computer to execute a procedure of a method," or "a computer or system for executing such a procedure" are often found to be patent eligible in Japan without further inquiry.^[13]

From a software-focused standpoint, a software-related invention is likely to be found to be patent-eligible when "information processing by the software is concretely realized by using hardware resources."^[14] In other words, the cooperation of software and hardware resources can elevate a claim to a level of patent eligibility. Examples of hardware resources include various "physical device[s] or physical element[s]" that are "used in processing, operation, or implementation of a function," such as a computer, CPU, memory, input device, output device, or a physical device connected to a computer.^[15]

The Japanese software-focused standard for patent eligibility is particularly notable for several reasons. For one, it is in stark contrast with U.S. standards, in which merely implementing a process using software and hardware is almost always insufficient for patent eligibility. Additionally, the lower hurdle before the JPO is undoubtedly a contributing factor to the higher level of allowed software-related claims and business method claims in Japan compared to that in the U.S.

For software-related claims, the Japanese standard as a whole, and particularly the software-focused standard, allows for a certain type of patent protection in Japan that is not currently available in the U.S.: program claims. A "program claim" is distinct from a computer readable medium (CRM) claim and was introduced into Japan Patent Law in 2002 to address the issue that a CRM claim does not cover a situation where a software program is provided to a user, not by a CRM such as a CD-ROM, but rather by the user downloading the software program over a network.^[16] In the JPO examination handbook, the JPO provides the following example forms that program claims can take, which U.S. practitioners will certainly note as being quite different from the scope of what is patent eligible in the U.S.^[17]

    Example 1: A program for causing a computer to execute a step A, a step B, a step C, …

    Example 2: A program for causing a computer to function as means A, means B, means C, …

    Example 3: A program for causing a computer to implement a function A, a function B, a function C, …

Because program claims do not require an apparatus that stores the software code, program claims provide patent protection in an area that CRM claims do not, and are thus useful for at least that reason.

There are other types of claims that fall under the JPO's definition of a "program" and are often found to be patentable using the software-focused standard. One example is a "trained model," such as "[a] trained model for causing a computer to function to output quantified values of reputations of accommodations based on text data on reputations of accommodations," where the model comprises multiple neural networks.^[18] Another example is a "data structure," such as "[a] data structure of dialogue scenarios utilized in a voice interactive system." These types of claims can be more difficult to obtain in the U.S.^[19]

As for business method claims, between 2012 and 2017 in the U.S., the allowance rate for business method claims was 32.4% in 2013, dropped to 6.2% by 2016, and rose to 12.7% in 2017.^[20] Over the same period of time in Japan, however, the allowance rate for such claims was consistently near 70%.^[21] The high allowance rate in Japan can be attributed to the low hurdle for software. In particular, while business methods are not patent eligible on their own, software for implementing such methods are patent eligible as long as they meet the aforementioned requirements. For example, claim 1 of Japanese Patent No. 5492261 is directed to "a system for determining executability of a loan transaction" and is recited as follows:

1. A system for determining executability of a loan transaction comprising:
    means for receiving a loan application telegraphic message including an identifier of a loan application client, a loan execution date and a loan application amount from a terminal device;
    means for storing, for the loan application client, a loan limit amount, a total amount of loan balance and a future loan execution amount that has been scheduled to be loaned during a period of time up to the loan execution date; and
    means for determining that a loan transaction for the loan application telegraphic message is executable if a first total amount of the loan application amount, the total amount of loan balance and the future loan execution amount is less than or equal to the loan limit amount.

The key feature of this claim is not the presence of "a terminal device" (which is arguably the only concrete recitation of hardware in the claim) or another technical aspect, but rather a business process. However, based on the JPO Examination Handbook, it would be clear to a person skilled in the art that, considering the claim as a whole, the underlying business process is "implemented by concrete means or procedures on which the software and hardware resources that a 'computer' usually comprises, such as a CPU, memory, storage means, input and output means, etc. cooperate."^[22] Here, a "means for determining" implies a CPU, a "means for storing" implies memory, and a "means for receiving" implies an input or output means. The business process is concretely realized by using hardware resources and is thus patentable.

A clear understanding of Japanese patent law in the areas of software and business methods can help practitioners avoid missteps and better represent companies who have or seek to have patent protection in Japan. For example, even when U.S. patentees pursue software-related claims in Japan, they often attempt to do so with CRM-style claims and do not consider whether they should file program claims. In fact, due to how unfavorably U.S. patent law is on business methods, and how risky U.S. patent law can be on software claims, U.S. patentees often forego pursuing patent protection in these areas altogether. Thus, U.S. practitioners and patent applicants alike should be aware of all the particular advantages of Japanese patent law in these areas and reach out to a Japanese associate if any other advice is needed. After all, it could be worthwhile for both parties.

^[1] Outline of the Partial Revision of the Patent Act, etc., Japan Patent Office (May 19, 2014), available at https://www.jpo.go.jp/e/system/laws/rule/hokaisei/document/tokkyohoutou_kaiei_2605 14/outline.pdf.

^[2] JPO Status Report 2019, Japan Patent Office, at 36 (March 2019), available at https://www.jpo.go.jp/e/resources/report/statusreport/2019/document/index/all.pdf.

^[3] Overview of Trial for Invalidation and Opposition Systems in Japan, JPO Trial and Appeal Department at 6 (March 2017), http://www.ptabbar.org/wp-content/uploads/2018/03/Pre-Conference-Session-Comparing-the-PTAB-to-Other-Forums-Around-the-World-FINAL.pdf.

^[4] 2019 Revised Patent Subject Matter Eligibility Guidance, Federal Register, 84 Fed. Reg 50 (Jan. 7, 2019).

^[5] 827 F.3d 1341, 1352 (Fed. Cir. 2016).

^[6] 958 F.2d 1053, 1056-57 (Fed. Cir. 1992).

[7] BASCOM Glob. Internet Servs., 827 F.3d at 1352.

[8] Arrhythmia Research Tech, 958 F.2d at 1057.

^[9] Examination Handbook for Patent and Utility Model in Japan, Japan Patent Office, Annex B, Chapter 1, Computer Software-Related Inventions, Section 2.1 and 2.1.1, available at https://www.jpo.go.jp/e/system/laws/rule/guideline/patent/handbook_shinsa/document/index/app_b1_e.pdf

^[10] Id.

^[11] Id. at Section 2.1.1.

^[12] Id. at Section 2.1.1.1.

^[13] Id.

^[14] Id. at Section 2.1.1.2.

^[15] Id.

^[16] News Release, JPO (April 2002)

https://www.jpo.go.jp/system/laws/rule/hokaisei/tokkyo/houkaisei_h140417/houkaisei_gaiyou.html.

^[17] Examination Handbook for Patent and Utility Model in Japan, Japan Patent Office, Annex B, Chapter 1, Computer Software-Related Inventions, Section 1.2.1.1.

^[18] Id. at Section 3, Case 2-14; see also Section 1.2.1.1.

^[19] Id. at Section 3, Case 2-13.

^[20] Business Methods Allowance Rate, USPTO, https://www.uspto.gov/patents-getting-started/patent-basics/types-patent-applications/utility-patent/business-methods-27 (last visited May 23, 2019).

^[21] See Nobuyuki Taniguchi, Recent Developments on Software-related Patents in Japan, Nakamura & Partners (Aug. 18, 2017), http://www.nakapat.gr.jp/en/legal_updates_eng/recent-developments-on-software-related-patents-in-japan/; Yukio Oishi, Protecting Fintech Business by Obtaining Patent Protection in Japan, Japan Patent and Trademark Update, TMI Associates (November 2017), available at https://www.tmi.gr.jp/wp-content/uploads/2017/11/jptu_issue_8.pdf.

^[22] See, e.g., Examination Handbook for Patent and Utility Model in Japan, Japan Patent Office, Annex B, Chapter 1, Computer Software-Related Inventions, Section 2.1.1.2, Example 4.
Merck Sharp & Dohme Corp. v. Albrecht (2019)

May 27, 2019

By Kevin E. Noonan —

Last week, in Merck Sharp & Dohme Corp. v. Albrecht, the Supreme Court continued its explication of the balance between state law tort liability that can be imposed on drug makers and the extent to which this liability can be pre-empted by the drug maker's compliance with Federal laws and regulations, particularly those related to FDA approval.

The case was brought by 500 users of Fosamax®, a drug administered to post-menopausal women to ameliorate the symptoms of osteoporosis. At the time the FDA approved Fosamax®, Merck scientists had concerns (disclosed to FDA) — but no clear evidence — that long term use of the drug could cause femoral fractures later termed "atypical femoral fractures" (AFFs), characterized in the Court's opinion as "a rare type of complete, low-energy fracture that affects the thigh bone." Because of the speculative nature of the association between AFFs and Fosamax® use at that time, the FDA did not require a warning regarding the risk of AFFs on the Fosamax® label. As time went on, and adverse effects involving AFFs were reported by Fosamax® users, the risk association became more established, so much so that Merck submitted a proposed warning to the FDA in 2008; the FDA did not approve the warning. Both the majority opinion and Justice Alito's concurring opinion suggest that the FDA's rejection was based at least in part on Merck's description of the side effect as a "stress fracture," which FDA did not believe properly notified the public of both the severity and atypicality of this type of fracture. Nevertheless, in 2011, the FDA ordered Merck to include a warning that specifically called out AFFs as a risk of long term Fosamax® use.

Plaintiffs' complaint below was based on state law tort liability for failure to warn patients about the risk of AFF prior to 2011. In its defense, Merck argued that the state law claims were pre-empted by the Federal Food, Drug, and Cosmetic Act (FDCA), 21 U.S.C. § 301 et seq., which governs, inter alia, drug labeling standards and requirements. Additionally, Merck asserted that when it had attempted to have the FDA add a "risk of AFF" warning in 2008, the agency refused.

In a consolidated action before the District Court for the District of New Jersey, the Court agreed with Merck's argument and dismissed the complaint. The Third Circuit vacated that decision in In re Fosamax (Alendronate Sodium) Products Liability Litigation, 852 F.3d 268 (CA3 2017), based on its evaluation of the Supreme Court's decision in Wyeth v. Levine, 555 U.S. 555 (2009). In the Third Circuit's opinion, Wyeth required that there be "clear evidence that the FDA would not have approved the change . . . to the label." In explaining its reasoning, the Third Circuit opined that the Supreme Court had intended to set forth a standard of proof in its Wyeth decision, and that that standard was not intended to specify "the type of facts that a manufacturer must show, or to the circumstances in which preemption will be appropriate" but instead "how difficult it will be for the manufacturer to convince the factfinder that the FDA would have rejected a proposed label change" (emphases in opinion). To satisfy that burden, "the factfinder must conclude that it is highly probable that the FDA would not have approved a change to the drug's label" and (importantly for the Supreme Court's ultimate decision) "whether the FDA would have rejected a proposed label change is a question of fact that must be answered by a jury." In addition, however, the Third Circuit suggested that the "clear evidence" standard was itself unclear and had been unevenly applied by lower courts, and suggested that "it would be helpful for [the Supreme] Court to 'clarif[y] or buil[d] out the doctrine.'"

Merck's certiorari petition focused the question of whether the factfinder should be the judge or jury, and the Supreme Court granted certiorari based on the "differences and uncertainties among the courts of appeals and state supreme courts in respect to the application of Wyeth."

The Court's opinion was written by Justice Breyer, joined by Justices Thomas, Ginsburg, Sotomayor, Kagan and Gorsuch. Justice Thomas wrote a concurring opinion; Justice Alito, joined by the Chief Justice and Justice Kavanaugh, wrote an opinion concurring in the judgment.

Justice Breyer gets right to the point at the beginning of his opinion, expressly citing Wyeth and announcing the holding of the Court that the pre-emption question was for the judge to decide, not the jury. (The explication of the Court's reasoning might prompt a wry smile from patent practitioners in view of the Court's antipathy to patent law in many of its recent decisions, because it cites extensively from patent law precedent for this conclusion.) Justice Breyer also announces the Court's meaning of "clear evidence" to be "evidence that shows the court that the drug manufacturer fully informed the FDA of the justifications for the warning required by state law and that the FDA, in turn, informed the drug manufacturer that the FDA would not approve a change to the drug's label to include that warning."

Justice Breyer suggests that pre-emption would be limited to those circumstances where "it is 'impossible for a private party to comply with both state and federal requirements,'" citing Mutual Pharmaceutical Co. v. Bartlett, 570 U.S. 472, 480 (2013). After a brief recap of the Federal statutory scheme, the facts of the case below, and the Court's Wyeth precedent, Justice Breyer sets forth the Court's basis in precedent and Federal law for its understanding of the balance between Federal regulatory and state tort law. Congress has never provided a federal cause of action or remedy for consumers harmed by "unsafe or ineffective" drugs, despite 70 years of experience since enactment of the FDCA and several amendments to the law; instead, in the Court's view, Congress enacted the FDCA "to bolster consumer protection against harmful products." In doing so, he apparently sought to distinguish between substances harmful per se, as being adulterated or otherwise unsafe or ineffective in human use, and harm attendant (as here) in the use of otherwise safe and effective drugs. From this, the Court understands that Congress, being aware of state law actions in tort for harm caused by drugs, did not intend to proscribe state sovereignty over such claims. The "central premise," according to the Court's opinion, is that manufacturers bear the legal liability for such harms and for the content of their labels warning the public of those possible harms. This responsibility translates to a duty to adequately warn "when the risks of a particular drug become apparent." As the Court stated in Wyeth, "absent clear evidence that the FDA would not have approved a change to [the drug] label, we will not conclude that it was impossible for Wyeth to comply with both federal and state requirements" (emphasis in opinion).

Justice Breyer's synthesis of precedent and law is that "[t]he underlying question for this type of impossibility pre-emption defense is whether federal law (including appropriate FDA actions) prohibited the drug manufacturer from adding any and all warnings to the drug label that would satisfy state law," and, in order to prevail, the drug maker must satisfy a court that the answer to this underlying question is yes. But in order for this to be the case, a drug manufacturer must show "that it fully informed the FDA of the justifications for the warning required by state law and that the FDA, in turn, informed the drug manufacturer that the FDA would not approve changing the drug's label to include that warning." In perhaps the pithiest citation in the opinion, Justice Breyer reminds us that "the possibility of impossibility is not enough," citing PLIVA, Inc. v. Mensing, 564 U. S. 604, 625, n.8 (2011). In this regard, the opinion also notes that there are two ways to warn under Federal Food and Drug law. First, FDA regulations contain a "changes being effected" (CBE) provision, where a drug label can be changed unilaterally by the manufacturer in view of new information without prior FDA approval (but such changes can be rescinded by the FDA if the agency disagrees) under 21 CFR § 314.70(c)(6)(iii)(A). Second, the drug maker can file a Prior Approval Supplement (PAS) application under § 314.70(b) to obtain FDA approval of changes to the label before the drug manufacturer changes its label.

Turning to one of the Third Circuit's concerns (and apparently misapprehensions), the opinion states that:

We do not further define Wyeth's use of the words "clear evidence" in terms of evidentiary standards, such as "preponderance of the evidence" or "clear and convincing evidence" and so forth, because, as we shall discuss, infra, at 15-17, courts should treat the critical question not as a matter of fact for a jury but as a matter of law for the judge to decide. And where that is so, the judge must simply ask himself or herself whether the relevant federal and state laws "irreconcilably conflic[t]." Rice v. Norman Williams Co., 458 U.S. 654, 659 (1982).

Finally, in Justice Breyer's explication of the legal standards, the opinion reminds us that "the only agency actions that can determine the answer to the pre-emption question, of course, are agency actions taken pursuant to the FDA's congressionally delegated authority" under the Supremacy Clause, U.S. Const., Art. VI, cl. 2, and within the confines of the authority conferred upon the agency by Congress, citing New York v. FERC, 535 U.S. 1, 18 (2002).

The opinion bases its determination that the pre-emption question is one of law for a court to decide by citing patent law precedent related to claim construction, for the principle that "judges, rather than lay juries, are better equipped to evaluate the nature and scope of an agency's determination. Judges are experienced in '[t]he construction of written instruments,' such as those normally produced by a federal agency to memorialize its considered judgments," citing Markman v. Westview Instruments, Inc., 517 U.S. 370, 388 (1996), and particularly with regard to "understand and to interpret agency decisions in light of the governing statutory and regulatory context," under 5 U.S.C. § 706. As it had in Markman, the Court voiced its confidence that this would "produce greater uniformity among courts; and greater uniformity is normally a virtue when a question requires a determination concerning the scope and effect of federal agency action." And even then, considering that "brute facts" can sometimes themselves be determinative, Justice Breyer found guiding principles in this regard in patent law: "we have also held that 'courts may have to resolve subsidiary factual disputes' that are part and parcel of the broader legal question," citing Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc., 574 U.S. ___ (2015) (slip op., at 6-7). As the Court decided in Markman, the "better positioned" decisionmaker here is the judge.

Justice Thomas writes in his concurring opinion that he believes "physical impossibility" for compliance with state and Federal law should not be the standard for determining that these laws "directly conflict," thus implicating pre-emption. Rather, he thinks the founders were more concerned with "logical contradiction[s]" in the law, because in some instances it may be physically possible to comply with a Federal law that permits an action that state law prohibits, merely by refraining from the action (reasoning from Wyeth). Justice Thomas further asserts that mere compliance with FDA regulations and the FDCA does not give Merck (or any drug maker) "an unconditional right to market [a] federally approved drug at all times with the precise label initially approved by the FDA," again citing Wyeth. Justice Thomas believes that Merck's assertion of "hypothetical future rejections" of their amended label did not constitute a pre-emptive "law" under the Supremacy Clause, and he concludes that "[b]ecause Merck points to no statute, regulation, or other agency action with the force of law that would have prohibited it from complying with its alleged state-law duties, its pre-emption defense should fail as a matter of law."

Justice Alito's opinion concurring in the judgment emphasizes the "back and forth" between Merck and the agency regarding evidence that Fosamax® treatment was associated with risk of AFFs, and asserts that the majority's pre-emption analysis was "a skewed summary" of the law. In particular, he believes that enactment of 21 U.S.C. § 355(o)(4)(A), which imposes a duty on the FDA to initiate a label change if presented with new information that supports the change, is something ignored by the Court that should be considered by the Third Circuit on remand. And on the facts, Justice Alito's opinion states that:

[F]or years the FDA was: aware of this issue, communicating with drug manufacturers, studying all relevant information, and instructing healthcare professionals and patients alike to continue to use Fosamax as directed. For this reason, the FDA itself, speaking through the Solicitor General, takes the position that the FDA's decision not to require a label change prior to October 2010 reflected the FDA's "determin[ation]" that a new warning "should [not] be included in the labeling of the drug," §355(o)(4)(A).

And this is consistent with Merck's position both below and before the Court.

Merck Sharp & Dohme Corp. v. Albrecht (2019)
Opinion by Justice Breyer, joined by Justices Thomas, Ginsburg, Sotomayor, Kagan, and Gorsuch; concurring opinion by Justice Thomas; opinion concurring in the judgment by Justice Alito, joined by Chief Justice Roberts and Justice Kavanaugh
Conference & CLE Calendar

May 27, 2019

May 30, 2019 – "Reasonable Measures to Protect Trade Secrets: Lessons for Litigators and In-House Counsel" (Intellectual Property Owners Association) – 2:00 to 3:00 pm (ET)

June 3-6, 2019 – BIO International Convention (Biotechnology Innovation Organization) – Philadelphia, PA

June 12-14, 2019 – Patent Fundamentals Bootcamp 2019: An Introduction to Patent Drafting, Prosecution, and Litigation (Practising Law Institute) – Chicago, IL

July 17-19, 2019 – Patent Fundamentals Bootcamp 2019: An Introduction to Patent Drafting, Prosecution, and Litigation (Practising Law Institute) – San Francisco, CA
IPO Webinar on Protection of Trade Secrets

May 26, 2019

The Intellectual Property Owners Association (IPO) will offer a one-hour webinar entitled "Reasonable Measures to Protect Trade Secrets: Lessons for Litigators and In-House Counsel" on May 30, 2019 from 2:00 to 3:00 pm (ET). Kenneth Corsello of IBM, David Morrison of Goldberg Kohn, and Shannon Murphy of Winston & Strawn LLP will analyze specific cases where plaintiff companies could not point to specific protective steps they had taken to protect their trade secrets, and in which defendants prevailed via a motion to dismiss, summary judgment, or at trial. The panel will outline ways a company, in order to overcome threshold challenges to the assertion of trade secret theft claims, can articulate, with specificity, the measures it undertook to protect its trade secrets, such as:

• Differentiating protective measures for the alleged proprietary trade secrets from those imposed on other corporate information
• Showing optimal terms in a confidentiality agreement
• Having procedures to limit access for departing employees

The panel will discuss how these measures are weighed and/or required by courts.

The registration fee for the webinar is $135 (government and academic rates are available upon request). Those interested in registering for the webinar can do so here.

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