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  • Regents of the University of Minnesota v. LSI Corp. (Fed. Cir. 2019)

    By Kevin E. Noonan —

    Federal Circuit SealThe Federal Circuit handed down its decision in Regents of the University of Minnesota v. LSI Corp. on Friday, and perhaps not surprisingly (in view of its decision last summer in Saint Regis Mohawk Tribe v. Mylan Pharmaceuticals Inc.), held that State sovereign immunity does not preclude institution of inter partes review proceedings before the Patent Trial and Appeal Board (PTAB) of the U.S. Patent and Trademark Office.  The panel decision was extensive and the Court relied heavily on its St. Regis decision's reasoning, but in doing so, likely increased the chances (to near certainty) of Supreme Court review sometime next year.

    To recap, the Regents of the University of Minnesota, an "arm of the state," sued separately LSI Corp. (a semiconductor chipmaker) and customers of Ericsson Inc. (a telecommunications company that intervened on its customers' behalf) for infringement of U.S. Patent Nos. 5,859,601 ('601 patent; LSI)) and 7,251,768 ('768 patent), 7,292,647 (RE45,230 patent), 8,588,317 ('317 patent), 8,718,185 ('185 patent), and 8,774,309 ('309 patent; Ericsson), and each defendant separately filed inter partes review (IPR) petitions against each asserted patent.  Before the Board instituted the IPRs, the University of Minnesota filed a motion to dismiss on State sovereign immunity grounds.  The PTAB, in an expanded panel, ruled that while State sovereign immunity applied, Minnesota had waived the immunity by filing suit.  This was a parsimonious, limited decision that, if merely affirmed by the Federal Circuit, likely would not have roiled patent jurisprudence waters, would have smacked of fairness (and provided a simple dichotomy between immune and non-immune situations), would have immunized States from political pestering from gadflies, and would have avoided what is almost certain to be Supreme Court scrutiny.

    Alas, like the proverbial moth drawn inexorably to the flame that will consume it (or, if recent patent jurisprudence is a guide, at least singe it a little) this panel (in a decision by Judge Dyk joined by Judges Wallach and Hughes) opined that State sovereign immunity did not immunize Minnesota from IPR proceedings for the same reasons that tribal sovereign immunity did not preclude IPR proceedings involving the St. Regis Mohawk Indian Tribe in last summer's decision.  The opinion notes that the Supreme Court did not grant certiorari in that case, perhaps believing the Court would similarly decline to consider the question in this case.  This outcome is not very likely, in view of the significant differences between the subordinate sovereignty that Indian Tribes enjoy compared to the constitutional enshrinement of State sovereign immunity in the Eleventh Amendment.

    The opinion sets forth the history of Congress's enactments relating to reconsideration of granted patents, from ex parte reexamination enacted in 1980, to inter partes reexamination in 1999, and finally to the palette of post-grant proceedings (post-grant review, inter partes review, and covered business methods review) enacted into law as part of the Leahy-Smith America Invents Act in 2011.  The opinion recites the need for such proceedings, based on the increasing number of patent applications filed (from 100,000 in 1980 to 650,000 in 2018) and the relatively low amount of time examiners have to perform their review, concluding that "in light of the USPTO's constrained resources and the absence of material outside input during the initial examination, it is inevitable that there are patents granted in error."  (The issue isn't that some patents are granted in error, of course; the mantra since about 2000 is that there are too many such patents, and in this portion of the opinion, the Court's sentiments could be substituted for those of groups like the Electronic Frontier Foundation.)  There is little need for this disquisition, of course: whether or not robust post-grant review proceedings are warranted is under the purview of Congress, and its decision is clear under the AIA.  (And despite a 650% increase in the number of applications filed per year, Congress in the 31 years between 1980 and 2011 only addressed the issue, and ineffectively so according to the Court, until enacting the AIA.)  The opinion also detours from the question before it to remind the reader that in England the Privy Counsel could reconsider the validity of granted patents.  While true, English patent law is only marginally relevant to American patent law, and our law did without an executive branch reconsideration statute between 1790 and 1980, further bringing the relevance of the Privy Counsel into question here.  This portion of the opinion ends with a detailed discussion of IPR procedures under the statute; after eighteen pages of a twenty-nine-page opinion, the Court finally gets to a discussion of State sovereign immunity.

    This portion begins with the greatest weakness of the Minnesota's (and its amici's) argument: neither ex parte not inter partes reexamination are barred by state sovereign immunity.  The opinion correctly notes that while the Eleventh Amendment provides a measure of immunity against suit to the States, "the sovereign immunity of the States neither derives from nor is limited by, the terms of the Eleventh Amendment," citing Alden v. Maine, 527 U.S. 706, 713 (1999), and Seminole Tribe of Fla. v. Florida, 517 U.S. 44, 54 (1996).  More specifically, "'[t]he preeminent purpose of state sovereign immunity is to accord States the dignity that is consistent with their status as sovereign entities,' while collaterally 'serv[ing] the important function of shielding state treasuries,'" citing Fed. Mar. Comm'n v. S.C. State Ports Auth., 535 U.S. 743, 760, 765 (2002) — the case that has been at the center of arguments for all parties in this and the St. Regis litigations, albeit each party reading this precedent in their own favor.  The exception to State sovereign immunity, according to the opinion, is for suits brought by the United States, which includes agency proceedings (this is the source of the panel's decision that State sovereign immunity no more excludes an "arm of the state" from being involved in an IPR than does tribal sovereign immunity according to the Court's St. Regis decision).  Citing FMC, the panel states that "sovereign immunity does not bar an agency from bringing an enforcement action against the state 'upon its own initiative or upon information supplied by a private party.'"

    As in St Regis (as well as Oil States Energy Servs., LLC v. Green's Energy Grp., LLC, 138 S. Ct. 1365 (2018)), the question for the panel came down to whether an IPR is a proceeding brought by an individual having sufficient similarity to Article III proceedings (and thus where State sovereign immunity should apply) or an administrative agency action as in FMC, where it should not.  In providing its opinion, the Court explicated its reasons in the St. Regis decision, and that decision's basis for finding IPRs to be agency decisions in the Supreme Court's decision in Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131 (2016).  The factors that convinced the Federal Circuit that IPRs are sufficiently akin to agency proceedings (and not adjudications between individual petitioners and patent holders) in its St. Regis decision were applied here to decide that State sovereign immunity also did not preclude subjecting patents owned by a State from IPRs.  The panel set out these factors as follows:

    1.  The Director, acting as a "politically appointed executive branch official" is responsible for instituting an IPR, not the private party petitioner.  The Director's decision to institute is plenary and is not subject to judicial review.

    2.  The PTAB can continue an IPR even if the third party petitioner decides not to participate in the IPR once it has been instituted.

    3.  IPRs are procedurally distinct from civil litigation (including the formally correct but in practice infrequent capacity for the patent holder to amend claims.

    The Court made the distinction that the PTO merely "harness[es] third parties for the agency to evaluate whether a prior grant of a public franchise was wrong," which it calls "a feature carried over from inter partes reexamination."  This characterization enabled the panel to analogize IPRs to the administrative proceedings at the heart of those in the FMC case and thus its decision that sovereign immunity does not shield the University of Minnesota from IPR proceedings in this case.

    The Court also bolstered the basis for its opinion with the "public rights" grounds for the Supreme Court's decision in Oil States, stating "[w]e interpret the Court's language in Oil States as concluding that IPR is an adjudication of public rights, and therefore able to be resolved in a non-Article III forum, because it is in key respects a proceeding between the United States and the patent owner.  In this way, these proceedings are not barred by state sovereign immunity since sovereign immunity does not bar proceedings brought by the United States," again citing FMC.

    The panel completed its consideration of the University's position in discussing whether the Hans presumption should apply ("that state sovereign immunity applies to proceedings, such as IPR, that were 'anomalous and unheard of when the Constitution was adopted'"), Hans v. Louisiana, 134 U.S. 1, 18 (1890).  The opinion disagrees, based in part on the putative understanding of the Founders that "'a patent system could include a practice of granting patents subject to potential cancellation in the executive proceeding of the Privy Council' (i.e., that the executive could provide a forum for resolving questions of patent validity)," citing Oil States, anomalously under circumstances where the Founders expressly did not include this practice.

    Having based its decision that State sovereign immunity did not bar IPRs against State-owned patents expressly on its decision in St Regis that tribal sovereign immunity did not do so, the panel then provides "additional views" which comprise additional grounds for its opinion not contained in the opinion itself (although these grounds were enunciated in concurring opinions to the PTAB's decision).  The basis for these views is that IPRs constitute proceedings in rem (against the patent) rather than in personam (against the patent holder) and thus sovereign immunities do not apply.  This distinction is useful analytically because "precedent has drawn a distinction between in rem and in personam jurisdiction, even when the underlying proceedings are, for the most part, identical," citing Tenn. Student Assistance Corp. v. Hood, 541 U.S. 440, 453 (2004).  In other words, the distinction is categorical, and by making it, the Court can reach its conclusion without any of the messier factual arguments raised by the University (or any other, perhaps different circumstances that other universities or "arms of the state" might assert in future cases).  In rem proceedings do not "'subject[] a State to the coercive process of judicial tribunals at the instance of private parties,' which [would] constitute[] an affront to a state's dignity," citing Seminole Tribe of Fla. v. Florida, 517 U.S. 44, 58 (1996), and do not require establishing personal jurisdiction over a state or its officers.  The views section distinguishes IPRs from instances where the Supreme Court has held in rem proceedings to be subject to sovereign immunity (typically instances involving real property (e.g., "land patents") or a State's ability to regulate within its borders).  The views assert that patents and IPR proceedings are more akin to proceedings in bankruptcy, which are in rem and not subject to State sovereign immunity.  Tennessee Student Assistance Corp. v. Hood, 541 U.S. 440 (2004):

    Just as with a bankruptcy proceeding to discharge a debt, IPR is an in rem proceeding that is not premised on obtaining jurisdiction over a state or its officers.  The Board's jurisdiction is premised on the res (i.e., the patent).  A person files a "petition to institute an inter partes review of the patent."  35 U.S.C. § 311(a) (emphasis added).  As in bankruptcy, a petitioner for IPR "does not seek monetary damages or any affirmative relief from a State by seeking to [have a patent reviewed in IPR]; nor does he subject an unwilling State to a coercive judicial process."  Hood, 541 U.S. at 450.  "[IPR] does not make any binding determination regarding 'the liability of [one party to another] under the law as defined.'"  Oil States, 138 S. Ct. at 1378 (quoting Crowell v. Benson, 285 U.S. 22, 51 (1932)).  The petitioner only seeks to have the agency reconsider a previous grant of a patent, and the only relief the Board can offer is the revocation of erroneously granted patent claims.  IPR ultimately terminates only with a certificate that either cancels erroneously granted patent claims, confirms claims determined to be patentable, or incorporates newly amended claims determined to be patentable.  35 U.S.C. § 318(b).  No monetary or other relief against the patent owner is authorized or provided.

    The views conclude that "we see no reason why the exercise of the executive's historically well-recognized ability to reconsider a grant of a public franchise in an in rem proceeding 'is more threatening to state sovereignty than the exercise of" an Article III court's bankruptcy in rem jurisdiction,'" which supports on other grounds the panel's decision that State sovereign immunity does not shield the University of Minnesota from IPR proceedings.

    Every State in the Union has one or more (and in larger states, several) state universities that, like the University of Minnesota, are "arms of the state."  Since enactment of the Bayh-Dole Act in 1980, Federally funded research at these universities (which comprises the overwhelming majority of such research) has resulted in robust patent portfolios that are actively licensed and hence valuable and attractive targets for challenge by IPRs.  These States constitute an active constituency certain to make their views on this decision known to the Supreme Court when Minnesota, almost certainly, petitions for certiorari.  The Question Presented will be one that addresses a fundamental question of the States' status as a sovereign entity under the Constitution, and as such is unlikely not to pique the Court's interest.  Add to that the Court's recent penchant for taking patent cases and that the decision is from the Federal Circuit, and it is extremely unlikely that the Court will not grant cert, and in about twelve months we will learn whether State sovereign immunity extends to IPR proceedings before the PTAB.

    Regents of the University of Minnesota v. LSI Corp. (Fed. Cir. 2019)
    Panel: Circuit Judges Dyk, Wallach, and Hughes
    Opinion by Circuit Judge Dyk; additional views by Circuit Judges Dyk, Wallach, and Hughes

  • Conference & CLE Calendar

    CalendarJune 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

    June 18, 2019 – "Doctrine of Equivalents: Tips for Plaintiffs, Defendants, and Patent Prosecutors" (Intellectual Property Owners Association) – 2:00 to 3:00 pm (ET)

  • IPO Webinar on Doctrine of Equivalents

    IPO #2The Intellectual Property Owners Association (IPO) will offer a one-hour webinar entitled "Doctrine of Equivalents: Tips for Plaintiffs, Defendants, and Patent Prosecutors" on June 18, 2019 from 2:00 to 3:00 pm (ET).  Brian Coggio of Fish & Richardson, Mark Feldstein of Finnegan, and Sailesh Patel of Schiff Hardin will provide insights regarding the doctrine of equivalents (DOE) for litigators, and also highlight prosecution pitfalls that can lessen the chance of the patentee proving infringement by the DOE in the future.  The panel will analyze decisions including Duncan Parking Technologies, Inc. v. IPS Group, Inc., Enzo Biochem Inc. v. Applera Corp., Mylan Institutional LLC v. Aurobindo Pharma Ltd., and discuss:

    • How limitations on DOE play a role, and difficulties plaintiffs face in making a case for the DOE;
    • Trying to find vitality in the DOE, such as by successfully applying the "function/result/way" or the "insubstantial difference" test; an
    • The danger to successful plaintiffs from the "ensnarement" doctrine, which has seen increased application and can play out as a trial within a trial.

    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.

  • U.S. Water Services, Inc. v. Novozymes A/S (Fed. Cir. 2019)

    By Donald Zuhn —

    Federal Circuit SealEarlier this year, in U.S. Water Services, Inc. v. Novozymes A/S, the Federal Circuit reversed a decision by the U.S. District Court for the Western District of Wisconsin, partially granting judgment as a matter of law in favor of Defendants-Appellees Novozymes A/S and Novozymes North America, Inc. that claims 1, 6, and 12 of U.S. Patent No. 8,415,137 and claims 1, 2, 5, 7–9, and 18–20 of U.S. Patent No. 8,609,399 were invalid as inherently anticipated.  In reversing and remanding the District Court, the Federal Circuit determined that Novozymes did not meet its burden at trial of showing that the prior art inherently anticipates the asserted claims.

    The dispute between the parties began when Plaintiffs-Appellants U.S. Water Services, Inc. and Roy Johnson filed suit against Novozymes for infringement of the asserted claims of the '137 and '399 patents.  A jury determined that the asserted claims were not inherently anticipated by International Publication No. WO 01/62947 A1 ("Veit").  Novozymes responded by moving for judgment as a matter of law, which the District Court granted, and U.S. Water Services then appealed.

    The '137 and '399 patents, which share a common specification as continuations of an earlier-filed application, are directed to methods for reducing the formation of deposits of phytic acid salts and phytates on equipment used during ethanol production.  Representative claim 1 of the '137 patent recites:

    1.  A method of reducing formation of insoluble deposits of phytic acid or salts of phytic acid on surfaces in a fuel ethanol-processing equipment, the method comprising:
        adding phytase to an ethanol processing fluid in the equipment containing phytic acid or salts of phytic acid under conditions suitable for converting the insoluble phytic acid or phytic acid salts to soluble products; thereby reducing the formation of deposits of insoluble phytic acid or phytic acid salts on surfaces in the equipment; wherein the equipment in which deposit formation is reduced comprises a beer column, and
        wherein the pH of the ethanol processing fluid in the beer column is 4.5 or higher during production of ethanol.

    The opinion notes that phytase is an enzyme that is capable of breaking down phytic acid found in plant material.

    Veit describes a process for producing ethanol, and in particular, discloses the addition of phytase during the fermentation step (or a combined or simultaneous fermentation and saccharification step) of ethanol production that may result in the increase in the fermentation and ethanol yields.  In the lone experiment disclosed in Example 1 of Veit, the addition of phytase is shown to improve the fermentation process; the experiment was conducted in a 500 mL bottle in which phytase was added during the pre-saccharification reaction (i.e., prior to fermentation).

    At trial, the jury determined that Novozymes had not proven by clear and convincing evidence that Veit anticipates the asserted claims by inherently disclosing the requirement of reducing the formation of insoluble deposits of phytic acid or salts of phytic acid.  The jury also determined that Novozymes infringed the asserted claims, and awarded damages of $7,582,966 to U.S. Water Services.  Novozymes moved for judgment as a matter of law, arguing that Veit inherently anticipates the asserted claims because Example 1 shows that in the absence of any phytate, no deposits of phytate can form.  The District Court granted Novozymes' motion, finding that Veit inherently disclosed using phytase to reduce phytate deposits because Veit's fermentation test expressly disclosed conditions sufficient to break down all the phytic acid present in the ethanol fluid, which would have prevented phytate deposits from forming on ethanol processing equipment.

    On appeal, U.S. Water Services argued that the District Court erred because Novozymes failed to show that a rational jury could have found that Example 1 inherently anticipateds the asserted claims since the asserted claims require a reduction of phytate deposits on surfaces on ethanol processing equipment.  The Federal Circuit agreed with U.S. Water Services, finding that:

    The District Court erred in ruling as a matter of law that Veit inherently anticipates the Asserted Claims.  The Asserted Claims require the reduction of phytic acid deposits in specific locations of an ethanol plant such as on the "heat transfer equipment" or in the "beer column."  . . .  By contrast, Veit does not disclose any examples using phytase to reduce phytic acid deposits in an ethanol plant, but rather describes in Example 1 an experiment in a laboratory bottle.

    In particular, the opinion notes that in Veit, the phytase is not added into fermentation, but rather is added into a saccharification step, which differs from the reaction specified in the asserted claims.  The opinion indicates that "[e]nzymes that may be effective at saccharification's temperatures may be ineffective at the lower temperatures required during fermentation," and therefore concludes that "Veit's addition of phytase at the pre-saccharification stage cannot disclose the reduction of phytic acid deposits on ethanol processing plant equipment as required by the Asserted Claims."  The Federal Circuit also noted that:

    [U]nlike the stated limitations for reducing deposits found in the Asserted Claims, Example 1 [of Veit] does not provide any conditions necessary to determine whether any deposit on equipment is formed during the experiment, nor does it provide any specific variables that impact phytase in a way that will always reduce deposits in the plant equipment.

    The Federal Circuit therefore determined that there was "substantial evidence to support the jury finding that Example 1 only discloses the possibility of reducing phytic acid concentration below detection levels, which is not legally sufficient to demonstrate inherent anticipation" (emphasis in opinion).  Citing Hansgirg v. Kemmer, 102 F.2d 212, 214 (CCPA 1939), for the proposition that "[i]nherency . . . may not be established by probabilities or possibilities," the Court explained that:

    Because Example 1 is silent as to whether its Protocol would reduce phytate fouling in the "beer column" or "heat transfer equipment" and Novozymes did not provide evidence that Example 1 satisfies all the required constraints in the Asserted Claims, Veit does not disclose whether any deposits would have formed when using Example 1's Protocol in a fuel ethanol plant.

    The Federal Circuit therefore found that Novozymes did not meet its burden at trial of showing by clear and convincing evidence that Example 1 would always eliminate phytic acid deposits under the conditions required by the asserted claims, that a jury could have reasonably found that Veit does not inherently anticipate the asserted claims, and that the District Court erred in overturning the jury's verdict.  The Federal Circuit thus reversed and remanded the District Court's decision partially granting judgment as a matter of law in favor of Novozymes.

    U.S. Water Services, Inc. v. Novozymes A/S (Fed. Cir. 2019)
    Nonprecedential disposition
    Panel: Circuit Judges Moore, Wallach, and Taranto
    Opinion by Circuit Judge Wallach

  • Even More Ill-Conceived Remedies from Congress Regarding Prescription Drug Costs

    By Kevin E. Noonan —

    Washington - Capitol #6"Solving" the problem of high prescription drug prices has been on the minds of our representatives in Congress lately, and the desire to "do something" about it has reached the point that just doing something (or being perceived as doing something) has become an end in itself (see "A Solution in Search of a Problem" and "More Ill-conceived Remedies from Congress Regarding Prescription Drug Costs").  The latest manifestation of this trend is a bill, entitled the "Terminating the Extension of Rights Misappropriated Act of 2019" or the "Term Act," introduced by Representative Hakeem Jeffries (D, NY-8), that would address the drug pricing problem by "prevent[ing] [] double patenting" of claims to patents for prescription drugs.

    How will the bill achieve its ends?  As set forth in Section 2(a) of the bill, it would amend 35 U.S.C. § 253 by introducing a new subsection (c) that reads:

    (c) DISCLAIMERS OF DRUG PATENT TERM.—

    (1) IN GENERAL.—Except as provided in paragraph (2), in a proceeding challenging the validity of patents under section 505(c) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(c)) with respect to a drug, under section 351(l) of the Public Health Service Act (42 U.S.C. 262(l)) with respect to a biological product, or a federal district court proceeding involving patents that are the subject of an action under section 271(e)(2), the patentee shall be presumed to have disclaimed the patent term for each of the listed patents after the date on which the term of the first patent expires, subject to the exceptions provided for in subsection (2).

    (2) DEMONSTRATION OF DISTINCT INVENTIONS.—If a patentee demonstrates by a preponderance of the evidence that certain patents described in paragraph (1) cover patentably distinct inventions from the invention claimed in the first such patent to expire, no part of the term of any such patent shall be presumed to have been disclaimed, and all patent term extensions granted by the United States Patent and Trademark Office shall be respected, unless and to the extent the patentee expressly disclaims, in writing, the patent term for each such patent.

    35 U.S.C. § 253(c) (emphasis added).

    While a boon to generic and biosimilar companies, the provision's presumption ignores the reasons why there are various related patents in a portfolio, such as the workings of the U.S. Patent and Trademark Office with regard to imposing restriction requirements and encouraging continuation practice with its attendant requirement for terminal disclaimers.  Instead of these procedures, which differ in response to each individual application and how these inventions are claimed and examined, Rep. Jeffries would impose a presumption that the patentee would be required to rebut, this increasing uncertainty in patent protection for inventions already burdened with risk.

    The bill does not ignore the Patent Office, however, having provisions seemingly directed to "getting to the bottom" of the root causes of the perceived problem.  Section 2(b)(2) provides in this regard:

    (2) REVIEW.—The Director shall conduct a comprehensive review of the patent examination procedures of the Office to determine whether the Office—

    (A) is using best examination practices, guidance, and procedures to avoid the issuance of patents relating to the same drug, or biological product, that are not patentably distinct from one another, and not subject to an appropriate disclaimer of patent term; and

    (B) should develop and implement new practices, guidance, or procedures to—

    (i) improve examination of patent applications relating to the same drug or biological product; and

    (ii) reduce the improper issuance of patents that improperly extend the term of exclusivity afforded a new drug or biological product.

    (3) REPORT.—Not later than 1 year after the date of enactment of this Act, the Director shall submit to the Committee on the Judiciary of the House of Representatives a report that contains—

    (A) the findings from the review conducted under paragraph (2); and

    (B) any recommendations of the Director with respect to the review conducted under paragraph (2).

    The vigor with which the Patent Office instituted the various types of post-grant review proceedings created by the Leahy-Smith America Invents Act (inter partes review, post grant review, and covered business method patents review), and the enthusiasm with which the Office declared the existence of thousands of improvidently granted patents, no doubt played a part in persuading Rep. Jeffries that the Office would take up with equal relish an investigation of why it had so badly managed the examination procedures applied to patents on drug products.  But of course these are the same examination practices that the Office applies to all patents and patent applications; it is the perceived outcome that Rep. Jeffries doesn't like, and even that ignores the beneficial outcome of thousands of small molecule and biologic drugs developed in recent years that in many cases treat diseases heretofore resistant to therapeutic intervention.

    Whether the flurry of Congressional activity coalesces into law is both unpredictable and unlikely (contrary to the reassuring fantasies of Schoolhouse Rock), but perhaps that's fortunate.  There is nothing wrong with our elected officials seeking solutions to the real problems of affordable medical care in this country.  It is just tiresome that their solutions always seem aimed at hobbling the incentives and protections of innovators responsible for producing new drugs for old (and even new) diseases and ignoring the many other bases for the problems, just because those solutions are politically more difficult to achieve.

    Hat tip to Bob Stoll, former Commissioner of Patents, for bringing this bill to our attention.        

  • News from Abroad — Technetix v Teleste: Doctrine of Equivalents

    By Antony Craggs —

    Since the introduction of the doctrine of equivalents in the UK in Actavis v Lilly, it has been questioned whether a claim can be extended by said doctrine (so that a product infringes the claim) where such an extension would render the claim obvious over the prior art at the priority date.  In Technetix v Teleste, HHJ Hacon has offered obiter guidance on the point.

    Background — Actavis v Lilly

    Actavis v Lilly introduced the following questions when assessing infringement:

    1. Does the variant infringe any of the claims as a matter of normal interpretation; and, if not,

    2. Does the variant nonetheless infringe because it varies from the invention in a way or ways which is or are immaterial?

    The latter question is further addressed by the following three questions:

    1. Notwithstanding that it is not within the literal meaning of the relevant claim(s) of the patent, does the variant achieve substantially the same result in substantially the same way as the invention, i.e. the inventive concept revealed by the patent?

    2. Would it be obvious to the person skilled in the art, reading the patent at the priority date, but knowing that the variant achieves substantially the same result as the invention, that it does so in substantially the same way as the invention?

    3. Would such a reader of the patent have concluded that the patentee nonetheless intended that strict compliance with the literal meaning of the relevant claim(s) of the patent was an essential requirement of the invention?

    In doing so, the approach to construction of the claims of patent (namely, purposive) remained the same but the scope of protection was broadened.  As validity was not in issue in the case, however, the nexus between validity and the doctrine of equivalents was not addressed.  This was a particularly acute issue because English law, prior to Actavis v Lilly, conflated the test of novelty and infringement, namely a claim lacked novelty if the prior publication disclosed subject-matter which, if performed, would necessarily infringe the claim.  In essence, the test for novelty elided construction with infringement, with the latter now including the doctrine of equivalents.

    Generics v Teva

    This issue was considered at first instance by Mr Justice Arnold in Generics v Teva.  He held that it was no longer the law that a claim lacked novelty if the prior publication disclosed subject-matter which, if performed, would necessarily infringe the claim.  Rather, the claim would only lack novelty if the prior publication disclosed subject-matter which fell within the claim in its proper construction.  It was not sufficient that the subject-matter would infringe the claim applying the doctrine of equivalents.  We await a more senior court to consider the issue.

    This leaves a potential lacuna between validity and infringement.  This is best demonstrated as follows:

    Table
    Prior to Actavis v Lilly, if a patent's features were novel and inventive (feature Z over X), a patent was valid.

    Further, if a patent's features were not embodied in the alleged infringement (Z is not Y), a patent was not infringed.  It followed that under the above example, the patent would be valid but not infringed.

    The position potentially changes after Actavis v Lilly because the patent can now be infringed by a product which has an equivalent feature (Y is the equivalent of Z).  If Y is obvious over X (but Z is not obvious over X), the patent remains valid but is infringed by an "obvious" product.  This is an untenable position: it is a fundamental principle of patent law that a party must be free to do that which was either not new or obvious at the priority date.

    Gillette defence

    A Gillette defence may be the answer.  It is the latter half of the last sentence which is important.  This is because, in practice, a Gillette defence has been applied as a counterclaim challenging the validity of the patent, not as a stand-alone defence.  The rationale for this was two-fold:

    1. absent the doctrine of equivalents, a patent could not be valid and infringe a product which was obvious over the prior art (there was, therefore, no need for a stand-alone defence); and

    2. as a matter of public policy it was appropriate to address the validity of the patent (as a right in rem), rather than as a defence (as a right in personam.

    So is a new stand-alone defence needed?

    Technetix v Teleste

    In the case at hand, Technetix brought a claim against Teleste for infringement of its patent, GB 2,383,473 for a cable tap unit for receiving and delivering a cable television or Internet signal to subscribers.

    Teleste counterclaimed, challenging the validity of the patent.

    Following an adjournment of the trial (see Technetix v Teleste: Adjournment of Patent Trial), the claim was heard before the Intellectual Property Enterprise Court (IPEC) in November 2018.  The patent was held to be invalid, but the court provided its obiter comments on infringement.  This defence was fully pleaded on both sides and argued at the trial.

    HHJ Hacon declined to hold whether such a defence exists.  However, he offered a proposal as to how such a defence (if it exists) may operate.  Drawing on the Germany Federal Supreme Court in Formstein, he posited that a defence could be adopted in English law so that, if an accused product or process is an equivalent and for that reason is nominally within the scope of the claim, but the equivalent would have lacked novelty or inventive step over the prior art at the priority date, then it is deemed to fall outside the scope of the claim.

    HHJ Hacon noted that such a defence also exists under Dutch law, see Core Distribution Inc v Lidl Nederland GmbH, and was analogous to the principle of ensnarement in the USA.

    Applying this to the facts (on the assumption that the patent was valid), HHJ Hacon held that the patent was not infringed on a purposive construction, but would be under the doctrine of equivalents. Assuming a Formstein defence existed, he concluded that the defendant was entitled to the defence.

    * Mr. Craggs is a partner and solicitor with D Young & Co

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

  • Return Mail, Inc. v. United States Postal Service (2019)

    By Joshua Rich —

    Supreme Court Building #2In a 6-3 decision, the Supreme Court today held that federal government agencies cannot avail themselves of America Invents Act (AIA) post-grant proceedings.  This decision was based on the Court's determination that the government is not a "person" as that term is used in relation to inter partes review (IPR), post-grant review (PGR), and covered business method (CBM) proceedings.  To parties accusing the federal government of infringing their patents, the decision means that they will be free of AIA post-grant challenges from the accused agency.  But more fundamentally, the decision serves as a Rorschach test for Supreme Court justices, showing how they feel about patents.

    The AIA created three types of post-grant proceedings to allow "a person who is not the owner of a patent" to petition the Patent and Trademark Office for the cancellation of issued patent claims.  First, IPRs allow such a person to seek to cancel claims for invalidity under § 102 or § 103 "on the basis of prior art consisting of patents or printed publications."  35 U.S.C. § 311.  Second, PGRs allow such a person to seek to cancel claims on any statutory grounds for invalidity.  35 U.S.C. § 321.  Third, a "person" who "has been sued for infringement of [a] patent or has been charged with infringement under [the] patent" — or is related to a party that has been sued or threatened — may bring a CBM review to invalidate claims of the asserted patent on any statutory grounds.  AIA § 18(a)(1).  These three proceedings have proven to be powerful alternatives to litigation, allowing potential infringers to invalidate patents and avoid infringement liability based on a preponderance of the evidence before the Patent Trial and Appeal Board (PTAB), rather than the clear and convincing evidence needed in litigation.

    In this case, Return Mail obtained a patent on methods of handling undeliverable mail, then offered a license to the U.S. Postal Service.  When negotiations broke down, the Postal Service petitioned for ex parte reexamination, which led to the cancellation of the initially issued claims but the issuance of new claims that the Patent Office deemed valid over the prior art.  Return Mail then sued the Postal Service in the Court of Federal Claims; in addition to asserting invalidity as a defense, the Postal Service petitioned for CBM review.  After the PTAB cancelled all of Return Mail's claims in the CBM review, Return Mail appealed based on the Postal Service not being a "person" eligible to petition for CBM review.

    A split Federal Circuit panel affirmed the PTAB's decision, finding that a number of factors including the structure of the Patent Act and the policies underlying the AIA suggested that the term "person" be read to include federal agencies.[1]  Judge Newman dissented, finding that long-standing precedent, the federal Dictionary Act, and the interplay between the benefit of AIA proceedings and the estoppel that generally arises from such proceedings (but would not apply against the Government in Court of Federal Claims cases) dictated that federal agencies not be "persons" permitted to bring AIA proceedings.[2]

    The Supreme Court granted certiorari, but in doing so disaggregated the issues of whether the Government would be a "person" in relation to AIA proceedings and whether estoppel would apply in Court of Federal Claims cases.[3]  Thus, the focus was to be primarily — if not exclusively — on the relevant statutes themselves.  At oral argument, however, the justices addressed numerous other issues.  Justices Breyer and Ginsburg appeared concerned that federal agencies could bring ex parte reexamination proceedings, but not more efficient AIA proceedings.[4]  Other justices, including Justice Kavanaugh, seemed concerned by the ability of one federal agency to appear in a quasi-litigation proceeding in front of another federal agency, when the executive branch is assumed to speak with one voice.[5]  In the end, however, the oral argument provided little insight into the Court's ultimate decision.

    Justice Sotomayor, writing for the Court, started from the presumption (as had Judge Newman) that the Government is a sovereign, not a "person."  That presumptive construction has a long pedigree in Supreme Court cases, reflects the common usage, and is also reflected in the general statutory definition for "person" in the Dictionary Act.  But there can be — and are — exceptions to the presumption, including in the Patent Act itself.  For example, under the Patent Act, federal agencies are "persons" expressly permitted to file patent applications, obtain patents, and can be sued for patent infringement.  And federal agencies have also been permitted to seek post-grant invalidation of patents, including through ex parte reexamination.  However, there are also uses of the term "person" in the Patent Act that clearly do not include federal agencies.

    The Court found that the inconsistent usage of the term "person" in the Patent Act meant that the general presumption should apply.  With regard to the AIA, both the text of the Act and the legislative history are silent on whether the government should be considered a "person."  The Court's majority believed that Congress's silence meant the presumption excluding the Government from that term should apply.  Finally, because the Government has advantages in actions brought in the Court of Federal Claims unavailable to private litigants defending against normal patent litigation (no injunctions, juries, or enhanced damages), the majority did not think it unfair that the Government would have to bear the burden of invalidating claims by clear and convincing evidence.

    Justice Breyer (joined by Justice Ginsburg and Justice Kagan) split from the majority on the importance of the instances in which the Patent Act uses the term "person," as well as the interpretation of the AIA's silence on the issue.  He asserted the uses of "person" that included federal agencies were more analogous to the use in relation to AIA review than the uses that excluded federal agencies.  He then looked to the purported purposes of AIA review (specifically, improving patent quality and eliminating invalid patents) rather than interpreting the statutory language to define the term.  That is, rather than basing his reasoning on what Congress actually said, he relied on his reading of what it intended.  Finally, he felt the availability of potentially large compensatory damages awards would make it unfair for federal agencies to bear that burden in litigation.  Notable in Justice Breyer's dissent, however, was that he did not rely on case law or the statutory language, instead focusing on his beliefs regarding the relevance of statutory provisions, the importance of policies underlying the statutes, and his view of potential litigation burdens.[6]

    Ultimately, the scope of the Supreme Court's decision is limited — closing the door to AIA review only for federal agencies — although it may prove to be important from time to time.  As the dissent points out, there have been cases with multimillion-dollar patent damages awards against the Government, and there is a potentially significant difference between the burdens of proof of invalidity in post-issuance proceedings (preponderance of the evidence) and Court of Federal Claims litigation (clear and convincing evidence).  To a party litigating against a federal agency, the Return Mail decision may deliver a different outcome.

    The real insight provided by the case, however, is into the Justices' attitudes toward patents.  Justice Sotomayor's majority opinion approached the case from the point of view that the Patent Act and AIA are federal statutes like all other federal statutes.  Her opinion seemed to view patents as conventional statutory constructs, and evinced no underlying hostility to their existence or validity.  In that vein, her opinion deemed the AIA to provide a balance between expedited resolution of validity issues and countervailing estoppel.  In contrast, Justice Breyer's dissent reflected his view that the intent of the AIA post-grant proceedings was to improve patent quality and eliminate invalid patents.  Thus, ultimately, Return Mail provides the most guidance through its insight into the Justices' views on the importance of patents.

    Return Mail, Inc. v. United States Postal Service (2019)
    Opinion by Justice Sotomayor, joined by Chief Justice Roberts and Justices Thomas, Alito, Gorsuch, and Kavanaugh; dissenting opinion by Justice Breyer, joined by Justices Ginsburg and Kagan

    [1] For a more extensive discussion of the Federal Circuit decision, see https://www.patentdocs.org/2018/10/supreme-court-to-decide-if-government-can-bring-aia-proceedings.html.

    [2] Id.

    [3] Id.

    [4] See https://www.patentdocs.org/2019/02/supreme-court-hears-oral-argument-in-return-mail-v-us-postal-service.html.

    [5] Id.

    [6] One other unusual aspect of Justice Breyer's dissent is that he relied heavily on lower court decisions, including establishing the burden of litigation in the Court of Claims based on a case brought by Hughes Aircraft in the Court of Federal Claims over 25 years ago.  Slip Op. at p. 7, citing Hughes Aircraft Co.v. United States, 31 Fed. Cl. 481, 488 (1994).

  • Intellectual Ventures II, LLC v. Sprint Spectrum, L.P. (E.D. Tex. 2019)

    By Donald Zuhn —

    District Court for the Eastern District of TexasIn April, in Intellectual Ventures II, LLC v. Sprint Spectrum, L.P., U.S. Magistrate Judge Roy S. Payne of the U.S. District Court for the Eastern District of Texas issued a Report and Recommendation that Defendants' Motion for Partial Summary Judgment that Certain Disputed References are Prior Art should be granted in part and denied in part.  In particular, Judge Payne recommended that summary judgment should be denied for four references (i.e., Hwang, Liebetreu, CATT, and LG) and granted for one reference (i.e., Yang).

    In arriving at his recommendation, Judge Payne noted that an important fact question in determining whether a reference qualifies as a printed publication under 35 U.S.C. § 102 is the public accessibility of the reference.  Citing Jazz Pharm., Inc. v. Amneal Pharm., LLC, 895 F.3d 1347 (Fed. Cir. 2018), for the proposition that "[a] reference is considered publicly accessible if it was 'disseminated or otherwise made available to the extent that persons interested and ordinarily skilled in the subject matter or art, exercising reasonable diligence, can locate it,'" Judge Payne pointed out that several factors are used by courts to determine whether a reference was publicly accessible.  Such factors include "how widely circulated the reference was, whether the reference was indexed in a manner that would have made it accessible to interested persons with a reasonable degree of effort, and whether the reference was distributed with a pledge or understanding that the contents would remain confidential"; another factor to be considered is the expertise of the target audience.

    Judge Payne addressed the Yang reference first, noting that Plaintiff Intellectual Ventures did not contest the public accessibility of this reference.  Judge Payne therefore concluded that the Yang reference was publicly accessible before the priority date of the asserted patents, and as a result, recommended that Defendants' Motion be granted with respect to this reference.

    Judge Payne next turned to the Hwang and Liebetreu references, which the Defendants (except for Nokia) argued were submissions to the March 2004 IEEE 802.16 Working Group Session #30 meeting, were publicly accessible by at least March 15, 2004, and thus qualified as prior art to U.S. Patent No. 8,953,641.  Despite Defendants' argument, however, Judge Payne determined that "fact questions remain as to whether the Hwang and Liebetreu references were publicly accessible before the relevant priority date," since "[b]oth references were filed on a website with somewhere between 4,000 to 10,000 references (by the estimate of the applicable Defendants' own witness) with the references listed primarily in chronological order."  Judge Payne also noted that "the Hwang reference was withdrawn, so it likely was not discussed at the meetings, making it even more difficult for this reference to be found."  Finding that "a question of fact exists as to whether these references were publicly available as it is unclear whether persons interested and ordinarily skilled in the subject matter would be able to locate these references using reasonable diligence," Judge Payne recommended that Defendants' Motion be denied with respect to the Hwang and Liebetreu references.

    Finally, Judge Payne addressed the CATT and LG references, which Defendants argued were publicly accessible by at least March 31, 2006, and thus qualified as prior art to U.S. Patent Nos. 8,682,357 and 9,532,330.  Finding that questions of fact remained as to the public accessibility of these references, Judge Payne recommended that Defendants' Motion also be denied with respect to the CATT and LG references.  In support of this recommendation, Judge Payne noted that "[w]hile the references were distributed by email to the working group and then placed on the 3GPP server, it remains unclear whether the references were indexed in a way that would allow persons interested and ordinarily skilled in the subject matter or art, exercising reasonable diligence, to locate the two references."  In response to Defendants' argument that indexing is not a prerequisite to finding that a reference qualifies as a printed publication, Judge Payne stated that "a failure to appropriately index may still create a question of fact as to whether a reference qualifies as a printed publication."  Moreover, Judge Payne noted that Intellectual Ventures' expert asserted that the CATT and LG references were not publicly available, and therefore, he indicated that "this suggests that summary judgment would be inappropriate."

    Judge Payne therefore recommended that Defendants' Motion for Partial Summary Judgment that Certain Disputed References are Prior Art should be denied for the Hwang, Liebetreu, CATT, and LG references, and granted for the Yang reference.

    Intellectual Ventures II, LLC v. Sprint Spectrum, L.P. (E.D. Tex. 2019)
    Report and Recommendation by Magistrate Judge Payne

  • Conference & CLE Calendar

    CalendarJune 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

  • Top 50 NIH-Funded Research Institutions FY2019

    By Kevin E. Noonan —

    GENGenetic Engineering News published the results of a study on Monday entitled "Top 50 NIH-Funded Institutions of 2019."  The report sets forth the context of these expenditures, with the Trump administration proposing large cuts in funding (12%, to a total outlay of $34.368 billion in Fiscal 2020) and Congress pushing back on any reductions (the House passed an appropriations bill allocating $41.084 billion, or a 5.12% increase and the Senate seems to be looking to follow suit).  And where does the money go?  The report states that 83% of that budget goes to fund extramural research, with FY2018 showing 47,000 grants awarded to 2,700 institutions in the amount of $26 billion.  This is in addition to supporting 6,000 scientists on the NIH campus.

    The remainder of the report shows the statistics for the 50 top "universities (including medical schools), research institutions, and teaching hospitals" for FY2019 through May 27th in dollars and number of grants awarded.  Not surprisingly, California has the most Federally granted institutions (7), with Massachusetts and New York ranking next with six apiece.  The report notes that these three states have 19 of the top 50 (38%) funded institutions.  Ohio is next with three institutions on the list, and seven states with two (Illinois, Maryland, Minnesota, North Carolina, Pennsylvania, Texas, and Washington).  Twenty-six states have no university or other research institution on the list, but the report notes that these states also receive a significant amount NIH research money.

    Top 50 NIH-Funded Institutions of 2019

    Table 1-25 Table 26-50