Patent Docs

Cuozzo Speed Technologies LLC v. Lee (2016)

June 20, 2016

By Kevin E. Noonan —

In its first pronouncement regarding the post-grant reviewing proceedings established by the America Invents Act ("AIA"), the Supreme Court ruled that the Patent and Trademark Office's positions on two of the law's provisions regarding inter partes review ("IPR") were correct. First, the Court held unanimously that the USPTO properly applied the "broadest reasonable interpretation" standard for claim construction for IPRs. Second, six members of the Court also agreed that the statute mandated that the decision to institute an IPR was not subject to judicial review. Justice Breyer authored the decision of the Court, with Justice Thomas authoring a concurring opinion to voice his continued displeasure with judicial deference to administrative agencies under Chevron USA Inc. v. Nat'l Defense Council, Inc. On the second question Justice Alito penned a dissent, which was joined by Justice Sotomayor. This post will discuss the Court's first holding regarding the standard of review for claim construction; a related post will discuss the unreviewability of the Office's decision to institute an IPR in the first place (found in Section II of the opinion).

Section I of Justice Breyer's opinion provides a detailed review of patent examination and reexamination procedures, up to an including IPRs under the AIA. This synopsis contains a highly simplified description of the invention (bordering on trivializing it) but then references an Appendix, which "offer[s] a less simplified (and more technical) description" of the invention.

Section III is directed to the claim construction standard used by the PTAB in deciding IPRs. Cuozzo argued that the Office did not have the legal authority to issue its regulations using the "broadest reasonable interpretation" (BRI) claim construction standard. But the Court found otherwise, that Congress gave the Office this authority is 35 U. S. C. §316(a)(4): "a provision that grants the Patent Office authority to issue 'regulations . . . establishing and governing inter partes review under this chapter'" — just like the Federal Circuit. This conclusion was expressly based on the following rubrics from Chevron: where a statute is clear, the agency must follow the statute, but where a statute leaves a "gap" or is "ambigu[ous]," the Court will "typically interpret it as granting the agency leeway to enact rules that are reasonable in light of the text, nature, and purpose of the statute." Such a "gap" is found here, because "[n]o statutory provision unambiguously directs the agency to use one standard or the other." In addition, "the statute 'express[ly] . . . authoriz[es] [the Patent Office] to engage in the process of rulemaking' to address that gap" in the Court's opinion, citing United States v. Mead Corp., 533 U. S. 218, 229 (2001).

The opinion addresses the dissent at the Federal Circuit: that the Office has authority only to issue procedural rules under §2(b)(2)(A), citing Cooper Technologies Co. v. Dudas, 536 F. 3d 1330, 1335 (Fed. Cir. 2008). But the Court believes § 316 expressly gives the Office rulemaking authority that authorizes using the BRI standard. In interpreting these two parts of the Patent Act, the opinion distinguishes the language of § 2(b)(2)(A), which gives "the Patent Office authority to issue 'regulations' 'which . . . shall govern . . . proceedings in the Office'" (emphasis in opinion) with the statutory language of §316(a)(4), which gives the Office the authority to promulgate regulations "establishing and governing inter partes review." According to the Court, "[t]he Circuit's prior interpretation of §2(b)(2)(A) cannot magically render unambiguous the different language in the different statute before us."

The opinion also addresses, and rejects, Cuozzo's argument (supported by certain amici) that Congress intended the IPR procedure to be adjudicatory in nature. Instead, the Court states that "inter partes review is less like a judicial proceeding and more like a specialized agency proceeding," on the basis that petitioners need not have standing, citing Consumer Watchdog v. Wisconsin Alumni Research Foundation, 753 F. 3d 1258, 1261–1262 (Fed. Cir. 2014); the parties may settle yet the PTAB may continue to a decision; and the Office's capacity to intervene, as it did in this case, in later judicial review of the PTAB's decisions. The opinion also notes the difference in the burden of proof in IPR (preponderance) versus at trial (clear and convincing evidence) as an indication that Congress did not intend an IPR to be a substitute for district court litigation.

The Court also was not persuaded that Congress changed the fundamental nature of the proceedings when it changed the name from "reexamination" to "review"; in the Court's view the essence of all these proceedings is to provide "a second look at an earlier administrative grant of a patent." "Thus, in addition to helping resolve concrete patent-related disputes among parties, inter partes review helps protect the public's 'paramount interest in seeing that patent monopolies . . . are kept within their legitimate scope," said the Court, citing Precision Instrument Mfg. Co. v. Automotive Maintenance Machinery Co., 324 U. S. 806, 816 (1945).

Finally, the Court found nothing in "the statutory language, its purpose, or its history" that suggested Congress had contemplated the claim construction standard the PTAB should apply. In reaching this conclusion, the Court rejected Cuozzo's contention that intent could be found in § 301(d), in mandating that the Office should "determine the proper meaning of a patent claim," in view of "a background of language and practices indicating that Congress designed a hybrid proceeding the Court found ambiguous statutory language regarding the "proper standard" of claim construction. Accordingly:

The upshot is, whether we look at statutory language alone, or that language in context of the statute's purpose, we find an express delegation of rulemaking authority, a "gap" that rules might fill, and "ambiguity" in respect to the boundaries of that gap. Mead Corp., 533 U. S., at 229; see Chevron U. S. A. Inc., 467 U. S., at 843.

This conclusion led the Court to consider whether, and conclude that, the regulation the Office has adopted is reasonable. Given primacy of place is the effect that using the BRI standard protects the public from "[a] reasonable, yet unlawfully broad claim [that] might discourage the use of the invention by a member of the public." The Court recognizes that "an examiner's (or reexaminer's) use of the broadest reasonable construction standard increases the possibility that the examiner will find the claim too broad (and deny it)" but that "use of that standard encourages the applicant to draft narrowly" (an outcome the Court, or at least Justice Breyer, clearly believes is desirable). The opinion is equally clear regarding its basis for believing this outcome is desirable: "[t]his helps ensure precision while avoiding overly broad claims, and thereby helps prevent a patent from tying up too much knowledge, while helping members of the public draw useful information from the disclosed invention and better understand the lawful limits of the claim." Moreover, the Court finds ample evidence of "past practice" before the Office applying the BRI standard, including in earlier reexamination proceedings and interferences (a position advocated by the Generic Pharmaceutical Association and friends as amici). And the Court rejected Cuozzo's arguments that Congress intended IPRs to be different in kind from inter partes reexaminations (for many of the same reasons enunciated by the Court earlier in the opinion). Importantly the Court also rejects the principal complaint by many commentators regarding the lack of the ability to amend claims that during ex parte examination provides the justification for using the BRI standard. According to the Court, "[t]he process [] is not as unfair as Cuozzo suggests" because "[t]he patent holder may, at least once in the process, make a motion to do just what he would do in the examination process, namely, amend or narrow the claim" (and the opinion "counts" in favor of this "fairness" the opportunity to amend present during ex parte examination, seemingly content to ignore the basis for instituting IPRs, that the art presented was not considered during initial examination of the application that granted, improvidently or not, into the patent challenged in the IPR). The opinion also elides the statistical evidence regarding the chimera that is the ability to amend claims in an IPR proceeding, saying "that question is not before us" (but "if not you, who? And if not now, when?" is a fair question in response). And finally, the Court is not disturbed by the issue of inconsistent outcomes between the PTAB and district court, saying "[t]his possibility [] has long been present in our patent system."

Lead PTAB Judge Michael Tierney remarked, at this year's BIO International Convention, that he believed cases where the standard of review would make a difference in the outcome of an IPR would be exceedingly rare.* It has certainly been the experience of most patent practitioners that in certain cases before certain examiners the reach of the "broadest" reasonable interpretation can seem strained. See, for example, In re Suitco Surface, Inc. Perhaps the PTAB will be more inclined to grant motions to amend as it (and practitioners) become more experienced in IPR proceedings, and as the likelihood increases that such amendments may in fact recite patentable claims. But what is clear is that the Court believes that the Office has properly exercised the authority it was given by Congress. Left untested is the question of whether this particular exercise of authority contravenes the separation of powers between Article I courts (such as the PTAB) and Article III courts that has been raised in other cases, but this is a question most decidedly not before the Court in this case.

*"Will the PTAB be a Road Block for Biotech? Lessons Learned from the First Three Years of Inter-Partes Review and Future Prospects."

Cuozzo Speed Technologies LLC v. Lee (2016)
Opinion by Justice Breyer, joined as to Part II by Chief Justice Roberts and Justices Kennedy, Thomas, Ginsburg, and Kagan; concurring opinion by Justice Thomas; opinion concurring in part and dissenting in part by Justice Alito, joined by Justice Sotomayor
Amicus Briefs in Support of Sequenom’s Petition for Certiorari: Dr. Chakrabarty, A Scientist’s View

June 19, 2016

By Donald Zuhn —

In March, following the Federal Circuit's denial of Sequenom's petition for rehearing en banc, Sequenom filed a petition for certiorari for Supreme Court review of the Federal Circuit's decision in Ariosa Diagnostics, Inc. v. Sequenom, Inc. In response to that petition, twenty-two amicus briefs were filed encouraging the Supreme Court to grant certiorari. With the Court scheduled to consider Sequenom's petition in conference on Thursday, Patent Docs will examine selected amicus briefs in the coming week. Today, we review the amicus curiae brief submitted by Dr. Ananda Mohan Chakrabarty. Dr. Chakrabarty is most recognizable to those in the patent community for developing a genetically engineered organism using plasmid transfer, for which he obtained U.S. Patent No. 4,259,444, which in turn was the subject of the landmark Supreme Court case, Diamond v. Chakrabarty, 447 U.S. 303 (1980).

Dr. Chakrabarty (at left) begins his brief by arguing that "the current direction for addressing the issue [of what constitutes patentable subject matter under U.S. patent law], represented by the Mayo/Myriad/Alice framework of analysis, has failed and will continue to fail all stakeholders in the United States patent system," and therefore, "this Court should reconsider the basic issue of how to handle the judicial exceptions to § 101, particularly as [it] relates to the judicial exception categories of 'natural phenomena' and 'law of nature,'" adding that the Ariosa v. Sequenom case "offers an excellent opportunity to do so." According to Dr. Chakrabarty, the Mayo/Myriad/Alice analytic framework "has turned § 101 into a needle's eye that must be traversed, rather than the broad open archway it was intended to be." Dr. Chakrabarty acknowledges that "dealing with the judicial exception categories of 'natural phenomena' and 'laws of nature' requires different thinking than dealing with the more ambiguous category of 'abstract concept,'" and contends that for the first two exceptions "the proper analysis should focus on determining whether the thing covered by the patent claims involves an alteration or manipulation by the hand of man and, if so, whether that alteration or manipulation has created useful qualities or characteristics that did not exist in the thing's natural state."

In a section of the brief entitled "A Scientist's View," Dr. Chakrabarty states that "[i]n this case, the Federal Circuit's adherence to Mayo, rather than following its own conviction that Sequenom's significant invention is worthy of patent protection, was exceptionally disappointing to scientists." Contrasting the Federal Circuit's decision in Ariosa with the Supreme Court's decision in Mayo, Dr. Chakrabarty explains that "[s]peaking as a scientist, it was not surprising that the Mayo patent was held invalid," but suggests that "the Sequenom technology is altogether different, involving innovative and novel ideas for a technology that no longer requires the isolation of rare whole fetal cells."

Quoting from Diamond v. Chakrabarty, Dr. Chakrabarty reminds that "[i]t is beyond dispute that 35 U.S.C. § 101 includes 'anything under the sun that is made by man,'" arguing that "[t]his principle is fully consistent with the judicially created exceptions of natural phenomena and laws of nature because those items — properly interpreted — are not new and not made by man." Turning to his '444 patent, Dr. Chakrabarty posits that while the '444 patent "is unequivocally proper and valid[,] . . . it is easy to realize that the outcome might have been different under the Mayo/Myriad/Alice framework of analysis." He suggests that "in that altered world of analysis, my patent would have been attacked as merely applying the basics of the genetic code, extracting a known natural DNA sequence from point A and inserting it into another known natural DNA sequence at point B using previously established (read 'conventional') techniques."

Dr. Chakrabarty also asserts that:

[T]he most far-reaching role of patentability in the modern life of a technical economy is to incentivize the formation of capital which leads to invention. The sophistication of current science requires large amounts of capital to fuel the fire of invention. The process takes years. And unless the Mayo/Myriad/Alice framework is revised significantly and soon, its disastrous effect will harm the U.S. (and world) economies for a long time [emphasis in brief].

For Dr. Chakrabarty, Step 1 of the Mayo/Myriad/Alice framework "is distinctly unhelpful," "provid[ing] no guidance on what that statement means or how to do it," and Step 2 of the Mayo/Myriad/Alice framework "is no better." The whole framework "inherently conflates § 101 with §§ 102-103, if for no other reason than that terms such as 'inventive concept' and 'conventional steps' have a 200 year history of use in the context of distinguishing claimed inventions from the prior art." Dr. Chakrabarty argues that "[t]he proper application of § 101 should be formulated in a manner that is separate and independent from §§ 101-103 and 112, just as those sections should be left free to do their jobs separate and independent from § 101." He suggests that Sequenom's petition for certiorari presents "a perfect vehicle to re-define the proper framework of analysis of § 101, at least for the area of life sciences," arguing that:

[T]he proper § 101 analysis should provide that, if the inventor claims a material — or a process using a material — that has been altered or manipulated by the hand of man and, if as a result of that alteration or manipulation, the claimed subject matter is shown to have qualities, characteristics, or properties that did not exist in the natural material, then that claimed subject matter passes muster under § 101 and is worthy of being considered under §§ 102-103 and 112.

Applying his proposed analytic framework to Sequenom's invention, Dr. Chakrabarty explains that "the starting point is a sample of maternal blood (claim 21), serum (claim 1), or plasma (claim 1)," that "[t]he sample is altered and manipulated, as disclosed in the patent, with the result of yielding information about sex and genetic deformities of a fetus," and that "[t]here is no dispute in this record that this manipulation by the hand of man is novel, nonobvious, and properly disclosed in the specification." He then asks "[h]ow can that not be patentable?"
Conference & CLE Calendar

June 19, 2016

June 15-17, 2016 - Fundamentals of Patent Prosecution 2016: A Boot Camp for Claim Drafting & Amendment Writing (Practising Law Institute) – New York, NY

July 6-8, 2016 - Fundamentals of Patent Prosecution 2016: A Boot Camp for Claim Drafting & Amendment Writing (Practising Law Institute) – San Francisco, CA

June 9, 2016 – "Overcoming §103 Rejections for Biotech and Chemical Patents: Leveraging Recent Decisions and USPTO Guidance" (Strafford) – 1:00 to 2:30 pm (EDT)

June 14, 2016 – "Patent Eligibility, Prior Art and Obviousness 2016: Current Trends in Sections 101, 102 and 103" (Practising Law Institute) – San Francisco, CA (also webcast)

June 23, 2016 - Trade Secrets Seminar (Intellectual Property Law Association of Chicago) – Chicago, IL

June 30, 2016 – Biotechnology/chemical/pharmaceutical (BCP) customer partnership (U.S. Patent and Trademark Office) – Alexandria, VA

June 30, 2016 – "Ethics in Intellectual Property" (Intellectual Property Law Association of Chicago New Programming Committee) – Chicago, IL

July 26, 2016 – "Pharma and Chemical Patent Applications: Meeting Written Description Requirement — Demonstrating Evidence of Possession of the Invention, Navigating the Guidelines, Maintaining Chain of Priority" (Strafford) – 1:00 to 2:30 pm (EDT)

August 4-5, 2016 - Advanced Patent Law Seminar (Chisum Patent Academy) – Seattle, WA

August 8-9, 2016 - Advanced Patent Law Seminar (Chisum Patent Academy) – Seattle, WA

***Patent Docs is a media partner of this conference or CLE
BCP Customer Partnership Meeting

June 18, 2016

The U.S. Patent and Trademark Office will be holding its next biotechnology/chemical/pharmaceutical (BCP) customer partnership meeting on Thursday, June 30, 2016 at the USPTO Headquarters (Alexandria, VA). The agenda for the meeting is as follows:

• Welcoming and Opening Remarks (10:00 – 10:10 am EDT) — Hope Shimabuku, Director, Dallas Regional Office, USPTO; Jerry Lorengo, Director, TC1600, USPTO; Daniel Sullivan, Director, TC1600, USPTO; and Wanda Walker, Director, TC1600, USPTO

• Stakeholders’ Perspective On Patent Quality Initiative (10:10 – 11:00 am) — Frank P. Grassler, VP for Technology Development, Office of Technology Development, University of Texas Southwestern Medical Center

• Inter Partes Review/Post Grant Review: Status Report and Overview of the New Rules (11:00 – 11:50 am) — Lora Green, Administrative Patent Judge, PTAB, USPTO

• Break (11:50 – 12:00 pm)

• Biological Deposit (12:00 – 12:40 pm) — Gary Benzion, SPE, TC1600

• TC Pendency (12:40 – 1:00 pm) — Brandon Fetterolf, SME/SPE, TC1600

• Lunch (1:00 – 1:45 pm)

• 101 New Examples; Workshop (1:45 – 3:15 pm) — Marjorie Moran, SME/SPE, TC1600; Zachariah Lucas, QAS, TC1600

• Subject Matter Eligibility, A Stakeholder’s Perspective (3:15 – 3:35 pm) — Leslie Fischer, Senior Patent Attorney, Novartis Pharmaceuticals Corp.

• Closing Remarks (4:50 – 5:00 pm) – TC1600 and Dallas Regional Office Directors

Additional information regarding the BCP customer partnership meeting, including registration information for those wishing to attend the meeting or register for online participation, can be found here.
IPLAC Ethics in IP Seminar

June 18, 2016

The Intellectual Property Law Association of Chicago (IPLAC) New Programming Committee will be offering a seminar on "Ethics in Intellectual Property" from 8:00 to 9:30 am (Central) on June 30, 2016 at the offices of Kirkland & Ellis in Chicago, IL. During the seminar, Mark Peterson of Aon Risk Solutions will share his experiences in ethics and risk management related to the prosecution and enforcement of intellectual property. The registration fee for the Seminar is $30 (IPLAC members) or $40 (non-members). Those interested in registering can do so here.
Webinar on Meeting Written Description Requirement in Pharma and Chemical Patent Applications

June 18, 2016

Strafford will be offering a webinar/teleconference entitled "Pharma and Chemical Patent Applications: Meeting Written Description Requirement — Demonstrating Evidence of Possession of the Invention, Navigating the Guidelines, Maintaining Chain of Priority" on July 26, 2016 from 1:00 to 2:30 pm (EDT). Thomas L. Irving of Finnegan Henderson Farabow Garrett & Dunner will provide guidance to patent counsel to ensure chemical and pharmaceutical patent applications meet the written description requirement, outline lessons for counsel from Federal Circuit and PTAB decisions, and offer perspectives and strategies to avoid challenges. The webinar will review the following issues:

• Guidelines for pharmaceutical application's written description support, e.g., a novel drug substance, product, and method(s) of treatments and manufacture;
• Preparing non-pharmaceutical, chemical application's written description in support of a novel compound, composition, and methods of use and compound manufacture;
• How a lack of written description support can be used in an AIA inter partes review before PTAB; and
• How a lack of written description support can be used before PTAB to attack claims by breaking the chain of priority to pre-AIA date benefit in an AIA post-grant review.

The registration fee for the webinar is $297. Those registering by July 1, 2016 will receive a $50 discount. Those interested in registering for the webinar, can do so here.
Amicus Briefs in Support of Sequenom’s Petition for Certiorari: Eli Lilly and Company et al.

June 16, 2016

By Donald Zuhn —

In March, following the Federal Circuit's denial of Sequenom's petition for rehearing en banc, Sequenom filed a petition for certiorari for Supreme Court review of the Federal Circuit's decision in Ariosa Diagnostics, Inc. v. Sequenom, Inc. In response to that petition, twenty-two amicus briefs were filed encouraging the Supreme Court to grant certiorari. With the Court scheduled to consider Sequenom's petition in conference next Thursday, Patent Docs will examine selected amicus briefs in the coming week. Today, we review the amici curiae brief submitted by Eli Lilly and Company, Eisai Inc., Upsher-Smith Labroatories, Inc., Pfizer Inc., and Etiometry, Inc.

The amici begin by noting that the Supreme Court has applied a nonstatutory "implicit exception" to patentability to ensure that patents cannot be granted for "concepts" (which, according to the amici, refer to laws of nature, natural phenomena, and abstract ideas), and that "[t]he Court has applied the implicit exception as part of a 'threshold test' for patentability that operates before other patentability requirements may be considered." The amici contend, however, that the implicit exception "does no more than duplicate the [Patent Act's] effects when statutory provisions would also invalidate the same patent," and ask:

Given the current explicit statutory limitations on patenting in the Patent Act—and the proper interpretation of those limitations—should the Court's judicially imposed implicit exception to subject matter considered to be eligible for patenting be abrogated, such that patentability and patent validity are to be determined solely under such explicit statutory provisions?

Citing the amicus brief of Paul Gilbert Cole, the amici point out that "[t]he most pointed criticism of the Court's implicit exception is that the Court's recent jurisprudence has expanded the reach of the exception such that today it applies to invalidate U.S. patents that would be clearly eligible for patenting under international norms." The amici note that the analytical framework devised by the Court for applying the threshold test for patentability is "intended to operate as a surrogate for the broader policy question of whether a patent claim is so conceptual that rights under the patent might dominate or otherwise preempt access to a law or product of nature, a natural phenomenon, or an abstract idea." The amici suggest, however, that "[l]ike many surrogate tests, it risks overreaching its policy objectives." Stating that "the Court has never considered whether the proper interpretation of the current statutory requirements, considered together rather than piecemeal, would fully address the policy considerations that caused the Court to mandate the non-statutory implicit exception," the amici argue that "it is now essential as an exercise of judicial restraint for the Court to consider whether to abrogate the implicit exception in deference to the present explicit statutory scheme" (emphasis in brief).

The amici spend the remaining pages of their brief explaining how the statutory patentability requirements prevent valid claims from protecting or dominating a law of nature, natural phenomenon, or abstract idea, or covering or otherwise precluding access to naturally-occurring subject matter. Noting that 35 U.S.C. § 101 requires that a valid claim must be drafted in terms of a "process, machine, manufacture, or composition of matter" or an improvement thereto, the amici contend that "[t]hese four statutory categories, by forcing valid patent claims to be expressed in terms of the applications that physically embody an invention, represent subject matter that is mutually exclusive with respect to mere concepts—such as laws, phenomena, and ideas." According to the amici, "the patent statute explicitly limits patenting to physical embodiments, things and act-based processes that can only ever be applications of any related concept and can never be the concept itself" (emphasis in brief). The amici argue that when 35 U.S.C. §§ 101, 103 and 112(a) are considered together, these statutory requirements, which limit valid patent claims to inventive and useful applications of any related concept, "operate to limit valid patent claims to inventive and practically useful applications of any law, phenomenon, or idea to which a claimed invention relates" (emphasis in brief).

The amici acknowledge, however, that "[w]hile these various statutory provisions address whether valid patent claims can literally cover a law, phenomenon or idea, they do not necessarily foreclose resort to patent drafting techniques that might be used to craft valid patent claims preempting access to such concepts." Nevertheless, the amici argue that "[t]he Patent Act of 1952 contains two provisions that, if properly interpreted and applied, fully negate the potential effectiveness of such drafting techniques: § 112(a) and § 112(f)." According to the amici, "the combination of § 112(a) and § 112(f) forecloses the possibility that patent drafting techniques might secure protection over a concept to which an invention relates beyond the physical embodiments of the invention as set out in terms of the specific structures, materials, or acts disclosed in the patent."

With respect to the statutory requirement for novelty, the amici argue that this requirement — and more specifically the "inherent anticipation" aspect of this requirement — "bars the patenting of any subject matter that exists or operates in nature," and "assures that patent rights cannot impair access to the basic tools of science or technology or in any other way impede the ability of the patent system to promote progress in the useful arts."

The amici conclude their brief by declaring that:

Interpreting the current statutory provisions in a manner consistent with the Court's precedents makes it impossible to identify any scenario under which a valid patent could provide protection for a law of nature, a natural phenomenon, or an abstract idea—either directly or through drafting techniques aimed at yielding a valid patent claim that might dominate or otherwise preempt access to such a law, product, phenomenon, or idea. The same applies with respect to patents relating to entirely mental processes and products of nature.

Given the manifest difficulties that the implicit exception presents to the proper functioning of the patent laws, the Court should address whether judicial restraint now dictates deference to the statutory framework.
Femto-Sec Tech, Inc. v. Lensar, Inc. (C.D. Cal. 2016)

June 15, 2016

Patent Having Claims That Apply Law of Nature Is Patent-Eligible

By Joseph Herndon —

On June 8, 2016, the U.S. District Court for the Central District of California issued an order denying a motion to dismiss, and found that U.S. Patent No. 5,720,894 is directed to patent-eligible subject matter in a case captioned Femto-Sec Tech, Inc. v. Lensar, Inc.

Lensar argued that the '894 Patent is directed to a "natural phenomena and laws of nature," but the Court made it clear that a patent with claims that apply laws of nature should not be considered patent-ineligible as being directed at that law of nature.

The '894 Patent is directed to the field of ultrashort pulse duration laser systems suitable for material and biological tissue processing. The patent purportedly improved upon the prior art of the use of lasers as a therapeutic and preventive tool in various fields, such as surgery, by increasing ablation efficiency while minimizing collateral damage to adjacent material.

The '894 Patent recites two independent claims, and claim 1 is representative and reproduced below.

1. A method for selective material removal processing comprising:
    providing a pulsed laser;
    operating said laser so as to produce a pulsed output beam, the beam comprising individual pulses each having a pulse duration in the range of from about 1 femtosecond to about 100 picoseconds;
    directing said pulsed output beam onto a target material from which removal is desired, wherein each pulse interacts with a thin layer portion of said material so as to form a plasma;
    allowing said formed plasma to decay, such that said material portion is removed; and
    repeating said plasma formation step at a pulse repetition rate greater than 10 pulses per second until a sufficient depth of material has been removed with substantially no transfer of thermal or mechanical energy into the remaining material and substantially no collateral damage thereto.

Nuijten Standard

An invention is patent-eligible if it claims a new and useful process, machine, manufacture, or composition of matter, according to 35 U.S.C. § 101. Claims that encompass transitory forms of signal transmission (e.g., transitory electrical and electromagnetic signals propagated through some medium) are invalid because those transitory embodiments are not directed to statutory subject matter. In re Nuijten, 500 F.3d 1346, 1353 (Fed. Cir. 2007). A transitory signal per se is not one of the four categories of patentable subject matter.

Lensar initially provided arguments questioning whether or not a laser beam is among one of the statutory categories, and submitted that the laser beam is more analogous to a signal per se. The Court, however, found that neither of the independent claims of the '894 Patent purports to claim a laser beam per se. Instead, independent claim one clearly claims only a "method" which includes, as a required step in the process, the use of a "pulsed laser." The method claim is a "process" under 35 U.S.C. § 101 and is, thus, directed to statutory subject matter.

The Court noted that contrary to Lensar's assertion, the Federal Circuit in Nuijten did not find the electromagnetic signal to be a patent-ineligible natural phenomenon. Courts applying Nuijten do not strike patents that improperly claim natural phenomenon, but rather, patents that improperly claim transitory signals. Here, because no signal is claimed, the Nuijten arguments were not relevant.

Alice Standard

Laws of nature, natural phenomena, and abstract ideas are not patentable. The two-step Alice test is used for patent eligibility purposes. First, the Court must determine whether the claims at issue are directed to one of those patent-ineligible concepts, and if so, then the second step requires the Court to search for an inventive concept.

Lensar argued that the claims are directed toward natural phenomena and the laws of nature. The Court found that Lensar failed to indicate what portion of the patent claims appear to claim for itself a particular law of nature, and rather, found that the '894 patent does not, in fact, recite a law of nature.

In Alice, the Supreme Court reiterated that a "patent is not rendered ineligible for patent simply because it involves" a patent-ineligible concept. Instead, a patent is ineligible if it is directed to the patent ineligible concept, for example, by claiming an essential building block of human ingenuity or a scientific principle.

Here, the Court found that the claims of the '894 Patent are not directed towards the broad, generalized use of electromagnetic spectrum. Instead, the '894 Patent has claimed a particularized, specific use of a specific range of the electromagnetic spectrum; a use that the '894 Patent claims has particular and useful effects. The Court further iterated that the plain focus of the claim is not directed, broadly, to laser beams, but instead the focus of the claim is the operation of a pulse laser of an ultrashort duration (between a femtosecond (quadrillionth of a second) and 100 picoseconds (trillionth of a second)) repeatedly to achieve the desired results of material removal with substantially no collateral damage.

The Court made clear that although this invention, like all patent-eligible inventions, may at some level "apply laws of nature," that does not mean that the present invention is directed at that law of nature.

The Court also noted that Lensar failed to show how ultrashort pulse laser beams are naturally occurring phenomena. In fact, the '894 Patent indicates that the ultrashort pulse laser beams have to be generated from a specialized piece of equipment. The Court found that the discovery that the material-removing properties of ultrashort pulsed lasers have beneficial effects is "not nature's handiwork" but rather the work of the inventor of the subject matter here.

Although the Court concluded that the claims of the '894 Patent survive scrutiny under step one of the Alice analysis, the Court also determined that the claims of the '894 Patent would also survive under step two of the Alice framework. The Court highlighted the fact that use of ultrashort pulsed beams at least improves the functionality of a laser for a specific, particularized purpose: material removal.

The Court thus concluded that the claims of the '894 Patent are patent eligible. The Court here provides a nice example to push-back on the unfounded allegations of § 101 attacks, and made it clear that a patent with claims that apply laws of nature should not be considered patent-ineligible as being directed at that law of nature.

Order Denying Defendant's Motion to Dismiss by Honorable James V. Selna
Halo Electronics, Inc. v. Pulse Electronics, Inc. and Stryker Corp. v. Zimmer, Inc. (2016)

June 13, 2016

By Kevin E. Noonan —

The aphorism that "[t]he race is not always to the swift nor the battle to the strong, but that's the way to bet," variously attributed to Damon Runyon, Franklin P. Adams, and Hugh Keough, could readily be updated to include that "Federal Circuit opinions are not always overturned by the Supreme Court" because recently that is decidedly the way to bet. And had anyone bet on the Court reversing (formally, vacating and remanding) the Federal Circuit's In re Seagate Tech. LLC jurisprudence they would have been in the money, because that is just what the Court did today in Halo Electronics, Inc. v. Pulse Electronics, Inc. and a companion case, Stryker Corp. v. Zimmer, Inc.

To recap, the statute (35 U.S.C. § 284) provides that a district court "may increase the damages [awarded to a patentee against an infringer] up to three times the amount found or assessed." The Federal Circuit's Seagate test created a two-pronged analysis for deciding willfulness, wherein a district court was instructed to find that infringement occurred "despite an objectively high likelihood" that the accused infringer's actions constituted infringement, as well as a subjective component, that the risk of infringement "was either known or so obvious that it should have been known to the accused infringer." Moreover, the evidentiary standard under the Seagate test was, for each prong, clear and convincing evidence. As a consequence, Seagate also provided a "trifurcated" standard of appellate review: de novo for the objective prong, substantial evidence for the subjective prong, and abuse of discretion for the overall determination of whether willful infringement would lie under particular circumstances.

Regarding the cases at bar, in Halo a jury found infringement but the District Court refused to award enhanced damages, despite evidence that defendant Pulse knew of the patents (because Halo had written, twice, offering a license), because Halo had not established the objective recklessness prong of the Seagate test. The Federal Circuit affirmed. In Stryker, the District Court enhanced a jury award against defendant Zimmer from $76.1 million to over $228 million based on willful infringement. But the Federal Circuit reversed the enhanced award, holding that Zimmer had asserted "reasonable defenses" at trial and despite a jury finding that Zimmer had "all-but instructed its design team to copy Stryker's products" and had adopted an aggressive stance in competing with Stryker while "opt[ing] to worry about the potential legal consequences later."

Chief Justice Roberts delivered the opinion of the unanimous Court that swept away these complexities for a simple discretionary standard to be applied by district courts and the Federal Circuit. The Court' s opinion first focused on the language of the statute itself, wherein a court "may" award enhanced damages but was not required to do so ("we have emphasized that the 'word "may" clearly connotes discretion,'" citing Martin v. Franklin Capital Corp., 546 U. S. 132, 136 (2005) (quoting Fogerty v. Fantasy, Inc., 510 U. S. 517, 533 (1994)). However, in the very next sentence the opinion cautions that "discretion is not a whim," according to Martin, and that this discretion is dependent on a district court's judgment "guided by sound legal principles." While eschewing any "precise rule or formula" the Court directs district courts to exercise its discretion "'in light of the considerations' underlying the grant of that discretion," citing Octane Fitness, LLC v. ICON Health & Fitness Inc., 572 U. S. ___, ___ (2014). The Court emphasizes that enhanced damages should not be "meted out in the typical infringement case" but are warranted only for "egregious infringement behavior" (providing a host of synonyms for such behavior, including "willful, wanton, malicious, bad-faith, deliberate, consciously wrongful, flagrant, or — indeed — characteristic of a pirate"). While acknowledging "180 years" of patent decisions regarding enhanced damages the Court also recognizes that "the channel of discretion ha[s] narrowed," citing Friendly, Indiscretion About Discretion, 31 Emory L.J. 747, 772 (1982), and that enhanced damages "are generally reserved for egregious cases of culpable behavior."

The Court found precedent for its decision in its case law going back to the beginning of the U.S. patent system, wherein the initial provision of treble damages for all infringement was changed (in the 1836 Patent Act) to be limited to cases of infringement by the "wanton and malicious pirate." Seymour v. McCormick, 16 How. 480, 488 (1854). This provision was expressly punitive, and as such not warranted by infringement undertaken in "ignorance or good faith." This cabining of enhanced damage award to cases of egregious conduct found support in Dean v. Mason, 20 How. 198, 203 (1858) ("aggravated circumstances"), contrasted with unintentional infringement due to ignorance regarding the patent (Hogg v. Emerson, 11 How. 587, 607 (1850). This limit on enhanced damages was maintained in the 1870 Patent Act as interpreted by the Court, including cases where enhanced damages were justified, Tilghman v. Proctor, 125 U. S. 136, 143–144 (1888); Topliff v. Topliff, 145 U. S. 156, 174 (1892), and those where they were not, Cincinnati Siemens-Lungren Gas Illuminating Co. v. Western Siemens-Lungren Co., 152 U. S. 200, 204 (1894). The opinion further distinguished apparently contrary precedent as being "not for the ages," Clark v. Wooster, 119 U. S. 322, 326 (1886), or being more properly directed to attorneys' fees awards, which are now the province of Section 285 of the Patent Act, such as Day v. Woodworth, 13 How. 363, 372 (1852), and Teese v. Huntingdon, 23 How. 2, 8–9 (1860). Finally, the Court found support for its interpretation of Section 284 in earlier cases directed to its proper ambit, such as Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U. S. 476, 505, n. 20 (1964); Dowling v. United States, 473 U. S. 207, 227, n. 19 (1985); and Florida Prepaid Postsecondary Ed. Expense Bd. v. College Savings Bank, 527 U. S. 627, 648, n. 11 (1999).

With this backdrop, the opinion states that the Seagate test "reflects, in many respects, a sound recognition that enhanced damages are generally appropriate under §284 only in egregious cases." But, as has so frequently been the case, the Court concludes that the test "is unduly rigid, and it impermissibly encumbers the statutory grant of discretion to district courts," just as it did in Octane Fitness in 2014. One example of this rigidity is the Court's apprehension that the test might "insulat[e] some of the worst patent infringers from any liability for enhanced damages"; in the Court's view, the objective prong precluded a finding of willfulness categorically provided that the accused infringer could mount a colorable challenge at trial to a patent's validity or the infringer's non-infringement of it (regardless of whether the infringer appreciated these grounds when commencing infringement) as being one example of this risk. This "threshold requirement" for finding willfulness liability under the Seagate test "excludes from discretionary punishment many of the most culpable offenders, such as the 'wanton and malicious pirate' who intentionally infringes another's patent — with no doubts about its validity or any notion of a defense — for no purpose other than to steal the patentee's business." Under these circumstances the Court can see no basis for requiring an "independent showing" of objective recklessness (by clear and convincing evidence no less) in the face of evidence of intentional infringement. In this regard the Court cites its recent decision in Octane Fitness for the principle that "subjective willfulness of a patent infringer, intentional or knowing, may warrant enhanced damages, without regard to whether his infringement was objectively reckless." This standard of "knowledge of the actor at the time of the challenged conduct" is also consistent with traditional tort law principles according to the Court.

Nevertheless, the opinion is also careful to state that merely finding egregious misconduct does not require a district court to award enhanced damages. The lodestar is discretion, wherein a district court "take[s] into account the particular circumstances of each case in deciding whether to award damages, and in what amount."

The opinion also disagrees with the Federal Circuit's clear and convincing evidence standard for recklessness, finding no basis in the statutory language (and particularly with reference to other statutory provisions that recite the clear and convincing evidentiary standard).

Finally, consistent with its rejection of the Seagate test, the opinion also rejects the Federal Circuit's "tripartite" nature of appellate review. The proper standard is abuse of discretion, following the Court's similar rejection of multipart standards of review in Highmark Inc. v. Allcare Health Management System, Inc., 572 U. S. ___ (2014). And while the Court recognizes the Federal Circuit's concerns ("The appellate review framework adopted by the Federal Circuit reflects a concern that district courts may award enhanced damages too readily, and distort the balance between the protection of patent rights and the interest in technological innovation") the Court also believes that "[n]early two centuries of exercising discretion in awarding enhanced damages in patent cases [] has given substance to the notion that there are limits to that discretion."

With regard to the concerns of Respondents and certain amici, that "allowing district courts unlimited discretion to award up to treble damages in infringement cases will impede innovation as companies steer well clear of any possible interference with patent rights," particularly from the dreaded "trolls," the Court acknowledges the risk that the "careful balance" between the need for patents to promote innovation and the importance of encouraging "imitation and refinement" could be disrupted "if enhanced damages are awarded in garden-variety cases." But "they should not be," says the Court, providing the most certain instruction to district courts and limitations of enhanced damages awards that the Court believes to be consistent with traditional application of the statute.

Justice Breyer concurred, in an opinion joined by Justices Kennedy and Alito. The concurrence gave voice to Justice Breyer's well-worn concerns regarding the burden on innovation occasioned by the need for due diligence in the form of a clearance opinion, bolstered by several amici who would rather not be bothered by patenting in the first place. One particular concern for the concurring Justices is that the Court's opinion should not be taken by district courts to mean willful misconduct can be established by knowledge of the patent "and nothing more." In this regard the concurrence stresses the "context" of the behavior as contributing to its characterization as "willful" or "wanton":

I describe these limitations on enhanced damages awards for a reason. Patent infringement, of course, is a highly undesirable and unlawful activity. But stopping infringement is a means to patent law's ends. Through a complex system of incentive-based laws, patent law helps to encourage the development of, disseminate knowledge about, and permit others to benefit from useful inventions. Enhanced damages have a role to play in achieving those objectives, but, as described above, that role is limited.

Once again Justice Breyer resorts to the balance between the "helpfulness" of an opinion of counsel to "help draw the line between infringing and noninfringing uses" and "the costs and consequent risk of discouraging lawful innovation," concerns accentuated by several amici. Also of concern is the "troll" question, with the Justice citing the practice of using patents to obtain licensing fees (and, curiously citing Thomas Jefferson regarding "the abuse of frivolous patents"). The Justice draws the conclusion, assuming that letters offering licenses are somehow an abuse of the patent system, that "[t]he more that businesses, laboratories, hospitals, and individuals adopt this approach, the more often a patent will reach beyond its lawful scope to discourage lawful activity, and the more often patent-related demands will frustrate, rather than 'promote," the "Progress of Science and useful Arts'" (in rhetoric thus "begging the question").

As for the majority opinion, to some degree the Court has made less burdensome a patentee's task of establishing willful infringement, by lowering the evidentiary standard ("patent-infringement litigation has always been governed by a preponderance of the evidence standard"; Octane Fitness) and by eliminating the "high bar" of establishing objective recklessness. However the Court was just as adamant that enhanced damages should not be available for "garden-variety infringement" and thus the Federal Circuit's Seagate standard as been supplanted (as in so many other areas of the patent law) by a much less defined, "totality of the circumstances" test. While Justice Breyer may admonish the Federal Circuit to "take advantage of its own experience and expertise in patent law" in reviewing a district court's performance in awarding enhanced damages, it will be interesting to see the extent to which the Court is willing to give credence to the Federal Circuit in doing so.

Halo Electronics, Inc. v. Pulse Electronics, Inc. and Stryker Corp. v. Zimmer, Inc. (2016)
Opinion by Chief Justice Roberts; concurring opinion by Justice Breyer, joined by Justices Kennedy and Alito
Colombian Organizations Send Letter to CEWG Regarding Imatinib Compulsory License

June 12, 2016

By Donald Zuhn –-

In letter from three Colombian organizations to the Chairman of the World Health Organization (WHO) 2016 Consultative Expert Working Group on Research and Development: Financing and Coordination (CEWG) (posted on the info.justice.org blog), the organizations informed the CEWG of efforts to secure a compulsory license for Imatinib, marketed by Novartis as Gleevec® or Glivec, and resistance to those efforts. The three Colombian organization signatories consisted of the IFARMA Foundation, Misión Salud, and CIMUN.

The organizations noted that since November 2014, the group had been encouraging the Ministry of Health (MOH) of Colombia to declare access to Imatinib to be of public interest with the goal of securing a compulsory license. While noting that the MOH had acknowledged that access to Imatinib is a matter of public interest, the groups also noted that efforts at securing a compulsory license had been met with resistance. The group pointed to "enormous pressure from developed countries, from Big Pharma and even from Colombian trade authorities trying to block the Public interest declaration and the Compulsory license," suggesting that the resistance "combines inaccuracies, distortions of international trade rules and even threats of trade claims under the dispute settlement mechanism."

The organizations state that "[w]e are conscious that efforts to reach the prevalence of health needs over commercial interests begin with the full use of TRIPS flexibilities," but add that "we feel that any efforts to move to a global system delinking monopoly prices from research and development investments could be perceived without sense when some countries impede the full use of TRIPS flexibilities with misleading arguments and methods." The group concludes the letter with the hope that by informing the CEWG of the situation, it "would help to encourage Colombian process" on declaring a compulsory license for Imatinib.

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