Patent Docs

Webinar on Top Patent Law Stories of 2015

December 12, 2015

McDonnell Boehnen Hulbert & Berghoff LLP will be offering a live webinar on the "Top Patent Law Stories of 2015" on January 21, 2016 from 10:00 am to 11:15 am (CT). For the past eight years, the Patent Docs weblog has presented an annual, end-of-the-year review of the top stories in patent law. In this presentation, Patent Docs co-authors Donald Zuhn and Kevin Noonan and Patent Docs contributor Michael Borella will take a look back at the top patent stories of 2015, many of which will likely impact patent applicants and practitioners in the coming year.

While there is no fee to participate, attendees must register in advance. Those wishing to register can do so here. CLE credit is pending for the states of California, Illinois, New Jersey, New York, North Carolina, and Virginia.
Webinar on Written Description and Functional Claiming

December 12, 2015

The American Intellectual Property Law Association (AIPLA) will be offering a webinar entitled "STRANGLEHOLD! Written Description and Functional Claiming in the Chemical and Biotech Arts" on January 7, 2016 from 12:30 – 2:00 pm (Eastern). Carla Mouta of Finnegan Henderson Farabow Garrett & Dunner, LLP will moderate a panel consisting of Kenneth Jenkins of Mintz Levin, PC; Suzannah Sundby of Canady + Lortz, LLP; and Robert Titus of Eli Lilly and Company. The panel will evaluate recent case law on written description and whether functional claiming is worth the risk for various chemical and biotech patent claims. The panelists will also offer best practice tips in patent prosecution to minimize exposure to these allegations.

The registration fee for the program is $95 (AIPLA member rate) or $150 (non-member rate). Those interested in registering for the program, can do so here.
Webinar on PTAB Appeals Before the Federal Circuit

December 12, 2015

Strafford will be offering a webinar/teleconference entitled "Preparing for and Navigating PTAB Appeals Before the Federal Circuit — Conducting PTAB Trials With Eye to Appeal, Determining Errors for Appeal, Understanding PTO Practice and Federal Circuit Law" on January 6, 2016 from 1:00 to 2:30 pm (EST). Erika H. Arner and Michael J. Flibbert of Finnegan Henderson Farabow Garrett & Dunner will provide guidance to patent counsel on preparing a PTAB case for appeal to the Federal Circuit, and offer strategic tips for conducting a PTAB trial with an eye to appeal and best practices for prevailing on appeal. The webinar will review the following issues:

• How the Federal Circuit will address potential review issues;
• The Federal Circuit's early guidance on standing to appeal; and
• Strategies in PTAB proceedings to build a record and preserve issues for appeal.

The registration fee for the webinar is $297 ($362 for registration and CLE processing). Those interested in registering for the webinar, can do so here.
Endo Pharmaceuticals Inc. v. Actavis Inc. (D. Del. 2015)

December 9, 2015

District Court Adopts Magistrate's Conclusion of Invalidity under § 101 and Grants Defendants' Motion to Dismiss Counts

By Donald Zuhn —

Last month, in Endo Pharmaceuticals Inc. v. Actavis Inc., Judge Richard G. Andrews of the U.S. District Court for the District of Delaware adopted Magistrate Judge Mary Pat Thynge's conclusion that U.S. Patent No. 8,808,737 was facially invalid under 35 U.S.C. § 101 because it is directed to patent-ineligible subject matter and, following the Magistrate's recommendation, granted Defendants' motion to dismiss certain counts. The '737 patent, which is assigned to Endo Pharmaceuticals Inc., is directed to methods of using oxymorphone to treat pain in patients with renal impairment. Representative claim 1 recites:

1. A method of treating pain in a renally impaired patient, comprising the steps of:
    a. providing a solid oral controlled release dosage form, comprising:
        i. about 5 mg to about 80 mg of oxymorphone or a pharmaceutically acceptable salt thereof as the sole active ingredient; and
        ii. a controlled release matrix;
    b. measuring a creatinine clearance rate of the patient and determining it to be (a) less than about 30 m[L]/min, (b) about 30 mL/min to about 50 mL/min, (c) about 51 mL/min to about 80 mL/min, or (d) above about 80 mL/min; and
    c. orally administering to said patient, in dependence on which creatinine clearance rate is found, a lower dosage of the dosage form to provide pain relief;
    wherein after said administration to said patient, the average AUC of oxymorphone over a 12-hour period is less than about 21 ng•hr/mL.

Plaintiffs Endo Pharmaceuticals Inc. and Mallinckrodt LLC filed suit against Defendants Actavis Inc. and Actavis South Atlantic LLC, asserting that Defendants infringed the '737 patent by manufacturing, offering for sale, or selling their generic Oxymorphone ER tablets and by submitting an ANDA to the FDA. Defendants moved to dismiss counts I, III, and IV of Plaintiffs' complaint pursuant to Fed. R. Civ. P. 12(b)(6), arguing that the '737 patent was facially invalid under 35 U.S.C. § 101 because it is directed to patent-ineligible subject matter.

On September 23, the Magistrate issued a Report and Recommendation regarding Defendants' motion, recommending that the District Court grant the motion. Noting that resolution of Defendants' motion depends on whether representative claim 1 of the '737 patent is directed to patent-ineligible subject matter under § 101 or is a patent-eligible application of a law of nature, the Magistrate applied the two-step analysis set forth in Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289 (2012), and reiterated in Alice Corp. Pty. Ltd. v. CLS Bank Int'l, 134 S. Ct. 2347 (2014). With regard to the first step, the Magistrate indicated that:

Here, defendants repeatedly point out that the '737 Patent attempts to cover the natural law that the "bioavailability of oxymorphone is increased in people with impaired kidney function." Indeed, plaintiffs effectively concede the first step of the Mayo analysis. They suggest though, that the invention is not related to the natural law, but is a "novel and useful application of that discovery — i.e., to the treatment of renally impaired patients by administering a lower dose of oxymorphone based upon the severity of the renal impairment." The '737 Patent, however, explains that oxymorphone is "widely used" for acute and chronic pain relief, thus showing that the utilization of oxymorphone is not the invention. Therefore, the connection between the severity of renal impairment and the bioavailability of oxymorphone, which the '737 Patent sets forth in detail, is the subject matter of the invention.

With regard to the second step of the Mayo/Alice analysis, the Magistrate began by examining each individual step of the claim and then looking at the claim as a whole. According to the Magistrate's Report, claim 1 consists of three steps: (1) a "providing" step; (2) a "measuring/determining" step; (3) and an "administering" step.

With respect to the "providing" step, the Magistrate found this step insufficient to make the claim patentable, stating that the step "simply informs patients and prescribing physicians of the relevant drug to be administered," and noting that "[t]his step is similar to the 'administering' step in Mayo because it merely identifies the specific drug for administration." The Magistrate also noted that the '737 specification admits that extended-release oxymorphone had been available on the market, and that oxymorphone was widely used in the treatment of acute and chronic pain. The Magistrate also determined that the "measuring/determining" step "suffers from similar deficiencies," noting that the step "only instructs the physician to measure the patient's creatinine level to determine the level of renal impairment using a previously recognized method." As to the "administering" step, the Magistrate noted that this step:

[S]imply limits the relevant audience to patients and prescribing physicians, who treat chronic or acute pain with oxymorphone, and instructs the administration of the correct dosage of oxymorphone depending on the severity of the renal impairment, a step very similar to Mayo, which limited the relevant audience to "doctors who treat patients with certain diseases with thiopurine drugs."

Finally, when analyzing the claim as a whole, the Magistrate concluded that "the steps in combination do not transform the natural law into a patentable application of that law." In response to the Plaintiffs' argument that the administering step turns the natural law recited in the claim into a patentable application, the Magistrate countered that the administering step "merely instructs physicians to dispense oxymorphone for the treatment of pain in a well-know[n] manner, while utilizing the natural law to manage the dosage," adding that "the '737 Patent recognizes the use of oxymorphone for pain relief is a well-understood activity." In recommending that Defendants' motion to dismiss be granted, the Magistrate concluded the Report by suggesting that:

[I]t is inevitable that a doctor may infringe [claim 1 of the '737 patent] by checking a patient's creatinine level to determine renal impairment (as it is known in the medical field that renal impairment affects the bioavailability of certain drugs) and lowering the dosage of oxymorphone in response to the lab test findings.

In his Order Adopting Report and Recommendation, Judge Andrews addressed Plaintiffs' arguments that the Magistrate erred in finding the '737 patent to be facially invalid under § 101 and recommending that Defendants' motion to dismiss be granted. With respect to the Magistrate's emphasis on the factual similarity between representative claim 1 of the '737 patent and the representative claim at issue in Mayo, Judge Andrews stated that "[b]ecause the claim limitations at issue in Mayo do in fact mirror the analogous limitations of Claim 1 of the '737 patent, I think it was correct for the Magistrate Judge to do so." Judge Andrews also found Plaintiffs' argument that the '737 patent does not claim a law of a nature, but rather claims a new and useful process, to be "thoroughly unconvincing," adding that "the subject matter of the invention is 'the connection between the severity of renal impairment and the bioavailability of oxymorphone,' or, in other words, the reaction of the human body of a renally impaired individual to oxymorphone, which is unquestionably a natural law."

In overruling Plaintiffs' objections to the Magistrate's Report and Recommendation, and granting Defendants' motion to dismiss, Judge Andrews concluded by expressing his "disagree[ment] with Plaintiffs' policy argument that the Magistrate Judge's reasoning is so far-reaching that it would invalidate all pharmaceutical method-of-treatment patents that employ an existing pharmaceutical compound." He suggested that:

Patentees can still avoid invalidation under § 101 by demonstrating an inventive leap beyond merely claiming a law of nature. Plaintiffs here claimed a widely-used, well-known method of treating pain. The only new aspect of the '737 patent was to tell doctors to adjust the dosage of oxymorphone based upon their discovery of a natural law-namely, how the bodies of individuals with renal deficiencies process the drug. No creative steps or inventive leaps aside from the discovery of a natural law are contemplated here. The patent merely tells doctors to apply the natural law. Accordingly, this case is hardly the poster child for a policy argument on the wide-ranging implications of a § 101 rejection of a pharmaceutical method patent.
PTAB Update — PTAB Claim Amendment Practice at the Federal Circuit

December 8, 2015

Prolitec Inc. v. Scentair Technologies, Inc. (Fed. Cir. 2015)

By Andrew Williams —

In another unsurprising turn, the Federal Circuit affirmed the motion-to-amend practice adopted by the PTAB in IPR proceedings. The majority opinion in Prolitec Inc. v. Scentair Technologies, Inc., authored by Chief Judge Prost, concluded (among other things) that the Board's approach of shifting the burden to the patentee to show the patentability of claim amendments was reasonable. Judge Newman, however, was not so approving. In another scathing dissent, she took the panel majority to task for acquiescing to the Board regarding this burden shift. "[T]he purpose of [the] post-grant review [system] is not to stack the deck against the patentee, but to achieve a correct and reliable result–for innovative enterprise is founded on the support of a system of patents," she emphasized. Nevertheless, the PTAB decision in this case to deny the motion to amend and render the claims unpatentable was affirmed.

This case arose from an IPR filed against U.S. Patent 7,712,683 ("the '683 patent") related to cartridges for use with "diffusion devices" — you know, air freshener dispensers. The goal of the invention disclosed in the '683 patent was to have the finer mist particles exit the cartridge, while trapping the larger mist particles, turning them into liquid to flow back into the reservoir. The Board found the two claims of the patent anticipated by WO 2004/0806042 ("Benalikhoudja") and obvious over Benalikhoudja in view of U.S. Patent No. 7,131,603 ("Sakaida"), in large part because of the adopted claim construction. The patentee appealed.

Claim Construction and Validity

The Board construed three claim terms using its "Broadest Reasonable Construction" standard — "mounted," "fixed in position," and "second/secondary chamber." The term "mounted" was used in claims in the following context: "a diffusion head mounted to the reservoir." The Board did not construe this term to mean "permanently joined," as Prolitec wanted. Instead, it concluded that the term meant something less permanent, because the specification apparently stated that the invention could cover reusable cartridges. Interestingly, both the majority and Judge Newman in dissent cited the passage that "head assembly 604 and reservoir 602 may be jointed to each other by heat or ultrasonic welding spin welding, or by use of an adhesive." The majority reached the conclusion that because the word "may" was used, the two items could be attached by other means, including those less permanent, while Judge Newman pointed out this sentence only highlighted the permanence of the attachment. The other two terms were similarly construed contrary to the assertions of the patentee.

After the claims were construed, the anticipation and obviousness of the claims were a forgone conclusion. For example, Prolitec had argued that Benalikhoudja's fastening of its liquid reservoir using a tamper-proof ring did not satisfy this element because it was not "permanently joined." But because the claim term was more broadly construed, Benalikhoudja's ring satisfied this claim limitation. A similar result flowed from the other two construed claim terms.

Judge Newman criticized this outcome. In a section labeled "The PTAB's claim construction requires judicial review for correctness as a matter of law, not deferential review as a question of fact," she pointed out that "anticipation requires that the same invention was previously known and described, not that a claim can be construed so broadly and incorrectly as to embrace a prior art device." For example, Judge Newman pointed out that the '683 patent improved on Prolitec's own device, which required a messy procedure to open the reservoir for refilling, resulting in leakage, inconsistent scent concentration, and cross-contamination. It did not make sense, according to her, to construe the claim terms so broadly that they would read on (for example) a device which was not permanently sealed. But, because BRI was used, all of the enlarged claim terms in turn could be found in prior art. Judge Newman disagreed: "Anticipation requires that the same invention was previously known; it is apparent from the specification that the PTAB's analysis is not correct."

Motions to Amend

As suggested above, Judge Newman's biggest complaint about the Court's ruling in this case was the approval of the Motion-to-Amend practice of the Board. The majority simply followed, and indeed felt compelled to follow, the Microsoft Corp. v. Proxyconn, Inc. case in which the practice was already approved (see "Microsoft Corporation v. Proxyconn, Inc. (Fed. Cir. 2015)"). In fact, the Court noted that the Board had issued a "representative" decision after the Proxyconn case. In MasterImage 3D, Inc. v. RealD Inc., IPR2015-00040 (PTAB July 15, 2015), the Board apparently relaxed the burden on the patentee in Motions to Amend. Instead of requiring the patentee to identify how its claim amendments are patentable over all prior art, it only had to show patentability over the "prior art of record," which could include "any material art in the prosecution history of the patent."

In the present case, Prolitec sought to amend the term "mounted" to "permanently joined." The resulting denial of the motion exemplifies why the PTO's use of the BRI standard might not make sense — one of the main justifications for using the standard is that the Patent Owner has the ability to amend the claims to narrow the scope. However, as this case demonstrates, in IPRs the Patent Owner doesn't necessarily have that right. The Board denied the motion in view of the Allred reference. Allred apparently taught a device that was permanently joined, although the other claim limitations were missing. Nevertheless, the Board found that Allred (cited during prosecution) could be combined with Benalikhoudja (the main IPR reference), and both references were already of record in this case. The Federal Circuit affirmed the denial because Prolitec did not adequately support its assertion of patentability over Allred and Benalikhoudja.

Judge Newman made at least four points regarding this denial. First, she thought the PTO erred in refusing to enter the substitute claim. The America Invents Act limits the reasons that a motion can be denied, according to her understanding of the statute. These include when the amendment does not respond to a ground of unpatentability involved in the trial and when the amendment enlarges the scope of the claims. Neither of these existed in this case. According to Judge Newman "[w]hen a proposed amendment would resolve a dispositive aspect of claim breadth, refusal to enter the amendment is contrary to both the purpose and the text of the America Invents Act."

Second, Judge Newman complained that the placement of burden of proof for claim amendments on the patentee is contrary to the statute. This criticism stems from the fact that the PTAB proceedings were intended to be a surrogate for a district court. The obvious flaw with this argument is that claims cannot be amended in district court.

Third, Judge Newman stated that "[t]he preponderance of the evidence is the statutory standard for PTAB validity decision," and the Federal Circuit should review cases to determine whether this standard has been applied correctly. The Court has been using the "substantial evidence" standard to conduct these reviews. Judge Newman believes that this standard is insufficient to review whether the PTAB's decisions meet its "preponderance of the evidence" standard.

Finally, Judge Newman complained that Prolitec should have been entitled to the benefit of PTO interpretations and changes in practice. It appears that since the time the Board handed down the Final Written Decision in this case, the rules of practice have changed. This includes a "quick fix" that was implemented back in March, and the MasterImage 3D case referenced above. The majority pointed out that the changes were irrelevant in this case because the two reference cited in denial were prior art of record in the case. Judge Newman wasn't having it, though, pointing out in a footnote that the MasterImage 3D decision was only designated "representative," and even Idle Free was only designated "informative" and therefore not binding on all PTAB panels. This error or uncertainty was sufficient for her to call for remand for reconsideration of the denial.

Prolitec Inc. v. Scentair Technologies, Inc. (Fed. Cir. 2015)
Panel: Chief Judge Prost and Circuit Judges Newman and Taranto
Opinion by Chief Judge Prost; dissenting opinion by Curcuit Judge Newman
Ariosa Diagnostics v. Verinata Health, Inc. (Fed. Cir. 2015)

December 7, 2015

By Donald Zuhn —

Last month, in Ariosa Diagnostics v. Verinata Health, Inc., the Federal Circuit vacated the decisions of the Patent Trial and Appeal Board concluding that Appellant Ariosa Diagnostics had not met its burden of proving that claims 1–30 of U.S. Patent No. 8,318,430 would have been obvious and remanded for for further consideration. The '430 patent, which is directed to methods of noninvasive prenatal testing for the presence of fetal chromosomal abnormalities, is owned by Appellee Verinata Health, Inc.

The Federal Circuit described the claimed methods (claim 1 is some 58 lines long) as involving "obtaining blood samples from several pregnant women; isolating from the samples genomic DNA molecules not contained in cells; choosing particular DNA sequences — some on a chromosome of concern, some not; indexing by maternal source the chromosomes or regions containing those sequences; amplifying (making many copies of) the group of chromosomes or regions; performing massively parallel sequencing on the resulting pool; using the indexing to count, for a particular maternal source, the number of sequences from chromosomes of concern versus the number from reference chromosomes or regions; and determining based on the comparison whether there are fetal chromosomal abnormalities, such as an extra copy of a chromosome of concern." The Court also characterized the '430 patent as being directed to a method for determining a presence or absence of a fetal aneuploidy in a fetus by amplifying target and reference sequences, pooling samples from several women and indexing them for later identification, and using massively parallel sequencing.

In separate inter partes review petitions, Ariosa had challenged claims 1-18 and claims 19-30 of the '430 patent for obviousness in view of three references: (1) U.S. Patent Application No. 2008/0090239 (Shoemaker et al.), which discloses a method of determining fetal aneuploidy by isolating fetal cells, not cell-free DNA; (2) U.S. Patent No. 7,332,277 (Dhallan), which discloses a method of detecting fetal genetic disorders using a maternal blood sample to obtain a mixture of cell-free fetal and maternal DNA; and (3) an article by Jonas Binladen et al., which describes a study that involved tagging and sequencing DNA samples from multiple sources simultaneously. In its petitions, Ariosa argued for obviousness based on combining Dhallan's teachings about cell-free fetal DNA with Binladen's PCR amplification techniques utilizing sample indices and massively parallel sequencing of pooled samples and Shoemaker's method of determining aneuploidy.

While the Board instituted both of Ariosa's reviews, it ultimately upheld all of the challenged claims, concluding that Ariosa did not carry its burden of showing that the claims would have been obvious because Ariosa failed to adequately explain how or where the references differ from the challenged claims, how one of ordinary skill in the art would go about combining their disparate elements, or what modifications one of ordinary skill in the art would necessarily have made in order to combine the disparate elements. The Board also discussed testimony presented by one of Ariosa's experts regarding a brochure that describes indexing and massively parallel sequencing using the commercially available Illumina Genome Analyzer System (Exhibit 1010), stating that:

This testimony, in effect, replaces the tagging and sequencing techniques of Dhallan and Binladen with the Illumina indexing kit and sequencing platform, but neither Petitioner nor Dr. Morton explains why Exhibit 1010 could not have been presented as part of the asserted ground of unpatentability in the first instance with the Petition. Therefore we accord this aspect of Dr. Morton's testimony no weight.

Ariosa appealed the Board's determinations of nonobviousness to the Federal Circuit, arguing that the Board erred in refusing to consider Exhibit 1010 for what it showed about the background knowledge that a skilled artisan would have possessed, particularly about DNA indexing, during the relevant time. In an opinion authored by Circuit Judge Taranto, the panel "agree[d] with Ariosa up to a point," stating that "the Board's language leaves open the distinct possibility that the Board incorrectly limited its consideration of Exhibit 1010." In particular, the Court indicated that:

The Board's language on its face supports Ariosa's interpretation of what the Board meant — that the Board was declining to consider Exhibit 1010, even as evidence of the background understanding of skilled artisans as of January 2010, simply because the brochure had not been identified at the petition stage as one of the pieces of prior art defining a combination for obviousness. If that is what the Board meant, the Board erred. Art can legitimately serve to document the knowledge that skilled artisans would bring to bear in reading the prior art identified as producing obviousness.

The opinion then discusses how Ariosa used Exhibit 1010, determining that Ariosa used the exhibit in the manner it had suggested (i.e., to show background knowledge possessed by the skilled artisan) and concluding that given the references to the exhibit in its petitions and supporting declarations, "Exhibit 1010 had to be considered by the Board even though it was not one of the three pieces of prior art presented as the basis for obviousness." However, because the Court could not "confidently discern whether the Board, in its consideration of Exhibit 1010, was actually relying on a legally proper ground," rather than its finding that Ariosa failed to adequately explain how the skilled artisan would combine the disparate elements of the cited references, and because the Court must not make factual and discretionary determinations that are for the Board to make, the Board vacated the Board's decisions and remanded.

Ariosa Diagnostics v. Verinata Health, Inc. (Fed. Cir. 2015)
Panel: Chief Judge Prost and Circuit Judges Wallach and Taranto
Opinion by Circuit Judge Taranto
BIO CEO: IPR System Threatens Medical Innovation

December 6, 2015

By Donald Zuhn —

In an article published earlier this fall on Medium, Biotechnology Industry Organization (BIO) President and CEO Jim Greenwood urges Congress to modify the inter partes review (IPR) system, which he argues has "turn[ed] the serious business of medical innovation and entrepreneurial risk-taking into a casino." Noting that IPRs were designed by Congress to offer a quicker alternative to the district court system in resolving patent disputes and as a way to curb the growing number of frivolous lawsuits filed by so-called "patent trolls" in the tech sector, Mr. Greenwood contends that "this attempted solution for one sector's problem has created dangerous, unintended consequences in other sectors, by undermining valid patents that support innovation in diverse industries–from manufacturing, to consumer products, to biotechnology." He asserts that Congress needs to act to address this serious issue "for the sake of biomedical innovation and the need that all of us have for the vital medical advances it provides."

To support his argument, Mr. Greenwood first compares the IPR system with the Hatch-Waxman regulatory scheme, "a thoughtfully conceived process instituted by Congress over thirty years ago" that "strikes an effective balance" by allowing generic companies to deliver lower cost drugs to patients and still incentivizing innovator companies to invest in new medications. He notes that as a result of the Hatch-Waxman scheme, patients have access to generic versions of about 90% of all prescription medicines on the market. Mr. Greenwood suggests, however, that "the IPR system has inadvertently created a parallel track to challenge biopharmaceutical patents, but one with lower standards that conflict with those of Hatch-Waxman." In particular, while patents are presumed valid when challenged via the Hatch-Waxman process, Mr. Greenwood indicates that "there is no presumption at all" when patents are challenged via the IPR system.

Mr. Greenwood also points to an unintended consequence of the IPR system: the use of IPRs by hedge funds "to manipulate the shares of public biotechnology companies, which the hedge funds sell short in advance of filing IPRs against their patents, hoping to profit by damaging these businesses and driving their share prices down." He notes that more than thirty such IPRs have been filed by hedge funds since the IPR system was implemented. Given the cost of new drug development, and the importance of patents to the biotech industry, Mr. Greenwood asks: "Who will invest in the treatments of tomorrow with the specter of IPRs looming, magnifying the uncertainty of any potential return on investment? . . . What investor would put hundreds of millions of dollars at risk in such a situation?"

Mr. Greenwood concludes his article by noting that twenty major life science venture capital firms, representing over $60 billion in investments, have asked Congress to exempt biopharma patents from the unintended consequences of the IPR system, and that over 100 patient advocacy groups wrote Congress requesting the same (see "101 Patient Organizations Ask Congress to Curb IPR Abuse"). Given Congress' consideration of patent reform legislation, Mr. Greenwood suggests that Congress take the opportunity to modify the IPR system.
Conference & CLE Calendar

December 6, 2015

December 10, 2015 – "Optimal Use of Provisional Patent Applications: Best Practices and Pitfalls to Avoid" (Technology Transfer Tactics) – 1:00 to 2:00 pm (Eastern)

December 10, 2015 – "Patent Litigation and Motions to Stay in Light of IPRs, PRGs and CBMs — Leveraging Stays, Understanding Court Treatment, Navigating the Interface of Hatch-Waxman Litigation" (Strafford) – 1:00 to 2:30 pm (EST)

December 17, 2015 – "Section 102 and Prior Art: Navigating the Expanded Scope of Prior Art and AIA Exceptions" (Strafford) – 1:00 to 2:30 pm (EST)

***Patent Docs is a media partner of this conference or CLE
Webinar on Patent Litigation and Motions to Stay

December 5, 2015

Strafford will be offering a webinar/teleconference entitled "Patent Litigation and Motions to Stay in Light of IPRs, PRGs and CBMs — Leveraging Stays, Understanding Court Treatment, Navigating the Interface of Hatch-Waxman Litigation" on December 10, 2015 from 1:00 to 2:30 pm (EST). Erika H. Arner, Linda J. Thayer, and Jeffrey C. Totten of Finnegan Henderson Farabow Garrett & Dunner will provide guidance to patent counsel on using stays in patent litigation in light of inter partes reviews (IPRs), post-grant reviews (PGRs), and covered business method (CBM) reviews, and examine how the courts have addressed stay motions and the issue of stays in the context of Hatch-Waxman litigation. The webinar will review the following questions:

• In light of IPRs, PGRs and CBMs, what are the key factors patent counsel should consider when determining whether and when to file a motion to stay?
• How has the courts’ approach to stay motions evolved since the institution of IPRs, PGRs and CBMs?
• What is the impact of IPRs on related Hatch-Waxman litigation?

The registration fee for the webinar is $297 ($362 for registration and CLE processing). Those interested in registering for the webinar, can do so here.
PTAB Update — The Constitutionality Edition

December 3, 2015

MCM Portfolio LLC v. Hewlett-Packard Co. (Fed. Cir. 2015)

By Andrew Williams —

In a decision that likely came as no surprise to anyone, the Federal Circuit upheld the constitutionality of IPR proceedings as provided for by the America Invents Act. With an analysis of two pre-1900 Supreme Court cases (as well as citations to several from the 20th and 21st centuries), the Court in MCM Portfolio LLC v. Hewlett-Packard Company ultimately felt bound by two recent Federal Circuit opinions that had previously considered the constitutionality of ex parte reexaminations. Because patents are public rights, and "the grant of a patent is primarily a public concern," Congress is able to create administrative procedures for assessing their validity. Moreover, just because validity can be called into question in an Article III Courts does not mean that federal courts have exclusive jurisdiction over such determinations. Because the outcome of this case turned on the Court's precedent (which itself had interpreted Supreme Court jurisprudence), any different outcome will necessarily require either the entire Court to rehear the case en banc, or for the Supreme Court to weigh in on the issue.

This case ultimately stemmed from U.S Patent No. 7,162,549 ("the '549 patent"), entitled "Multimode Controller for Intelligent and 'Dumb' Flash Cards." The '549 patent related to the coupling of computer systems with flash memory storage systems. Controllers are responsible for transferring data between a computer and a peripheral device, in this case a flash memory card (such as is used in digital cameras). The controllers at issue here work to achieve error correction. Of course, such memory cards come in different flavors. Therefore, the patent claimed improvements to flash memory card readers by including a controller chip that can determine whether the card has an onboard controller for error correction, and if not, providing for error correction using firmware.

Patent Owner MCM filed suit against Pandigital more than one year before HP filed its IPR petition against the '549 patent. These two parties were potentially related because HP resold allegedly infringing digital picture frames from Pandigital. Nevertheless, the Board rejected the argument that HP was barred from filing the petition because it was only a successive owner of the accused products, and the Board found this insufficient to confer privity. The Board instituted trial with respect to four claims, finding there was a reasonable likelihood that HP would prevail to as least one claim based on obviousness in view of two prior art references. In its final written decision, the Board concluded that HP had shown by a preponderance of the evidence that the four claims would have been obvious. It also rejected the argument that the IPR proceeding violated Article III and the Seventh Amendment of the constitution.

Real Party In Interest

MCM challenged the Board's find that HP was not in privity with Pandigital, and as such, the trial never should have been instituted. As of the date of the oral argument, the only two significant cases on the issue were In re Cuozzo and Versata Development Group v. SAP America. The Cuzzo Court ruled that 35 U.S.C. § 314(d) prohibit the review of Board decisions related to institution (see "In re Cuozzo Speed Technologies, LLC (Fed. Cir. 2015)"). However, in Versata, the Court reviewed the Board's determination whether a patent was available for CBM review, because (as the Court put it), it goes to the Board's ultimate authority to invalidate (see "Should the Federal Circuit Be Reviewing Any Part of the Decision to Institute? — The Versata Dissent-in-part"). Nevertheless, in the interim, the Federal Circuit issued the Achates Reference Publishing v. Apple case, which was nearly identical to the present case (see "Achates Reference Publishing, Inc. v. Apple Inc. (Fed. Cir. 2015)"). As such, the Court ruled that review of the Board's decision was forbidden by the statute.

Constitutionality

As a threshold matter, the Federal Circuit noted that it could review the constitutionality challenge because MCM was questioning the final decision, not the decision to institute. MCM had argued that the 1898 Supreme Court case of McCormick Harveting Machine v. Aultman dictated the outcome that AIA post-grant challenges were unconstitutional. That case apparently involved a patent related to automatic twine binders for harvesting machines. During a district court case, the accused infringer noted that the Patent Owner had sought a reissue patent, but after claims had been rejected, it withdrew the application in favor of the original patent. The district court held that there could be no infringement because the claims had been found invalid by the Patent Office. The Supreme Court ultimately disagreed because the patent owner requested return of the original patent, which it had the right to do. The Federal Circuit interpreted this case to read that the Patent Office, without statutory authority, could not cancel an issued patent, because to do so would deprive the owner of its property without due process of the law.

The situation is different when Congress provides such authority to the Office. It was an 1855 Supreme Court case, Murray's Lessee v. Hoboken Land & Improvement Co., that recognized that Congress may or may not provide Article III courts with the authority to adjudicate matters involving public rights. Such public rights had been found for administrative agencies determining fair rents for holdover tenants; proceedings for unfair importation practices; binding arbitration under the Federal Insecticide, Fungicide, and Rodenticide Act; and for customer reparation proceedings related to broker violations of the Commodity Exchange Act. On the other hand, the Supreme Court in 2011 held that a bankruptcy court could not enter judgement on a state law tort counterclaim, because that issue did not flow from a federal statutory scheme. That case, Stern v. Marshall, was more commonly known as the case of Anna Nicole Smith (a fact which, while interesting, has no bearing on IPR proceedings).

The Federal Circuit concluded that Patent Office proceedings, such as reexams and IPRs, were indistinguishable from the agency adjudications approved of in these above-referenced cases, and were "wholly distinguishable" from the state tort claim issue in the Anna Nicole Smith case. Of course, the Court had already determined that patents were primarily a public concern in the Patlex Corp. v. Mossinghoff case related to ex parte reexaminations, and therefore did not violate Article III of the constitution. In fact, the Federal Circuit later considered a second challenge in the Joy Technologies v. Manbeck case, with the same outcome. The Court therefore felt it was bound by those cases, and that there was no intervening Supreme Court case that dictated otherwise.

MCM had also alleged that it had a right to a trial by jury under the Seventh Amendment to decide invalidity. However, Supreme Court precedent indicated that Congress was able to establish administrative procedures to address statutory rights without violating the Seventh Amendment. In fact, this issue was also addressed and the practice affirmed in the reexamination context in the Patlex and Joy Techs. cases. Moreover, the mere fact that Markman stated that patent infringement actions were subject to the Seventh Amendment does not mean that patent validity cases cannot be determined by administrative adjudication.

Obviousness

Finally, the Court briefly addressed the merits of the case. The Board had determined that U.S. Patent No. 6,199,122 ("Kobayashi") and WO 98/03915 ("Kikuchi") could be combined to render the four claims of the '549 patent obvious. The Board found that Kobayashi taught a memory device with a converter, for example, a flash memory card reader. A sensor would determine if the flash memory card included a controller. If it did not, a selector connected the flash memory card with an ATA controller. Kobayashi did not teach a controller that performs error correction. Kikuchi, on the other hand, taught a flash memory card with a one-chip ATA controller that included an error controller. The Board found that one skilled in the art would have had the knowledge and inclination to place both functionalities on the same chip.

The Federal Circuit found that the Board's findings were supported by substantial evidence. MCM has argued that Kobayashi required that the controller by able to be placed on either the reader or the card. The Court recognized, however, that the proper test for obviousness was whether the combined teachings would have suggested the combination to a skilled artisan. Therefore, even though the physical incorporation of the two controllers would have conflicted with the Kobayashi instructions, the Board did not err in determining that a single controller chip with error correction functionality would have been obvious.

MCM Portfolio LLC v. Hewlett-Packard Company (Fed. Cir. 2015)
Panel: Chief Judge Prost and Circuit Judges Dyk and Hughes
Opinion by Circuit Judge Dyk

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