Patent Docs

Webinar on Trade Secret Theft

May 24, 2013

McDonnell
Boehnen Hulbert & Berghoff LLP will be offering a live webinar entitled
"Preventing Chinese Trade Secret
Theft: The Obama Administration's Strategy on Mitigating the Theft of U.S.
Trade Secrets" on June 11, 2013 from 10:00 am to 11:15 am
(CT). MBHB attorney Joshua Rich will
cover recent developments in the attempt to mitigate theft of U.S. trade
secrets. Topics to be covered include:

•
An overview of the "Administration Strategy on Mitigating the Theft of
U.S. Trade Secrets"
•
Recent Obama Administration steps to implement the Administration strategy
•
Industry and public suggestions for the improvement of Federal trade secret law
•
Pending Congressional measures for the prevention of trade secret
misappropriation

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, Georgia, Illinois, North Carolina, New Jersey, New York and
Virginia.
Dey, L.P. v. Sunovion Pharmaceuticals, Inc. (Fed. Cir. 2013)

May 23, 2013

By Kevin E. Noonan —

Enactment
of the Leahy-Smith America Invents Act in 2011 focused the patenting community
on the changes of U.S. patent law from "first to invent" under the
1952 Patent Act to "first inventor
to file" under the AIA as the basis for deciding priority and defining the
scope of prior art to a claimed invention. Nevertheless, the provisions of the 1952 Act remain in force for any
application filed prior to March 16, 2013, and the Federal Circuit's recent
decision in Dey, L.P. v. Sunovion
Pharmaceuticals, Inc., illustrates that there remain issues in the "old"
law that will continue to be explicated and addressed.

The
issue in the Dey case is the
patentability bar under 35 U.S.C. § 102(b) that arises from "public
use" of an invention more than one year prior to an applicant's filing
date. The circumstances surrounding the
assertion of invalidity under this provision of the statute were somewhat
unusual, as recognized by the Court: typically it is the accused infringer who
asserts a patentee's own prior public use as invalidating, but here defendant
Sunovion asserted its own prior clinical trial as a public use of Dey's claimed
invention. Specifically, both Sunovion
and Dey developed pharmaceutical formulations of a known drug, formoterol, as a
nebulized formulation for treating chronic obstructive pulmonary disorders
(COPS) such as emphysema. Both companies
owned patents on their formulations: No. 6,040,344 to Sunovion (filed in 1998
and issued in March 2000); and Nos. 7,348,362; 7,462,645; 7,465,756; 7,473,710;
and 7,541,385 to Dey (all claiming priority to July 10, 2003). Sunovion was the first to market in 2007 with
its Brovana product, after what the Court terms a "long" path to
obtaining regulatory approval. Sunovion's
clinical trials began in 1998, and of interest in the decision is a particular
Phase III clinical trial, Study 50, that began in February 2002, wherein one of
the formulations tested was identical to the Brovana formulation.

Just
prior to launch, Dey sued Sunovion for infringement of its patents, and
Sunovion filed a motion for summary judgment of invalidity for prior public use under § 102(b), based on its own clinical trials. Under Sunovion's legal theory, the Phase III
clinical trial identified as Study 50 included a formulation (given to 124
clinical trial participants) that was within the scope of Dey's patent claims
and the conditions of the clinical trial constituted a prior public use that
occurred more than one year before Dey's earliest filing date of July 10,
2003. The conditions Sunovion cited in
support of the prior art status of its clinical trial were:

• Patients were told that they were being
given a formulation of formoterol
• Patients
enrolled in the trial were told they could (and indeed should) inform their
personal physicians about the trial
• Patients
enrolled in the study were under no conditions of confidentiality
• At
least some of the vials ("a fraction of one percent") of the
formulated drug were unaccounted for during and after the clinical trial

The District Court granted summary judgment against Dey, finding that Sunovion had
established by clear and convincing evidence that the asserted claims of Dey's
patents in suit were invalid as being anticipated under the "public use"
prong of § 102(b).

The
Federal Circuit reversed, in an opinion by Judge Bryson, joined by Judge O'Malley
over a dissent by Judge Newman. The
panel noted that the purpose of the bar was to "discourage[e] the removal,
from the public domain, of inventions that the public reasonably has come to
believe are freely available," citing Tone Bros., Inc. v. Sysco Corp.,
28 F.3d 1192, 1198 (Fed. Cir. 1994). The
test for deciding whether a prior use was a "public use" under the
statute has two elements: "'whether the purported use: (1) was accessible
to the public; or (2) was commercially exploited,'" citing Invitrogen Corp. v. Biocrest Mfg., L.P.,
424 F.3d 1374, 1380 (Fed. Cir. 2005). Factual issues to be considered when determining whether a prior use
constitutes a "public use" include "'the nature of the activity
that occurred in public; the public access to and knowledge of the public use;
[and] whether there was any confidentiality obligation imposed on persons who
observed the use'" according to the opinion, citing Bernhardt, L.L.C.
v. Collezione Europa USA, Inc., 386 F.3d 1371, 1379 (Fed. Cir. 2004). In the absence of commercial exploitation a
confidentiality agreement could "negate" the status of a prior use as
a public use. Invitrogen at 1382.

The
status of a prior use as a public use is not dependent on the public use being
an applicant's use; activities of third parties (such as Sunovion here) can
constitute an invalidating prior public use. Eolas Techs. Inc. v. Microsoft Corp., 399 F.3d 1325, 1334 (Fed.
Cir. 2005). But such a third party use
must be a public not a private use (i.e., the fact that there was a prior use
by another does not by itself constitute a public use) according to the Court,
citing Woodland Trust v. Flower- tree Nursery, Inc., 148 F.3d 1368, 1371
(Fed. Cir. 1998), and W.L. Gore & Assocs. v. Gar-
lock, Inc., 721 F.2d 1540, 1549-50 (Fed. Cir. 1983). The opinion notes that, as with all question
under § 102 this is a question of fact
depending on the circumstances, such as a situation where there is no
confidentiality agreement: there, "the skill and knowledge of those
observing an invention can shed light on the degree to which it was kept
confidential" and even "limited disclosure" may suffice if it is
to "those who are skilled enough to know, understand, and 'easily
demonstrate the invention to others,'" citing Netscape Commc'ns Corp.
v. Konrad, 295 F.3d 1315, 1321 (Fed. Cir. 2002).

The Federal Circuit reversed the District Court's
summary judgment because it found disputed issues of material fact that made
summary judgment inappropriate. However
the majority opinion went on to set forth the considerations important for
making the determination and the places where in the majority's opinion the District Court went astray. The majority
identified two issues important to the District Court's decision that warranted
comment. The first was the lower court's
determination that the use of the particular "infringing" formulation
during the clinical trial was "open and free," a determination with
which the Court disagreed. The basis for
this disagreement revolved around the incapacity of the clinical trial
participants to "reverse engineer" the formoterol
formulation even knowing the identity of the drug. In addition, the panel majority disagreed
that the study participants were provided with a "personal supply" of
the formulations that they could use "however they saw fit" and that
provided them with an "unfettered use of the composition for weeks at a
time." The panel agreed with Dey
that the use by the study participants was anything but "unfettered,"
citing the restrictions contained in agreements between the clinical trial
administrators and participants, including requirements that the participants
be the only individuals taking the medication and that they keep "accurate
usage logs"; the Court also noted that despite the extremely low level of
the formulation that was unaccounted for the participants and administrators in
the trials were required to return all unused portions of the drug and to
account for all administered and inventory supplies of the formulated drug. Specifically the opinion states:

The fact that a tiny fraction of the thousands
of vials were lost without penalizing the responsible test subject(s), or that
the practicalities of the study required self-administration at home rather
than physician administration in a closed facility, does not preclude a
reasonable jury from concluding that the use of Batch 3501A was sufficiently
controlled and restricted, rather than unfettered and public.

The majority also disagreed that the
details of the clinical trial were not required to be kept confidential by
trial participants. The issue for the Court was what information was kept
confidential and here the panel noted that "the particulars of its invention — embodied
in the formulation and stability characteristics of Batch 3501A — were kept
sufficiently confidential to avoid a finding of 'public use.'" Also important for the panel's decision were
the confidentiality obligations imposed on the clinical investigators (clearly
more knowledgeable than the patients), who were required to sign confidentiality
agreements. The panel majority found
that the individuals most likely to have sufficient disclosure for the clinical
trial to be a public use were under an obligation not to disclose (thereby negating
the clinical trial as a public use as to those individuals), and that the
individuals (the patients) not under any
confidentiality obligations had insufficient information to constitute prior
disclosure of the invention.

The panel majority noted that the
circumstances surrounding the clinical trial were common and that prior
precedent "routinely rejected the argument that such an arrangement
necessarily strips the trial of confidentiality protection or renders it
accessible to the public," citing Bayer Schering Pharma AG v. Barr
Labs., Inc., No. 05- CV-2308 (PGS), 2008 WL 628592, at *11-12, *38-42
(D.N.J. Mar. 3, 2008); Eli Lilly & Co. v. Zenith Goldline Pharm., Inc.,
364 F. Supp. 2d 820, 873-75, 912-13 (S.D. Ind. 2005), aff'd, 471 F.3d
1369, 1380-81 (Fed. Cir. 2006); Janssen Pharmaceutica N.V. v. Eon Labs Mfg.,
Inc., 374 F. Supp. 2d 263, 276 (E.D.N.Y. 2004), aff'd, 134 F. App'x
425, 430-31 (Fed. Cir. 2005); and In re Omeprazole Patent Litig., 490 F.
Supp. 2d 381, 508 (S.D.N.Y. 2007), aff'd on other grounds, 536 F.3d 1361
(Fed. Cir. 2008). Circumstances in
common in such cases and the case at bar noted by the Court is that study
participants were informed as to the identity of the administered drug, that
such patients were entrusted to administer doses themselves not under the
control or supervision of a study administrator or doctor and that these prior
participants were permitted to discuss the trial with their personal
physicians.

Finally, the panel majority identified
several other "misconceptions" underlying the District Court's decision. These included that lack of any
confidentiality obligations to Dey by
Sunovion's clinical trial
participants, which the panel recognized would require any third party prior
use (even a secret use) to be a patent-invalidating public use. And the panel rejected Sunovion's attempt, in
their view, to stretch precedent related to "experimental use," such
as New Railhead Mfg., L.L.C. v. Vermeer Mfg. Co., 298 F.3d 1290, 1299
(Fed. Cir. 2002), and City of Elizabeth v. American Nicholson Pavement Co.,
97 U.S. 126, 136 (1877), to apply in this situation. In those cases the invention was "public"
but was not appreciated by the public under circumstances where the use was
necessary to demonstrate reduction to practice of the invention ("During
experimentation, the public might have knowledge of an invention (because they
see it), but may not be using the invention within the meaning of the statute
(because the inventor is experimenting)"). Accordingly, the Court remanded the case to the District Court for
reconsideration on the merits.

Judge Newman's dissent was not based on
her disagreement with the outcome but rather because she would prefer the Court
remand with instructions to deny the motion on the grounds that the Sunovion
clinical trials did not constitute a "public use." "No sound reason appears for remanding
for findings or trial, when the matter is readily resolved on undisputed facts. Nor is there any reason for casting judicial doubt on the standard
confidentiality procedures of clinical trials, at this late date of decades of
established practice," in Judge Newman's view.

Dey, L.P. v. Sunovion Pharmaceuticals, Inc. (Fed. Cir. 2013)
Panel: Circuit Judges Newman, Bryson, and O'Malley
Opinion by Circuit Judge Bryson; dissenting opinion by Circuit Judge Newman
Supreme Court Grants Certiorari in Medtronic v. Boston Scientific

May 22, 2013

By Andrew Williams —

On
May 20, 2013, the Supreme Court granted certiorari
in the Medtronic Inc. v. Boston
Scientific Corp. case (Supreme Court docket number 12-1128). The sole issue on appeal is encapsulated by
the question presented:

QUESTION PRESENTED:

In
Medlmmune, Inc. v. Genentech, Inc., 549 U.S. 118, 137 (2007),
this Court ruled that a patent licensee that believes that its products do not
infringe the patent and accordingly are not subject to royalty payments is "not
required . . . to break or terminate its . . . license agreement before seeking a
declaratory judgment in federal court that the underlying patent is . . . not
infringed."

The question presented is whether, in such a
declaratory judgment action brought by a licensee under Medlmmune, the
licensee has the burden to prove that its products do not infringe the
patent, or whether (as is the case in all other patent litigation, including
other declaratory judgment actions), the patentee must prove infringement.

As
suggested, this wrinkle is the inevitable consequence of the Court's previous MedImmune decision, which allowed a
patent licensee to challenge the validity (and non-infringement) of a patent in
a DJ action without repudiating the license. In such a case, however, the patent holder could not have brought its
own patent infringement action (because of the license agreement), and more
importantly, the patent holder could not bring an infringement
counterclaim. The Supreme Court did not
address in MedImmune whether the
patent holder would still have the burden of proving infringement in such a
case where the licensee was seeking to disturb the status quo ante. This issue was answered in the negative by
the Federal Circuit in Medtronic Inc. v.
Boston Scientific Corp., 695 F.3d 1266 (Fed. Cir. 2012), as we reported at
the time. In its petition for cert., Medtronic equated this with a "presumption of
infringement," and noted that proving the negative can be "a
formidable task." In any event, it
can be assumed that the Supreme Court took up this case because it disagreed
with the Federal Circuit's decision, and therefore the burden will likely shift
back to the patentee to prove infringement in the MedImmune context. Nevertheless, it may be useful to look at the factual differences
between the MedImmune and Medtronic cases, and identify what to do
if faced with a similar situation in the interim.

One
of the most significant differences between these two cases is that, despite the
lengths that Justice Scalia takes to categorize the suit in MedImmune as one for a determination of non-infringement,
that earlier case was really a case about validity. MedImmune had entered into a license agreement
with Genentech for rights to an existing patent related to the production of
chimeric antibodies, and for the future rights to a then-pending patent
application related to the coexpression of immunoglobulin chains in a host
cell. That pending application issued as
the "Cabilly II" patent, and Genentech informed MedImmune that its
manufacture of Synagis, a drug used to prevent respiratory tract disease in
infants and young children, was covered by this patent. MedImmune's precise position on whether the
Cabilly II patent covered the manufacture of Synagis is unclear from the
description in the Court's opinion. However, it appears that MedImmune believed that it did not "infringe
any valid claim," and did not believe that there would be no infringement regardless
of the validity of the claims.

The
situation in the current Medtronic
case is distinct. Medtronic had entered
into a license agreement in 1991 with the predecessor-in-interest of the patents-in-suit,
which covered cardiac resynchronization therapy ("CRT") devices. However, the products that were the subject
of this case were not marketed until 2004, and therefore (obviously) they were
not specifically identified in the license. Nevertheless, the license contained a provision by which the licensor
could identify new Medtronic products that it believed were covered by its
patents. If Medtronic believed that any
newly identified products were not covered by the agreement, they had the
option to initiate a declaratory judgment action to challenge the non-infringement
and/or validity of the asserted patents. In other words, this agreement had a MedImmune
provision more than 15 years before the Supreme Court decided the case. So, at its heart, the present case is a
non-infringement case (non-infringement of the licensed patents), not
necessarily a validity case (even though there were validity counts in the
lower court).

So,
why does this matter? Well, it might
not. But, a review of the reasoning used
by the Supreme Court in MedImmune shows
that the logic begins to unravel if it is applied to every factual
situation. In MedImmune, the Court gave the impression that it is axiomatic that
a licensee can bring a declaratory judgment action without repudiating the
contract, but in so doing, it needed to overcome many logical hurdles to reach
that conclusion. This is because the
existence of a license should remove any case-or-controversy as required by
Article III. Nevertheless, as the Court
put it: "[t]he rule that a plaintiff must destroy a large building, bet
the farm, or (as here) risk treble damages and the loss of 80 percent of its
business, before seeking a declaration of its actively contested legal rights
finds no support in Article III." MedImmune Inc., 549 U.S. at 134. Is this always the case, though? It would not appear to be in situations where
the patent and the licensed product or method existed when the license
agreement was reached. In such a case,
if the licensee had a reasonable belief that the patent was invalid (or not
infringed), such as an opinion of counsel, then it should not be at risk of
treble damages. Instead, after MedImmune, such a licensee can negotiate
the best terms possible, and still be able to subsequently attack the patents
while hiding behind the license as a shield. The MedImmune logic,
therefore, only appears to be applicable to after-arising patents or
products/methods.

In
fact, the MedImmune case had the ideal
fact situation for the logic presented. MedImmune needed the license to the first patent to practice its method
of manufacture without fear of suit. Therefore, it could not repudiate the agreement, even though it believed
that the claims of the issued Cabilly II were invalid (and, unfortunately, the
Court's opinion in silent as to why the Cabilly II application was included in
the first place). This is the classic "bet-the-farm"
situation. This is not necessarily the
case for the Medtronic fact scenario,
which encompasses after-arising products that were not part of the agreement. Specifically in that case, it was the license
provision dealing with new products that required Medtronic to bring its
declaratory judgment action. However, in
these cases, it all comes down to license drafting — what mechanism does the
agreement use to incorporate products or methods that do not exist at the time
of execution? Correspondingly, the
response to the question presented of whether the licensor patent holder or the
licensee should have the burden of proving infringement/non-infringement should
also depend on the particular facts.

But,
in the end, this distinction will likely not matter, because the MedImmune decision was decided as a non-infringement
case (over the protests of Justice Thomas in dissent). It is possible that Justice Scalia took such
pains to describe the case as such, because a DJ case directed solely to
validity of patents would have looked a lot more like an advisory opinion, and
therefore satisfaction of Article III's case-or-controversy requirement would
have been more suspect. It can therefore
be presumed that a majority of the Court will still not view these cases as
factually distinct. And, given that cert. was granted, it is likely that the Medtronic burden-of-proof issue will swing
back to the patentee.

What
actions should a licensor patent holder take if now faced with a MedImmune-style DJ action? It would clearly seem advisable to put on the
best infringement case possible, in case the burden of proof does shift back. Otherwise, it would seem critical to treat all
of these issues upfront when entering into a license agreement. Careful attention should go into any
provision that would determine how any new patent or product/method would get
incorporated into the agreement, if such a provision is even included at
all. It is not inconceivable that that
parties would need to renegotiate for any subsequent activity that might be
incorporated to the agreement.

Patent Docs
will continue to monitor this case and provide any updates as warranted.
CLS Bank Int’l v. Alice Corp. (Fed. Cir. 2013) (en banc) — Opinions by Judge Moore, Judge Newman, and Judges Linn and O’Malley

May 21, 2013

By Michael Borella —

A previous
post presented the background of this case, as well as Judge Lourie's
plurality concurrence, and a second post addressed Chief Judge
Rader's concurrence-in-part and dissent-in-part. As noted in those
posts, Alice's claimed inventions involved the reduction of settlement risk
using a third-party intermediary. This post continues the story of Alice by discussing the dissenting-in-part opinion by Circuit Judge Moore, the concurring-in-part and dissenting-in-part
opinion by Circuit Judge Newman, and the dissenting opinion by Circuit Judges Linn and
O'Malley.

Judge Moore's
dissent-in-part

Judge Moore begins her opinion, which was joined by Judges
Rader, Linn, and O'Malley, with a warning: "if all of these claims,
including the system claims, are not patent-eligible, this case is the death
of hundreds of thousands of patents,
including all business method, financial system, and software patents as well
as many computer implemented and telecommunications patents." She noted that 320,799 patents were granted
over a 13 year period in the USPTO's "Electrical Computers, Digital
Processing Systems, Information Security, Error/Fault Handling" technology
area, and that all of these patents were potentially at risk under Judge Lourie's
opinion.

Like Judge Rader, Judge Moore stated that claims must be
considered as a whole, and under that standard, Alice's system claims would be
patent-eligible. She noted that Prometheus explicitly indicated that
interpreting the judicial exceptions to subject matter patentability too
broadly would "eviscerate patent law" because at some level all
inventions are based on abstract ideas, laws of nature, and/or natural
phenomena.

Judge Moore also argued against the conflation of § 101, § 102,
and § 103. She noted that Judge Lourie's
"inventive concept" analysis introduced a time-dependency into the §
101 inquiry that was more appropriate for the inquiries of the other
sections. To illustrate this point, she
provided examples:

Even
though the concept of addition is an abstract idea, the first calculator that
could perform addition was a patent-eligible machine under § 101. If someone subsequently discovered that, by
rewiring the calculator, it could perform addition and subtraction (both
abstract mathematical concepts), the improved calculator would similarly be
patent-eligible. The act of modifying the circuitry of a known device such that
it is configured to apply an abstract idea does not transform it into an
abstract idea.

Accordingly, largely based on the same general reasoning as
Judge Rader, Judge Moore would have found Alice's system claims
patent-eligible.

Judge Newman's
concurrence-in-part and dissent-in-part

Judge Newman begins by noting that this case has provided three
incompatible standards for § 101 analysis, opening the door for "opportunistic
litigation, whose result will depend on the random selection of the panel." She plainly stated that the Federal Circuit
has failed to clarify the interpretation of § 101.

Judge Newman's position, like that of four of her colleagues,
is that the § 101, § 102, and § 103 inquiries are separate. She writes "it is not necessary, or
appropriate, to decide whether subject matter is patentable in order to decide
whether it is eligible to be considered for patentability." She propounded a simplification of the § 101
inquiry by suggesting that "when the subject matter is within the
statutory classes in section 101, eligibility is established." Invoking the oft-quoted phrase that patent
law embraces "anything under the sun that is made by man," she would
push off all considerations of claim breadth to the other sections of the
statute.

Ultimately, Judge Newman positioned her separate opinion as
call for the Federal Circuit to affirm three basic principles of patentable
subject matter.

1) "The
court should hold that section 101 is an inclusive statement of patent-eligible
subject matter." Judge Newman
advocated eliminating claims that are abstract or that pre-empt abstract ideas or
the other judicial exceptions using "laws of novelty, utility, prior art,
obviousness, description, enablement, and specificity."

2) "The court
should hold that the form of the claim does not determine section 101
eligibility." Whether the invention
is claimed as a method, CRM, or system, and whether it is implemented with
hardware or software, would not be relevant to the § 101 inquiry for Judge
Newman. Like Judge Lourie, she would
attempt to decrease the impact of the so-called "clever draftsman."

3) "The court
should confirm that experimental use of patented information is not barred." Perhaps most important of the three, Judge
Newman believes that the popular media has misconstrued the debate on
patentable subject matter to mean that a patented invention cannot further be
studied. In particular, she would have
the Court hold that experiments that improve or build upon patented subject
matter, compare it with alternatives, seek to understand its mechanisms, and to
find new applications should be considered non-infringing activities.

Judge Linn's
and Judge O'Malley's dissent

In stark contrast to their colleagues, Judges Linn and O'Malley
would reverse the District Court ruling and find all claims patent-eligible for
procedural reasons.

Since the summary judgment motions were filed prior to claim
construction, the District Court gave the claims, for purposes of considering
these motions, an interpretation defined by Alice. Thus, Judges Linn and O'Malley afforded that
the District Court was "required to read into the claims whatever
limitations Alice asserted a skilled artisan would assume they possessed." And, as noted above, the parties stipulated
at trial that all claims required a computer and a memory to be performed.

Consequently, Judges Linn and O'Malley faulted Judges Rader and
Moore of improperly construing the method claims more broadly than the system
claims, and also reproached Judge Lourie for importing the breadth of the
method claims into the system and CRM claims. Judges Linn and O'Malley would have all claims rise or fall
together.

With respect to the patent-eligibility of the system claims,
the judges reiterated the position of Judge Rader. However, they would also apply the same
analysis to the method and CRM claims, and find those claims meeting the § 101
requirements as well.

Judges Linn and O'Malley concluded with a discussion of
software patents at large. Rather than
use § 101 to mitigate a supposed "proliferation and aggressive enforcement
of low quality software patents" concerning the various amici curiae, they would push this issue
back to Congress for legislative action. They suggested that Congress could limit the term of software patents,
or limit their scope by requiring functional claiming.

CLS
Bank Int'l v. Alice Corp. (Fed.
Cir. 2013) (en banc)
Opinion for the court per
curiam; concurring opinion by Circuit Judge Lourie, joined by Circuit
Judges Dyk, Prost, Reyna, and Wallach; concurring-in-part and
dissenting-in-part opinion by Chief Judge Rader, joined by Circuit Judge Moore,
and by Circuit Judges Linn and O'Malley as to all but part VI of that opinion;
dissenting-in-part opinion by Circuit Judge Moore, joined by Chief Judge Rader
and Circuit Judges Linn and O'Malley; concurring-in-part and dissenting-in-part
opinion by Circuit Judge Newman; dissenting opinion by Circuit Judges Linn and
O'Malley; additional reflections by Chief Judge Rader.
CLS Bank Int’l v. Alice Corp. (Fed. Cir. 2013) (en banc) — Chief Judge Rader’s Concurrence-in-part and Dissent-in-part

May 20, 2013

By Michael Borella —

A previous
post presented the background of this case, as well as Judge Lourie's
plurality concurrence. As noted in that
post, Alice's claimed inventions involved the reduction of settlement risk
using a third-party intermediary. Despite the claims being of various statutory classes, including
process, article of manufacture, and machine, Judge Lourie found that they were
all directed to patent-ineligible abstract ideas, and thus they failed to meet
the requirements of 35 U.S.C. § 101.

This post continues the story of Alice by discussing Chief Judge
Rader's concurrence-in-part and dissent-in-part.

Chief Judge Rader, joined by Judges Linn, Moore, and O'Malley,
presented the lengthiest opinion in opposition to Judge Lourie. Chief Judge Rader and Judge Moore would have affirmed
the patent-ineligibility of Alice's method and computer-readable medium (CRM)
claims, but came to this conclusion based on different reasoning than Judge
Lourie. On the other hand, Chief Judge Rader
and Judge Moore believed that the system claims passed the § 101 bar. Judges
Linn and O'Malley would have held that all claims were patent-eligible. Based on the style with which this opinion
was drafted, it may have been in competition with Judge Lourie's concurrence for
a majority of the en banc panel.

Throughout, Chief Judge Rader expounded the broad language of § 101,
as well as for the separation of the §§ 101, 102, and 103 patentability
analyses, which he accused Judge Lourie of conflating. In doing so, he provided an overview of the legislative
history, from the 1952 Patent Act, of the modern interpretation of § 101. He further pointed to both statements of the
authors of the 1952 Act, as well as subsequent case law and commentaries, that
indicate that the § 101 analysis is not an "inventiveness" analysis,
and that such an analysis instead falls within the ambit of § 103. In a rebuttal of Judge Lourie's "discovery
vs. invention" dichotomy, Chief Judge Rader pointed to the language of 35 U.S.C. §
100(a), which states that "[t]he term 'invention' means invention or
discovery."

Regarding laws of nature, natural phenomena, and abstract
ideas, he advocated restraint when applying these judicial exceptions
so that they do not swallow the statutory language of § 101. He also emphasized that claims pass the § 101
bar if they recite the application of
such an exception, such as a practical use of an abstract idea. As opposed to Judge Lourie's piecemeal
approach, Chief Judge Rader advocated that determining whether this is the case for a
given claim requires consideration of the claim as a whole.

Citing support in Diehr
and Prometheus, he wrote:

Any claim
can be stripped down, simplified, generalized, or paraphrased to remove all of
its concrete limitations, until at its core, something that could be
characterized as an abstract idea is revealed . . . . A court cannot go hunting
for abstractions by ignoring the concrete, palpable, tangible limitations of
the invention the patentee actually claims.

Indeed, he strongly implied that Judge Lourie's
approach could be used to render virtually any claim abstract.

He then stated that "[t]he relevant inquiry must
be whether a claim includes meaningful limitations restricting it to an
application, rather than merely an abstract idea," and proposed six
factors to consider when undertaking this analysis:

• First, "a
claim is not meaningfully limited if it merely describes an abstract idea or
simply adds 'apply it.' "

• Second, "if a claim
covers all practical applications of an abstract idea, it is not meaningfully
limited."

• Third, "if a
claim does not wholly pre-empt an abstract idea, it still will not be limited
meaningfully if it contains only insignificant or token pre- or post-solution
activity — such as identifying a relevant audience, a category of use, field of
use, or technological environment."

• Fourth, "a claim
is not meaningfully limited if its purported limitations provide no real
direction, cover all possible ways to achieve the provided result, or are
overly-generalized."

• Fifth, "a claim
is meaningfully limited if it requires a particular machine implementing a
process or a particular transformation of matter."

• Sixth, "[a] claim
also will be limited meaningfully when, in addition to the abstract idea, the
claim recites added limitations" that are "central to the solution
itself."

Remarkably, these factors overlap to a large degree with the
four factors of Judge Lourie's "inventive analysis." The main difference between the two is that
Judge Lourie suggested considering whether the human contribution to the claim
amounts "to more than well-understood, routine, conventional activity
previously engaged in by researchers in the field." Chief Judge Rader would eschew separate consideration
of such a human contribution, and instead consider each claim as a whole. However, the inclusion of the Chief Judge's sixth
factor may make this consideration more difficult to achieve in practice.

His factors also reject the notion that there is an
inventiveness or ingenuity requirement component in the § 101 analysis. Instead, he stated that "[t]he
eligibility inquiry is not an inquiry into obviousness, novelty, enablement, or
any other patent law concept . . . [e]ach section plays a different role and no
one section is more important than any other." Unlike Judge Lourie, Chief Judge Rader would read
the "inventive concept" language of Prometheus as:

[S]horthand
for its inquiry into whether implementing the abstract idea in the context of
the claimed invention inherently requires the recited steps. Thus, in Prometheus,
the Supreme Court recognized that the additional steps were those that anyone
wanting to use the natural law would necessarily use. If, to implement the abstract concept, one
must perform the additional step, then
the step merely separately restates an element of the abstract idea, and thus
does not further limit the abstract concept to a practical application. (Internal citation omitted.)

He went on to discuss how computer-specific
limitations should be considered in light of these factors. Invoking shades of the Bilski machine or transformation test, he wrote:

The key
to this inquiry is whether the claims tie the otherwise abstract idea to a specific way of doing something with a
computer, or a specific computer for
doing something; if so, they likely will be patent eligible, unlike claims
directed to nothing more than the idea
of doing that thing on a computer. While
no particular type of limitation is necessary, meaningful limitations may
include the computer being part of the solution, being integral to the
performance of the method, or containing an improvement in computer technology. (Emphasis in original.)

While Judge Lourie seemed to believe that adding general
purpose computer components (e.g., a processor, data storage, a transceiver,
etc.) to a claim failed to provide meaningful limitations, Chief Judge Rader
disagreed. In fact, he quoted
the language of In re Alappat,
stating that "a general purpose computer in effect becomes a special
purpose computer once it is programmed to perform particular functions pursuant
to instructions from program software."

Applying his reasoning to the system claims, the Chief Judge found
all of them patent-eligible under § 101. Acknowledging that issue before the Federal Circuit was whether to grant
CLS's motion for summary judgment, he found that there was a lack of
clear and convincing evidence that the claims were directed to an abstract
idea. Instead, relying on the reasoning
of Bilski, he posited that "[i]f
tying a method to a machine can be an important indication of
patent-eligibility, it would seem that a claim embodying the machine itself,
with all its structural and functional limitations, would rarely, if ever, be
an abstract idea." He also noted
claiming an invention to include "circuitry, transistors, capacitors, and
other tangible electronic components," or "electronically
programmable machines that can fit in the palm of your hand," makes no
difference on the abstractness of the claim.

Specifically, the representative system claim included "at
least four separate structural components: a computer, a first party device, a
data storage unit, and a communications controller coupled via machine
components to the computer and the first party device." Chief Judge Rader found that, given this recited
structure as well as further structural limitations of the invention's
configuration, labeling the claim as abstract would defy the meaning of that
term. Particularly, he noted that "someone can
use an escrow arrangement in many other applications, without computer systems,
and even with computers but in other ways without infringing the claims,"
and that the recited structure was not inherent in the steps of performing a
third-party escrow transaction.

With respect to the method and CRM claims, he
considered these together because Alice had conceded that the CRM claims rise
or fall with the method claims, despite the CRM claims having a different
statutory category. He framed the issue
for the Court as "whether the recited steps are inherent in an escrow and
claimed at a high level of generality, such that in fact the claim is not to a
practical application of the concept of an escrow, but in effect claims the
abstract concept of an escrow."

Nonetheless, in applying his analysis, he broke (or,
at least, severely bent) his own rules on not conflating the analyses of § 101
and § 103, and considering the claim as a whole. Particularly, in determining that the concept
of an escrow is abstract, he cited to a prior art accounting reference. He also performed a step-by-step analysis of
the claim and found that each step "recites merely a general step inherent
within the concept of an escrow, using a third party intermediary in this
fashion."

Finally, Chief Judge Rader indicated that that method claims recited
no computer structure. He found that the
stipulation of the method merely being performed by computer was insufficient
to meet § 101 requirements due to its lack of specificity about how the
computer implementation is arranged. Chief Judge
Rader's reasoning echoes that of the panel in Dealertrack v. Huber, which found a computer-aided method
unpatentable because "[t]he claims are silent as to how a computer aids the method, to what extent a computer aids the method, and the significance of a computer performance
of the method.

Additional discussion of the open questions coming out of this decision will be
the subject of future posts.

CLS
Bank Int'l v. Alice Corp. (Fed.
Cir. 2013) (en banc)
Opinion for the court per
curiam; concurring opinion by Circuit Judge Lourie, joined by Circuit
Judges Dyk, Prost, Reyna, and Wallach; concurring-in-part and
dissenting-in-part opinion by Chief Judge Rader, joined by Circuit Judge Moore,
and by Circuit Judges Linn and O'Malley as to all but part VI of that opinion;
dissenting-in-part opinion by Circuit Judge Moore, joined by Chief Judge Rader
and Circuit Judges Linn and O'Malley; concurring-in-part and dissenting-in-part
opinion by Circuit Judge Newman; dissenting opinion by Circuit Judges Linn and
O'Malley; additional reflections by Chief Judge Rader.
Court Report

May 19, 2013

By Sherri Oslick —

About Court Report: Each week we will report briefly on recently filed biotech and pharma cases.

AbbVie Inc. v. Hetero USA Inc.
et al.
1:13-cv-00852; filed May 15,
2013 in the District Court of Delaware

• Plaintiff: AbbVie Inc.
• Defendants: Hetero USA Inc.;
Hetero Labs Ltd.

Infringement of U.S. Patent
Nos. 7,148,359 ("Polymorph of a Pharmaceutical," issued December 12,
2006), 7,364,752 ("Solid Dispersion Pharmaceutical Formulations,"
issued April 29, 2008), 8,268,349 ("Solid Pharmaceutical Dosage Form,"
issued September 18, 2012), 6,037,157 ("Method for Improving
Pharmacokinetics," issued March 14, 2000), and 6,703,403 (same title,
issued March 9, 2004) following a Paragraph IV certification as part of Hetero's
filing of an ANDA to manufacture a generic version of AbbVie's Norvir®
(ritonavir, used to treat human immunodeficiency virus (HIV) infection). View the complaint here.

Senju Pharmaceutical Co. Ltd. et
al. v. Strides Inc. et al.
1:13-cv-00851; filed May 15,
2013 in the District Court of Delaware

• Plaintiffs: Senju Pharmaceutical
Co. Ltd.; Kyorin Pharmaceutical Co. Ltd.; Allergan Inc.
• Defendants: Strides Inc.;
Agila Specialties Private Ltd.

Infringement of U.S. Patent
No. 6,333,045 ("Aqueous Liquid Pharmaceutical Composition Comprised of
Gatifloxacin," issued December 25, 2001) following a Paragraph IV
certifications as part of defendants' filing of an ANDA to manufacture a
generic version of Allergan's Zymar® (0.3 w/v % gatifloxacin ophthalmic
solution, used for the treatment of bacterial conjunctivitis) and of Allergan's
Zymaxid® (0.5 w/v % gatifloxacin ophthalmic solution, used to treat bacterial
conjunctivitis). View the complaint here.

Endo Pharmaceuticals, Inc. v.
Par Pharmaceutical Companies, Inc. et al.
1:13-cv-03284; filed May 15,
2013 in the Southern District of New Yorkk

• Plaintiff: Endo
Pharmaceuticals, Inc.
• Defendants: Par
Pharmaceutical Companies, Inc.; Par Pharmaceutical, Inc.

Endo Pharmaceuticals Inc. v.
Sandoz Inc.
1:13-cv-03287; filed May 15,
2013 in the Southern District of New York

Endo Pharmaceuticals Inc. v.
Roxane Laboratories, Inc.
1:13-cv-03288; filed May 15,
2013 in the Southern District of New York

Endo Pharmaceuticals Inc. v.
Mallinckrodt LLC
1:13-cv-03288; filed
May 15, 2013 in the Southern District of New York

Endo Pharmaceuticals Inc. v.
Teva Pharmaceuticals USA, Inc. et al.
1:13-cv-03288; filed May 15,
2013 in the Southern District of New York

• Plaintiff: Endo
Pharmaceuticals, Inc.
• Defendants: Teva
Pharmaceuticals USA, Inc.; Teva Pharmaceutical Industries Ltd.; Barr
Laboratories, Inc.

The complaints in these cases
are substantially identical.
Infringement of U.S. Patent Nos. 7,851,482 ("Method for Making
Analgesics," issued December 14, 2010), 8,309,122 ("Oxymorphone
Controlled Release Formulations," issued November 13, 2012), and 8,329,216
(same title, issued December 11, 2012) following a Paragraph IV certification
as part of defendants' filing of an ANDA to manufacture a generic version of
Endo's Opana® ER CRF (oxymorphone hydrochloride, crush-resistant formulation,
used to treat moderate to severe pain in patients requiring continuous,
around-the-clock opioid treatment for an extended period of time). View the Par
complaint here.

Bayer Pharma AG et al. v. Par
Pharmaceutical Inc. et al.
1:13-cv-00845; filed May 14,
2013 in the District Court of Delaware

• Plaintiffs: Bayer Pharma AG;
Bayer Intellectual Property GmbH; Bayer HealthCare Pharmaceuticals Inc.
• Defendants: Par
Pharmaceutical Inc.; Par Pharmaceutical Companies Inc.

Infringement of U.S. Patent
Nos. 6,362,178 ("2-phenyl Substituted Imidazotriazinones as
Phosphodiesterase Inhibitors," issued March 26, 2002) and 7,696,206 (same
title, issued April 13, 2010) following a Paragraph IV certification as part of
Par's filing of an ANDA to manufacture a generic version of plaintiffs' Staxyn®
(vardenafil hydrochloride, used to treat erectile dysfunction). View the complaint here.

Astrazeneca AB et al. v.
Watson Laboratories, Inc.- Florida et al.
3:13-cv-03038; filed May 10,
2013 in the District Court of New Jersey

• Plaintiffs: Astrazeneca AB;
Astrazeneca LP; KBI-E Inc.; Pozen, Inc.
• Defendants: Watson
Laboratories, Inc.- Florida; Watson Pharma, Inc.; Actavis, Inc.

Infringement of U.S. Patent
Nos. 5,714,504 ("Compositions," issued February 3, 1988), 6,369,085 ("Form
of S-omeprazole," issued April 9, 2002), 6,875,872 ("Compounds,"
issued April 5, 2005), 7,411,070 ("same title," issued August 12
,2008), and 7,745,466 (same title, issued June 29, 2010) following a Paragraph
IV certification as part of Watson's filing of an ANDA to manufacture a generic
version of AstraZeneca's Vimovo® (naproxen and esomeprazole magnesium, used to
relieve the signs and symptoms of osteoarthritis, rheumatoid arthritis, and
ankylosing spondylitis, and to decrease the risk of stomach (gastric) ulcers in
patients at risk of developing stomach ulcers from treatment with non-steroidal
anti-inflammatory drugs (NSAIDs)). View
the complaint here.

Purdue Pharma L.P. et al. v.
Impax Laboratories, Inc.
1:13-cv-03188; filed May 10,
2013 in the Southern District of New York

• Plaintiffs: Purdue Pharma
L.P.; The P.F. Laboratories, Inc.; Purdue Pharmaceuticals L.P.
• Defendant: Impax
Laboratories, Inc.

Infringement of U.S. Patent
No. 8,337,888 ("Pharmaceutical
Formulation Containing Gelling Agent," issued December 25, 2012) following
a Paragraph IV certification as part of Impax's filing of an ANDA to
manufacture a generic version of Purdue Pharma's OxyContin® (controlled release
oxycodone hydrochloride, used to treat pain).
View the complaint here.
Conference & CLE Calendar

May 19, 2013

May 21, 2013 – Ethics in IP Practice (Intellectual Property Law Association of Chicago) – Chicago, IL

May 21-23,
2013 – Pharma Legal Affairs (IBC Life Sciences) – Shanghai, China

May 27, 2013 – A Harmonized Patent World — Are
We Getting There? (Intellectual Property Owners Association) – Brussels, Belgium

May 29, 2013 – AIA and Patent Due Diligence Understanding the AIA Impact and Best Practices for
the Due Diligence Process (Strafford) – 1:00 – 2:30 pm
(ET)

May 30, 2013 – Harmonization of USPTO Ethical Standards in
the Post-AIA Era (McDonnell
Boehnen Hulbert & Berghoff LLP) – 10:00 – 11:15 am (CT)

June
5-7, 2013 – Advanced Forum on Biosimilars (American Conference
Institute) – New York, NY

June 9-11, 2013 – IP Business Congress (Intellectual Asset
Management) – Boston, MA

June 12-14, 2013 – Fundamentals of Patent Prosecution
2013: A Boot Camp for Claim Drafting & Amendment Writing (Practising
Law Institute) – New York, NY

July 15-19, 2013 – Patent Law Summer
Intensive (Benjamin N. Cardozo School of Law) – New York, NY

June 25-26, 2013 – Maximising
Pharma Patents (C5 (UK)) – London, England

July
10-12, 2013 – Fundamentals of Patent Prosecution
2013: A Boot Camp for Claim Drafting & Amendment Writing (Practising
Law Institute) – San Francisco, CA

July 31 to August 2, 2013 – Advanced Patent Law Seminar (Chisum Patent Academy) – Seattle, WA

August 5-7, 2013 – Advanced Patent Law Seminar (Chisum Patent Academy) – Seattle, WA

***Patent Docs is a media partner of this conference or CLE
Chisum Patent Academy Patent Law Seminar

May 17, 2013

The
Chisum Patent Academy will be offering its next Advanced Patent Law Seminars
from July 31 to August 2, 2013 and from August 5-7, 2013 in Seattle, WA. The three-day seminar will focus on the
following patent law topics:

•
Patent Practice Gone Wrong: Lessons from Recent Cases on Patent Malpractice and
Rule 11 Sanctions
•
CLS Bank v. Alice Corp.: Making Sense
Out of Nonsense
•
Blockbuster Supreme Court and en banc
Federal Circuit cases: Myriad
(patent eligible subject matter–pending), Lighting
Ballast Control (claim interpretation standard of review–pending)
•
Giving Meaning to Means Clauses
•
Drafting and Enforcing Method and System Claims: Active Inducement, Divided
Infringement, Territoriality Issues
•
Design Patents and Injunctions: Apple
v. Samsung as a Case Study
•
AIA Review: Where Are We So Far?
•
Recent Nonobviousness Developments
•
Pleading Requirements for Infringement Actions

The
seminar is co-taught by Donald Chisum,
author of the treatise Chisum on Patents
(LexisNexis), and Janice Mueller, who was a
tenured full Professor at the University of Pittsburgh School of Law from
2004-2011. The registration fee for the
seminar is $2,000; a maximum of ten registrations will be accepted for each
seminar. Those interested in registering
for the seminar can do so here. Additional information regarding the seminar
can be obtained here or by
e-mailing info@chisum.com.
IPLAC Program on IP Ethics

May 17, 2013

The Intellectual Property Law Association of Chicago (IPLAC) will be offering a program on "Ethics in IP Practice" on May 21, 2013 from 12:00 to 5:00 pm (Central) at the offices of Winston & Strawn LLP in Chicago, IL. Wendy Muchman, Chief of Litigation/Professional Education, ARDC; Michael Barrett, Director of Risk Control, CNA; and William Covey, Deputy General Counsel and Director for Office of Enrollment and Discipline, USPTO will discuss the new professional code of conduct and other ethical considerations. The registration fee for the program is $25 for IPLAC members and students and $30 for non-members. Those interested in registering for event can do so by e-mailing cwagner@winston.com. Additional information regarding the event can be found here.
WIPO Reports Increase in International Application Filings in 2012

May 16, 2013

By Donald Zuhn —

In March, the World
Intellectual Property Organization (WIPO) announced that International
patent applications filed under the Patent Cooperation Treaty (PCT) increased by
6.6% in 2012. WIPO noted that of the
194,000 PCT applications filed last year, Japan and U.S. accounted for nearly
half (48.8%) of those applications. Five
countries had double-digit growth in PCT filings in 2012: the Netherlands (+14.0%), China (+13.6%),
Republic of Korea (+13.4%), Finland (+13.2%), and Japan (+12.3%). PCT filings in several countries dropped in
2012, including Turkey (-16.3%), Mexico (-15.6%), India (-9.2%), Canada
(-6.7%), South Africa (-5.3%), the Russian Federation (-4%), Spain (-2.4%), and
Australia (-1.8%).

With regard to technical
field, electronic machinery (7.5% of published applications), digital
communications (7.1%), computer technology (7%), medical technology (6.4%), and
pharmaceuticals (4.4%) saw the largest shares of published applications. Biotechnology applications had a 3.0% share
of published applications in 2012. While
several technical fields saw double-digit growth in share of published
applications between 2011 and 2012, including IT methods for management (+22.8%),
micro-structural and nano-technology (+21.2%), computer technology (+18.2%),
transport (+17.5%), electrical machinery (+17.1%), optics (12.3%), measurement
(10.8%), and machine tools (10.6%), biotechnology and pharmaceutical
application share rose by only 1.0% and 1.1%, respectively.

WIPO released the following
infographic on PCT filings for 2012.

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