Tag: Federal Circuit

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FTC ITC Patents

Philips and Thales’ Standard Essential Patent Fight at the Federal Circuit, District Court, and ITC

The following post comes from Jack Ring, a rising 2L at Scalia Law and a Research Assistant at C-IP2. Click here for a related post.

a gavel on a desk in front of booksI. INTRODUCTION

On July 13, 2022, the Federal Circuit affirmed the denial of Thales DIS AIS Deutschland GMBH’s (Thales) motion to enjoin Koninklijke Philips N.V. (Philips) from proceeding in a parallel investigation against Thales at the United States International Trade Commission (ITC).[1] This dispute, stemming from SEP licensing negotiations dating back to 2015, seemed poised to be a vehicle to set SEP policy. It offered an opportunity for the District Court and the Federal Circuit to prevent a party from seeking an exclusion order from the ITC when a court was asked to set FRAND rates. It further offered the ITC the opportunity to apply its public interest factors broadly to the same ends. However, all three courts that heard this dispute sidestepped the policy debate.

On the same day in 2020, Philips brought a district court case in Delaware[2] and an ITC investigation[3] against Thales asserting the same four essential patents. In response, Thales moved for a preliminary injunction to prevent Philips from proceeding at the ITC. Thales claimed inter alia that the ITC investigation was causing irreparable harm to its business by disrupting business and deterring customers. Chief Judge Colm F. Connolly, presiding in Delaware, denied Thales’ preliminary injunction, reasoning that Thales’ claims failed to illustrate irreparable harm.

While Thales’ motion sought to enjoin Philips, granting the preliminary injunction would have effectively stripped the ITC of its jurisdiction. This would have been at odds with the ITC’s statutory scheme. As Chief Judge Connolly acknowledged during his ruling on the motion, Congress authorized patentees to pursue ITC and district court proceedings on parallel tracks. Chief Judge Connolly noted the potential policy issues with granting SEP owners exclusion orders, but he reasoned that he was not the one who should make policy, instead deferring to Congress or a higher court.

On appeal, the Federal Circuit agreed, ruling that Thales failed to present evidence of a likelihood of irreparable harm beyond conclusory customer concerns. The Federal Circuit’s opinion came just seven days after the ITC’s final determination finding no violation of Section 337 and multiple claims of the Asserted Patents invalid.

This appeal and the ITC investigation seemed poised to tackle those big policy issues Chief Judge Connolly declined to answer. However, the subsequent rulings avoided any policy decisions. The Federal Circuit’s narrow holding did not discuss any policy issues, solely focusing on the lack of irreparable harm. The ITC’s finding of no violation meant it needed not consider the statutory public interest factors. The Commission’s prior request for public interest statements request garnered a statement from Chair Lina Khan and Commissioner Rebecca Slaughter of the Federal Trade Commission (FTC), which lobbied the ITC to deny relief to any Complainants asserting patents that are subject to FRAND-setting litigation in other forums.

II. DISTRICT COURT ACTION

Philips brought two district court cases in Delaware and an ITC investigation against Thales and three of its customers on December 17, 2020.[4] The ITC investigation, Inv. No. 337-TA-1240 (the “ITC investigation”) and one of the Delaware cases, C.A. No. 20-1713 (the “District Court Action”) shared the same asserted patents, which Philips claimed are essential. Those patents are U.S. Patent Nos. 7,944,935, 7,554,943, 8,199,711, and 7,831,271 (collectively, the “Asserted Patents”). The second district court case brought by Philips asserted six additional, non-essential patents, against the same parties, C.A. No. 20-1709[5].

Philips’ complaint sought declaratory judgment setting worldwide FRAND licensing terms and alleged infringement of the Asserted Patents. Thales counterclaimed, alleging breach of contract of Philips’ contractual duties to the European Telecommunication Standards Institute (ETSI)[6] and seeking declaratory judgment setting FRAND terms.[7] Contemporaneous with its answer, on March 5, 2021, Thales filed a motion for a preliminary injunction to enjoin Philips from pursuing the ITC investigation. Thales claimed the ITC action divested the district court of its authority and was an attempt to extract a supra-FRAND royalty rate.

Thales argued it was likely to succeed on its breach of contract claim in addition to its declaratory judgment claim because both parties requested the same relief, a FRAND rate determination by the court. On irreparable harm, Thales claimed imminent risk of losing market share, customers, sales, and business opportunity, as well as business disruption, as a result of Philips’ seeking an ITC exclusion order. Thales clarified that the irreparable harm was “the uncertainty and the cloud hanging over our head from now until [the ITC rules].”

At the preliminary injunction hearing in May 2021,[8] Chief Judge Connolly, ruling from the bench, denied Thales’ motion. Chief Judge Connolly found the irreparable harm evidence conclusory and that litigating on parallel tracks in the ITC and District Court did not constitute irreparable harm. Chief Judge Connolly also ruled that Thales had not established likelihood of success. Following denial of the preliminary injunction on May 21, 2021, Thales noticed an appeal to the Federal Circuit on June 21, 2021. The Delaware Action was stayed and administratively closed on August 20, 2021, pending resolution of the ITC investigation.

III. ITC INVESTIGATION

While Thales and Philips litigated in Delaware, the ITC investigation proceeded at full pace. As discussed above, Philips filed its complaint at the ITC on December 17, 2020, the same day as the District Court Action. The complaint asserted the same four patents against Thales and the same three customers plus Telit Wireless Solutions, Inc. and Telit Communications PLC.[9] The Commission instituted the investigation on January 19, 2021.[10]

Following an evidentiary hearing in October 2021, Administrative Law Judge David Shaw found no violation in the Final Initial Determination (ID) on April 1, 2022. In addition to finding no violation, ALJ Shaw found multiple claims of the Asserted Patents invalid. On July 6, 2022, the Commission released a Notice of Determination reviewing certain findings, taking no position on many findings, and affirming portions of the ID. The Commission maintained the finding of no violation, and adopted only the following other findings:

(1) the asserted claims of the ’935 patent, the ’711 patent, the ’943 patent, and the ’271 patent are not infringed; (2) Philips did not satisfy the technical prong of the domestic industry requirement with respect to any of the four asserted patents; (3) claim 9 of the ’711 patent and claim 12 of the ’943 patent are invalid as indefinite; and (4) the asserted claims of the ’271 patent are invalid as indefinite and for lack of written description.

As part of its review, the Commission requested public interest statements from the public. One submission, from Chair Khan and Commissioner Slaughter of the FTC urged the ITC to utilize its Public Interest statute to deny relief to any Complainants asserting patents that are subject to FRAND-setting litigation in other forums.[11] In light of the finding of no violation, the Commission did not need to consider the effect of the proposed remedy on the public interest as required by statute.[12]

IV. APPEAL AT THE FEDERAL CIRCUIT

On July 13, 2022, one week after the ITC released its Final Notice, the Federal Circuit affirmed the District Court’s denial of Thales’ preliminary injunction and awarded costs to Philips. Chief Judge Kimberly Moore’s opinion focused exclusively on Thales’ failure to show it was likely to suffer irreparable harm from Philips’ ITC action. Like Chief Judge Connolly, Chief Judge Moore found the evidence presented conclusory. Thales did not meet its burden because it failed to present evidence that it lost customers, had customers delay purchase, or struggled to acquire new business because of the ongoing ITC proceedings. Rather, the ITC investigation caused customers to voice concerns or express doubt. The Court reasoned that “This type of speculative harm does not justify the rare and extraordinary relief of a preliminary injunction.”

V. TAKEAWAYS

While this dispute seemed prepared to make policy waves in the SEP space, there will be future cases that give rise to similar issues. Even now, Apple and Ericsson are litigating SEPs at the ITC and in District Court.[13] That dispute may reach some of the policy questions raised in this case and specifically in Chair Khan and Commissioner Slaughter’s Public Interest Statement from this investigation.

[1] Koninklijke Philips N.V. v. Thales DIS AIS USA LLC, No. 2021-2106 (Fed. Cir. July 13, 2022).

[2] Koninklijke Philips N.V. v. Thales DIS AIS USA LLC, C.A. 20-1713 (D. Del.).

[3] Certain UMTS & LTE Cellular Communications Modules & Products Containing the Same, Inv. No. 337-TA-1240 (USITC).

[4] The customers include CalAmp Corp., Xirgo Technologies, LLC, and Laird Connectivity, Inc.

[5] Koninklijke Philips N.V. v. Thales DIS AIS USA LLC, C.A. 20-1713 (D. Del.).

[6] Both Philips and Thales are members of ETSI, a standard setting organization for digital cellular communications.

[7] Thales USA answered separately on April 5th and did not include counterclaims. Thales USA moved to be severed and dismissed as misjoined party under Fed. R. Civ. P. 21 on April 5, 2021.

[8] The transcript of the May 21, 2021, hearing can be found attached to Philips’ Opening Brief to the Federal Circuit.

[9] Philips also asserted the four essential patents against Telit in Delaware District Court, Koninklijke Philips N.V. v Telit Wireless Sols., Inc., C.A. 20-1711 (CFC) (D. Del.).

[10] 86 FR 7305 (Jan. 19, 2021).

[11] https://www.ftc.gov/system/files/ftc_gov/pdf/Written_Submission_on_the_Public_Interest_if_Chair_Khan_and_
Commissioner_Slaughter_to_ITC.pdf.

[12] 19 U.S.C. §§ 1337(d)(1), (f)(1).

[13] Certain Mobile Telephones, Tablet Computers With Cellular Connectivity, & Smart Watches With Cellular Connectivity, Components Thereof, & Products Containing Same, Inv. No. 1299 (USITC); Ericsson Inc. v. Apple, Inc., C.A. 6:22-cv-60 (W.D. Tex.).

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CPIP Roundup

CPIP Roundup – August 31, 2020

Greetings from CPIP Executive Director Sean O’Connor

Sean O'Connor

August has seen the beginning of a highly unusual school year, but I hope everyone is continuing to stay safe. And, since even a pandemic can’t keep the world from having a busy back-to-school month, I’ll keep this month’s note short.

First, we’re gearing up for The Evolving Music Ecosystem conference on September 9-11, 2020. The conference will be held via Zoom and feature a keynote address by singer, songwriter, and author Rosanne Cash. Registration is still open, and we hope you’ll join us!

Second, I’d like to welcome University of Missouri-Kansas City School of Law Professor Chris Holman as CPIP’s new Senior Fellow for Life Sciences. He will be taking over the role from Professor Erika Lietzan of University of Missouri School of Law, who has been supporting CPIP in that capacity for the past year. (Clearly, we have an affinity for the Show-Me State!) We’re excited to have him join us, and by way of an introduction, we encourage you to check out his recent guest column for The Phoenix advocating for protection of new uses for old medicines.

Third, we are finalizing the schedule for our Eighth Annual Fall Conference, to be held via Zoom on October 7-8, 2020. This year’s theme is 5G at the Nexus of IP, Antitrust, and Technology Leadership.

In other news, CPIP Senior Fellow for Innovation Policy Jonathan Barnett is now blogging at Truth on the Market, a platform for academics and economists to discuss various aspects of business law. You can read his inaugural post here. CPIP Senior Scholar Erika Lietzan has been appointed a Public Member at the Administrative Conference of the United States (ACUS), which focuses on improving the administrative process. CPIP Director of Copyright Research and Policy Sandra Aistars spoke this past month on a copyright licensing panel hosted by Artomatic with the goal of informing visual artists about essential aspects of copyright law. It has also been a busy month for CPIP Senior Scholars Kristen Osenga and Mark Schultz—I encourage you to keep reading below to keep up with their recent news!

Registration Closing Soon for Evolving Music Ecosystem Conference with Rosanne Cash on September 9-11

Rosanne Cash

Please join us for The Evolving Music Ecosystem conference, which will be held online from Antonin Scalia Law School in Arlington, Virginia, on September 9-11, 2020. The event features three days of panel presentations by leading experts and a keynote address by Grammy-winning singer, songwriter, and author Rosanne Cash.

This unique conference continues a dialogue on the music ecosystem begun by CPIP Executive Director Sean O’Connor while at the University of Washington School of Law in Seattle. In its inaugural year in the D.C. area, the conference aims to bring together musicians, music fans, lawyers, artist advocates, business leaders, government policymakers, and anyone interested in supporting thriving music ecosystems in the U.S. and beyond.

For more information, and to register, please click here.

Spotlight on Scholarship

a pair of glasses, an apple, and a stack of books

Kristen Osenga, Patent-Eligible Subject Matter… Still Wielding the Wrong Weapon–12 Years Later, 60 IDEA: L. Rev. Franklin Pierce Center for Intell. Prop. 104 (2020)

CPIP Senior Scholar Kristen Osenga has published a new paper on patent-eligible subject matter at IDEA entitled Patent-Eligible Subject Matter… Still Wielding the Wrong Weapon–12 Years Later. The paper looks at changes to patent eligibility that have developed since Prof. Osenga published an article on the same subject in 2007. At the time, she concluded that the Patent Office was using the “elephant gun” of new guidelines on the “ants” of patent eligibility. In the new paper, Prof. Osenga traverses the Supreme Court’s subsequent Section 101 decisions that drove the courts and Patent Office to continue wielding an “outsized elephant gun” when it comes to patent eligibility. However, she does note that recent activities at the Patent Office and Congress offer some hope that things may be changing for the better.

Mark F. Schultz, The Importance of an Effective and Reliable Patent System to Investment in Critical Technologies (USIJ July 2020)

Venture capitalists pouring money into a small startup has become a sort of new American Dream for many innovators. The success stories of big American companies starting with nothing more than an idea have pervaded their way into pop culture, inspiring TV shows, movies, and the like. However, CPIP Senior Scholar Mark Schultz has released a new report for USIJ entitled The Importance of an Effective and Reliable Patent System to Investment in Critical Technologies showing that this dream may be harder to attain today due to recent shifts that have weakened the patent system and driven away venture capital investment. Our blog post summarizing the report is available here, and you can read the summary at IPWatchdog here.

Activities, News, & Events

a lit lightbulb hanging next to unlit bulbs

On August 5, 2020, CPIP Director of Copyright Research and Policy Sandra Aistars joined Jaylen Johnson, Attorney Advisor at the U.S. Copyright Office, and Kim Tignor, Executive Director at the Institute for Intellectual Property & Social Justice (IIPSJ), for a virtual panel presentation on copyright protection for visual artists that was hosted by Artomatic. The panel focused on explaining key concepts of copyright law pertinent to visual artists and sharing resources that they can use to learn more about the basics of copyright protection. It also touched on common pitfalls among visual artists when it comes to protecting their creative works, including those that befall joint authors, and common misconceptions about fair use. Our blog post summarizing the event is available here.

On August 25, 2020, CPIP Senior Fellow for Innovation Policy Jonathan Barnett published a new essay at Truth on the Market entitled Will Montesquieu Rescue Antitrust? In the post, Prof. Barnett examines recent pressure on state and federal regulators to use antitrust laws against firms that have established market dominance, and he praises the genius of the eighteenth-century philosopher Montesquieu for developing the theory of separation of powers that allows the judiciary to police overly zealous antitrust prosecutors today. Traversing recent—and failed—antitrust enforcement actions, including AT&T’s acquisition of Time-Warner, Sabre’s acquisition of Farelogix, and FTC v. Qualcomm, Prof. Barnett explains how the judicial branch has become an important counterbalance to prosecutorial antitrust overreach that betrays the fundamental objective of promoting the public interest in deterring anticompetitive business practices.

On August 25, 2020, CPIP Senior Scholar Kristen Osenga published an op-ed in the Washington Times entitled If We Want Innovation, Companies Must Be Able To Rely on Patent Law To Protect Their Investments. The op-ed explains the importance of effective patent protection for innovative companies to develop and commercialize their new technologies. In particular, Prof. Osenga praises the recent antitrust victory of Qualcomm over the FTC in the Ninth Circuit, noting that a “race that results in innovation that other companies, and the public, dearly desires is exactly the point of competition.” Prof. Osenga also authored a recent op-ed for the Richmond Times-Dispatch, With Biomedical Research, Taxpayers Are Getting a Great Deal, explaining how the critics are wrong to argue that the government should take control of important biomedical inventions like remdesivir. She was also quoted in a recent article at Bloomberg Law entitled Court Split Over Driveshaft Patent Muddies Eligibility Question about the Federal Circuit’s recent 6-6 split on whether to review an important patent-eligibility case en banc.

Categories
Patent Law

Supreme Court to Assess USPTO’s Controversial Attorneys’ Fees Position

U.S. Supreme Court buildingBy Chris Katopis & Devlin Hartline

This week, the U.S. Supreme Court agreed to hear an important case concerning patent law procedures and the American legal system in general. In Iancu v. NantKwest, the Court asks, “Does all really mean all?” Specifically, the Court will examine whether Section 145 of the Patent Act, which provides that “[a]ll the expenses of the proceedings shall be paid by the applicant,” includes the personnel expenses that the U.S. Patent & Trademark Office (USPTO) incurs when its employees and attorneys defend the agency in the proceedings.

Under U.S. patent law, a patent applicant who is disappointed with the final decision of the Patent Trial and Appeal Board (PTAB) has the right to seek judicial review through one of two options. Applicants may either appeal directly to the U.S. Court of Appeals for the Federal Circuit under Section 141, or they may file a civil action against the Director of the USPTO in the U.S. District Court for the Eastern District of Virginia under Section 145. Unlike Section 145, Section 141 mentions nothing about recouping expenses.

In the present case, NantKwest is the assignee of a patent application directed to a method for treating cancer. The examiner rejected the claims as obvious and the PTAB affirmed. NantKwest then sued the Director of the USPTO in the Eastern District of Virginia. The district court held on summary judgment that the claims were obvious, and the Federal Circuit affirmed in a nonprecedential opinion.

In the district court, the USPTO moved for reimbursement of nearly $112,000 in expenses under Section 145 to cover attorneys, paralegals, and expert witnesses. The district court granted the expert-witness expenses but denied the personnel expenses. A divided panel of the Federal Circuit reversed, finding that the personnel expenses were compensable under Section 145. The Federal Circuit then took the case en banc, with the majority affirming the district court’s holding that the personnel expenses were not “expenses” under Section 145.

The USPTO then petitioned the Supreme Court for a writ of certiorari, which NantKwest opposed. Just yesterday, the Court agreed to hear the case. The USPTO argues that when Congress enacted Section 145, it was clear that “all” meant “all” regarding any costs or expenses arising from the district court litigation. Accordingly, the USPTO argues, an applicant who initiates a civil action under Section 145 must pay all of the expenses borne by the USPTO in the proceedings, including the salaries of the government’s attorneys and paralegals.

Notably, this recent position on Section 145 by the USPTO is a sharp departure from decades of earlier practice. It also presents a potentially costly factor for patents applicants seeking to challenge adverse PTAB decisions in the Eastern District of Virginia, where they would have to pay the government’s personnel expenses even if their patent rights are vindicated by the federal courts.

In its en banc majority opinion by Judge Kara Stoll, the Federal Circuit held that “the American Rule prohibits courts from shifting attorneys’ fees from one party to another absent a ‘specific and explicit’ directive from Congress.” Under the American Rule, the opposing parties in litigation pay their own attorneys’ fees, whether they win or lose. This Rule, the majority noted, promotes “fair access to the legal system” for those who “might be unjustly discouraged from instituting actions to vindicate their rights,” especially the “small businesses and individual inventors” who seek to avail themselves of Section 145’s benefits.

Having held that the American Rule’s presumption against shifting attorneys’ fees applies to Section 145, the Federal Circuit found that nothing in the text of Section 145 rebutted it. Under Supreme Court precedent, there must be a “specific and explicit” authorization by Congress to displace the American Rule. The Federal Circuit held that Section 145’s statement that applicants must pay “[a]ll the expenses of the proceedings” was ambiguous and thus fell short of the Supreme Court’s stringent standard.

The majority emphasized the fact that, under the USPTO’s interpretation, even successful applicants would have to pay the government’s personnel expenses, and it noted that the USPTO itself could not identify any other such provision for shifting fees to the prevailing party. That sharp departure from the bedrock principle of the American Rule, the majority reasoned, made the government’s anomalous position all the more suspect since Congress would have made it more clear if it intended this odd result.

This case has significant ramifications for the American innovation economy. Patent applicants at the cutting-edge of innovation occasionally receive multiple rejections from patent examiners that are affirmed by the PTAB. Some seek to vindicate their rights in the Eastern District of Virginia, which is their right under Section 145 of the Patent Act as enacted by Congress. The shifting of attorneys’ fees to such applicants would increase the cost of inventing and commercializing new technology. It would strongly discourage dissatisfied applicants from challenging the PTAB before a federal district court.

The American Rule is grounded on the notion that those who feel they have been wronged should not be afraid to seek justice in the courts. The USPTO would flip this bedrock principle on its head, even in cases where the courts reverse the agency’s wrongful denial of patent rights to innovators. Hopefully the Supreme Court will affirm the Federal Circuit’s defense of the American innovation economy, lest our innovative entrepreneurs be forced to think twice before taking their case to the federal courts.

Categories
Patents

CPIP Scholars To Federal Circuit: Protect Innovation in the Life Sciences

Microscopic image of cellsLast week, a group of CPIP scholars—Chris Holman, David Lund, Adam Mossoff, and Kristen Osenga—filed an amicus brief in Natural Alternatives International v. Creative Compounds, a case currently on appeal to the U.S. Court of Appeals for the Federal Circuit. The amici ask the appellate court to correct the district court’s misapplication of the patent-eligibility test under Section 101 of the Patent Act since it threatens innovation in the life sciences.

The plaintiff-patentee, Natural Alternatives International or NAI, provides nutritional products, including proprietary ingredients and customized nutritional supplements, to its clients. NAI owns several patents relating to beta-alanine, a non-essential amino acid that delays the onset of muscle fatigue. The district court held that the claims were ineligible subject matter under the two-step Alice-Mayo test: the claims were directed to a natural phenomenon and lacked an inventive concept containing more than conventional, routine activity.

The amici point out that the district court’s overly-restricted view of patent-eligibility doctrine will dissuade the research and development of natural products that are beneficial for mankind. They note that the district court glossed over several predicate factual questions and failed to properly consider the claims as a whole. They conclude that the continued misapplication of the Section 101 analysis has resulted in legal uncertainty, undermining the innovation industries that rely on stable and effective patent rights.

The Summary of Argument is copied below, and the amicus brief is available here.

***

SUMMARY OF ARGUMENT

The district court’s decision in Natural Alternatives International, Inc. v. Creative Compounds, LLC, No. 16-cv-02146-H-AGS, (S.D. Cal. Sept. 5, 2017) and Natural Alternatives International, Inc. v. Hi-Tech Pharmaceuticals, Inc., No. 16-cv- 02343-H-AGS, (S.D. Cal. Sept. 5, 2017), represent an improper application of 35 U.S.C. § 101. The parties in their briefs address the relevant innovation covered by Natural Alternatives’ patents, as well as the application of the Supreme Court’s and the Court of Appeals for the Federal Circuit’s § 101 jurisprudence. Here, amici offer additional insight concerning the legal and policy problems with the trial court’s decision. Specifically, amici contend that Natural Alternatives’ claims represent precisely how the patent system should reward discovery of a therapeutic use of a natural compound, and thus their invention should be eligible for patent protection. The Supreme Court has repeatedly emphasized that patents claiming new uses of known drugs or new applications of laws of nature are patent eligible, and these teachings properly applied provide patent eligibility for the kinds of claims at issue in this case. Assoc. for Molec. Pathology v. Myriad Genetics, Inc., 569 U.S. 576, 594 (2013); Mayo Collaborative Servs v. Prometheus Labs., Inc., 566 U.S. 66, 87 (2012). The district court’s decision to the contrary conflicts with the Patent Act as an integrated statutory framework for promoting and securing innovation in the life sciences, as construed by this court as well as by the Supreme Court.

The Supreme Court has recognized that the plain meaning of the language of § 101 indicates that the scope of patentable subject matter is broad. See Diamond v. Chakrabarty, 447 U.S. 303, 315 (1980); Myriad at 577. This is why the Supreme Court consistently has held that “[t]he § 101 patent-eligibility inquiry is only a threshold test.” Bilski v. Kappos, 561 U.S. 593, 602 (2010). Accordingly, the “threshold test” of § 101 is necessarily followed by the more exacting statutory requirements of assessing a claim as a whole according to the standard of a person having skill in the art as to whether it is novel, nonobvious, and fully disclosed as required by the quid pro quo offered to inventors by the patent system. Id.

Unfortunately, courts have applied the two-step “Mayo/Alice test” from the Supreme Court’s recent § 101 cases in an unbalanced and legally improper manner. See Alice Corp. Pty. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014); Mayo, 566 U.S. at 66. These practices of the inferior courts include dissecting claims into particular elements and then construing these elements in highly generalized terms with no evidentiary support. Thus, as happened in this case, a district court all too often merely asserts a conclusory finding that the claim—actually, specific elements dissected out of the claim as a whole—covers ineligible laws of nature or natural products to conclude that a patented invention is ineligible.

The lower courts’ unduly stringent and restrictive patent eligibility test under the Mayo/Alice test produces results such as the district court’s decision in this case. This improper application of the Mayo/Alice test inevitably leads to § 101 rejections of patentable product and method inventions; here, the district court rejected an innovative invention in the biotechnology sector that the patent system is most certainly designed to promote. When a patent describes a discovery made by the inventor, even if that invention relates to a natural product or natural law, it should be possible to describe a particular application of that law or discovery that is patent eligible so as to reward the inventor for their efforts.

Furthermore, the improper treatment of the § 101 inquiry as primarily a question of law requiring no evidentiary findings whatsoever, especially when the parties expressly disagree as to what a person having skill in the art would consider routine or ordinary, allows courts to gloss over both what the claims are directed to and what importance limitations beyond the ineligible material may have. See Berkheimer v. HP Inc., 881 F.3d 1360, 1368-69 (Fed. Cir. 2018). This improper characterization of § 101 has sowed indeterminacy in patent eligibility doctrine, and has left inventors and companies in the innovation industries with little predictability concerning when or how courts will dissect claims and make conclusory assertions that they are patent ineligible under § 101.

The court in this case has an opportunity to more properly instruct the lower courts in the manner in which the § 101 analysis should be made, particularly with regard to the role of factual evidence in determining when a claimed application of a natural law or product is routine, well-understood, or conventional and when it is not and thus that the claimed invention is eligible for patenting.

To read the amicus brief, please click here.

Categories
Innovation Patent Law

CPIP Scholars File Amicus Brief Urging Supreme Court to Fix Section 101

dictionary entry for the word "innovate"On December 4, 2017, CPIP Founder Adam Mossoff and CPIP John F. Witherspoon Legal Fellow David Lund filed an amicus brief urging the Supreme Court to grant certiorari in RecogniCorp. v. Nintendo. The amicus brief was joined by several law professors, including Richard Epstein and Michael Risch, as well as CPIP Senior Scholars Chris Holman, Kristen Osenga, Mark Schultz, and Ted Sichelman. Bob Sachs of Robert R. Sachs P.C. served as counsel of record.

The technology at issue involves a method of encoding and decoding composite facial images on a computer. The invention solved the problem of decreased image quality when such images are transmitted digitally. RecogniCorp sued Nintendo for patent infringement, and Nintendo challenged the eligibility of the patent under Section 101. Applying the Mayo-Alice framework, the district court held that invention was ineligible subject matter because it was directed to an abstract idea and lacked an inventive concept. Agreeing with that analysis, the Federal Circuit affirmed.

The amici argue that the Supreme Court should grant certiorari in this case in order to correct the continued misapplication of the Mayo-Alice test by the Federal Circuit, the district courts, and the Patent & Trademark Office. By breaking down claims into individual elements and then generalizing them in broad terms, the lower courts and the PTO are failing to properly consider the claimed invention as a whole.

The Summary of Argument is copied below:

SUMMARY OF ARGUMENT

This Court has repeatedly reminded the Court of Appeals for the Federal Circuit, district courts, and the United States Patent & Trademark Office (“PTO”) that § 101 of the Patent Act is a key requirement in assessing the validity of both patent applications and issued patents. In doing so, this Court set forth a two-part test for assessing whether an invention is patentable subject matter (the “Mayo-Alice test”). See Alice Corp. Pty. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014); Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289 (2012). These cases build upon prior cases such as Diamond v. Diehr, 450 U.S. 175 (1981), which held that a software-based method for operating a rubber mold is patent eligible under § 101.

Unfortunately, the lower courts and the PTO have misunderstood how to apply the Mayo-Alice test. Specifically, the lower courts and the PTO have adopted an indeterminate and overly restrictive approach, invalidating legitimate patented innovation under § 101 with little predictability for inventors or patent attorneys. This frustrates the constitutional function of the patent system in promoting the “Progress of . . . useful Arts.” U.S. Const. art. 1, § 8, cl. 8.

This case exemplifies both of these fundamental problems—indeterminacy and over-restrictiveness—because the lower courts held that a claim is patent ineligible as an “abstract idea” merely because the process was implemented through the use of computer software. These problems undermine inventors’ ability to use the patent system to protect computer-mediated processes that are exactly the kind of innovation that the patent system is designed to promote.

Petitioner details the substantial confusion in the application of the Mayo-Alice test in this case, as well as at the PTO and in the lower courts. Amici here identify a further key insight: when lower courts and the PTO apply the Mayo-Alice test to only individualized elements of a claim, generalizing these elements into a broad, categorical description and not evaluating the claimed invention as a whole, they are using a methodological approach that conflicts with this Court’s existing precedents on determining patent eligibility under § 101.

In this case, the Federal Circuit held that a software-based method of producing images of faces on a computer screen is an “abstract idea.” RecogniCorp, LLC v Nintendo Co., 855 F.3d 1322, 1327 (Fed. Cir. 2017). It reached this conclusion by dissecting the claim into its separate elements and ignoring other key elements, ultimately finding the claimed invention is ineligible under § 101. By reducing the claim to “encoding and decoding data,” the court ignored the invention as a whole that improves the way computers generate digital representations of faces for display.

This Court can easily remedy this problem by (1) recognizing the role of the patent system in protecting computer-implemented innovation, a key driver of modern technological progress, and (2) providing further instructions to lower courts and to the PTO that they should apply the Mayo-Alice test only to the claimed invention as a whole. This is a predicate legal requirement in assessing novelty under § 102 and in assessing nonobviousness under § 103 of the Patent Act. It is also a fundamental legal requirement for asserting patents for both literal and equivalents infringement under § 271. In all of these other patent doctrines, this Court has maintained the basic requirement of assessing patentability or limiting assertion of patents to the claimed invention as a whole, as this avoids the same policy problems of indeterminacy and over-restrictiveness (or over-inclusiveness, depending on the perspective) in these other patent doctrines. Thus, this Court should grant the petition for certiorari, reverse the Federal Circuit, and provide further instructions for applying the Mayo-Alice test only to the “claimed invention as a whole.”

To read the amicus brief, please click here.

Categories
Patent Law

CPIP Publishes Prof. John F. Witherspoon’s Tribute to the Late Judge Giles S. Rich

Judge Giles S. RichCPIP has published a tribute to Judge Giles S. Rich by Professor John F. Witherspoon. Prof. Witherspoon is Director Emeritus, Intellectual Property Program, Antonin Scalia Law School. Prof. Witherspoon’s career in government, academia, and private practice spans more than fifty years.

After practicing with a patent law firm in Washington, Prof. Witherspoon was appointed by the President in 1971 to be an Examiner-in-Chief and to serve on the then Board of Appeals in the Patent Office. Prof. Witherspoon returned to private practice in 1978 and continued practicing law until he retired in 2016. In 1992, Prof. Witherspoon was invited to join the adjunct faculty at Antonin Scalia Law School as Distinguished Professor of Intellectual Property Law and to head the School’s intellectual property law program.

Upon graduating from Georgetown Law School, Prof. Witherspoon clerked for the Honorable Giles S. Rich at the U.S. Court of Customs and Patent Appeals (now the U.S. Court of Appeals for the Federal Circuit). This tribute is adapted from Prof. Witherspoon’s remarks delivered at the January 18, 2017, meeting of the Giles Sutherland Rich American Inn of Court. Prof. Witherspoon pays a heart-warming tribute to the late Judge Rich, whom many regard as one of the foremost authorities on U.S. patent law.

To read the tribute, please click here.

Categories
Copyright Uncategorized

CPIP’s Sandra Aistars & Scalia Law Alumnae Urge Federal Circuit to Protect Creators and Rein In Fair Use in Oracle v. Google

U.S. Capitol buildingOn February 17, 2017, CPIP Senior Scholar Sandra Aistars filed an amicus brief in Oracle v. Google, a copyright case currently before the Federal Circuit. Prof. Aistars worked in conjunction with Scalia Law alumnae Antigone Peyton and Jennifer Aktins of Cloudigy Law and third-year law student Rebecca Cusey to file the brief on behalf of 13 intellectual property scholars, including CPIP’s Matthew Barblan, Devlin Hartline, Sean O’Connor, Eric Priest, and Mark Schultz.

The amici urge the Federal Circuit to find that Google’s for-profit, verbatim copying of thousands of lines of Oracle’s copyrighted code was not fair use. They note that an overly broad application of the fair use defense “threatens the fundamental protections of copyright law,” and they argue that “the application of fair use in this case must be faithful to the underlying purposes of both copyright law and the fair use defense.” The amici point out that there would be “significant negative ramifications for all authors” if the Federal Circuit were to excuse Google’s copying of Oracle’s creative work for the purpose “of creating a competing commercial product.”

The amici conclude: “Expanding the fair use defense to excuse appropriation of software code for commercial gain will harm both creators and the public, as creators will have less incentive to develop new software. The public will not be well-served by policy that slows down the creative advancement of software. Nor will the public be well-served by an application of fair use that will gut copyright protection for other creative works by excusing a purely commercial copying of a creative work that harms the market for the original or its derivatives.”

To read the amicus brief, please click here.

Categories
Copyright

Oracle v. Google: Expansive Fair Use Harms Creators

The following post comes from Rebecca Cusey, a third-year law student at Antonin Scalia Law School, George Mason University, and a movie critic at The Federalist.

Rebecca CuseyBy Rebecca Cusey

The fair use doctrine has expanded far beyond its purpose, according to an amicus brief filed this past Friday on behalf of 13 law professors in Oracle v. Google, a copyright case currently before the Federal Circuit. Scalia Law alumnae Antigone Peyton and Jennifer Aktins of Cloudigy Law worked in conjunction with CPIP Senior Scholar Sandra Aistars to file the brief, and I had the pleasure of helping them draft it.

While there are several related decisions for the court to make, the primary issue before the Federal Circuit is whether Google’s use of Oracle’s software code, known as an API, is excused by the fair use defense. This case is long and complex, as would be expected from two software giants battling over the use of important code. Phones don’t run themselves, after all, and there’s a huge, lucrative market.

In 2014, the Federal Circuit held that Oracle’s API code was copyrightable because it contained protectable, original expression. The court reasoned that the software code resembled a taxonomy instead of a system or method of operation, which would be unprotectable. The issue of functionality versus creativity was addressed, and the court found that the creative code in question was not precluded from copyright protection even though it was also functional.

The Federal Circuit remanded the case to the district court on the issue of whether the use of the API code was excused by the fair use defense. A jury found in May of 2016 that fair use did indeed excuse Google’s use of the protected code in its phones. Oracle now appeals this fair use finding to the Federal Circuit.

The amicus brief argues that the fair use defense does not cover Google’s use of the software code. The fair use doctrine was intended to balance the rights of creators to profit from and control their work with the public interest to be derived from critique, scholarship, and parody. In this case, there is no critique. Rather, Google seeks to sell a product using code it could have licensed but did not.

It matters, as all intellectual property matters, because the more we allow the fair use defense to expand and take money off of the table for creators, the more it destroys their incentive for creating original content in the first place. Why would a person or a company invest time, effort, and money in writing a song, developing a drug, or coding a program if someone else could simply take that song, drug, or code and sell it as their own? Fair use doesn’t excuse that, nor should it.

Although software code is complex and difficult to understand for the average person, there are no special rules in this area of copyright law, nor should there be. Just as copying a portion of a song and inserting it into one’s own song can be infringement, so too can taking a portion of code and selling it as part of one’s own product. Just as it takes creativity to use words to create a book, so too it takes creativity to create new and exciting code.

It may be obtuse to many people, but coding is a highly creative endeavor that brings astonishing and exciting products to market, products that have shaped and improved the world around us. It is in the interest of everyone, both software coders and society at large, that the incentive created by copyright to produce such advancement remains strong.

Categories
ITC Trademarks

CPIP Founders File Amicus Brief on Behalf of 11 Law Professors in Converse v. ITC

a gavel lying on a table in front of booksCPIP Founders Adam Mossoff & Mark Schultz filed an amicus brief today on behalf of 11 law professors in Converse v. International Trade Commission, a trademark case currently before the Federal Circuit.

In late-2014, Converse filed a complaint with the International Trade Commission alleging that more than thirty companies, including Skechers, Walmart, New Balance, and Highline, were violating Section 337 of the Tariff Act of 1930 by importing and selling infringing shoes. Converse owns a registered trademark on the midsole of its iconic Chuck Taylor All Star shoe, including the signature toe cap, toe bumper, and midsole stripes:

patent drawing of a Converse shoe

An administrative law judge found that Converse owns a valid registered trademark and that each respondent sold at least one infringing knock-off. That opinion was later reversed by the Commission, which held that Converse’s registered trademark was invalid. In the Commission’s opinion, Converse failed to prove that its iconic midsole had acquired secondary meaning—though it nevertheless found that Converse’s trademark would have been violated had it been valid. Converse has now appealed that ruling to the Federal Circuit.

The amicus brief filed by Professors Mossoff & Schultz argues that the Commission failed to properly consider the fundamental role of trademark law in securing the productive labors of companies like Converse that create famous products like its Chuck Taylor All Star shoe. The brief was co-signed by Professors Gregory Dolin, Christopher Frerking, Hugh Hansen, Jay Kesan, Irina D. Manta, Kristen Osenga, Eric Priest, Ted Sichelman, and Saurabh Vishnubhakat.

The Summary of Argument from the amicus brief is copied below:

SUMMARY OF ARGUMENT

This case deals with one of the most iconic, long-lived brands in the footwear industry: the Chuck Taylor athletic shoe. As one of the first massively successful athletic shoe products—selling hundreds of millions of pairs over the past 80 years—the name and design of these athletic shoes is an exemplar of the successful commercial goodwill that trademark law is intended to promote and secure to innovative commercial enterprises like Converse. Unfortunately, the International Trade Commission (Commission) chose to ignore the fundamental importance of investment in goodwill—to trademark law generally and to the establishment of secondary meaning specifically.

The appellant addresses the numerous doctrinal and factual infirmities with the Commission’s decision, and thus amici offer an additional legal and policy insight into this case that is necessary to understand the full scope of the Commission’s error: the Commission contradicted a fundamental precept of modern trademark law that it secures the valuable goodwill created by companies like Converse through their productive labors in creating, manufacturing and marketing iconic, famous products like the Chuck Taylor athletic shoes. See Qualitex v Jacobson, 514 U.S. 159, 163-64 (1995) (“The law thereby encourages the production of quality products, and simultaneously discourages those who hope to sell inferior products by capitalizing on a consumer’s inability quickly to evaluate the quality of an item offered for sale.”).

In addition to protecting consumers from significant costs and other harms imposed on them by commercial pirates, it is a longstanding, fundamental policy in trademark law to secure the valuable goodwill created by innovative commercial enterprises in selling products in the marketplace. See, e.g., Partridge v. Menck, 5 N.Y. Ch. Ann. 572, 574 (1847) (stating a trademark owner “is entitled to protection against any other person who attempts to pirate upon [its] goodwill”). Courts recognize these two key, mutually reinforcing policies in trademark law—securing goodwill and protecting consumers—as two sides of the same coin. See Groenveld Transport Efficiency v Lubecore Intern., Inc., 730 F.3d 494, 512 (6th Cir. 2013) (“Trademark law’s likelihood-of-confusion requirement . . . incentivizes manufacturers to create robust brand recognition by consistently offering good products and good services, which results in more consumer satisfaction. That is the virtuous cycle envisioned by trademark law, including its trade-dress branch.”). These two policies necessarily work together to ensure that trademark law functions properly.

In this case, the Commission disregarded the dual policies that animate trademark law by focusing solely on consumer issues while denying Converse its justly earned legal protection for its long-established and valuable goodwill. Thus, amici believe that the Commission’s decision should be reversed solely on the grounds of this contradiction of fundamental trademark policy. This is a case in which commercial pirates have undoubtedly “tread closely on the heels of [a] very successful trademark,” and thus are within the “long shadow which competitors must avoid” that is cast by Converse’s valuable goodwill in its famous mark—the Chuck Taylor athletic shoe design. Kenner Parker Toys Inc. v. Rose Art Industries, Inc., 963 F2d 350, 353-54 (Fed. Cir. 1992) (quotations and citations omitted).

To read the amicus brief, please click here.

Categories
Innovation Software Patent

Trading Technologies v. CQG: Federal Circuit Gets One Right On Software Patents

dictionary entry for the word "innovate"The Federal Circuit issued another important opinion yesterday affirming that software is a patentable invention in the United States. In Trading Technologies Int’l, Inc. v. CQG, Inc., the court determined that a graphical user interface (GUI) for a commodities trading platform was patent eligible. Ten law professors, including CPIP Senior Scholars and others, filed an amicus brief in support of Trading Technologies, explaining that its GUI patents were a patentable inventions under § 101 of the Patent Act and that this is exactly the type of twenty-first-century innovation the patent system is intended to promote and secure. (CPIP’s Adam Mossoff was one of the co-authors of the amicus brief as well.)

The accused infringer in this case argued that Trading Technologies’ two patents were unpatentable because they were an “abstract idea” under § 101 of the Patent Act. This opinion arose from the infringer raising this defense in response to Trading Technologies’ lawsuit against it for patent infringement. Despite the defendant’s arguments that the patents merely broadly referred to the abstract idea of “commodities trading,” both of the GUI patents describe technological improvements in the interface that commodities traders use. The court discussed how the inventors’ specific improvements in this GUI program increases the efficiency and accuracy of trading—a real-world, valuable function in a twenty-first-century technological innovation. Thus, these patents cover inventions that are more than just an abstract idea.

As described by the law professors’ amicus brief, the defendant’s broad argument about the “abstract idea” exclusion in patent law would eviscerate the patent system. Any invention can be described at a high level of abstraction, and thus an overly broad understanding of “abstract idea” would invalidate patents on thousands of legitimate patents on valid inventions, such as the telephone, GPS, typewriters, and optical discs. In this case, the court properly recognized that this framing of the “abstract idea” rule in patent law necessarily incorrect. Hopefully, this decision will stem the tide of massive invalidations of patented innovation, as more courts recognize the value in software inventions and that patents are important for promoting and securing this innovation.