by Dennis Crouch

WesternGeco LLC, v.  ION Geophysical Corp. (Supreme Court 2019) [Petition]

In 2018, WesternGeco seemingly won its international-patent-damages case against ION — with the court agreeing that lost-profit damages are available even for extra-territorial sales.  After winning its $100 million trial against ION, WesternGeco sued another competitor, Petroleum Geo-Services (PGS), for infringement.  PGS then challenged the asserted patents in an Inter Partes Review (IPR) proceeding that resulted in all of the claims being cancelled as obvious or anticipated.

35 U.S.C. §315(b) bars the Patent Office Director from instituting an IPR proceeding on a petition “filed more than 1 year after the date on which the petitioner, real party in interest, or privy of the petitioner is served with a complaint alleging infringement of the patent.”  By the end of its infringement trial, ION was time-barred — however, PTO still allowed ION to join PGS’s case once instituted – but gave it “spectator status.” Still, ION (but not PGS) defended the Board’s decision on appeal.

The Federal Circuit affirmed the Board decision, finding that unpatentability findings supported by substantial evidence, and that the Section 315(b) time-bar didn’t apply since ION did not have any direct or indirect control PGS’s IPR filings and PGS had a separate legitimate reason to file the IPR other than protecting ION.

WesternGeco presented evidence that the two companies worked together to launch the infringing product, and that their agreement included an indemnity agreement — with ION making a “product assurance pledge” for products delivered by PGS.  The Federal Circuit, however, disregarded the evidence as insufficient to create the specific privity needed to trigger the Section 315(b) time-bar.

Now, WesternGeco is back before the Supreme Court asking for review on the real-party-in-interest question. Here is how WesternGeco frames the question:

ION worked closely for years with another company, PGS, as its “launch partner,” to develop a product found to willfully infringe WesternGeco’s patents. ION and PGS shared an indemnity relationship, with ION making a “product assurance pledge” regarding the accused product and the asserted patents. After ION lost at trial and was concededly time barred from pursuing IPRs, PGS filed petitions (which ION later joined), resulting in the invalidation of many of WesternGeco’s patents. The Patent Office not only denied WesternGeco discovery into details of the PGS-ION relationship, it prohibited WesternGeco from even filing a motion for such discovery because WesternGeco did not already have evidence that ION “controlled” these IPRs. The Federal Circuit applied a “control” test in affirming.

The questions presented are:

1. Whether the court of appeals and agency erred by holding that “real party in interest, or privy of the petitioner” refers only to others who “control” the petitioner’s litigation before the agency.

2. Whether the Patent Office. may deny discovery—or even leave to file a discovery motion—designed to meaningfully test whether that statutory prohibition applies, and then invalidate a patent.

I see this as a good case for the Supreme Court to take and hear – especially since the court is already familiar with the patents and parties in question.  I find it interesting how the Federal Circuit identified the indemnification provision as “fairly standard” and not specific enough to trigger the real-party-in-interest or privity clauses of 315(b).

One issue of importance in this area is the implied Warranty Against Infringement found in Article 2 of the Uniform Commercial Code.

Unless otherwise agreed a seller who is a merchant regularly dealing in goods of the kind warrants that the goods shall be delivered free of the rightful claim of any third person by way of infringement or the like but a buyer who furnishes specifications to the seller must hold the seller harmless against any such claim which arises out of compliance with the specifications.

UCC 2-312(3).  Although the UCC does not apply to WesternGeco’s case, it likely applies in many others as a potential way to show sufficient privity to trigger the time-bar against against a supplier.

by Dennis Crouch

Absent a more creative solution, the current Federal Government shutdown will continue until a new appropriations law is passed by Congress and signed by the President (or veto-overridden).  The Patent Office (USPTO) is caught-up in this, but in a little bit of a quirky way.

The USPTO is a fee funded agency.  Generally, patent applicants pay the USPTO, and the USPTO uses that money to pay the examiners.  However, Congress has not provided USPTO with authority to simply spend whatever it collects. Rather Congress declares annual appropriation amounts that may be spent – if collected.  If the USPTO brings-in more funds than appropriated then it can put those funds in a “Patent and Trademark Fee Reserve Fund” held by the US Treasury.

And, under the Patent Act, the USPTO can only spend funds that have been appropriated to the Agency.  As a consequence, the USPTO cannot spend new-money coming in the door and it cannot spend money in the aforementioned Reserve Fund (that is empty anyway).

So, how is the USPTO Operating:  The USPTO has continued to operate for the past 25 days without much of any slowdown — paying its employees and contractors. Over the past several years, the PTO has begun placing some amount of appropriated spending into an “Operating Reserve” — treating the money as spent for the purposes of appropriations, even though it hasn’t really been spent.  The Administration has determined that it is proper to save that money on an annual basis and to spend the money now on operations despite the lack of an appropriations bill.  This same approach has been used in the recent prior shutdowns as well and is a primary justification for the fund in the first-place.

Although the Agency’s goal is to have three-months operating reserve, it only had about five-weeks set aside (~$320 million) at the start of the shutdown.  Funds have not yet run-out, but they are now dwindling.

The chart below comes from the 2018 PPAC Annual Report. In that report, the PPAC suggested that the optimal balance be boosted to $700 million+. Once the reserve reaches that amount, the PPAC would then consider suggesting reduction in fees.

When the Funds Run Out: The USPTO has indicated that once those funds are too-low, the PTO will shut down examination activity.  However, the Agency will keep a small-staff working (perhaps unpaid) “to receive new applications and any other examination, post-examination, post-issuance, and PTAB or TTAB filings; receive payments related to such filings; and maintain IT infrastructure, among other functions.”

Congratulations to the PPAC members, PTO Directors, and especially Tony Scardino (PTO Chief Financial Officer since 2010) for their forethought and dedication to this important issue that is now serving the patent community.

by Dennis Crouch

Realtime Data, LLC v. Iancu (Fed. Cir. 2019)

Interesting obviousness case here regarding motivation-to-combine.

The PTAB’s obviousness finding is based upon two prior art references. However, the references are not being combined so-to-speak. Rather, the Board found that the first reference (O’Brien) teaches all limitations of the lossless encoding scheme in Realtime’s claim 1.  The second reference (Nelson) was used essentially to show that the “string encoding” described in O’Brien was the same as the “dictionary-based encoding” in Realtime’s claims.

On appeal, Realtime argued a lack of “motivation to combine” the references — based upon longstanding precedent that a “factfinder must further consider the factual questions of whether a person of ordinary skill in the art would be motivated to combine those references.” Dome Patent L.P. v. Lee, 799 F.3d 1372 (Fed. Cir. 2015).

Here, however, the Federal Circuit ruled that motivation-to-combine was not necessary since the obviousness finding did not combine two different disclosures. Rather, the Board used the second reference to help explain the first reference.

We conclude that, in this case, the Board was not required to make any finding regarding a motivation to combine given its reliance on O’Brien alone. . . . HP relied on Nelson merely to explain that O’Brien’s encoder is a type of dictionary encoder. . . . Under these circumstances, the Board was free to come to the very conclusion it reached: that O’Brien alone disclosed every element of claims 1–4, 8, and 28. And because the Board did not rely on Nelson for the disclosure of a particular element or teaching, the Board had no obligation to find a motivation to combine O’Brien and Nelson.

The CAFC noted that an anticipation determination rather than obviousness may have been more appropriate since O’Brien taught all of the elements of Realtime’s claim.  However, the court concluded that obviousness still worked — since  “a disclosure that anticipates under § 102 also renders the claim invalid under § 103, for ‘anticipation is the epitome of obviousness.’” Connell v. Sears, Roebuck & Co., 722 F.2d 1542 (Fed. Cir. 1983) (quoting In re Fracalossi, 681 F.2d 792, (CCPA 1982)).

= = = = =

Patent at issue: U.S. Patent No. 6,597,812, covering lossless data compression and decompression. Realtime sued HP and others back in 2015 and that led to the responsive IPR filing that is the subject of this appeal.

by Dennis Crouch

Erik Brunetti’s “FUCT” line of apparel doesn’t have much appeal to my sense of style, but the clothing certainly seem to make a statement.  The USPTO refused to grant Brunetti’s application to register the mark — finding that the mark “comprises immoral * * * or scandalous matter” and thus cannot be registered under Section 2(a) of the Lanham Act.

On appeal, the Federal Circuit sided with Brunetti — holding the statute unconstitutional as contrary to the Free Speech provision of the First Amendment.  In its decision, the court followed the Supreme Court’s lead in Matal v. Tam, 137 S. Ct. 1744 (2017). In Tam, the Supreme Court addressed disparaging marks — also prohibited under Section 2(a) — finding that the prohibition on registration to be contrary to free speech rights.  The Government then petitioned the Supreme Court to review the case, and the court has now granted certiorari with the direct question:

Whether Section 1052(a)’s prohibition on the federal registration of “immoral” or “scandalous” marks is facially invalid under the Free Speech Clause of the First Amendment.

In an unusual turn of events, Brunetti did not oppose the petition, but instead agreed that the Supreme Court should weigh-in — and additionally address the following additional question:

Whether Section 1052(a)’s prohibition on the federal registration of “immoral” or “scandalous” marks is unconstitutionally vague under the First and Fifth Amendments.

In granting certiorari, the Supreme Court did not indicate whether the court is addressing both questions, or only the one proposed by the the Government.  Since Tam, the Supreme Court has changes somewhat — Justice Kennedy is gone and Justices Gorsuch and Kavanaugh are now on the court.

by Dennis Crouch

ZUP, LLC, Petitioner v.  Nash Manufacturing, Inc. is a nice teaching case because the invention is so simple.  Zup’s patent covers a wake-board with a particular handle configuration and a method of riding the board — using the handles to change positions. U.S. Patent No. 8,292,681.

In its decision, the Federal Circuit sided with the accused infringer Nash — affirming that the asserted claims are invalid as obvious.  In particular, the Federal Circuit agreed with the lower court ruling that Zup had simply combined well-known elements (handles & foot bindings, e.g.) to solve a longstanding watersport goal.  Zup presented evidence of secondary considerations of both long-felt but unresolved need and copying.  Zup explains its position:

Here, the defendant Nash had been in the field for over 50 years, obtaining numerous patents on water recreation devices similar to the ZUP Board. Nash had tried, but failed, to create a device that would allow broader participation in watersports like waterskiing. Nash praised the ZUP Board. Nash attempted to do business with ZUP, obtaining a ZUP Board from ZUP to analyze. Instead of partnering with ZUP, however, Nash decided to copy ZUP. The ZUP Board is nonobvious if Nash tried and failed to invent it for over 50 years and then copied it
after failing to partner with ZUP.

The appellate majority rejected Zup’s arguments and instead ruled that “The weak evidence of secondary considerations presented here simply cannot overcome the strong showing of obviousness.”  The majority was penned by Chief Judge Prost and joined by Judge Lourie.  Writing in Dissent, Judge Newman argued that the majority improperly treated secondary considerations as a rebuttal factor rather than an integral aspect of the obviousness analysis.

Now, Zup has petitioned the Supreme Court for writ of certiorari — asking whether secondary considerations are properly relegated to rebuttal evidence.

Read the new petition here. SCOTUS.

The Role of Objective Indicia in Non-Obviousness Doctrine

by Dennis Crouch

In re Marco Guldenaar Holdings B.V. (Fed. Cir. 2018)

Guldenaar is is seeking to patent his method of playing a dice game using specially marked dice.  U.S. App. No.  13/078,196.  The PTAB denied his patent on eligibility grounds and the Federal Circuit has now affirmed — holding that the method of game play is an abstract idea and the special markings on the dice represent unpatentable printed matter.  The decision here falls in line with In re Smith, 815 F.3d 816 (Fed. Cir. 2016) where the court held that the claimed method of playing and wagering-on a card game was an abstract idea. The patented method in Smith used a standard deck of cards, and the Federal Circuit noted that “shuffling and dealing a standard deck of cards are “purely conventional” activities. Citing Alice.

Guldenaar’s claim 1 is directed to a “method of playing a dice game” that begins with the provision of a set of three dice — each die having either one, two, or three identical marks. (See the figures above).  Someone then bets on whether or not the marks will appear face-up on the next role, and, after the roll, the bet is settled.  Pretty simple game. (Claim text below).

In applying Alice Step 1, the court found that the claims here are directed to the “rules for playing a dice game,” which is an abstract idea.  In the process, the court warned the PTO that its generalized approach to labeling “methods of organizing human activities” as abstract ideas, but found that this particular method fit the bill.

Under Alice Step 2, claims directed to an abstract idea can be patentable if the claims also include an “inventive concept” sufficient to transform the claimed abstract idea into a patent-eligible application.”  Here, one particular inventive concept appears to be the claimed set of dice that is arguably inventive, and at least not purely conventional.  On appeal, however, the Federal Circuit ruled that the die markings “constitute printed matter [that] fall outside the scope of § 101.”

In Smith, the claims were directed to a standard deck of cards and the court indicated that claims using an original deck of cards could survive Alice. “We could envisage, for example, claims directed to conducting a game using a new or original deck of cards potentially surviving step two of Alice.”   The panel here appears to reject that notion — holding instead that the the original set of dice cannot be seen as transformative since the original aspects

Judge Chen authored the majority opinion that was joined by Judge Bryson.  Judge Mayer filed a concurring opinion channeling Justice Stevens concurring opinion in Bilski.  In Bilski, Justice Stevens (joined by Justices Ginsburg, Breyer, and Sotomayor) argued for a categorical exclusion of business method patents. Here, Judge Mayer argues for a categorical exclusion to the patenting of games — “claims directed to dice, card, and board games can never meet the section 101 threshold because they endeavor to influence human behavior rather than effect technological change.”

= = = =

Claim 1:

1. A method of playing a dice game comprising:

placing at least one wager on at least one of the following: that the first die marking on the first die will appear face up, that the second die marking on the second die will appear face up, that the third die marking on the third die will appear face up, or any combination thereof;

rolling the set of dice; and

paying a payout amount if the at least one wager occurs.

The also PTO continues to save the world from claims to pure information by asking applicants to limit information storage to non-transitory storage mechanisms.

The USPTO has indicated that it “remains in normal operating status” despite the Federal Government funding crisis.

The USPTO remains open for business as normal. This is possible because the agency has access to prior-year fee collections, which enables the USPTO to continue normal operations for a few weeks. Should the USPTO exhaust these funds before a partial government shutdown comes to an end, the agency would have to shut down at that time, although a small staff would continue to work to accept new applications and maintain IT infrastructure, among other functions.

The patent system may be helping with the Border Wall. Consider the following:

• U.S. Pub. No. 20180273288 — directed toward border wall or fence is constructed from a plurality of existing ISO steel shipping containers which are connected together both horizontally and vertically at their corners using conventional corner locks so as to present a continuous physical barrier of any selected length. (Note the 4th floor golf cart).
• U.S. Pub. No. 20180313200 — directed toward an underground wall that also detects “enemy” tunnels.

Stephen Yelderman is a Professor of Law at the University of Notre Dame Law School.

Continuing our study of prior art in the district court, in this post we’ll take a closer look at printed publications. As I discussed in my original post, around 13% of anticipation invalidations and 34% of obviousness invalidations rely on art in this category. (The numbers may be a touch higher than that, as a result of invalidations for which we could not determine the prior art supporting the court’s conclusion). For more background on this project, you can find the full paper here.

The potential sweep of this prior art category is breathtaking. By the terms of the statute—both before and after the America Invents Act—a printed publication found anywhere in the world can qualify as prior art. Moreover, under Federal Circuit precedent, this category includes a number of things that would seem to stretch the colloquial meaning of “publication.” For example, a single copy of a doctoral thesis stored in a university library, a drawing available only by travelling to another country’s patent office, and a posterboard displayed for several days at a conference have all been held to constitute “printed publications.” In dicta, the Federal Circuit has even suggested that a transient display of slides, or a billboard (!?) could, on certain facts, count as a printed publication.

When I teach patent law, our discussion of the printed publications category tends to dwell on these extreme possibilities. But how often do these non-traditional publications actually invalidate patents in practice?

To get a handle on this question, we further classified printed publication prior art into several sub-categories:

This chart illustrates the percentage of invalidations relying on printed publications in each sub-category, as a share of invalidations relying on printed publications at all. Encouragingly, the majority of invalidations based on printed publications relied on traditional reference publications. Just over half of anticipating publications were categorized as regularly published books and journals. Among obviousness invalidations citing a printed publication, 68% cited at least one regularly published book or journal. (The percentages of obviousness invalidations sum to more than 100% because of invalidations citing publications in multiple sub-categories.)  Though some of these regularly published books and journals may have come from obscure outlets, they are at least the kind of documents that a library might collect and an interested researcher might access.

The next sub-category—catalogs, manuals, and brochures—consists of documents distributed to teach the public about the features or availability of a product. This category is conceptually interesting for two reasons. First, though catalogs and manuals are typically mass-produced and widely disseminated, they are not usually collected in research libraries. By their nature, many publications in this category are intended to be transient. These characteristics suggest that publications in this sub-category would likely be much more difficult for a hypothetical prior art searcher to find than a regularly published book or journal.

The second reason that the catalog, manuals, and brochures category is conceptually interesting is that these documents are often evidence of a different kind of prior art entirely—that is, prior uses and sales. In fact, in a few cases we found it unclear whether a product manual was coming in as a distinct prior art reference, or as evidence about the features present in a prior sale. The fact that district courts sometimes rely on publications in this category suggests that activity prior art may be even more important than our top-level analysis suggested.

That said, catalog, manuals, and brochures were fairly insignificant in the larger scheme of things. About a quarter of anticipating printed publications fell into this sub-category. But since only 13% of anticipation events cited a printed publication, that means only about 3% of anticipation events overall relied on a catalog, manual, or brochure. Likewise, though 15% of obviousness events citing a printed publication relied on a catalog, manual, or brochure, that comes out to only about 5% of obviousness events overall. So whether one conceives of these cases as invalidity by prior sale or invalidity by printed publication, the high-level picture of prior art does not change very much.

The next sub-category—“other”—includes all identifiable printed publications not falling into the other two sub-categories. For example, we found patents that had been invalidated by poster board displays, industry whitepapers, proposals circulated at working group meetings of technical standards bodies, doctoral dissertations, and postings on Internet discussion forums. (We did not, for the record, find any cases of patents invalidated by billboards.) The good news was that reliance on potentially obscure or idiosyncratic documents like these appeared to be rare. About 19% of anticipating printed publications fell into this sub-category, amounting to just about 2% of anticipation events overall. A little more than a quarter of obviousness invalidations citing a printed publication included one in the “other” category. These constituted about 9% of obviousness invalidations overall.

There were, however, some publications that defied further classification—usually because sealed court records prevented us from finding more than a shorthand reference to the relevant document. For anticipation, this was rare enough that it could not change our results very much. But this happened frequently enough in cases of obviousness that we must acknowledge some potential uncertainty. If all of the unidentifiable publications turned out to be non-traditional publications, it’s possible that up to 16% of obviousness invalidations may have relied on a publication in the “other” category.

Finally, it’s important to remember that this data only tells us how district courts invalidate patents—not how many or why patents might be invalid in general. It is possible that cases involving non-traditional publications are more likely to settle than other cases, or, for that matter, that they’re less likely to settle. There is a significant possibility of selection effects here, which prevents us from making any inferences about patent quality overall. So, in the end, I’ll have to keep teaching those cases about slide presentations and unpublished college theses, even if “publications” like those only rarely invalidate patents in court.