I teach internet law, and focus substantial time on computer privacy and cyber security law.  The core anti-hacking statute is the Computer Fraud and Abuse Act (18 U.S.C. 1030(a)). Although I’m somewhat surprised by the new DNC v. Russia lawsuit, it is not surprising that the CFAA serves as a primary basis for the lawsuit.

[Read the Complaint]

In addition to Russia, the Democratic National Committee (DNC) also joined Donald Trump Jr., Paul Manafort, Wikipedia, Julian Assange, Jared Kushner, Guccifer 2.0, and others as defendants alleging violations of a wide array of federal laws, including the CFAA, RICO the Wiretap Act, the Stored Communications Act, the DMCA, and the Defend Trade Secrets Act, as well as common law trespass and trespass to chattels.

The complaint begins:

In the run-up to the 2016 election, Russia mounted a brazen attack on American Democracy. The opening salvo was a cyberattack on the DNC, carried out on American soil.  In 2015 and 2016, Russian intelligence services hacked into the DNC’s computers, penetrated its phone systems, and exfiltrated tens of thousands of documents and emails. Russia then used this stolen information . . . supporting the campaign of Donald J. Trump (“Trump”), whose policies would benefit the Kremlin.

In the Trump campaign, Russia found a willing and active partner in this effort . . . Through multiple meetings, emails, and other communications, these Russian agents made clear that their government supported Trump and was prepared to use stolen emails and other information to damage his opponent and the Democratic party.

The intellectual property claims here are two-fold:

1. Violation of the anti-circumvention provisions of the DMCA; and
2. Trade secret misappropriation.

The DMCA’s anti-circumvention provisions provide a cause of action against someone who circumvents a “technological measure” used to control access to a copyrighted work:

No person shall circumvent a technological measure that effectively controls access to a work protected under this title.

17 U.S.C. 1201. Here, the argument is that the firewalls and passwords protecting the DNC computers were the “technological measures” used to protect the files, documents, and emails — all of which are copyrighted.

Similarly, the DNC argues that those files also contain trade secret material.  Here, the DNC argues that – although a non-profit – the DNC is in business.  “Specifically, the DNC is in the business of supporting Democratic political campaigns.” The stolen documents included important strategic information whose value required secrecy.

Although clearly politically motivated, it will be interesting to follow the development of the lawsuit.

by Dennis Crouch

Droplets, Inc. v. E*Trade Bank (Fed. Cir. 2018)

Droplets Patent No. 8,402,115 (interactive link delivery) is invalid as obvious unless it properly claimed priority back to its 1999 provisional application.  The Board found that priority had not been properly claimed — a judgment affirmed on appeal by the Federal Circuit.

The ‘115 patent (the patent at issue) was filed as an application in January 2009 and claims priority to U.S. Pat. No. 7,502,838 (filed November 2003) which itself expressly claims priority to the 1999 provisional via a separate utility patent (the ‘745 patent filed in June 2000).  The ‘115 patent also claims priority directly to the 1999 provisional, although the provisional had expired well before the 2009 file date.

Full Chain of Priority: The problem for the patentee, is that the patent does not expressly spell-out the full chain of priority. In other words, the patentee should have stated something like:

The present application is a continuation of allowed U.S. patent application Ser. No. 10/720,728, filed on Nov. 24, 2003 which has issued as U.S. Pat. No. 7,502,838, which is a continuation application U.S. application Ser. No. 09/599,382 filed Jun. 22, 2000, which has issued as U.S. Pat. No. 6,687,745 on Feb. 3, 2004, and which claims the benefit of Provisional Patent Application No. 60/153,917, filed Sep. 14, 1999.

Instead, the the patentee left-out the full chain (omitting the middle application):

The present application is a continuation of allowed U.S. patent application Ser. No. 10/720,728 … Priority is [also] herewith claimed  … from copending Provisional Patent Application No. 60/153,917, filed Sep. 14, 1999.

At an abstract level, the patentee has done enough to show its intent to claim priority through the chain of priority back to the 1999 application. In my view, the Statute seems to support what the patentee has done. 35 U.S.C. 120 (requiring only “specific reference to the earlier filed application”); see also Section 119(e)(1).

The Earlier Filed Application: The problem, though is that the statute is quite poorly written on the chain-of-priority point.  The statute allows for a priority claim to the filing date of a no-longer-pending “first application” if filed during the pendency of a later filed and still pending application that is “similarly entitled to the benefit of the filing date of the first application.”  The primary requirement in that circumstance is that the new application must include a “specific reference to the earlier filed application.” Note here, that the statute does not discuss further intermediary priority filings — only the “first application” and the later filed application that claims priority back to the first application.  We’re left without a definition of what Congress meant by “the earlier filed application.”  I would suggest three possible definitions: (1) the first application; (2) the later-filed application or (3) both the of these applications (the only two mentioned in the statute).  Federal Circuit holds here, however, that a fourth possibility is correct: (4) “the earlier filed application” means all applications in the priority chain, including all intermediate priority documents.

Let me note here, this decision is not new, but repeats prior Federal Circuit decisions, including Medtronic CoreValve, LLC v. Edwards Lifesciences Corp., 741 F.3d 1359, (Fed. Cir. 2014).  In Medtronic, the Federal Circuit particularly held that Section 120 “requires ‘a specific reference’ to each earlier filed application.”  The PTO also has regulations on point that require “specific reference to each prior-filed application to which the application seeks to claim priority … [including] a reference to each such prior-filed application, identifying it by application number … and the relationship of the applications.” see 37 C.F.R. § 1.78(d)(3).   See also Encyclopaedia Britannica, Inc. v. Alpine Elecs. of Am., Inc., 609 F.3d 1345 (Fed. Cir. 2010).  Perhaps this is beating a dead horse, but I have quite a bit of difficulty following the Federal Circuit’s interpretation of the Statute, but it is the precedent.

Incorporation by Reference: The priority statement in the Droplets patent also included an incorporation-by-reference provision.  Here the Federal Circuit also held that the intermediate priority claims could not be made “specific” via incorporation by reference.

Raniere v. Microsoft and AT&T (Fed. Cir. 2018)

Chain of Title problem.  Keith Raniere is one of the listed inventors of U.S. Patent Nos. 7,215,752 and 7,844,041. Back in 1995, all the inventors, including Raniere, assigned their rights and interests to Global Technologies Inc. (GTI). However in 1996, GTI was administratively dissolved. 18 years later, in 2014 Raniere executed a document purportedly on GTI’s behalf transferring the patents from GTI to Raniere.  He then sued Microsoft and AT&T for infringement.  Unfortunately for Raniere – he could not provide sufficient evidence that he had authority to effect the transfer by GTI (he was never an officer of the company, rather it was substantially owned by his ex-gf).

Rubens’s documents showed the GTI shareholders’ consent to a transfer of shares from Raniere’s ex-girlfriend — who owned 75% of GTI’s shares — to Raniere. The documents Raniere proffered did not indicate that any such transfer was ever completed, however, and did not establish that Raniere owned the patents at issue.

The district court then dismissed the case with prejudice — finding that it was highly unlikely that Raniere would be able to cure his standing defect.  In addition, the court found that Raniere’s testimony absolutely lacked credibility and his conduct involved “a clear history of delay and contumacious conduct.”  Raniere appealed that decision, which was affirmed by the Federal Circuit without opinion (“summary affirmance”).

The district court noted that Raniere promised repeatedly that he could produce evidence that would cure the standing defect identified by Appellees and the district court. Id. Raniere failed to satisfy these promises, according to the district court, as “[d]espite numerous representations, [Raniere] failed to produce any written document or other credible evidence that he had an interest in GTI that would allow him to transfer the patents to himself.” Id. Raniere’s conduct required Appellees “to expend significant resources to oppose [Raniere]’s arguments, which the Court now finds were made in bad faith to vexatiously multiply these proceedings and avoid early dismissal.”

The subject of this appeal is the subsequent award of attorney fees and costs under 35 U.S.C. 285. And here, the Federal Circuit found it an easy case —

Raniere challenges the district court’s decision on four grounds. First, he contends that the district court erred in finding that Appellees are prevailing parties under § 285. Second, he argues that the district court abused its discretion in finding this case “exceptional.” Third, he asserts that the district court erred in sanctioning Raniere under its inherent authority, in the alternative to a fee award under § 285. Finally, he argues that the district
court abused its discretion in determining the
amount of the fee award. We conclude that Appellees are prevailing parties, and that the district court did not abuse its discretion in
finding this case exceptional under § 285 or in its fee award. We, thus, need not reach the district court’s sanction under its inherent authority in the alternative.

Following Octane Fitness and Highmark, we know that attorney fee awards are within the discretion of district court judges and are reviewed with deference on appeal.  Easy judgment here:

The district court specifically found that Raniere’s behavior throughout the litigation employed “a pattern of obfuscation and bad faith,” and that this behavior caused Appellees to incur significant fees and costs to oppose Raniere’s positions. These positions, in the district court’s view, “were made in bad faith to vexatiously multiply these proceedings and avoid early dismissal”—in effect, to stall the termination of the proceedings. Fees Decision, 2016 WL 4626584, at *5. “Because the district court lives with the case over a prolonged period of time, it is in a better position to determine whether a case is exceptional and it has discretion to evaluate the facts on a case-by-case basis.” SFA Sys., LLC v. Newegg Inc., 793 F.3d 1344 (Fed. Cir. 2015). The district court properly examined the totality of the circumstances in this case and found the case to be exceptional. We see no reason to disturb the district court’s well-reasoned determination.

Here, those costs add up — $450,000 in attorney fees for the defendants win at the ultra-preliminary stage for lack-of-standing. Let me note – this is ridiculous $450k to win on standing grounds. OMG! Note – the bill submitted was greater, but the Judge reduced it by 20%.

To put this dollar figure into perspective — excellent lawyer for the defendant Constantine Trela from Sidley argued the appeal and explained the case with the following analogy:

[This case is akin to someone] throwing together a set of documents that says ‘I own a controlling interest in Apple, I hereby name myself chairman, and hereby assign all of Apple’s patents to me.”

I would hope that defendants could win that case for less than $450,000.

New USPTO Director Andrei Iancu testified in Congress on April 18 for the first time in his new official capacity — this time before the Senate Judiciary Committee.  The Director must certainly be a visionary — as the chief guide of U.S. intellectual property policy.  At the same time, the Director is head of a multi-billion-dollar agency with 12,000+ employees.

Although not speaking for the Senate as a whole, Senator Coons kicked-off the hearing with a statement that AIA Trials: “The current review system is systematically biased against patent owners.”  From Senator Coon’s perspective, the AIA was designed to give the USPTO Director authority to “fine-tune” the AIA trial proceedings without further congressional actions — and that Director Iancu should take this opportunity to correct the imbalance.

One key statement from Director Iancu is that he is ready to work with Congress on legislative solutions to the “uncertainty” created by Supreme Court 101 jurisprudence.

The following is the Director’s Opening Statement:  (more…)

by Dennis Crouch

In WesternGeco v. Ion Geophysical, the Supreme Court is focused on the extraterritorial application of U.S. Patent Law.  The particular situation is the scope of damages available for the harm caused by exporting a components of a patented invention in violation of 35 U.S.C. 271(f). The April 16 oral arguments began with Former US Solicitor Paul Clement arguing on behalf of the patentee seeking lost profits associated with would-be infringing uses on the high-seas.  Zachary Tripo argued on behalf of the U.S. Government as Amicus Curiae supporting the patentee.  On the other side was Kannon Shanmugam supporting the Federal Circuit’s decision.

[Read the Oral Argument Transcript]

In my view, the Supreme Court is quite likely to overturn the Federal Circuit’s limitation on lost profit damages and hold instead that Section 284 allows for full compensation for all forms of infringement. The key analogy that may well have won the day is that of the hypothetical French Tourist injured while visiting the US and left unable to work.  Under ordinary U.S. tort law, the tourist would still be able to collect full damages even though the job-loss is in France.  Likewise, according to petitioner and USGov’t, the US patent infringement act (export) should lend itself to full compensatory damages.  That said, I expect for the Supreme Court’s opinion to place additional language on the meaning of proximate cause that may eventually force the Federal Circuit to tighten its doctrine in that area.

The following are a set of somewhat re-arranged excerpts — an attempt to bring some amount of meaning to the ranging discussion.

MR. SHANMUGAM (for the infringer): The presumption against extraterritoriality applies with particular force to the Patent Act. . . . And while the Act of infringement here all of the parties now agree was concededly domestic, our submission is that the damages here were, in fact, foreign. . . . The only thing that you have domestically here — and we all agree that this is true — is the initial act of infringement.

MR. CLEMENT (for the patentee): The plain text of the Patent Act (Section 284) . . . gives the victim of Section 271(f) infringement an entitlement to adequate damages, including lost profits. And the presumption against extraterritoriality raises no obstacle to that commonsense result. . . . I do think it’s important to recognize, though, that what is the infringing conduct is what ION does in the United States [i.e., the export]. What the foreign combiners of the components do on the high seas is not infringement of a U.S. patent at all, which is why I think the presumption against extraterritoriality is really a misfit here. . . . What we’re doing [i.e., asking for] is we are collecting damages for the foreseeable consequences of the domestic act of infringement. . . . I mean, at some level, this case is pretty simple. Because of ION’s domestic act of infringement, my client has $90 million less in its wallet in Houston than it otherwise would have if they had obeyed the law.

MR. SHANMUGAM: To be fair . . . I think that what Petitioner is trying to do in this case is effectively to hold us secondarily liable for what would be or what might not be an act of foreign direct infringement . . . converting a single act of supply from the United States into a springboard for what would effectively be worldwide damages.

JUSTICE GORSUCH: [The claimed profits] arise from a third party’s use over which you have no lawful monopoly. Your patent doesn’t run to the high seas, and so your uses aren’t protected there. So help me out with that portion of the damages alone.

MR. CLEMENT: Sure. The reason that we can collect those damages, even though that conduct is not proscribed by a U.S. patent, is because it is the reasonably foreseeable result of domestic infringement.  (Here, this is simply proximate cause analysis).

JUSTICE BREYER: Imagine you have the converse case. I mean, if we can have a law like this, so can every other country. And now an American firm makes a part in some other country, all right? And that happens more and more. They have laboratories all over the world. They make a part. They bring it back here. It doesn’t violate the patent law of the other — of our country, not at all.

They sue to sell it all over the place.  And suddenly a foreign patent holder, in, say, Switzerland, has — takes this American company and obtains enormous profits on the basis of the sales in the United States, where those sales do not violate American law.

I mean, suppose 10 countries do this. I try to think about that and I see chaos or confusion. And at that point, I think part of comity is, what happens if everybody does it? And then I become uncertain about whether there’s no place for our concern with what happens when we apply American law abroad.

MR. CLEMENT: A couple of points, Justice Breyer. First of all, this has been the rule for basically 100 years. . . . The other thing is . . . I get a couple of pluses because this has also been the rule . . . in the copyright context. And the world hasn’t ended in the copyright context. . . . With all due respect, there would be no chaos. And that is my principal response. And we would have seen chaos in some context if this were really a problem.

MR. TRIPP [Gov’t Lawyer supporting the patentee]: The rule that we’re advocating of full compensation is already the rule that applies basically everywhere else in U.S. law, in tort, in contract, in copyright, that this Court previously assumed applied in patent law as well, and it hasn’t given rise to any significant foreign relations problems in — in any of those areas.

JUSTICE ALITO: But this is what makes this case difficult, because there’s such a gap between the legal injury, which is ephemeral, and the practical injury, which occurs completely abroad.

MR. TRIPP: Yeah, so I think two responses to that. So, first, the patent is a property right, and we often think of the invasion of a property right as — as being something significant, even if it doesn’t have additional tangible harm. But also more fundamentally, it’s quite common to hold a tortfeasor responsible for the harm that it causes when it sets into motion a series of events by which the victim will be — will be hurt, even if they’re not hurt at the time.

JUSTICE KENNEDY: Well, your position is that the Petitioner is not entitled to full compensation for its injury? That’s your position?

MR. SHANMUGAM: Petitioner is not entitled to compensation for foreign damages;

JUSTICE KENNEDY: Which in the full compensation for its injury, your whole position is that this Petitioner is not entitled to full compensation for his injury, yes or no?

MR. SHANMUGAM: Yes, as a consequence of the application of the presumption against extraterritoriality.

JUSTICE GINSBURG: What about proximate cause? Wouldn’t you have to establish at least that the reason that the sales that you lost to the foreign, whatever the people who sweep the high seas, that you would have gotten those contracts if they didn’t?

MR. CLEMENT: Absolutely. We have to satisfy proximate cause. It provides sufficient protection here.

MR. TRIPP: You have the proximate cause overlay on top of it. I think the other place that I think is helpful to look at this is Professor Yelderman’s amicus brief, which does a nice job of walking through the doctrine both of causation in fact and proximate cause in the Federal Circuit when dealing with problems that are analogous to these. These are a robust check.

MR. CLEMENT: I would just like to clarify two details and make a couple of points. One detail, my friend mistakenly referred to this case being brought in the Eastern District of Texas. It was, in fact, brought in the Southern District of Texas, where both of these companies are located. It may be a pedantic point, but the Eastern District of Texas has a certain implication to it that I wanted to clarify. (Laughter.)

by Dennis Crouch

Vanda is an important patent eligibility case drawing a fine line between the the eligible personalized medicine treatment claims and the ineligible methods of Mayo and Ariosa. 

Vanda Pharma v. West-Ward Pharma (Fed. Cir. 2018)

In a split decision, the Federal Circuit has affirmed the validity/infringement of Vanda’s U.S. Patent No. 8,586,610 covering a schizophrenia treatment using iloperidone. The claims require personalized dosage — depending upon the patient’s metabolization rate of iloperidone (“CYP2D6 activity”).

West-Ward filed an Abbreviated New Drug Application (ANDA) that substantially copied Vanda’s FANPAT application — Vanda then sued for infringement.

ANDA-Filing infringement is an oddity – filing of an FDA application to make a generic version of a patented drug is the act of infringement.

It shall be an act of infringement to submit— (A) an application … for a drug claimed in a patent or the use of which is claimed in a patent.

35 U.S.C. 271(e)(2).  Infringement was straightforward here because the proposed package label recommends personalized dosage based upon the aforementioned metabolic activity (and thus would induce infringement).

Eligible Subject Matter: The primary dispute is whether the claims survive the Mayo and Ariosa — i.e,. are they eligible or are they instead directed to an unpatentable law of nature.

The claims at issue in Vanda were roughly parallel to those found unpatentable in Mayo v. Prometheus.  In Mayo, representative claim 1 of the challenged Patent No. 6,355,623 was directed to treatment method that involved (a) administering a drug (6-thioguanine); and then (b) determining blood level of the drug.  A low blood level (less than about 230 pmol per 8×10⁸ red blood cells) indicates a lack of effectiveness and a need for a higher subsequent dose while a high blood level (greater than about 400 pmol per 8×10⁸ red blood cells) indicates potential for toxicity and that the next dose should be reduced.

In finding the claim invalid, the Supreme Court unanimously held that the correlation between blood level, efficacy and toxicity was an unpatentable law of nature and that the administration and determination steps were already well known in the art and thus insufficient to transform the claim to a patent eligible invention.

In Vanda, representative claim 1 is directed to a method of treating a patient suffering from schitzophrenia by (a) determining whether the patient is genetically a poor metabolizer of the drug (CYP2D6 genotype) then (b) administering iloperidone to the patient (12-24 mg per day if good metabolizer; <12 mg per day if poor metabolizer) in order to reduce the risk of “QTc prolongation” for poor metabolizers.

First the dissent — Chief Judge Prost identified the similarity here and explained her position that “the asserted patent claims [are] directed to a law of nature.”  At its crux, the invention began with the discovery of the health problems created by treating folks with lower CYP2D6 activity and recognition that a lower dose would be appropriate.

Importance of the preamble: The majority (Judges Lourie and Hughes) took the other side – and argued that the claiming differences were important between Mayo and Vanda.  Importantly, for them, the preamble in Mayo directed the claims toward “a method of optimizing therapeutic efficacy” while the Vanda claims are directed to “a method for treating a patient.”

This case, however, is not Mayo. First, the claims in Mayo were not directed to a novel method of treating a disease. Instead, the claims were directed to a diagnostic method based on the “relationships between concentrations of certain metabolites in the blood and the likelihood that a dosage of a thiopurine drug will prove ineffective or cause harm.” Id. This “relation is a consequence of the ways in which thiopurine compounds are metabolized by the body—entirely natural processes. And so a patent that simply describes that relation sets forth a natural law.”

Although the representative claim in Mayo recited administering a thiopurine drug to a patient, the claim as a whole was not directed to the application of a drug to treat a particular disease. See id. at 74, 87. Importantly, the Supreme Court explained that the administering step was akin to a limitation that tells engineers to apply a known natural relationship or to apply an abstract idea with computers. See id. at 78 (comparing the claim in Mayo to “Einstein telling linear accelerator operators about his basic law and then trusting them to use it
where relevant”). To further underscore the distinction between method of treatment claims and those in Mayo, the Supreme Court noted that “[u]nlike, say, a typical patent on a new drug or a new way of using an existing drug, the patent claims do not confine their reach to particular applications of those laws.” Id. at 87.

In this case, the ’610 patent claims are directed to a method of using iloperidone to treat schizophrenia. The inventors recognized the relationships between iloperidone, CYP2D6 metabolism, and QTc prolongation, but that is not what they claimed. They claimed an application of that relationship. Unlike the claim at issue in Mayo, the claims here require a treating doctor to administer iloperidone in the amount of either (1) 12 mg/day or less or (2) between 12 mg/day to 24 mg/day, depending on the result of a genotyping assay. The specification further highlights the significance of the specific dosages by explaining how certain ranges of administered iloperidone correlate with the risk of QTc prolongation. See, e.g., ’610 patent at col. 4 ll. 1–15. Thus, the ’610 patent claims are “a new way of using an existing drug” that is safer for patients because it reduces the risk of QTc prolongation. Mayo, 566 U.S. at 87

Very important case here. Although I believe that the invention should be patent eligible, the majority’s approach appears to latch onto simple patent drafting tricks as the basis for distinguishing Mayo — an approach directly rejected by the Supreme Court in Mayo.

by Dennis Crouch

The US Gov’t petition for en banc reheraing in the Brunetti (FUCT) scandalous mark case has been denied without opinion.

Section 2(a) of the Lanham Act (codified at 15 U.S. Code § 1052) authorizes the PTO to refuse registration of marks that are:

immoral, deceptive, or scandalous matter; or matter which may disparage or falsely suggest a connection with persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt, or disrepute… [or certain geographic indicators for wine/spirits]

In Tam, the Supreme Court held that the prohibition on registering marks that disparage persons was a free speech violation.  In that case, Simon Tam had attempted to register the mark SLANTS in reference to the East Asian heritage of his band.

Similarly, Erik Brunetti, is attempting to register the mark FUCT — which is a homonym of a well known profane word. The TTAB refused to register the mark — finding it scandalous.  It is an easy case under old Federal Circuit precedent that ‘vulgar’ marks are scandalous. On appeal, however, the Federal Circuit held that the analysis from Tam applies to scandalous marks as well; and that there is no genuine legal distinction between scandalous and immoral marks.  Thus, the prohibition on registering marks that are scandalous or immoral is also a free speech violation.

One question (of several) is what remains enforceable from the Section 2(a) prohibition? I argue that the remaining three are all still enforceable – and can justify prohibition:  Deceptive Marks; Marks that Falsely Suggest a Connection; and the Limitation on Geographic Indicators.  Although dicta, both the Supreme Court and the Federal Circuit appear to support ongoing refusal to register deceptive marks — noting that Section 2(e) also prohibits registering marks that are “deceptively misdescriptive.”  Similarly, the notion of falsely suggesting a connection seems to me to also be a form of deception.  This all makes sense as a primary purpose of our trademark laws is consumer protection against deception.

In his 1993 article, Branding Attorney Stephen Baird made this same distinction — arguing that prohibitions on Immoral, Disparaging, and Scandalous marks “do not further the stated goals of the Trademark Act.”  However, “registration prohibitions
concerning deceptive and false connection trademarks appear to facilitate the goal of
preventing confusion and deception in the market place. Stephen R. Baird, Moral Intervention in the Trademark Arena: Banning the Registration of Scandalous and Immoral Trademarks, 83 TRADEMARK REP. 661, 788 (1993). See also Friedman v. Rogers, 440 U.S. 1 (1979) (First Amendment permits barring of potentially deceptive marks.) [Note – Baird blogs at duetsblog.com]

In the Brunetti case, the U.S. Gov’t. has one last shot in the court proceedings — petition to the US Supreme Court.  In addition, Congress could move to more narrowly tailor the law to make it constitutionally permissible — for instance by only barring registration of “obscene” marks.

USPTO Director Andrei Iancu gave the keynote address at the April 11, 2018 Patent Policy Conference hosted by the U.S. Chamber of Commerce. The following is an excerpt:

… Dr. Eli Harari … risked everything: his career, his finances, and his family. That first company actually did not work out well, but a few years later, Harari risked it all again and co-founded a new company, which he ultimately called SanDisk. At SanDisk, Harari built upon his EEPROM technology, added critically important new inventions, and perfected flash memory data storage. And he obtained patents, including on how to turn memory chips into reliable systems. Harari’s flash technology came to be used almost universally in devices like digital cameras and cell phones. In 2016, Western Digital acquired SanDisk for $19 billion. But think about it: Without patents, how could someone like Dr. Harari risk everything, put aside his secure career at an established company, and strike it on his own?

As Dr. Harari told me: “The only asset you have is your idea.  If you have no way to protect your idea, you are at the mercy of the next bad guy.  The U.S. patent system is genius, really the bedrock foundation of capitalism.” Harari’s sentiment was echoed by President Ronald Reagan, who said in 1982: “Throughout our Nation’s history, the patent system has played a critically important role in stimulating technological advances.”

How true that is.

Yet today, our patent system is at a crossroads. For more than just a few years, our system has been pushed and pulled, poked and prodded. The cumulative result is a system in which the patent grant is less reliable today than it should be. This onslaught has come from all directions: There has been major reform legislation, and proposed legislation. There have been massive changes brought about by major court cases. And the USPTO itself has taken a variety of actions in an effort to implement these changes. Plus, importantly, the rhetoric surrounding the patent system has focused relentlessly on certain faults in, or abuses of, the system—instead of the incredible benefits the system brings to our nation. …

Still, we are at an inflection point with respect to the patent system. As a nation, we cannot continue down the same path if we want to maintain our global economic leadership. And we will not continue down the same path. This administration has a mission to create sustained economic growth, and innovation and IP protection are key goals in support of that mission.  So, how do we reverse the trend? The good news is that reclaiming our patent leadership status is within reach.

For today, let me focus on two principal points:

(1) Creating a new pro-innovation, pro-IP dialogue, and
(2) Increasing the reliability of the patent grant.

First, we must change the dialogue surrounding patents. … [A] successful system must be defined by its goals, aspirations, and successes. Obviously, errors in the system should be corrected. And no abuse should be tolerated. Errors and abuse should be identified and swiftly eliminated. However, the focus for discussion, and the focus for IP policy, must be on the positive.  We must create a new narrative that defines the patent system by the brilliance of inventors, the excitement of invention, and the incredible benefits they bring to society. And it is these benefits that must drive our patent policies. …

But, how exactly do we translate this into a better patent system? Here’s a start: when we write, interpret, and administer patent laws, we must consistently ask ourselves: Are we helping these inventors? Whether it’s an individual tinkering in her garage, or a team at a large corporation, or a laboratory on a university campus—we must ask ourselves: are we helping them? Are we incentivizing innovation?

And that brings me to my second principal point for today: increasing the reliability of the patent grant. Because that is key to incentivizing innovation. Without reliable patents, inventors like Dr. Eli Harari are less likely to risk it all in order to bring their new concepts to the market. As I said at my Senate confirmation hearing: “When patent owners and the public have confidence in the patent grant, inventors are encouraged to invent, investments are made, companies grow, jobs are created, science and technology advance.” … [The Chamber] report identifies two principal reasons for the increased uncertainty (or lower reliability) of our patents:

(1) Patentability Standards, or more specifically, patent subject matter eligibility pursuant to 35 USC Section 101; and
(2) Opposition procedures, namely, the post-grant procedures, such as IPR, that were established by the America Invents Act.

Let me address each of these in turn.

First, our current law surrounding patentable subject matter has created a more unpredictable patent landscape that is hurting innovation and, consequently, investment and job creation. Recent cases from the Supreme Court – Mayo, Myriad, and Alice – have inserted standards into our interpretation of the statute that are difficult to follow. Lower courts applying these cases are struggling to issue consistent results. Patent lawyers trying to advise their clients are, in turn, struggling to predict the outcome with respect to certain patents. And examiners at the USPTO must spend increased amounts of time addressing this challenging issue. The current standards are difficult for all: stakeholders, courts, examiners, practitioners, and investors alike. System-wide, a significant amount of time is being spent trying to figure out where the lines should be drawn, and what’s in and what’s out. And multiple people looking at the same patent claims often have trouble agreeing on, and predicting, the outcome. Something must be done. To be sure, we must and will apply Supreme Court law faithfully. This does not mean, however, that more cannot be done to increase clarity and predictability. Of course, given our statutory mandate, there is only so much that the USPTO can do. But within that mandate, we will do everything we can. Currently, we’re actively looking for ways to simplify the eligibility determination for our examiners through forward-looking guidance. Through our administration of the patent laws, which we are charged to execute, the USPTO can lead, not just react to every new case the courts issue.

Second, your report also mentions our “patent opposition procedures” as a reason for the increased uncertainty of our patents. This refers primarily to our Inter Partes Review, or the IPR system. This was a creation of the America Invents Act, and since its introduction five and a half years ago, we have now conducted more than 8,000 such proceedings. It’s been a very popular proceeding. Opinions on this new system diverge widely. Yet each opinion is passionately held by its supporters. Pointing to the high invalidation rates in IPR proceedings, some hate the new system with vigor, arguing that it’s an unfair process that tilts too much in favor of the petitioner. Others love the system, and think it’s the best tool we have to correct errors, eliminate “bad patents,” and improve patent quality. Who is right? Well, both arguments have legitimate elements. But I encourage people to reduce the hyperbole and look at the process with fresh eyes, in order to understand its true benefits and true challenges. This is what we are now doing at the USPTO.  Indeed, it’s one of our highest priorities. We need to carefully balance rights-holder’s and rights challenger’s interests. On the one hand, for example, this proceeding can come years after issuance, when the patent owners and the public may both have relied on those rights and made investments accordingly. On the other hand, we do want to execute the statutory mandate and help maintain the quality of patent rights. And – assuming the Supreme Court does not declare it unconstitutional – we do want the IPR system to effectively address invalid claims, but at the same time, we don’t want to throw out the baby with the bathwater. The filters need to be appropriately set.  And so, among various other things, we are now examining: how and when we institute proceedings, the standards we employ during the proceedings, and  how we conduct the overall proceedings.The goal, with whatever action we take, is to increase predictability of appropriately-scoped claims….

We have a remarkable patent system, born from our Constitution and steeped in our history. It is a crown jewel; a gold standard. We have a unique opportunity to ensure it meets its full Constitutional mandate to promote innovation and grow our economy.

I look forward to working with all of you in support of that great endeavor. Thank you again for the invitation to participate in this important discussion.

by Dennis Crouch

Maxon v. Funai (Fed. Cir. 2018) (nonprecedential opinion)

In a sweeping judgment,the N.D. Ill. district court dismissed Maxon’s infringement case — finding the claims of the plaintiff’s four asserted patents to be invalid for claiming ineligible subject matter under 35 U.S.C. 101.   On appeal, the Federal Circuit has affirmed.

The patents here are all part of the same family — all directed to a seeming business method of providing an “electronic means of increasing user control over subscription entertainment content.”  U.S. Patent Nos. 8,989,160; 7,489,671; 7,486,649; and 7,171,194.  Although the bulk of the patents were issued pre-Alice (2014), the ‘160 was issued later in 2015.  During prosecution, the examiner did reject the claims originally under Section 101 — that was overcome however by amending the specification to limit “computer-readable medium” to only non-transitory storage.  Of course, that strict line-drawing does not work for the flexible eligibility analysis applied in court.

Claim 8 of the ‘160 patent is listed down below and is treated as representative.  The claim is directed to a device capable of sharing services with other devices.  In walking through the two-step Alice framework, the Federal Circuit first noted the patentee admitted that the patents were directed to an abstract idea — that of “decentralized delivery controlled by the owner of a plurality of devices.” Yes indeed, the opening brief begins with the following statement: “Maxon’s claims are indeed directed to an abstract idea: decentralized service delivery controlled by the owner of a plurality of devices.”  This is a strategy that I probably would have avoided — especially recognizing the strong correlation between the two Alice steps.

While is true that a claim directed to an abstract idea can still be patent eligible if they offer application of an inventive concept beyond the abstract idea itself, that did not work here for Maxon.  Rather, both the district and appellate courts found “the claims merely recite generic computer elements for their basic functions and thus do not transform the claimed abstract idea into eligible subject matter under Alice.”  Maxon had argued that the “ordered combination of the claimed elements” constituted an inventive step. The courts disagreed with that argument — holding that “[t]he only method of reaching the result the patent teaches is, in essence, use of generic computer components for their standard purposes to achieve the result.”

Invalidity Affirmed.

= = = = =

Representative Claim 8:

An audio-video device capable of sharing services with a plurality of other devices within a personal network, the audio-video device comprising:

a computer-readable medium having storage for a first address corresponding to the audio-video device, a second address corresponding to the personal network, and a third address corresponding to a service provider network;

input/output logic configured to receive from a user a desired change to a service capable of being provisioned to the audio-video device from at least one service available generally to the personal network;

a processor in communication with the computer-readable medium and the input/output logic, the processor programmed to prepare an inbound signaling word comprising at least the first address and payload data representing the desired change to the service capable of being provisioned to the audio-video device from the personal network;

and a transceiver providing the inbound signaling word to the service provider network where the service provider network comprises logic to process the inbound signaling word including modifying stored information in a subscriber database to effect the desired change to the service capable of being provisioned to the audio-video device from the personal network,

the transceiver further receiving an outbound signaling word comprising the first address corresponding to the audio-video device and data indicating the desired change to the personal network, the outbound signaling word responsive to the desired change to the service capable of being provisioned to the audiovideo device from the personal network.

The 8th Circuit court of appeals holds court at Mizzou law school about once each year.  Although no IP cases this year, all three slated for tomorrow’s oral arguments are interesting:

Is the right to counsel enforceable in court?: The first case involves the class action Church  v. State of Missouri and Gov. Eric Greitens.   Plaintiffs in the case are “individuals who are currently facing criminal charges in Missouri state court and who are represented by lawyers from the Missouri State Public Defender Office.”  The problem is that Missouri has inadequately funded the Public Defender Office in a way that public defenders allegedly “systematically provide constitutionally deficient legal representation.”  The lower court is allowing the case to proceed.  The appeal by the State argues for immunity.  In particular, the Government argues that: (a) the Eleventh Amendment and the doctrine of sovereign immunity bar Plaintiffs’ claims against the State of Missouri; (b) Plaintiffs’ claims against Missouri’s Governor do not fall within the Ex parte Young exception to sovereign immunity; and (c) that absolute legislative immunity bars Plaintiffs’ claims against the Governor.

Seizing Guns of Someone with Mental Instability who has Committed No Crime:  The second case fits well within recent news cycles.  Mark Wellman v. St. Louis County.  In 2014, Wellman permitted himself to be admitted on a short term basis (96 hour hold) to a psychiatric facility based upon suicide threat.  He was released and has no further relevant medical history.  At the time, Officers were told there were guns in the home — they entered on two occasions while he was hospitalized without permission or a warrant and found dozens of weapons that they confiscated.   St. Louis County then refused to return the weapons unless he jumped through special hoops, including either obtaining a Writ of Replevin or else a “no-danger” note from a treating psychiatrist followed by administrative approval from St. Louis County Counselors.  Instead, he sued – both for a return of the guns and for damages for violating his constitutional rights.  The district court ordered return of the guns, but did not assign any liability under 42 U. S. C. §1983.  Wellman appealed.

Is an RV a residence or a vehicle?: US v. Houck. After snooping through peer-to-peer usage, a Pennsylvania cyber-crimes investigator found six files allegedly containing child pornography associated with a particular IP address. Using a court order, the investigator obtained information that Audrey HJ (the Defendant’s mother) was assigned that particular IP for her home use.  The police obtained a search warrant for Audrey’s Pennsylvania home as well as all “vehicles” present at the time.  At the time of the raid, the police searched Houck’s Recreational Vehicle (RV) (a “fifth wheel trailer”) where he claims to have been living (at the time, the RV was hooked-up to water and electric lines, and its A/C was running).  The district court suppressed the evidence — finding it to be an unreasonable search, and the U.S. government has appealed.

Helsinn Healthcare v. Teva Pharma (Supreme Court 2018)

Helsinn’s petition for certiorari received strong support this week from a bevy of ten briefs amici.  The missing element now is a call from the Supreme Court for the views of the Solicitor General (CVSG) and a resulting brief from the U.S. Government supporting the petition.

The Patent Act bars the patenting of inventions that were “on sale” prior to to the invention’s filing date.  The question on appeal here is whether the AIA limited “on sale” to only include publicly available information — or instead do secret and confidential business deals also count as invalidating prior art (if ever discovered). Question Presented:

Whether, under the [AIA], an inventor’s sale of an invention to a third party that is obligated to keep the invention confidential qualifies as prior art for purposes of determining the patentability of the invention.

I previously wrote about the petition here:

Helsinn v. Teva: On Sale Bar Post AIA

Briefs:

• Brief amicus curiae of Congressman Lamar Smith. Brief filed by Robert Armitage who was a major shepherd of the AIA argues that new law eliminates inventor-focused forfeiture provisions.  17-1229 Amicus Brief of Lamar Smith
•  Amicus brief of American Intellectual Property Law Association. Statute amended the old law — eliminating secret prior art. Final AIPLA Amicus Brief Helsin v Teva 3-30-18
• Amicus brief of Intellectual Property Owners Association. Federal Circuit approach is at odds with PTO interpretation. 17-1229 Brief for Amicus
• Brief amicus curiae of Pharmaceutical Research and Manufacturers of America.  Federal Circuit decision here calls into question “countless” issued patents. 17-1229_tsac_PhRMA
• Amicus brief of Bar Association of the District of Columbia. Decision will chill innovation. 17-1229 Amicus Brief–PDFA.
• Amicus brief of The Naples Roundtable. The “Sense Of Congress” harmonization portion of the AIA should be helpful in the interpretation.  17-1229 Brief of Amicus Curiae
• Amicus brief of The Massachusetts Biotechnology Council.  There is currently too much uncertainty in the law. MassBio Amicus Brief Apr 2 2018 Efile Final – PDFA
• Amicus brief of Boston Patent Law Association.  The case is ripe for review.  17-1229 ac The Boston Patent Law Association
• Amicus brief of The Biotechnology Innovation Organization (BIO). The Federal Circuit’s “Atextual Interpretation” sends mixed messages. 17-1229 Amicus Brief
• Amicus brief of US Inventor, Inc. “The ‘little guy’ stands to bear a disproportionate and the most destructive brunt of this “on sale” bar storm.  17-1229 TSAC Brief

Knowles Electronics v. Iancu (Fed. Cir. 2018)

In a split decision, the Federal Circuit has affirmed a PTAB Inter Partes Reexamination decision against a patentee – finding the claims of Knowles Patent No. 8,018,049 invalid as anticipated/obvious.

The patent here covers a cool microphone on a chip with a special inlaid housing for shielding a transducer the transducer when in use in a hearing aid.  The patent claims the microchip “package,” and the construction of that term forms the crux of the appeal.  Note here that this is the same debate previously discussed in the Federal Circuit’s March 1 decision in Knowles Electronics v. Cirrus Logic (Fed. Cir. 2018) [Knowles Case]

Here, the PTAB construed “package” as “a structure consisting of a semiconductor device, a first-level interconnect system, a wiring structure, a second-level interconnection platform, and an enclosure that protects the system and provides the mechanical platform for the sublevel.”

On appeal, Knowles asks argues that the package should further require a “a second-level connection with a mounting mechanism.”  That limitation was required by the Federal Circuit in two prior decisions on closely related claims.  In appeal the Federal Circuit sided with the PTO — reaffirming that the USPTO need not follow prior Federal Circuit claim construction decisions:

We have held that, in some circumstances, previous judicial interpretations of a disputed claim term may be relevant to the PTAB’s later construction of that same disputed term. See Power Integrations, Inc. v. Lee, (Fed. Cir. 2015).

According to he court, the PTAB satisfied its requirements by considering the prior court constructions and determined that its construction still complied with the term’s broadest reasonable interpretation (BRI).

Jude Newman offered a dissent making two collateral points:

1. The PTO should not have been allowed to intervene in this case to defend the PTAB Judgement.
2. Even if allowed to intervene, the PTO should not have been permitted to present additional evidence (in the form of dictionary definitions) in the appeal.

Droplets v. Iancu (Supreme Court 2018)

A new petition for writ of certiorari questions the extent that the Federal Circuit can affirm a PTAB IPR decision on grounds different than those relied upon by the Board.

The rule in the Federal Circuit yes, affirmance-on-other-grounds is allowed so long as the Federal Circuit does not need to decide new issues of “fact, policy, or agency expertise.”  In re Comiskey, 554 F.3d 967, 974 (Fed. Cir. 2009). The Federal Circuit’s approach is in some amount of tension with the Chenery doctrine of Administrative law which advises courts to “judge the propriety of [agency] action solely by the grounds invoked by the agency.” SEC v. Chenery, 332 U.S. 194 (1947).  Droplets asks the question:

Whether “an agency’s action must be upheld, if at all, on the basis articulated by the agency itself” (State Farm, 463 U.S. at 50), or whether a court can substitute its own views for the agency’s whenever the issue is “legal in nature” (In re Comiskey, 554 F.3d 967 (Fed. Cir. 2009)).

There are a few difficulties with Droplets case here – most pointedly is the fact that the Federal Circuit did not expressly rule on other grounds, but instead affirmed without opinion (R.36).  Here, the Droplets argument comes from a “tacit” admission from the PTO Solicitor that the Board’s basis for its decision was inadequate.

Read the petition: droplets v. iancu–cert.petition–FILED