Patent Eligibility: Handling Disputed Issues of Material Fact

Following the Federal Circuit’s decisions in Berkheimer, AATRIX, and ATS, the role of evidence and factual conclusions in the eligibility analysis is in a somewhat confused state. That setup makes Cleveland Clinic’s recent petition for writ of certiorari quite timely.

Cleveland Clinic Foundation v. True Health Diagnostics LLC, Supreme Court Docket No. 17-997 (2018) questions presented:

In this case, the patents were fully examined by the PTO and found to be novel and not obvious, including for one of the patents, confirmation after two ex parte reexaminations. The PTO further found that the prior art taught away from the claimed inventions. Notwithstanding …, the district court declared [the patents] invalid at the pleading stage. It gave the patents a cursory review, and refused to construe any claim terms. It took 55 separate claims – each claiming a distinct invention with many different limitations – and analyzed them as if all of the claimed inventions were a single method with two simplistic steps. The court did not permit evidentiary submissions or development of the record, and while the district court purported to take judicial notice of the prosecution history, it ignored the PTO record in its analysis. The Federal Circuit affirmed the lower court, invalidating valuable patent rights in a new and nonobvious diagnostic method using known techniques to detect an element in blood, but where the inventors had discovered that adapting known techniques for an entirely new purpose yielded medically-relevant data not known in the prior art and, in fact, taught away from by the prior art.

The questions presented are:

1. Whether the court below erred in holding, contrary to Mayo, that a method involving natural phenomena is ineligible for patent protection if it claims known techniques that have been adapted for a new use and purpose not previously known in the art.

2. Whether Mayo authorizes a district court to invalidate valuable patent rights on the pleadings when there are disputed questions of fact, a disputed question of claim construction or scope, and/or an undeveloped evidentiary record, notwithstanding the presumption of patent validity and settled procedural and Seventh Amendment safeguards that ordinarily prevent the resolution of such disputed questions on the pleadings.

The petition was filed in January and was supported by an Amicus brief filed by Raymond Mercado.  In the wake of Berkheimer and AATRIX the petitioner then filed a supplemental brief setting up the conflict between Judges Moore and Stoll on the one hand and Judge Reyna on the other (Judge Reyna was also author of the Cleveland Clinic decision).

The defendant in this case, True Health Diagnostics, has waived its right to respond to the petition. If the Supreme Court has any interest in the case, the most likely next step would be to ask True Health for responsive briefing — likely followed by a request for the views of the Solicitor General.

Eligibility: A Factual Dispute Requires Alleged Facts

The recent non-precedential opinion of Automated Tracking Solutions v. Coca Cola provides something of a backstop to AATRIX and Berkheimer.   The ATS panel includes Judges Moore and Stoll – the two leading judges pushing for more formality in considering factual conclusions underlying an eligibility decision.  In ATS, however, the panel affirmed a district court judgment on the pleadings that the asserted patent lacks eligibility.  The panel restated its prior conclusions that “patent eligibility under § 101 is a question of law that may contain underlying issues of fact.” However, in this case the court found no material facts in dispute.

The four asserted ATS patents are all directed to “inventory control” processes using RFID technology. U.S. Patent Nos. 7,551,089; 7,834,766; 8,842,013; and 8,896,449.  RFID chips include a transponder that is then identified by a reader that receives a signal via an antenna.  

Claim 1 of the ‘766 patent is listed below:

1. A system for locating, identifying and/or tracking of an object, the system comprising:

a first transponder associated with the object;

a reader that is configured to receive first transponder data via a radio frequency (RF) signal from the first transponder;

an antenna in communication with the reader and having a first coverage area;

a processor coupled to the reader, wherein the processor is configured to receive the first transponder data from the reader and to generate detection information based on the received first transponder data, the detection information comprising first sighting and last sighting of the first transponder in the first coverage area; and

a storage device that is configured to store the detection information.

In reviewing this claim, the District Court followed the Alice/Mayo two step framework asking first, whether the claim is directed toward an ineligible abstract idea and if so, whether the claim also includes an inventive step that goes beyond the ineligible aspects to transform the whole into an eligible invention. On appeal here, the Federal Circuit has affirmed. The results:

Step 1: The claim is directed to the process of collecting data, analyzing the data, and determining results based upon the analysis.  As stated, that process is an abstract idea.

Step 2: Recognizing that RFID technology was known at the time, the claim adds no inventive step beyond the abstract idea.

The patentee attempted to establish a disputed factual question – whether the RFID technology as used in the claims was “routine and conventional” at the time.  In Berkheimer, the Federal Circuit determined that issue to be a question of fact.  Here, however, the patentee had failed to make plausible factual allegations in its complaint sufficient to create a dispute here.  “The complaint alleges nothing to support ATS’s contention that RFID was a developing technology Nor does the complaint allege that any o the hardware components in the representative claims–either alone or in combination as a system–are anything but well understood, routine, and conventional.”  Rather, the specification of the patent states that RFID systems are known and can be quite simple. 

Dismissal affirmed.  

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As an aside, I’ll ask why this case was released as non-precedential while the two parallel 101 cases mentioned above were deemed precedential. Professors Lemley and Gugliuzza (BU) have accused the court (members of the court) of attempting to shift the rule by hiding precedent. Can a Court Change the Law by Saying Nothing?

= = = =

And, you have to love the drawings in the patents. You’ll notice the typical corporate shelf in figure 4 above that includes typical documents and files along with weapons, money, and narcotics.

Science Fiction Law — Still Reeling: Minority Report, Sixteen Years Later

Michigan Law Professor Nicholson Price is teaching an interesting seminar this semester merging science fiction and legal analysis.  We agreed that his students should write blog posts and that I would publish the most worthy on Patently-O.  The first post comes from Lauren Kimmel and is focused on stopping future crimes. – DC

Guest Post by Lauren Kimmel

Steven Spielberg’s Minority Report (starring Tom Cruise) was released over a decade and a half ago; and yet, in many ways, the film has withstood the test of that time. The film takes place in Washington, D.C., in the year 2054—nearly a hundred years after American writer Philip K. Dick published his original short story with the same name and general storyline. In the film, the District’s Precrime Division use futuristic and fatalistic visions of three “precogs” to detect and apprehend would-be, “heat-of-passion” murderers before they are able to carry out their respective homicides.

Sixteen years later, Minority Report offers some interesting insight about where we are in the narrative of our own law and society. For example, the science fiction of the film bears remarkable, if not alarming, similarity to the technology behind predictive policing, a term used to encompass a range of real-world precrime detection systems currently in use around the country and even across the globe. The National Institute of Justice defines predictive policing as “taking data from disparate sources, analyzing them and then using the results to anticipate, prevent and respond more effectively to future crime.” We do not know exactly what predictive policing looks like from the inside out—but these precrime detection systems likely combine crime-mapping software, statistical data, police reports, and complex algorithms to help police better anticipate the next steps of would-be criminals.

On the one hand, predictive policing presents clear benefits to the communities who make use of it; it may be helpful, for example, in halting everything from drug deals to domestic terrorist activity to mass shootings, to violent or gang-related crimes. But predictive policing also raises serious questions about our own “progress” toward a science-based society. Is science-based progress always a good thing? And, even if it is not, is this our path, for better or worse?

Predictive policing helps us write a story about when and where crime will happen, as well as who will commit it. But in the context of our imperfect society, we must ask, Is this story the right one? Importantly, the “black box” of predictive policing technology obscures from public scrutiny its process for arriving at certain crime predictions, sparking key constitutional and public policy concerns. Where does the data come from? What factors are entered into the algorithms? Are certain factors weighted more than others? Does the technology behind predictive policing change over time to incorporate new patterns and findings—and if so, how? Does it learn (a la artificial intelligence technology), or does human instruction (and, along with it, human error) play a role? Do those developers return to the black box of algorithms to clarify when a crime “occurred” but no one was ever charged (i.e., arrests vs. convictions)?

And most importantly, what is the purpose that we, as a society, want predictive policing to serve—and does the technology ultimately serve this purpose? What’s more, even though computers are not biased, the statistics feeding it might be; moreover, predictive policing is only as good as the officers and analyzers who handle the data. Even if human error, at least in the sense of data input, is not a primary concern, context may be just as important as the data itself. A lack of understanding of the context could (and likely does) exacerbate existing racial and socioeconomic tensions. For example, if police are already patrolling a poorer, primarily black neighborhood and, as a natural result, detecting more crime there than the more affluent and perhaps primarily white neighborhoods they are not monitoring (but where crime may nevertheless be occurring), the crime maps compiled using these statistics may be skewed to reflect a measured bias against the former group. Or, if poorer communities are more likely to see theft—because many individuals lack and cannot afford basic necessities—the data may similarly imply that these communities are simply more “crime-prone” than others—when there is really more to the discussion.

One last consideration and concern is the fact that these predictive policing technologies are developed and carried out by private companies, such as PredPol, HunchLab, and Upturn. We should be asking whether it is a good or bad idea to privatize these services, and trust them with developing and interpreting predictive policing technology. Consider the following quote from Rashad Robinson, Executive Director of Color of Change: “Sending corporate power and corporate interest into the criminal justice system will end in bad results. It will end in profits over people and profits over safety and justice and none of us can afford that.”  Especially when we consider what this process has done to our prison systems, it may be worth thinking twice about privatizing other aspects of the criminal justice system.

More on Prosecution Disclaimer

By Dennis Crouch

Arendi v. Google (Fed. Cir. 2018)

In its petition for inter partes review (IPR), Google argued the obviousness of all 79 claims of Arendi’s of U.S. Patent No. 6,323,853. The PTAB granted the petition (acting on behalf of the PTO Director) and issued a final decision cancelling the claims. In its decision, the PTAB followed a common district court practice of issuing alternative reasons for its judgment – holding that (1) its preferred broad claim construction rendered the claims invalid; but (2) the claims would still be invalid under a more narrow construction. On appeal, the Federal Circuit disagreed with the broad construction, but agreed with the alternative reasoning – thus affirming the obviousness holding.

One Click Substitutes: Arendi’s patent claims a process for substituting information (such as a name or address) in a document based upon a single user command. Basically, following user activation, the program will look for a first bit of information within the document – such as a name in a <NAME> field. A database is then used to lookup related information to fill other fields in the document, such as an <ADDRESS> field. The program might also update the original <NAME> field fit the formal version found in the db.

Prosecution Disclaimer: During prosecution, the claims were particularly amended to require operation “upon a single entry of the execute command by means of the input device.” In order to over come prior art, the patentee distinguished the TSO prior art reference based upon the fact that TSO required a user to select a text string while Arendi’s amended claims did “not require the user to select a text string [but] functions automatically upon a single click.” The examiner included that distinguishing point in the reasons for allowance.

During the IPR, however, the PTAB found that (1) the claims to not expressly exclude typing-in a text string; and (2) the statements by the patentee during prosecution were not sufficient to rise to a prosecution disclaimer that would narrow the claim scope; and (3) the examiner’s reasons for allowance are essentially immaterial because prosecution disclaimer is based upon applicant statements, not examiner statements.

On appeal, the Federal Circuit found “clear and unmistakable” surrender of subject matter – the requirement for prosecution disclaimer under cases such as Middleton, Inc. v. 3M, 311 F.3d 1384 (Fed. Cir. 2002); Omega Eng’g, Inc. v. Raytek Corp., 334 F.3d 1314 (Fed. Cir. 2003), Innova/Pure Water, Inc. v. Safari Water Filtration System, Inc., 381 F.3d 1111 (Fed. Cir. 2004); and Sorensen v. Int’l Trade Comm’n, 427 F.3d 1375, 1379 (Fed. Cir. 2005).

Not so easy in My View: I do not see this case as quite so easy as the Federal Circuit made-out. In particular, the patent applicant never stated or argued (on record) that its invention excluded the manual selection of text, but rather stated that “the present invention does not require the user to select a text.”  Ordinarily, an argument that a claim does not “require” a particular action is seen as a far-cry and treated quite differently from a statement that a claim “does not cover” or “disclaims coverage over” that action.  The “comprising” transition language used by the claim further builds upon this argument that no disclaimer took place.

In any event, the holding is that the scope was disclaimed and thus the first portion of the PTAB decision was rejected.

As mentioned above, the PTAB offered its decision in the alternative – and the Federal Circuit agreed with the second reason.  The claims are obvious under the second analysis since a prior art reference (Goodhand) performs “essentially the same textual analysis” and does not require the user text selection.

In sum, the PTAB found that Goodhand shows all of claim 1’s limitations, when giving effect to the prosecution disclaimer and limiting the scope of the “single entry” command. This finding is supported by substantial evidence. On the PTAB’s findings, the alternative conclusion of unpatentability on the ground of obviousness in view of Goodhand is sustained.

Claim Cancellation Affirmed


Isolating and Measuring a Natural Phenomenon

by Dennis Crouch

Ex Parte Simons, APPEAL 2016-002684 (Patent Tr. & App. Bd. Jan. 31, 2018) (Decision on Rehearing)

In this case pending before the USPTO, Australian company Haplomic Technologies is seeking to patent a method of mapping whether methylated DNA bases are cis or trans.

16. A method for improving methylation mapping, comprising,

substantially isolating a DNA molecule from the biological sample, wherein the DNA molecule is an individual metaphase chromosome or a chromatid, or a fragment obtained therefrom;

analyzing the DNA molecule to determine the presence or absence of one or more methylated bases in the DNA molecule and

determining whether any two methylated bases are present in cis on the DNA molecule.

In its original decision, the PTAB affirmed an examiner rejection – finding the claim ineligible as directed toward a natural phenomenon.  However, the patentee requested a rehearing – arguing that the PTAB had failed to properly identify the natural phenomenon being claimed.  On reharing though, the PTAB reaffirmed the decision of no patentable subject matter.

In its analysis, the Board first noted that the claims are not directed toward any transformation of the isolated DNA, but rather simply detecting its parts.  We know from prior cases that isolated DNA remains a product of nature (Myriad) and that detecting DNA sequence is also a phenomenon of nature (Ariosa).  Similarly here, the PTAB ruled:

because the DNA is methylated in its cis or trans configuration prior to isolation, and because Appellant’s claims are directed merely to determining the configuration that exists prior to such isolation, Appellant’s claims are directed to a naturally-occurring phenomenon, i.e., a “phenomenon of nature,” and, therefore, to a judicially-created exception to Section 101.

Looking to step two of the Alice/Mayo analysis, the court found that the claims were written so broadly as to preempt the entire area — and did not including any saving inventive concept application.  “In short, Appellant’s claims are directed to determining, by any means, including means well known in the art, the naturally-occurring cis or transposition of methylated sites on a sequence of isolated DNA.”

Part of the applicant’s argument here was essentially that it combined two different ineligible concepts (isolating the DNA and cis testing) to somehow leave the invention patent eligible. The PTAB though rejected that argument.

It will be interesting to see whether the patentee pushes this case to a District Court or the Federal Circuit for review. Although those options are fun, the more likely outcome is that the patentee will narrow the claims and try again. Mark Nuell at Roberts Mlotkowski argued the case for the applicant.


Some Laws Regarding Laws of Nature

United States Declaration of Independence

When in the Course of human events it becomes necessary for one people to dissolve the political bands which have connected them with another and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature’s God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.

= = =

Institutes of Justinian 2.1.1

By the law of nature these things are common to mankind—the air, running water, the sea and consequently the shores of the sea.

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Georgia Code § 5-5-41.

[DNA testing permitted if . . .]  (F) The testing requested employs a scientific method that has reached a scientific state of verifiable certainty such that the procedure rests upon the laws of nature; and

= = =

La. Stat. Ann. § 15:422 (now repealed)

Judicial cognizance is taken of the following matters: . . . The laws of nature

(Note, in general, courts still take judicial notice of laws of nature).




Apology to Judge Reyna

I want to pause here for a moment to make an apology to Federal Circuit Judge Reyna regarding what could easily be perceived as poor taste humor.  I continue to have the highest respect for the Judge and hope that it was not taken in offense.

Last week when I wrote about the AATRIX Software case, I included an image of Mexican actor Alfonso Bedoya from the 1948 neo-western “The Treasure of the Sierra Madre” along with a modification of the “stinkin’ badges” quote.  The quote was used again in the Mel Brooks classic Blazing Saddles.

At the time when I wrote about AATRIX, I had no conscious thought of Judge Reyna’s Latino cultural heritage. (Judge Reyna dissented-in-part in the AATRIX decision).  A few hours later I deleted the image after considering that it did not reflect well on either myself, Patently-O, or the patent law community.  However, even at that time I did not consciously recognize the potential link to Judge Reyna.  It was only later that I recognized with some horror how it would be interpreted.

Perhaps no offense was taken. Either way though, I do apologize.

– Dennis Crouch


Patents and Antitrust: Trump DOJ Sees Little Connection

Image result for Makan Antitrust Great AgainFor the first time ever, the head of the Antitrust Division for the Department of Justice is a patent attorney – Makan Delrahim – who is known to be “Makan Antitrust Great Again

In a recent speech, Delrahim explained his general position – that patent holders rarely create antitrust concerns.  Rather, it is equally likely that the problem lies with companies implementing new technologies without first obtaining a license from the relevant patent holders.  He explained that the DOJ’s historic approach has been a “one-sided focus on the hold-up issue” in ways that create a “serious threat to the innovative process.”

In response to Delrahim’s approach, a group of technology implementer companies (also known as downstream innovators) and law professors wrote to Delrahim arguing that “patent hold-up is real, well documented, and harming US industry and consumers” — especially in the area of Standards Essential Patents (SEP) — and in ways that the antitrust laws should help fix.

Sweeping in now to buffer Delrahim’s position are a group of libertarian scholars and others (including David Kappos and Judge Michel) who have offered their competing letter.  Their position is largely that the drastic remedies associated with antitrust laws should only be used based upon strong evidence of problems being caused in the market.  Here, they argue that no evidence has shown that violations of FRAND commitments actually cause market harm.

Prof. Jorge Contreras has written on these issues in several Patently-O posts. Contreras did not sign either letter.

Guest Post by Prof. Jorge Contreras: TCL v. Ericsson: The First Major U.S. Top-Down FRAND Royalty Decision

Unwired Planet v. Huawei: An English Perspective on FRAND Royalties

Guest Post on Using the Antitrust Laws to Police Patent Privateering

Good Things Come in Threes? DOJ, FTC and EC Officials Wax Eloquent About FRAND


PTAB Appeals, Standing, and the PTO’s Voice as Intervenor

Guest Post by Matthew J. Dowd and Jonathan Stroud

Professor Saurabh Vishnubhakat’s recent well-reasoned post and longer article add much to the discussion about standing to appeal from the PTAB. Standing has recently garnered significant interest from the Federal Circuit. Building on existing scholarship, we have written a concise synopsis of standing law as applied to PTAB appeals, forthcoming in Catholic University of America Law Review.

Drawing from it, we offer a counterpoint to Professor Vishnubhakat’s view, as expressed in his post, of intervenor standing—with his permission (and we thank Prof. Crouch for the opportunity). Professor Vishnubhakat’s thesis asserts, in part, that while 35 U.S.C. § 143 grants the PTO “the right to intervene in an appeal,” separate and independent constitutional standing requirements should prevent it from doing so when an appellee fails to appear. He finds that the PTO’s “ability to intervene often will rest on its ability to show Article III standing” and that the PTO “as intervenor may be able avoid having to show its own standing—but only if (1) the agency has entered the case on the side of a party that does establish standing, and so long as (2) the agency does not seek relief that is different from what that friendly party seeks.” The PTO, he concludes, should not be able to intervene where a party does not appear.

In our view, as a matter of standing alone, the PTO can participate as an intervenor in virtually all AIA appeals from the PTAB—and many reasons are consonant with the principles on which Professor Vishnubhakat bases his reasoning. We make no judgment here on the merits of the positions the PTO solicitor has or will adopt, or the frequency of intervention. While there is a valid debate about the policy choices and the frequency with which the PTO has intervened, that debate is distinct from the legal question of whether the PTO has, or must have, standing as an intervenor beyond their express statutory grant. Professor Vishnubhakat reasons correctly; he just goes a bridge too far.

First, while no court has definitively held that each party to an appeal must establish independent Article III standing where appellants have standing, most courts and opinions suggest that if the party invoking the court’s jurisdiction establishes Article III standing, the inquiry is resolved. For instance, in Camreta v. Greene, 131 S. Ct. 2020 (2011), the Supreme Court found that any opposing party necessarily has an “ongoing interest in the dispute,” so that the case by nature features “that concrete adverseness which sharpens the presentation of issues.”

In ASCARCO Inc. v Kadish, 490 U.S. 605 (1989), the Supreme Court held that while the state-court plaintiffs-respondents lacked Federal Article III standing, the Court had jurisdiction, because the petitioners seeking review had suffered “a specific injury stemming from the [adverse] state-court decree.” Importantly, the Court took no issue with the respondents’ participation in the appeal; they found simply that “the parties remain adverse,” as the plaintiffs-respondents were defending the state court’s judgment, and an appeal would resolve a “genuine case or controversy.”

And the following year in Department of Labor v. Triplett, 494 U.S. 715 (1990),
the Department of Labor and the Committee on Legal Ethics appealed the claims of a third-party attorney below. The majority held that both appealing parties had standing. The government’s “Committee on Legal Ethics” had “the classic interest of a government prosecuting agency arguing the validity of a law upon which its prosecution is based.” There was “no question” the third-party defendant-respondent Triplett had standing, the court reasoned, given his claim that his clients were being deprived of due process. Justice Marshall, concurring, explained that where “respondent has not invoked the authority of any federal court, then, federal standing principles are simply inapplicable to him.” He went on: “Under this Court’s clear pronouncement in ASARCO, the only relevant question for us here is whether one of the petitioners has standing to seek review by this Court of the state court’s judgment.”

Those are a few in an extensive line of cases supporting the view that the party having to show standing is the one seeking to invoke the court’s jurisdiction. For instance, in Rumsfeld v. FAIR, Inc., 547 U.S. 47 (2006), the Supreme Court held that “the presence of one party with standing is sufficient to satisfy Article III’s case-or-controversy requirement.” At a minimum, any fulsome analysis of intervenor standing must consider this precedent.

Second, Town of Chester v. Laroe Estates, Inc., 137 S. Ct. 1645 (2017)—the Court’s most recent opinion on intervenor standing—comports with prior precedent and runs against the need for intervenors to establish standing independent from the parties to the matter, or to establish the standing of an underlying party whose position they support. In Town of Chester, the Court squarely held that “an intervenor must meet the requirements of Article III if the intervenor wishes to pursue relief not requested by a plaintiff.” The Court cited cases specifying that it is the “plaintiff” who needs to show standing, maintaining consistency with the cases discussed above. To read in a requirement that intervenors must establish standing for their positions—or for the parties they side with—even where they pursue the same relief requested by a party would impermissibly broaden the holding.

The Court further explained that, in multi-plaintiff cases, “[a]t least one plaintiff must have standing to seek each form of relief requested in the complaint.” That statement implicitly accepts that not every party needs to prove Article III standing if multiple parties are seeking the same relief and one party has standing. And it does not follow that at least one defendant must have standing to participate on appeal. The Court has deliberately distinguished between a plaintiff’s standing requirement versus a defendant’s.

Arizonans for Official English v. Arizona, 520 U.S. 43 (1997), is not to the contrary, as the good professor suggests. There, the Court held that standing “must be met by persons seeking appellate review, just as it must be met by persons appearing in courts of first instance.” The person seeking appellate review—and thus invoking the court’s jurisdiction—is the appellant, similar to the plaintiff below.

A third consideration—one noted in Professor Vishnubhakat’s post—further supports the PTO’s role as intervenor, and supports the bulk of, but not all of, his conclusions. He is right that, in cases where the PTO will be asking for relief different from one party with standing, the PTO may then have to demonstrate standing, consistent with Town of Chester. This would be true regardless of—and separate from—whether the underlying party has standing.

This matters little given the Chenery doctrine, which bars courts from accepting an agency’s post hoc rationalization as support for the agency’s decision. Chenery essentially precludes the PTO from asking the Federal Circuit for relief that is any broader than what the PTAB held or what the appellee might argue on appeal. In PTAB appeals, rarely will the PTO be seeking a different scope of relief than what the PTAB did or what an appellee will be seeking—usually affirmance. And if the intervening PTO does expand its argument beyond the scope of the original decision, then its argument is simply barred from doing so by Chenery, and the court need not concern itself with a standing analysis.

Fourth, as a practical matter, even if the PTO had to demonstrate standing, the PTO has a statutory right to participate in the appeal as an amicus. The PTO could advance the same arguments as amicus as if it were intervenor, rendering this debate somewhat academic. And the Federal Circuit, if it were so inclined, could grant the PTO leave to file a brief longer than the standard amicus brief, or any additional briefing it might seek. This point does not affect the Article III standing analysis directly, but it speaks to any practical effect of denying the PTO its statutory right to participate as intervenor. If the Federal Circuit is confronted with the choice of having only one side argued, as opposed to having both sides argued, we would suggest most judges, as a practical matter, would prefer to have the competing arguments for consideration, instead of a docket of one-sided, limited, or partially argued cases. The standing issue aside, the patent system and the public good are best served by arguments fully vetted by the adversarial process.

As a final point, we acknowledge the distinct policy concerns created by frequent intervention on one side of the “v.” Getting beyond the standing issue—which we don’t see as much of a hurdle for PTO participation in PTAB appeals—more significant questions arise about if, when, and how often the PTO intervenes. Indeed, George Washington University Law School Professor Dmitry Karshtedt has persuasively called for further exploration of whether the PTO solicitor must or should defend the Board’s decision. Dmitry Karshtedt, Acceptance Instead of Denial: Pro-Applicant Positions at the PTO, 23 B.U. J. Sci. & Tech. L. 319 (2017). This issue is the third question raised sua sponte in Knowles Electronics LLC v. Matal, currently pending at the Federal Circuit. Professor Karshtedt concludes that the PTO solicitor may disagree with the Board where it is plainly inconsistent with the public good. Although we take no position here, we recommend his paper and agree that it’s a debate well-worth having.

We leave these debates for another day, simply noting that a rough internal count reveals: As of September 2016, out of 179 cases decided, the PTO had intervened 98 times (~54% of decided cases); by September 2017, that percentage had fallen dramatically, to 144 out of the 408 then-decided (~35%). Overall, the PTO has said it has intervened in fewer than 25% of all appeals, and that number continues to fall. There may be several reasons for the decline, such as fewer fundamental legal issues as the AIA matures, or a change in PTO policy after thinking its frequent intervention may have irked some judges. Regardless of the precise reasons for the decline and the other policy concerns raised in Knowles, the question of the PTO’s standing to intervene is a distinct legal question. And we think precedent strongly supports the PTO’s ability to intervene in most, if not all, appeals from the PTAB.

Stambler v. Mastercard: Petition to SCOTUS

Two questions presented on Leon Stambler’s petition for writ of certiorari:

1. Whether covered business method review, an adversarial process used by the Patent and Trademark Office to analyze the validity of existing patents, violates the Constitution by extinguishing private property rights through a non-Article III forum without a jury.

2. Whether the Federal Circuit’s issuance of Rule 36 judgments without opinions for the disposition of appeals from the Patent and Trademark Office violates 35 U.S.C. § 144’s requirement that the Federal Circuit “shall issue” its “mandate and opinion” for such appeals.

The petition explains:

The first question is substantially similar to that presented in Oil States Energy Servs., LLC v. Greene’s Energy Grp., LLC, No. 16-712 (June 12, 2017), which has been argued and is awaiting decision by the Court. The second question is identical to that presented by the Petition for writ of certiorari in Celgard, LLC v. Matal (No. 16-1526) (question #2, petition pending).

The case relates to Stambler’s U.S. Patent No. 5,793,302 (authentication system and method). The patent has been asserted in dozens of cases and upheld in several court decisions prior to the PTAB finding it invalid.


Eligibility Analysis and its Underlying Facts: A Roadmap for Surviving Dismissal on the Pleadings

by Dennis Crouch

Aatrix Software, Inc. v. Green Shades Software, Inc., 2017-1452, 2018 WL 843288 (Fed. Cir. Feb. 14, 2018)

Following upon its February 8 decision in Berkheimer, the Federal Circuit has again sided with the Patentee on eligibility grounds – holding here that the lower court’s judgment on the pleadings failed to consider disputed issues of material fact.  Prior to this pair of cases, it was unclear whether eligibility analysis involved factual questions.  Although pair of cases indicate a precedential sea-change, both opinions were written by Judge Moore and joined by Judge Taranto (Berkheimer was also joined by Judge Stoll).  Here, Judge Reyna dissented, writing:

I respectfully disagree with the majority’s broad statements on the role of factual evidence in a § 101 inquiry. Our precedent is clear that the § 101 inquiry is a legal question. In a manner contrary to that standard, the majority opinion attempts to shoehorn a significant factual component into the Alice § 101 analysis.

Reyna in dissent.

The divide among the court is now quite clear — what is needed is an en banc consideration of the issues.  Failing that, we will continue to muddle and err.

Going back to the majority opinion, the court explained the setup:

  • Plaintiff filed complaint alleging patent infringement;
  • Defendant motioned for dismissal on the pleadings — asking the court to declare the asserted patent ineligible as a matter of law;
  • Plaintiff filed a motion to amend its complaint to add specific allegations of fact directed to step-two of the Alice/Mayo inquiry — attempting to setup a material factual dispute that could not be resolved on the pleadings;
  • District Court found the patent claims ineligible; refused to allow the amended complaint; according to the court the amendment would not have made any difference – would not have manufactured a factual dispute – since eligibility is a pure question of law.
  • On appeal here, the Federal Circuit has vacated the judgment — holding that the complaint raises factual disputes that must be resolved prior to ruling on the eligibility issue.

The majority writes here:

[The Federal Circuit has previously] held that patent eligibility can be determined at the Rule 12(b)(6) stage. This is true only when there are no factual allegations that, taken as true, prevent resolving the eligibility question as a matter of law.

. . .

The district court granted this Rule 12(b)(6) motion without claim construction. We have some doubt about the propriety of doing so
in this case, but need not reach that issue because it did err when it denied leave to amend without claim construction and in the face of factual allegations, spelled out in the proposed second amended complaint, that, if accepted as true, establish that the claimed combination contains inventive components and improves the workings of the computer.

Moore majority opinion.

Following the majority opinion, some plaintiffs will now look to the patentee’s proposed proposed amended complaint as one roadmap establishing a factual dispute sufficient for a patentee to overcome a motion on the pleadings.  In particular, the complaint alleges a novel data importation scheme that is database independent and that “eliminat[es] the need for hand typing in the values.”  Further, the complaint alleges that the result is “increased the efficiencies of computers processing tax forms” and “saved storage space” on the computers.

Although not proven, Judge Moore suggests that – if proven – these allegations would leave the asserted claims patent eligible since they are “directed to an improvement in the computer technology itself and not directed to generic components performing conventional activities.”  Judge Moore then goes on to explain that these allegations are factual allegations rather than conclusory legal allegations and must be given due process according to the rules of our legal system.  The majority opinion also claims the following:

Whether the claim elements or the claimed combination are well-understood, routine, conventional is a question of fact. And in this case, that question cannot be answered adversely to the patentee based on the sources properly considered on a motion to dismiss, such as the complaint, the patent, and materials subject to judicial notice.

This quote sets-up the potential en banc case: To what extent does eligibility involved factual disputes; to what extent should extrinsic evidence be available to prove those facts?  For patent litigators, these questions look strikingly similar to the decades old dispute over the proper approach to patent claim construction.  It is easy to see eligibility following in the same line of reasoning seen in Teva and Phillips that allows for full judicial but opens the door to potential (but often not required) factual findings regarding extrinsic evidence.

Last note here — The claims at issue are claims 1, 2, and 22 of U.S. Patent No. 7,171,615 (“’615 patent”) and claims 1, 13, and 17 of U.S. Patent No.
8,984,393.  These patents cover really simple tax prep forms that I expect the Supreme Court would eat for lunch.

Trump’s Budget Proposal for USPTO Flat for FY 2019

The Trump proposed budget for FY2019 appears to be essentially flat as compared with FY2018.  The proposed budget would permit the USPTO to spend up to $3.459 billion in FY 2019 (year beginning October 1, 2018). We are approaching the 1/2 way mark for FY 2018.  In the most recent PPAC meeting, PTO Chief Financial Officer Tony Scardino reported expected FY2018 spending of $3.444 billion.

Trump Budget (PTO on p. 199):




Reversing vs. Vacating PTAB Decisions

By Dennis Crouch

In re Hodges (Fed. Cir. 2018)

In a split opinion, the Federal Circuit has rejected the PTAB’s anticipation and obviousness decisions – finding that the Board erred in holding that the key prior art reference inherently disclosed the an “inlet seat” defined by a “valve body” of the claimed drain assembly.

Anticipation arises from analysis of the “four corners” of a prior art reference. That one document must “describe every element of the claimed invention, either expressly or inherently, such that a person of ordinary skill in the art could practice the invention without undue experimentation.” Spansion, Inc. v. Int’l Trade Comm’n, 629 F.3d 1331 (Fed. Cir. 2010).  Although “inherent description” offers some leeway, the doctrine only applies if the supposed inherent characteristic necessarily follows from the express teachings of the reference.  Right-off-the-bat, we can note a problem here with the Examiner’s statement that “it is at least ‘arguable’ that [the prior art reference] does not disclose “a valve body which defines an inlet seat.”

Beyond that, in walking through the prior art, the Federal Circuit found a major problem with the PTO analysis — basically that the prior art’s “valve body” was disconnected from the inlet-valve (that inherently contained an inlet seat).  Thus, according to the court, the valve could not “define” the inlet seat as required by the claim.

Figure 7 avove from the prior art shows the issue:  The portion marked in yellow defines the claimed valve assembly and the top red valve is the location of the required inlet seat.  The claim though requires that the valve assembly “define” the valve seat.  I’ll note here a major problem with the analysis – why not just define the “valve assembly” of the prior art as including the upper valve (as I’ve done with my redrawing of Figure 7 below)?

I mentioned above the split opinion. Both the majority (Judges O’Malley and Lourie) and the Dissent-in-part (Judge Wallach) agreed that the PTO had failed to show anticipation.  The difference came with the result – the majority reversed while the dissent would have taken the lesser action of vacating the PTAB ruling.

Here, the appellate panel’s problem with the PTAB is that it found an erroneous factual finding.  However, because the lower tribunal is ordinarily seen as the finder-of-fact, the result of this type of disagreement is usually to vacate the PTAB’s decision and have the lower tribunal review the evidence once again.  Here, the Majority justified its reversal with a conclusion that the PTAB conclusions were “plainly contrary to the only permissible factual finding that can be drawn from [the prior art] itself.”

Writing in dissent, Judge Wallach argues:

When an agency fails to make requisite factual findings or to explain its reasoning, “the proper course, except in rare circumstances, is to remand to the agency for additional investigation or explanation. The reviewing court is not generally empowered to conduct a de novo inquiry into the matter being reviewed and to reach its own conclusions based on such an inquiry.” Fla. Power & Light Co. v. Lorion, 470 U.S. 729, 744 (1985). By reversing the PTAB’s determination [of anticipation] the majority engages in the very de novo inquiry against which the Supreme Court has cautioned.


Patent Pendency Snapshot

The charts below provide a pendency snapshot for utility patents issued in the past month. Each chart provides two curves – one counting pendency from filing date (or 371 Date for Nat’l Stage) to issuance and the other counting pendency from the earliest priority filing date to issuance.  (Each dot represents a three-month period). Median pendency is now down to about 25 months from filing and only about 10% of these newly issued patents were pending for > 4 years.

Federal Circuit: Walker Process Claims do not Arise Under US Patent Law

By Dennis Crouch

Xitronix Corp. v. KLA-Tencor Corp (Fed. Cir. 2018)

Acting sua sponte, the Federal Circuit has transferred this appeal to the Fifth Circuit – holding that the Walker Process monopolization case does not arise under the U.S. Patent Laws as required by the appellate court’s jurisdiction statute 28 U.S.C. § 1295(a)(1). This decision reverses the court’s position from In re Ciprofloxacin Hydrochloride (Cipro) Antitrust Litigation, 544 F.3d 1323 (Fed. Cir. 2008) based upon the intervening Supreme Court decision of Gunn v. Minton, 568 U.S. 251 (2013). The court (Judge Moore) was also clearly perturbed by both parties’ failure to cite or discuss Gunn in their requested supplemental briefs.

Walker Process lawsuits get their name from the 1965 Supreme Court decision Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172, 176–77 (1965). The case stands for the proposition that federal antitrust liability (Sherman Act) can stem from attempts to enforce a patent procured through fraud (inequitable conduct). Here, Xitronix allegation is that KLA-Tencor obtained United States Patent No. 8,817,260 by “intentional and willful misrepresentations and omissions” in a way that created “an artificial impediment to competition.” Complaint. The district court dismissed the case on summary judgment – holding that, “even assuming [he] misstated the state of the prior art,” the prosecuting attorney’s “remarks may fairly be viewed as attorney argument and not factual misrepresentations.” [XitronixSJ]

Pre Gunn: In its 2008 Cipro decision, the Federal Circuit explained that a Walker Process claim arose under U.S. patent law “because the determination of fraud before the PTO necessarily involves a substantial question of patent law.” In Nobelpharma, the Federal Circuit specifically held that the patent-specific issues lead the court to apply Federal Circuit law to Walker Process claims (rather than the default of regional circuit law). Nobelpharma AB v. Implant Innovations, Inc., 141 F.3d 1059 (Fed. Cir. 1998).

Impact of Gunn: In 2013, the Supreme Court altered course in Gunn – holding that that the Federal Circuit’s approach to arising-under jurisdiction had been too loose. In that case, the Court held that a legal malpractice case did not arise under U.S. patent law even though the claim necessarily required application of U.S. patent law. The court explained that, even though necessary, “the federal issue in this case is not substantial.” In Gunn and the prior decision Grable & Sons, the Supreme Court was clear that our system of Federalism requires a “balance of federal and state judicial responsibilities.”

For Xitronix, the state-federal balance is not an issue as it was in Gunn and Grable but rather a question of which Federal Appellate court has jurisdiction. However, the Federal Circuit followed the same approach that the Supreme Court did in Gunn – finding the one-off outcome here unlikely to impact or undermine the court’s “uniform body of patent law.”

Holding: Federal Circuit does not Have Jurisdiction. Case Transferred to 5th Circuit

Federal Circuit: “Injected Molded” limitation imparts structure (although we can’t define what structure)

By Dennis Crouch

In re Nordt Development Co., LLC. (Fed. Cir. 2018)

During the course of prosecution of its flexible knee brace patent, Nordt amended the claims to include a limitation that the struts and other components were “injection molded.” The idea here was that the prior art primarily used fabric or elastic bands and so the injection molding limitation would allow the applicant to slip through.

Claim 1 at issue here:

A support for an area of a body that includes a hinge joint, comprising:

(a) a hinge mechanism comprising an injection molded strut component and injection molded first and second arm components;

(b) an elastically stretchable framework injection molded about the strut and arm components of the hinge mechanism, the framework being configured to extend across the hinge joint of the area of the body, and the framework defining a flexible, elastically stretchable web of elastomeric interconnecting members; …

The examiner though gave essentially no weight to the new limitation. According to the examiner, the claims are apparatus claims and thus the included method of manufacturing is immaterial.

Injection molding is a method of manufacturing an apparatus and claim 1 is an apparatus claim. In order to anticipate the injection molded feature, the prior art must disclose the finished product and not the method of making the product. Therefore, although [the prior art] does not disclose the sleeve is injection molded, [it] does disclose the sleeve is a flexible, elastically stretchable web of elastomeric interconnecting members [as required by the claims]

On ex parte appeal to the PTAB, the Board affirmed the rejection and further implied that, although the “injection molded” limitation could potentially be limiting, Nordt had failed to “persuasively explain structural limitation is imparted by this manufacturing practice.” Thus, although the prior art knee brace was not injection molded, the Board found it to anticipate the resulting product since it included the same structural elements. The approach offered by the PTO classifies the claim as a product-by-process claim. For those claims, the Federal Circuit has ruled that patentability “does not depend upon its [claimed] method of production.” In re Thorpe, 777 F.2d 695 (Fed. Cir. 1985). Rather, the claim will be unpatentable if the resulting product is found in the prior art “even though the prior product was made by a different process.” Id.

On appeal here, the Federal Circuit has vacated that finding – holding that the “injection molded” limitation is a structural limitation and thus should be seen as limiting. In its holding, the court followed the precedent of In re Garnero, 412 F.2d 276 (CCPA 1969) (holding that “interbonded one to another by interfusion” connotes structure to a claimed composite and should therefore be considered in the determination of patentability) as well as Hazani v. U.S. Int’l Trade Comm’n, 126 F.3d 1473, 1479 (Fed. Cir. 1997) (“chemically engraved” was a structural limitation); Vanguard Prods. Corp. v. Parker Hannifin Corp., 234 F.3d 1370 (Fed. Cir. 2000) (term “integral” was a structural requirement even though described as a manufacturing process in the specification); 3M Innovative Props. Co., 350 F.3d 1371 (finding “superimposed” to describe a structural relationship and not a process); SmithKline Beecham Corp. v. Apotex Corp., 439 F.3d 1312 (Fed. Cir. 2006) (Newman, J., dissenting) (listing “a molded plastic” as an example of a process limitation that connotes structure).  See MPEP 2113.

Thus, the general precedent of Thorpe is good law: Board should typically not accord patentable weight to a process limitation in a product-by-process claim. However, patentable weight should be given to the limitation when it connotes a required structure. Here, the Federal Circuit found that this case fits the second category:

[W]e find that “injection molded” connotes structure. Although the application describes “injection molded” as a process of manufacture, neither the Board nor the examiner dispute Nordt’s assertion that “there are clear structural differences” between a knee brace made with fabric components and a knee brace made with injection-molded components.

Here, the court concluded that it surely connotes structure, but was unable to particularly define what that structure means. Rather, on remand the Board will need to determine what particular structures are being claimed by the “injection molded” limitation.

= = = = =

Note here that the court did not discuss how broadest reasonable interpretation impacts the decision here. A different panel might have held that the “best” interpretation of the claims is that the limitation provides structure, but a reasonable interpretation is that it merely indicates the process of manufacturing.

= = = = =

Could the applicant have drawn the same line by claiming that the strut is “configured to exhibit the properties of an injection molded material” rather than claiming an “injection molded” strut?