This case is an example of a “picture claim” that works to avoid the prior art.

Toy’s picture-claim wins the day before the PTAB.

ChoiRock Contents Factory v. Aldric Saucier, Spin Master, Ltd. (Fed. Cir. 2020)

This case centers on Spin Master’s patented transformable toy. U.S. Patent 7,306,504. Korean toymaker ChoiRock petitioned for IPR, but the PTAB sided with the patentee — holding that the challenged claims had not been proven unpatentable.

On appeal, the Federal Circuit issued a split opinion on obviousness with Judges Bryson (Author) and Taranto in the majority affirming patentability and Judge Dyk dissenting (with regard to most of the claims).

Standing to Appeal: Before reacting the merits, the court first considered whether the patent petitioner had standing to appeal. ChoiRock challeged the patent in an IPR that reached final decision and thus has a statutory right to appeal under 35 U.S.C. 319.

A party dissatisfied with the final written decision of the PTAB under section 318(a) may appeal the decision pursuant to sections 141 through 144. Any party to the inter partes review shall have the right to be a party to the appeal.

In addition to the statutes, Federal Courts also have their own standing requirements based upon the limited jurisdiction offered by the case-and-controversy requirement found in Article III of the U.S. Constitution (as interpreted).  When a patent challenger appeals an adverse ruling from the PTAB it must establish that it sits in conflict with the patent holder regarding the patent in a way that is sufficiently concrete. In Spokeo, the Supreme Court offered a three part requirement of (1) injury in-fact; (2) the injury being fairly traceable to challenged conduct of the other-side; and (3) the injury being redressable by the court. Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016).

IPR appeals offer an interesting setup because the parties have been vigorously fighting over patent validity at the PTAB and because the statute expressly purports to create a right-to-appeal.  Still, the Federal Circuit requires that the appellant show that the patentee has been wielding the patent in a way that causes injury to the challenger.

Here, Spin Master sent a letter to ChoiRock indicating that the company was infringing several of its patents, including the patent at issue here and, according to the court, ChoiRock “provided evidence establishing that it has concrete plans to begin selling that product line in the United States by early 2020.”  The Federal Circuit does not review this evidence of concrete plans. I pulled-up the briefing and found the unhelpful briefing regarding this evidence:

Obviousness:

The basic argument on obviousness is that the prior art teaches all of the elements.

On appeal, however, the Federal Circuit agreed with the PTAB that the prior art’s “display member” include a “plurality of revealers rotatably connected to [a] movable member[]”.  Rather, only the head was a rotatably connected revealer (one is not a plurality).  This is where Judge Dyk dissented — arguing that the arms and legs were also “revealers.”

Proof that the Infringer was Notified of the Infringement

by Dennis Crouch

Arctic Cat Inc. v. Bombardier Recreational Prods. Inc. (Fed. Cir. 2020)

This case involves the notice requirement for collecting back-damages in patent cases.  35 U.S.C. 287(a) creates a system for limiting back-damages in instances  where a patentee fails to mark its patented articles as patented.

In the event of failure so to mark, no damages shall be recovered by the patentee in any action for infringement, except on proof that the infringer was notified of the infringement and continued to infringe thereafter, in which event damages may be recovered only for infringement occurring after such notice. Filing of an action for infringement shall constitute such notice.

Id.  The marking requirement only applies to patentees practicing the invention via a “patented article.”  Non-practicing entities have nothing to mark, nor do patentees practicing their unmarkable patented process. In those situations, back damages are available — although still limited to six-years pre-complaint under 35 U.S.C. 286.

In this case, Arctic Cat had stopped manufacturing its patented thrust steering systems by the time the patent had issued — so no marking possible there.  However, Arctic Cat had licensed several of its patents to Honda, including the patents at issue here.  A couple of details regarding the license are important here: (1) The license was agreed-to prior to the issuance of the patents at issue and so did not expressly name them by patent number. However, the license expressly includes later-patents covering Thrust Steering. (2) The license expressly states that Honda has no marking requirements.

Honda made & sold products under the license and did not mark the products with Arctic Cat’s patent numbers.  Although disputed, Honda arguably stopped making covered-products in 2013.  Arctic Cat then sued Bombardier in 2014.   The question then on appeal is how-far back can Arctic Cat collect damages:

  1. Damages only go back to the date of the complaint filing since licensed products had been sold and not marked;
  2. Damages go back to 2013 — when it was no longer possible to mark the products; or
  3. Damages go back the full six years based upon a jury’s holding that the infringement was willful, which implies actual notice of the patent.

Holding: The answer by the court is #1 – Arctic Cat won’t get any pre-filing damages.

#2 (Damages after Cessation) is incorrect because “cessation of sales of unmarked products” alone does not excuse or cure “noncompliance with the notice requirement of § 287.” Rather, “to begin recovering damages after sales of unmarked products have begun, § 287 requires that a patentee either begin marking its products or provide actual notice to an alleged infringer; cessation of sales of unmarked products is not enough.”

#3 (Full Damages) is incorrect because the Federal Circuit has previously held that the back-damages “actual notice” requirement focuses on providing-of-notice.  What we look at is whether the patentee acted to provide notice — it is “irrelevant … whether the defendant knew of the patent or knew of his own infringement.” Amsted Indus. Inc. v. Buckeye Steel Castings Co., 24 F.3d 178, 187 (Fed. Cir. 1994) (citing Am. Med. Sys., Inc. v. Med. Engr. Corp., 6 F.3d 1523, 1537, N.18 (Fed. Cir. 1993) and quoting Devices for Medicine, Inc. v. Boehl, 822 F.2d 1062 (Fed.Cir.1987) (“Absent notice, [infringer’s] ‘knowledge of the patents’ is irrelevant.”).

Looking back to the statute — the key line calls for “proof that the infringer was notified of the infringement.”  287(a).  The court holds here that “notified of the infringement” requires an action by the patentee to provide actual notice. This outcome is similar to what is required by Fed. R. Civil Procedure R. 4(c) which places the burden on the plaintiff for providing notice of a new complaint being filed. A key difference though is that the rules of civil procedure actually spell out that “the plaintiff is responsible for having the summons and complaint served.” I’ll note here that the “filing” of a lawsuit triggers notice under 287 — service of the complaint and summons is seemingly not required. It is also different outcome than the notice requirement found in property recording statutes, including 35 U.S.C. 261 which asks whether a “subsequent purchaser” was “without notice.”

The language of Section 287 at issue here stems from the Patent Act of 1861. That statute indicated that – absent marking – “no damage shall be recovered by the plaintiff, except on proof that the defendant was duly notified of the infringement, and continued after such notice to make or vend the article patented.”  In an 1894 decision, the Supreme Court found that the “duly notified” statement requires an action by the patentee to provide notice.

The clear meaning of this section is that the patentee or his assignee, if he makes or sells the article patented, cannot recover damages against infringers of the patent, unless he has given notice of his right, either to the whole public, by marking his article ‘Patented,’ or to the particular defendants, by informing them of his patent, and of their infringement of it.

Dunlap v. Schofield, 152 U.S. 244, 247–48 (1894).  In Coupe v. Royer, 155 U.S. 565 (1895), the Supreme Court repeated that the required notice is “an affirmative fact, and is something to be done by him” i.e., done by the patentee.

In an interesting article, Michael McKeon argues that the Federal Circuit’s approach of requiring “an affirmative act” is actually based upon “a specific misquote of a critical word (act instead of fact).” Michael J. McKeon, The Patent Marking and Notice Statute: A Question of “Fact” or “Act”?, 9 Harv. J.L. & Tech. 429, 431 (1996). McKeon argues that Dunlap and Coupe were both about placing a burden of proof on the patentee — the patentee must affirmatively prove the fact that notice occurred — and that the Federal Circuit mistakenly read the cases as requiring an affirmative act of providing notice. McKeon cites to several pre-Federal Circuit cases that find actual notice is sufficient even without affirmative notice from the patentee. See, for instance, Warner v. Tennessee Products Corp., 57 F.2d 642 (6th Cir. 1932) (“Actual notice of the issue and contents of the patent, and of the claims that a practice infringes, is sufficient regardless of the source of such notice.”); Abington Textile Mach. Works v. Carding Specialists (Canada) Ltd., 249 F. Supp. 823, 849 (D.D.C 1965) (defendant’s actual/constructive notice was sufficient even though prior to formal notice from the patentee).

Patently-O Bits and Bytes by Juvan Bonni

Recent Headlines in the IP World:

Commentary and Journal Articles:

New Job Postings on Patently-O:

Processing Checks and Patent Eligibility

Solutran’s new petition for writ of certiorari asks a seemingly simple question:

Does Alice’s step one require that the claims be viewed as a whole and that consideration be given to the claimed advance over the prior art?

Solutran, Inc., v. Elavon, Inc. (Supreme Court 2020).

In the underlying litigation, the district court denied the defendant’s summary judgment motion on eligibility.  Similarly, the USPTO PTAB had refused to institute a covered-business-method review  on eligibility — explaining that the method of processing paper checks includes nothing “that would indicate that it is directed to an abstract idea at all.” On appeal, however, the Federal Circuit reversed — holding that the claims were directed to the abstract idea of crediting a merchant’s account as early as possible while electronically processing a check.

Claim 1 of U.S. Patent No. 8,311,945 is a method of processing checks and lists a four step process: (1) receiving data associated with magnetic ink character recognition (MICR) for each paper check (but not an image file of the checks); (2) crediting the merchant account; (3) subsequently scanning the checks for a digital image and (4) comparing the scanned image with the MICR information.

[Petition]

Solutran v. Evalon: Processing Paper Checks and Patent-Eligible Subject Matter

 

 

Pre-Possessory Interests in Patent Law

by Dennis Crouch

A newly canonical case in property law texts is Popov v. Hayashi, 2002 WL 31833731 (Cal. Super. Dec. 18, 2002).  The case involves a Barry Bonds record-setting home run baseball.  Alex Popov almost caught the ball, but as it entered his glove he was immediately engulfed by the crowd of fans who were deemed an “out of control mob, engaged in violent, illegal behavior.”  The ball came-out and Patrick Hayeshi (who was also knocked to the ground) picked up the ball and took possession. There was no credible evidence that Hayeshi took part in any of the violent or illegal behavior. Because of the oddity of fandom, the $6 ball was boosted to an expected value $1.5 million based upon its record-setting experience. (It was eventually sold at auction for ~$500k because of Bonds’ drop from fame).

Hayeshi had physical possession, but Popov wanted ownership and sued — pleading conversion, trespass to chattel, injunctive relief and constructive trust.

In its decision, the California judge partially ruled for Popov — holding that he had a “pre-possessory interest” in the baseball once it went in his glove, and that interest was unlawfully interrupted by the Crowd.

As a matter of fundamental fairness, Mr. Popov should have had the opportunity to try to complete his catch unimpeded by unlawful activity. To hold otherwise would be to allow the result in this case to be dictated by violence. That will not happen.

Although Popov had some interest in the ball, Hayeshi was the one who took actual possession (gaining complete control of the ball and stopping momentum), and did so using within the bounds of both law and baseball custom.

In the end, the judge was unable to figure out which of the two should win:

Neither can present a superior argument as against the other.

Mr. Hayashi’s claim is compromised by Mr. Popov’s pre-possessory interest. Mr. Popov cannot demonstrate full control. … Their legal claims are of equal quality and they are equally entitled to the ball.

The court therefore declares that both plaintiff and defendant have an equal and undivided interest in the ball.

Id. In the end, the two co-owners sold the ball. The case would have come out differently if Hayashi was seen as a wrongdoer (Popov would get full ownership) or if Popov had dropped the ball without being wrongfully jostled (Hayashi would get full ownership).  The halfsies outcome is somewhat unusual in property law but was made easier because both parties announced they wanted to sell the ball — it was much easier to split the money rather than share possession of the ball itself.

In patent law, conception used-to establish a pre-possessory interest in the future patent.  Conception created an inchoate (incomplete) right that could be secured by diligently reducing the invention to practice (either actually or constructively by filing the patent application).  This approach has changed substantially post-AIA where the focus is on completing the invention process by filing for patent rights with severe limitations on any pre-filing rights or interests.  Prof Oliar and Stern explained;

The first-to-invent rule was abandoned following enactment of the Leahy-Smith America Invents Act (“AIA”) in 2011, the most comprehensive overhaul of U.S. patent law in at least half a century. Its most prominent change was to replace the first-to-invent rule with a first-to-file system, or more precisely, a system that awards patents to the first person to disclose their invention to the public, whether by filing a patent application or through other public acts. The AIA thus pushes back the temporal lynchpin from the beginning of the inventive process to its end.

Dotan Oliar, James Y. Stern, Right on Time: First Possession in Property and Intellectual Property, 99 B.U. L. Rev. 395, 422 (2019) (DDC: Note that the FTF change hasn’t been the most prominent change as suggested by the authors).

Patent law presents an element beyond the Oliar article and the Popov v. Hayashi decision. The patent system is not not generally focused on a winner-take-all approach. We’re not talking about the single Barry Bonds ball (or even a half-dozen). Rather, there are hundreds of thousands of potential valuable inventions awaiting discovery.  The plethora of potential inventions naturally offers the partial reward granted in Popov v. Hayashi.  No single person or entity will be able to claim all (or even a substantial percentage) of the inventions.  But, to claim any rights, the inventor must actually capture the “wily quadruped” despite knowledge of other hunters.  Pierson v. Post, 3 Cai. 175, 175 (N.Y. Sup. Ct. 1805) (“Pierson, well knowing the fox was so hunted and pursued, did, in the sight of Post, to prevent his catching the same, kill and carry it off.”).

In thinking through Popov v. Hayashi, I would pause to distinguish between the Popov’s pre-possessory interest in the ball and the pre-filing inchoate rights of an inventor.  While the second has been long considered a property right — the former is more like a personal interest that should not be wrongfully injured.  The closest actions would be unfair competition or wrongful interference with contractual relationships. Those actions are powerful, but are generally seen as outside of the property law context and instead in the midst of torts. The Supreme Court, on the other hand, has explained the power of an inchoate right to a patent:

The discoverer of a new and useful improvement is vested by law with an inchoate right to its exclusive use, which he may perfect and make absolute by proceeding in the manner which the law requires.

Gayler v. Wilder, 51 U.S. 477, 493 (1850).

Disqualification of a Party’s Expert Who Migrates to the Firm of a Court-Appointed Expert

By David Hricik, Mercer Law School

An order by Judge Alsup in Oracle Am., Inc. v. Google, LLC (N.D. Cal. Jan 28, 2020 (here)) reflects an unusual fact pattern.  The court had appointed an expert (in docket 2143, which by itself says a lot) who worked with the firm of Charles River Associates (“CRA”).  Google had an expert, Dr. Leonard.  Google notified Oracle that Dr. Leonard was to become “affiliated” with CRA, prompting Oracle to file an “objection” with the court.

In response, Judge Alsup issued an order stating the most it could say so far was “that Dr. Leonard (and Google) have made this move at their peril.”  He asked for motion practice and an appropriate record.

Expert witnesses are not subject to the same rules of conflicts of interest as lawyers (even when a lawyer is serving as an expert witness).  I know of cases where opposing parties choose experts who end up at the same firm, but never one where a court-appointed expert is affiliated with the same firm as a party’s expert.  If it is a conflict — and one that can’t be obviated by a screen of Dr. Leonard and other appropriate measures (I can think of many) — presumably Google will suffer disqualification of its expert, which would presumably cause tremendous problems with its case if, as you’d think, Dr. Leonard is serving an important and non-cumulative role.

Interesting problem.

Oracle’s brief: More competing questions

By Jason Rantanen

Yesterday, Dennis wrote about competing questions in a Supreme Court cert petition.  In its merits brief in Google LLC v. Oracle America, Inc., filed on Wednesday, Respondent Oracle also frames the issues a bit differently than Google did.

Google Questions presented

Oracle Questions presented

1. Whether copyright protection extends to a software interface. 1. Under §102(a), computer programs, like all “works of authorship,” have “[c]opyright protection,” as long as they are “original.” The merger doctrine does not make any expression unprotectable except in the rare circumstance where there were very few ways to express the idea. Does the Copyright Act protect the code and organization that Google concedes were original and creative and that Oracle could have written in countless ways to perform the same function?
2. Whether, as the jury found, petitioner’s use of a software interface in the context of creating a new computer program constitutes fair use. 2. Was the Court of Appeals correct in holding that Google’s copying was not fair, where Google conceded it copied for commercial purposes and that the code it copied serves the same purpose and has the same meaning, and Google did not dispute the evidence that Android competes directly with Oracle’s work, harming its actual and potential markets?

Read Google’s brief here: Brief of Petitioner (Google)

Read Oracle’s brief here: Respondent Brief (Oracle)

We’re reading the Google and Oracle briefs in my Introduction to Intellectual Property class this semester as part of the concluding exercise for the unit on copyright.  On Monday we’ll discuss and debate the two positions in small groups then see which is most persuasive to a group of smart law students with a few weeks of copyright law.

Google Servers – Not Enough for Venue

In re Google (Fed. Cir. 2020)

In a mandamus order, the Federal Circuit has ruled that Google cannot be sued in E.D. Texas for patent infringement — holding that the district is an improper venue under TC Heartland LLC v. Kraft Foods Group Brands LLC, 137 S. Ct. 1514 (2017).

For most Federal Causes of action, venue is deemed proper if the court hearing the case has personal jurisdiction over the defendants. However, patent infringement cases are different.  Patent cases fall under a more specific venue statute that limits actions to districts where either (a) the defendant ‘resides’ (i.e., is incorporated) or (b) the defendant has a regular and established place of business and has committed acts of infringement. 28 U.S.C. 1400(b).

In Super Interconnect Techs. LLC v. Google LLC, No. 2:18-CV-00463-JRG, 2019 U.S. Dist. LEXIS 132005 (E.D. Tex. Aug. 7, 2019), Super Interconnect sued Google for infringing, but Google responded a motion for dismissal for improper venue.

Google is not a Texas company and so does not reside in E.D. Texas. Google is accused of infringing in TX, but Google argues that the company does not have a “regular and established place of business” in the district.

  • Yes, Google does have many millions of customers and dollars in revenues from the district.
  • Yes, Google does market its goods and services directly to consumers in the district.
  • Yes, Google has AI services that provide immediate access to information and activities to millions within the district.
  • Yes, Google ha[d] very large servers located within the district particularly designed to serve customers within the district. (Note (1) these servers were operated by local ISPs rather than Google itself; and (2) after the filing of this lawsuit, Google removed its servers from the District in order to avoid being sued in E.D. Tex.).

But:

  • No, Google does not have a regular and established place of business in the district.

In its decision, the Federal Circuit repeated its prior holding in Cray that a regular-and-established-place-of-business must be a physical place located within the district.  While the servers qualify for the physicality requirement, they are not a “place of business.” According to the court, a “place of business” must have an “employee or agent” conducting business in the location — Google’s AI is not sufficient.

We conclude that a “regular and established place of business” requires the regular, physical presence of an employee or other agent of the defendant conducting the defendant’s business at the alleged “place of business.”

In making this “employee or agent” requirement, the court looked to the patent-law service-of-process statute 28 U.S.C. 1694 that indicates service may be made upon a defendants “agent or agents conducting such business” at the regular and establish place of business. The court explains:

The service statute plainly assumes that the defendant will have a “regular and established place of business” within the meaning of the venue statute only if the defendant also has an “agent . . . engaged in conducting such business.” Likewise, the provision that “service . . . may be made by service upon the agent” and the “regular and established” character of the business assumes the regular, physical presence of an agent at the place of business. In the absence of a contrary indication, these assumptions must govern the venue statute as well. . . .

Slip Op.

Judge Wallach joined the opinion, but also penned a concurrence questioning Google’s business model (hmm, seems that the company is doing pretty well for itself…). Judge Wallach explains:

I join with the majority’s order, but I write separately to raise questions about Google’s business model. During oral argument, Google did not answer, when asked, the question of what its main source of business is in the Eastern District of Texas. Google simply explained that it does not “actively do[] anything. In other words, there’s no evidence of any employee or agent . . . being present in the district.” Oral Arg. at 51:55–52:15.

When asked again, “what do you do in the Eastern District?,” Google responded  what “what Google does in the District will depend on what the subject of that verb is,” and “when you look at the service statute the subject of that verb has to be ‘employees’ or ‘agents’ in the District.” Id. at 52:30–52:53. Finally, Google was asked “when you gather information, from customers, which is part of your business, you agree. How does that get passed back to Google? It goes through the server?” Id. at 58:59–59:10.
Google’s counsel responded stating: “I am not aware.

There’s nothing in the record that I’m aware of on that point, your Honor.” Id. at 59:11–59:14. Given the absence from the record of information sufficient to understand Google’s business model, the question remains for the District Courts to determine whether Google’s end users become agents of Google in furtherance of its business by virtue of voluntarily or involuntarily sharing information generated on Google’s servers. If, for example, by entering searches and selecting results a Google consumer is continuously providing data which Google monetizes as the core aspect of its business model, it may be that under the analysis in which I today join, Google is indeed doing business at the computer of each of its users/customers. Because this is a question I believe should be entertained by District Courts, I concur.

Competing Questions in Supreme Court Petitions

I enjoy reading competitive questions-presented in Supreme Court petitions.  Although I don’t have evidence to support this, my contention is that respondents have become much more aggressive at recharacterizing the questions from the way they were presented in the original petition.  As that aggression grows, so does the propensity of petitioners to write even more biased questions.

Briefing in Collabo Innovations, Inc. v. Sony Corp., Docket No. 19-601 (Supreme Court 2020), shows how the U.S. Solicitor’s office has gotten on-board the ‘game.’

Compare below:

Collabo Petition:

When U.S. Patent No. 5,952,714 issued in September 1999, the Patent Act provided only two avenues for challenging the validity of the patent’s claims: ex parte reexamination and district court litigation. Shortly thereafter, Congress added a third method, inter partes reexamination, but deliberately chose to exclude older patents from the new proceeding. More than 10 years later, Congress replaced inter partes reexamination with a fundamentally different proceeding, inter partes review, and made it apply retroactively to all prior patents.

Responsive Brief from U.S. Gov’t

For almost four decades, the United States Patent and Trademark Office (USPTO) has “possessed the authority to reexamine – and perhaps cancel – a patent claim that it had previously allowed.” Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131 (2016). In the Leahy-Smith America Invents Act (AIA), Congress replaced one of the existing mechanisms for administrative reconsideration of issued patents with a new administrative reconsideration proceeding known as inter partes review. Congress further provided that inter partes review “shall apply to any patent issued before, on, or after th[e] effective date” of the AIA.

The questions presented are as follows:

1. Does the retroactive application of inter partes review to a patent that issued before the passage of the AIA, violate the Takings Clause of the Fifth Amendment?

2. Does the retroactive application of inter partes review to a patent that issued before the passage of the AIA, violate the Due Process Clause of the Fifth Amendment?

The questions presented are as follows:

2. Whether the cancellation, following inter partes review, of petitioner’s pre-AIA patent violates the Just Compensation Clause.

1. Whether Congress’s decision to authorize the USPTO to conduct inter partes review of patents issued before the AIA’s effective date is irrational, and thus violates the Due Process Clause.

Notice the competing preambles that talk-past each other without addressing the same key points; The US Gov’t then reordered and rewrote the questions.  On the takings question — petitioner uses the trigger keyword “retroactive application” of IPR while the Gov’t refers to the more neutral “cancellation.”  Cancellation is an important term here because cancellation was already allowed pre-AIA under the reexamination statutes. On the due process question, the Gov’t flips the “rational basis” test to ask instead whether the AIA is “irrational.”  The Gov’t approach on this second question incorrectly suggests that Congressional irrationality is the test or perhaps the issue raised by the petition.  It turns out that neither are true because due process is also concerned with arbitrary government action (as indicated in Collabo’s briefing).

What is most interesting to me here is that these shifts and tilts of the question are all transparent to the Supreme Court justices and their law clerks. Still I expect that the alternate narratives trigger an emotional response; and those emotions are typically the root of decision making even for the highly rational.

 

Contact List Appeal Not Frivolous

Mira Advanced Tech v. Microsoft (Fed. Cir. 2020)

The PTAB sided with Microsoft — finding the challenged claims of Mira’s two challenged patents obvious. U.S. Patents 8,848,892 & 9,531,657.  On appeal, Mira hired new counsel and argued for an alternative claim construction of the term “contact list.”  Figure 1 in the claims is described in the patent as “the database structure of contact list of present invention.”  The idea here is to have a “memo” interface tightly incorporated into a contact list.

Microsoft’s attorney Chris Carroway responded to the appeal with a motion for sanctions:

An appeal is not a mulligan. While a party is certainly free to retain new counsel to pursue an appeal, that new counsel is not free to raise new arguments that could have been made, but were not made, on behalf of the client before the first tribunal. An appeal premised on such new arguments—arguments waived because they were not presented to the first tribunal—is futile and, therefore, frivolous.

MicrosoftMotionForSanctions.  Mira then responded with a discussion of de novo claim construction — arguing that the main question on appeal is the correctness of the Board’s construction — which was vigorously argued before the Board.

In the appellate court, sanctions for frivolous appeals are handled under Federal Rule of Appellate Procedure R. 38:

If a court of appeals determines that an appeal is frivolous, it may, after a separately filed motion or notice from the court and reasonable opportunity to respond, award just damages and single or double costs to the appellee.

FRAP 38.  In its judgment, the Federal Circuit did not delve into the merits of either claim construction or the sanctions. Rather, the court (1) issued a R.36 affirmance of the Board’s decision in Microsoft’s favor and (2) denied the sanctions without explanation.  The oral arguments included some limited discussion of whether sanctions can apply to a appeal that is weak on the merits — or must there be additional misconduct or failed lawyering.

Underlying the IPR is a pending lawsuit in West Virginia involving the patents at issue. That case has been stayed since 2017 – pending resolution of the IPR proceedings. The court now won’t have to decide Microsoft’s pending motion to dismiss on 101 and for improper venue.

Infringe Ford’s Design Patents by Repairing your Car

Automotive Body Parts Ass’n v. Ford Global Techs, LLC (Supreme Court 2020) [19-__PetitionForAWritOfCertiorari]

Ford has implemented an aggressive strategy of patenting the various parts of its new vehicles.  Many of these new patents are design patents: Wheels; fenders; airbag compartments; grilles; bumpers; tail lights; headlights; console; hood; mirror; etc.

After an accident, a vehicle owner typically wants to repair the vehicle.  While repair of the vehicle may seem permissible under an exhaustion doctrine, the difficulty comes in when looking at individual parts. Repair of the vehicle might require replacement/reconstruction of a patent part (such as the side-mirror pictured above).  The repair industry (and insurance companies) would like to use less-expensive repair parts — one way is to buy off-brand parts — especially for lower-tech items such as a fender or headlight cover.  But, the design patents are preventing that from happening.

In its new petition for writ of certiorari, Automotive Body Parts Ass’n asks the Supreme Court should provide a broader view for the exhaustion doctrine:

Under the patent exhaustion doctrine, a patentee’s decision to sell a product exhausts all of its patent rights in that item. The unrestricted sale creates an implied license to use, which includes the right to repair. Analysis of whether a right to repair exists requires identification of the correct article of manufacture.

The Federal Circuit held that repair rights and identification of the article of manufacture should be determined solely by what is claimed in the patent. This holding allows a patentee to greatly diminish or eliminate the right to repair and allows improper broadening of design patent protection over unclaimed portions of a design. The question presented is:

How should the article of manufacture be determined when applying the patent exhaustion and repair doctrines in design patent cases?

These issues have already been discussed in some ways by the Supreme Court in Aro Mfg. Co., Inc. v. Convertible Top Co., 365 U.S. 336 (1961) and Aro Manufacturing Co. v. Convertible Top Replacement Co., 377 U.S. 476 (1964).  However, the petitioner largely sets these cases aside — arguing that design patents are particularly problematic — and that the Supreme Court can fashion a design-patent-specific remedy.

Columbia v. Seirus: The Sky Is Not Falling

By Sarah Burstein, Professor of Law at the University of Oklahoma College of Law

Despite the protestations of Columbia and its amici in support of the petition for rehearing, the Federal Circuit’s decision in Columbia v. Seirus is not the end of design patent law as we know it. (For prior Patently-O coverage, of this case and the pending petition, see here and here.)

It would be better for everyone if the court had been clearer on one key point but—even if that part is not corrected—the sky still will not fall.

The paragraph that has spurred these declarations of designpocalypse reads as follows:

The district court relied on one precedent from this court—L.A. Gear—for the proposition that logos should be wholly disregarded in the design-infringement analysis. In that case, the parties did not dispute that the patented and accused designs were substantially similar. L.A. Gear, 988 F.2d at 1125. In fact, “copying [was] admitted.” Id. In evaluating infringement there, we explained that design infringement is not avoided “by labelling.” Id. at 1126. A would-be infringer should not escape liability for design patent infringement if a design is copied but labeled with its name. But L.A. Gear does not prohibit the fact finder from considering an ornamental logo, its placement, and its appearance as one among other potential differences between a patented design and an accused one. Indeed, the fact finder is tasked with determining whether an ordinary observer would find the “effect of the whole design substantially the same.” Gorham, 81 U.S. at 530. It would be inconsistent with this mandate to ignore elements of the accused design entirely, simply because those elements included the name of the defendant.

Columbia v. Seirus, 942 F.3d 1119 at 1131. Columbia and its amici argue that the court’s decision in Columbia is inconsistent with a “holding” in L.A. Gear and will wreak destruction and devastation on design patent law. Columbia and its amici are wrong on both counts.

First, the statement in L.A. Gear that pertained to “labelling” was not a holding. As the Columbia panel noted, the issue of whether the designs were sufficiently similar was not before the court in L.A. Gear. In the briefs, none of the parties involved in L.A. Gear argued that “labelling” was relevant to design patent infringement. Nothing in the decision in L.A. Gear suggests that the issue came up in oral argument. The issue of whether “labelling” was relevant to the issue of design patent infringement was simply not before the Federal Circuit in L.A. Gear. Thus, nothing the Federal Circuit said about “labelling” vis-à-vis design patents constituted a decision of any kind—let alone a holding.

It’s not clear why the L.A. Gear panel chose to include that bit of “labelling” dicta. But it is dicta.

And even if it weren’t, not all uses of logos, brand names, etc. constitute “labelling.” As the panel appreciated, these visual elements can be used decoratively. (For many good examples, consider Louis Vuitton’s textile designs.) If we were to have a rule against “labelling,” some thoughtful development and line-drawing may be required.

Second, Columbia argues (and some of its amici echo) that the decision in Columbia v. Seirus will require courts to issue judgments of noninfringement whenever a defendant “simply emblazon[s] [its] brand name or logo on another’s design.” The panel decision says no such thing. It merely says that courts don’t have to ignore any and all uses of logos.

The three traditional types of protectable designs are: (1) configuration (a/k/a shape), separate and apart from any surface ornamentation; (2) surface ornamentation, separate and apart from the underlying configuration; and (3) a combination of both. The USPTO currently interprets the second category broadly, including any and all “surface treatment.”

In Columbia v. Seirus, the claimed design was for surface ornamentation only. Despite the broad language used by the panel, the panel had no occasion to—and could issue no holding as to—all possible types of designs. This decision simply does not apply to designs that claim configuration only. If patent owners wish to avoid having brand names, logos, etc. considered as part of the infringement analysis, they are free to keep claiming configuration-only designs (such as those shown in Bison’s amicus brief). Read properly, the panel’s decision in Columbia v. Seirus, merely says that, when surface ornamentation is claimed as part of the design, a court should consider the entire surface design—even if the surface design includes logos or brand names.

That ruling is consistent, by the way, with the USPTO’s current treatment of logos, brand names, etc. in the prosecution context. Logos, brand names, etc. can—and are—claimed as (or as part of) “surface treatments.” Here are just a few examples:

It would be odd to say that these kinds of elements count as “designs” (or parts thereof) for the purposes of patentability but must be ignored entirely when it comes to infringement. Such a rule would not only be odd, it would also significantly undermine the notice function of design patents.

Of course, we could have a system where we said that logos, brand names, etc. aren’t protectable as “designs” and should be irrelevant to both patentability and scope. But that’s not the system we have today. Perhaps it’s a conversation we should have.

The panel’s decision in Columbia v. Seirus could put some pressure on patentees to be clearer about whether they’re claiming a configuration-only or combination design. After all, the latter involves surface designs while the former does not. But that wouldn’t be a bad thing. Greater clarity in this area would promote competition and greater public notice and could be achieved with minimal cost or complication for design patent applicants.

One final note: It’s not clear why the panel in Columbia v. Seirus put such emphasis on “copying.” Copying is neither necessary nor sufficient to support a finding of design patent infringement. (For more on the contemporary test for design patent infringement, see this short piece.) The references to copying are unhelpful at best; pernicious dicta at worst.

To summarize, if the panel in Columbia v. Seirus wanted to issue a revised decision that made it clear that they’re talking about surface designs—not configuration-only designs—that would probably be helpful. And the part about “copying” could go. But the sky is not falling.

= = = = =

The following briefs have been filed in the pending en banc petition for the case:

Short 101 Decision

In re Noble Systems Corp. (Fed. Cir. 2020)

So far in 2020, the Federal Circuit has issued judgment on 30+ appeals from the USPTO.  The majority of these issued without opinion under the Federal Circuit’s “Rule 36” that allows for no-opinion judgments. In this case, the court changed tack and instead issued a two-sentence opinion. Although short, this is better than non opinion at all:

In this case, the Board affirmed the Examiner’s rejection of claims 1–7 and 9–21 of U.S. Patent Application No. 13/950,907. We affirm the Board on the ground that the claims are patent ineligible under 35 U.S.C. § 101.

Although not expressly stated, by affirming on eligibility, the Federal Circuit did not affirm the PTAB’s parallel finding of obviousness based upon a single prior art reference. In this situation, the creation of an opinion actually creates a greater preclusive impact on the patent applicant than would have existed otherwise. R.36 judgments on the other hand are only seen as preclusive as to issues necessary for the final judgment.

= = = =

The claims at issue are software code that the PTAB found to be directed to “providing e-learning training content to an agent in a call center” which is nothing “other than an abstract idea of organizing human activity.”

18. A tangible computer-readable storage medium comprising instructions that when executed by a computer processor, cause the computer processor to:

receive input identifying an agent to receive a training course where the input comprises an agent identifier, a training course identifier of the training course;

generate training context data comprising a logical association of the agent identifier, the training course identifier;

determine whether the agent is to be provided the training course as fixed-time training or flex-time training, and

if the training course is to be provided as fixed-time training, then request a schedule module in a workforce management system (“WFM”) to schedule a start time for a training session for the agent,

wherein the WFM is configured to [1] generate a first beginning-of-training indicator to an e-learning module comprising the computer processor at the start time of the training session, and [2] generate a second beginning-of-training indicator to a call handling system,

wherein the call handling system ceases offering calls to the agent in response to receiving the second beginning-of-training indicator.

Patently-O Bits and Bytes by Juvan Bonni

Recent Headlines in the IP World:

Commentary and Journal Articles:

New Job Postings on Patently-O:

What Counts as a New Argument in Reply

Apple Inc. v. Andrea Electronics (Fed. Cir. 2020)

After Andrea sued Apple for infringing its U.S. Patent 6,363,345 (noise cancelling audio signal processing), Apple responded with two inter partes review (IPR) petitions.  The PTO initiated both petitions and eventually cancelled all of the claims except 6-9.  Apple then appealed – asking that they all be invalidated.

The invention sets noise-thresholds for a set of frequency groups and subtracts-out amplitude beyond a calculated “future minimum value.”  Claim 6 does this on a periodic basis.

In the original IPR ‘626 petition, Apple argued obviousness of the claims based upon Hirsch over Martin.  In its responsive briefing during the IPR, Andrea argued that Martin does not disclose the “future minimum value” as claimed in claims 6-9.  Then in reply, Apple explained that obviousness becomes clear when seen over multiple periods (sub-windows).  However, the Board refused to consider Apple’s reply – finding that the multiple sub-window argument “raised a new theory of unpatentability for the first time in its reply brief.”

On appeal, the Federal Circuit reversed this holding — concluding instead that the reply brief did not offer a new argument:  “Its reply still asserted that claims 6–9 would have been obvious over Hirsch and Martin [and] relies on the same algorithm from the same prior art reference to support the same legal argument: that Martin
discloses the … “future minimum” limitations of the asserted claims.”  In its decision, the Federal Circuit distinguished prior cases where the reply brief cited to new evidence or new portions of already cited evidence.

  • Ariosa Diagnostics v. Verinata Health, Inc., 805 F.3d 1359, 1367 (Fed. Cir. 2015) — reply improperly referenced an embodiment of the prior art not discussed in the petition.
  • Intelligent Bio-Sys., Inc. v. Illumina Cambridge Ltd., 821 F.3d 1359 (Fed. Cir. 2016) — reply improperly cited new non-patent literature references.

The issue here is age-old. A good reply brief should do more than simply rehash the exact statements found in the original brief. At the same time, the reply should not be introducing new arguments that go beyond the original brief.  Consider the following interesting article: John F. Muller, The Law of Issues, 49 Wake Forest L. Rev. 1325 (2014)

On remand, the PTAB will now consider Apple’s reply brief and whether its argument is sufficient to render the claims obvious.

Your Patent License Likely Includes an Implied License to Other Patents

by Dennis Crouch

The decision in Cheetah Omni is an important reminder regarding implied licenses.  The holding solidifies the presumption that a license to a particular patent impliedly includes a license to all parents and continuations that “disclose the same inventions as the licensed patent.”  This extends the court’s prior decision in  General Protecht Group Inc. v. Leviton Manufacturing Co., 651 F.3d 1355 (Fed. Cir. 2011) and builds upon the parallel doctrine of legal estoppel discussed in AMP Inc. v. US, 389 F.2d 448 (Ct. Cl. 1968) and TransCore, LP v. Elec. Transaction Consultants Corp., 563 F.3d 1271 (Fed. Cir. 2009).

Cheetah Omni LLC v. AT&T Services, Inc. & Ciena Corp. (Fed. Cir. 2020), began when Cheetah sued AT&T for infringing its U.S. Patent 7,522,836 (optical communication networks).

In a prior lawsuit, Cheetah had asserted the ‘714 patent against Ciena and Fujitsu (See family tree above). That lawsuit settled with a license agreement and covenant not to sue — relevant here because Ciena and Fujitsu supply AT&T with the accused infringing devices.  The question on appeal: whether the license agreement includes an implied license to the ‘836 patent.

The Ciena/Fujitsu lawsuit centered on the ‘714 patent. The resulting license agreement was directed toward the patent-in suit and also expressly called out certain family patents that were also included in the license:

all parents, provisionals, substitutes, renewals, continuations, continuations-in-part, divisionals, foreign counterpartsreissues, oppositions, continued examinations, reexaminations, and extensions of the Patents-in-Suit … whether filed before, on or after the [License] Effective Date.”

Ciena License Agreement (emphasis added).  Although the list of family-members is extensive, it does not include continuations-of-parents or the specific relationship here: a continuation of a continuation of a parent-in-part (or nephew).

The Federal Circuit asks the question as follows:

In personal terms, because the uncle and grandparent of the ’836 patent, are licensed, is the ’836 patent also licensed?

I’ll pause here to note how the Federal Circuit’s question shifts the focus from the way I presented the case above.  Although the license agreement discusses everything in relation to the patent-in-suit (the uncle ‘714 patent), the Federal Circuit concludes that an important relationship is the “grandparent” relationship between the ‘836 patent and the ”925 patent, neither of which were the patent in-suit.  That shift to the ‘925 patent is important for two reasons (1) we have prior precedent implying a license to grandchildren patents but not to ‘uncles.’ General Protecht; and (2) the linkage between the ‘836 and the uncle ‘714 patent is tenuous because of the continuation-in-part status, whereas the grandchild lineage is straight continuation all the way down. The conclusion here is easy once the focus shifts to the grandparent-grandchild setup.

In General Protecht, the Federal Circuit found that a license to particular patent impliedly licensed the grandchild as well (continuation-of-a-continuation) – “because those continuations disclose the same inventions as the licensed patent.” On appeal, the Federal Circuit ruled that the General Protecht reasoning worked here as well:

Applying the presumption established in General Protecht provides a simple and clear resolution in this case. Because the ’925 patent is an expressly licensed patent in the licenses, the licenses also include an implied license to a continuation of its continuation, the ’836 patent. . . . If Cheetah did not intend its license “to extend to claims presented in continuation patents, it had an obligation to make that clear.” General Protecht.

Slip Op. License agreements are contracts typically interpreted under state-law (or foreign law). This particular style implied license appears to fall under federal law in finding that a patentee is legally estopped from claiming no-implied-license. “Legal estoppel prevents licensors from derogating or detracting from definable license rights granted to licensees for valuable consideration.”

Cheetah makes a couple of extra arguments here.

  • The ‘836 patent covers a different/narrower invention — Doesn’t matter since “the same inventive subject matter was disclosed in the expressly licensed patents.”
  • The parties all knew about the ‘836 patent but didn’t include it — Doesn’t matter because presumption goes against patentee. Further the license included a list of excluded patents and the ‘836 was not on the list.

I’ll note the 2018 decision in Cascades AV LLC v. Evertz Microsystems Ltd., 335 F. Supp. 3d 1088, 1097 (N.D. Ill. 2018) where the district court refused to find an implied license for a divisional.  The court noted differences in the claims — however the Federal Circuit here holds (again) that the focus should be on the disclosure.  That case was settled though so we don’t know how the Federal Circuit would react.

Commissioner for Trademarks: David Gooder

WASHINGTON – The United States Patent and Trademark Office (USPTO) announced today that U.S. Secretary of Commerce Wilbur Ross has appointed David Gooder to be the new Commissioner for Trademarks. As Commissioner, Gooder will be responsible for oversight of all aspects of the USPTO’s Trademarks organization.

 Gooder has worked for more than 25 years on intellectual property (IP) and brand protection challenges facing iconic global brands. Gooder will begin his new role on March 2, 2020. (more…)

IP in State of the Union Address:

Trump:

I also promised our citizens that I would impose tariffs to confront China’s massive theft of American jobs. Our strategy worked. Days ago, we signed the groundbreaking new agreement with China that will defend our workers, protect our intellectual property, bring billions of dollars into our treasury, and open vast new markets for products made and grown right here in the United States of America. For decades, China has taken advantage of the United States, now we have changed that but, at the same time, we have perhaps the best relationship we have ever had with China, including with President Xi. They respect what we have done because, quite frankly, they could never believe what they were able to get away with year after year, decade after decade, without someone in our country stepping up and saying: Enough. Now, we want to rebuild our country, and that is what we are doing.

Read the US China Agreement (Phase 1) here: Economic_And_Trade_Agreement_Between_The_United_States_And_China.

With regard to the New NAFTA, IPO has suggested that it does not live-up to the hype with regard to pharmaceutical patent enforcement.  From IPO:

President TRUMP signed the U.S.-Mexico-Canada Agreement (USMCA), the North America trade pact that will replace NAFTA. The White House states that the USMCA “contains new protections for American intellectual property, ensuring strong, effective protection for American innovators and creators.” IPO has expressed disappointment with the agreement and said that “[i]n the future, IPO hopes to work with the Administration and Congress to create a fair and level playing field with our trading partners and establish appropriate safeguards for American innovators.”

IPO’s basic problem with new NAFTA is its lack of provisions focusing on protections for data submitted to regulatory authorities (especially for biologics).

 

Constitutionality of Administrative Patent Judges

The Federal Circuit has issued two recent Arthrex-related orders of note.

In Arthrex, the Federal Circuit held that the appointment process for PTAB judges (Administrative Patent Judges) violates the Appointments Clause of Article II of the U.S. Constitution.  According to the court, these Judges are “principal officers” and thus must be appointed by the President of the United States (rather than merely the head of the Commerce Dep’t).  I explained in a prior post that the court also “issued a cy-près ruling in an attempt to limit the upset” caused by invalidating the appointments of all these judges.  “In particular, the court invalidated a portion of the statute that limited the PTO’s ability to remove APJs from the board. According to the court, that change was enough to reclassify the PTAB Judges as inferior officers that do not need presidential appointment.”  That decision is now up for en banc rehearing — with three separate petitions filed.

Principal Officers: Three En Banc Petitions in Arthrex v. Smith & Nephew

Impact on Ex Parte Examination: In the pending case of In re: Boloro Global Limited, Appeal No. 19-2349 (Fed. Cir. 2020), the Federal Circuit has ordered the USPTO to explain the impact of Arthrex on ex parte patent examination cases:

Within 14 days from the date of filing of this order, the Director [of the USPTO] is directed to submit a supplemental response, not to exceed 20 pages, addressing whether Arthrex should be extended to ex parte examination cases. Boloro’s reply to that supplemental response, which is not to exceed 10 pages, is due within seven days thereafter.

Order of February 5, 2020.

= = = = =

Polaris Innovations Ltd. v. Kingston Tech. Co., Inc., 2018-1831, 2020 WL 504974 (Fed. Cir. Jan. 31, 2020) is parallel to Arthrex and the Federal Circuit vacated the PTAB IPR decision and “remanded to the Board for proceedings consistent with this court’s decision in Arthrex.”  The interesting aspect of the decision the concurring opinion by Judge Hughes and joined by Judge Wallach.  The pair concluded that they were bound by the prior panel decision in Arthrex, but “disagree with the merits” of the holding.  The opinion explains (1) PTAB judges should be seen as inferior officers and (2) if principal officers, the Arthrex panel’s solution is highly questionable.

I believe that viewed in light of the Director’s significant control over the activities of the [PTAB] and Administrative Patent Judges, APJs are inferior officers already properly appointed by the Secretary of Commerce. But if APJs are properly considered principal officers, I have grave doubts about the remedy Arthrex applied to fix their unconstitutional appointment. In the face of an unconstitutional statute, our role is to determine whether severance of the unconstitutional portion would be consistent with Congress’s intent. Given the federal employment protections APJs and their predecessors have enjoyed for more than three decades, I find no legislative intent to divest APJs of their Title 5 removal protections to cure any alleged constitutional defect. … But, given the high standard for finding non-severability, I cannot say that the Arthrex panel’s remedy was improper.

Id.

Guest Post by Prof. Holbrook: Whose Law Controls On Sale Prior Art in Foreign Countries?

Guest post by Timothy R. Holbrook, Vice Provost for Faculty Affairs and Asa Griggs Candler Professor of Law, Emory University.

The America Invents Act (AIA) effected a sea change in U.S. patent law.  One of the most significant changes was to shift the U.S. from a “first to invent” to a “first inventor to file” system for allocating priority.  This move is reflected in the restructuring of 35 U.S.C. § 102, the provision that defines prior art for assessing whether an invention is novel and non-obvious.

Aside from the shift in assessing priority, some contended that, by amending § 102, Congress had rejected long-standing Supreme Court precedent that allowed secret uses and sales of the invention to trigger the statutory bars under the 1952 Patent Act.  In Helsinn Health Care S.A. v. Teva Pharmaceuticals USA, Inc., the Supreme Court, in its first case addressing the AIA’s § 102, rejected this argument.

The AIA did more than shift the United States to a first-inventor-to-file system, however.  The AIA also eliminated geographic limits on prior art.  Under the 1952 Patent Act, activities triggering the public use and on-sale bars under then-35 U.S.C. § 102(b) had to take place “in this country.” The elimination the geographic limit greatly expands what qualifies as prior art under the AIA.  Moreover, the Supreme Court’s interpretation of the AIA in Helsinn makes that even more sweeping as secret sales activity that may not be accessible to the broader public can now qualify as prior art.

The removal of the territorial limits, however, also presents a different question: whose law will govern whether an invention is deemed “on sale”?  Under the 1952 Patent Act, to be on sale, an invention (1) had to be the subject of a formal commercial offer for sale and (2) had to be ready for patenting.  Whether the invention is subject to a formal commercial offer is assessed from basic contract principles.

In the foreign context, however, what constitutes a formal commercial offer may vary from U.S. law. Because these proposed or completed sales transactions could take place outside of the United States, the law of another country generally would govern any potential or actual agreements.

The elimination of the geographic limits to on-sale activity now presents a choice of law problem.  On one hand, one could argue that the law of the relevant country should control: the parties in the transaction have that law in mind and not necessarily U.S. patent law.  On the other, if the courts were to rely on foreign law to assess whether the invention is “on sale” under § 102(a) of the AIA, then what qualifies as on-sale prior art would vary widely, depending on the law of the country in which the commercial activity took place.  The same activity might qualify as prior art in one context and not in another.  Courts, therefore, would be better of creating U.S. law defining triggers on-sale prior art regardless of where the activity occurred.

So what route will the courts take?  I suspect it will be the latter, using Federal Circuit law to define the contours of on-sale prior art even when the activity arises overseas.

The Federal Circuit addressed an analogous situation in interpreting the statutory bars under § 102(b) of the 1952 Patent Act.  After the Supreme Court reworked the on-sale bar test in Pfaff v. Wells Electronics, Inc., the Federal Circuit in Group One, Ltd. v. Hallmark CardsInc., clarified step one of the two-part test by requiring a formal commercial offer for sale.  In so doing, the court confronted a similar choice of law issue: should the law of the state governing the transaction dictate whether the invention was on sale, or should Federal Circuit law?

The court opted for the latter, rejecting the district court’s use of Missouri law to determine whether the invention was on sale.  The court reasoned that reliance on state law would create variability in interpreting a federal statute and emphasized “the importance of having a uniform national rule.” As the court stated:

To hold otherwise would potentially mean that a patent could be invalid in one state, when the patentee’s actions amounted to an offer under the laws of that state, and valid in a second state, when the same actions did not amount to an offer under the laws of that second state. Such a result is clearly incompatible with a uniform national patent system.

If past is prologue, one could easily see the court reaching the same conclusion with respect to the use of foreign law to interpret § 102(a) of the AIA.  Applying the law of various countries where commercial activities arise could lead to widely varying standards for on-sale prior art.  Indeed, the situation would be fare more complex than applying state law not only because of differing legal standards but also differing legal systems.  It is a more complicated analysis for U.S courts to discern foreign law than to discern the law of a given state.  It seems highly likely, therefore, that the Federal Circuit choose to apply its own law, using basic contract principles, in interpreting § 102(a) on-sale prior art that arises in foreign countries.

The situation at the international level, however, is far more complex than refusing to apply state law.  Activities in a foreign country would be assessed, and indirectly regulated, through the application of a U.S. legal standard, implicating concerns of the extraterritorial application of U.S. law.  Unlike the state law situation – where state law is subordinate to federal law – the Federal Circuit will be applying the law of the United States to acts in a co-equal sovereign. Actors in the relevant country may be unaware that their commercial behavior is violating U.S. patent law if there are significant substantive differences. That said, I would be surprised if courts consider this activity to trigger the presumption against extraterritoriality, in the same way they failed to truly account for the presumption in the patent exhaustion context.

The removal of geographic limits on public uses and on-sale prior art is a rather sweeping change.  As yet, the importance of the removal of these territorial limits has not been explored by the courts.  Particularly as it relates to on-sale prior art, courts likely will be applying U.S. law to activities arising in foreign countries in the interest in having a uniform standard.

Tim Holbrook is Vice Provost for Faculty Affairs and Asa Griggs Candler Professor of Law at Emory University.  This essay is drawn from part of his article, What Counts As Extraterritorial in Patent Law?, 25 B.U. J. SCI. & TECH. L. 291 (2019).