Whitewater West Indus. v. Richard Alleshouse and Yong Yeh (Fed. Cir. 2020)

This is an important case invalidating provisions of an employment agreement based upon California Law. Alleshouse left his former employer Wave Loch (predecessor to Whitewater) and started working on inventions for his new venture the very next day. Within two months he (along with his partner Yeh) had filed a set of provisional patent applications at issue in this case.  Whitewater then sued, arguing that the employment contract included rights over post-employment inventions.

The agreement:

a. Assignment: Employee agrees that all right, title and interest in all inventions … that Employee conceives or hereafter may make or conceive …

(a) with the use of Company’s time, materials, or facilities; or (b) resulting from or suggested by Employee’s work for Company; or (c) in any way connected to any subject matter within the existing or contemplated business of Company

shall automatically be deemed to become the property of Company as soon as made or conceived, and Employee agrees to assign to Company, its successors, assigns, or nominees, all of Employee’s rights and interests in said inventions, improvements, and developments in all countries worldwide. Employee’s obligation to assign the rights to such inventions shall survive the discontinuance or termination of this Agreement for any reason.

Prong (c) from the contract is at issue that requires Alleshouse to assign any invention connected with the business of Wave-Loch — apparently reaching indefinitely into the future.  It just so happens that Wave-Loch makes wave-riding attractions, and that is also the subject of Alleshouse inventions here. So the patents fall squarely within the express and literal terms of the contract.

On appeal, the court looked to § 16600 of the California Business and Professions Code.

Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.

The provision voids any contract that restrains anyone from engaging in a lawful profession or trade. Here, the Federal Circuit found that the assignment provision reaching indefinitely into the future would have “a broad restraining effect” because it would prevent Alleshouse from working effectively in the field for any other company.

The Federal Circuit cited to a number of prior district court decisions confirming “that invention-assignment provisions that go beyond protection of proprietary information and ensnare post-employment inventions are to be judged under the strict § 16600 standards that protect former employees.”  The court also cited older cases that discuss these same issues. See, e.g., Standard Plunger Elevator Co. v. Stokes, 212 F. 893, 896 (2d Cir. 1914); and Guth v. Minnesota Min. & Mfg. Co., 72 F.2d 385 (7th Cir. 1934) (improper to force someone to “turn over the children of his inventive genius” conceived after employment).

The weak point: The baseline here is that the court found that this assignment agreement to be void. The weak point of the Federal Circuit’s decision is that it is seemingly contrary to its own prior express statement that “section 16600 [applies] to employment restrictions on departing employees, not to patent assignments.” Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems, Inc., 583 F.3d 832, 837 (Fed. Cir. 2009), aff’d on other grounds, 563 U.S. 776 (2011).  On appeal here, the court attempted to skirt that statement by interpret interpret as only applying to assignment agreements that were not themselves driven by employment agreements, even though that caveat is not found in the decision.

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U.S. Patent Nos. 9,044,685; 9,302,189; and 9,592,433.

= = =

Alleshouse was Represented by Manuel de la Cerra with Rick Taché on the other side.

Tracy Nixon v. General Motors (Fed. Cir. 2020).

Nixon sued GM in E.D. Texas, acting pro-se.  The complaint makes the following allegation:

The defendant infringed on the Plaintiffs Design for the Chevrolet Corvette that consisted of the rear trunk LTD Wing, Aerodynamic Full Body Combo Kit, and Hood DAM sold on the 2014-2019 Corvette C7 and Z06 Corvette before the Plaintiff could patent the invention for sale to the public.

Pro Se Complaint.

GM did not make an entry of appearance into the lawsuit and Nixon asked for default judgment. However, Judge Gilstrap refused to enter default judgment — holding that GM had not been properly served with the summons and complaint as required by FRCP 4.

The rule includes several mechanisms for service process, including  “following state law for serving a summons …”   Nixon thought service was proper — Nixon sent the Summons & Complaint to the Texas Secretary of State who forwarded the Summons and Complaint to General Motors HQ via Certified Mail. (See image below). Texas law allows for service-via-SOS in special circumstances, such as where a company is supposed to have a registered agent, but does not have one (or that one isn’t accepting service). See Texas Business Organizations Code § 5.251. (Failure to Designate Registered Agent). A non-Texas company only needs a registered agent in Texas if it “Transact Business” within the state. .

Texas does not make its list of registered agents freely available online, but I just paid for a search and found that General Motors does have a a registered agent in Texas, and that is who should have received service of process.

The District Court denied default judgment, and Nixon immediately appealed to the 5th Circuit who denied appellate jurisdiction for lack of final judgment:

Nixon also appealed directly to the Federal Circuit in parallel who has issued a notice-to-show-cause on whether this is a patent case.  If you remember, Nixon does not have a patent but has sued for theft of the idea.  The court writes:

It appears that this case is not within this court’s limited subject matter jurisdiction. Although this court does have jurisdiction “of an appeal from a final decision . . . in any civil action arising under . . . any Act of Congress related to patents,” it does not appear that Mr. Nixon’s complaint raises a non-frivolous claim arising under the patent laws. See Gayler v. Wilder, 51 U.S. 477, 493 (1850) (explaining that “no suit can be maintained by the inventor against any one for using it before the patent is issued”).

Nor does it appear that transfer to the appropriate federal court of appeals, in this case, the United States Court of Appeals for the Fifth Circuit, would be in the interest of justice. It appears that Mr. Nixon’s request for permission to appeal was initially filed at that court, which issued an order on November 4, 2020 denying his request because “[t]he district court’s order denying the motion for default judgment is not a final order . . . [and] the order has not been certified for immediate appeal under 28 U.S.C. § 1292(b) by the district court.” Nixon v. Gen. Motors Corp., No. 20-90032 (5th Cir. Nov. 4, 2020).

NixonGMOrder.

In the end, Nixon may be left with properly serving GM to get his case moving forward.

by Dennis Crouch

C R Bard Inc. v. AngioDynamics, Inc., No. 19-1756 (Fed. Cir. 2020) (Opinion by Judge Reyna, joined by Judges Schall and Stoll).

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Important: The court in this case particularly holds that “a claim may be found patent ineligible under § 101 on the grounds that it is directed solely to non-functional printed matter and the claim contains no additional inventive concept.”

= = = =

Question: How does the printed-matter-doctrine apply to letters that can only be read using an X-ray?

Answer: It is still printed matter; the limitations are given no patentable weight; and might render the whole claim ineligible.

= = = =

The invention in this case was prompted by a 2005 FDA labelling requirement for IV ports capable of handling fluids “power injected” directly into a patient’s veins.  (Most IV ports are designed for low-pressure gravity flow).  Bard’s IV ports were apparently already designed for use in power-injection, but not fully labelled.

More than Skin Deep: The problem with labelling is that the ports are under the skin, and so are not susceptible to a written label.  Bard’s solution: “a radiographic marker in the form of the letters ‘CT’ etched in titanium foil on the device.”   The radiomarker would then be seen on a pre-treatment “scout scan.”  The products also include shapes palpable through the skin, although that feature is not required in the claims:

providing an access port including … a radiographic feature indicating that the access port is suitable for flowing fluid at a rate of at least 1 milliliter per second through the access port …

identifying the access port as being suitable for flowing fluid at a rate of at least 1 milliliter per second through the access port via the image of the radiographic feature of the access port …

Claim 8 of US8805478.  In essence, Bard wants to be the only company that sells ports with the CT radiographic marker.

In 2015, Bard sued AngioDynamics for infringement and the case went to trial before a jury. But, the jury never got to deliberate.  After Bard presented its case-in-chief the court terminated the trial and granted JMOL (directed verdict) for the defendant — finding particularly: no infringement, no willful infringement, and that the claims are invalid as directed ineligible subject matter (printed matter) and also not inventive. The district court explained:

Fundamentally, after listening to the evidence presented to the jury and considering the evidence for the previous motions for summary judgment, the Court finds this patent is about labeling, not invention and not technology.

C R Bard Inc. v. AngioDynamics Inc., 382 F. Supp. 3d 332 (D. Del. 2019).

Printed Matter Doctrine: Under Praxair and other cases, the Federal Circuit has expanded the printed matter doctrine to “encompass[] any information claimed for its communicative content.” Printed matter can be patent eligible it is functional rather than merely communicating about the invention.

Here, the court found that the marker is on the port as a label precisely for the purpose of informing others about the functionality of the product.

Indeed, as early as the 1930s, our predecessor court recognized that the mere marking of products, such as meat and wooden boards, with information concerning the product, does not create a functional relationship between the printed information and the substrate. See In re McKee, 75 F.2d 991 (CCPA 1935); In re Johns, 70 F.2d 913 (CCPA 1934); In re Bruce, 56 F.2d 673 (CCPA 1932).

Slip Op.

Printed Matter and Eligibility: So we have claimed printed matter what next?:  One answer is that portion of the claim is “not entitled to patentable weight.”  The second question though is weather the entire claim fails under Alice?

Although the underlying rationale of the printed matter doctrine lies in the requirements of subject matter eligibility under § 101, our case law has typically applied the doctrine to hold that specific limitations of a claim are not entitled to patentable weight for purposes of novelty under § 102 and non-obviousness under § 103.

Slip Op.

Although the court has traditionally not applied eligibility-doctrine to printed-matter, the court here notes that prior precedent “did we foreclose the possibility that an entire claim could be found patent ineligible when the claim as a whole is directed to printed matter.” Slip Op.

We therefore hold that a claim may be found patent ineligible under § 101 on the grounds that it is directed solely to non-functional printed matter and the claim contains no additional inventive concept.

Id. On the merits of this case, the court found that Step-Two of Alice (lack of “something more”) was not clear enough for a directed verdict summary judgment:

AngioDynamics’s evidence is not sufficient to establish as a matter of law, at Alice step two, that the use of a radiographic marker, in the “ordered combination” of elements claimed, was not an inventive concept.  Even if the prior art asserted by AngioDynamics demonstrated that it would have been obvious to combine radiographic marking with the other claim elements, that evidence does not establish that radiographic marking was routine and conventional under Alice step two.

Id.  A confusing aspect of the decision is that it identified its judgment on Section 101 as a “reversal”, but really looks more like a vacatur.

= = = =

What is the impact of a claim term being “not entitled to patentable weight.”  Here, the court narrowly defined the printed matter as “the information that the claimed access ports are suitable for [power] injection.”  The court still gave weight to the requirement of a “radiographic marker.” Thus, if you scroll up to the two claim-terms that I copied, it appears that the first term (“providing … a radiographic feature”) is given patentable weight while the second term (acting on information provided by the feature) is not.  The district court gave neither patentable weight. On appeal the court also vacated on anticipation.

On remand there will be a new trial on infringement and validity, apparently including aspects of Alice Step 2.

Donner Technology, LLC v. Pro Stage Gear, LLC, App. No. 20-1104 (Fed. Cir. 2020)

The PTAB sided with the IPR patentee — finding the cited prior art had not been proven “analogous” On appeal, the Federal Circuit has vacated and remanded for lack of substantial evidence to support that conclusion.

The Analogous Art Test: Federal Circuit obviousness doctrine begins with prior art as defined by 35 U.S.C. 102, but then limits the scope of potential references with the “analogous art” test.  The test appears to have its origin in Judge Giles Sutherland Rich’s 1966 decision of In re Winslow, 365 F.2d 1017, 1020 (Cust. & Pat. App. 1966) (“Section 103 requires us to presume full knowledge by the inventor of the prior art in the field of his endeavor.”).  There are two potential ways of showing that a reference is analogous. The first option follows directly from Winslow, asking “whether the art is from the same field of endeavor, regardless of the problem addressed.”  In re Bigio, 381 F.3d 1320, 1325 (Fed. Cir. 2004).  The alternative asks “whether the reference … is reasonably pertinent to the particular problem with which the inventor is involved.” Id.  If either prong is met (a factual question), then the reference is deemed analogous and available for use in an obviousness argument.  I believe a fair reading of KSR further expands the doctrine, but the courts have not gone there.

In the same way that a pretextual police stop opens the door to more invasive searches, the analogous arts test also opens the door to more extensive obviousness analysis. In particular, once the reference is admitted as analogous art, any aspect of the reference (including non-analogous aspects) can be used.

Here, Pro Stage Gear’s US 6,459,023 is directed to a guitar effects pedalboard with space for mounting guitar pedals and running cables.  The image above comes from the patent and shows the patented mounting-board with various controls attached.

Donner petitioned for IPR citing US 3,504,311 (along with several other references).  The ‘311 patent has nothing to do with guitars or guitar pedals.  Rather, that patent is directed to electrical relays, including a support structure for holding a relay and wiring-channel space.

The PTAB found the ‘311 patent non-analogous.  On appeal, that judgment was vacated.  Although everyone recognized the patent came from a different field of endeavor, the fight was on the second-prong — whether it addressed the same-problem as the ‘023 inventors faced.

On appeal, the court first addresses the PTAB’s apparent failure to read the briefs:

The Board erroneously stated that Donner did ‘not put forth any argument’ [that the ‘311 patent addressed questions considered by] a pedalboard inventor. . . . “To the contrary, Donner submitted detailed expert testimony relevant to the inquiry. . . . Given the Board’s mistaken assertion to the contrary, it is unclear whether the Board meaningfully considered all of Donner’s arguments and evidence.”

On a more substantive push, the court found that the Board had improperly tied the patentee’s problem-to-be-solved to the field-of-endeavor without actually focusing on the true nature of the problem:

For instance, the Board at one point stated that the “purpose of the ’023 patent” is “to mount guitar effects on a pedal board.” But substantial evidence does not support that statement. As the
’023 patent readily discloses, guitar effects had already been mounted on a pedalboard. Thus, that could not possibly be a relevant purpose of the invention. Indeed, with respect to the analogous art inquiry, the relevant purposes of an invention are those relating to solving a problem.

Slip Op. In the end, the court remanded for reconsideration rather than offering a complete reversal:

Although we conclude that the Board applied the wrong standard and might have failed to analyze certain arguments and evidence, we do not further hold that “no reasonable fact finder could conclude, under the proper standard,” that Mullen is not analogous art. Accordingly, we leave this factual issue for the Board to resolve on remand.

Id.   This outcome appears correct since the question of analogous art is a question of fact.  What the court is really holding here is that substantial evidence did not support the PTAB’s factual conclusion.

The jury awarded less than $1 per device, but it still adds up.  This $500 million verdict is stacked atop a $400 million judgment from earlier this year.

by Dennis Crouch

Valeant Pharmaceuticals v. Mylan Pharmaceuticals (Fed. Cir. 2020)

Prior to TC Heartland, Federal Circuit precedent equated proper venue with personal jurisdiction — finding venue proper in any court that had personal jurisdiction over the defendant. See 28 U.S.C. § 1391.  In 2017, however, the Supreme Court gave renewed force to the text of 28 U.S.C. § 1400(b).

Any civil action for patent infringement may be brought [1] in the judicial district where the defendant resides, or [2] where the defendant has committed acts of infringement and has a regular and established place of business.

28 U.S.C. § 1400(b). You’ll see that I underlined “where the defendant has committed acts of infringement” in the quote above because Valeant focuses on the location-of-infringement.

Valeant is an innovator-generic ANDA case.  ANDA lawsuits are peculiar because the statutory act-of-infringement is submitting an Abbreviated New Drug Application (ANDA) to the FDA for a patented drug/use (along with a paragraph IV certification).  35 U.S.C. § 271(e)(2)(A) (“submit an application”). Here, the court held that that the location-of-infringement for venue purposes is “where actions related to the submission … occur.”  The court further clarified that Section 271(e) infringement (for venue purposes) does not consider “locations where future distribution of the generic products specified in the ANDA is contemplated.”

On the facts here:

• Mylan Pharmaceuticals Inc. (“MPI”) is a West Virginia corporation and a subsidiary of the UK/Dutch company Mylan N.V.  Mylan is set to merge with Pfizer later this calendar year.
• MPI submitted the ANDA documents from its Morgantown office to the FDA, which is located in Maryland just north of DC.
• Valeant then sued for infringement in New Jersey — noting that MPI plans to market the generic drugs within the state.

We do not have information about the course taken by the ANDA filing, but the most efficient route from WV to MD does not pass through NJ. (Note assumption regarding mail efficiency.) In any event, the district court concluded: “defendant MPI submitted its ANDA application in West Virginia, to the FDA in Maryland. None of these actions occurred in New Jersey.”  On appeal, the Federal Circuit affirmed:

A plain language reading of this provision directs us to the conclusion that it is the submission of the ANDA, and only the submission, that constitutes an act of infringement in this context. Valeant makes several arguments as to why we should understand § 271(e)(2) as encompassing more. None persuade us to reach a different conclusion.

Slip Op.

There has been some debate about the how to think about § 271(e).  It seems odd that “to petition the Government” constitutes an act of infringement. (Quoting the First Amendment, U.S. Const.).  Some courts have seen the provision as creating an “artificial act of infringement” to trigger resolution before the real-infringement occurs.  You might see this as nunc-pro-tunc constructive infringement “by virtue of submitting an ANDA for the purpose of engaging in that future infringing conduct.” (quoting appellant’s brief); See also Eli Lilly and Co. v. Medtronic, Inc., 496 U.S. 661 (1990) (§ 271(e)(2) creates a “highly artificial act of infringement”).

On appeal, the Federal Circuit rejected the future-infringement theory and instead walked through a straight statutory read —

The Hatch-Waxman Act … speaks in real terms—submission of the ANDA is the infringing act. . . an ANDA submission is a real, albeit statutorily created, act of infringement.

Slip Op.

Although I have not developed this argument, the court’s straight-read of the statute here places the provision on rocky First Amendment grounds regarding both speech and gov’t petitions.  The court considered some of these issues in the personal-jurisdiction context in Zeneca Ltd. v. Mylan Pharm., Inc., 173 F.3d 829 (Fed. Cir. 1999)

In any event, MPI wins this round — with a holding that venue is improper against MPI in New Jersey.

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Foreign Defendant: Mylan Laboratories Ltd. (“MLL”) is also a defendant in the lawsuit, MLL is an “Indian corporation with a principal place of business in Hyderabad, India.”  If you remember, TC Heartland applied directly only to domestic corporations, and the district court held here that 28 U.S.C. § 1391(c)(3) allows the lawsuit in N.J. against the foreign corporation:

(3) a defendant not resident in the United States may be sued in any judicial district.

Id. However, the court went-ahead and dismissed the case against MLL on venue grounds. On appeal, the Federal Circuit reversed this holding.  MLL also argued that its case should be dismissed on R. 12(b)(6) for failure-to-state-a-claim. In particular, the complaint alleges that it was MPI who submitted the ANDA, not MLL.  On appeal, the Federal Circuit punted on that issue and remanded to the district court to determine the issue.

Although venue is “proper” for MLL it probably isn’t the most-convenient forum if the rest of the case is heading to W.V.  In addition, MPI might be considered a necessary party who cannot be joined under FRCP R. 19 (Required Joinder of Parties).  As such, I expect that the NJ case against MLL will be dismissed.

By Colleen V. Chien, Professor of Law; and  Jonathan Collins,  Zachary J. Daly , and Rodney Swartz, PhD, all third-year JD students; all at Santa Clara University School of Law. This post is fourth in a series about insights developed based on data released by the USPTO.

“To truly advance innovation and human progress, we must all work to broaden the innovation community and make sure everyone knows that they, too, can change the world through the power of a single idea.”

– June 17, 2020 USPTO Director Andre Iancu

As we wait for a life-saving COVID vaccine, each new day reminds us of the inequalities that the pandemic has laid bare. 30% of public school children lack internet or a computer at home, making school reopenings an urgent priority. Black and brown people, are dying at a much higher rate from Covid due to a complex set of factors, and are at higher risk of lacking access to prescription drugs because of cost.

Though only one part of the larger innovation ecosystem, the patent system has an important role to play in advancing inclusive innovation. Below we build on the USPTO’s recent leadership and the AIA’s recent inclusionary policies (regional offices, pro se/bono supports, fee discounts) to provide a few ideas: being a beacon for the innovation needs of underrepresented populations, addressing the patent grant gap experienced by small inventors, diversifying inventorship by diversifying the patent bar, and developing and reporting innovation equity metrics. These ideas draw upon the paper by one of us, Inequalities, Innovation, and Patents and earlier work, and the ongoing efforts at the USPTO to “broaden the innovation community.”

Be a Beacon for the Unique Innovation Needs of Underrepresented People and for Tech Transfer 

Historically, innovation for underrepresented and underresourced groups has been underfunded. For example, Senator and VP candidate Kamala Harris recently introduced a bill to fund research on uterine fibroids, which, though receiving scant research attention, disproportionately impacts African-American women at a rate of 80% over their lifetimes. Closing the broadband access gap will require innovative technology solutions to deal with the “last mile” problems that face rural and underserved populations. The USPTO can use its powers to accelerate innovation to meet the unique needs of underrepresented and underresourced groups, including, as was done in the context of the Cancer Moonshot initiative, identifying relevant patents and applications and combining patent data with external data sources for example from agencies like the National Institutes of Health and Food and Drug Administration. These efforts bring connect patented inventions to “upstream funding and R&D as well as downstream commercialization efforts.” To speed COVID innovation, the agency has taken a number of other steps including deferring or waiving fees, prioritizing examination, and launching a platform to facilitate connections between patent holders and licensees. These capacities could be directed to priority equity areas, which are positioned to benefit especially when private and public funding is at stake.

Expand Equality of Opportunity by Addressing the “Patenting Grant Gap”

When startups and innovation entrants patent, good outcomes often follow: first-time patenting is associated with investment, hiring, and economic mobility. But in many cases, the applications submitted by small entity inventors don’t actually turn into patents. Using open government data helpfully made available by the USPTO Open Data Portal (beta) we find, as documented in Fig. 1 below from the paper, that small entities are less likely to succeed when they apply for patents: by our estimate, applications filed 10 years ago have turned into patents 73% of the time vs. 51% for small/micro entities, a 40%+ difference.

Others including work by former USPTO Chief Economist Alan Marco, have reached similar conclusions. Empirical studies have also found that inventors with female sounding names, or who are represented by law firms that are less familiar to patent examiners are less likely to get patents on their applications than their counterparts. (source: Colleen Chien,  Inequalities, Innovation, and Patents)

The difference in allowance rates may be due to any of a variety of factors, for example, a higher abandonment rate or differences in the types of patents sought. The possibility of implicit bias – based on inventor, or firm name – is also worth investigating further; the USPTO isn’t the only federal agency where the possibility of bias has been documented. But no matter the reason, ungranted applications to underrepresented groups present not only potential equity problems for society but also economic problems for the agency: applications that never mature into patents don’t generate issuance and maintenance fees.

One solution may be to try to improve the quality of underlying applications. As previously documented using PTO office action data, the applications of discounted entities are much more likely to have 112 rejections, and in particular 112(b) rejections. (Fig. 5A) A lack of “applicant readiness,” as described by examiners, may be one culprit. (source: Colleen Chien,  Rigorous Policy Pilots the USPTO Could Try (2019))

A promising approach as discussed previously by one of us would be to democratize access to drafting tools and aids, which are often used by sophisticated applicants to, for example, check the correspondence between claim terms and the specification. Using error correction technology to level the playing field in government filings, through public and private action, is precedented. Improved application quality advances the shared goal of compact prosecution, and to that end it is encouraging to see that the Office of Patent Quality Assurance, in their ongoing work to improve applicant readiness, is reportedly working to “identify opportunities for IT to assist with quality enhancements early in the process.” Such efforts could go a long way to address both the equity and economic challenges described above. We encourage continued investigation and prioritization of public and private efforts to address the “patent grant gap” in support of broader inventorship and participation in innovation.

Diversifying Inventorship by Diversifying the Patent Bar 

As argued in the paper, patenting is a social activity that depends on social connections -“who you know and who you can call upon.” But access to patent talent is uneven – Sara Blakely, the founder of Spanx, has reported that she could not find a single female patent attorney in the state of Georgia to file the patent upon which she built her billion-dollar undergarments empire. To sit for the patent bar generally requires a science, technology, or engineering degree. But because of their underrepresentation among STEM, engineering, and computer science graduates, women, Black and Hispanic people are disproportionately excluded from participation.  The technical degree requirement particularly disadvantages those with design experience but not engineering degrees, who are often women, and who might otherwise want to prosecute design patents over fashion or industrial design, Christopher Buccafusco and Jeanne Curtis have noted. Relaxing the technical degree requirement would enable diversification of the patent bar, in support of diversifying inventorship and entrepreneurship.

Develop and Prioritizing Innovation Equity Metrics and What Works

While each year the number of new patent grants is announced, perhaps the patent statistic that has catalyzed the most action recently is the USPTO’s groundbreaking Progress and Potential series of reports which, for the first time, officially documented that only 12-13% of American inventors are women, and Director Iancu’s leadership and his staff on the issue. This report has prompted conferences and toolkits, and spurred companies to revisit their patent programs and pipelines. As additional resources are invested into making innovation more inclusive, “innovation equity metrics” that take advantage of the granularity, quality, and regularity of patent data, and that track, for example “inventor entry” and “concentration” and the geographic distribution of patents, as demonstrated in the paper, are worth investing in. Improved data collection, for example, of race and veteran status data, and federation and coordination with other datasets, for example held by the Small Business Administration, or in connection with the Small Business Innovation Research program, and Census could go a long way. Doing so would allow for more regular reporting and analysis of the overall health of the innovation ecosystem, which, by a few measures appears to be waning: as described in the paper, patenting by new entrants is down while the concentration of patent holdings is up. Surveys of underrepresented inventors, and what have been enablers and blockers, can also lend inform the development of policies of inclusion.

Conclusion

Though only one part of the larger innovation ecosystem, the patent system’s long-standing commitment to a diversity of inventors and equal opportunity position it well to answer the call of the current moment, for greater inclusion in innovation. We encourage readers with concrete ideas about how to advance inclusion in innovation, through the patent or other governmental levers, to submit them to the DayOneProject, which is collecting ideas for action for the next administration. For more, also check out the recent Brookings Report on Broadening Innovation by Michigan State Prof. Lisa Cook, a leading economist (see, e.g. the NPR Planet Money podcast, Patent Racism, about her work).

The authors represent that they are not being paid to take a position in this post nor do they have any conflicts of interest in the subject matter discussed in this post.  Comments have been disabled at the authors’ request. 

by Dennis Crouch

Bio-Rad Laboratories, Inc. v. 10X Genomics Inc., 19-2255 (Fed. Cir. 2020).

Without opinion, the Federal Circuit has denied defendant-appellant 10X Genomics’ en banc rehearing petition on the following three questions:

1. Whether a patentee can overcome prosecution history estoppel under the tangentiality exception merely because the inventors ceded more claim scope than necessary;
2. Whether a claim term written in binary form is vitiated by an equivalent that is the opposite of that term; and
3. Whether the requirement to apportion reasonable royalty damages in every case applies in comparable license cases.

EnBancPetition.  The petition filed by Joshua Rosenkranz sets-up a push for writ of certiorari with the Supreme Court.

The $100 million case involves technology for growing and analyzing eukaryotic cells using microchip technology. Effectively cyborg technology albeit at a 1-cell-at-a-time level rather than whole organism.

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Bio-Rad’s U.S. Patent No. 8,889,083 is particularly directed to a microfluidic system.  The claims require “a non-fluorinated microchannel.”  But, it turns out that 10X’s product uses a fluorinated microchannel.  This automatically raises the issue of vitiation and thus 10X’s question “Whether a claim term written in binary form is vitiated by an equivalent that is the opposite of that term.”

BioRadJuryVerdict. The jury was particularly asked about whether the element was satisfied under the doctrine of equivalents, and said yes, it was DOE infringement. On appeal, the Federal Circuit affirmed — rejecting “10X’s attempt to limit the inquiry to a binary choice between ‘fluorinated’ and ‘nonfluorinated’ microchannels.”

The appropriate inquiry is whether a reasonable juror could have found that a negligibly-fluorinated microchannel performs the same function, in the same way, and achieves the same result, as a non-fluorinated microchannel. Here, based on the evidence presented at trial … the district court concluded that a reasonable juror could find that a 0.02% Kynar-containing microchannel is insubstantially different from a non fluorinated microchannel.

Slip Op.

Damages 1 vs 3: The jury found infringement of three separate patents. However, on appeal the Federal Circuit reversed claim-construction for two of the patents and thus vacated the infringement judgment. Although the damages verdict was based upon three patents, the appellate panel affirmed “the entirety of the jury’s damages award” even after finding no infringement for two of the patents.  The court explained: “The jury verdict and jury instructions show that the damages award is not predicated on infringement of any one patent.”

by Dennis Crouch

The court issued an important short-opinion, In re Ivantis, Inc. (Fed. Cir. 2020), that should be read and considered as a case-study by in-house counsel. The case involves pre-lawsuit destruction of evidence.

The basic setup is that Ivantis has a corporate email-destruction-policy* of deleting emails that are 12-months old.  Glaukos sued Ivantis for infringement in April 2018 and served the defendant with the Summons and Complaint on April 16, 2018. On April 19, 2018 the company instituted an internal “litigation hold” that suspended the deletion-policy for emails potentially related to the lawsuit.  It turns out that Ivantis has been preparing for this litigation and considering work-arounds for Glaukos patents since at least 2013, and all those emails were deleted.

The district court found that Ivantis actually anticipated the litigation and that the email deletion constituted improper spoliation under FRCP 37(e) . As a penalty, the court found that the jury should be given an adverse inference instruction, focusing on willfulness:

Ivantis intentionally deleted and failed to preserve relevant evidence for this litigation. Ivantis anticipated patent infringement litigation from Glaukos, but nonetheless adopted and maintained a policy that deleted all company email after 12 months, resulting in the destruction of virtually all emails at Ivantis that pre-date April 2017, including emails specifically relating to the Glaukos Asserted Patents. You may presume from that destruction that the destroyed evidence was favorable to Glaukos and unfavorable to Ivantis, including on the issue of whether Ivantis willfully infringed the Asserted Patents.

Glaukos adverse inference order.  The district court also awarded “a sanction prohibiting Ivantis from referring to any pre-suit investigation of the Asserted Patents as a basis for believing that it did not infringe or that the patents were invalid.”

On mandamus, the Federal Circuit has refused to take the case – finding that the decision was not “so patently unreasonable as to warrant mandamus.” Ivantis argued that immediate appeal was important because “a massive damages judgment and an injunction against sales of Ivantis’s only product will cast a dark shadow over the company, threatening its ability to grow at this critical juncture in its development—even if Ivantis were to obtain a stay and ultimately prevails on appeal.”  The Federal Circuit noted that argument, but found it unconvincing: “we are not prepared to depart from the usual practice of waiting until after final judgment to review such orders based on such speculation.”

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I should note here that this case has more red-flags than the typical email-retention issue.

• Both companies are competing in the narrow field of FDA-approved stent-treatments for glaucoma.
• As early as 2009, Ivantis was told that it infringed Glaukos patents.
• In 2013, Ivantis hired “patent litigation counsel” to conduct diligence
  related to Glaukos’s patents.  Shortly thereafter, Ivantis instituted its email-deletion policy that resulted in deleting all the emails relating to the patents at issue here. The same attorneys represent Ivantis in this litigation.
• In 2017, Ivantis CEO distributed a report from an industry analyst wo indicated Glaukos would sue Ivantis for infringement in 2018.
• In 2018 (about a month before the lawsuit), Ivantis began preparing a petition for IPR.

In its decision, the appellate panel found these events sufficient to sustain the lower court’s determination that Ivantis “acted with the intent to deprive another party of the information’s use in the litigation.”

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* Ivantis uses the politically correct ‘retention policy’ rather than ‘destruction policy.’

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FRCP R. 37(e) Failure to Preserve Electronically Stored Information. 

If electronically stored information that should have been preserved in the anticipation or conduct of litigation is lost because a party failed to take reasonable steps to preserve it, and it cannot be restored or replaced through additional discovery, the court:

(1) upon finding prejudice to another party from loss of the information, may order measures no greater than necessary to cure the prejudice; or

(2) only upon finding that the party acted with the intent to deprive another party of the information’s use in the litigation may:

(A) presume that the lost information was unfavorable to the party;

(B) instruct the jury that it may or must presume the information was unfavorable to the party; or

(C) dismiss the action or enter a default judgment.

By: Colleen V. Chien, Professor of Law; Nicholas Halkowski, first-year associate at Wilson Sonsini and 2020 JD grad; Maria He, Masters Graduate of the Masters in Business Analytics Program at Leavey Business School, and Rodney Swartz, PhD, patent agent, Intellectual Property Associate at SRI International, and third-year JD student; all at Santa Clara University and writing in their personal capacity. This post is the third in a series about insights developed based on data released by the USPTO.

Almost two years have passed since the USPTO issued its January 2019 Patent Eligibility Guidance (PEG). As the prospect of near-term Supreme Court or Congressional action on Section 101 remains murky, it is worth taking stock of patent prosecution and application trends following the PEG, and also, the Office’s accompanying Guidance on Section 112. In this post, we report on quarterly trends in office actions and filings before and after the PEG. We build on earlier analyses reported in PatentlyO and the USPTO Office of Chief Economist’s own report from earlier this year, Adjusting to Alice, which found that the PEG was followed by decreases in both the likelihood of receiving a rejection and the uncertainty in patent examination.

It is thanks to the exciting continued releases of patent data from the Patent Office, collectively as part of the Open Data Portal (in beta), that we can follow these trends in an attempt to understand the impact of policy. We encourage the USPTO to continue providing data and improving its coverage and quality, providing the only source of data that the courts and policymakers can turn to on the prosecution impacts of their work, as well as research and patent data startups. As to the office action and appeals data, discontinuities and quality issues in currently available datasets presented challenges to our analysis, which we overcame by developing a number of computational approaches. The accompanying PatentlyO Bar Journal Article, Parsing the Impact of Alice and the PEG, (hereinafter referred to as “Article”), has the details and code we used, as well as a summary of the supporting analyses described below.

We find, following the PEG:

1. Decline in 101 Subject Matter Rejections and Stabilization of Appeals: The prevalence of 101 subject matter rejections declined by 37% after the PEG with absolute declines most dramatic among “software” applications as previously defined. (Fig. 1) Ex parte appeal decisions addressing 101 subject matter appeared to stem their rise. (Article 1A)

2. No Discernable Increase in 112 Rejections: The 112 Guidance issued by the Patent Office in January 2019 described the use of 112(a), (b), and (f) to address functional claims in computer-implemented inventions. Following the 112 Guidance, we did not discern an increase in the examiner’s application of 112 rejections, in general (Fig. 2) or at the subsection level, except in the case of 112(f) rejections as applied to “software” applications which have increased steadily since the USPTO’s February 2014 Executive Action on Claim Clarity and Federal Circuit’s June 2015 Williamson decision, both directed to functional claiming, from 2.7% in 1Q14 to 7.6% in 4Q19. (See Article 2A)

3. Leaving Small Entities Behind Through Forum Shopping?: Some applicants have responded to elevated 101 rejection rates by using analytic tools to draft their claims in order to “forum shop” out of Alice-impacted art units. Though the use of these tools is not observable, it is plausible that their cost puts them out of reach of small and micro entities, and might, as a result, lead to a greater concentration of discounted applications in these art units. However, when we looked at the data, we found that the share of applications by discounted entities over time had not increased but rather, has stayed relatively steady among applications filed from 2010 to 2018. (See Article Fig. 3)

4. No Noticeable Decline in “Medical Diagnostic” or “Software” Applications following Alice or Mayo: One limitation of focusing solely on rejection rates is that they do not capture applications “never filed” due to the changes in law or policy. To gauge whether or not there was an “Alice” or “Mayo” “effect” on the number of applications, we looked for declines, in absolute and relative terms, among medical diagnostic and software technology applications, as previously defined, but found no such declines. (See Article Fig.4) Although the PEG came out more than 18 months ago, we do not yet have a complete picture of application trends following the PEG, so cannot rule out that it was followed by increases in filings.

5. More Unique Words in Issued Patent Claims post Alice: Another limitation of focusing on examiner behavior is that it does not take into account changes in applicant behavior and the dynamic there between. With the help of Rocky Berndsen, Peter Glaser, and William Gvoth of Harrity and Harrity, we looked at the number of words included in patents filed after Alice. Applying a “differences in differences” approach, we found that the number of unique words in “software” patents relative to a baseline doubled from 10 additional to 20 additional words, consistent with the hypothesis that the Alice decision led to the addition of claim details. (See Article Fig. 5) As patents filed after the PEG are granted, it will be worth seeing whether or not outcomes along this metric have changed.

Conclusion

The data indicate that, following the PEG, the prevalence of 101 subject matter rejections, and likely frustration associated with same, declined. At the same time, we did not find that 112 rejections increased noticeably to take their place, or that caselaw or the PEG resulted in sustained diminished filings. While we are not able to report on the impact of the PEG on filings and application “quality” (words and details), due to time effects, fortunately, the USPTO’s data releases should seed continued study and analysis of the impact of it and future guidance and court decisions.