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Supreme Court to Review Burden of Proof in Declaratory Judgment Actions

May 21, 2013

Yesterday, the Supreme Court agreed to hear the appeal of the declaratory judgment plaintiff in Medtronic Inc. v. Boston Scientific Corp.  The question presented in the case is as follows:

In MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 137 (2007), this Court ruled that a patent licensee that believes that its products do not infringe the patent and accordingly are not subject to royalty payments is “not required … to break or terminate its … license agreement before seeking a declaratory judgment in federal court that the underlying patent is … not infringed.”

The question presented is whether, in such a declaratory judgment action brought by a licensee under MedImmune, the licensee has the burden to prove that its products do not infringe the patent, or whether (as is the case in all other patent litigation, including other declaratory judgment actions), the patentee must prove infringement.

Federal Circuit Decision

Medtronic licensed patented technology related to cardiac resynchronization therapy (CST) from Mirowski Family Ventures (MFV).  Nearly from the start of the relationship, the parties disagreed as to which products were covered by the patents and whether the patents were valid.  In 2003, Medtronic challenged the validity of a licensed patent while paying royalties into an escrow account.  The parties ultimately settled the case.  The settlement agreement indicated that MFV would inform Medtronic as to which products were covered by the patents.  If Medtronic disagreed, it could retain the license while bringing a declaratory judgment action to have the court decide the issue.

In late 2007, Medtronic filed just such a declaratory judgment action of non-infringement and invalidity of the patents.  Because it continued in the license agreement, MFV could not counterclaim for infringement.  The parties disputed whether the burden to prove infringement rested on MFV, as is typically the case for the patent owner, or if, given the stature of the case, Medtronic bore the burden to prove non-infringement.  The district court sided with Medtronic and found the MFV did not meet its burden of proving infringement of the Medtronic products.

On appeal, the Federal Circuit recognized that the case is not the typical patent infringement situation where the patent owner files the initial complaint, nor is it the typical declaratory judgment case where the patent owner files the compulsory infringement counterclaim.  In those situations, the patent owner quite clearly bears the burden of proving infringement.

Now that the Supreme Court has indicated that counterclaims can be filed in the absence of ceasing royalty payments, patent owners cannot always file infringement counterclaims in the face of a declaratory judgment action.  Does the patent owner still bear the burden of proving infringement or has it shifted to the declaratory judgment plaintiff?

The Federal Circuit reversed the district court and allocated the burden of proof to the declaratory judgment plaintiff.  The court clearly struggled with how to handle the burden in light of MedImmune.  The court ultimately reasoned that MedImmune would become not simply a shield to keep licensees from large damage awards from non-payment of the license, but also a sword to haul the patent owner into court where the patent owner must prove infringement.  It is the licensee and not the patent owner who seeks relief from the court and a change in the status quo.  If neither party presented evidence, the court should not upset the status quo of the license agreement.  Thus, fairness requires them to bear the burden of proof.

The Supreme Court has now agreed to resolve this dilemma of its own making during its October 2013 term.

Posted in Supreme Court | Leave a Comment »

Chen Closer to Federal Circuit Confirmation

May 16, 2013

Last month, PTO Solicitor Raymond Chen had his hearing before the Senate Judiciary Committee.  Today, the Committee unanimously reported the nomination favorably to the full Senate.  Hopefully, the full Senate will vote on his nomination in the coming weeks (or months or years).

The Federal Circuit currently includes 10 active judges, although the court has 12 judicial seats.  Todd Hughes was nominated at the same time as Raymond Chen.  He has not yet received a hearing before the Senate Judiciary Committee.

Chen’s nomination seems to be proceeding with incredible speed compared to recent nominations.

HT:  Hal Wegner

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Supreme Court Affirms Federal Circuit in Seed Patent Exhaustion Case

May 13, 2013

In a rare affirmance of the Federal Circuit, the Supreme Court found no exhaustion in the seed patent case.  Bowman v. Monsanto Co.

Justice Kagan, writing for a unanimous Court, held that the doctrine of patent exhaustion only restricts a patent owner’s rights to a particular article sold.  It does not limit the patent owner’s right to keep others from making additional copies of the patented invention.

Exhaustion protected Bowman as to his ability to use the patented seeds as he saw fit.  It does not, however, protect him from charges of infringement should he decide to “make” new seeds.  This is what the Court said he did.  He planted the original seeds and harvested new ones from the resulting plants.  The act of making the new seeds was an act of infringement not protected by patent exhaustion.

More details are available in my preview post for the Supreme Court’s current term.

Posted in Court Decisions, Supreme Court | Leave a Comment »

Federal Circuit En Banc on Patentable Subject Matter

May 10, 2013

A Federal Circuit panel had reversed a district court opinion that related to patent eligibility of computer-related claims.  The details of the patent are related in my earlier post, but the salient issue is that the patent included method, system, and computer-readable media claims.  The panel divided over the issue with Judges Linn and O’Malley reversing the district, while Judge Prost dissented.  The court agreed to hear the case en banc.

Today, the 10 member en banc court overruled the panel decision and affirmed the district court.  If you were looking for precedent, however, you will be disappointed.  Here is the entire per curiam opinion:

Upon consideration en banc, a majority of the court affirms the district court’s holding that the asserted method and computer-readable media claims are not directed to eligible subject matter under 35 U.S.C. § 101.

An equally divided court affirms the district court’s holding that the asserted system claims are not directed to eligible subject matter under that statute.

In other words, a majority of the court holds that the method and computer-readable media claims are not patent eligible, but they can’t agree on the reasoning.  The court divided 5-5, however, on the patent eligibility of the system claims.  In such a case, an appellate court affirms the lower court; the tie goes to the runner so to speak.

After that brief opinion, however, an additional 120+ pages are allocated to concurring and dissenting opinions that apparently could not garner a majority.

Judges Lourie, Dyk, Prost, Reyna, and Wallach

Judges Lourie, Dyk, Prost, Reyna, and Wallach filed a concurring opinion where they laid out the analysis they would use for the claims at issue.

First, it must be determined whether the claims fit within one of the four statutory classes:  process, machine, manufacture, composition of matter.  Next, does the claim pose the risk of preemption of an abstract idea?  The claim must include an inventive concept, a genuine human contribution.

In applying this analysis to the claims-at-issue, this group of 5 judges would hold that none of the claims are patent eligible.

Chief Judge Rader and Judges Linn, Moore, and O’Malley

Next, Chief Judge Rader and Judges Linn, Moore, and O’Malley filed an opinion concurring-in-part and dissenting-in-part.  Chief Judge Rader and Judge Moore agree with the majority that the method and computer-readable media claims are not patent eligbile, while Judges Linn and O’Malley would find all of the claims to be patent eligible.

This opinion notes that the exceptions to patent eligibility are “laws of nature, natural phenomena, and abstract ideas.”  In crafting these exceptions, the Supreme Court was concerned with the “monopolization of the basic tools of scientific and technological work” and impede innovation more than promote it.

The opinion notes that claims must be “meaningfully limited.”  For computer-related claims, this means that the otherwise abstract idea must be performed in a “specific way” on the computer or be performed on a “specific computer.”  The computer must perform a meaningful role in the performance of the invention.  The court must be careful not to consider novelty, obviousness, or section 112 issues when determining patent eligibility.

Judge Moore filed an opinion dissenting-in-part that was joined by Chief Judge Rader and Judges Linn and O’Malley.

Judge Moore is very concerned that the exception to patent eligible subject matter is getting too large and that a very large number of currently valid patents may be implicated.  She describes the court as “irretrievably fractured” over the issue of patent eligibility.  The Supreme Court only seems to review cases where it is going to rule the claims to be patent ineligible.  She seems to urge them to review this case and hold otherwise.

She is extremely critical of Judge Lourie’s opinion.  She indicates that he strips away all known features from the claims in his search for an “inventive concept.”  This is, of course, continuing the confusion between § 101 and §§ 102 and 103 of the Patent Act.

Judge Newman

Judge Newman filed an opinion concurring-in-part and dissenting-in-part.  Judge Newman is concerned over the added uncertainty to patentees now that patent eligibility seems to be a completely separate litigation issue.  She decries the division over the issue on the court and that it will not provide any guidance to patent owners.  She would hold all of the claims in this case to be patent eligible.

Judges Linn and O’Malley

Judges Linn and O’Malley filed a dissenting opinion.  They note that no claim construction analysis was conducted in this case and it comes to the court on a grant of summary judgment of patent ineligibility.  The defendant in the case has agreed to a much narrower construction of the claims than they have been given by the court.  Based on the sparse record, they would hold all of the claims to be patent eligible.

Finally, Chief Judge Rader provided “additional reflections” where he reviews other patent eligibility cases with which he has been involved.  He leaves us with a mantra to ponder:

When all else fails, consult the statute!

Posted in Court Decisions, Federal Circuit | 1 Comment »

Be Certain to Rebut Examiner’s Statements During Prosecution

April 17, 2013

Yesterday, a divided panel of the Federal Circuit affirmed the district court’s narrow claim construction based on the applicant’s prosecution history disclaimer in Biogen IDEC v. GlaxoSmithKline.

Biogen obtained a patent that covered a method for treating patients with Chronic Lymphocytic Leukemia (CLL) by administering a therapeutically effective amount of anti-CD20 antibody.  Anti-CD20 antibodies are antigen proteins that are capable of being used in cancer treatment.  At issue in the case was the meaning of the term “anti-CD20 antibody.”

During prosecution of the patent, the examiner rejected the claims for lack of enablement.  The claims were not enabled under the broadest reasonable interpretation standard used by the PTO for “any and all anti-CD20 antibodies, no matter the specificity or affinity for the specific epitope on the circulating tumor cells.”  The examiner acknowledged that the specification did enable certain antibodies, such as RITUXAN® (rituximab), but was silent as to necessary specificity and affinity for other anti-CD20 antibodies.

The applicant responded that those of skill in the art would know that

even though antibodies directed to the same antigen might have different affinities and functional characteristics, one of skill in the art could readily identify an antibody that binds to CD20 with similar affinity and specificity as does RITUXAN® using techniques that are well known in the art. . . . With that knowledge in hand, the skilled artisan could readily produce anti-CD20 antibodies using similar techniques, and screen such antibodies for those having an affinity and functional activity similar to RITUXAN®.

The examiner then withdrew the enablement rejection and the claims were allowed.

GSK developed an anti-CD20 antibody with distinctly different characteristics from RITUXAN®.  Biogen sued GSK for infringement.

The district court construed the term “anti-CD20 antibody” to mean “rituximab and antibodies that bind to the same epitope of the CD20 antigen with similar affinity and specificity as rituximab.”  This construction was based on Biogen’s disclaimer during prosecution of the patent to overcome the examiner’s enablement rejection.  Biogen stipulated that, under this construction, GSK did not infringe the claims of the patent.

Federal Circuit

On appeal, Biogen argued for the ordinary and customary meaning of the anti-CD20 antibody claim term.  The court acknowledged that to overcome this heavy presumption of the ordinary meaning, a “clear and unmistakable disavowal” by the applicant during prosecution is required.  The majority ruled that the applicant did make such a disavowal in this case.

According to the court, rather than challenging the examiner’s understanding of the “anti-CD20 antibody” claim term, the applicant merely argued that the claims were enabled for anti-CD20 antibodies that are similar to RITUXAN®.  The applicant seemed to acquiesce to the examiner’s assertion that the claims were not enabled for other types of anti-CD20 antibodies.

Although Biogen argued that the applicant was discussing functional and affinity characteristics of anti-CD20 antibodies generally, and suggested that those skilled in the art would apply their understanding of the selection of such antibodies similar to the selection of RITUXAN®, the court instead held that the statement demonstrated a disavowal of claim scope of reasonable clarity and deliberateness.

This case is highly unusual in that prosecution history disclaimers are usually a result of the applicant’s statements during prosecution, not the examiner’s.  The court, however, was unconvinced.

This case deals not only with applicants letting stand an examiner’s narrow characterization of a claim term, but also their adoption of that characterization to overcome the examiner’s enablement rejection.

Judge Plager dissented from the majority opinion.  He argued that the give-and-take with the examiner is part of a negotiation with the applicant.  Such negotiation often results in ambiguous statements as in this case.  These less-than-clear statements should not be used against the applicant as they do not enhance the prosecution history’s notice function to the public.  Such is the case here.  Judge Plager would reverse and use the ordinary meaning of the term.

Lessons

It seems fairly clear that in this case Judge Plager is correct.  The record seems less than clear as to why the examiner withdrew the enablement rejection.  Was it because the applicant disclaimed certain claim scope that was considered non-enabled?  Was it because the examiner was convinced by the applicant’s argument that by demonstrating enablement for certain anti-CD20 antibodies that it was enabled for others as well?  This is definitely not a clear and unmistakable disavowal of claim scope.

The lesson, however, is that applicants should rebut all of the examiner’s statements in office actions with which he does not agree.  In this case, the applicant may believe that he did just that.  He presented an argument that overcame the examiner’s rejection.  This is a really tough opinion on this issue.

Earlier in my career, I worked with an attorney in the past who taught me to use language such as the following.

To avoid any unintended consequences to the contrary, the undersigned respectfully does not accept or acquiesce in any statement, argument, or description in the Office Action except as expressly stated herein.

While this language generally seems to be overkill, and seems to be merely boilerplate, it would (hopefully) avoid a situation such as in this case.

Posted in Court Decisions, Federal Circuit, Patent Strategies | Leave a Comment »

International IP Exhaustion Reprised

March 27, 2013

As an update to my earlier post on the case, the Supreme Court recently issued its decision on international copyright exhaustion.

Kirtsaeng v. John Wiley & Sons

The Supreme Court reversed the decision of the Second Circuit and held that John Wiley’s copyright was exhausted by the authorized sale of the textbooks in Thailand.  Kirtsaeng was free to do whatever he wanted with the books once he lawfully acquired them, including importing them into the United States and reselling them.

Professor Kristen Osenga of the University of Richmond Law School (my wife) provided a podcast for the Federalist Society about the Supreme Court’s decision.  http://www.fed-soc.org/publications/detail/kirtsaeng-v-john-wiley-sons-inc-post-decision-scotuscast.

The question of what, if any, impact this decision will have on patent law remains unanswered.  The Supreme Court refused to consider an appeal in a patent case on this same issue and left the Federal Circuit’s patent exhaustion opinion in place, even though the decision is contrary to the decision in Kirtsaeng.  Ninestar v. ITC.

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Federal Circuit to Reconsider Claim Construction Deference

March 15, 2013

The Federal Circuit issued as order today that it will reconsider whether to grant any deference to a district court’s claim construction ruling.  Lightning Ballast Control LLC v. Philips Electronics North America Corp.

Since the late 1990′s, the Federal Circuit has treated claim construction–the determination of what the various words and phrases in a patent claim mean–as a matter of law.  This means that the court had reviewed lower court determinations de novo.  This means that the Federal Circuit would determine the meaning of the claim terms with no consideration of how the district court construed the terms.  Needless to say, the reversal rate of such determinations is very high.

When an appellate court reviews a lower tribunals factual findings, by contrast, the reviewing court grants deference to the lower court’s determination.  They will instead review factual findings for clear error.  After all, the lower court actually reviewed the evidence and listened to the witness testimony.  The appellate court is merely reviewing the written record of what happened.  The lower court is a better judge as to the credibility of the testimony or evidence.

Claim construction often includes a determination of underlying facts such as prosecution history statements and how one of ordinary skill in the art would actually understand a claim term.

While there has been a call to revisit the de novo review standard for years, the court has generally resisted these advocates for change.  The time has finally come to readdress the issue.  The court’s order requests the parties to address three questions:

a. Should this court overrule Cybor Corp. v. FAS Technologies, Inc., 138 F.3d 1448 (Fed. Cir. 1998)?

b. Should this court afford deference to any aspect of a district court’s claim construction?

c. If so, which aspects should be afforded deference?

Posted in Court Decisions, Federal Circuit | 1 Comment »

Senate Finally Confirms Richard Taranto

March 12, 2013

TarantoYesterday, the full Senate finally confirmed Richard Taranto to a seat on the Federal Circuit.  Taranto was nominated November 10, 2011, giving his nomination a 16 month pendency before the Senate.  This nomination was not at all contentious, the final vote being 91-0.

Taranto becomes the 10th active judge on the court, joining Chief Judge Randall Rader and Judges Pauline Newman, Alan Lourie, Timothy Dyk, Sharon Prost, Kimberly Moore, Kathleen O’Malley, Jimmie Reyna, and Evan Wallach.  Six additional judges remain on the court in senior status:  H. Robert Mayer, S. Jay Plager, Raymond Clevenger, Alvin Schall, William Bryson, and Richard Linn.  Judges Newman, Lourie, and Dyk are eligible for senior status should they so choose.

Two seats on the court remain vacant.  In February, President Obama nominated Raymond Chen and Todd Hughes to fill those seats.  Will we have to wait until June 2014 before their confirmation?

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Patent Malpractice Cases Belong in State Court

February 21, 2013

Yesterday, a unanimous Supreme Court has overturned the Federal Circuit practice of keeping malpractice cases against patent attorneys in Federal court with appeals to the Federal Circuit.  Gunn v. Minton.

In this case, the Texas Supreme Court had followed the Federal Circuit’s rule and dismissed the case for lack of subject matter jurisdiction.  The Federal Circuit’s rule was that such cases required resolution of significant issues of patent law, including whether the complainant would have prevailed if not for the alleged malpractice.  Would the complainant have received its patent in prosecution or prevailed on infringement claims in litigation?  The Federal Circuit was concerned that state courts are not adequately experienced in deciding patent cases which have exclusive Federal jurisdiction.  There could also be cases with conflicting results.

Judge O’Malley had recently been dissenting from the court’s prevailing view on this issue.

The Supreme Court held that although the state courts must answer questions of patent law to resolve the malpractice claims, the answer has no broader effects.  It is not binding precedent on future patent claims and will not effect the validity of the patent.  Therefore, state courts may retain jurisdiction over such malpractice claims.

The question next becomes whether the resolution of this case will effect other cases.  For example, is a dispute over a license or other contract whose subject matter is a patent belong exclusively in Federal court?  Contract disputes are typically decided under state law.  This question is presented in another case where a petition is pending before the Supreme Court.  Regents of Univ. of California v. Caldera Pharm., Inc.

As noted by Patently-O, however, the AIA changed the jurisdictional requirement from whether the dispute “arises under” the patent laws to whether it involves “any claim for relief arising under any Act of Congress relating to patents.”

Posted in Court Decisions, Supreme Court | Leave a Comment »

Judge Rader Chides Supreme Court’s IP Decisions

January 24, 2013

Judge RaderLaw360 (subscription) is reporting a speech by Federal Circuit Chief Judge Randall Rader where he called out the Supreme Court’s recent patent decisions for judicial activism.  In the speech at the New York State Bar Association’s annual meeting, Judge Rader argued that the Supreme Court’s decisions have ignored or only partially applied the patent statute.  The Court instead relied on interpreting its own precedent.

Judge Rader specifically called out the Court’s decisions in Mayo v. Prometheus and eBay v. MercExchange.  In Mayo, the Court held that the claims to a method of optimizing therapeutic efficacy for treatment of an immune-mediated gastrointestinal disorder were not patentable because they were directed to natural laws and routine, conventional activity.

Judge Rader noted that the patent statute says nothing about laws of nature.  Instead, the Patent Act states that patents are permitted for “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.”  The Patent Act also states that inventions that are not novel or are obvious are not patentable.  Laws of nature can clearly not be patented because they are not novel and have not been invented.  The Supreme Court instead ignored the statute and instead interpreted its own judicially-created exception to patentable subject matter.

In eBay, the Supreme Court held that an injunction should not automatically issue in a patent case upon a finding of infringement.  Instead, courts must go through a four part test to determine whether the injunction is appropriate.  Judge Rader noted that the patent statute states that upon a finding of infringement, courts “may grant injunctions.”  The statute does not refer to the four part test.  He argued that injunctions should issue in most cases of infringement, unless there is good reason, such as where the public interest is affected or where health would be endangered.

Judge Rader also argued that other groups are also seeking to interpret patent law in a way that is not reflected or intended by the statute.  For example, a number of groups seek restrictions on infringement actions brought by so-called patent trolls, entities that do not practice the patented invention.  Courts should not decide cases based on the status of the parties, but rather based on the law.  Courts should not permit parties to extend the scope of patents beyond the actual contribution of the invention to the field.

Posted in Federal Circuit | 2 Comments »

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