INVENTIVE STEP

As expected, the ACLU filed a petition asking the Supreme Court to review the Myriad case.  The petitioners raise two questions in their brief.

1. Are human genes patentable?

2. Did the court of appeals err in adopting a new and inflexible rule, contrary to normal standing rules and this Court’s decision in MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007), that petitioners who have been indisputably deterred by Myriad’s “active enforcement” of its patent rights nonetheless lack standing to challenge those patents absent evidence that they have been personally and directly threatened with an infringement action?

The strange things about the petition are that the first question is the ACLU’s attempt to get cute about the case. 

The second is that the petitioners won on the second question when they probably shouldn’t have.  The only plaintiff to have standing saw lost his standing while the case was on appeal.  The Supreme Court should probably dismiss the case as moot.

We now await Myriad’s response before seeing whether the Supreme Court will wade into this case.

A copy of the petition is available here.

We didn’t really think that the issue of patentable subject matter was settled after Bilski.  The Supreme Court will be hearing another appeal in a patentable subject matter case in the current term.  Several others could be added to the docket as the losing parties will probably file cert. petitions to the Court.

Mayo v. Prometheus

The Court will hear argument in Mayo v. Prometheus on December 7.  This case concerns patent claims directed to methods of calibrating drug dosages.  The original district court opinion found the patent claims to be invalid as not directed to patentable subject matter.  In 2009, a Federal Circuit panel reversed the decision.  After the Supreme Court’s decision in Bilski, the Court ordered the Federal Circuit to reconsider this case.  The Federal Circuit did so and again confirmed the patentability of the claims.  The Supreme Court has again agreed to hear the case, presumably because the Federal Circuit disregarded the district court’s and Mayo’s extreme reliance on Justice Breyer’s dissent from the dismissal order in LabCorp.

Classen v. Biogen

Classen is a case that is similar to Mayo in that the claims are directed to immunization methods.  The Federal Circuit originally held that the claims did not meet Bilski‘s machine-or-transformation test.  After the Supreme Court’s decision in that case, the Federal Circuit had to reconsider its earlier opinion.  The court that included a largely reconstituted panel changed its position, holding that the claims are patent eligible.  Judge Newman and Chief Judge Rader held the claims to be patent eligible, while Judge Moore wrote an extensive dissent.  The opinions totaled 57 pages, potentially signalling that the case may be headed back to the Supreme Court.

A cert. petition is due in late November.  The Supreme Court may hold the petition until it decides the Mayo case since the cases are similar.  It could then tell the Federal Circuit to reconsider its opinion again.

Association for Molecular Pathology v. Myriad

After the district court held that Myriad’s patent to isolated genes were not patent eligible, the Federal Circuit reversed.  The court did hold that several claims to methods of comparing and analyzing gene sequences were not eligible since they are directed to abstract mental processes.  Another big issue in this case, ignored by the Federal Circuit, is that none of the plaintiffs have standing in the case anymore.  This could be a problem for Supreme Court review.

A cert. petition is due in December.  The ACLU originally filed this case with the expectation of High Court review, so a petition is expected to be filed.

CyberSource v. Retail Decisions

In CyberSource, the Federal Circuit repudiated tens of thousands of patents in holding that Beauregard-type claims may be considered as methods directed to abstract ideas.  Beuregard-type claims are claims that are directed to computer-readable media that include program instructions for performing a particular method.  The Patent Office has been granting such patents for years with the understanding that a computer-readable medium is a tangible object and not an abstract method.

If no rehearing petitions are filed in this case, a cert. petition would be due in December.

I am participating in a discussion on SCOTUSblog regarding the Supreme Court’s patent jurisprudence.  Many other distinguished patent and intellectual property scholars are also participating.

Check it out.

The Supreme Court seems to be taking a greater interest in patent cases during the last decade or so.  During the 2009 term, the Court decided Bilski.  During the 2010 term, the Court decided Global-Tech where it ruled that willful blindness=knowledge for induced infringement, and i4i where it ruled that patent invalidity must be proved by clear and convincing evidence.  After a number of years of hearing and reversing the Federal Circuit on most cases, such as KSR and eBay, the Court affirmed the Federal Circuit on both major cases this term.

As it nears the end of the current term, the Supreme Court has agreed to review three more patent cases during its October 2011 Term.  First, the Court has granted cert. for the second time in Mayo Collaborative Services v. Prometheus Labs., Inc.  This is another patentable subject matter case directed to methods of calibrating drug dosages.  The Federal Circuit originally reversed the district court opinion finding the patent invalid as not directed to patentable subject matter in 2009.  After the Supreme Court’s decision in Bilski, the Court ordered the Federal Circuit to reconsider this case.  The Federal Circuit did so and again confirmed the patentability of the claims.  The Supreme Court has again agreed to hear the case, presumably because the Federal Circuit disregarded the District Court’s and Mayo’s extreme reliance on Justice Breyer’s dissent from the dismissal order in LabCorp.

Next, the Supreme Court agreed to review the Federal Circuit’s decision in Kappos v. Hyatt.  Once a patent applicant has received a final agency action from the Board of Patent Appeals and Interferences, the applicant has two means of challenging that final decision.  The applicant may appeal the decision to the Federal Circuit or the applicant may file a civil action against the PTO in district court in Washington, DC and challenge the decision through a trial.  In Hyatt, the Court will decide whether an applicant may present new evidence in a district court challenge of the PTO decision that was not presented to the PTO and whether the district court must give deference to the PTO’s prior factual findings in the case.  The en banc Federal Circuit had decided both issues in favor of the applicant and the PTO has requested consideration by the Supreme Court.

Finally, Caraco Pharm. Labs., Ltd. v. Novo Nordisk A/S is a case involving a particular aspect of the Hatch-Waxman Act as pertaining to pharmaceutical approval.  The Court will decide whether in a patent infringement suit, a generic pharmaceutical company may counterclaim that the brand pharmaceutical company has submitted an overbroad description of its patent claim scope to the FDA.  May this information be corrected as argued by the petitioner, or must it simply be deleted as the Federal Circuit ruled.

The Court will hear arguments in these cases during the fall or winter of 2011-12 and issue decisions by the end of the term in June 2012.

On Monday, the Supreme Court heard oral argument in Microsoft v. i4i regarding the appropriate burden of proof for challenging issued patents.  A transcript of the argument is available here.  I have previously summarized the issues in the case.  Many others have already posted summaries and impressions of the argument.  I simply seek to add some of my thoughts on the issues here.

Many groups and individuals, such as UCLA Law Professor Doug Litchman in a New York Times editorial, suggest that the issues are very simple.  Patent examiners cannot rightfully be characterized as experts because they are overworked and under-informed.  Way too many bad patents are being issued.  All bad patent stifle innovation and the economy.  Thus, there should be no deference accorded to the work of patent examiners.

Although I’m not sure that Professor Litchman has the experience to provide an expert opinion on what exactly happens during patent prosecution, that is beside the point.  The issue is clearly more complex than he presents.

During argument at the Supreme Court, Justice Breyer seemed to want to focus almost exclusively on the issue of bad patents and the harm they cause.  He seemed to dismiss concerns on the opposite side raised by Seth Waxman, arguing for i4i, about legitimate patents that have been granted by the PTO being improperly invalidated by lay juries.

Other members of the Court seemed to take a more nuanced approach to the issues in the case.  One of the issues is the intent of Congress when it enacted the relevant statutory provision 35 U.S.C. § 282:

A patent shall be presumed valid. . . . The burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity.

The legislative history of this section seems to indicate that Congress sought to codify existing Supreme Court standards of proof when it enacted this law in 1952.  Supreme Court precedent before, and lower court precedent after, 1952 were anything but crystal clear.  Only once the Federal Circuit took over reviewing patent decisions did it standardize the burden of proof to clear and convincing evidence.

During argument in i4i, there was a great deal discussion about Justice Cardozo’s 1934 opinion in RCA v. Radio Engineering Labs.  In that case, Justice Cardozo appears to have set forth a high burden for invalidating a patent (“a heavy burden of persuasion”).  Microsoft’s attorney, Thomas Hungar, tried to distinguish that case, but the Court seemed to give it a great deal of weight.

Another issue in the case, initially alluded to by the Court in dicta in KSR, is that there doesn’t seem to be any justification for a heightened burden when using evidence that was not previously considered by the administrative agency.  This could create a dual-burden regime where invalidity must be proven by clear and convincing evidence when evidence was considered by the PTO and by a preponderence of the evidence when it was not.

The government, arguing in support of i4i’s position, suggested that this approach would be unworkable.  First, it would require the jury to make an initial finding as to whether the evidence was previously considered by the PTO and, if not, whether it is more pertinent to prior art that was considered.  Then, it would need to apply two different standards of proof to various evidence presented in the case.  When multiple prior art references are considered, the jury may need to apply different evidentiary standards to each.  Neither party was aware of any other area of administrative law having multiple burdens of proof.

The Federal Circuit’s current approach is much more workable and errs in favor of deference to the expertise of the Patent Office.  All challenges to issued patents must be proven by clear and convincing evidence.  If some particular evidence was not previously considered by the PTO, this evidence could be weighed more heavily than evidence that was reviewed by the agency.

Justice Breyer did cite positively to the AIPLA’s brief where it noted that the burdens of proof apply to facts and not to the underlying decision.  Under current law, to prove invalidity, facts supporting such a finding must be proven by clear and convincing evidence.  The ultimate conclusion of invalidity is a legal determination made by the court.  Although this is a legitmate distinction that has been countenanced by the courts, in practice, juries are usually simply asked whether the patent claim is invalid under one or more provisions of the Patent Act.

The Chief Justice has recused himself from this case.  A decision by the Court is expected by the end of the current term in June.

On April 18, the Supreme Court will hear arguments in Microsoft v. i4i regarding the proper burden of proof for challenging the validity of an issued patent.  I previously covered the issues in this case, including the meaning of the various standards of proof discussed below.

Last week, the US Government filed an amicus brief where it, somewhat surprisingly, sided with the respondent that the burden to challenge a patent should be clear and convincing evidence, regardless of whether the prior art had been previously considered by the patent examiner.

United States Brief

The Solicitor began the brief by arguing that § 282′s presumption of validity merely codified Supreme Court precedent prior to enactment of the 1952 Patent Act that required a higher standard of proof than a preponderance to overturn an issued patent.  The prior Supreme Court decisions cited in the brief refer to the challenge of a patent as a collateral attack on the agency’s decision to grant the patent.  Thus, principles of administrative deference require a heightened standard of proof.

The next argument is that permitting a lay jury de novo review of the PTO’s decision to grant the patent is inconsistent with administrative law principles.  The patent examiner, having expertise in the field of the invention, conducts fact-finding pursuant to the PTO’s statutory authority.  The heightened standard to challenge the issued patent supports the theory of the PTO’s expertise, which the lay jury clearly does not possess.

The Solicitor then rebuts the petitioner’s argument of PTO bias in the examination process in favor of patent applicants.  To take this argument to the extreme, why have a PTO examination process at all?  Why not simply issue all patent applications and let challengers fight them in court?  Congress has made the determination that ex parte patent application proceedings strike the proper balance between agency resources and protection of the public interest.

Patents create property interests on which patent owners and the public rely.  Many parties invest significant money on innovation and the patenting process.  In return for the inventor’s disclosure of the invention, he may be granted a patent if the PTO determines that the application meets the statutory standards.  To permit a jury, whose decision is granted deference on appeal, the ability to overturn the agency decision on a mere preponderance of the evidence, would disrupt this reliance and perhaps cause less investment in and disclosure of inventions.  The agency’s decision should only be overturned if it is clearly erroneous.

When a party challenges the validity of a patent, it has the choice to present the evidence of invalidity in a court proceeding or in a reexamination proceeding before the PTO.  Courts, unlike the PTO during a reexamination proceeding, do not have the ability to permit amendments or narrowing of a patent claim.  Thus, there is the lower burden of establishing invalidity in a reexamination proceeding that requests the agency to reconsider its own decision.  This justifies the higher burden of proof for challenging the patent in court even when the prior art had not been previously considered by the PTO. 

Reexamination proceedings should be encouraged as an alternative to litigation.  The lower burden of proof is one way Congress has chosen to do so.

Furthermore, having different burdens of proof for evidence that was considered by the patent examiner and that which was not puts the jury in a position to second-guess the PTO.  Difficult questions may arise as to whether the evidence is actually different or is merely cumulative of what the examiner did consider.  It also requires the jury to determine what the examiner would have or should have done when confronted with the evidence.

Any changes to the settled standards of proof for patent challenges should be made by Congress and not by the Court.

The Court’s Options

It is generally accepted that the Supreme Court has three options for this case. 

First, it could affirm the Federal Circuit and continue to require all challenges to issued patents to be by clear and convincing evidence.  This seems unlikely.

Second, it could change the standard to permit all challenges to be proven by a preponderance of the evidence.  If it goes this route, what does the statutory presumption of validity mean? 

Third, it could take a hybrid approach.  For prior art that was considered by the patent examiner, the burden would remain clear and convincing evidence.  For all “new” evidence, the standard would only be a preponderance of the evidence.

While this third option seems like the fairest and most logical approach, it is also the one that has the greatest unintended consequences.  Under US law, patent applicants have no requirement of performing a search of the prior art before or during the patenting process.  If the applicant, patent attorney, or others that are substantively involved in the prosecution have knowledge of prior art or other evidence that is material to the patentability of a pending claim, they have the duty to disclose this evidence to the PTO.  There is an exception, however, if the evidence is cumulative to evidence already of record.

What do you think will happen if the Supreme Court chooses this hybrid burden approach?  Patent applicants will obviously have an incentive to flood the patent examiner with prior art references, whether or not the applicant believes them to be relevant to patentability.  This will significantly increase the burden on an examination process that is already time-crunched.  It will also place the burden on juries to determine whether the evidence was not considered because it is cumulative.

A Fourth Approach

A group of law, business, and economics professors has suggested yet another approach.  They recognize that the hybrid burden suggested above would cause a flood of submissions to the PTO.  Thus, they suggest that the clear and convincing standard should only apply to “prior art or arguments actually discussed in writing by a patent examiner in an office action.”  Their brief does suggest that applicants can also discuss specific references on the record at their own behest to get the higher burden of proof.  In effect, a small percentage of references considered by the examiner during prosecution actually reach the level of discussion on the record or use in a rejection.  Thus, the proposal seeks to limit the higher burden to those few instances.

This proposal, unfortunately, does not live in the real world.  First, it basically renders irrelevant any prior art that applicants must now submit to fulfill their duty of disclosure to the PTO.  Why should applicants bother to or be required to submit references to the PTO if we assume that the references are ignored by the patent examiner?  Why not just do what a number of countries, including the EPO, do and not require any applicant submissions?

Next, the proposal seeks to encourage applicants to discuss references on the record that are not raised by the patent examiner.  This is actually a good suggestion provided that we eliminate most of the Federal Circuit’s jurisprudence on the issue.  The risk of estoppel, inequitable conduct, unintended claim construction, and frankly malpractice is simply too great to take this suggestion seriously.

There is no question that patent examination could be conducted in a better and more efficient and focused manner if applicants felt free to have frank discussions on the record with the patent examiner.  The Federal Circuit has done too much, however, to discourage this type of free exchange.  It simply won’t happen.

The professors even want their proposal enacted retroactively.  They suggest that applicants who relied on the current regime to obtain their patents and now desire the higher burden for challenging their patents could simply file reissue applications or requests for reexamination of their patents. 

This argument is a red herring.  Under the law, a reissue application can only be filed to correct an error in a patent.  An applicant should argue that the error in his patent is that he didn’t discuss references on the record that the patent examiner didn’t consider to be relevant enough to the patent to use to reject the claims in an office action?  Reexamination requires a substantial new question related to patentability.  If the prior art is already of record, the applicant must now argue that it does constitute a new question?  Are you serious?  This would be suicide for the patent.

Conclusion

Because the PTO has, justifiably or not, been getting a lot of bad press for issuing “bad” patents, the Supreme Court will probably feel obligated to change the burden of proof for challenging an issued patent.  And naturally, they would not have agreed to hear the case if they didn’t intend some change.  The question is, what will it be?

I sympathize with the difficulty in challenging patents and see merit in the view that the examiner’s expertise should not warrant the higher standard for prior art not considered during prosecution (by considered, I mean submitted or found by the examiner, not that the art had to be actually discussed on the record).  The consequences of this change, however, will significantly alter the patent process, both during prosecution and during later litigation.

The Chief Justice has recused himself from this case, so it will be heard by the other 8 justices.  A decision is expected by the end of the Court’s term in June.  i4i has collected the various briefs and other documents in the case here.

A defense to a claim of patent infringement is that the patent is invalid for failure to comply with one or more sections of the Patent Act.  These provisions include lack of novelty, obviousness, or violation of the written description or enablement requirement.  An accused infringer may have a patent claim declared invalid by a court for violation of these provisions.

Yet, the Patent Act also contains a provision that would seemingly help the patent owner.  “A patent shall be presumed valid.”  35 U.S.C. § 282.  What exactly does that mean?  The courts have interpreted this statutory provision to mean that, in order for a challenger to prove that a patent is invalid for violating one of the provisions of the Patent Act, he must make such proof by clear and convincing evidence.

Standards of Proof

In the law, there are a number of standards of proof that are used in particular cases.  In criminal cases, the prosecution must prove the elements of a crime were committed by the accused “beyond a reasonable doubt.”  This generally means that the trier of fact (the court or the jury) is convinced of the truth of the facts to the point where it would be unreasonable to doubt their veracity. 

In most civil cases, including patent infringement, the party seeking to prove a fact must do so by a “preponderance of the evidence.”  This means that the trier of fact must be convinced that the facts are more likely true than not true.

In a few instances, such as when attempting to prove that a patent claim is invalid, the party seeking to prove a fact must do so by “clear and convincing evidence.”  This standard is a bit uncertain, but it is a higher standard than simply more likely than not; it does not, however, reach the level of beyond a reasonable doubt.  It has been defined as a “strong belief” in the truth of the fact.

Presumption of Validity

Why did Congress grant patents a presumption of validity?  Why must invalidity be proven by clear and convincing evidence?  The rationale behind this statutory provision is that the PTO is a Federal agency that has already passed on the validity of the patent claims.  Patent examiners are presumed to be experts in the subject matter of reviewing and granting patents.  Thus, for the initial Federal review by an expert to have any meaning, a challenger must present evidence that reaches a higher level than merely more likely than not.

For some time now, there has been a discussion as to whether this presumption of validity should only cover issues that were actually considered by the patent examiner and not to newly raised issues.  For example, should the presumption of validity cover prior art references (to prove the patent claim is not novel or is obvious) that were not found or considered by the patent examiner?  Or should invalidity based on previously undiscovered references be determined by the trier of fact on the more likely than not standard of review?

On the one hand, the patent examiner is presumed to have searched for and discovered the most relevant prior art.  Perhaps he found the prior art presented by the accused infringer as new, but didn’t consider it pertinent or material enough to consider it with respect to the patent claims.  Is it really newly discovered or not?  Should it matter if the PTO passed on the patent claims?  Should a court or jury be allowed to second-guess the PTO?

On the other hand, sometimes the expertise of the patent examiner is overblown.  We know that examiners have little time to review each patent application.  They couldn’t possibly discover every pertinent piece of prior art in the world.  Accused infringers have strong incentives to discover such prior art.  We shouldn’t hamstring the trier of fact by the higher standard of proof required to invalidate the patent.

Microsoft v. i4i

Yesterday, the Supreme Court granted certiorari in Microsoft v. i4i.  The Court will consider the question:

Whether the court of appeals erred in holding that Microsoft’s invalidity defense must be proved by clear and convincing evidence.

The Federal Circuit, following long standing precedent, ruled that Microsoft was required to prove invalidity by clear and convincing evidence even when the prior art had not been considered by the patent examiner.  The prior art in this case being a sale made by i4i more than one year before it filed the patent application.

A number of parties filed amicus briefs where they urged the Supreme Court to review this case.  It seems likely that the Supreme Court will lower the standard of proof from clear and convincing evidence.  The main question the justices must decide then is:  what does the statutory presumption of validity mean?  Simply lowering the standard to a preponderance of the evidence would render the presumption of validity a nullity.

Is this case important?  How often will an accused infringer not be able to prove invalidity by the clear and convincing standard, but still be able to prove it by a preponderance of the evidence?  Do juries even understand the difference?  Does anyone?  Juries usually don’t indicate that they would find a patent invalid under the lower standard, but because they are constrained by the higher standard they don’t find it invalid.

The case is important because the presumption of validity and the higher standard of proof required provide a psychological barrier to invalidity arguments, especially for juries.  A ruling in Microsoft’s favor may indeed result in more patents being declared invalid in litigation.

The Court will hear arguments in the case in the spring.  A decision is expected by the end of the Court’s current term in June.  The Chief Justice recused himself from the case, so it will be decided by the remaining 8 justices.

This morning the Supreme Court granted certiorari in Global-Tech Appliances, Inc. v. SEB, S.A.

In February, the Federal Circuit affirmed a finding that the defendant induced infringement of a patent even though there was no evidence that the defendant had any knowledge of the patent.  Knowledge of the patent is generally an element of such a finding.  The court held that deliberate indifference to the whether a patent existed on a product that it had copied was sufficient to warrant the finding of infringement.

A number of bar associations and other groups filed amicus briefs supporting a petition that the entire Federal Circuit consider the case to clarify this area of the law that has been further confused by the Federal Circuit decision.  This petition was denied.

Now, it appears that the Suppreme Court has agreed to step in to rule on this area of the law.  The Court will hear the case during the current term with a decision expected by June 2011.

HT:  Hal Wegner