Patent Claims Must Recite "Significantly More" than a Law of Nature
by Robert H. Underwood, Paul Devinsky and K. Nicole Clouse, Ph.D.
Speaking through Justice Breyer, a unanimous Supreme Court of the United States (reversing the U.S. Court of Appeals for the Federal Circuit) held that claims directed to a blood-testing method are invalid because they do not define patent-eligible subject matter. Mayo Collaborative Services v. Prometheus Laboratories, Inc., Case No. 1150 (Supr. Ct., March 20, 2012)(Breyer, Justice). Starting from the premise that laws of nature, natural phenomenon and abstract ideas are not patentable, the Supreme Court explained that in order to transform an unpatentable law of nature into a patent-eligible method, the claims must do more than simply recite the law of nature while adding the words "apply it." Rather, the scope of the claims must be limited by a "particular inventive application of the [natural] law." In this instance, the Supreme Court concluded the claims embody natural relations, but fail to do "significantly more than simply describe ... [the] natural relations" and do not "add enough to their statements of the correlations to allow the processes they describe to qualify as patent-eligible processes that apply natural laws" (emphasis in original).
Prometheus sells diagnostic tests covered by patent and, for a time, Mayo purchased these tests from Prometheus. In 2004, however, Mayo began to use and sell its own version of the test. Prometheus filed suit and the district court found Mayo's test to infringe, but ultimately found the patents to be invalid on the grounds that it was drawn to subject-matter ineligible for patenting under 35 USC § 101.
On appeal, the Federal Circuit reversed, finding that the claims were patentable because they recited steps that met the Federal Circuit's "machine or transformation" test. Mayo appealed to the Supreme Court, which granted certiorari, but then vacated the Federal Circuit's holding and remanded the case for reconsideration in light of its then recent holding in In re Bilski (IP Update, Vol. 14, No. 1). In Bilski, the Supreme Court held that the "machine or transformation" test was not the definitive test for patentable subject matter, but merely an informative tool for determining the patentability of subject matter within the context of a more holistic approach.
On remand, the Federal Circuit again found the claims to recite patentable subject matter. Mayo again appealed to the Supreme Court.
Claims Must Recite "Significantly More" than a Law of Nature
The claims recite methods physicians may use to determine if a patient's administered dose of a thiopurine drug is too low and thus ineffective or too high and thus potentially toxic. Because different patients metabolize drugs differently, it is not always easy for a physician to initially prescribe the correct dose. Claim 1 of the Mayo patent is exemplary and states:
- A method of optimizing therapeutic efficacy for treatment of an
immune-mediated gastrointestinal disorder, comprising:
(a) administering a drug ... to a subject having said immune-mediated gastrointestinal disorder; and
(b) determining the blood level of [the drug] in said subject having said immune-mediated gastrointestinal disorder,
wherein the level of [the drug] less than about [a lower limit] indicates a need to increase the amount of said drug subsequently administered to said subject and
wherein the level of [the drug] greater than about [an upper limit] indicates a need to decrease the amount of said drug subsequently administered to said subject.
As viewed by the Supreme Court, this claim essentially recites a two-step method: an "administering" step, in which a drug is administered in any possible way; and a "determining" step, in which levels of a metabolite of the drug are measured, again in any possible way. The claim concludes with "wherein" clauses that do not recite an actual step of modifying the dosage level, but merely specify observation of certain metabolite levels "indicates a need" to either increase or decrease the dosage of the drug during the administering step. In other words, the Supreme Court found claims do not require dose modification to occur, but merely what a treating physician might learn from observing the metabolite levels.
The Supreme Court concluded the claims do not sufficiently transform a natural law, i.e., the correlation between a metabolite level and the need to increase or decrease drug dose, into a patent-eligible application of the law because "the steps in the claimed processes (apart from the natural laws themselves) involve well-understood, routine, conventional activity previously engaged in by researchers in the field." As Justice Breyer explained: "If a law of nature is not patentable, then neither is a process reciting a law of nature, unless that process has additional features that provide practical assurance that the process is more than a drafting effort designed to monopolize the law of nature itself."
The Supreme Court analyzed whether the claims include the requisite "additional features" by examining each part of the claim individually and the claim as a whole. The Supreme Court found the steps of the claim "simply tell doctors to gather data from which they may draw an inference in light of the correlations" and ultimately concluded "the steps are not sufficient to transform unpatentable natural correlations into patentable applications ... ."
The Supreme Court explained that, when a patent claim involves reliance on a natural law or correlation, the claim must contain "significantly more" than that natural law alone. It concluded that Prometheus' claims fail in this regard because the claimed method steps "add nothing specific to the laws of nature other than what is well-understood, routine, conventional activity, previously engaged in by those in the field" and simply "tell doctors to apply the law somehow when treating their patients."
Patent Claims Cannot Monopolize Laws of Nature
A theme running through Justice Breyer's opinion is the policy concern that the "patent law not inhibit further discovery by improperly tying up the future use of laws of nature." The Supreme Court acknowledged that, on one hand, discovery of new natural laws is important and should be encouraged. On the other hand, however, "those laws and principles, considered generally, are 'the basic tools of scientific and technological work,'" and denying the scientific community access to those tools will stifle future innovation (quoting Gottschalk v. Benson).
The Supreme Court reviewed several amici curiae on both sides of the issue and ultimately concluded "the underlying functional concern here is a relative one: how much future innovation is foreclosed relative to the contribution of the inventor." In Prometheus, the Supreme Court found the claims tip the balance too far in the direction of stifling innovation by tying "up the doctor's subsequent treatment decision whether that treatment does, or does not, change in light of the inference he has drawn using the correlations."
Indeed, the Supreme Court contrasted two prior cases it heard relating to the patentability of claims involving laws of nature, Diamond v. Diehr (upholding claims involving natural laws) and Parker v. Flook, (invalidating claims involving natural laws). The Court likened Prometheus to the situation in Flook, stating the claims in both cases simply recited laws of nature and instructions to apply those laws in known, conventional ways.
35 USC § 101 Should Not Be Conflated with Other Patentability Provisions
In its amicus brief, the U.S. government argued that almost any step beyond a simple recitation of the law of nature should suffice to meet the § 101 standard and that other sections of the code (e.g., 35 USC §§ 102, 103 and 112) are sufficient to screen claims for patentability. The Supreme Court rejected this argument, noting that such an approach "would make the 'law of nature' exception to 35 USC §101 patentability a dead letter."
While acknowledging that sometimes the §§ 101 and 102 inquiries "sometimes overlap," the Supreme Court concludes the inquiries are different, "[a]nd to shift the patent eligibility inquiry entirely to these later sections risks creating significantly greater legal uncertainty, while assuming that those sections can do work that they are not equipped to do."
The Supreme Court expressly declined the invitation of the U.S. government to simply discount or ignore a law of nature, to the extent it is recited in a claim, when evaluating novelty (§ 102) or obviousness (§ 103) as a whole or when evaluating compliance with § 112, noting that such an approach would "not [be] consistent with prior law;" citing to Bilski, Diehr, Flook and Benson.
Practice Notes: The Supreme Court did not completely shut the door on all claims involving laws of nature. It confirmed that claims to novel compositions or methods of treatment will still constitute patentable subject matter, even if they involve laws of nature. Nevertheless, this decision may have substantial implications for the fields of personalized medicine and medical diagnostics, potentially affecting their business models. Patent owners and licensees may wish to review and analyze their claims in view of Prometheus, and might consider taking actions (e.g., through reexamination or reissues) to address any perceived weaknesses.
Prometheus stands for the proposition that there are no absolute bright-line rules for determining patent-eligible subject matter under § 101. While the precise claim language is important for determining whether claims are patent eligible, the Supreme Court expressed concern with too-clever practitioners trying to draft around the § 101 requirement, stating that patent eligibility should not "depend simply on the draftsman's art." Thus, the particular law of nature, the method steps in applying the law of nature, and the scope and field of the claim are all relevant factors that should be considered when determining whether claims define patent-eligible subject matter. At a minimum, it is appropriate for claim drafters to parse out the law of nature in the claim from the other claim language and ensure the remaining claim language recites substantial additional features that go beyond a mere instruction to apply the law of nature. What is not absolutely yet clear is what language will suffice to meet the Prometheus standard.
In the wake of its decision in Prometheus, the Supreme Court (on March 26, 2012) remanded the so-called breast cancer gene case, The Association for Molecular Pathology v. Myriad Genetics, Case No. 10-725 (IP Update, Vol. 14, No. 8), back to the Federal Circuit for reconsideration in view of the Mayo decision. In July, the Federal Circuit (in a 2-1 decision reversing the SD NY) ruled that the isolated BRCA1 and BRCA2 genes were patentable because they were "markedly different" from naturally occurring molecules.
Intervening Rights Limited to Text-Based Amendments
by Joseph H. Paquin
A splintered U.S. Court of Appeals for the Federal Circuit, sitting en banc, reversed on earlier panel decision and concluded that intervening rights cannot be applied to claims whose text was not amended or that were not added during reexamination. In so holding, the Court rejected the reasoning of a prior panel that intervening rights could be applied based on claim scope limiting arguments made during reexamination. Marine Polymer Techs., Inc., v. HemCon, Inc., Case No. 10-1548 (Fed. Cir., Mar. 15, 2012) (en banc).
In the court below, a jury found that HemCon had infringed Marine Polymer's directed to preparations of p-GlcNAc, a naturally occurring polymer produced by organisms such as arthropods, fungi and microalgae.
The patent claims place particular importance on "biocompatible" compositions of p-GlcNAc. The specification describes four tests that can be used to assess the biocompatibility of a substance and states that biocompatibility requirements are met if a given test substance shows no more than mild or slight biological reactivity. The district court construed the claim term "biocompatible p-GlcNAc as p-GlcNAc "with low variability, high purity and no detectable biological reactivity as determined by biocompatibility tests."
In the midst of the district court litigation, HemCon filed a request for ex parte reexamination of the Marine Polymer patent. During the ensuing proceedings, the examiner adopted a construction of "biocompatible" different from the district court's, concluding that under its broadest reasonable interpretation, the term meant "low variability, high purity and little or no detectable reactivity." (emphasis added). The examiner noted that several dependent claims required test scores that correspond to slight or mild reactivity. The examiner explained that the district court's construction, requiring "no detectable biological reactivity," conflicted with those claims, while his interpretation avoided the inconsistency. Using his broader construction, the examiner rejected all of the claims based on the prior art.
In response Marine Polymer cancelled the dependent claims, arguing that the inconsistency had been eliminated and the district court's construction should be adopted in view of the teachings in the specification. The examiner agreed and confirmed the patentability of the remaining claims. The U.S. Patent and Trademark Office (USPTO) issued a notice of intent to issue a reexamination certificate after the district court had already entered final judgment in the infringement action.
As explained by the Court, there are two kinds of intervening rights: intervening rights that abrogate liability for infringing claims added to or modified from the original patent if the accused products were made or used before the reissue, often referred to as absolute intervening rights; and intervening rights that apply as a matter of judicial discretion to mitigate liability for infringing such claims even as to products made or used after the reissue if the accused infringer made substantial preparations for the infringing activities prior to reissue, often referred to as equitable intervening rights.
Under 35 U.S.C. § 252, intervening rights apply only when the reissued claims are not "substantially identical" to the original claims. 35 U.S.C. § 307(b) extends intervening rights to ex parte reexamination proceedings. Consequently, both absolute and equitable intervening rights are available for patents that have undergone ex parte reexamination.
Prior Panel's Decision
In the prior panel decision (IP Update, Vol. 14, No. 10), authored by Judge Dyk, the Court held that the district court's claim construction was incorrect and should have allowed for p-GlcNAc that exhibited some biological reactivity. As a result, the claim scope vis a vis the correct construction was narrowed during reexamination by Marine Polymer's arguments and cancellation of the dependent claims. Because of this narrowing, the Court found that the reexamined claims were not substantially identical to the original claims, reversed the district court's judgment of infringement on the ground of absolute intervening rights and remanded to the district to determine whether HemCon is entitled to equitable intervening rights.
Judge Lourie dissented, finding it improper for the appellate court to decide the issue of intervening rights in the first instance without the benefit of the district court's view. In addition, even if proper, Judge Lourie believed that intervening rights should not have applied because the textual language of the claims had not been changed and no new claims were added.
En Banc Decision
Two competing opinions were authored by the en banc Court. Judge Lourie and four judges would have adopted the district court's "no detectable biological reactivity" construction, while Judge Dyk and four other judges would have reversed the district court's claim construction and applied a broader "little or no detectable biological reactivity" construction. Circuit Judges Moore and O'Malley did not participate in the decision. As the court was equally divided on the correct claim construction, the district court was affirmed.
When considering the intervening rights issue, however, Judge Linn switched sides, creating a 6-4 majority for the opinion of Judge Lourie. The majority found the language of § 307(b) to be clear and unambiguous:
[T]he plain directive of the governing statute [§ 307] before us does not permit HemCon to invoke intervening rights against claims that the PTO confirmed on reexamination to be patentable as originally issued. To be sure, patent applicants' actions and arguments during prosecution, including prosecution in a reexamination proceeding, can affect the proper interpretation and effective scope of their claims. But in rejecting HemCon's request for intervening rights, we are not here interpreting claims. Rather, we are interpreting a statute that provides for intervening rights following reexamination only as to "amended or new" claims. The asserted claims of the '245 patent are neither.
Judge Dyk's dissent chastises the majority for considering the intervening rights issue without additional briefing or oral argument. Further, the dissent characterizes the majority's ruling as dicta, because affirmance of the district court's claim construction means that the scope of the claims was never altered during reexamination and the issue of intervening rights should have been mooted.
On the merits of the intervening rights issue, the dissent argues that "the 'amended or new' language in § 307(b) was clearly intended to have the same meaning as 'substantially identical' in § 252."
Practice Note: Although the majority's opinion is based on the language of § 307(b), which deals only with ex parte reexaminations, the "amended or new" language is also used in the patent statute dealing with inter partes reexaminations and the portions of the America Invents Act (AIA) that provide for inter partes review and post-grant review. Thus, the Court's analysis is expected to be equally applicable to those proceedings.
It remains unclear, however, whether argument-based intervening rights might still be applied to reissue proceedings, where intervening rights is governed solely by § 252. In that case, the original panel's and dissent's analysis would seem to be more persuasive.
Only time will tell if a litigant will be able to successfully argue that (based on the affirmance of the district court's original claim construction) the intervening rights decision here is only dicta and not entitled to the effect of a precedential en banc decision (and therefore not binding on future panels or entitled to deference by a future en banc panel).
Broad Range Anticipates Narrow Range that Lacks Criticality
by Daniel Bucca, Ph.D.
In a decision that some may regard as blurring the distinction between anticipation and obviousness, U. S. Court of Appeals for the Federal Circuit found that a broad range anticipated a narrow range that lacked "criticality". ClearValue Inc. v. Pearl River Polymers Inc., Case No. 11-1078 (Fed. Cir. Feb. 17, 2012)(Moore, J.). The Federal Circuit reversed a jury verdict that ClearValue's patent was not invalid as anticipated under 35 U.S.C. § 102. According to the Court, the verdict was not supported by substantial evidence because the basis for finding lack of anticipation was expert testimony that the prior art taught away from the claimed subject matter. The Court explained that "teaching away" evidence, while applicable to an obviousness analysis, was not relevant to an anticipation analysis.
The ClearValue patent claimed a process for the clarification of water of raw alkalinity less than or equal to 50 ppm by chemical treatment. The prior art, Hassick, disclosed the same process for clarifying water but with alkalinity of 150 ppm or less. According to the Court, since ClearValue did not argue that the 50 ppm limitation in its claim was "critical," or that the claimed method worked differently at different points within the prior art range of 150 ppm or less, its claim was anticipated.
The Court distinguished an earlier case, Atofina v. Great Lakes Chem. Corp. (IP Update, Vol. 9, No. 4) that reached the opposite result, concluding that claims directed to the narrow range were patentable. In Atofina, the claims were directed to a method of synthesizing a compound within a narrow numerical temperature range, while the prior art disclosed the synthesis within a broader temperature range that included the narrower range. During prosecution, Atofina described its claimed narrower temperature range as "critical," and its patent stated that problems occur when operating outside of the narrower range.
In distinguishing this case from Atofina, the Court explained that the evidence in Atofina "showed that one of ordinary skill would have expected the synthesis process to operate differently outside the claimed temperature range, which the patentee described as 'critical' to enable the process to operate effectively."
Practice Note: Analyses involving the "expectation" of a skilled artisan and "criticality" are traditionally used in connection with an obviousness inquiry. However, in this case the Federal Circuit has applied a similar analysis to anticipation.
This decision underscores the importance of having meaningful (i.e., critical) claim limitations to distinguish the prior art, for both anticipation and obviousness. It also counsels for the presentation of statements as to the criticality of a claimed range in the written description.
Broadening Reissue Applications: No Restrictions to Subject Matter
by Nathaniel McQueen
Addressing the ability of a patent holder to broaden claims of a patent more than two years after issuance where new claims are added that are unrelated to other broadened claims or to the originally issued claims, the U.S. Court of Appeals for the Federal Circuit reversed the USPTO's rejection of claims in a multi-continuation broadening reissue application. In re Erik P. Staats et al., Case No. 10-1443 (Dyk, J.) (O'Malley, J., concurring).
On August 17, 1999, Staats was issued a patent directed to improvements to management of isochronous data transfers. The patent discussed two separate embodiments, yet all of the original claims were directed only to the first embodiment. In compliance with 35 U.S.C. § 251, within the two-year statutory deadline, Staats filed a first broadening reissue application directed to subject matter of the previously unclaimed first embodiment.
Afterwards Staats filed a second broadening reissue application, which was a continuation of the first reissue application. While the second application was filed outside the two-year deadline, it was filed during the pendency of the first reissue application. Like the first reissue application, the second reissue application was directed to the originally unclaimed first embodiment. Moreover, as the second application merely addressed errors in the first application, the USPTO allowed the application.
Still later, Staats filed a third broadening reissue application. This third application was filed as a continuation of and during the pendency of the second reissue application, but was directed to the subject matter of the originally claimed second embodiment. The USPTO rejected the application.
The examiner rejected the claims in the third reissue application on the basis that the claims were directed to subject matter "not related in any way to what was covered in the original broadening reissue." In doing so, the examiner distinguished the case from In re Doll, a case in which the Federal Circuit held while that the two-year time bar of § 251 only applies to the first broadening reissue application, an applicant is not barred form making further broadening changes after the two-year period in the course of prosecution of the reissue application, even if they are broader in scope than both the original claims and claims filed in a previous broadening reissue application. The Board of Patent Appeals and Interferences affirmed the examiner's rejection, noting that the claims on the third application were "independent and distinct" from the claims of the original patent and the earlier filed broadening reissue applications. Staats appealed.
The Federal Circuit reversed, noting that Doll makes no distinction between "related" or "unrelated" subject matter and as such, the USPTO had no authority to distinguish which claims were subject to Doll and which were not. The Court also noted that while Doll held that the two-year time limit applied only to the first broadening reissue application, its later decision in In re Graff clarified that so long as a broadening reissue application is filed within the two-year statutory period, an applicant is "not barred from making further broadening changes," i.e., after the two-year statutory period, in the course of prosecuting the reissue application. In addition, the Federal Circuit found that if the USPTO's relatedness approach were used, application of it would be "difficult to administer in a consistent and predictable way."
In a concurring opinion, Judge O'Malley chastised the majority for placing too much emphasis on Doll and instead argued that "the plain language of 35 U.S.C. § 251, coupled with legislative history, long-standing unambiguous regulations implementing the statute, all relevant case law and common sense, all compel reversal in this case." In a strong rebuke of the USPTO, O'Malley further opined, "the PTO's policy arguments are overstated—substantially so. Even if those policy statements were not overstated, they would be an insufficient reed upon which to rest such a sweeping change in the law."
Bring New Claim Construction Arguments to the Appeal at Your Peril
by Paul Devinsky
In a case largely significant as a reminder as to what an appellant is (and is not) entitled to argue on appeal, the U.S. Court of Appeals for the Federal Circuit (once again) warned that "a party may not introduce new claim construction arguments on appeal or alter the scope of the claim construction positions it took below." Digital-Vending Services International, LLC v. The University of Phoenix, et al., Case No. 11-1216 (Fed. Cir. March 7, 2012) (Rader, C. J.) (Moore, J., dissenting-in-part).
After the district court issued a claim construction order, the defendant, Phoenix, sought summary judgment of non-infringement based on the claim construction. The plaintiff, Digital-Vending, filed a motion seeking clarification of the district court's construction of the claim term "registered user." In construing the term, the district court did not adopt either party's construction but ordered its own construction. The district court granted the defendant's summary judgment motion and denied the plaintiff's motion for "clarification." Digital-Vending appealed.
On appeal, Digital-Vending did not contest the grant of summary judgment based on the district court's claim construction, but only on the construction itself. In the appeal, Digital-Vending argued for a construction that was different from and narrower than the construction it proposed to the district court; the new construction was also narrower than the construction adopted by the district court. The Federal Circuit refused to even review the argument since it had not been proposed to the trial court.
While the Federal Circuit conceded that it reviews claims construction without deference, it followed with the admonition that "a party may not introduce new claim construction arguments on appeal or alter the scope of the claim construction positions it took below." The Federal Circuit rebuffed Digital-Vending argument that under Blackboard v. Desire2Learn, a party is free to seek a claim construction on appeal that is substantially different from the construction it proposed whenever a district court "construed the claim language in a manner different from the construction proposed by either party." Rather, the Court explained that in Blackboard, "the appellee's claim construction position on appeal was consistent with its earlier proposed construction" even though inconsistent with a statement made at the Markman hearing. Even based on colloquy, the Federal Circuit explained that the question of waiver was a "difficult one" but ultimately held (in Blackboard) that the appellee had not waived its validity challenge, which relied upon an issue of claim construction. However, in what appears to be an effort to foreclose the issue from arising in the future, the Court very clearly explained that Blackboard "did not hold that a party was free to argue a claim construction different from both its earlier proposed construction and the district court's construction simply because the district court had not adopted either party's proposed constructions. To the contrary, this court has often stated that a party may not, as a general rule, change the scope of its claim construction on appeal."
Ultimately however, the Federal Circuit did reverse the summary judgment based on its own construction of the term "registration server" and remanded.
Judge Moore, in dissent, would have affirmed the district court's claim construction—based on what she regarded to be a clear case of disavowal under the principles articulated in Teleflex v. Ficosa (2002)—and therefore the grant of summary judgment of non-infringement as well.
Issues from an Initial Determination that Are "Noticed" but Not Reviewed by the ITC May Be Appealed to the Federal Circuit
by Christopher G. Paulraj
The U.S. Court of Appeals for the Federal Circuit has held that a losing party in a Section 337 investigation may appeal any adversely decided issue, regardless of whether the International Trade Commission (ITC) actually addresses the issue upon review in its Final Determination. General Electric Co. v. International Trade Commission, Case No. 10-1223 (Fed. Cir., Feb. 29, 2012) (Rader, C. J.). In doing so, the Federal Circuit rejected the ITC's position that any issue in the final Initial Determination (ID) on which the Commission granted to view but then took no position, is not subject to appeal.
The complainant, General Electric, initiated the underlying Section 337 investigation by filing a complaint alleging infringement of certain patents for variable speed wind turbines by the respondent, Mitsubishi . After considering the evidence presented, the administrative law judge (ALJ) determined that Mitsubishi violated Section 337 based on his findings that that none of the three asserted patents were proven invalid, that Mitsubishi infringed all three patents and that GE had established a domestic industry based on its own practice of two of the three patents. Pursuant to 19 C.F.R. § 210.45, the parties petitioned the ITC to review certain adverse aspects of the Final ID. In a "Notice of Commission Determination to Review a Final Initial Determination of the Administrative Law Judge," the ITC indicated it would review all aspects of the Final ID, except for the issues of importation and the intent finding underlying the ALJ's inequitable conduct determination.
After considering additional briefing on the issues that it had noticed for review, the ITC issued a Final Determination holding that one of the asserted patents was not invalid based on obviousness or written description, that two of the asserted patents were not infringed by the accused Mitsubishi turbines and that the domestic-industry requirement was not met as to any of the asserted patents. The ITC thus held that § 337 was not violated by the imported Mitsubishi turbines. The ITC, however, took no position on any other issues in its Final Determination.
When GE appealed to the Federal Circuit, it addressed issues in the ID that the ITC did not address in its Final Determination. The ITC argued to the Federal Circuit that GE had no statutory right to appeal issues that were not addressed in its Final Determination.
Under 19 U.S.C. § 1337(c), "[a]ny person adversely affected by a final determination of the Commission ... may appeal such determination ... to the United States Court of Appeals to the Federal Circuit." According to the ITC, under § 1337(c), issues in an ID that are not selected for review may be appealed to the Federal Circuit, but issues selected by the full ITC for review, but then not reviewed in the Final Determination, may not be appealed. The ITC argued that this anomalous procedure was established by the Federal Circuit in Beloit Corp. v. Valmet Oy (1984). The Federal Circuit decision rejected this argument, noting that its holding in Beloit only stood for the proposition that unreviewed issues cannot be appealed by the party prevailing on those issues, but the Beloit decision did not allow the Commission to strip the right to appeal from a losing party. The Federal Circuit also rejected the ITC's argument that the 2008 amendment to 19 C.F.R. § 210.45(c), which provides "the Commission may take no position on specific issues or portions of the initial determination of the administrative law judge," allowed the ITC to effectively shield issues not decided by the Commission from appellate review.
Is Subject-Matter Eligibility Really a Threshold Issue?
by Yar R. Chaikovsky and Cary Chien
The U.S. Court of Appeals for the Federal Circuit affirmed a district court's decision granting summary judgment of invalidity on method patents covering database search technology. MySpace v. Graphon Corp., Case No. 2011-1149 (Fed. Cir. March 2, 2012) (Plager, J.) (Mayer, J., dissenting). The Court, however, spends more than 20 pages discussing the issue of subject matter-eligibility (35 U.S.C. § 101), an issue raised neither by the district court nor the parties. While the majority opinion decided the case on validity grounds under anticipation and obviousness (35 U.S.C. §§ 102 and 103), the dissent argued that the issue of subject-matter eligibility was an "antecedent question" that needed to be decided before reaching the issue of patent validity.
GraphOn's patents disclosed a method and apparatus to create, modify and search for a database record over a distributed computer network. Although the majority agreed that the patented invention falls outside of § 101 because it claims an abstract idea, it concluded that the "problem with addressing § 101 initially every time it is presented as a defense is that the answer in each case requires the search for a universal truth: in the broad sweep of modern innovative technologies does this invention fall outside the breadth of human endeavor that possibly can be patented under § 101?" The majority recognized that the Court has spent numerous pages revisiting its own cases and those of the Supreme Court and still "disagree vigorously over what is or is not patentable subject matter." Instead, the majority urges district courts to avoid the "swamp of verbiage that is § 101 by exercising their inherent power to control the processes of litigation" and insist litigants address issues of patent validity as provided by specific statutes, specifically §§ 102, 103 and 112.
Citing to the Supreme Court's decision in Bilski, the dissent urged that the Court must first resolve the "threshold test" of whether GraphOn's invention was a patentable "abstract idea" before turning to "subordinate issues related to obviousness and anticipation." Analogizing to Bilski's method of hedging risk in the commodities markets, the dissent reasoned that GraphOn's concept of allowing users to control the content of their online databases is "abstract" because it "simply took the concept of allowing a user to control the content and categorization of his own communications and implemented it using conventional computer technology."
Addressing head-on the Court's past view that § 101 was a "course eligibility filter" and that other patent validity requirements such as §§ 102 and 103 should also be applied to provide a more fine-grained assessment of a patent claim, the dissent argued that there is no evidence that relying on §§ 102, 103 and 112 will solve the problem of weeding out poor-quality patents.
Practice Note: The decision of the Supreme Court in the Prometheus case (this issue of IP Update), appears to support Judge Mayer to the extent the Supreme Court declined the position of the U.S. government in that case to only consider § 101 issues where a case could not be resolved by resort to other sections of the Patent Laws; i.e., §§ 102, 103 and 112.
Method for Tax-Deferred Real Estate Investments Not Patentable, Notwithstanding Computer Limitations
by Vanessa Lefort
On de novo review, the U.S. Court of Appeals for the Federal Circuit upheld a district court's grant of summary judgment invalidating method claims for tax-deferred real estate investments as unpatentable "abstract ideas" (under § 101). Fort Properties, Inc. v. American Master Lease LLC, Case No. 09-1242 (Fed. Cir., Feb. 27, 2012) (Prost, J.).
The patent at issue is directed to a method for real estate investments designed to take advantage of a federal law that allows tax deferrals for certain real estate transactions. Claim 1 comprised three steps: aggregating title to a number of real properties into a real estate portfolio; encumbering the property in the portfolio with a master agreement; and dividing the property interests in the portfolio into tenant-in-common shares, called "deedshares," that are subject to reaggregation under the master agreement. The 41 claims in the patent fell into two categories: claims that were similar to claim 1, and like claim 1 did not recite computer implementation, and claims that were similar to claim 1, but additionally required a computer to "generate a plurality of deedshares." All the claims were held to be unpatentable.
The Federal Circuit likened the claims in the first category to those in the Supreme Court's Bilski decision (IP Update, Vol. 13, No. 7), where a method by which buyers and sellers of commodities could hedge against the risk of price changes was held to be an abstract idea. The patent holder, American Master Lease (AML), argued that its real estate investment method claims were not just abstract ideas, but required a series of steps to take place in the real world, involving real property, deeds and contracts. Rejecting this argument, the Federal Circuit explained that the Supreme Court previously rejected claims with ties to the physical world in Bilski (commodities and money) and Flook (catalytic chemical conversion of hydrocarbons). Further, citing to its own precedent in In re Comiskey (IP Update, Vol. 12, No. 1) and In re Schrader (1994), the Federal Circuit reaffirmed that the test is "whether the claim as a whole recite[d] sufficient physical activity to constitute patentable subject matter" and not whether there are some physical ties such as entering bids in a record or using a contract.
The Federal Circuit also held that the addition of a computer limitation was "insignificant post-solution activity," which the Bilski decision reaffirmed is not enough to render an otherwise abstract idea patentable. Applying its own precedents in Cybersource (IP Update, Vol. 14, No. 9), Ultramercial (IP Update, Vol. 14, No. 10) and Dealertrack (IP Update, Vol. 15, No. 2), the Federal Circuit emphasized that in order for a computer limitation to confer subject-matter eligibility, the use of the machine "must impose meaningful limits on the claim's scope" and must "play a significant part in permitting the claimed method to be performed." Significantly, during claim construction, AML had agreed that "using a computer" merely meant "operating an electronic device that features a central processing unit." The Federal Circuit held that such a broad and general limitation does not "impose meaningful limits on the claim's scope." The Federal Circuit contrasted the claims of the AML patent against the permissible claims in Ultramercial, which recited "an extensive computer interface" and involved "advances in computer technology," requiring "intricate and complex computer programming" and "specific application to the Internet and cybermarket environment."
Reexamination Appeals: Go Directly to Fed. Circuit, Do Not Pass Dist. Court
by Clifford R. Lamar III (Dale)
In a matter of first impression, the U.S. District Court for the District of Columbia recently held that the American Inventors Protection Act of 1999 (the Act) requires patent owners to appeal reexamination decisions of the Board of Patent Appeals and Interferences (Board) directly to the Federal Circuit. Teles AG v. Kappos, Case No. 11-vc-00476 (D.D.C., Mar. 5, 2012) (Howell, J.).
A competitor of Teles sought ex parte reexamination of Teles' patent covering a telecommunications routing switch. During reexamination, the examiner found that certain claims were obvious, and the Board affirmed. Teles brought a civil action under 35 U.S.C. § 306 in district court seeking to overturn the Board's decision. Teles expressly stated in its complaint that it filed suit in district court because it intended to prove non-obviousness by taking advantage of "discovery mechanisms available through the Federal Rules of Civil Procedure that are not available during appellate review at the Federal Circuit." In other words, Teles intended to compel discovery from third-parties to obtain evidence that was not in front of the U.S. Patent and Trademark Office (USPTO) during reexamination.
The USPTO moved for dismissal for lack of subject matter jurisdiction, arguing that § 306 does not confer jurisdiction on a district court for an appeal by a "patent owner." Judge Howell agreed with the USPTO and transferred the case to the Federal Circuit. Judge Howell examined the language of §§ 134, 141, 145 (all referenced in § 306), as well as § 306 before and after amendments made by the Act in 1999. Prior to 1999, § 306 provided patent owners a right to appeal reexamination decisions to the Board under § 134, and then it allowed "court review of any Board decision under sections 141 to 145." Sections 141-144 provided direct appeal to the Federal Circuit for "patent applicants," while § 145 provided for a civil action against the USPTO in the District of Columbia for "an applicant." Courts had previously held that a patent owner could file a § 145 civil action to contest a reexamination decision prior to the Act.
After 1999, the Act amended §§ 134 and 141 to expressly include reference to both patent applicants and patent owners, while § 145 continued to only reference patent applicants. The Act's amendments to § 134 partitioned this section into three parts: (a) "Patent applicant," (b) "Patent owner," and (c) "Third-Party." Furthermore, § 145 was amended to refer to "§ 134(a)" instead of "§ 134." Thus, the court reasoned that Congress must have intended to limit § 145 civil actions only to patent applicants. According to the court, an examination of the legislative history for the 1999 amendments confirmed this intention.
Practice Note: Teles is not the first party to grasp the advantages of discovery in a civil action when challenging a Board decision. No less than two other actions challenging reexamination rulings under § 145 are currently pending. Recently, a patent owner sought a ruling from the U.S. District Court for the Eastern District of Virginia that an inter partes reexamination is a "contested case" in order to allow access to discovery during reexamination. In a similar vein, the Supreme Court heard oral arguments in January of this year in Hyatt v. Kappos, in which a patent applicant sought de novo review in a civil action under § 145 following the Board's affirmance of rejection during primary examination. The Federal Circuit, en banc, agreed that Hyatt was allowed to submit further evidence of patentability not before the Board in his § 145 civil action. The decision in Hyatt v. Kappos is expected later this term.
Interference Time Bar Can Flex
by Kristin Connarn
Addressing the issue of whether the one-year time bar for a patent interference can be overcome, the U.S. Court of Appeals for the Federal Circuit affirmed that the one-year bar for a patent interference could be overcome by proving a prior patent application was directed to the same invention, through multiple, non-overlapping claims in combination. Pioneer Hi-Bred International Inc. v. Monsanto Technology LLC., Case No. 11-1285 (Fed. Cir., Feb. 28, 2012) (Clevenger, J.).
In November 2009, the Board of Patent Appeals and Interferences (the Board) declared an interference between claims of a patent belonging to Pioneer and those of a pending application owned by Monsanto. On the face of the Pioneer patent, a date of invention of June 10, 1988 was claimed. The Monsanto involved application containing the interfering claims was filed June 13, 2005. The Monsanto involved application claims a date of invention of January 22, 1990, which is the filing date of an earlier Monsanto application. Pioneer moved for judgment after the interference was declared, arguing the claims in the Monsanto involved application in issue were time-barred under 35 U.S.C. § 135(b). Section 135(b) precludes any applicant from presenting a claim already made in an issued patent at any time after the "critical date," which is the date one year after the patent in question issued.
The Board concluded that the interference was not time-barred, even though the Monsanto involved application was filed after the critical date of July 10, 2002 and even though it did not contain any claim that had been in the earlier Monsanto application. It ruled that a combination of the claims in the earlier application were enough to meet the requirements of § 135(b). Pioneer appealed.
The Federal Circuit affirmed, concluding that claim 1 of the involved Monsanto application contained a preamble equivalent to claim 1 of the earlier Monsanto application, as well as four limitations that were substantially equivalent to a set of separate dependent claims in the earlier application. The Court concluded that it was appropriate to considerate the combined claims, despite the fact that they do not depend on one another, determining that the scope of the combination of claim 1, a dependent claim and two claims referencing claim 1, were similar in coverage to and not "directed to inventions outside what was later claimed by Monsanto" in the application.
"Just Say No to 'CRACKBERRY'"
by Sarah Bro
In a precedential opinion, the United States Trademark Trial and Appeal Board (Board) sustained three opposition proceedings based on grounds of likelihood of confusion, and four opposition proceedings based on grounds of likelihood of dilution by blurring, in favor of Research in Motion Ltd. (RIM), the maker of BLACKBERRY-brand mobile devices. Research in Motion Ltd. v. Defining Presence Marketing Group, Inc. and Axel Ltd. Co., Case No. 91178668 (TTAB, Feb. 27, 2012) (Bucher, ATJ).
RIM filed opposition proceedings against four trademark applications for "CRACKBERRY" filed for use in connection with marketing services, computer and online services and clothing goods. RIM alleged that the applications for CRACKBERRY would cause a likelihood of confusion with its U.S. trademark registrations for BLACKBERRY covering smart phones and related goods and services, and would dilute its famous BLACKBERRY mark.
Concerning RIM's likelihood of confusion claim, the Board rejected the applicant's argument that its use of CRACKBERRY was a parody of BLACKBERRY as a reference to the addictive nature of RIM's BLACKBERRY-brand handheld devices. The Board explained that the issue of trademark registrability is a much "narrower question" than that of free speech. Further, the Board noted that the defense of fair use of a trademark by parody is weaker when there is potential for confusion as to the source of goods or services with a known mark, especially when used on similar goods or services.
Reviewing the applicable DuPont factors to determine whether there was a likelihood that the relevant purchasing public would be misled to believe that the goods and services under the respective marks originated from a common source, the Board found the fame of the BLACKBERRY mark, the similarity of the parties' marks and the overlap of trade channels to weigh in RIM's favor. Further, the applied-for goods and services in three of the CRACKBERRY applications—namely marketing, computer and online services—were found similar to those covered by RIM's registrations. The likelihood of confusion claim against the fourth CRACKBERRY application for clothing goods was dismissed due to the absence of a relationship between the parties' goods.
Concerning RIM's dilution claim, the Board determined that the BLACKBERRY mark had attained the high level of fame required for dilution purposes and had done so prior to applicant's 2006 and 2007 filing dates for its CRACKBERRY applications. Thus, the Board found that all four CRACKBERRY applications would dilute RIM's BLACKBERRY mark by blurring because of the already existing association of the terms by the public, as well as the applicant's intent to create an association with the famous mark, which was supported by the applicant's parody defense.
Responding to the applicant's parody defense to the dilution claim, the Board explained that the parody defense is available to accommodate use of a famous mark in free speech and that claiming use of a term as a trademark for goods and services removes it from the fair-use provisions.
Distinguishing its holding from the U.S. Court of Appeals for Fourth Circuit's decision in a parody case involving "CHEWY VUITTON" dog toys, the Board explained that applicant's use of CRACKBERRY on goods and services similar to RIM's "undercuts the effectiveness of the asserted parody." Unlike the use of "CHEWY VUITTON" for a dog's chew toy which was found to be an effective parody when compared to an elegant LOUIS VUITTON-brand handbag, use of CRACKBERRY to market similar goods and services was found to harm the distinctiveness of the BLACKBERRY mark.
No Likelihood of Confusion or Dilution Between COACH for Test Preparation Materials and COACH for Handbags
by Rita Weeks
Considering whether the Trademark Trial and Appeal Board (TTAB) erred in permitting the registration of COACH for test preparation materials over objections from the owner of COACH for handbags, the U.S. Court of Appeals for the Federal Circuit upheld the TTAB's finding that no likelihood of confusion existed and insufficient evidence was presented to find fame to support a dilution claim. Coach Services, Inc., v. Triumph Learning LLC, Case No. 11-1129 (Fed. Cir., Feb. 21, 2012) (O'Malley, J.).
The defendant published test preparation books and software and claimed to have used the mark COACH in connection with its products since at least 1986. In 2004, the defendant filed three use-based applications to register its COACH marks for those products. The plaintiff had used the mark COACH since at least 1961 for a wide variety of "accessible luxury" products, including handbags, luggage, clothing, watches, eye glasses and wallets. The plaintiff filed a Notice of Opposition opposing registration of all three of the defendant's COACH marks on the grounds of likelihood of confusion and dilution. The plaintiff further claimed that the defendant's mark was barred from registration as merely descriptive when used on goods in the educational and test preparation industries. The TTAB dismissed the plaintiff's opposition, finding that no likelihood of confusion existed between the parties' marks and that there was no likelihood of dilution of the plaintiff's COACH mark for lifestyle goods by the defendant's COACH marks for educational materials. The TTAB also held that while the defendant's COACH marks were merely descriptive, they were entitled to registration because they had acquired secondary meaning.
On appeal, the Federal Circuit determined that the TTAB correctly found no likelihood of confusion. While the parties' word marks were identical in sound and appearance because they both used the word "Coach," the Court agreed that the parties' marks had completely different meanings and commercial impressions. The defendant's COACH mark, when applied to educational materials, brought to mind a person who instructs students, while the plaintiff's COACH mark used for luxury leather goods, brought to mind traveling by carriage. Further, the parties' goods were wholly unrelated, and the defendant marketed to sophisticated purchasers who would exercise care in purchasing decisions, minimizing likelihood of confusion. The Court also upheld the TTAB's finding that although COACH for handbags was famous for likelihood of confusion purposes, the significance of this factor was outweighed by the unrelated nature of the parties' goods and different channels of trade.
Concerning dilution, the Court affirmed the TTAB's holding that the plaintiff had not provided sufficient evidence of fame of its COACH mark to support a dilution claim. The Court explained that the burden to show fame for dilution purposes is high and rejected the plaintiff's argument that the same evidence that established fame for likelihood of confusion purposes also established fame for dilution purposes. Notably, the Court emphasized that the burden to show fame is "not insurmountable," and that it was not holding that the plaintiff could never establish the requisite level of fame. The plaintiff's evidence proffered in this particular case, however, was too weak. Significantly, the TTAB only considered one year of the plaintiff's sales and advertising of its COACH-branded products, noting that the plaintiff had not properly authenticated documents showing years of such figures and thus excluded them. Further, the plaintiff's evidence of unsolicited media attention was lacking because most of the articles the plaintiff offered in support were dated after the defendant filed its applications, and thus did not show that the plaintiff's mark was famous prior to the filing date as required to sustain a dilution claim. Further, the plaintiff's brand-recognition study was not convincing because the plaintiff did not offer a witness with first-hand knowledge of the study to explain how it was conducted, and the survey was conducted several years after the defendant had filed its applications.
Finally, the Court found that the TTAB had erred in its secondary meaning analysis and vacated the TTAB's decision solely on its finding that the defendant's mark had acquired distinctiveness and remanded for further proceedings on that issue.
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