2019 was another important year in intellectual property law that resulted in hundreds of decisions by the courts and Patent Trial and Appeal Board (PTAB) that may affect your company’s litigation, patent prosecution or business strategy. This special report on patents discusses some of the most important cases from 2019 from the US Supreme Court, the US Court of Appeal for the Federal Circuit and the PTAB.
On January 22, 2019, the Supreme Court addressed in Helsinn Healthcare S.A. v Teva Pharmaceuticals, USA, Inc. the question of whether, under the America Invents Act (AIA), an inventor’s sale of an invention to a third party that is obligated to keep the invention confidential qualifies as prior art for purposes of determining the patentability of the invention. In a unanimous decision authored by Justice Clarence Thomas, the Supreme Court concluded that such a sale qualifies as prior art.
Also, in the Supreme Court’s highly anticipated opinion in Iancu v. NantKwest, the Court struck down the US Patent and Trademark Office (USPTO) policy that automatically demanded repayment of its legal bills, finding that it was against the centuries-old “American Rule,” which requires US litigants to pay their own attorney fees.
2019 also saw the USPTO’s and Federal Circuit’s application of §315(b) time bar statute. On January 24, 2019, the PTAB found that an inter partes review (IPR) petition was time barred because an unnamed real-party-in-interest (RPI) and privy of the petitioner had been served with a complaint more than one year earlier. Ventex Co., Ltd. v. Columbia Sportswear North America, Inc., Case No. IPR2017-00651 (PTAB Jan. 24, 2019) (Cocks, APJ). The PTAB determined that structured, pre-existing, contractual and well-established business dealings between entities can create an RPI relationship, and made the unnamed party a privy of the petitioner. In another precedential decision, the PTAB dismissed a petition for IPR, finding that the one-year time limit for filing an IPR petition under § 315(b) is triggered even if a party serving a district court complaint alleging infringement lacks standing to sue. GoPro, Inc. v. 360Heros, Inc. Relying on the Federal Circuit’s 2018 decision in Click-to-Call v. Ingenio, the PTAB found that service of a pleading asserting a claim of infringement triggers the one-year time period for a petitioner to file a petition, even where the serving party lacks standing to sue or where the pleading is otherwise deficient.
Further, although § 315(d) provides that “the determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable,” the en banc Federal Circuit held that a decision to institute an IPR after finding that the § 315(b) time bar did not apply was appealable.
Although the Federal Circuit tried to clarify patentability under 35 U.S.C. §101 by issuing several precedential decisions, it is still difficult to know with certainty what is considered patent eligible subject matter these days. In Athena Diagnostics, Inc. v. Mayo Collaborative Services, the Federal Circuit addressed the subject matter eligibility of diagnostic methods based on underlying natural laws, finding them invalid notwithstanding the Federal Circuit’s acknowledgement of the claims’ recitation of “certain concrete steps.” Along the same lines, the Federal Circuit found claims directed to methods of identifying and detecting a biomarker to be directed to patent-ineligible natural law. (IP Update Vol. 20, No. 8) In contrast to the diagnostic methods that the Court has declared invalid on several occasions, the Federal Circuit has been willing to find method-of-treatment claims, employing a specific method on specific patients or subjects using a specific compound at specific doses to achieve a specific outcome, patent eligible. See e.g., Natural Alternatives Int’l, Inc. v. Creative Compounds, LLC, Case No. 18-1295 (Fed. Cir. Mar. 15, 2019); Endo Pharmaceuticals Inc. v. Teva Pharmaceuticals USA, Inc. Similarly, in the field of computer technology, a divided panel of the Federal Circuit held that a claimed method for monitoring and analyzing a computer network was directed to an improvement in computer capability, not an abstract idea. SRI International, Inc. v. Cisco Systems, Inc. Relying on the Court’s Enfish opinion, the majority explained that the claimed technology provides a network defense system that monitors network traffic in real time to automatically detect large-scale attacks, thus providing a “specific asserted improvement in computer capabilities.” In its analysis, the Court explained that the challenged claims were not directed to using a computer as a tool, but instead were directed to improving the technical functionality of the computer and computer networks by reciting a specific technique for improving computer network security.
To help alleviate some confusion in view of the recent Federal Circuit decisions, the USPTO issued the revised 2019 Patent Subject Matter Eligibility Guidance, as well as an update issued on October 18, 2019. The update is similar to the 2019 PEG and includes additional examples applying the subject matter eligibility test. While the USPTO guidance is useful, especially in the context of prosecution, practitioners should not assume, especially in the context of enforcement actions, that a claim similar to one designated as patent eligible in the PTO guidance will survive a § 101 challenge.
In addition to the impact of several key decisions in 2019, there are several important cases on the Supreme Court’s docket in 2020 that are relevant to IPR institutions. The Supreme Court has agreed to consider whether a petition for an IPR was filed within the one-year window provided by 35 USC § 315(b). Dex Media Inc. v. Click-To-Call Technologies, LP, Case No. 18-916 (S. Ct. June 24, 2019) (cert granted). Dex’s cert petition also asked the Supreme Court to consider whether an infringement suit that was voluntarily dismissed triggers the IPR time bar. While the PTAB has long said that it does not, the Federal Circuit in this case said that position was wrong. However, the Order granting cert does not include that issue.
Although the Supreme Court has not granted cert to any §101 cases, we can anticipate the Federal Circuit to issue several more precedential opinions to further clarify patent eligibility unless Congress beats them to it. The Federal Circuit’s opinion in Cellspin Soft, Inc. v. Fitbit, Inc. is likely to have an impact on the types of allegations contained in the patentee’s complaint with respect to the novel aspects of their patent. Addressing patent eligibility at the motion to dismiss stage of a case, the Federal Circuit vacated a district court’s grant of a motion to dismiss, finding that the district court improperly failed to accept as true the patent owner’s factual allegations that the asserted claims were directed to an inventive concept. In addition to holding that patents granted by the USPTO are presumed valid under § 101, the Court’s opinion will likely lead to patentees pleading additional facts related to the novel aspects of their patent in order to avoid an early dismissal.
Additionally, in all cases filed after July 25, 2019 and assigned to Judge Rodney Gilstrap, defendants are now required to serve “eligibility contentions” no later than 45 days after receiving service of the “Disclosure of Asserted Claims and Infringement Contentions.” Standing Order Regarding Subject Matter Eligibility Contentions Applicable to All Patent Infringement Cases Assigned to Chief District Judge Rodney Gilstrap (E.D. Tex. July 25, 2019) (Gilstrap, J). The confluence of timing requirements between P.R. 3-3 and the new Standing Order suggests that the eligibility contentions are envisioned as part of the invalidity contentions.
Finally, the constitutionality of the IPRs may continue to be at issue following the controversial Federal Circuit decision in Arthrex, Inc. v. Smith & Nephew, Inc., which held the appointment of administrative patent judges (APJs) at the PTAB was unconstitutional. The Court found that PTAB judges were appointed as if they were “inferior officers” but vested by the PTAB with authority that is reserved for Senate-confirmed “principal officers.” The decision creates uncertainty in dozens of IPR proceedings. While the full impact of this decision remains unclear, it appears the holding will immediately affect many pending cases. Some estimates note that at least 200 AIA reviews may be subject to rehearing. RPX Insight (Nov. 8, 2019). Similarly, the Supreme Court’s decision in Collabo Innovations Inc. v. Sony Corp. (petition filed Nov. 12, 2019) will address whether the retroactive application of IPRs to a patent that issued before the passage of the AIA violate the Takings Clause and Due Process Clause of the Fifth Amendment. A decision finding IPRs to be unconstitutional to pre-AIA patents will markedly limit the usefulness of IPRs for a great many patents for the near future.