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What You Say Can and Will be Used Against You – Prosecution History and Prior Infringement Arguments

Noting patent owner’s prior litigation statements, the US Court of Appeals for the Federal Circuit upheld a district court ruling that a clear and unmistakable disclaimer in the prosecution history affected claim construction of an asserted patent. SpeedTrack, Inc. v. Amazon.com, Inc., Case No. 20-1573 (Fed. Cir. June 3, 2021) (Prost, J.)

In 2009, SpeedTrack filed suit against various online retailers alleging infringement of its patent directed to a method for accessing files in a filing system leveraging “category descriptions” to aid in organizing the files. The patent describes associating category descriptions with files using a “file information directory.” A “search filter” then searches the files using their associated category descriptions. A limitation that “the category descriptions hav[e] no predefined hierarchical relationship with such list or each other” was added during prosecution to overcome a prior art reference that leveraged hierarchical field-and-value relationships.

The district court initially adopted a proposed claim construction that lacked any reference to a field-and-value relationship, noting that the construction “account[ed] for the disclaimers made during prosecution.” Following a motion by SpeedTrack, the court concluded there was still a fundamental dispute about the scope of the claim term. After further analyzing SpeedTrack’s prosecution history, the court concluded that the history “demonstrate[d] clear and unambiguous disavowal of category descriptions based on hierarchical field-and-value systems” and issued a second claim construction order explicitly disclaiming “predefined hierarchical field-and-value relationships” from the scope of “category descriptions.” SpeedTrack subsequently stipulated to noninfringement under the second claim construction and appealed.

On appeal, the Federal Circuit stressed that prosecution-history disclaimer can arise from both claim amendments and arguments. Here, the prosecution history showed that the applicants “repeatedly highlighted predefined hierarchical field-and-value relationships” as a difference between the prior art and the patent claims in no uncertain terms. That SpeedTrack distinguished the prior art on other grounds did not moot its disclaimer statements.

The Federal Circuit also noted that SpeedTrack argued in litigation against another defendant that the purpose of the amendment was to distinguish the category descriptions from attributes that “have a ‘hierarchical’ relationship between fields and their values.” While the Court agreed with SpeedTrack that such litigation statements were not a disclaimer on their own (since they were not the inventors’ prosecution statements), these litigation statements further supported not accepting SpeedTrack’s arguments. The Court reminded SpeedTrack that it has cautioned (in Aylus and Southwall) that “the doctrine of prosecution disclaimer ensures that claims are not ‘construed one way in order to obtain their allowance and in a different way against accused infringers.’”

After assessing SpeedTrack’s prior statements, the Federal Circuit considered whether the disclaimer was clear and unmistakable. The Court concluded it was. In rejecting SpeedTrack’s argument that prior decisions not expressly finding disclaimer supported that prosecution statements were not clear and unambiguous, the Court noted the construction had not been fully considered in those judgments. Similarly, the Court rejected the notion that the district court’s issuance of a second claim construction order showed there was no clear and [...]

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Submarine Sunk: Patent Prosecution Laches Pops GATT Bubble

Addressing for the first time whether the US Patent & Trademark Office (PTO) can assert prosecution laches as a defense in a civil action brought under 35 U.S.C. §145, the US Court of Appeals for the Federal Circuit held that the PTO could assert prosecution laches as a defense against four patent applications in a case where the plaintiff delayed presenting the claims for these applications over a period of at least 10 years. Hyatt v. Hirshfeld, Case Nos. 2018-2390; -2391; -2392; 2019-1038; -1039; -1049; -1070 (Fed. Cir. June 1, 2021) (Reyna, J.)

Gilbert Hyatt is well known for having built a prolific patent application portfolio based on nearly 400 initial filings made just before the United States changed from an issuance-based patent exclusivity system to a filing-based patent exclusivity system under the Uruguay Round of the General Agreement on Tariffs and Trade (GATT). By 2003, those 400 initial filings had exploded into 45,000 independent claims. Hyatt’s applications were so labor intensive that the PTO developed a separate examining unit specifically dedicated to their review. Many of these applications have been rejected.

After the PTO finally rejected four of Hyatt’s computer software patent applications, in 2005 Hyatt filed a § 145 action in the district court. Throughout the litigation, the PTO argued that Hyatt had routinely delayed prosecuting his patent applications and never complied with his verbal agreement with the PTO to streamline each application to apply for only one invention. Ultimately, after a five-day bench trial, the district court found that the PTO failed to prove it had taken sufficient action to advance prosecution of Hyatt’s applications. The PTO appealed.

Resolving the threshold issue on appeal of whether prosecution laches is even available to the PTO in a § 145 action, the Federal Circuit explained that the right to assert laches as an affirmative defense flows naturally from the PTO’s rights to reject applications based on laches and defend such rejections on appeal in the Federal Circuit on the same grounds. Any other conclusion, the Court recognized, would create incongruence and undermine the PTO’s authority. Such a defense is available even if raised for the first time in the district court, as “§145 actions open the door to new evidence.”

The Court found significant errors in the district court’s application of prosecution laches law. First, the Federal Circuit held that the district court too narrowly focused on the PTO’s specific conduct without considering the totality of the circumstances, including delays caused by Hyatt’s sweeping amendments and prosecution of other patent applications, as well as the relative costs and burdens of examining Hyatt’s gargantuan application portfolio. The Court was particularly critical regarding the district court’s assignment of blame to the PTO in its attempts to manage the unwieldy task before it.

After reviewing the evidence presented by the PTO, the Federal Circuit found that the PTO had amassed significant evidence of Hyatt’s delay of prosecution of his applications—i.e., “patterns of prosecution conduct [that] created a perfect storm that overwhelmed the [...]

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IP Ownership Considerations in Multi-jurisdictional Software Development Agreements

As a result of the healthcare sector’s growing dependence on software, health IT companies are increasingly taking advantage of globalisation to engage contractors in low wage jurisdictions to develop their user-facing software applications. This can trigger unforeseen legal risks owing to the differing laws across jurisdictions related to the ownership and transfer of intellectual property (IP) rights.

At the most extreme end, best practices in some jurisdictions are unenforceable or even impermissible in others. In view of these issues, it is strongly recommended that a company looking to take advantage of cross-border contracting for critical development eorts should carefully consider the choice of law provisions in their agreements, and engage with local counsel to ensure proper vesting of intellectual property rights.

An inability to demonstrate proper ownership of such rights can be a substantial obstacle for later financings or in corporate activities. Depending on the jurisdictions involved, a contracting company may need to concern itself with at least three types of IP in the software that is developed on its behalf: copyrights, moral or author’s rights, and patents.

Click here to read the full article in our latest edition of International News.




Navigating the Interplay Between the ITC, PTAB and District Courts

Recent changes in intellectual property law in the US International Trade Commission (ITC), the Patent Trial and Appeal Board (PTAB) and federal US District Courts have had major impacts on litigation strategy and business operations. Within these venues, key changes often run parallel to each other, and understanding and maximizing the interplay between them is critical to formulizing an IP strategy. A panel of McDermott attorneys, including Charlie McMahon, Amol Parikh, Jay Reiziss and Jiaxiao Zhang, recently hosted a webinar exploring these issues in collaboration with IAM and Lexology. Click here to watch their discussion of the complexities of these related developments as well as innovative and practical insights to help you navigate them.

KEY TAKEAWAYS

  • The rate at which the PTAB institutes petitions for Inter Partes Review (IPR) has been steadily declining, with a newer low expected this year. The falling institution rate over the last several years is attributable in part to discretionary denial under § 314(a).
  • Until 2020, there was still uncertainty behind the contours of how the PTAB’s discretionary denial would be applied when there was a co-pending district court or ITC proceeding. Last year, the PTAB designated as precedential its decision in Apple v. Fintiv, setting forth factors intended to guide the discretionary decision to institute when there are parallel proceedings.
  • Post-Fintiv, it looks less likely that litigants will be able to simultaneously pursue district court litigation and a PTAB proceeding. One of the benefits of the PTAB is the lower burden of proof to demonstrate that a patent is unpatentable. Removing this tool from the litigation toolbox could have a profound impact on defensive strategy.
  • It is still unclear how the PTAB’s Finitiv decision will apply to ITC investigations. Fitness technology companies, among others, have since asked the PTAB’s Precedential Opinion Panel (POP) to determine whether Fintiv should apply to parallel ITC investigations.
  • There have also been additional developments at the ITC related to the use of licensing to satisfy the domestic industry requirement. The pending Advancing America’s Interests Act (AAIA) would significantly change how complainants can rely upon licensing activities to establish a domestic industry.

 




It’s Highlighted and Verified: Reversal of PTAB Non-Obviousness Decision

In a relatively unusual outcome, the US Court of Appeals for the Federal Circuit reversed a Patent Trial & Appeal Board (Board) decision finding non-obviousness in an inter partes review (IPR). Becton, Dickinson, and Co. v. Baxter Corp. Englewood, Case No. 20-1937 (Fed. Cir. May 28, 2021) (Dyk, J.)

Becton petitioned the Board for IPR of Baxter’s pre-America Invents Act (AIA) patent, directed to a system for preparing patient-specific doses and a method for telepharmacy. The Board decided that the patent claims were not shown to be invalid as obvious, but also found that Baxter’s secondary considerations evidence was “weak.” Becton appealed based on two contested limitations: a verification limitation and a highlighting limitation. The Federal Circuit reversed the Board, concluding that the challenged claims were obvious and explained that weak evidence of secondary considerations could not overcome the strong showing of obviousness.

First, the Federal Circuit decided that the Board erred in finding that a prior art reference that taught a remote pharmacist may verify a dose preparation did not render obvious a claimed method where a remote pharmacist must verify. The reference made clear that a non-pharmacist could not further process work without the verification step. Baxter’s own expert witness conceded that, in accordance with the teachings of the prior art, a non-pharmacist would be disciplined for continuing to process dose preparation without authorization. The Court concluded there was no significant difference between the teaching in the prior art reference and Baxter’s verification requirement.

Second, the Federal Circuit decided that the Board erred in finding that the “highlighting” limitation as it relates to a set of drug preparation steps on a computer was non-obvious. In what it characterized as a “close case,” the Board decided that a prior art reference’s teachings highlighting patient characteristics when dispensing repackaged medication did not make obvious highlighting, in a drug formulation context, prompts for additional information. Citing KSR v. Teleflex, the Court explained that the “combination of familiar elements according to known methods is likely to be obvious when it does no more than yield predictable results.” The reference taught highlighting in terms of various inputs and information delivered. Becton’s expert testified that one of ordinary skill would understand from the reference that other information, such as prescription order information, could be displayed on the user interface. Baxter’s expert did not contradict Becton’s expert. Because “a person of ordinary skill is also a person of ordinary creativity, not an automaton,” the Board erred in using that one reference as the only source for what one of ordinary skill would consider.

Lastly, Baxter unsuccessfully argued that under pre-AIA 35 U.S.C. § 102(e)(2), one of the patent references was ineligible as prior art. Sec. 102(e)(2) provides that a prior art reference may be a “patent granted” on another’s application filed in the United States before the invention by the applicant. Baxter argued that since the claims of the reference were cancelled after a 2018 IPR, the reference no longer qualified as a “patent granted” [...]

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PTO Rules Not Subject to the Paperwork Reduction Act

The US Court of Appeals for the Ninth Circuit concluded that certain challenged rules of the US Patent and Trademark Office (PTO) that relate to the patent application process do not violate the Paperwork Reduction Act (PRA) because each called for a response to an individualized communication; a category which is expressly exempted from the PRA. Hyatt v. Office of Management and Budget, Case No. 20-15590 (9th Cir. May 20, 2021) (Nguyen, J.).

Inventor Gilbert Hyatt and the American Association for Equitable Treatment (AAET) contended that patent applicants should not have to comply with certain PTO rules, alleging that the rules violated the PRA, which Congress passed to reduce the burden imposed on the public when responding to federal agencies’ requests for information from private individuals. The PRA requires federal agencies engaged in “collections of information” to first submit them to the Office of Management and Budget (OMB) for approval and an assignment of a control number. Collections of things other than “information” do not need to receive OMB approval, and the PRA applies only to “collections” seeking information through identical questions or requirements imposed on 10 or more people. Thus, the PRA and its regulations expressly exclude individualized communications from PRA applicability.

Hyatt asked OMB to review PTO rules 111, 115 and 116, arguing that those rules imposed “collections of information” under the PRA. Hyatt suggested that because the rules had not received OMB approval and control numbers, he was not required to maintain, provide or disclose the information these rules referenced. OMB responded that it had already determined that “these collections are not subject to the PRA because what is collected is not considered ‘information,’ pursuant to [three] exemptions in OMB’s PRA implementing regulation”:

  • Exemption 1: “[a]ffidavits, oaths, affirmations, certifications . . . provided that they entail no burden other than that necessary to identify the respondent, the date, the respondent’s address, and the nature of the instrument. . .”
  • Exemption 6: “request[s] for facts or opinions addressed to a single person”
  • Exemption 9: “[f]acts or opinions obtained or solicited through nonstandardized follow-up questions designed to clarify responses to approved collections of information.”

5 C.F.R. §§ 1320.3(h)(1), (6), (9).

AAET made similar arguments in submitting three requests to OMB on PTO rules 105, 130, 131 and 132 and MPEP § 2173.05(n). In its response to AAET, OMB only stated that “the requests under Rule 1.105 are not subject to the PRA because the responses to questions submitted under Rule 1.105 are not ‘information,’ but instead are exempt under” Exemption 9. AAET submitted three more requests to OMB on the same rules with similar arguments. OMB responded that Rules 105, 130, 131 and 132 and MPEP § 2173.05(n) were exempt under Exemptions 6 and 9; and Rules 130, 131 and 132 were additionally exempt under Exemption 1.

Hyatt and AAET sued OMB in district court, alleging that OMB’s denial of their petitions was arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law in [...]

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New Perspective on Specific Personal Jurisdiction in Patent DJ Venue

The US Court of Appeals for the Federal Circuit concluded that the minimum contacts or purposeful availment test for specific personal jurisdiction was satisfied where a patent owner sent multiple infringement notice letters and other communications to a resident of California who then filed for declaratory judgment of non-infringement in federal district court in California. Trimble Inc. v. PerDiemCo LLC, Case No. 19-2164 (Fed. Cir. May 12, 2021) (Dyk, J.)

PerDiem accused Trimble of infringing several of PerDiem’s patents. PerDiem exchanged 22 communications with Trimble in California over a period of three months, some through Trimble’s subsidiary ISE in Iowa and other communications through its chief IP counsel in Colorado. The communications started with a letter (sent to ISE in Iowa) that had attached an unfiled complaint and which PerDiem used to try to launch license negotiations. This unfiled complaint asserted nine of PerDiem’s patents. After ISE brought Trimble, its parent, into the discussion, PerDiem accused Trimble’s products of infringing 11 patents and sought to enter into binding mediation on its infringement allegations. PerDiem also threatened to sue Trimble in the Eastern District of Texas and identified the counsel it planned to use for this purpose. Trimble filed for a declaratory judgment of non-infringement in the Northern District of California. The district court dismissed the complaint, relying on the Federal Circuit’s 1998 decision in Red Wing Shoe v. Hockerson-Halberstadt, concluding that it would be unreasonable to assert personal jurisdiction over PerDiem based on its communications. Trimble appealed.

The sole issue in the appeal was whether the district court erred in holding that there was no specific personal jurisdiction over PerDiem in the Northern District of California. The Federal Circuit explained that PerDiem’s contacts with California were far more extensive than those in Red Wing, noting the manner in which PerDiem amplified its threats of infringement as the communications continued, asserted more patents, and accused more of Trimble and ISE’s products of infringement. The Court noted that PerDiem even identified the counsel it retained to sue Trimble and the venue in which it planned to file suit. Overall, the Court found that PerDiem’s 22 communications over the course of about three months fell well outside the “sufficient latitude” the Court sought to grant patentees “to inform others of [their] patent rights without subjecting [themselves] to jurisdiction in a foreign forum” on the basis of three letters sent over a similar time period in Red Wing.

Practice Note: It remains to be seen how useful this case may be in the context of obtaining specific personal jurisdiction over non-practicing entities (or other patent owners) based on sending demand letters into a potential declaratory judgment venue viewed as less hospitable to patent owners.




Arthrex Argument May Be Available in Round Two

The US Court of Appeals for the Federal Circuit found that a party did not waive the Patent Trial & Appeal Board’s (Board) constitutionality argument by raising it for the first time in its opening brief because the Court’s decision in Arthrex, Inc. v. Smith & Nephew, Inc. was issued after the party sought rehearing. New Vision Gaming v. SG Gaming, Inc., Case Nos. 20-1399, -1400 (Fed. Cir. May 13, 2021) (Moore, J.) (Newman, J. concurring in part, dissenting in part)

New Vision appealed two covered-business method (CBM) review final written decisions in which the Board found that all claims of the patents, as well as its proposed substitute claims, were directed to patent ineligible subject matter under 35 U.S.C. § 101. In its opening brief before the Federal Circuit, New Vision requested the Court vacate and remand the Board’s decisions in light of Arthrex. SG Gaming argued New Vision had waived its right to a challenge under Arthrex since it raised it for the first time on an appeal. The Court disagreed, finding that New Vision had not waived its ability to challenge the Board’s decision under Arthrex since Arthrex was issued after the Board’s final written decisions and after New Vision sought Board rehearing. The Court vacated the Board’s final written decisions in the CBMs and remanded for further proceedings consistent with Arthrex without reaching the merits or any other issues.

In her partial dissent, Judge Pauline Newman agreed that Arthrex applied and vacating the Board’s final written decisions was appropriate. She also argued that another threshold issue (venue) should have been resolved, rendering the remand under Arthrex unnecessary and unwarranted. Additionally, Judge Newman agreed with New Vision that since the parties agreed to a different forum for dispute resolution in their license agreement, compliance with the parties’ patent license agreement would be appropriate. Under that agreement, if “any dispute” arose, jurisdiction would be “exclusive” in the appropriate federal or state court in the state of Nevada. New Vision filed suit in the federal district court in Nevada before SG filed CBM petitions before the Board. The Board stated it “[does] not discern, nor has Patent Owner pointed to, any portions of chapter 32 or § 18 of the AIA, or authority otherwise, that explicitly provide for a contractual estoppel defense,” in its decision and proceeded to a final decision despite the forum selection agreement.

Both parties briefed the forum selection question, with New Vision citing the Federal Circuit 2019 decision in Dodocase VR v. MerchSource in which a case was removed from the Board based on an agreed choice of forum. SG countered that the Board’s rejection of choice of forum is an unreviewable “institution” decision under Thryv vs. Click-to-Call. Andrei Iancu, the Director of the US Patent and Trademark Office (USPTO), intervened in the appeal, arguing that the Board’s decision is “final and nonappealable” under 35 U.S.C. § 324(e). As to the Board’s “conduct” in declining to [...]

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Prosecution History Prevents Patent Owner from “Intercepting” Win on Appeal

In reviewing whether the Patent Trial & Appeal Board (Board) correctly interpreted the meaning of “intercepting” in the context of Voice over Internet Protocol (VoIP) technology, the US Court of Appeals for the Federal Circuit found that the claim language and prosecution history supported the Board’s decision. The Court thus affirmed the Board’s construction and subsequent finding of obviousness. Uniloc 2017 LLC v. Apple Inc., Case Nos. 20-1403, -1404 (Fed. Cir. May 12, 2021) (Prost, C.J.)

Uniloc owns a patent directed to a system and method for using various VoIP features, such as caller-ID, call waiting, multi-line service, and different levels of service quality known as the “codec specification.” The patent explains that in order to generate revenue for these features, service providers must maintain control over which subscribers have paid for these additional features. To achieve that control, the system employs an enforcement mechanism that sits between the sender of the communication and the intended recipient. The enforcement mechanism ensures that both parties are authorized to use the particular features by intercepting the signaling message, determining whether the client is authorized, and filtering the signaling message based on the authorization. The majority of the claims require authorization related to only one service type. However, one of the claims (claim 18) requires authorization related to at least two service types.

Apple filed a petition for inter partes review (IPR), alleging that all claims of the patent were invalid as obvious over a prior art patent referred to as Kalmanek. Kalmanek discloses signaling messages that are routed through at least one “gate controller,” which can authenticate the identity of the calling party and authorize the services sought. The services include at least caller-ID and enhanced levels of call quality. Kalmanek’s process is accomplished by sending a SETUP message, which the calling party sends to the gate controllers and then to the intended recipient. After receipt, the called party sends a SETUPACK message along a return path to the gate controllers and then to the caller.

During the IPR, Apple asserted that the term “intercepting” a signaling message associated with the call, as recited in all independent claims, should be interpreted to mean “the signaling [message] is received by a network entity located between the endpoints of the call.” Uniloc disagreed and argued that the term should be interpreted as excluding the receipt of a signaling message by the intended recipient of the message. The Board agreed with Apple’s construction and subsequently found that all terms were invalid as obvious with the exception of claim 18. With respect to claim 18, the Board concluded that Apple failed to meet its burden to show that Kalmanek disclosed authorization related to a codec service. Furthermore, the Board opined that even assuming Apple had properly advanced such an argument, it would have lost on the merits.

On appeal, Uniloc challenged the Board’s construction of the “intercepting” term, and Apple cross-appealed the Board’s finding with respect to the non-obviousness of claim 18. The Federal Circuit affirmed [...]

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Full Scope of Claimed Invention Must Be Enabled

In a case relating to nucleic acid sequencing, the US Court of Appeals for the Federal Circuit upheld a jury verdict of non-enablement because a skilled artisan would have only known how to successfully practice a narrow range of the full scope of the nucleic acids covered by the asserted claim at the time of the invention. Pacific Biosciences of California, Inc. v. Oxford Nanopore Technologies, Case No. 21-2155, -2156 (Fed. Cir. May 11, 2021) (Taranto, J.)

PacBio sued Oxford for infringement of two patents related to methods for sequencing nucleic acids (such as DNA) using nanopore technology. The methods involve drawing nucleic acids through a nanometer-sized hole formed in a substrate. A voltage is applied to the substrate, and as the nucleic acids pass through the hole, the identity of each nucleic acid is identified based on changes in electric current passing through the substrate.

At trial, Oxford’s lawyer made opening remarks that included references to the potential applications of Oxford’s accused products to the then-emerging global COVID-19 crisis. PacBio immediately objected, and the district court gave exactly the curative instruction that PacBio requested. The district court also required that going forward, the parties give advance notice if they intended to make any reference to COVID-19. Ultimately, the jury found all asserted claims infringed, but also determined that the claims were invalid for lack of enablement under 35 USC § 112. In post-trial motions, the district court denied PacBio’s request that the court grant a new trial because of Oxford’s remark during opening statements regarding the accused products’ potential application to the then-emerging COVID-19 crisis. PacBio appealed.

On appeal, PacBio argued that the jury’s finding of lack of enablement was unsupported by the evidence, citing to testimony from its expert that a person skilled in the art at the priority date would have been able to successfully perform the methods of the asserted claims. The Federal Circuit disagreed, noting that the expert only demonstrated successful practice of the asserted claims for a narrow subset of nucleic acids covered by the claims—namely DNA hairpin molecules. The Court cited evidence where PacBio admitted through a stipulation that it had never performed the nanopore sequencing methods of the asserted claims, meaning its reduction to practice was purely constructive. The Court also noted that Oxford produced evidence that it was not until 2011 (two years after the priority date) that anyone in the field was able to use nanopore sequencing to sequence biological DNA—a different type of nucleic acid within the scope of the asserted claims. Thus, the Court found that PacBio had only demonstrated that a person of skill in the art would have been able to successfully practice a narrow range of the full scope of the nucleic acids covered by the asserted claim. The Court explained that it is not enough for enablement that the relevant artisans knew how to perform some nanopore sequencing before the priority date. Instead, what matters is the scope of the asserted claims, which relate [...]

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