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Even Judges Have a Boss: PTAB Must Sufficiently Articulate its Obviousness Reasoning

Addressing the sufficiency of the Patent Trial & Appeal Board’s (PTAB) justification of its inter partes review (IPR) determination, the US Court of Appeals for the Federal Circuit reversed the PTAB’s obviousness determinations, concluding that the PTAB’s findings regarding motivation to combine were not supported by substantial evidence. Chemours Company FC, LLC v. Daikin Industries, Ltd., Daikin America, Inc., Case No. 20-1289, -1290 (Fed. Cir., July 21, 2021) (Reyna, J.) (Dyk, J., concurring in part and dissenting in part).

Chemours, owner of the challenged patents, appealed the PTAB’s final written decisions in two IPRs initiated by Daikin. The challenged claims relate to a unique polymer for insulating communication cables formed by pulling wires through melted polymer to coat and insulate the wires, a process known as “extrusion.” The challenged claims of the patents recite that the polymer has a specific melt flow range of about 30+/- g/10 mins. The polymer’s melt flow range correlates with how fast the melted polymer can flow under pressure during extrusion. A higher melt flow rate means a faster coating of the polymer onto a wire. During the IPRs, the PTAB found all challenged claims unpatentable as obvious.

The Federal Circuit reviews the PTAB’s legal determinations de novo and its factual findings for substantial evidence, which “requires more than a ‘mere scintilla’ and must be enough such that a reasonable mind could accept the evidence as adequate to support the conclusion.” Obviousness is a question of law necessarily made on underlying findings of fact, and in making factual findings, the PTAB “must have both an adequate evidentiary basis for its findings and articulate a satisfactory explanation for those findings.”

In this instance, the Federal Circuit found that the PTAB’s obviousness findings were not supported by substantial evidence. According to the Court, while the PTAB may rely on prior art other than the references being applied or combined to inform itself of the state of the art at the time of the invention, the scope of the relevant prior art encompasses only that which is “’reasonably pertinent to the particular problem with which the inventor was involved.”’ Here, the Court explained that the only prior art reference relied on was not appropriate because it expressly taught away from the claimed invention and relied on teachings from other references that were not concerned with the particular problems the prior art sought to solve. As the Court noted, the PTAB “did not adequately grapple with why a skilled artisan would find it obvious to increase [the reference’s] melt flow rate to [the] claimed range while retaining its critical ‘very narrow molecular-weight distribution.’” To support its obviousness conclusion, the PTAB needed “competent proof showing a skilled artisan would have been motivated to, and reasonably expected to be able to, increase the melt flow rate of [the reference’s] polymer to the claimed range when all known methods for doing so would go against [the reference’s] invention by broadening molecular weight distribution.” By failing to provide its reasoning, the PTAB relied [...]

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PTO Updates Arthrex Guidance

The US Patent & Trademark Office (PTO) updated its June 29, 2021, interim procedure to implement the Supreme Court of the United States’ decision in U.S. v. Arthrex, Inc., and specifically updated the Arthrex Q&As section. The PTO’s July 20, 2021, updates address the effect of Arthrex on Patent Trial & Appeal Board (PTAB) proceedings generally and ongoing proceedings in particular. In Arthrex, the Supreme Court held that appointment of PTAB administrative patent judges violated the Appointments Clause of the Constitution, and that the proper remedy was to vest the PTO director with discretion to overturn the PTAB’s decisions.

In section A of the Q&As, pertaining to the effect of Arthrex on PTAB proceedings, the PTO explained that the director has the option to sua sponte initiate director review of any final written decision at any point before the filing of a notice of appeal or before the time for filing such a notice has expired. The updated Q&As further explain that a request for director review is not an opportunity for a party to make new arguments or submit new evidence and imposes a 15-page limit on any request. The updated Q&As also clarify the mechanism to request review by the director. The update clarifies that a party cannot request both director review and a panel rehearing after the issuance of a final written decision, and if a party requests both it will be treated as a request for director review. However, if a panel rehearing is granted, a party can request director review of the rehearing panel decision.

In section B of the update, pertaining to the effect of Arthrex on ongoing PTAB proceedings, the PTO clarified the deadline for requesting a rehearing by the director and the circumstances under which the director will consider granting extensions of the rehearing deadlines.

In addition, the PTO added a new section, section D, pertaining to the interim internal process for director review. In section D, the Q&As address:

  1. What happens to a director review request when it is received by the PTO?
  2. What criteria does the advisory committee use when evaluating director review requests?
  3. How will the director identify decisions for sua sponte director review?

Regarding 1), the Q&As explain that requests for director review will be evaluated by an advisory committee established by the director. Regarding 2), the Q&As explain there is no exclusive list of criteria, but list criteria the advisory committee may consider. Regarding 3), the Q&As explain that the PTAB internal management review team will alert the director to decisions that may warrant director review.




A Goldilocks Dilemma: What is the “Right Amount” When Pleading Patent Infringement Cases?

Addressing the issue of pleading requirements for patent infringement cases, the US Court of Appeals for the Federal Circuit clarified that patentees need not prove their case at the pleading stage on an element-by-element basis but can plead themselves out of court by presenting facts that are inconsistent with their infringement claims. Bot M8 LLC v. Sony Corp. of Am., Case No. 20-2218 (Fed. Cir. July 13, 2021) (O’Malley, J.)

Bot M8 filed suit against Sony and alleged that Sony’s PlayStation 4 and PlayStation network infringed Bot M8’s asserted patents, which are all generally directed to casino, arcade and video games. The asserted patents describe an “authentication mechanism to verify that a game program has not been manipulated,” a “gaming machine [that stores] gaming information and a mutual authentication program on the same medium,” a “gaming device with a fault inspection system,” and a “gaming machine that changes future game conditions based on players’ prior game results.”

The district court sua sponte instructed Bot M8 to file an amended complaint, “specifying ‘every element of every claim that [Bot M8] say[s] is infringed’” and to reverse engineer Sony’s products to prove its case. Bot M8 did not challenge the district court’s order and agreed to file claim charts. Following Bot M8’s service of the first amended complaint, Sony filed a motion to dismiss, which the district court granted. On an unrelated patent, both parties filed summary judgment motions. The district court entered final judgment in favor of Sony, and Bot M8 subsequently appealed both the dismissals and the grant of summary judgment.

On appeal, the Federal Circuit emphasized that “patentees need not prove their case at the pleading stage” and thus found that the district court had erred by misapplying Iqbal and Twombly. Apparently exasperated by the need to reiterate the proper pleading standard, the Court emphasized that “[a] plaintiff is not required to plead infringement on an element-by-element basis.”

While reaffirming a standard favorable to patentees, the Federal Circuit explained that for a complaint to pass muster under Iqbal and Twombly, it still must provide sufficient factual allegations to “articulate why it is plausible that the accused product infringes the patent claim.” Thus, “a patentee may subject its claims to early dismissal by pleading facts that are inconsistent with the requirements of its claims.” The Court explained that Bot M8’s allegations conflicted with claim 1 of Bot M8’s patent. Whereas that claim required a motherboard separate from the authentication and game programs, Bot M8’s claim charts expressly alleged that “[t]he authentication program for the PlayStation 4 hard drive, operating system, and games is stored on PlayStation 4 . . . Serial Flash Memory” and that “[t]he PlayStation 4 motherboard contains flash memory.” According to the Court, it was “not even possible, much less plausible” for Bot M8 to prevail because of this inconsistency between Bot M8’s allegations and its patent with respect to the location of the authentication and game programs relative to the motherboard. By pleading “too much rather [...]

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Unified at Last? Germany’s Constitutional Court Removes UPC Hurdle

On July 9, 2021, Germany’s Federal Constitutional Court rejected a pair of applications for a preliminary injunction directed against the German Approval Act on the Agreement on a Unified Patent Court (UPC) (decision of June 23, 2021, 2 BvR 2216/20). Thus, German ratification of the Agreement now only requires a presidential signature of the Approval Act and the subsequent deposition of the ratification.

The Constitutional Court’s press release can be found here (in English and German). The text of the decision itself is available here (in German only).

BACKGROUND

So far, 15 EU Member States have ratified the 2013 Agreement on a UPC. In recent years, the ratification process has faced several unexpected hurdles and proved to be cumbersome. Last year, post-Brexit, the United Kingdom formally revoked its ratification (as of July 20, 2020). Since then, of the ratifications required for entry into force, only Germany’s remained pending.

Germany’s Federal Constitutional Court annulled a first national ratification Approval Act on February 13, 2020, after a successful constitutional complaint. Now, following an apparently unsuccessful second round of constitutional complaints, nothing remains to prevent the second Approval Act, which was redrafted and approved by the German legislator in fall 2020, from being formally signed by the German president.

GROUNDS FOR THE CONSTITUTIONAL COURT’S DECISION

The Constitutional Court stated that the constitutional complaints were inadmissible on the merits because the complainants had not sufficiently substantiated the possibility of a violation of their fundamental rights.

Under German constitutional law, national legal acts may only transfer sovereign rights to the European Union or EU-related institutions under certain conditions. In particular, in order for a national act to be deemed unconstitutional, it must be established that the transfer of rights would undermine the German constitution or, in the words of German constitutional law, would affect the integral core or identity of the German constitution. In its 2020 decision, the Federal Constitutional Court recognized that the first Approval Act lacked the two-thirds majority in parliament required for such a significant transfer of sovereign rights. The first Approval Act was adopted unanimously, but only 35 of the approximately 600 German members of parliament were present for the vote, which was found to be too few for such a far-reaching piece of legislation.

In principle, the hurdles for a successful constitutional complaint are high. The Approval Act represents a democratically legitimized majority decision by a constitutional body. Now 570 members of parliament have voted in favor of the second Approval Act. Therefore, in the present decision, the Federal Constitutional Court (for the first time) considered the merits of the law rather than the formalities of passage.

In the present case, the complainants argued that Articles 6 et seq. of the UPC Agreement violated the independence of judges established in the German constitution and the constitutionally guaranteed principle of the rule of law due to the appointment of the judges of the UPC for six years, their possible reappointment and the [...]

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USPTO Conducting Patent Eligibility Jurisprudence Study

At the request of Senators Thom Tillis (R-NC), Marie Hirono (D-HI), Tom Cotton (R-AR) and Chris Coons (D-DE), the US Patent & Trademark Office (USPTO) is undertaking a study on the current state of patent eligibility jurisprudence in the United States and how the current jurisprudence has impacted investment and innovation, particularly in critical technologies like quantum computing, artificial intelligence, precision medicine, diagnostic methods and pharmaceutical treatments. On July 9, 2021, the USPTO issued a Federal Register Notice seeking public input on these matters to assist in preparing the study. The deadline for submitting written comments is September 7, 2021.

The Federal Register Notice included 13 concerns on which comments were requested:

  1. Explain how the current state of patent eligibility jurisprudence affects the conduct of business in your technology areas, and identify your technology areas.
  2. Explain what impacts you have experienced as a result of the current state of patent eligibility jurisprudence in the United States. Include impacts on as many of the following areas as you can, identifying concrete examples and supporting facts when possible:
    1. patent prosecution strategy and portfolio management;
    2. patent enforcement and litigation;
    3. patent counseling and opinions;
    4. research and development;
    5. employment;
    6. procurement;
    7. marketing;
    8. ability to obtain financing from investors or financial institutions;
    9. investment strategy;
    10. licensing of patents and patent applications;
    11. product development;
    12. sales, including downstream and upstream sales;
    13. innovation and
    14. competition.
  3. Explain how the current state of patent eligibility jurisprudence in the United States impacts particular technological fields, including investment and innovation in any of the following technological areas:
    1. quantum computing;
    2. artificial intelligence;
    3. precision medicine;
    4. diagnostic methods;
    5. pharmaceutical treatments and
    6. other computer-related inventions (e.g., software, business methods, computer security, databases and data structures, computer networking, and graphical user interfaces).
  4. Explain how your experiences with the application of subject matter eligibility requirements in other jurisdictions, including China, Japan, Korea, and Europe, differ from your experiences in the United States.
  5. Identify instances where you have been denied patent protection for an invention in the United States solely on the basis of patent subject matter ineligibility, but obtained protection for the same invention in a foreign jurisdiction, or vice versa. Provide specific examples, such as the technologies and jurisdictions involved, and the reason the invention was held ineligible in the United States or other jurisdiction.
  6. Explain whether the state of patent eligibility jurisprudence in the United States has caused you to modify or shift investment, research and development activities, or jobs from the United States to other jurisdictions, or to the United States from other jurisdictions. Identify the relevant modifications and their associated impacts.
  7. Explain whether the state of patent eligibility jurisprudence in the United States has caused you to change business strategies for protecting your intellectual property (e.g., shifting from patents to trade secrets, or vice versa). Identify the changes and their associated impacts.
  8. Explain whether you have changed your behavior with regard to filing, purchasing, licensing, selling, or maintaining patent applications and patents in the United States as a result of [...]

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Venue Manipulation Obviates Geographically Bounded Claims in Venue Analysis

The US Court of Appeals for the Federal Circuit issued a rare grant of two mandamus petitions directing the US District Court for the Western District of Texas to transfer the underlying patent infringement actions to the US District Court for the Northern District of California pursuant to 28 U.S.C. § 1404(a). In re: Samsung Elecs. Co., Ltd., Case Nos. 21-139, -140 (Fed. Cir. June 30, 2021) (Dyk, J.)

Ikorongo Technology owned four patents directed to functionalities allegedly performed by applications run on the accused mobile products sold by Samsung and LG. Ikorongo Technology assigned to Ikorongo Texas—an entity formed only weeks before—exclusive rights to sue for infringement of those patents within specified parts of the state of Texas, including certain counties in the Western District of Texas, while retaining the rights to the patents in the rest of the United States.

Ten days later, Ikorongo Texas sued Samsung and LG in the Western District of Texas. Although Ikorongo Texas claimed to be unrelated to Ikorongo Technology, the operative complaints indicated that the same five individuals owned both Ikorongo Texas and Ikorongo Technology, and that both entities shared office space in North Carolina.

The day after filing the initial complaints, Ikorongo Texas and Ikorongo Technology filed first amended complaints, this time naming both Ikorongo Technology and Ikorongo Texas as co-plaintiffs, noting that together Ikorongo Texas and Ikorongo Technology owned the entire right, title and interest in the asserted patents, including the right to sue for past, present and future damages throughout the United States and the world.

Samsung and LG separately moved under 28 U.S.C. § 1404(a) to transfer the suits to the Northern District of California, arguing that “three of the five accused third-party applications were developed in Northern California, where those third parties conduct significant business activities and no application was developed or researched in Western Texas.” Samsung and LG also argued that potential witnesses and sources of proof were located in the Northern District of California.

The district court first concluded that Samsung and LG failed to establish § 1404(a)’s threshold requirement that the complaints “might have been brought” in the Northern District of California. Because Ikorongo Texas’s rights under the asserted patents were limited to the state of Texas and could not have been infringed in the Northern District of California, the district court held that venue over the entirety of the actions was improper under § 1400(b), which governs venue in patent infringement cases. Alternatively, the district court analyzed the traditional public- and private-interest factors, finding that defendants had not met their burden to show cause for transfer. Samsung filed for mandamus to the Federal Circuit.

The Federal Circuit found that the district court erroneously disregarded Ikorongo Technology and Ikorongo Texas’s attempts to manipulate venue when analyzing venue under § 1404(b). While no act of infringement of Ikorongo Texas’s geographically bounded rights took place in the Northern District of California, the Federal Circuit determined that “the presence of Ikorongo Texas is plainly recent, ephemeral, and [...]

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Unsigned, Sealed, Delivered: PTO Eliminates Handwritten Signatures for Certain OED Correspondence and Credit Card Payments

The US Patent & Trademark Office (PTO) eliminated the requirement for original handwritten signatures on certain correspondence with the Office of Enrollment and Discipline (OED) and on certain payments made to the PTO by credit card. The handwritten signature requirements of 37 CFR § 1.4(e) were deleted effective July 2, 2021.

37 CFR § 1.4(e)(1) previously required correspondence related to registration to practice before the PTO in patent cases, enrollment and disciplinary investigations, and disciplinary proceedings to be submitted with an original handwritten signature personally signed in permanent dark ink or its equivalent. 37 CFR § 1.4(e)(2) required the same for payments by credit cards where the payment was not made via the electronic filing system. Elimination of the entirety of § 1.4(e) allows the use of facsimile transmissions and S-signatures in enrollment and disciplinary matters before the OED, and for payments by credit card.




Don’t Let Prophetic Examples Work Against You

On July 1, 2021, the US Patent & Trademark Office (PTO) issued a notice reminding patent applicants that when their applications contain both prophetic and working examples, they must make a clear distinction between the two.

Prophetic examples illustrate reasonably expected results or anticipated results. They stem from experiments that have not been actually performed and are instead hypothetical simulations. In contrast, working examples result from experiments that were actually performed. In order to aid in distinguishing between the two example types within a patent application, prophetic examples should be written only in the future or present tense—not in the past tense. Prophetic examples cannot be used to meet the written description and enablement requirements for a patent application.

The PTO’s recent notice underscores the importance of the applicant’s duty to clearly distinguish between prophetic and working examples: “[k]nowingly asserting in a patent application that a certain result ‘was run’ or an experiment ‘was conducted’ when, in fact, the experiment was not conducted or the result was not obtained is fraud.”




Diehr Alice, Yu are Superimposing Novelty onto Patent Eligibility. Love, Newman.

The US Court of Appeals for the Federal Circuit affirmed the district court’s grant of a Rule 12(b)(6) motion to dismiss on the basis that, under the two-step Alice analysis, the patent claims—directed to a digital camera—were directed to ineligible subject matter under 35 U.S.C. § 101. Yu, et al. v. Apple Inc., et al., Case Nos. 20-1760; -1803 (Fed. Cir. June 11, 2021) (Prost, J.) (Newman, J., dissenting)

The patent claim under consideration recited an “improved digital camera” that has two lenses, two image sensors, an analog-to-digital converter, a memory and a digital image processor for “producing a resultant digital image from said first digital image enhanced with said second digital image.” Yu conceded that “the idea and practice of using multiple pictures to enhance each other has been known by photographers for over a century” and that the components recited in the claim “are themselves generic and conventional.”

Applying the Supreme Court’s two-step Alice v. CLS Bank test for determining patent eligible subject matter, the Federal Circuit determined at step one that the claim was “directed to the abstract idea of taking two pictures . . . and using one picture to enhance the other in some way.” At step two, the Court held that the claim failed to otherwise define a patent eligible invention because the digital camera “is recited at a high level of generality and merely invokes well-understood, routine, conventional components to apply the abstract idea of [using one picture to enhance the other in some way].” The Court rejected Yu’s attempts to use portions of the patent’s specification to support eligibility, explaining that the eligibility analysis is limited to the literal recitations of the asserted claims.

Then, along came Judge Pauline Newman. With a chainsaw.

In dissent, Judge Newman argued that the majority was improperly enlarging the § 101 analysis to include other “substantive requirements of patentability.” Judge Newman emphasized (twice) that the claim literally recited an electromechanical camera, not an abstract idea. In her view, the camera recited in the claim met the requirements of § 101 as a new and useful machine, without regard to whether the claimed camera also met the novelty requirements of §§ 102 and 103. Referring to the Supreme Court’s 1981 holding in Diamond v. Diehr, Judge Newman wrote that “[i]n contravention of [Diehr‘s] explicit distinction between Section 101 and Section 102, the majority now holds that the [claimed] camera is an abstract idea because the camera’s components were well-known and conventional and perform only their basic functions.” Judge Newman further proclaimed that “the principle that the majority today invokes was long ago discarded.”

Judge Newman also admonished the majority for the destabilizing effects that similar holdings have already had on US patent policy. She noted that “[i]n the current state of Section 101 jurisprudence, inconsistency and unpredictability of adjudication have destabilized technologic development in important fields of commerce,” and that “[t]he fresh uncertainties engendered by the majority’s revision of Section 101 are contrary to the statute and [...]

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Federal Circuit Lacks Appellate Jurisdiction over Standalone Walker Process Claims

The US Court of Appeals for the Federal Circuit ordered the transfer of a case asserting standalone Walker Process antitrust claims involving an unenforceable patent to the regional circuit, in this case the US Court of Appeals for the Fifth Circuit. Chandler v. Phoenix Services LLC, Case No. 20-1848 (Fed Cir. June 10, 2021) (Hughes, J.) The case originated in the US District Court for the Northern District of Texas, over which the Fifth Circuit has appellate jurisdiction. The decision to transfer was based on a subject matter jurisdiction analysis for Walker Process claims. The Federal Circuit reiterated that its precedent does not mandate exclusive Federal Circuit jurisdiction over all Walker Process cases.

In 2006, Phoenix Services and Mark Fisher (collectively, Phoenix) acquired a company called Heat On-The-Fly and its patent to protect a purported proprietary fracking process. Heat-On-The-Fly, and later Phoenix, sought to enforce the patent against numerous parties. During the patent application process, however, Heat On-The-Fly had failed to disclose numerous public uses of the fracking process prior to the application filing. In 2018, in an unrelated case, Energy Heating, LLC v. Heat On-The-Fly, the Federal Circuit, held that “failure to disclose prior uses of the fracking process rendered the . . . patent unenforceable due to inequitable conduct.” The plaintiffs in the case at hand, Ronald Chandler, Chandler MFG., Newco Enterprises and Supertherm Heating Services (collectively, Chandler), alleged that Phoenix’s continued enforcement of the patent violated Walker Process pursuant to § 2 of the Sherman Act.

Walker Process monopolization claims originate from a 1965 Supreme Court decision that recognized an antitrust cause of action under the Sherman and Clayton Acts when a party fraudulently obtains a patent for the purpose of attempted monopolization. Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp. To succeed on a Walker Process claim, a plaintiff must satisfy two elements:

  • The plaintiff must show that the defendant obtained the patent through knowing and willful fraud on the US Patent & Trademark Office and enforced that patent with knowledge of its fraudulent procurement.
  • The plaintiff must be able to satisfy all other elements for a Sherman Act monopolization claim.

Pursuant to 28 U.S.C. § 1295(a)(1), the Federal Circuit retains jurisdiction over any civil case arising under any act of Congress relating to patents. In this instance, the Federal Circuit stated that Walker Process antitrust claims may relate to patents “in the colloquial use of the term,” but under 1988 Supreme Court precedent, Christianson v. Colt Indus., the Federal Circuit’s jurisdiction only extends to cases where the cause of action is created under federal patent law, or where the plaintiff’s right to relief “necessarily depends on resolution of a substantial question of federal patent law.”

Here, the Federal Circuit relied on its own 2018 precedent where it analyzed subject matter jurisdiction for Walker Process claims. Xitronix Corp v. KLA-Tencor Corp. (Xitronix I). Xitronix I involved alleged fraud by the defendants to obtain a patent. The Court acknowledged [...]

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