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2019 IP Law Year in Review: Patents

by Paul Devinsky | Feb 20, 2020 | Patents

Executive Summary

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.

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Are You Ready for the UPC? Act Now to Prepare for its Opening on June 1

by Dr. Henrik Holzapfel, Charles Larsen and Diana Pisani | Mar 1, 2023 | EU Update, Patents

On February 17, 2023, Germany ratified the Agreement on the Unified Patent Court (UPC) and triggered the UPC’s entry into force on June 1, 2023. The UPC will revolutionize patent enforcement across Europe and impact companies around the world that hold European patents or conduct business in Europe.

Owners of existing European patents or pending applications can “opt out” of the UPC’s jurisdiction for an initial transitional period of at least seven years. Companies must act now if they want to opt out before the court officially opens.

Understanding the UPC

The UPC will have exclusive jurisdiction over patent infringement and invalidity actions in its member states for patents granted by the European Patent Office (EPO), including existing European patents and new European patents with unitary effect (unitary patents). There are currently 17 EU Member States participating in the UPC (Germany, France, Belgium, Bulgaria, Denmark, Estonia, Finland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Austria, Portugal, Sweden and Slovenia). Additional EU Member States may join the UPC in the future.

The UPC will have local and regional divisions in its member states, with a central division in Paris and Munich and a Court of Appeal in Luxembourg.

As a streamlined patent enforcement venue, the UPC will provide several new benefits to patent owners, including faster decisions with limited discovery and lower cost, and the possibility of injunctive relief throughout the member states. At the same time, the UPC will allow revocation of a patent in a single action with effect for all member states, alongside the possibility to oppose a European patent before the EPO.

European Freedom to Operate

Because of the UPC’s structure and incentives, patent litigation will likely increase in Europe, which will heighten the intellectual property (IP) infringement risk for companies doing business in Europe. If a company has not already done so, it should promptly review its competitors’ European patent estates to assess the potential risks and develop a defense strategy to avoid a surprise attack from a competitor after June 1, 2023.

European Enforcement Actions

Although the UPC is new and untried, it has the incentive to provide strong relief for those who trust it. If a company needs to bring a patent infringement action against a competitor and would like to do so in a fast, cost-effective manner, with the possibility of significant remedies, the UPC should be considered as a potential venue. The company should review its portfolio and infringement evidence to assess its opportunities.

Deciding Whether to Opt Out

The right to opt out European patent filings from the UPC’s jurisdiction will be available for an initial transitional period of seven years, which may extend to 14 years. It will be possible to reverse an opt-out, but not if the patent has been enforced or attacked in national court.

McDermott’s UPC Resource Center explores the various advantages and disadvantages of both staying in and opting out of the UPC.

It May Be a Hairy Situation, but Detailed Declaration Sufficient Evidence of Prior Use

by Karen Gover | May 9, 2024 | Trademarks

The US Court of Appeals for the Federal Circuit affirmed the Patent Trial & Appeal Board’s refusal to register a mark, finding that an unchallenged, detailed declaration by the opposing company’s director sufficed as substantial evidence of prior use. Jalmar Araujo v. Framboise Holdings, Inc., Case No. 23-1142 (Fed. Cir. Apr. 30, 2024) (Lourie, Linn, Stoll, JJ.)

On December 3, 2019, Jalmar Araujo filed an application to register #TODECACHO as a standard character mark for hair combs. Framboise Holdings filed an opposition on the grounds that Araujo’s mark would likely cause confusion with its #TODECACHO design mark (below).

Framboise Holdings alleged that it owned the mark based on its prior use of it in connection with various hair products since March 24, 2017. Framboise also filed its own application for registration of its design mark on April 14, 2020, claiming the same date of first use.

On October 18, 2021, the final day on which Framboise could submit its case in chief to the Board, it moved for a seven-day extension. Four days after filing the motion, it served Araujo with the declaration of Framboise Director Adrian Extrakt. Although it was the testimony of a single interested party, the Board found Extrakt’s declaration alone to be convincing evidence of prior use. His declaration provided a list of products and dates of first use, as well as examples of the mark displayed on products in stores. After the Board sustained the opposition, Araujo appealed.

Araujo argued that the Board abused its discretion in granting Framboise an extension of the trial period, and that the Board’s finding that Framboise established prior use of the #TODECACHO design mark was not supported by substantial evidence. The Federal Circuit disagreed.

The Federal Circuit concluded that the Board had not abused its discretion in granting Framboise an extension because it identified and applied the correct good cause standard and “reasonably found good cause to grant the extension.” The Court also found that the Board was correct in finding that Extrakt’s declaration alone was sufficient evidence to support a priority date of March 24, 2017, based on evidence of the design mark’s use in connection with various hair products. The Court noted that the declaration did not simply consist of “naked general assertions of prior use,” but contained evidence. Araujo neither deposed Extrakt nor offered any evidence to dispute his claims. Hence, Extrakt’s declaration sufficed to meet the applicable preponderance of the evidence standard.

Practice Note: Oral or written testimony, even when offered by an interested party, can establish priority of use in a trademark proceeding if it is sufficiently detailed, is supported by exhibits and is convincing.

Clean Up on Aisle PTAB: Clarification of Discretionary Denial Practice

by Peter Brunovskis, PhD | May 2, 2024 | Patents

The US Patent & Trademark Office (PTO) issued a Notice of Proposed Rulemaking (NPRM) for inter partes review (IPR) and post-grant review (PGR) proceedings before the Patent Trial & Appeal Board, seeking to codify existing precedent and guidance regarding the Board’s discretionary considerations in denying IPR or PGR petitions. 89 Fed. Reg. 28693 (Apr. 19, 2024).

The NPRM follows a 2020 request for comments and an April 2023 Advance Notice of Proposed Rulemaking (ANPR) that the PTO had hoped to finalize in terms of rulemaking by fall 2023. However, proposals in the ANPR hit a snag following criticism from Congress and more than 14,500 comments from stakeholders and the public, including charges that the PTO Director was overstepping her authority.

The newly proposed rules address:

Briefing on motions for discretionary denial
Factors for discretionary denial
Termination and settlement agreements

Briefing on Motions for Discretionary Denial

A significant aspect of the proposal provides for a separate briefing schedule between a patent owner’s preliminary response (POPR) and a request for discretionary denial, which must be filed no later than one month prior to the deadline for the POPR for briefing on its merits. Under the proposal, the discretionary denial arguments would be excluded from the preliminary response unless otherwise authorized by the Board and are intended to avoid encroaching on the wordcount limits for briefing on the merits. Under the proposed briefing process, there would be a 10-page limit for a patent owner’s request for discretionary denial and for the petitioner opposition, and a five-page limit for the patent owner’s sur-reply.

Factors for Discretionary Denial

The proposed rules address denial of institution for “parallel petitions” or “serial petitions” to provide a framework for considering whether previously presented art or arguments provide grounds for denial. The proposed rules also address treatment of joinder petitions, particularly in relation to already instituted petitions. Parallel petitions are defined in the proposed rule as two or more petitions by the same petitioner challenging the same patent that are filed on or before the filing of a POPR to any of the petitions or on or before the due date for filing a POPR to the first petition. Serial petitions are defined as challenged claims of the same patent overlapping with those in a previously filed petition for IPR, PGR or covered business method patent review.

According to the proposed rules, a parallel petition would not be instituted without a good cause showing of why more than one petition is necessary. Factors for a good cause showing include:

A petitioner’s ranking of desired petitions for consideration
An explanation of differences and materiality between the petitions
The number of challenged patent claims, including those asserted by the patent owner in district court litigation
A priority date dispute
Alternative claim constructions requiring different prior art references on mutually exclusive grounds
Knowledge of asserted claims at the time of filing a petition
Complexity of the technology

Similar considerations would also apply to joinder petitions.

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New Guidance Addresses Use of AI Systems, Tools in Practice Before the PTO

by Peter Brunovskis, PhD | Apr 18, 2024 | Technology

The US Patent & Trademark Office (PTO) issued new guidance on the use of artificial intelligence (AI) tools in practice before the PTO. The new guidance is designed to promote responsible use of AI tools and provide suggestions for protecting practitioners and clients from misuse or harm resulting from their use. This guidance comes on the heels of a recent memorandum to both the trademark and patent trial and appeal boards concerning the applicability of existing regulations addressing potential misuse of AI and recent guidance addressing the use of AI in the context of inventorship.

Patent practitioners are increasingly using AI-based systems and tools to research prior art, automate the patent application review process, assist with claim charting, document reviews and gain insight into examiner behavior. The PTO’s support for AI use is reflected in patent examiners’ utilization of several different AI-enabled tools for conducting prior art searches. However, because AI tools are not perfect, patent practitioners are potentially vulnerable to misuse or misconduct. Therefore, the PTO’s new guidance discusses the legal and ethical implications of AI use in the patent system and provides guidelines for mitigating the risks presented by AI tools.

The guidance discusses the PTO’s existing rules and policies for consideration when applying AI tools, including duty of candor, signature requirement and corresponding certifications, confidentiality of information, foreign filing licenses and export regulations, electronic systems’ policies and duties owed to clients. The guidance also discusses the applicability of these rules and policies with respect to the use of AI tools in the context of document drafting, submissions, and correspondence with the PTO; filing documents with the PTO; accessing PTO IT systems; confidentiality and national security; and fraud and intentional misconduct.

AI tools have been developed for the intellectual property industry to facilitate drafting technical specifications, generating responses to PTO office actions, writing and responding to briefs, and drafting patent claims. While the use of these tools is not prohibited, nor is there any obligation to disclose their use unless specifically requested, the guidance emphasizes the need for patent practitioners to carefully review any AI outputs generated before signing off on any documents or statements made to the PTO. For example, when using AI tools, practitioners should make a reasonable inquiry to confirm that all facts presented have evidentiary support, that all citations to case law and other references are accurately presented, and that all arguments are legally warranted. Any errors or omissions generated by AI in the document must be corrected. Likewise, trademark and Board submissions generated or assisted by AI must be reviewed to ensure that all facts and statements are accurate and have evidentiary support.

While AI tools can be used to assist or automate the preparation and filing of documents with the PTO, care must be taken to ensure that no PTO rules or policies are violated and that documents are reviewed and signed by a person, not an AI tool or non-natural person. AI [...]

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ITU Applicants Beware: Federal Courts Have Jurisdiction Over Pending Trademark Applications

by Cecilia Choy, Ph.D. | Apr 11, 2024 | Trademarks

The US Court of Appeals for the Ninth Circuit affirmed in part a district court’s ruling in a trademark dispute, upholding its decision to invalidate trademark applications. The Ninth Circuit held that district courts have jurisdiction to alter or cancel trademark applications in an action properly brought under 15 U.S.C. § 1119, and that in the context of challenges to intent-to-use (ITU) applications, proof of a lack of bona fide intent can invalidate. BBK Tobacco & Foods LLP v. Central Coast Agriculture, Inc., Case Nos. 22-16190; -16281 (9th Cir. Apr. 1, 2024) (Hurwitz, Desai, JJ.) (Bumatay, J., dissenting).

BBK sells and distributes smoking-related products with BBK’s “RAW” branding. Central Coast Agriculture (CCA) sells cannabis products using “Raw Garden” branding. BBK filed a complaint against CCA including claims of trademark infringement and a petition to void several ITU trademark applications owned by CCA for lack of a bona fide intent to use the relevant trademarks in commerce. Instead of disputing the merits of BBK’s claims, CCA argued that the district court had no jurisdiction to adjudicate this issue. The district court granted summary judgment in favor of BBK on its claims to invalidate the trademark applications. CCA appealed.

The Ninth Circuit affirmed the summary judgment in favor of BBK on its claims to invalidate CCA’s trademark applications. The Court explained that “when an action involves a claim of infringement on a registered trademark, a district court also has jurisdiction to consider challenges to the trademark application of a party to the action.” The Lanham Act, at 15 U.S.C. § 1119, provides that “[i]n any action involving a registered mark the court may determine the right to registration, order the cancelation of registrations, . . . restore canceled registrations, and otherwise rectify the register with respect to the registrations of any party to the action.” The Lanham Act, at § 1051, defines an application for use of trademark as a “request for registration of a trademark on the principal register.” Because a challenge to an application affects the applicant’s right to the registration, the Court reasoned that § 1119 authorizes a district court to resolve disputes over trademark applications.

The Ninth Circuit held that a “lack of bona fide intent to use a mark in commerce is a valid basis to challenge a trademark application,” aligning with decisions in sister circuits and the Trademark Trial & Appeal Board. An applicant can seek to register a mark if the mark is already being used in commerce or if the applicant has a bona fide intention, under circumstances showing the good faith of such person, to use a trademark in commerce. While applicants filing under the ITU provisions may begin the registration process based on a bona fide intent to later use the mark in commerce, the Lanham Act requires such applicants to either subsequently file a verified statement of actual use of the mark or convert their application into a use application. As a result, the Ninth Circuit affirmed the district court’s ruling [...]

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Read the Fine Print: Covenant Not to Sue “At Any Time” Terminated Upon License Expiration

by Karen Gover | Mar 14, 2024 | Patents

Illustrating the importance of carefully drafting and reviewing language in a covenant not to sue, the US Court of Appeals for the Federal Circuit found that the plain language of a covenant permitted a licensor to sue a licensee for breach of contract only after termination of the contract. AlexSam, Inc. v. MasterCard Int’l., Inc., Case No. 22-2046 (Fed. Cir. Feb. 28, 2024) (Lourie, Chen, Stoll, JJ.) (non-precedential).

In 2005, AlexSam and MasterCard entered into a patent licensing agreement that guaranteed AlexSam ongoing royalties under two of its patents that involved pre-paid cards used with point-of-sale devices. The agreement included a covenant not to sue, in which AlexSam agreed to “not at any time initiate, assert, or bring any claim . . . against MasterCard . . . relating to Licensed Transactions arising or occurring before or during the term of this Agreement.” The agreement also included a Term and Termination provision, which recited that the agreement would remain in full force for the life of the licensed patents unless a party breached, at which time, if the party failed to cure, the non-breaching party would have the right to terminate the agreement. The patents expired on July 10, 2017.

In May 2015, two years before the licensed patents expired, AlexSam sued MasterCard for breach of contract in the district court, claiming that MasterCard had not properly paid the royalties per transaction under the agreement. Separately, in March 2017, MasterCard filed a petition for Covered Business Method (CBM) Review, asking the Patent Trial & Appeal Board to review the patentability of the licensed patents. AlexSam argued that MasterCard lacked standing under 37 C.F.R. § 42.302(a), which required that MasterCard first be sued or charged with infringement of the patent on which it sought review. The Board determined that MasterCard lacked standing to bring the review. The Board also noted that it “need not, and do[es] not, address the question of whether [AlexSam’s] breach of contract claim in the New York Action itself violates the covenant not to sue.”

MasterCard moved for and was granted summary judgment in the district court on the grounds that AlexSam’s arguments before the Board regarding the covenant not to sue judicially estopped it from asserting its breach of contract claims. AlexSam filed its first appeal, and the Federal Circuit reversed the district court’s ruling, finding that it had abused its discretion in crediting AlexSam with a position it never actually took before the Board. The Court remanded the case for the district court to determine whether the covenant not to sue prohibited a claim for royalties. MasterCard again moved for summary judgment. The district court granted the motion, finding that the covenant not to sue barred AlexSam’s claim for unpaid royalties. AlexSam again appealed.

In this second appeal, AlexSam argued that the covenant not to sue in the 2005 License Agreement did not bar suit for breach of nonpayment of royalties since AlexSam would then have no remedy against a failure by MasterCard to pay [...]

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PTO Seeks Permanent Rules Regarding Motion to Amend Practice Before Board

by Peter Brunovskis, PhD | Mar 14, 2024 | America Invents Act

On March 4, 2024, the US Patent & Trademark Office published a Notice of Proposed Rulemaking seeking to revise its Motion to Amend (MTA) pilot program practice in connection with certain America Invents Act (AIA) proceedings. 89 Fed. Reg. 15531 (Mar. 4, 2024). The PTO set a May 3, 2024, deadline for stakeholders to submit written comments in response to the proposed rules.

The MTA pilot program has evolved since its inception nearly five years ago and has been extended to September 16, 2024. The proposal seeks to make permanent certain provisions of the pilot program in response to the PTO’s May 2023 request for comments. The rules would apply to the existing consolidated set of rules relating to trial practice for inter partes review (IPR), post-grant review (PGR) and derivation proceedings in trial proceedings under the AIA.

Under the existing MTA pilot program, patent claims challenged during an AIA trial proceeding provide the patent owner with two options when proposing substitute claims in response to a petitioner’s opposition. The first option gives the patent owner the ability to file an MTA so that the Patent Trial & Appeal Board can issue preliminary non-binding guidance regarding the likelihood of an invalidation decision. The PTO proposes to revise its rules of practice to provide for the issuance of preliminary guidance in response to an MTA and to provide a patent owner with the option of filing one additional revised MTA.

The Board’s preliminary guidance typically would come in the form of a short paper issued after a petitioner files its opposition to the MTA and typically would provide the Board’s preliminary views on the MTA, specifically whether the MTA meets the statutory and regulatory requirements for an MTA, whether the parties have met their respective burdens of proof and whether the substitute claims are likely to be found unpatentable. However, the preliminary guidance would not be binding on the Board.

The proposed provisions would also provide the Board with greater authority to raise new grounds of unpatentability based on a preponderance of evidence standard. The new grounds of unpatentability could rely on the entirety of the record, including all prior art of record. The guidance would be accompanied by citations to the evidence in support of these new grounds. Further, where no opposition is filed or other circumstances constitute a lack of opposition, the prior art of record may further include references obtained from the PTO (i.e., examiners) in response to a request from the Board.

The proposed provisions would allow a patent owner to file a revised MTA after receiving a petitioner’s opposition to the original MTA or after receiving the Board’s preliminary guidance. Under the current pilot program, a revised MTA must be preauthorized for “good cause.” Under the revised provisions, the patent owner would be able to file a revised MTA without preauthorization. A revised MTA would replace the original MTA and must include new proposed substitute claims in place of the originally proposed claims. [...]

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I Hear Ya – No Intent to Deceive, No Inequitable Conduct

by Kyle Sorenson, PhD | Mar 7, 2024 | Patents

The US Court of Appeals for the Federal Circuit affirmed a district court’s finding that the asserted patents were not unenforceable for inequitable conduct, determining that statements made by counsel to the US Patent & Trademark Office (PTO) to revive an abandoned application were not shown to have been made with deceptive intent. Freshub, Inc. v. Amazon.com, Inc., Case No. 2022-1391 (Fed. Cir. Feb. 26, 2024) (Reyna, Taranto, Chen, JJ.)

Freshub sued Amazon for infringement of patents directed to voice processing technology. Amazon denied infringement and defended on the basis that the patents should be declared unenforceable based on inequitable conduct by Freshub’s parent company, Ikan Holdings, during prosecution of the application at the PTO. Amazon alleged that Ikan improperly revived an earlier-abandoned parent application from which the asserted patents descend.

The predicate facts are as follows: In June 2011, the PTO issued a final office action rejecting the claims of the parent application. Ikan failed to respond to the office action, rendering the application abandoned in January 2012. In January 2017, Ikan petitioned the PTO to revive the application. In support of its revival petition, Ikan’s counsel asserted that “[t]he entire [five-year] delay in filing the required reply . . . was unintentional.” “[R]elying on petitioner’s duty of candor and good faith,” the PTO granted the petition, eventually resulting in issuance of the three patents-in-suit.

At trial, a jury found that Amazon did not infringe the asserted patents. The district court subsequently conducted a bench trial on inequitable conduct and found that Amazon had failed to prove inequitable conduct by clear and convincing evidence. Freshub appealed, arguing that it was entitled to judgment as a matter of law that Amazon infringed. Amazon cross-appealed, seeking reversal of the district court’s inequitable conduct ruling.

The Federal Circuit affirmed the district court’s determination of failure to prove inequitable conduct, finding that Amazon had not shown by clear and convincing evidence that Ikan misrepresented or omitted material information with the specific intent to deceive the PTO. The Court focused its analysis on deceptive intent, finding that the district court did not commit clear error in rejecting Amazon’s inequitable conduct defense.

The Federal Circuit noted that the record was minimal due to the passage of time and the limited testimonial and documentary evidence available, as well as the many unchallenged claims of attorney-client privilege. Nevertheless, both parties presented evidence concerning Ikan’s intent between 2012 and 2017.

To support its position, Freshub relied on the 2017 statement by Ikan’s counsel asserting that Ikan’s delay in filing its reply to the PTO’s final office action was unintentional. The Federal Circuit found this evidence probative, even without the presentation of additional evidence to further explain why the period of non-response was so long. On the other hand, Amazon presented specific evidence that it contended demonstrated deceptive intent. For example:

The 2017 statement to revive the parent application was made by the same counsel that prosecuted the application at the time of its 2012 abandonment.
Ikan’s counsel [...]

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Keep Calm and Party On: New Issue Prohibition Doesn’t Apply to Motions to Amend

by Amol Parikh | Jan 25, 2024 | Patents

The US Court of Appeals for the Federal Circuit affirmed a Patent Trial & Appeal Board obviousness determination, explaining that inter partes review (IPR) statutory provisions that prohibit an otherwise time-barred party from introducing new issues into the proceeding do not apply to motions to amend. CyWee Group Ltd. v. ZTE (USA), Inc. et al., Case No. 21-1855 (Fed. Cir. Jan. 18, 2024) (Prost, Hughes, Stoll JJ.)

CyWee owns a patent directed to a “three-dimensional (3D) pointing device capable of accurately outputting a deviation including yaw, pitch and roll angles in a 3D reference frame and preferably in an absolute manner.” ZTE filed a petition for IPR of the patent asserting that certain claims were unpatentable. The Board instituted the IPR. LG later filed an IPR petition challenging the patent and moved to join ZTE’s ongoing IPR, stating that it would “act as a passive ‘understudy’ and [would] not assume an active role unless [ZTE] ceases to participate in the instituted IPR.”

While LG’s motion was pending, CyWee moved to amend its patent claims, contingent on cancellation of the original claims. ZTE opposed the motion to amend. The Board gave preliminary guidance that the proposed claims lacked written description support and introduced new matter, and also that one of the proposed claims was invalid over the asserted prior art.

The Board granted LG’s motion to join ZTE’s IPR proceeding but placed restrictions on LG’s participation that required LG to consolidate filings with ZTE, rely on ZTE to take and defend depositions, refrain from requesting or reserving additional deposition or oral hearing time, and agree to other procedural concessions to minimize delay to the IPR proceeding.

After LG’s joinder, CyWee filed a revised motion to amend. ZTE indicated that it did not oppose the motion. LG, arguing that ZTE was no longer actively participating in the IPR, moved for leave to oppose CyWee’s motion to amend. Ultimately, the Board permitted LG to present argument and evidence independent from ZTE. LG filed an opposition arguing that CyWee’s proposed revised claims were obvious over Withanawasam, Bachmann and Bachmann2. Notably, ZTE had not cited Withanawasam in its opposition to CyWee’s initial motion to amend.

After the Board issued its final decision finding that the proposed revised claims were obvious over Withanawasam, Bachmann and Bachmann2, CyWee appealed.

CyWee argued that the Board erred by allowing LG to oppose CyWee’s motion to amend in a manner that violated the terms of LG’s joinder and by allowing LG to raise Withanawasam in opposition to the motion to amend. The Federal Circuit rejected both arguments. The Court explained that the Board concluded that although ZTE still participated in the IPR, the proceeding “no longer appear[ed] to be meaningfully adversarial” as to the revised motion to amend. The Court found no error in the Board’s conclusion that ZTE was no longer an active participant in the IPR proceeding, and thus there was no violation of the joinder terms.

The Federal Circuit also concluded that the Board did not err [...]

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