Welcome to the first edition of Transformative’s Patent News Funnel! Here, the team at Transformative distills the latest developments in the world of patent law, as reported by top bloggers, experts, and law firms. Our aim is to publish an edition of the Funnel about every 2-3 weeks. We here at Transformative hope this informal report will provide an opportunity for busy executives and innovators engaged with intellectual property, but who have little time to sort through the rapidly changing world of patent law, to catch up on the most important stories to them. Sign up with us to receive this and similar reports in your email in-box or check back regularly.
Our Summary is divided into three parts:
(1) substantial stuff and noteworthy news (our picks for the top developments – if you can only read a few things, read these stories);
(2) interesting insights (new observations on the world of IP); and
(3) the fine print (stories on topics that are getting pretty deep in the legal weeds, which we expect are mostly of interest to legal professionals).
The top story for April in our view goes to the Federal Circuit’s (CAFC’s) recent Vanda decision. It’s a 2-1 decision, but the majority was able to salvage a method of treatment claim from being held invalid under 35 USC 101 (“101”) as that statute has been interpreted since the Supreme Court’s earthshattering 2012 decision in Mayo.
If you are not familiar with Mayo, it held that claims to a method of treatment based on the discovery of a natural correlation of a marker and a condition in patients was not patentable under 101. The courts then jumped on the bandwagon, going so far as invalidating claims to what were undoubtedly groundbreaking inventions in 2015’s Sequenom decision. Law firm Fish & Richardson provides an excellent overview of 101 as applied by and after Mayo here https://www.fr.com/wp-content/uploads/2017/09/Life-Science-Patent-Eligibility-101.pdf.
Per leading IP blogger Dennis Crouch, the claims in Vanda were “roughly parallel to those found unpatentable in Mayo”. As in Mayo, the claims here were directed to (1) determining a physiological state in a patient and (2) administering an amount of a compound to the patient based on that information. The dissent picked up on this fact, but the majority of judges relied on differences in the preamble to save the claim. In Mayo the preamble was directed to “a method of optimizing therapeutic efficacy” while in Vanda the claim was directed to “a method for treating a patient.” The majority said that this was enough to make the claim meaningfully different; noting that the claims in Mayo were to a diagnostic method, not a therapeutic one. Professor Crouch does an excellent job explaining the details and provides additional insights here https://patentlyo.com/patent/2018/04/eligibility-preamble-federal.html. In the current 101 environment smart claim drafting is important, and it seems that sometimes even the preamble can make a difference.
The recent Droplets case provides an excellent demonstration of just how hyper-technical patent law can be. Priority claims in patent law are important. Priority refers to the ability of a patent application to claim that it is directly related to an earlier application and, thus, benefit from the “parent” applications earlier filing date. Priority claims can create the definitive lines between what is and what is not prior art (to learn more about priority art see our earlier post http://transformative.legal/getting-the-basics-what-is-prior-art-part-1/)
Here, priority was the deciding factor. If the patent owner could claim an earlier priority date, it won. If not, it lost. The issue was whether or not it did. The priority claim in question was to a specific provisional application. The patent practitioner mentioned the provisional in the patent’s priority claim, along with other applications that had also claimed priority to that provisional (and even incorporated them by reference!). However, the unfortunate practitioner (reasonably?) failed to specifically write in the full “chain” of all the patent application numbers between the application that became the patent and the provisional application. The result? Per the court, not a valid priority claim and not a valid patent. Again, Professor Crouch describes the details and related law here. https://patentlyo.com/patent/2018/04/priority-specifically-include.html. As often happens in this area of law, there is a poorly written statute to partially blame. Other implications? (1) In patent prosecution formalities it’s hard to go too overboard on details; (2) all doubts are against the patent owner; and (3) all of this leads to why patent practice is complex and expensive.
A federal jury just ordered Apple to pay VirnetX, a non-practicing entity (what the anti-patent faction would call a “patent troll”) about $500 million for infringing patents relating to certain aspects of FaceTime, iMessage, and VPN on demand allegedly covered by four patents. Will Apple ultimately pay up? It remains to be seen. The dispute has apparently been in the courts for 8 years! It would seem an appeal is likely, but the case still goes to show the kind of monetary risk that can come with patent infringement in connection with a successful product. More here: https://www.engadget.com/2018/04/11/apple-500-million-imessage-patent-suit/
In the recent DSS Technology Management case the CAFC reversed the Patent Trial and Appeal Board (PTAB) decision which had invalidated software patents in an IPR brought by tech giant Apple. The CAFC said the PTAB failed to provide sufficient reason for its invalidation decision, but, more helpfully to patent owners, per IP Watchdog, also said that the PTAB “misapplied common sense” (by using it to provide a missing claim element). Specifically, rather than citing a piece of prior art that provided a teaching of a disputed element, the PTAB said that a person of “ordinary creativity” would have come up with the element. Not good enough said the CAFC, at least for the kind of element at issue. In an interesting twist, IPWatchdog also notes that the APJ in this case is a former Apple attorney and notes that the PTAB does not have rules of conduct that cover recusal in the case of potential conflict of interest in such situations. The two facts of the apparently misguided PTAB decision and the history of the APJ may be unrelated, the author admits, but the article raises some interesting questions, and maybe signals some good news from the CAFC. In our view, anything positive in the software space is still cause for celebration for patent owners. Quite a bit more on the case is reported here http://www.ipwatchdog.com/2018/04/11/federal-circuit-reverses-ptabs-invalidation-wireless-network-patent-apj-clements/id=95500/
On the other hand, the CAFC also recently upheld a 101 ruling on a motion to dismiss, easily invalidating patents directed to App management. The four patents at issue here apparently “covered electronic means for improving user control over subscription entertainment content.” The patent owner sued a manufacturer of consumer electronic devices for including user interfaces that allow users to select services “available to but not associated with the device” by “incorporating hardware, software and firmware into its TVs enabling them to run and activate applications such as Netflix.” The magistrate judge quickly found the claims invalid, finding terms such as “computer-readable medium,” “logic,” “a processor” and “transceiver,” to be “not by themselves inventive.” The CAFC agreed, finding the claims to broadly read on subject matter beyond even the context of a computer and holding that the “claims merely recite generic computer elements for their basic functions and thus do not transform the claimed abstract idea into eligible subject matter” and lacked any combination of such elements to confer patent eligibility/validity. IPwatchdog provides a detailed discussion of the case here http://www.ipwatchdog.com/2018/04/20/cafc-upholds-section-101-invalidity-finding-on-rule-12b6-motion-nixing-patents-covering-app-management-on-devices-in-common-network/id=95855/. Professor Dennis Crouch also reports more negative software patent owner news, this time in connection with a recent case involving a patent owner that tried the interesting approach of admitting that the claims were abstract when attacked under 101. The result? According to Professor Crouch, the court agreed and invalidated the patent claims at issue. https://patentlyo.com/patent/2018/04/admitting-abstract-idea.html.
The recent news from the USPTO on 101 seems to be all trending pro-patent owner. First, the new USPTO Director, Andrei Iancu, publicly stated in April that it’s time to change direction in enforcement of US patents, indicating he is in favor of seeing the pendulum swing back to patent strength. IPWatchdog provides excellent coverage of this development here http://www.ipwatchdog.com/2018/04/11/iancu-we-will-not-continue-down-the-same-path/id=95778/. Director Iancu took his campaign a step further, telling the US Senate that 101 is “an issue we must all address.” http://www.ipwatchdog.com/2018/04/18/director-iancu-tells-senate-101-issue-we-must-all-address/id=96012/. And, either in happy coincidence or a well-timed case of “walking the talk” the USPTO issued new 101 guidance limiting examiner ability to merely conclude elements are well-known, conventional, or routine. More from IPWatchdog on that point here http://www.ipwatchdog.com/2018/04/19/uspto-issues-101-guidance/id=96084/
In another promising recent development the PTAB has actually granted two motions to amend claims in IPR proceedings! While the AIA allows for such amendments they have generally been about as rare as snow here in Arizona. Two in a month may be a record. More on this story is covered at PatentDocs. http://www.patentdocs.org/2018/04/ptab-grants-two-motions-to-amend-in-march-aberration-or-sign-of-things-to-come.html
Some potentially disturbing news from law firm Cole Schotz: A “little-publicized part of the new tax law … may negatively affect the value of some patents and other intellectual property … by changing the tax treatment of income from sales of ‘patents, models and secret formulas or processes’ from capital gains to ordinary income.” In a strange twist, the change appears to impact innovators, rather than paid owners. More is reported here: https://www.jdsupra.com/legalnews/the-new-tax-law-may-make-your-patents-47561/
Obviously big news in late March was the announcement that President Trump was imposing $60 billion in tariffs on China, in part over intellectual property “theft.” Some facts about the decision are reported here http://www.dw.com/en/us-set-to-impose-50-billion-worth-of-tariffs-on-china-over-intellectual-property/a-43085617 and https://www.ip-watch.org/2018/04/13/chinas-theft-foreign-technology-prompts-unlawful-us-response/ (subscription required). This doesn’t seem like a big surprise; China is a rapidly changing landscape with respect to intellectual property protection, but, even with the steps backwards in the US for patent owners, remains an uncertain environment. That said, things are evolving, and the country is reportedly looking at developing stronger systems for balancing generic and innovative drugs as reported at JD Supra (by law firm Ropes & Gray): https://www.jdsupra.com/legalnews/china-announces-new-initiatives-to-10387/.
The AIA, which gave us IPRs and much, much more also created the “derivation proceeding”, where issues of stolen inventorship can be addressed and resolved. It reportedly took until now, however, before one of these proceedings resulted in a PTAB trial being instituted, reflecting that derivation is going to be significantly rarer than its pre-AIA predecessor, the interference proceeding (only 14 proceedings have been brought to date; and it appears to us from earlier reports that only about half of those brought by petitioners will be allowed to move forward when the applications are ready). A derivation petitioner must sufficiently prove (1) prior conception of the challenged claim, and (2) communication of the conception to the respondent, and the communication must be corroborated. The remedy is a correction of inventorship, which could potentially be a huge turn of events, as inventorship determines ownership in the US. More on this first-of-its-kind case is covered by the experts at PatentDocs – http://www.patentdocs.org/2018/04/ptab-institutes-its-first-derivation-trial-andersen-corp-v-ged-integrated-solutions-inc.html
Patent filings are down… why? The why is not clear, but it is clear that it is complex. It may be a pendulum effect, an effect of globalization, or views on the value of IP at the moment. Read more here http://www.ipwatchdog.com/2018/04/11/fewer-patent-applications-filed/id=94436/.
It turns out there is also a patent “gender gap”. Per Above the Law, “not only do female inventors make up just a fraction of the inventing population, but they are less likely to be granted a patent when they apply. “Female inventors’ patent applications were more likely to be rejected, have their claims narrowed in scope, granted patents were maintained less often, and overall received fewer citations.” Far more, including a tribute to some excellent women inventors is provided here: https://abovethelaw.com/2018/04/the-patent-gender-gap/?rf=1. As many of us here are parents of inventive girls ourselves, we applaud the effort to put a spot light on the role of women in intellectual property and in STEM more broadly. Such spot lights remind us of the need for our society to continue, and to expand, all efforts to break down walls in order to allow all great minds to contribute to making our world a better place.
Reflecting the changing world, and in anticipation of coming US Patent 10,000,000, the USPTO is unveiling a new cover for issued patents. See more about this passion project here: New Patent Design Unveiling at SxSW.
The USPTO has launched an interesting program that allows for simultaneous searching and examination of patent applications at the USPTO, the Japanese Patent Office (JPO), and the Korean Intellectual Property Office (KIPO). The Expanded CSP no longer requires users to use the First Action Interview Pilot Program as in the original CSP, and the requirement for claims correspondence is reduced to only independent claims. More on the program is covered at JD Supra: https://www.jdsupra.com/legalnews/got-expanded-collaborative-search-pilot-84973/
Issue preclusion is the legal principle that when an issue is decided by an earlier judicial decision, it is binding on later decisions. Does it apply to the PTAB when a court construes a patent claim? Not yet, and the CAFC just took another pass at deciding that it should, according to IPWatchdog. http://www.ipwatchdog.com/2018/04/13/issue-preclusion-ptab-split-federal-circuit-knowles-electronics-v-cirrus-logic/id=95659/
Standing is the legal concept of having the ability to bring a legal action. It’s important stuff in litigation and mistakes in it can be expensive; but it’s mostly of interest to attorneys. Two recent cases on the issue are worth noting for practitioners. The first one deals with standing to appeal IPR decisions, which have been consistently limited to the parties in the dispute. See more from PatentDocs here: http://www.patentdocs.org/2018/04/luitpold-pharmaceuticals-inc-v-pharmacosmos-as-fed-cir-2018.html. A more dramatic and interesting decision on standing, and also touching on court awards of attorney’s fees, is reported here: https://patentlyo.com/patent/2018/04/450.html. Both cases reflect the need to make sure the basics are correctly established before going into litigation.
If you’ve gotten this far we salute you! What do you think? Too long, too short, or just right? Send us your feedback at firstname.lastname@example.org. Thanks! Stay safe out there and don’t forget that a smart legal strategy can transform a great idea into a valuable legal asset.