IP Update, Vol. 20, No. 11 - McDermott Will & Emery

IP Update, Vol. 20, No. 11




No Ticket to Ride for Transit-Limited Claims

The US Court of Appeals for the Federal Circuit affirmed a district court ruling that claims directed to the specific field of mass transit were directed to patent-ineligible subject matter under 35 USC § 101 because they failed both steps of the Alice inquiry. The Court found that the claims were directed to an abstract idea and otherwise lacked inventive concept. Smart Systems Innovations, LLC v. Chicago Transit Authority, Case No. 16-1233 (Fed. Cir., Oct. 18, 2017) (Wallach, J) (Linn, J, concurring in part and dissenting in part).

The representative claims in issue, taken from four related patents, were directed to either payment systems using a bankcard in connection with accessing mass transit, or data collection and storage systems regarding such payment systems. At the district court, the Chicago Transit Authority filed a motion for judgment on the pleadings, asserting that the claims were subject matter ineligible under 35 USC § 101. After the district court granted the motion, Smart Systems appealed.

The Federal Circuit considered all of the representative claims from the four patents together, and analyzed the claims under the two-part Alice test. In doing so, the Court agreed with the district court that the claims were directed to an abstract idea, namely, “formation of financial transactions in a particular field (i.e., mass transit) and data collection related to such transactions,” or “paying for a subway or bus ride with a credit card.” Smart Systems argued that the patents were not abstract because the claims were directed to a particular, concrete field, i.e., mass transit. The Court rejected this argument as “beside the point.” The Court distinguished Enfish (IP Update, Vol. 19, No. 6) and DDR Holdings (IP Update, Vol. 18, No. 1), noting that Smart Systems did not argue that the claims were directed at an improvement in computer technology. Similarly, the Court distinguished McRO (IP Update, Vol. 19, No. 10) as inapposite, noting that the claims in issue were not directed to specific rules that improve a technological process. Therefore, the Court concluded that all of the representative claims failed step one of the Alice inquiry.

Turning to step two of the Alice inquiry, the Federal Circuit affirmed the district court finding that the representative claims lacked an inventive concept because they merely required generic computer components, which do nothing more than run a “bankcard sale—that is, the performance of an abstract business practice.” The Court went on to reject each of Smart Systems’ arguments of “other indicia” of inventive concept, including the lack of preemption and satisfaction of the machine-or-transformation test, and ultimately concluded that all representative claims failed the “something more” aspect of Alice step two.

In dissent, Judge Linn argued that two of the four patents, which were directed to the payment systems using a bankcard in connection with accessing mass transit, were not directed to an abstract idea. Linn explained that the majority opinion erred by describing the claims at “such a high level of abstraction as to overlook and misstate what the inventors considered to be their invention.” Linn argued that the recited transit system is not merely a generic environment that may be ignored, and that the claims did not cover the kind of basic building blocks that would foreclose or inhibit future innovation.

Judge Linn agreed with the majority that the other two patents were directed at data collection and storage systems and thus failed both steps of the Alice inquiry. In particular, Linn agreed with the majority that these patents were directed at fundamental economic practices not tied to the transit system, and as such fell into a category of patents that are directed towards abstract ideas. Although Linn disagreed with this categorical exclusion, he concluded that he was bound to that finding by controlling precedent.


Return to Sender: § 101 Eligibility Requires Additional Claim Specificity

The US Court of Appeals for the Federal Circuit found a software patent directed to the transmission of digital communication using a sender-generated identifier to be ineligible subject matter because the claims contained “no additional elements that transform the nature of the claims into a patent-eligible application of the abstract idea.” Secured Mail Solutions LLC v. Universal Wilde, Inc., Case No. 16-1728 (Fed. Cir., Oct. 16, 2017) (Reyna, J).

The patent at issue involves methods whereby a sender affixes an identifier on an outer surface of a mail object before the mail object is sent. The identifier takes different forms, such as an “intelligent” barcode, a QR code or a personalized URL. The barcode consists of sender/recipient data and shipping method data that is concatenated into a set of encoded data. An authenticating portion of the barcode is stored for later retrieval by the recipient to verify that the mail object is authentic. The QR code is simply data that enables the recipient to request and receive personalized data from the sender. The personalized URL is a network address that directs the site visitor to personalized information.

After Secured Mail sued Universal alleging patent infringement, the district court dismissed the complaint, concluding that the patent was directed to patent-ineligible subject matter and therefore failed to state a claim under Rule 12(b)(6). The district court explained that the claims were directed to the abstract idea of “communicating information about a [mail object] by use of a marking,” and found no additional elements to transform the claims into patent-eligible subject matter because the sender-generated identifier was not a sufficiently inventive concept. Secured Mail appealed.

The Federal Circuit affirmed, finding that the challenged claims were indeed ineligible for patenting. Regarding step one of the Alice inquiry, the Court found that the challenged claims were directed to an abstract idea because the claims simply “embrace the abstract idea of using a marking affixed to the outside of a mail object to communicate information about the mail object.” The Court concluded that the claimed methods of affixing the sender-generated identifier for communicating information to a recipient were void of any rules or steps that establish how the focus of the methods is achieved, citing Enfish (IP Update, Vol. 19, No. 6), McRO (IP Update, Vol. 19, No. 10) and Thales (IP Update, Vol. 20, No. 4) for guidance.

Unlike the “self-referential table” in Enfish, the claims were silent on a new barcode format, an improved method of generating or scanning barcodes, or similar improvements in computer functionality. The Court concluded that an encoded identifier that is used to make a process more efficient does not necessarily render an abstract idea less abstract, and dismissed Secured Mail’s argument that the sender-generated identifier improved on the existing process. In contrast to the “automatic use of rules of a particular type” in McRO and “the particular configuration of inertial sensors” in Thales, the claims were void of any special rules or details of computers, databases, printers or scanners. The common observation raised by the Court in its analysis was the lack of detail in the claims regarding how the “unique identifier” is generated or how it is different from other identifiers aside from the fact that it is unique and generated by the sender.

Regarding step two of the Alice inquiry, the Federal Circuit found that the sender-generated identifier was not a sufficiently inventive concept, explaining that the claim language recited a conventional use of a barcode generated using generic computer technology for permitting generic communication between a sender and a recipient. The Court also concluded that the claim language lacked any specific showing of how the sender generates the information from various pieces of data, explaining that the claims were non-specific and lacked technical detail.


Secondary Considerations Transformed into Rebuttal Evidence

Amol Parikh

Addressing the issue of prima facie obviousness, the US Court of Appeals for the Federal Circuit affirmed a district court’s ruling that evidence of secondary considerations failed to overcome a strong showing of obviousness. Merck Sharp & Dohme Corp. v. Hospira, Inc., Case No. 17-1115 (Fed. Cir., Oct. 26, 2017) (Lourie, J) (Newman, J, dissenting).

Merck owns a patent directed to a process for preparing a degradation-free formulation of the antibiotic ertapenem. The claimed process involves mixing ertapenem in a carbon dioxide solution having a pH between 6.0 and 9.0 with a temperature between -3°C and 15°C. The combined solution is then lyophilized to obtain the final formulation. Merck sued Hospira for infringement of the patent based on Hospira’s filing of an abbreviated new drug application (ANDA).

Following a bench trial, the district court found the claims of the asserted patent obvious over a combination of two prior art references. The court found that the claimed formulation was disclosed in the prior art and that the steps leading to that formulation were nothing more than conventional manufacturing steps that would have been obvious from the prior art disclosures. The district court also reviewed Merck’s evidence of secondary considerations, finding that while commercial success and copying by others were shown, that evidence could not overcome the strong prima facie case of obviousness. Merck appealed.

The Federal Circuit affirmed the district court’s obviousness finding. The Court found that substantial evidence supported the district court’s factual finding that the prior art combination expressly taught forming the carbon dioxide adduct of ertapenem at pH 6.0–9.0 and that the final formulation was to be obtained using “standard lyophilization techniques.” The Court also found that while the claimed temperature range was not explicitly disclosed in the prior art, it was understood that degradation is minimized at low temperatures, and a skilled artisan would therefore have wanted to keep the temperature as low as possible without freezing. Turning to Merck’s evidence of secondary considerations, the Federal Circuit found that the district court did not err in finding that Merck’s evidence of commercial success and copying could not overcome the weight of the evidence that the claimed process was described in the prior art.

In dissent, Judge Newman called for a return to the obviousness standard set forth in the Supreme Court of the United States’ decision in Graham v. John Deere Co. (1966). Judge Newman criticized the inconsistency of Federal Circuit decisions converting the four-factor test from Graham into one where the first three Graham factors operate as a self-standing prima facie case of obviousness and the fourth Graham factor (secondary considerations) serves as rebuttal evidence. Judge Newman appears concerned that the district courts will diminish the stability, predictability and fairness of obviousness inquiries if the inconsistent application of the Graham factors continues.

Practice Note: Until the Graham factor analysis is clarified, consider formulating the inquiry in the most advantageous way for your particular situation. For example, practitioners may argue with the majority when challenging validity on § 103 grounds but endorse Judge Newman’s view when defending against an obviousness attack using objective indicia.


Functional Claim Language Describing System Capabilities May Undermine Indefiniteness

Addressing issues of indefiniteness and claim construction, the US Court of Appeals for the Federal Circuit affirmed the district court’s claim construction but reversed its indefiniteness decision, concluding that the system claims at issue did not impermissibly claim two different subject matter classes. MasterMine Software, Inc. v. Microsoft Corp., Case No. 16-2465 (Fed. Cir., Oct. 30, 2017) (Stoll, J).

MasterMine sued Microsoft for infringement of two patents that disclosed methods and systems for allowing users to mine and report data maintained in customer relationship management (CRM) applications. The patents described the creation of an electronic worksheet containing a “pivot table,” which allows users to “quickly and easily summarize[] or view large amounts of CRM data.” The district court construed “pivot table” to mean “an interactive set of data displayed in rows and columns that can be rotated and filtered to summarize or view the data in different ways.” The district court also held several claims to be indefinite for improperly claiming both an apparatus and a method using the apparatus. Following the claim construction order, both parties stipulated to final judgments of non-infringement and invalidity for indefiniteness, but MasterMine reserved the right to appeal the district court’s claim construction order.

On appeal, the Federal Circuit affirmed the district court’s construction of the term “pivot table,” finding that it was supported by the intrinsic evidence. Turning to the issue of indefiniteness based on functional claiming, the Court centered its analysis on its 2005 decision in IPXL Holdings, L.L.C. (IP Update, Vol. 8, No. 12). In IPXL, the Court held that a claim covering both an apparatus and a method of use of that apparatus is indefinite under § 112, ¶ 2 because it is unclear whether infringement occurs by creating an infringing system or by actually using the system in an infringing manner. The Court also noted that several cases after its decision in IPXL also found claims indefinite for reciting apparatus and method steps.

Despite IPXL and subsequent decisions, the Federal Circuit noted that “apparatus claims are not necessarily indefinite for using functional language.” For example, the Court recognized that in HTC Corp. v. IPCom GmbH & Co., KG (IP Update, Vol. 15, No. 2), it found apparatus claims using functional language to not be invalid because the functional language served the purpose of establishing the underlying network environment in which the claimed mobile station operated. The Court also noted other cases in which functional language in the claims was tailored to recite the capability of the recited functions and therefore did not render the claim indefinite under IPXL.

Turning to MasterMine’s patent, the Federal Circuit explained that even though it included “active verbs—presents, receives, and generates—these verbs represent permissible functional language used to describe capabilities of the reporting module.” The Court further found that the claims were distinguishable from IPXL because they did not claim activities performed by the user of the system. Rather, the claims recited the system’s capability to receive and respond to a user’s selection. Thus, the Court concluded that the claims used permissible functional language to describe the capabilities of the claimed system, and it was clear that infringement occurs only when one makes, uses, offers to sell, or sells the claimed system.


Extrinsic Evidence Makes a “Swell” Difference in Claim Construction

Upholding a Patent Trial and Appeal Board (PTAB or Board) patentability finding, the US Court of Appeals for the Federal Circuit found that the PTAB did not err in determining the broadest reasonable construction of a claim term and finding that the record did not establish anticipation or obviousness. Organik Kimya AS v. Rohm & Haas Co., Case Nos. 15-1983; -2001 (Fed. Cir., Oct. 11, 2017) (Newman, J).

Rohm & Haas owns two patents directed to a process for preparing emulsion polymers that can be used in opaque coatings, such as paints and inks. The opacity of the emulsion polymers is a property produced by voids formed within the polymer particles during the process. The claimed process requires the step of providing a monomer and a “swelling agent under conditions wherein there is no substantial polymerization of the monomer.” Organik Kimya filed petitions for inter partes review against both patents, each of which was instituted. During the trial, the PTAB construed the term “swelling agent” to mean “capable of permeating the shell and swelling the core, in the presence of the multistage polymer and monomer, under the conditions of the specific process for which the agent is to be used.” Based on this construction, the PTAB determined that the prior art did not anticipate or render the claims obvious. Organik Kimya appealed.

On appeal, Organik Kimya objected to the PTAB’s construction because it required that the swelling agent operate “under the conditions of the specific process for which the agent is to be used.” Organik Kimya argued that the term “swelling agent” requires only the addition of any base and does not require reference to whether the reaction conditions are suitable for swelling.

The Federal Circuit rejected Organik Kimya’s argument, focusing on language in the specification that stated “suitable swelling agents include, are those which, in the presence of the multistage emulsion polymer and monomer, are capable of permeating the shell and swelling the core.” The Court also found that substantial evidence supported the extrinsic evidence on which the PTAB relied. For instance, Rohm & Hass’s expert testified that the “swelling agent” is defined in the specification with reference to the process conditions in which it is used, and Organik Kimya’s expert testified that the function of the base depends on the conditions of its use.

Turning to patentability, the Federal Circuit found that substantial evidence supported the PTAB’s finding that the patents were novel and nonobvious over the prior art. The PTAB relied on evidence provided by Rohm & Haas’s expert witness, who replicated experiments disclosed in the prior art and found that in these experiments, the base did not penetrate to the core of the polymer particles and cause swelling therein. While Organik Kimya’s expert criticized these studies, he did not provide any contrary evidence. As a result, substantial evidence supported the PTAB’s conclusion that Rohm & Hass’s “experimental evidence outweighed the unsupported criticism of [Organik Kimya’s] methodology.”


Cat on a Hot Asphalt Roof? PTAB’s BRI Is Too Narrow

Alexander P. Ott

Addressing a Patent Trial and Appeal Board (PTAB or Board) decision upholding patentability of the challenged claims in an inter partes review, the US Court of Appeals for the Federal Circuit rejected the PTAB’s broadest reasonable claim construction as unduly narrow. Owens Corning v. Fast Felt Corp., Case No. 16-2613 (Fed. Cir., Oct. 11, 2017) (Taranto, J).

Fast Felt sued Owens Corning for infringement of a patent directed to a method for making a roofing or building cover material that includes nail tabs applied by a pressure roller. Owens Corning responded by filing a petition for inter partes review, which was instituted as to three asserted obviousness grounds.

In its final written decision, the PTAB found all claim elements to be disclosed by the prior art combinations, but concluded that a skilled artisan would not have made the combinations. The PTAB interpreted the term “roofing or building cover material” to require materials that have been or will be coated with asphalt. On that basis, the PTAB concluded that the main prior art taught away from using a pressure roller for asphalt coating, and that a skilled artisan would not have looked to the non-asphalt coating secondary prior art. The PTAB thus found the challenged claims not unpatentable. Fast Felt appealed.

The Federal Circuit reversed, concluding that the PTAB’s claim interpretation unreasonably limited the claims to materials that have been or will be covered in asphalt. The Court acknowledged that the preferred embodiments focused on such materials, but explained that the claim terms were not so limited. In particular, the Court noted that the claims were not even limited to roofing materials and more broadly included “building cover” materials. The Court pointed to one such disclosed building cover material that did not include asphalt.

Based on its broader construction, the Federal Circuit reversed the PTAB and found all claims to be unpatentable. The Court reviewed the factual record and concluded that Owens Corning did not present any meaningful response that was not tied to the asphalt requirement, and consequently held that the only permissible fact-finding was one in favor of obviousness.


PTO Implements Attorney Discipline Diversion Program

Amol Parikh

The US Patent and Trademark Office (PTO) initiated a two-year Diversion Pilot Program to align its attorney discipline program with the practices of more than 30 states. The program is designed to give patent and trademark practitioners who engage in minor misconduct the opportunity to avoid formal discipline by implementing remedial measures. The program is available to practitioners whose physical, mental or emotional health issues (including substance or alcohol abuse) or law practice management issues resulted in minor misconduct and little, if any, harm to a client. In certain circumstances, the practitioner will be offered the opportunity to enter into a diversion agreement with the PTO, but will be required to take affirmative steps to correct the issue that led to the minor misconduct.

The criteria for participation in the program initially will be based on criteria recommended by the American Bar Association. To participate in the program, practitioners must not have been publicly disciplined by the PTO or any other jurisdiction in the prior three years, and the conduct at issue must not involve fraud, deceit, misappropriation of funds or a serious crime. In addition, the conduct must not result in or be likely to result in substantial prejudice to the client or other persons. Finally, practitioners are not eligible to participate if the conduct at issue is part of a pattern of similar misconduct or is of the same nature as misconduct for which the practitioner has been disciplined within the past five years.

Once the PTO determines that a practitioner is eligible to participate in the program, other factors will determine whether the diversion program is appropriate in a particular case. Those factors include, for example, whether the sanction is likely to be less severe than reprimand or admonition, whether participation is likely to benefit the practitioner and accomplish the goals of the program, and whether diversion was already attempted.


New PTO Rule on Attorney-Client Privilege Before the PTAB

The US Patent and Trademark Office (PTO) issued a new rule on attorney-client privilege for trials before the Patent Trial and Appeal Board (PTAB) on November 7, 2017. The new rule takes effect December 7, 2017. The new rule was spurred by the decision of the US Court of Appeals for the Federal Circuit in In re Queen’s University at Kingston (IP Update, Vol. 19, No. 4), which held that communications between a client and a non-lawyer patent agent relating to PTO proceedings are privileged in federal court cases.

New rule 37 CFR § 42.57 provides that communication between a client and a PTO patent practitioner or a foreign jurisdiction patent practitioner that is reasonably necessary and incident to the scope of the practitioner’s authority shall receive the same protections of privilege as the communication would if it were between a client and lawyer. A PTO patent practitioner is a person who has fulfilled the requirements to practice before the PTO. A foreign jurisdiction practitioner is a person who is authorized to provide legal advice on patent matters in a foreign jurisdiction.

The PTO adopted the holding in In re Queen’s as it pertained to patent agents recognized by the PTO and extended the holding to include foreign jurisdiction patent practitioners. In extending the privilege to foreign jurisdiction patent practitioners, the PTO noted that some foreign jurisdictions use non-lawyer patent agents exclusively or predominantly, so it may not be possible for applicants to rely on the privilege afforded by US courts to foreign lawyers.

As a result of the new rule, authorized communications between patent agents and clients pertaining to trials before the PTAB—including inter partes review, post-grant reviews, covered business methods and derivation proceedings—will be protected, along with communications pertaining to patent drafting and prosecution.

Practice Note: Patent agent communications could still be admissible in state court depending on the laws of the particular state. Whether client-patent-agent communications are privileged in a state court contract dispute is currently on appeal before the Texas Supreme Court. In addition, patent agent communications concerning validity and non-infringement opinions are not covered by the privilege.

America Invents Act


Wands Analysis Required to Establish Lack of Enablement in PGR Eligibility Review

Mandy H. Kim

Addressing the threshold question of whether a patent is eligible for post-grant review (PGR), the Patent Trial and Appeal Board (Board or PTAB) denied institution of the PGR because the petitioner had not adequately demonstrated that the claims at issue were not enabled or lacked written description in any non-provisional parent applications. Merck Sharp & Dohme Corp. v. Wyeth LLC, Case Nos. PGR2017-00016; PGR2017-00017 (PTAB, Oct. 20, 2017) (Obermann, APJ).

Merck filed two PGR petitions seeking to invalidate claims of a patent owned by Wyeth that was related to an immunogenic composition comprising polysaccharide-protein conjugates containing capsular polysaccharides prepared from different S. pneumoniae serotypes.

PGR is only available for patents that are subject to the America Invents Act (AIA), which applies only to patents and applications that include at least one claim having an effective filing date on or after March 16, 2013. While the challenged patent issued from a non-provisional application filed after March 16, 2013, it claimed priority to several non-provisional parent applications filed before March 16, 2013.

To establish standing to file the PGR, Merck argued that at least one challenged patent claim was not entitled to a pre-March 16, 2013, priority date. First, Merck argued that none of the claims were enabled by any of the non-provisional parent applications and thus were not entitled to a pre-AIA priority date. Second, Merck argued that two of the challenged claims lacked written description support in any non-provisional parent application and were not entitled to a pre-AIA priority date. The PTAB disagreed on both grounds and denied the petitions.

As to enablement, the PTAB found that the petitions did not sufficiently demonstrate that a person of ordinary skill in the art could not identify the structure of any particular serotype without undue experimentation. The PTAB noted that Merck’s failure to adequately address the Wands factors supported denial of the PGR petitions. The PTAB also found that a declaration submitted in support of the petitions relied on “unsupported opinions” and “unsubstantiated calculation,” and that Merck and the declarant had not explained why experiments would be undue. The PTAB concluded that the examples set forth in the provisional applications provided adequate guidance enabling the “generation and characterization of a representative multivalent composition of the granted claims.”

The PTAB further found that Merck failed to sufficiently demonstrate lack of written description support for the “antigens” of the two identified claims. Agreeing with Wyeth, the PTAB concluded that Merck’s argument that the provisional applications failed to support certain unclaimed features of the invention (such as buffer or protein concentrations) was meritless.


The Importance of Affidavit Evidence in Proving Public Accessibility of Printed Publications

Addressing the issue of evidence sufficient to establish when a document qualifies as printed publication and prior art, the Patent Trial and Appeal Board (PTAB or Board) issued two decisions reaching differing conclusions, each based on whether the evidence established public availability. ABS Global, Inc. v. Inguran, LLC, Case No. IPR2016-00927, Paper 33 (PTAB, Oct. 2, 2017) (Kalan, APJ); Seabery North America, Inc. v. Lincoln Global, Inc., Case No. IPR2016-00840, Paper 60 (PTAB Oct. 2, 2017) (Giannetti, APJ).

In ABS Global, ABS challenged the patentability of a patent directed to sorting animal sperm cells according to DNA characteristics based on the Leary prior art reference. For purposes of institution, the PTAB accepted ABS’s contention that Leary was a prior art printed publication. During trial, however, Inguran argued that ABS had failed to establish Leary’s publication date. Specifically, Inguran argued that while ABS pointed to (1) a date stamp placed on the reference by a library, (2) a copyright notice, (3) a printout from the publisher’s website stating the date published, and (4) the ISSN and ISBN, none of this information established whether Leary was publicly accessible on the relevant dates.

The PTAB agreed that the categories of evidence relied upon by ABS were insufficient to establish Leary as prior art under § 102. As to the library date stamp, the PTAB found that ABS provided no evidence about the library’s procedure for indexing, cataloging and shelving publications, and thus the date stamp by itself did not establish when Leary became publicly accessible. As to the copyright notice and the printout from the publisher’s website, the PTAB found that neither demonstrated that anyone received or could have ordered the publication on the dates listed. Finally, the PTAB disregarded the ISSN and ISBN dates because there was no evidence that they established public accessibility of Leary on a particular date. The PTAB thus concluded that because there was no evidence of the date on which Leary was publicly accessible, ABS failed to establish that Leary was prior art.

On the same day, the PTAB issued its decision in Seabery, finding that the prior art reference at issue was publicly accessible before the filing of the challenged patent. Lincoln Global owns a patent directed to tracking and analyzing welding activity. Seabery filed a petition for inter partes review challenging the validity of the patent based on a German doctoral thesis by Dorin Aiteanu. To establish the publication date of the thesis, Seabery provided evidence in the form of (1) library catalogue dates, (2) a copyright notice, (3) an online catalogue screen shot and (4) the ISBN. Seabery also submitted an affidavit from Aiteanu’s thesis supervisor that university rules required the thesis to be deposited in the university’s library before Aiteanu could receive his PhD, and that the thesis was indeed deposited before Aiteanu received his PhD. The supervisor also provided evidence of the thesis’s check-out history in the library, and testified as to how dissertations are formally published, indexed in the national library system and assigned an ISBN. Relying on this additional evidence, the PTAB found that the thesis was accessible to the public before the filing of the challenged patent.

Practice Note: In order to establish the public accessibility of a prior art reference, petitioners should submit affidavits attesting to the public availability of the prior art reference. Such evidence may include, for example, testimony regarding policies and established practices for publishing, and the check-out history of the reference.

AIA / IPR / § 325(d)

PTAB Underscores Reasons for Denying Institution Under 35 USC § 325(d)

The Patent Trial and Appeal Board (PTAB or Board) designated as informative three decisions denying institution of inter partes reviews. CULTEC, Inc. v. Stormtech LLC, Case No. IPR2017-00777 (Grossman, APJ) (Aug. 22, 2017); Hospira, Inc. v. Genentech, Inc., Case No. IPR2017-00739 (Pollock, APJ) (Jul. 27, 2017); Unified Patents Inc. v. John L. Berman, Case No. 2016-01571 (Haapala, APJ) (Dec. 14, 2016). In each decision, the PTAB denied institution based on its discretionary power under 35 USC § 325(d) because the same or substantially the same prior art or arguments previously had been presented to the US Patent and Trademark Office.

In CULTEC, the petitioner asserted five obviousness grounds of unpatentability against the challenged patent. Each ground was based on the same primary prior art reference either alone or in various combinations with three other references. The PTAB panel observed that the primary reference was submitted during original prosecution of the challenged patent by petitioner’s lead counsel in a third-party prior-art submission. The PTAB panel further noticed that one of the petitioner’s secondary references had been cited and applied by the examiner throughout prosecution of the application for the challenged patent. Finding that the petitioner cited the two remaining references for teaching the same subject matter as the first two references, the PTAB panel denied institution under § 325(d).

In Hospira, the petitioner alleged that the challenged patent was not entitled to its putative priority date and was consequently anticipated by each of three prior publications. During prosecution of the challenged patent, the examiner had similarly rejected the pending claims as being anticipated by the earliest of the petitioner’s three references and likewise disregarded the application’s earliest priority claim, in the same way the petitioner had. Specifically, in the examiner’s initial rejection of the challenged claims, the examiner found that the earlier applications in the challenged patent’s priority chain failed to satisfy the written description and enablement requirements under 35 USC § 112. The PTAB panel noted that the applicant overcame the examiner’s initial rejection by argument and amendment of the claims, causing the examiner to withdraw the rejection based on the earliest prior art reference since it was not prior art against the challenged patent. Because the other two references relied on by the petitioner had later publication dates, they also were not prior art against the challenged patent. As the petitioner had not raised any other arguments, the PTAB panel denied institution under § 325(d).

In Unified Patents, the petitioner asserted that the challenged claims were invalid based on three grounds of obviousness. Two of the petitioner’s grounds relied on a primary reference that the Patent Owner overcame during prosecution. For those grounds, the PTAB determined that the petitioner’s secondary reference was relied on in the same way as references used by the examiner during prosecution. Because the PTAB panel discerned nothing that distinguished the petitioner’s arguments from the examiner’s prior consideration of the primary reference, the PTAB declined to institute review based on those two grounds, concluding “[t]his would not be an efficient use of PTAB resources in this matter.” Significantly, the PTAB treated the petitioner’s third ground differently, since the petitioner relied on a secondary reference not considered during prosecution, in order to teach certain claimed subject matter. Addressing the third ground on the merits, the PTAB found that the petitioner had failed to adequately explain how the combined teachings of the prior art rendered the challenged claims obvious.

Practice Note: These three informative decisions notify prospective petitioners that the PTAB is very reluctant to set aside any determination made by an examiner during prosecution unless a petitioner presents new evidence or arguments that would convince the PTAB that the examiner’s earlier determination was unreasonable.



Holy First Amendment Rights, Batman

Sarah Bro

In relation to a long-fought and contentious trademark dispute involving the COMIC CON mark, the US Court of Appeals for the Ninth Circuit issued a brief but definitive opinion, finding that certain district-court-ordered prior restraints on the defendant’s speech pertaining to the ongoing trademark litigation violated the First Amendment. In Re: Dan Farr Productions; Bryan Brandenburg; Daniel Farr, Case No. 17-72682 (9th Cir., Oct. 10, 2017) (per curiam).

This case, decided on petition for writ of mandamus, arose from an ongoing trademark infringement dispute filed in 2014 by San Diego Comic Convention (SDCC) against the producers of the Salt Lake Comic Con, Dan Farr Productions and affiliated individuals (together, Dan Farr) over Dan Farr’s use of the trademarks COMIC-CON or COMIC CON. In addition to allegations that the COMIC CON trademark is generic, descriptive and otherwise abandoned by SDCC, Dan Farr had also taken to the court of public opinion by posting to websites and social media platforms its own thoughts on the merits of the case, third-party news articles discussing the dispute, and publicly available documents from the district court docket. Dan Farr claims it seeks “moral and material” support from other comic fans who also disagree with the premise of the trademark dispute and SDCC’s claims of exclusivity over the COMIC CON mark—especially when “comic cons” have been held by third parties in hundreds of venues across the United States.

In response to the Dan Farr online campaign, SDCC petitioned the district court for a protective order, claiming that Dan Farr’s objective was to taint the jury pool. After reviewing evidence consisting of various social media posts, the district court granted a suppression and disclaimer order on grounds that the Dan Farr posts threated SDCC’s right to a fair trial. The order was two-pronged in that it prohibited certain online statements pertaining to the case and dictated the form in which public court documents could be displayed online, while also requiring that Dan Farr post a disclaimer on websites, social media or other news outlets essentially describing the terms of the district court’s order.

In taking up Dan Farr’s petition for a writ of mandamus, the Ninth Circuit held that the court-ordered prior restraints on Dan Farr’s speech violated the First Amendment. The panel concluded that the suppression and disclaimer orders prohibited speech that did not pose a clear and present danger to a fair trial. Moreover, the court explained that prior restraint is not the least restrictive means of ensuring a fair trial. On this point, the Court concluded that Dan Farr’s posts would not irreparably taint the applicable jury pool, and noted that well-established doctrines on jury selection and the court’s inherent management powers provide an alternative, less restrictive means of ensuring a fair trial. Thus, the Court granted the petition and ordered the district court to vacate the suppression and disclaimer order.


Federally Registered Service Marks Get College Credit

The US Court of Appeals for the 11th Circuit concluded that in the context of federally registered service marks (as opposed to common law trademarks), the trademark owner’s first use of its marks on goods was not determinative. Savannah Coll. of Art & Design, Inc. v. Sportswear, Inc., Case No. 15-13830 (11th Cir., Oct. 3, 2017) (Jordan, J).

Sportswear began using federally registered service marks owned by Savannah College of Art & Design in connection with apparel and other goods on its website, without permission from the college. Savannah College sued, arguing that Sportswear had infringed its service marks, among other things. The district court concluded that Savannah College had failed to establish that it had enforceable rights in its marks that extended to apparel because the college had only registered its service marks for use in connection with educational services, and had not shown that it had used its marks on apparel earlier than Sportswear. Savannah College appealed.

On appeal, the 11th Circuit reversed the district court, concluding that the case did not simply involve infringement of a common law trademark, and consequently the date of Savannah College’s first use of its trademarks on goods was not determinative. According to the controlling case law, protection is extended for federally registered service marks to goods. The Court explained that the case law upon which the district court relied was inappropriate because in the cited precedent case, “neither party had a federally-registered trademark and as a result both sides could only assert common-law trademark rights. . . . That is why priority of use became a critical issue in that case.” Here, Savannah College’s claims revolved around federally registered marks.

The 11th Circuit instead relied on the 1975 US Court of Appeals for the Fifth Circuit decision in Boston Prof’l Hockey Ass’n, Inc. v. Dallas Cap & Emblem Mfg., Inc., which extended protection for federally registered service marks to goods. The Court concluded that Boston Hockey, despite “lacking critical analysis, implicitly but necessarily supports the proposition that the holder of a federally-registered service mark need not register that mark for goods—or provide evidence of prior use of that mark on goods—in order to establish the unrestricted validity and scope of the service mark, or to protect against another’s allegedly infringing use of that mark on goods.”

Therefore, the 11th Circuit concluded that that the district court erred in finding that Savannah College had failed to establish that it used its mark first on goods, since first use on goods is not determinative in the case of federally registered service marks.



Posting Service Entitled to Broad Immunity Under CDA

The US Court of Appeals for the First Circuit agreed with the district court that posting service immunity under the Communications Decency Act (CDA) should be “broadly construed,” and that the act of posting complaints was in itself sufficient consideration for grant of an irrevocable nonexclusive license. Small Justice LLC v. Xcentric Ventures LLC, Case Nos. 15-1506; 16-1085 (1st Cir., Oct. 11, 2017) (Barron, J).

Massachusetts lawyer Richard Goren and his company, Small Justice (collectively, Goren), sued Xcentric Ventures, the owner of RipoffReport.com, for copyright infringement, libel, interference with a contract and violation of Massachusetts’ unfair competition statute. The Ripoff Report permits customers to “post free complaints, called ‘reports,’ about companies and individuals whom [sic] they feel have wronged them in some manner.”

Goren’s claims all pertained to a dispute arising from two reports that Christian DuPont authored and posted on the Ripoff Report that were highly critical of Goren, who had provided legal representation on an unrelated matter adverse to DuPont, the defendant in that matter. In the two postings, DuPont leveled a number of criticisms at Goren’s character and conduct. In response, Goren filed suit in Massachusetts state court, under Massachusetts state law, for libel and intentional interference with prospective contractual relations. DuPont did not defend the lawsuit, and Goren, after first voluntarily dismissing those counts of the state court complaint that sought money damages, successfully obtained a default judgment. The state court also transferred to Goren “all rights in and to ownership of the copyright” for each of the two reports that DuPont had posted, which Goren assigned to himself and then to Small Justice.

Goren next filed the present lawsuit in federal court in Massachusetts against Xcentric, the owner of the Ripoff Report. Goren claimed that Small Justice had ownership of copyright to a declaration and to the two DuPont reports, and asserted copyright infringement. Xcentric moved to dismiss the complaint, which the district court granted in part. Specifically, the district court found that the CDA at 47 USC § 230 shielded Xcentric, an interactive computer service provider, from liability for information provided by another content provider. The district court rejected Goren’s argument that, by holding itself out as the copyright holder and by having “directed” internet search engines to list the postings, Ripoff Report itself became the information provider.

At the conclusion of discovery, the district court granted Xcentric summary judgment on the copyright infringement claim, finding that Goren’s claim failed because DuPont had “transferred copyright ownership to Xcentric by means of an enforceable browsewrap agreement. Specifically, the district court concluded that DuPont made that transfer pursuant to the Ripoff Report’s terms and conditions, which provided (in part) that a user of the site agreed to “grant to Xcentric an irrevocable, perpetual, fully-paid, worldwide exclusive license to use, copy, perform, display and distribute” the user’s posting. Even though DuPont may not have seen the full terms and conditions prior to submitting his postings (given the configuration of the website), the district court concluded that DuPont was on inquiry notice of those terms and conditions “because of the vertical scroll bar to the right of the text box, which was captioned ‘Terms and Conditions’, and because of the ‘conspicuously visible’ hyperlinks at the bottom of each page in the submission process to the website’s ‘terms of service.’” The district court subsequently modified the judgment to find that the browsewrap license failed to meet the requirements for the transfer of an exclusive copyright license but did grant an irrevocable non-exclusive license. This distinction did not, however, change the outcome. Goren appealed.

The First Circuit reviewed the dismissal of the libel and tortious interference claims de novo and affirmed. The Court explained that the CDA’s § 230 immunity is to be liberally construed, noting that Congress has expressed a “policy choice not to deter harmful online speech through the route of imposing tort liability on companies that serve as intermediaries for other parties’ potentially injurious messages.” Applying de novo review again, the First Circuit also affirmed the copyright decision, rejecting Goren’s argument that the license “contract” failed because no consideration was given to DuPont. The Court noted that while consideration is necessary to support an irrevocable license grant, the “performance can itself constitute consideration sufficient to establish a binding contract.” Thus the act of actually posting the complaints was sufficient consideration under these circumstances.

Finally, the Court determined that it need not address whether a browsewrap agreement may satisfy the exclusive license writing requirement of 17 USC § 204. This remains an open issue in the First Circuit.


Trebled Damages Means No Injunction for Knock-Off Software

Jodi Benassi

The US Court of Appeals for the Fourth Circuit affirmed in part, reversed in part and remanded a district court finding that a defendant was liable for breach of a software license agreement and therefore infringed the plaintiff’s copyright in the subject software. SAS Institute, Inc. v. World Programming Ltd., Case No. 16-1857 (4th Cir., Oct. 24, 2017) (Wilkinson, J).

SAS sells an integrated system of business software known as the “SAS System,” which users operate by writing instructions in a computer programming language known as SAS. Essentially, the SAS System is required to make an SAS program function. WPL, a UK company and competitor of SAS, develops statistical reporting software. WPL purchased several copies of the SAS Learning Edition, a low-cost version of the SAS System marketed as an educational tool to enable students to learn the SAS System, and used the SAS Learning Edition to develop a competing product called World Programming System. The license terms on the SAS Learning Edition included a prohibition on “reverse engineering,” as well as a restriction limiting use to “non-production purposes.” SAS sued WPL, first in the United Kingdom, asserting claims for copyright infringement and breach of the Learning Edition license agreement, and subsequently in federal district court in North Carolina, asserting copyright infringement and breach of the license agreement, along with other state law claims.

The UK court determined that under the EU Directive on software copyright, SAS’s software copyright did not cover aspects of the program that were reproduced and the parties could not contract around the Directive. The UK court entered a final judgment for WPL on all claims except for copyright infringement of the SAS manuals. In the United States, the district court determined that the input and output formats WPL copied were not protected under copyright, but that WPL had breached the license restriction against reverse engineering. WPL appealed the district court’s ruling that the UK litigation did not preclude the US suit, and the grant of summary judgment on the breach of contract claim, damages, attorneys’ fees and evidentiary rulings. SAS appealed the court’s denial of injunctive relief and the court’s copyright ruling.

On the issue of res judicata (based on the UK case), the Fourth Circuit reasoned that many of the legal and factual differences between the UK and US cases meant that applying the doctrine would deprive SAS from having its claims heard in an adequate forum and would undermine US and North Carolina public policies in favor of the UK and EU policies. WPL was unable to establish that the violations of US copyright could have been litigated in the UK court.

With respect to the breach of license agreement, the Fourth Circuit rejected WPL’s argument that summary judgment against it was inappropriate because the terms “reverse engineering” and “non-production” were ambiguous. The Court found that SAS’s definition of the terms, supported by dictionary definitions, favored a broad definition giving effect to every word in the contract and was consistent with North Carolina law on contract interpretation. The Court affirmed summary judgment on the breach of the Learning Edition agreements, finding that WPL violated the unambiguous reverse engineering prohibition.

The Fourth Circuit disagreed with SAS on the issue of denial of injunction relief based on the breach of contract and fraud claims it had prevailed on below. The Court found that SAS failed to demonstrate an irreparable injury from WPL’s actions. First, the Court noted that SAS did not leave the court penniless; it received a trebled damages award of more than $79 million, which included not only SAS’s lost profits, but also future damages after trial. The Court also determined that an injunction was not warranted on the grounds that WPL could not pay damages or that enforcement of the monetary award would be difficult. The Court reasoned that an injunction would have “a significant negative impact on WPL’s sales” and would frustrate, rather than facilitate, WPL’s ability to pay damages.

On the copyright claim, the only relief SAS sought that it had not already received was the requested injunction. Since the Fourth Circuit determined that SAS was not entitled to injunctive relief even if it were to prevail on the copyright claim, the Court dismissed the copyright claim as moot.