Boston Scientific Corp. v. Johnson & Johnson: Written Description Requirement Spreads its Wings

On June 7th, in a Fed. Cir. panel decision written by Judge Moore, the panel affirmed the invalidation of four J&J patents (a copy of these patents is available at the end of this post) for failure to meet the written description requirement of s.112(1). The patents claimed drug eluting stents, used to keep angioplastied arteries from re-closing, or undergoing restenosis. Boston Scientific Corp. v. Johnson & Johnson, App. No. 2010- 1230-1234 (Fed. Cir. June 7, 2011). The stents disclosed in the specifications all released rapamycin, a macrocyclic lactone, but the claims were broader, and used terms like “rapamycin or a macrocyclic lactone analog of rapamycin” or a” macrocyclic triene analog of rapamycin.” However, no such rapamycin analogs were disclosed in the specification.

The “problem” with the summary judgment below, at least as J&J saw it, was that a number of workable rapamycin analogs were known to the art as of the effective filing date of the applications. In fact, BSC was using one of them in its stents. J&J felt it could rely on the court’s holding in Capon v Eshhar, 418 F.3d 1349 (Fed. Cir. 2005) which affirmed that claims to chimeric DNA molecules were adequately supported by the specification in combination with evidence that many examples of useful subunits were known.

The court started out by quoting from UC v. Lilly – always a bad sign for patentee – and then reaffirmed that the Lilly standards for meeting the WDR applied both to novel compounds and to “inventions claiming combinations of prior art compounds with other elements,” citing Carnegie Mellon Univ. v. Hoffmann-La Roche, 541 F.3d 1115 (Fed. Cir 2008). “The test for WDR is the same whether the claim is to a novel compound or a novel combination of known elements. The test is the same whether the claim element is essential or auxiliary to the invention [Ed.: remarkably now citing Aro Mfg. Co. v. Convertible Top Replacement Co.!].”

However, at this point, Judges Moore and Bryson get a bit lost. Instead of explaining why the specification read in combination with the knowledge of the art about rapamycin analogs fails to meet the Lilly standards, the majority jumped back to the deficiencies in the specification:

“With no guidance at all in the specification as to how to properly identify or choose the claimed analogs, and in light of the unpredictability and nascent state of using drug-eluting stents to treat restenosis, we agree with the [grant of SJ below].” Slip op. at 21.

The panel put a great deal of emphasis on disclosures in the two specifications that “directly contradict information that the patentee alleges is ‘well-known’ to a person of skill at the effective filing date.”  In this case, the specifications of one group of patents stated that “the precise mechanism of action of rapamycin in still under active investigation…The shared specification indicates that the alleged correlation between structure and function was not well known by the effective filing date.” Slip. Op.. at 22. In other words, the panel used statements in the specification to effectively cut off the ability of the patentee to argue that knowledge available to the art could be used to meet the WDR:

“Given the absence of information regarding structural characteristics of [rapamycin analogs] in the specification, the unpredictability of the art and the nascent state of using drug eluting stents…we affirm the [grant of SJ]. The patent laws do not reward an inventors invitation to other researchers to discover which of the thousands of macrocyclic lactone analogs of rapamycin could conceivably work in a drug eluting stent.” Slip. Op. at 23.

This is starting to sound a lot like a holding based on “broader than the enabling disclosure,” and this was specifically noted by Judge Gajarsa, concurring-in-part, when he wrote: “The majority’s opinion further extends the [WDR] into the realm of enablement. Much of the confusion in this case is due to the difficulty of determining…how the [WDR] applies to novel compounds as opposed to novel combinations of known elements…the enablement analysis is simpler and more appropriate.” He would have affirmed the invalidation of the patent claims for non-enablement as well. If this opinion has anything to teach the court, it may be that the “easy button” of using the WDR to eliminate patents with claims a panel feels are just too broad, is not as easy as Lilly, Rochester and Ariad made it look.

Patents Invalidated

Vendor’s Economic Injury Is Insufficient to Establish DJ Jurisdiction, but Implicit Claim of Contributory Infringement Is Enough:

Patent / Declaratory Judgment Standing

The U.S. Court of Appeals for the Federal Circuit has now ruled that a supplier vendor has standing to commence a declaratory judgment action if a patent holder accuses the supplier’s customers of direct infringement and if the supplier’s product functions as a material component in the allegedly infringing system or the supplier’s product is used in the performance of the allegedly infringing method.   Arris Group v. British Telecommunications PLC, Case No. 10-1292 (Fed. Cir., May 19, 2011) (Dyk,  J.).

Arris makes and sells cable telephony and data products for use in networks with Voice over Internet Protocol (VoIP) telephone services.  British Telecommunications (BT) sent Arris’ customer, Cable One, a letter accusing Cable One’s network of infringing various system and method claims of the patents-in-suit.  Licensing discussions ensued.  BT sent Cable One a 118-page presentation comparing the patent claims to Cable One’s network, which included repeated identification of Arris’ products as meeting certain system claim elements and steps of the method claims.  BT’s presentation identified Cable One (not Arris) as a direct infringer.  Thereafter, at Cable One’s request, Arris became involved in the licensing discussions.  BT offered Cable One a license but declined to license Arris.  Arris filed a declaratory judgment action against BT; the district court dismissed the action, finding that Arris lacked standing because there was no case or controversy between Arris and BT.  Arris appealed.

The Federal Circuit rejected Arris’ argument that case or controversy exists because Arris has suffered an economic injury as a result of BT’s infringement threats.  The Court held that a mere adverse economic interest was insufficient to create declaratory judgment jurisdiction and that the Supreme Court’s MedImmune decision did not alter the prior law in this regard.  What is required to establish jurisdiction is an adverse legal interest of sufficient immediacy and reality.  However, the Federal Circuit found an adverse legal interest because BT implicitly asserted that Arris contributorily infringed the BT patents when it accused Cable One of direct infringement.  Arris’ products were “central” to the BT’s direct infringement allegations against Cable One and, for many of the asserted claims, BT identified Arris’ products as meeting virtually all of the claim elements.  The Court further found that, at a minimum, BT identified Arris’ products as satisfying at least one central element of every asserted claim.  BT allegations that Arris’ products complied with industry standards also suggested that Arris’ products were especially made or adapted for uses that infringe and are not staple articles of commerce.  Other relevant factors to the Court’s conclusion included Arris’ involvement in the prior licensing negotiations, as well as BT’s refusal to grant Arris a covenant not to sue.

Practice Note:   The “central” nature of Arris’ products in the infringement allegations entitled the Court to finding that standing existed.  However, the nature and quantity of contacts between the Arris and BT also strongly supported the Court’s conclusion.  Patent holders seeking to avoid declaratory judgment battles with indirect infringers should take care to minimize the nature of the allegations made about indirect infringers and should not rely on non-binding disclaimers that suppliers are not being accused of infringement.

Patent Reform is on the Immediate Horizon – New Options for Challenging Patents Before the USPTO

On June 23, 2011, the U.S. House of Representatives passed the America Invents Act (H.R. 1249), which follows in the wake of the Senate version, S. 23, approved on March 8, 2011. Although differences between the two bills will have to be reconciled before the proposed legislation can be signed into law by the President, Congress is poised to enact major reforms to the patent laws. After many years of debate and compromise, patent reform seems to be just steps from the finish line.

We focus here on two provisions relating to challenging patents before the U.S. Patent and Trademark Office, as currently set forth in the House bill.  First, inter partes reexaminations will be replaced with inter partes review proceedings. Second, the legislation will create post-grant review proceedings for the first time. Together, these proceedings will expand the options available to competitors who wish to challenge patents before the USPTO.

Both inter partes review and post-grant review will be adjudicated by a three-judge panel of the Patent Trial and Appeal Board (PTAB). The PTAB will be formed from and supplant the current Board of Patent Appeals and Interferences. As with current interference proceedings, inter partes review and post-grant review will involve filing motions (e.g., to amend claims) and provide for limited discovery. Thus, there are likely to be many procedural parallels between interferences, inter partes review and post-grant review. Additionally, inter partes reviews and post-grant reviews must be concluded within one year, extendable to 18 months in unusual cases.

Inter Partes Review

Inter partes review includes some significant differences from the current inter partes reexaminations. Like inter partes reexamination, inter partes review will permit a third party to challenge one or more patent claims as anticipated or obvious on the basis of prior art patents or printed publications. Unlike reexamination, which can be ordered at any time during the period of enforceability of a patent, a petition for inter partes review can only be filed after the later of: (1) nine months after the grant of a patent or a reissue of a patent; or (2) the termination of post-grant review, if a post-grant review has been instituted for that patent. The standard for commencing an inter partes review will be higher than that for ordering reexamination. Reexamination is ordered if there is “a substantial new question of patentability affecting a claim of the patent.” In contrast, inter partes review will be commenced upon a determination that “there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged.” Thus, competitors will find it more difficult to mount challenges to patents under this provision of the law.

The legislation addresses the interplay between inter partes review and district court litigation, and it places constraints on the extent to which the proceedings will overlap. Inter partes review may not be instituted if the petitioner has already filed a civil action challenging the patent’s validity. However, a counterclaim by a defendant in a civil action may challenge the patent’s validity without barring inter partes review. Following a final decision in an inter partes review, a petitioner will be estopped from subsequently disputing a claim’s validity in litigation or before the USPTO on grounds that the petitioner “raised or reasonably could have raised” during the inter partes review. Settlement of the inter partes review proceeding will eliminate any estoppel, thus giving parties greater incentive to settle than under the current scheme. Thus, in a settlement context, the estoppel provisions underinter partes review are somewhat less onerous than under inter partes reexamination.

Finally, the legislation also provides for reexaminations that are instituted as the result of supplemental examination of the patent. A patent owner may request supplemental examination of a patent to have the Office consider, reconsider, or correct information believed to be relevant to the patent. In contrast to current law regarding reexaminations, this information is not limited to prior art patents and publications, and it may include, for example, information relating to an on-sale bar or experimental data relevant to the enablement requirement. If information presented in the request raises a substantial new question of patentability, the Director will order reexamination. Supplemental examination immunizes a patent against a later holding of unenforceability based on the same information provided during supplemental examination.

Post-Grant Review

As a supplement to inter partes review proceedings, the new legislation also creates post-grant review as a mechanism for challenging patents. Although there are many similarities between the two procedures, significant differences are present, and they warrant a closer look. Unlike inter partes review, a third party may challenge an issued patent on any invalidity ground by filing a petition within nine months after issuance or re-issuance of the patent. The broad grounds available for seeking post-grant review parallel those available for finding invalidity in a civil action in district court. For example, post-grant review will permit challenges based on lack of written description or lack of enablement, thus expanding the bases for attacking patents in proceedings before the USPTO. The USPTO will authorize a post-grant review upon a showing that “it is more likely than not” that at least one challenged claim is unpatentable. This standard is more stringent than the “substantial new question of patentability” standard for initiating inter partes reexamination under the current law. Alternatively, post-grant review may be authorized if a petitioner raises a novel or unsettled legal question that is important to other patents or applications. As with inter partes review, post-grant review cannot be initiated if the petitioner has filed a civil action challenging the validity of the patent. Additionally, a final decision in a post-grant review proceeding will create an estoppel on any ground that the petitioner “raised or reasonably could have raised” during thatpost-grant review.

Conclusion

The new legislation will give competitors greater options for challenging patents. Although it remains to be seen how effectively the USPTO will be able to handle the proceedings, given the one-year time constraint for concluding such proceedings, the existence of each option should be borne in mind both by patent owners who may seek to enforce their patents and by competitors who wish to eliminate the patents of others. As compared to civil litigation, post-grant review and interpartes review may prove to be attractive tools for challenging patents, particularly in view of the faster resolution and lower costs than typical district court litigation, the “preponderance-of-theevidence” standard of proof, and the broadest reasonable claim construction that are applied at the USPTO. Potential patent challengers will wish to stay informed regarding the patent landscape, so that they can timely file for post-grant review if desired.

Adding Only Dependent Claims Is Error Correctible By Reissue

The U.S. Court of Appeals for the Federal Circuit held that patent applicants can file a reissue application that retains all original claims and adds only dependent claims. In re Yasuhito Tanaka (Fed. Cir., Apr. 15, 2011) (Linn, J.) (Dyk, J., dissenting).

Yasuhito Tanaka (Tanaka) appealed from the precedential decision of the Board of Patent Appeals and Interferences (the Board), holding that a reissue application that adds only dependent claims does not present the type of error correctible by reissue under 35 U.S.C. §251.  Tanaka filed a reissue application seeking to broaden claim 1 of his patent and did so within two years of the patent issuance.  Over the course of prosecuting the reissue application, Tanaka gave up on broadening claim 1 and presented original claims with a new dependent claim.  The examiner rejected the claims, asserting that no error has been specified that broadens or narrows the scope of the claims.  The rejection was made final.  Tanaka appealed to the Board.

The Board held that §251 “disallow[s] reissue applications that simply add narrow claims to the reissue patent when no assertion of inoperativeness or invalidity for the reasons set forth in § 251 can be made by the patentee.”  Therefore, the Board affirmed the examiner’s decision, whereupon Tanaka appealed to the Federal Circuit.

On appeal, Tanaka argued that the Board’s holding is inconsistent with long standing Court of Customs and Patent Appeals (CCPA) precedent such as In re Handel and In re Muller, as well as with Federal Circuit precedent such as Hewlett-Packard v. Bausch & Lomb.  The Federal Circuit agreed, noting that § 251 provides “[w]henver any patent is … deemed wholly or partly inoperative or invalidby reason of the patentee claiming more or less than he had a right to claim in the patent, the Director shall…reissue the patent.”  Referring to its precedent, the Federal Circuit noted that the term less means claiming fewer claims than patentee could have properly claimed rather than referring to the scope of protection.  In In re Handel, it was stated that adding dependent claims as a hedge against possible invalidity of original claims is a proper reason for asking for a reissue to be granted.

Accordingly, the Federal Circuit concluded that patent applicants can file a reissue application for purposes of adding only additional dependent claims.

Judge Dyk, in dissent, cited an 1883 Supreme Court case, Gage v. Herring, that in his view prohibited a reissue applicant from returning his original claims without amendment.

The Federal Circuit Affirms the Delaware District Court’s Summary Judgment of Invalidity for Failure to Disclose the Best Mode

In Wellman, Inc. v. Eastman Chemical Co., No. 2010-1249 (Fed. Cir. Apr. 29, 2011), the Federal Circuit affirmed the U.S. District Court for the District of Delaware’s grant of summary judgment on invalidity of Wellman’s patent claims for failure to disclose the best mode.

Plaintiff-patentee Wellman filed an action against Eastman Chemical, claiming it infringed U.S. Patent Nos. 7,129,317 (the ’317 patent) and 7,094,863 (the ’863 patent), which claim polyethylene terephthalate (PET) resins for use in plastic beverage containers. More particularly, the Wellman patents disclose “slow crystallizing” PET resins that purportedly retain exceptional clarity and do not shrink or become hazy from crystallization when “hot-filled” with product at temperatures of 180° C to 205° C.

Eastman Chemical defended by moving for summary judgment of invalidity on the grounds of indefiniteness and failure to set forth the best mode of practicing the claimed invention under 35 U.S.C. § 112, ¶ 1. The district court found that the patents were invalid, and Wellman appealed.

In its opinion, the Federal Circuit reaffirmed the law of “best mode.” Determining compliance with the best-mode requirement requires a two-prong inquiry. First, it must be determined whether, at the time the application was filed, the inventor possessed a best mode for practicing the invention. This is a subjective inquiry that focuses on the inventor’s state of mind at the time of filing. Second, if the inventor has a subjective preference for one mode over others, the court must then determine whether the inventor “concealed” the preferred mode from the public. The second prong inquires into the inventor’s disclosure of the best mode and the adequacy of that disclosure to enable one of ordinary skill in the art to practice that part of the invention. This second inquiry is objective, depending on the scope of the claimed invention and the level of skill required in the relevant art.

With respect to the first inquiry, the Federal Circuit agreed with the district court’s finding that the inventors possessed a best mode for practicing the invention. In particular, the district court found, based on the testimony of the inventors, that one inventor believed a specific formula for a slow-crystallizing, hot-fill PET called Ti818 to be the best mode of carrying out the claimed invention. The parties agreed that all but five of the asserted claims encompassed Ti818. Additionally, the Federal Circuit agreed with the district court that another inventor believed the use of carbon black (N990), an ingredient in its Ti818 PET formula, to be the best mode at the time of filing the application.

With respect to the second inquiry, the Federal Circuit agreed with the district court’s finding that Wellman effectively concealed the best mode from the public. Specifically, the district court found, and the Federal Circuit agreed, that Wellman effectively concealed the recipe for Ti818 by identifying preferred concentration ranges for certain ingredients that excluded those used in Ti818 and by identifying preferred particle sizes for an additive other than that used in Ti818. Thus, Wellman did not disclose the specific recipe for Ti818 or any other specific PET resin recipes. “By masking what at least one inventor considered the best of these slow-crystallizing resins, Wellman effectively concealed its recipe for Ti818.”

The Federal Circuit agreed with the district court and further held that Wellman not only failed to disclose its use of carbon black N990 in its Ti818 PET formula, but also deliberately chose to protect that ingredient as a trade secret, and, therefore, “intentionally concealed” the best mode. The Federal  Circuit found that the Wellman patents “lead away” from the use of carbon black N990 in Ti818.

While affirming the district court’s decision on invalidity based on the best mode, however, the Federal Circuit reversed the district court’s grant of summary judgment on the issue of indefiniteness. Specifically, the Federal Circuit found that the district court erred when it concluded that the patents did not provide sufficient guidance to those skilled in the art for construing the temperature (TCH) at which the sample crystallized the fastest during heating in a differential scanning calorimetry machine. The specifications of the patents supported construing the TCH term to require testing of amorphous materials.

The Federal Circuit affirmed the district court’s summary judgment that all asserted claims of the ’317 and ’863 patents that covered the PET recipe Ti818 were invalid for failure to disclose the best mode of practicing the claimed invention. The Federal Circuit, however, reversed the district court’s judgment that the asserted claims were indefinite under 35 U.S.C. § 112, ¶ 2, and remanded the case for further proceedings.

A copy of the opinion can be found at http://www.cafc.uscourts.gov/images/stories/opinions-orders/10-1249.pdf.

Patent Law Unchanged by Microsoft Supreme Court Decision

Despite all of the anticipation surrounding the outcome of the Microsoft v. i4i case, on June 9, 2011, the Supreme Court upheld the current state of patent law rather than change long-held precedent. Specifically, the Court held unanimously that when an accused infringer alleges that a patent is invalid, such an allegation needs to be proven by clear and convincing evidence.

This “clear and convincing evidence” standard has been defined as requiring “evidence indicating that the thing to be proved is highly probable or reasonably certain.” This standard provides a relatively high hurdle for accused infringers to overcome in order to invalidate a patent and, thus, provides a rather stable environment for patents.

The Court based this decision on section 282 of the Patent Act of 1952, which grants to patents a presumption of validity. The Court noted that “Congress specified the applicable standard of proof in 1952 when it codified the common-law presumption of patent validity.” Relying on previous Supreme Court precedent, the Court cited Justice Cardozo, who stated, “There is a presumption of validity, a presumption not to be overthrown except by clear and cogent evidence.”

In this case, Microsoft asserted an invalidity defense to an allegation of infringement which relied on evidence that had not been considered by the United States Patent and Trademark Office (USPTO) during examination. Microsoft alleged that i4i sold a version of the software covered by U.S. Patent No. 5,787,449 (“the ’449 patent”) more than a year before the patent was filed. Microsoft presented evidence that suggested the software at issue was previously marketed and sold to another company. The evidence included various documents describing the software such as manuals, a funding application, and letters to potential investors, etc. However, i4i maintained that the software that was sold did not include the contents of the patent at issue in this case. Unfortunately, the code at issue was destroyed and was not available for a comparison to the patent. The lower courts determined that the evidence presently did not clearly and convincingly show that the software sold was the same as the software described in the ’449 patent. While one might be able to infer that fact from the evidence in question, it did not meet the clear-and-convincing standard of proof. Therefore under the Court’s interpretation the patent remains valid.

Further, the Court determined that the standard of evidence should be consistent regardless of whether the evidence was previously considered by the USPTO. However, the Court also stated that juries may be instructed to give more weight to evidence not previously considered by the USPTO when considering the issue of patent validity. Thus, in cases, such as Microsoft, where some material was not before the USPTO during prosecution, the jury may be instructed to give these materials more weight during consideration. Unfortunately for Microsoft, no such request was made of the district court.

With respect to the policy arguments put forth, the Court found itself “in no position to judge these policy arguments.” The Court relied instead on the almost thirty-year history of interpretation and congressional action regarding section 282 of the Patent Act of 1952. During this time frame, the Court noted that the evidentiary standard has been left “untouched.”

The Court affirmed the current standard of proof for invalidity. Many patent holders are now breathing a sigh of relief.

Now the question is, will Congress take up the challenge set forth by the Court when it stated, “Any recalibration of the standard of proof remains in its hands.”

Supreme Court: Evidence Of Invalidity Must Be “Clear And Convincing”

On June 9, 2011, the Supreme Court rejected Microsoft’s contention that a preponderance of the evidence should be sufficient to establish patent invalidity in an 8-0 (Roberts abstained) opinion, which affirmed the Fed. Cir.’s opinion (for a change). (The decision can be found at the end of this post.) The Court interpreted Congress’ intent in 35 USC 282 to preserve the presumption of validity of a patent claim unless an attacker can meet the burden of presenting “clear and convincing” evidence of invalidity.

The Court also rejected the notion that some sort of “fluctuating standard of proof” should apply in situations in which the evidence relied upon was not considered by the PTO during prosecution. Even if the primary rationale behind the clear and convincing standard, that the PTO applied its expertise correctly, “seems much diminished’ (citing KSR 550 US 398), the Court held that Congress “codified the common-law presumption of patent validity and, implicitly the heightened standard of proof attached to it” and that standard of proof must still be met. The Court suggested that, in such cases, the jury could be instructed that it could give weight to the fact that the evidence before it is “materially new” when determining if clear and convincing evidence of invalidity had been presented.

Common Sense Variation Is Unpatentable

Affirming the district court’s grant of summary judgment of invalidity, the U.S. Court of Appeals for the Federal Circuit held that a common-sense variation of known technology is unpatentable.   Odom v. Microsoft Corp., Case Nos. 11-1160 (Fed. Cir., May 4, 2011) (Lourie, J.).

In August 2008 James Odom brought suit against Microsoft, alleging infringement of its patent directed to both a method for manipulating groups of “tools” in “toolbars” commonly found in computer software applications, as well as to the ability to use the divider to hide or display selected tools, by Microsoft’s Office 2007, a suite of office productivity software.  During the litigation, Odom’s counsel withdrew from the case and, failing to retain new counsel, Odom moved to dismiss his claims without prejudice.  The district court granted Odom’s request to dismiss but declined to dismiss Microsoft’s declaratory judgment counterclaims.  Microsoft subsequently moved for summary judgment of non-infringement and invalidity.

The district court granted Microsoft’s motions for summary judgment, holding that the asserted claims of the patent were invalid for obviousness and not infringed by Office 2007.   In so finding, the court stated that the asserted claims presented “one of the clearest” cases of obviousness that had come before it because Odom had simply “cobbled together various pieces of what was already out there in a manner … that would have been obvious to anyone skilled in the art at the time of the invention.”  Odom appealed.

On appeal, Odom argues that the district court erred in its obviousness analysis by looking at separate pieces of the claimed invention rather than the invention as a whole, by impermissibly applying hindsight in determining obviousness, and argued that the manipulatable sections of the composite toolbar disclosed in the prior art are very different from the claimed tool groups.  The Federal Circuit disagreed.  The Court found that user-manipulatable toolbars (which can be customizing according to user preferences and which include groups of command buttons’ or toolbars) were known in prior art at the time the patent in suit was filed.  The Court found that the only difference between the prior art and the patent in suit was that the groups of tools claimed in the patent are on a single toolbar.  Citing KSR, the Court held that this difference “is an insignificant advance.”

Since it would have been a trivial change for a person of skill in the art designing such alterable tool groups to add an indicator that could indicate any altered condition of the tool group, the Federal Circuit concluded that the district court did not err in determining that the manner in which patent divides up toolbars into groups, and the claimed manipulation of tool groups, would have been a common sense variation for a person of skill in the art.

The Federal Circuit also rejected Odom’s arguments of secondary considerations and reiterated that weak secondary considerations generally do not overcome a strong prima facie case of obviousness.

A Four-Step Guide for Securing Patent Portfolios after Stanford v. Roche

On June 6, 2011, the U.S. Supreme Court issued its highly anticipated decision in the Stanford v. Roche case. The facts behind Roche are easily replicated on college and university campuses around the nation, forewarning institutions of the potentially problematic IP issues that lurk behind each of their patent and technology transfer agreements. Today, most major research universities boast of vast IP portfolios, including dozens of patents, which were invented by professors and the like during the course of their employment. Oftentimes, these patents allow universities to generate a critical revenue stream by licensing the patents through established licensing offices or policies. However, under Roche, the ownership of the patents may not be as clear as universities previously thought. Though a serious review of existing patent portfolios and potential modifications of boilerplate patent agreement language is likely necessary, first understanding the facts behind Roche will clarify why these steps are strongly advised for universities.

Research fellow, Dr. Holodniy, signed a Copyright and Patent Agreement with Stanford University agreeing to assign his “‘right, title and interest in’ inventions resulting from his employment at the University.” Stanford, like many institutions, received federal funding from the National Institutes of Health for the HIV measurement technique research that Dr. Holodniy participated in. Dr. Holodniy, in pursuit of developing an improved method for quantifying HIV levels in blood samples, later collaborated with Cetus, a California research company that worked with Stanford’s scientists. Equally wary of patent laws and eager to get the right to the findings, Cetus had Dr. Holodniy sign a Visitor’s Confidentiality Agreement stating he “‘will assign and do[es] hereby assign’ to Cetus his ‘right, title and interest in each of the ideas, inventions and improvements’ made ‘as a consequence of [his] access to Cetus.’”

Two research entities. Two patent right agreements. One patent. Who wins?

According to the majority opinion in Roche, authored by Chief Justice Roberts, Cetus prevailed. This opinion is by no means groundbreaking. Rather, the decision merely reinforces the historical rule that “rights in an invention belong to the inventor.” Any institution involved with research and potential IP issues traditionally has their employees sign copyright and patent agreements since an employer has no right to their employees’ inventions without an express grant. Barring such agreement, employee inventions “remain the property of him who conceived it.” Thus, Roche mirrors the general principle that inventors own their inventions by holding, “mere employment is [not] sufficient to vest title to an employee’s invention in the employer.”

Next, Roche is not fodder for major legislative change since it simply provides a straightforward reading of the Bayh-Dole Act. An undoubtedly landmark piece of legislation, Bayh-Dole recognized the need for the commercialization of inventions that federal money was heartily supporting. Bayh-Dole has promoted and facilitated federal collaboration with commercial and nonprofit organization research by specifying what rights each party has when federal funding is involved. The relevant part of the Act cited in Roche provides that federal contractors (which include individuals, small business firms or nonprofits that are a party to the funding agreement) may “elect to retain title to any subject invention.” “Subject invention” is then defined as “any invention of the contractor conceived or first actually reduced to practice in the performance of work under a funding agreement.” The Roche opinion begins to sound more like a grammar lesson than a ruling from the highest court as Roberts explains what the phrase “of the contractor” means. Just as it reads, an “invention of a contractor” would be an invention that a contractor owns. And for the contractor to own such invention in the university context, its employees who participated in the federally funded research would have had to sign an agreement transferring their ownership rights. Thus, the Act is simple: federal contractors can elect to retain title to any invention they own.

Thus, Roche does not change the fact that universities still need to obtain express agreement from employees in order to acquire the rights to any inventions of their employees. The case also does not change any of the traditional interpretations or precedents involving the Bayh-Dole Act. However, the case does clarify the technology transfer and related rights between universities with federally funded research and the private companies with which they collaborate. This clarification signals the need for a stricter approach that universities should take in terms of drafting and ensuring their rights under patent agreements. In light of Roche, an immediate four-step plan should be implemented by colleges and universities.

First, institutions must examine their existing patent portfolios. As the marketability of portfolios increases with the sheer volume of patents, many universities strive to possess a wealth of patented inventions. The value of portfolios thus is not generally linked to a single patent, but the number of patents that outside firms are willing to invest in or collaborate with. Universities therefore capitalize on their portfolios through technology transfers, facilitating the commercialization of research and incentivizing future research through income generation. Thus, examining existing portfolios requires universities to determine what patent rights they currently possess. For those universities that receive federal funding for research, verify whether such funding was acquired before or after the development of each patented invention. If the patent was developed under the funding, check to see whether the employee solely assigned their rights to the university and whether the university has elected to retain the rights to such patent. As Roche explicitly held, “the Bayh-Dole Act does not confer title to federally funded inventions on contractors or authorize contractors to unilaterally take title to those inventions; it simply assures contractors that they may keep title to whatever it is they already have.”

Further, determine which patents were developed collaboratively with outside research firms and institutions. Because academia, private firms and the government are the holy trinity for innovation, universities must be clear on which of their patents were developed by their sole efforts. Creating a framework of mutual benefit that technology transfer ultimately desires requires an examination of the actual benefits universities have afforded themselves through their existing patents.

Second, institutions should closely scrutinize their previously signed employment agreements. Begin by checking whether employees even had rights to transfer in the first place. If the employee came from other institutions or private firms, are they now conducting research at their current university employer that was started elsewhere? Are current employees starting from scratch or building upon existing inventions developed through the funding, efforts and resources of outside entities with which the university has no connection? Finding these answers may require a look into the backgrounds of employees who joined the university as experienced researchers and professors, since they are likely to have signed prior patent agreements. Speak with employees who raise concern and inquire about any past employment agreements they signed. As part of inspecting existing patent agreements, determine the scope of the agreement- does it cover only the original invention or does it extend to any other inventions developed based off the underlying research? Answering these questions is vital in guaranteeing that a university actually retains rights to the patents marketed in their portfolios.

Third, develop a plan for amending existing agreements, or obtaining written intellectual property agreements if none exist. Start by finding out which employees have not signed patent and copyright agreements. Of those employees who have not signed, determine whether any have, or are in the process of, researching and developing inventions. Work with an attorney to develop specific agreements that will assign all existing rights to the university and will also transfer the employee’s rights to future inventions developed during their employment to the university. Any professor who knows that if they invent it, they own it, may be reluctant to hand over such rights. However, patent marketability and the benefit of commercialization of inventions that comes with university technology transfers should leverage some bargaining power over a hesitant employee. Alternatively, incentive provisions may be warranted in certain instances.

Further, refine or amend existing assignments that do not operate under the assumption that the university owns the patent rights. As part of this change, determine whether there are any employees who have transferred departments since the original patent or copyright agreement was signed. If a professor is currently in a research capacity but was not previously, determine whether that departmental change necessitates a revision of their previous agreement or the execution of a new one. Also research and ensure that employees have not assigned their rights to underlying inventions elsewhere or at any previous point during their current employment. Develop a plan for handling employees who are unwilling to sign modified agreements, as reluctance from some employees should be expected. Finally, care should be given in regard to the potential tax implications of amendments to existing agreements and additional incentives offered in connection with any transfer of existing rights in an invention.

Fourth, institutions should draft future employment agreements with more stringent language to prevent the type of patent right quandary exhibited in Roche. The problem in Roche could have been solved by conforming the tense of the verbs to the intention of the university- had Dr. Holodniy’s agreement with Stanford read that he “does” assign his rights, the ownership would have immediately transferred to Stanford. However, the language that Dr. Holodniy “agree[d] to assign” his rights was only a promise to do something in the future. That expectancy did not vest, however, because the Dr.’s subsequent agreement with Cetus included language immediately transferring ownership rights. The “will assign and do[es] hereby assign” phrase gave priority of ownership to Cetus, serving as partial justification for Stanford losing the suit. Thus, it is not an exaggeration to say that each agreement signed with professors and research fellows must be ironclad and reviewed to make certain the existing agreement accomplishes its intended purpose. This may require terminating the old form of agreement and replacing them with individualized agreements that definitively establish a status quo transfer of rights. The use of present tense verbs is imperative to ensure that rights actually are assigned, rather than just promising to be assigned subsequently.

In addition, incorporate provisions within the new agreements to handle situations where researchers work with other institutions in order to prevent an inadvertent transfer of rights. Employ language that specifically requires consent from the university before any employee signs over their rights to an outside institution. Also, include provisions requiring the disclosure of previously signed patent agreements at the outset of employment so that universities will be aware of potential litigation arising from contract and patent disputes.

With a large enough patent portfolio, the process of reviewing and updating patent agreements may appear daunting. However, based on the undisputable message of inventor rights in Roche, a serious assessment of existing agreements and the need for heightened specificity in the future is paramount. The decision in Roche encourages vigilance on the part of universities and requires steps to be taken to reduce liability to patent infringement and contract violation claims. The four above recommended steps above are not an exhaustive list of actions universities could take; instead, they provide a necessary starting point for universities in navigating patent portfolio review and reform.

Nonanalogous Art Lives! In Re Klein

Yesterday, the CAFC decided IN RE ARNOLD G. KLEIN 2010-1411, finding error in the USPTO’s rejection of patent claims based on obviousness, using non-analogous art.  You may find the following useful in your prosecution efforts. (A link to the decision can be found at the end of this post.)

The law is …

“A reference qualifies as prior art for an obviousness determination under § 103 only when it is analogous to the claimed invention. Innovention Toys, LLC, v. MGA Entertainment, Inc., No. 2010-1290, slip op. at 12 (Fed. Cir. Mar. 21, 2011); In re Bigio, 381 F.3d 1320, 1325 (Fed. Cir. 2004); In re Clay, 966 F.2d 656, 658 (Fed. Cir. 1992). “Two separate tests define the scope of analogous prior art: (1) whether the art is from the same field of endeavor, regardless of the problem addressed and, (2) if the reference is not within the field of the inventor’s endeavor, whether the reference still is reasonably pertinent to the particular problem with which the inventor is involved.” Bigio, at 1325. Here, the Board focused exclusively on the “reasonably pertinent to the particular problem” test. “A reference is reasonably pertinent if, even though it may be in a different field from that of the inventor’s endeavor, it is one which, because of the matter with which it deals, logically would have commended itself to an inventor’s attention in considering his problem.” Clay, 966 F.2d at 659. “If a reference disclosure has the same purpose as the claimed invention, the reference relates to the same  problem, and that fact supports use of that reference in an obviousness rejection.” Id.

Mr. Klein did not challenge the Board’s factual finding of the problem he was addressing, namely “making a nectar feeder with a movable divider to prepare different ratios of sugar and water for different animals.”

The panel of judges concluded …

“We agree with Mr. Klein that the Board’s conclusory finding that Roberts, O’Connor, and Kirkman are analogous is not supported by substantial evidence. The purpose of each of Roberts, O’Connor, or Kirkman is to separate solid objects. An inventor considering the problem of “making a nectar feeder with a movable divider to prepare different ratios of sugar and water for different animals,” would not have been motivated to consider any of these references when making his invention, particularly since none of these three references shows a partitioned container that is adapted to receive water or contain it long enough to be able to prepare different ratios in the different compartments. See Clay, 966 F.2d at 659 (“If [a reference] is directed to a different purpose, the inventor would accordingly have had less motivation or occasion to consider it.”).”

and …

“Greenspan and De Santo are not analogous, Mr. Klein argues, because they do not address multiple ratios or have a ‘movable divider.’ We agree. While Greenspan and De Santo are each directed to containers that facilitate the mixing of two separated substances together, an inventor considering the problem of “making a nectar feeder with a movable divider to prepare different ratios of sugar and water for different animals,” would not have been motivated to consider either of these references since neither of the references shows a movable divider …”

In Re Arnold G Klein

Microsoft Corp. v. i4i Limited Partnership et al.: Supreme Court Observations

In Microsoft v. i4i, the U.S. Supreme Court today unanimously (8-0) affirmed the clear and convincing evidence standard for invalidating issued U.S. patents under Section 282 of the Patent Act (1952).  In 2007, i4i sued Microsoft in U.S. District Court for infringement of i4i’s patent. As part of its defense, Microsoft asked for a jury instruction reciting a preponderance of the evidence standard for finding i4i’s patent invalid, rather than the long-standing clear and convincing evidence standard.  The District Court rejected Microsoft’s lower standard of proof, and a jury found that the patent was valid and that Microsoft infringed, awarding i4i a 9 figure damages sum.  Microsoft appealed to Federal Circuit, asserting in particular, that the District Court improperly instructed the jury on the standard of proof for invalidity.  The Federal Circuit affirmed the lower court’s holding and Microsoft petitioned the Supreme Court for certiorari, which was granted.

In its argument to the Supreme Court, Microsoft argued that either (1) a defendant in a patent infringement action need only convince the jury that an issued patent is invalid by a preponderance of the evidence standard, or (2) alternatively, that at the very least, the preponderance of the evidence standard should apply to evidence that was never considered by the PTO during examination.  The Supreme Court in its decision rejected both of Microsoft’s arguments.

In its decision, the Court first focused on the language of Section 282, which specifies that “[a] patent shall be presumed valid” and “[t]he burden of establishing invalidity of a patent … shall rest on the party asserting such invalidity.”  Microsoft had argued that Federal Circuit precedent establishing a clear and convincing evidence standard was not supported by the 1952 Act because Section 282 did not explicitly set forth that standard.  The Supreme Court noted that, while the statute includes no express articulation of the standard of proof, the statute does use the term “presumed valid,” which has a settled meaning in the common law.  Relying on its long-standing decision in Radio Corporation of America (RCA) v. Radio Eng’g Labs., Inc., 293 U.S. 1 (1934), the Court found that the common law jurisprudence dating back to the 19th century reflects that Microsoft’s proposed preponderance standard of proof “was too ‘dubious’ a basis to deem a patent invalid.”  According to the common law, the Court held, “a defendant raising an invalidity defense bore a ‘heavy burden of persuasion,’ requiring proof of the defense by clear and convincing evidence.”

The Court also noted that the Federal Circuit has interpreted Section 282 to require this clear and convincing evidence standard for nearly 30 years. And while Congress has amended the patent laws several times since the Patent Act was passed, “the evidentiary standard in § 282 has gone untouched.”  The Court concluded that Congress is well aware of the Federal Circuit’s treatment of the statute, but thus far has not amended the statute, and further that “[a]ny re-calibration of the standard of proof remains in [Congress’s] hands.”

The practical implications of the decisions are many.  First and foremost, the decision preserves the status quo, which in turn maintains the strength of U.S. patents and current patent enforcement mechanisms, particularly as they relate to innovation, business certainty, and job creation.  The Court has also sent a clear signal that, in view of well-established jurisprudence, if the standard is to change, it must be done by Congress, as any such change would have a profound ripple effect on the entire patent system.

Supreme Court Attempts to Clarify Bayh-Dole Act

The Supreme Court issued its much anticipated decision in Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems, Inc. et al. on June 6, 2011.  In a 7–2 decision, the Supreme Court determined that the University and Small Business Patent Procedures Act (“Bayh-Dole Act”) clarifies the priority of rights regarding ownership of patents arising from federally funded research.  In particular, the Court held that federal contractors do not gain automatic patent rights to federally funded inventions because inventors have the initial claim to ownership.

The Bayh-Dole Act allows for the transfer of exclusive control over many government-funded inventions to universities, nonprofit organizations and small businesses operating with federal contracts for the purpose of further development and commercialization.  The contracting universities, organizations and businesses are then permitted to exclusively license the inventions to other parties.  The federal government, however, retains “march-in” rights to license the invention to a third party, without the consent of the patent holder or original licensee, where it determines the invention is not being made available to the public on a reasonable basis—in other words, to issue a compulsory license.

The Court affirms the Federal Circuit decision that Stanford lacked standing to sue Roche because a Stanford researcher had assigned his rights to his invention to Cetus, a company who later became part of Roche.  The researcher had signed a visitor’s confidentiality agreement while working at Cetus, which stated that he “will assign and do[es] hereby assign” inventions to Cetus.  The Federal Circuit held that the visitor’s agreement superseded a copyright and patent agreement with Stanford in which the researcher “agree[d] to assign” inventions to Stanford.

On appeal, both Stanford and the solicitor general argued that the Federal Circuit decision would allow individual inventors to unilaterally terminate the exclusive rights of the university and other contractors.  However, the Supreme Court found that the position of Stanford and the solicitor general would move the inventor “from the front of the line to the back,” suggesting that inventors have the initial rights to their inventions and must explicitly assign any rights to an employer or a third party.

What ramifications does this decision have for federally funded inventions?

According to the Court, the Bayh-Dole Act merely gives contractors the right to “retain” ownership, which suggests that contractors must first obtain ownership.  Unfortunately, the issue of assignments was not before the Supreme Court.  The Federal Circuit interpreted the Cetus assignment where the inventors “will assign and do hereby assign” to be an explicit (present) assignment of future inventions, whereas the Stanford assignment, where the inventors “agree[d] to assign” inventions to Stanford, was a promise to hand over future inventions.

For now, companies may wish to ensure that their patent assignments explicitly state that inventors affirmatively assign their invention rights by incorporation of self-executing language.  Furthermore, it is advisable that employment agreements indicate that inventors are contractually obligated to and by their signature do assign their inventions to the company.

Reexamination Practice: One Size Does Not Fit All

Recently, there was a reexamination roundtable at the Patent Office last week where ideas for reexamination reform were proposed.  The Patent Office listened and took notes.  Relatively, it was a very productive meeting overall.  As the various speakers presented their comments to the questions posed by the Office, it was a clear reminder how everyone views reexamination differently:

  • Patent Owners who are trying to enforce their patents want a fair system that will not amount to a tool of delay and thin or meritless attacks on their patents;
  • Businesses and in-house counsel need a predictable system that can be used to challenge inferior patents and nuisance assertions;
  • Judges need to know that if a case is stayed pending reexamination, there will be a reasonably expedient final decision that can be used for the litigation;
  • Examiners need time and tools to help process unusually large and complicated reexaminations; and
  • The Patent Office needs clear rules that are fair to both sides, and can reach finality of a reexamination with special dispatch.

But right now we don’t have adequate metrics to know the situation, much less to measure progress.  What exactly does that mean?

Variation in Size and Complexity

For example, perhaps we should be tracking reexamination progress based on complexity:

  • Some reexaminations involve 5 claims.  Some involve 50 claims.  There is no reason why a 50 claim reexamination should take the same amount of time and resources as a 5 claim reexamination.
  • One reexamination may involve 4 grounds of rejection and another may involve 8.
  • One reexam request is 50 pages.  One is 2000 pages.
  • One reexamination involves several petitions.  Another involves no petitions.
  • One reexamination involves substantial claim amendments (including, adding new claims).  Another involves cancellation of claims.  Yet another has no amendments.

We could be counting claim volume as a metric, as opposed to just disposition of matters without regard to claim volume.  We could be tracking the disposition of petitions, pages of reexamination request, volume of SNQs, or any number of other metrics indicative of the size or complexity of a matter.

Variation in Timing – Especially due to Procedural Variations

Perhaps we should be tracking more information about pendency and measurement of time.  We should get more visibility into the timing of reexaminations at various stages.  Our current understanding of PTO statistics on reexaminations is that they often cite the time to NIRC.  That does not seem fair to the CRU, because the statistics do not seem to separate the amount of time in the CRU from the amount of time at the BPAI or the Federal Circuit.  That means that the pendency of reexaminations will scale with the numbers of appeals filed.  Perhaps the number in appeals is statistically strong or weak enough that this metric is a reliable indicator of pendency, but I do not see enough information to discern that.  And as the volume of cases increases, any change in appeal volume would change the statistical significance of past numbers.  Anyone with better insight and information is encouraged to send that to me and it will be posted if appropriate.

A Little More Data Would Go a Long Way

One size does not fit all when it comes to reexamination.  Of course, you cannot measure everything, but you also cannot manage what you do not measure.  A bit more detail in the figures would go a long way to measuring progress in the future.

Perils of Reissue – Recapture Doctrine Has Teeth!

Patent owners beware! Over the past year, the Federal Circuit has issued two major rulings1 which stand as a warning to patent owners that when requesting reissue of an arguably defective patent, if you attempt to broaden aspects of the claims relating to subject matter surrendered during prosecution of the defective patent,2 courts (and now likely the U.S. Patent Office as well) will extensively examine the “entire” prosecution history of the defective patent and its family to determine if you are attempting to recapture the surrendered subject matter.3 This means that the review will not only include the prosecution history of the “defective” patent undergoing reissue, but also the prosecution history of any and all “ancestor patent applications.”4 The warning is out. Improper recapture of surrendered subject matter will not be tolerated.

The unfortunate result of the Federal Circuit’s zealous desire to prevent improper recapture, however, is that: pursuit of claims of a broader or mixed scope through the reissue process can be tantamount to walking through a mine field that grows with the number of patent applications added to the patent’s family. If patent owners and portfolio managers desire to enlarge the scope of the claims of an issued patent,5 the reissue application must be applied for within two years from the grant date of the issued patent. Due to these broaden reissue difficulties, it may be prudent to make a determination of whether broader claims are desired much earlier in an application process and prior to patent grant/issuance to avoid the broaden reissue route.

One of the better available routes or strategies, for example, appears to be to pursue such broadened or mixed-scope claims through use of one or more continuation or divisional applications at some point prior to issuance/grant of the patent, e.g., after issuance of a notice of allowance. This continuation or divisional strategy can help patent owners avoid the reissue process, which under certain circumstances, arguably now seems to be best reserved for neutral or narrowing claim amendments6 such as: to account for newly discovered prior art, changes in the legal landscape7 or other impetus which may cause there to be a question as to the validity of the patented claims, to correct an error in the patent disclosure,8 to correct a foreign or domestic priority claim, or to add an additional non-surrendered species, thereby leaving broaden reissue reserved only as a procedure of last resort.

Rule Against Recapture

Section 251 of Title 35 of the U.S. Code allows patent owners to “enlarge the scope of the claims of the original patent” if “through error without any deceptive intention…the patentee claim[ed]…less than he had a right to claim in the [original] patent.” Deliberate withdrawal or amendment of claims or specific arguments limiting the scope of terms used in a claim to obtain a patent, however, are not considered to involve the type of “error” contemplated by Section 251.9 As such, in accordance with the statute, the patentee may not utilize the reissue process to broaden the claims of a patent to recapture subject matter surrendered10 through deliberate amendments or through specific arguments made during prosecution to overcome prior art.

Two recent court rulings out of the Federal Circuit, In re Mostafazadeh11 and MBO Laboratories Inc.12 further highlight and explain this requirement.

In re Mostafazadeh (“Mostafazadeh”)

In April 1998, inventors Mostafazadeh and Smith filed a patent application directed to semiconductor packaging, which issued as a patent in March 2000. During prosecution, the inventors amended the independent claims to add a claim element describing a “circular attachment pad” and argued that “circular” attachment pads were novel—no assertions were made that non-circular attachment pads were novel.13 The application was allowed as a result of the amendment and the patent issued as U.S. Patent No. 6,034,423 (“the ‘423 patent”). The inventors did not file a continuation application in order to pursue claims of a broader or different scope prior to the patent issuing.

In December 2001, the inventors filed a reissue application, deleting the “circular” shape requirement and declaring that the original claims of the ‘423 patent were partially inoperative because the “circular” shape feature of the attachment pad limitation was unduly limiting. The examiner rejected the reissue claims as violating the recapture doctrine, noting that the circular attachment pad limitation was argued during prosecution of the ‘423 patent “to be both critical to the invention and distinguishing over the prior art.” The inventors appealed to the Board of Patent Appeals and Interferences (“Board”), which affirmed the examiner’s rejection. Having been rebuffed by the Board, the inventors appealed to the Federal Circuit, asserting, in essence, that the reissue claims were materially narrower than the pre-amended version of the patent claims because they retained the “attachment pad” limitation.14

The Federal Circuit, however, disagreed, finding that the inventors failed to demonstrate material narrowing because use of a non-circular attachment pad was “well known in the prior art.”15 The court also found that additional narrowing features unrelated to the surrendered subject matter were insufficient to avoid recapture.16 In other words, to avoid the effects of the recapture doctrine, the reissue claims must retain at least material portions of the surrendered subject matter, and the remaining portions must serve the purpose of the addition of the original surrendered subject matter – i.e., to differentiate the reissue claims from the prior art. Even substantial material narrowing to other elements of the reissue claims will not allow patent owners to avoid this requirement.

MBO Laboratories Inc. (“MBO”)

Beginning in November 1990, MBO’s inventors submitted a series of patent applications covering a hypodermic safety syringe designed to minimize needle-stick injuries through the use of a needle positioned within a guard sleeve. These patent applications included a continuation-in-part application (“the ‘013 application”) which issued as U.S. Patent No. 5,395,347 (“the ‘347 patent”), and a continuation application (“the ‘772 application”) claiming priority to the ‘013 application filed one day prior to issuance of the ‘347 patent. After receiving a notice of allowance for the ‘772 application, MBO subsequently abandoned it and filed a new continuation application (“the ‘803 application”) with additional claims, which issued as U.S. Patent No. 5,755,699 (“the ‘699 patent”) without objection. MBO did not file a continuation application in order to pursue claims of a broader or different scope prior to the patent issuing, and no other applications in the application chain or family were pending.17

Slightly more than one year after issuance of the ‘699 patent, MBO requested a broadening reissue of the ‘699 patent, apparently fearing that the claims could be interpreted to cover only a retractable needle that retracts into a fixed guard, and not the arguably equivalent feature of a fixed needle and slidable guard. Surprisingly, in spite of the fact that during prosecution of the ‘772 application, MBO distinguished its invention from cited prior art, in essence, by arguing that MBO’s invention included the retractable needle limitation, the USPTO allowed the reissue without objection, which resulted in U.S. Patent No. RE 36,885 (“the RE ‘885 patent”).18

In 2003, MBO filed suit against Becton, Dickinson & Co. (“Becton”) asserting infringement of various claims of the RE ‘885 patent, which included three original claims copied without amendment from the ‘699 patent and four claims added during the reissue process. During the course of the litigation, Becton challenged the four reissue claims as being invalid under the recapture rule—arguing that the reissue claims recaptured subject matter surrendered during patent prosecution. The District Court agreed, holding that the four added claims were invalid. The District Court, however, also held that all claims including the original claims were invalid.19  MBO in an appeal to the Federal Circuit requested clarification.20

In discussing whether the patentee surrendered any subject matter, which necessarily requires a review of prosecution history, the Federal Circuit clarified that the determination of the existence of surrender of a claim’s scope, includes surrendered subject matter made not only while prosecuting the original application directly resulting in the original patent (i.e., the ‘699 patent), but also subject matter surrendered in any precedent divisional, continuation, or continuation-in-part application (here both the ‘722 and ‘013 applications).21 The original claims, however, remain unaffected by the recapture rule.22

Moral of This Story

As shown by these recent Federal Circuit cases, violation of the recapture rule results in invalidity of the offending reissue claims, but does not result in invalidity of claims that are not subject to the rule (i.e., original and non-violating amended claims). Depending upon the outcome of a review of the file history of the patent application that would result in the original patent (if still pending), any pending child, ancestor, or sister applications, and issued patents, as well as a determination of whether or not either of the pending ancestor or sister patent applications have a written description that would adequately support claims having the desired scope,23 there often is a likelihood that a broaden reissue would not provide the ability to achieve the same claim scope as could be achieved through the filing of one or more continuation or divisional applications or by amending the claims of the respective pending application. As such, one can surmise that had there been a child, ancestor, or sister patent application pending at the time the respective patent owners in these cases determined that their respective issued patents had insufficient claim scope, the claims of any such pending patent application could have been amended; or additional claims could have been added, or an additional continuation or divisional application claiming priority to the respective patent application strategically could have been filed, to provide broader scope of coverage. Accordingly, these recent Federal Circuit cases highlight the perils of the reissue process, show that the Recapture Doctrine still has teeth, emphasize the importance and benefits of strategic use of continuation or divisional applications and other actions by applicants prior to patent grant/issuance, and of course, warn of the potential hazards lurking in patent prosecution file histories.

New Standards for Litigants in Patent Cases: Inequitable Conduct is No Longer a Boiler Plate Defense

In recent years, an all too common defensive strategy to patent infringement claims has been to cry foul on the patent-holder and allege misconduct during the patenting process. Inequitable conduct, a judicially created equitable doctrine, is a defense to patent infringement allegations, which if successfully proven, can bar enforcement of the patent. However, inequitable conduct allegations may not have the same legal luster they once held based on the recent Federal Circuit holding in Therasense, Inc. v. Becton, Dickinson & Co.

Years of fluctuating opinions on the issue of inequitable conduct and its remedies, coupled with the over-use of the defense, has “plagued not only on the courts but also the entire patent system.” Fearing the guillotine-like effects of inequitable conduct charges, those applying for patents have deluged the PTO (Patent and Trademark Office) with often hundreds of unnecessary documents in an attempt to comply with the disclosure requirements during the patenting process. Such document submissions have created a backlog at the PTO. Moreover, fearing their clients may lose a patent infringement claim, an estimated “80 percent of patent infringement cases included allegations of inequitable conduct” as a defense. However, those days may now be over as Therasense will likely be a dramatic game-changer in the strategic side of patent litigation.

The Federal Circuit’s en banc decision under Chief Judge Rader sets forth new standards for establishing a defense of inequitable conduct. First, the opinion clarified what is meant by the term intentionally deceive: “to prevail on a claim of inequitable conduct, the accused infringer must prove that the patentee acted with the specific intent to deceive the PTO.” Rather than the amorphous criteria for intent that previously included negligence, gross negligence, and that the applicant “should have known,” now claims must be supported by clear and convincing evidence. Further, if nondisclosure of information regarding prior art is the foundation of an inequitable conduct claim, there must be clear and convincing evidence that the “applicant made a deliberate decision to withhold a known material reference.” Thus, a defendant can no longer just point to a general nondisclosure, but rather, must have sufficient evidence to show the applicant “knew of the reference, knew that it was material, and made a deliberate decision” to withhold it from the PTO.

Unlike cases that treat intent and materiality interchangeably, Judge Rader clarified that the two are “separate requirements” under an inequitable conduct defense. This distinction abolishes the use of a “sliding scale” by courts whereby a weak showing of intent could simply be supplemented with a strong showing of materiality and vice versa. Because these two elements are separate, neither can be inferred based on the existence of the other, forcing courts to now “weigh the evidence of intent to deceive independent of its analysis of materiality.”

The court also discussed the form of proof for intent, recognizing that “direct evidence of deceptive intent is rare,” therefore allowing judges to make inferences from “indirect and circumstantial evidence.” Because varying judicial inferences previously encouraged the proliferation of inequitable conduct claims, the court established that a clear and convincing evidence standard again must be met. However, the specific intent to deceive must be the “single most reasonable inference able to be drawn from the evidence.” Therefore, if “multiple reasonable inferences” as to the applicant’s intent can be drawn, then the defense will fail to meet this heightened standard.

Second, the ruling held that “but-for materiality” is required to prove inequitable conduct on the part of an applicant. The stringent standard of but-for materiality comes down to a simple question- had the PTO known of the prior art that an applicant failed to disclose, would the PTO have allowed their claim? If the PTO “would not have allowed a claim had it been aware of the undisclosed prior art,” the prior art is but-for material. However, like with most rules, the court carved out an exception– but-for proof is not necessary in cases of “affirmative egregious conduct”. Thus, if a company filed an “unmistakably false affidavit” then the misconduct is per se material. According to Judge Rader, this exception will help to restore a needed balance in patent law between encouraging “honesty before the PTO” and reducing “unfounded accusations of inequitable conduct.”

Finally, the remedy for inequitable conduct was dramatically changed. Previously, the remedy for inequitable conduct had earned itself the title of being the “‘atomic bomb’ of patent law” because of its far-reaching and potentially devastating financial, reputational and intellectual effects. A successful inequitable conduct defense could “render[] the entire patent unenforceable,” was unable to be “cured by reissue or reexamination” and could “spread from a single patent to render unenforceable other related patents and applications in the same technology.” Thus, once the trigger was pulled on an inequitable conduct defense, a company’s entire patent portfolio could face the firing squad. However, this majority holding recognized the concept of basic fairness undergirding the doctrine of inequitable conduct and held that courts should limit their application of the complete unenforceability remedy to “instances where the patentee’s misconduct resulted in the unfair benefit of receiving an unwarranted claim.”

The Therasense ruling will require patent attorneys to curb their inclination to over-use the defense of inequitable conduct and may alleviate the prior art research pressures of filing for a patent. Attorneys will also need to revise their trial strategies since those who do not update their playbook with the Federal Circuit’s new rules will likely fail on their inequitable conduct allegations. With stricter standards for proving intent and materiality and new limits on the application of inequitable conduct as a remedy, courts can predict more hesitation from alleged patent-infringers and the PTO can expect less prior art paperwork flooding their office.

Federal Circuit Attempts to Eradicate the Plague of Inequitable Conduct, Sets New Standards

The Federal Circuit issued its much anticipated en banc decision in Therasense, Inc. v. Becton, Dickinson & Co. on May 25, 2011 regarding inequitable conduct by patent applicants and attorneys during prosecution of patents. The Federal Circuit established a new standard for materiality and clarified its contradictory precedent on intent to deceive—the two factual predicates that must be established to prove inequitable conduct.  The Court thus recognized the problems created by the overuse of inequitable conduct claims by litigants and the differing standards applied by federal courts in evaluating issues of materiality and intent to deceive.

Inequitable conduct is an affirmative defense to a claim of patent infringement. At its most fundamental level, the battle cry of inequitable conduct is an assertion that the patent applicant or lawyer acted fraudulently before the United States Patent and Trademark Office. Therefore, notwithstanding any finding of infringement, the patent should be rendered unenforceable.

Because of the frequency with which it is plead, the potential devastating effects it has on the rights of the patent owner, the potential harm it may cause to the reputation of patent lawyers associated with the prosecution of the patent and the harm it has caused the examination process before the Patent and Trademark Office, the Federal Circuit has described inequitable conduct as both an “atomic bomb” and a “plague” on the patent system.

Court Creates “But-For” Test for Materiality

The Court laid out a new test for materiality that significantly raises the bar. With one exception, the Federal Circuit explained that information is material only when a claim would not have been allowed by the Patent and Trademark Office had the office been aware of the information. The one exception to this “but-for” test is in cases of affirmative egregious misconduct. For example, where the patent applicant “deliberately planned and carefully executed scheme[s]” to defraud the Patent and Trademark Office or courts, such information and misconduct is always material.

Court Adopts “Single Most Reasonable Inference” Test for Intent

Addressing the “intent” prong, the Federal Circuit clarified that a party must show, by clear and convincing evidence, that the patentee made a deliberate decision to withhold a known material reference. The Court was careful to note that the intent prong is independent of the materiality prong and that the sliding scale approach where a party could demonstrate a lower level of intent if the information was highly material is no longer acceptable. Instead, to meet the test, the evidence must be sufficient to require a finding of deceitful intent in light of all the circumstances. The specific intent to deceive must be the single most reasonable inference able to be drawn from the evidence. Finally, the Court noted that a patentee need not offer any good faith explanation to counter a finding of intent until the accused infringer first proves a threshold level of intent to deceive by such clear and convincing evidence.

Overall, the Federal Circuit adopted a more stringent standard for proving inequitable conduct that is likely to reduce the high number of meritless inequitable conduct claims in litigation. Notwithstanding the high hurdles introduced by way of this landmark opinion, patent applicants still need to take care in managing the disclosure of information during prosecution and be ever mindful of material information including disclosures and arguments made in related foreign applications.

Federal Circuit Significantly Restricts the Doctrine of Inequitable Conduct in Therasense v. Becton Dickenson

On May 25, 2011, the U.S. Court of Appeals for the Federal Circuit issued an en banc decision in Therasense v. Becton Dickenson, No. 2008-1511 (Fed. Cir., May 25, 2011), outlining a heightened standard for inequitable conduct in patent infringement cases, requiring a finding of both specific intent to deceive and a “but-for” materiality.

The doctrine of inequitable conduct is a defense to patent infringement that, if proved, bars enforcement of the patent. In making its decision, the Federal Circuit noted that the doctrine evolved from three early U.S. Supreme Court Cases, which involved particularly egregious misconduct, including perjury, the manufacture of false evidence, and the suppression of evidence, to a broader scope of misconduct including the mere nondisclosure of information to the PTO. In addition, the doctrine evolved from a mere dismissal of the suit, to the unenforceability of the entire patent and its continuations and divisionals. In order to prove inequitable conduct, the accused infringer must prove intent and materiality by clear and convincing evidence. If the infringer meets this burden, the court must then weigh the equities to determine whether the applicant’s conduct before the PTO warrants rendering the entire patent unenforceable. The Federal Circuit noted that the standards for materiality have fluctuated over time, and the standard has been weakened by placing intent and materiality on a sliding scale, thus both conflating and diluting the standards at the same time. As a result, inequitable conduct has become a significant litigation strategy, increasing the complexity, duration, and cost of patent litigation. According to the Federal Circuit, one study estimated that eighty percent of patent infringement cases included allegations of inequitable conduct. This has plagued the courts and the whole patent system.

In this en banc decision, the Federal Circuit adopted a much more restrictive test for inequitable conduct. With regard to intent, an accused infringer must now prove that the patentee acted with specific intent to deceive the PTO. For example, the accused infringer must prove by clear and convincing evidence that:

(1) the applicant knew of the reference,

(2) knew that it was material to the prosecution of the application, and

(3) made a deliberate decision to withhold it.

With regard to materiality, the Federal Circuit adopted a “but-for” standard, e.g. but-for the non-disclosure of the reference, the patent would not have issued.This is a much more restrictive standard than the prior standard and even the patent office’s own standard under Rule 56. In fact, the Federal Circuit said specifically that they do not adopt the PTO’s definition of materiality under Rule 56.

The Therasense decision has strictly limited the usefulness of the inequitable conduct doctrine as a defense to patent infringement. It is likely that this decision will help to simplify patent infringement cases and may lead to more patents being upheld and infringed.

Therasense Inc. v. Becton, Dickinson and Company—The Federal Circuit tightens the standards necessary to establish the inequitable conduct defense by requiring a “but-for” showing of materiality

In Therasense Inc. v. Becton, Dickinson and Co., Appeal No. 2008-1511(May 25, 2011), an en banc Federal Circuit issued a significant ruling on the elements necessary to establish an inequitable conduct defense. The stakes for a patent owner facing a charge of inequitable conduct are high: inequitable conduct renders the affected patent unenforceable and could support a finding that the case was exceptional, entitling the alleged infringer to attorneys fees. A party alleging inequitable conduct had to show that the patentee misrepresented or failed to disclose material information with an intent to deceive the Patent Office. The courts were then to engage in an equitable “balancing” of materiality and intent to determine whether the conduct justified finding the patents unenforceable.

While recent scholarship suggests that the defense was not particularly successful in cases that made their way to the Federal Circuit and that the Federal Circuit applied stricter standards as to the elements of the defense, the incentives to assert the defense were so great that patent litigators were alleging inequitable conduct as a matter of course. In fact, the defense of inequitable conduct was said to have been asserted in as many as 60 to 80 percent of patent infringement cases. Also, many believed that the standards for finding inequitable conduct elements had not been sufficiently articulated by the Federal Circuit.

In Therasense, a six-judge majority addressed those concerns by significantly tightening the standards to be used in assessing the materiality and intent elements. Most importantly, the majority held that in most circumstances the party asserting an inequitable conduct defense must establish that “but-for” the misrepresentation or omission, the patent would not have issued. Further, materiality and intent were held to be separate requirements and were no longer part of a sliding scale where a showing of greater materiality permitted a showing of lesser intent. The Federal Circuit did, however, recognize that in instances of egregious misconduct, a “but-for” showing would not be required.

The decision brings to a close an almost 30-year effort by the Federal Circuit to tighten up the standards for proving inequitable conduct which the Court had earlier described as “a plague” on the patent system. As a result, it was contributing to the massive citation of prior art to the PTO, which in turn contributed significantly to the backlog of patent applications. The use of the inequitable conduct defense was also said to haveFederal Circuit tightens the standards necessary to establish the inequitable conduct defense by requiring a “but-for” showing of materiality  several other negative effects, such as the potential to destroy parts of patent portfolios/families, inhibit the possibility of settlement and cast a cloud over the reputations of inventors and patent prosecutors. Indeed, the Federal Circuit prefaced its holding by stating that it “now tightens the standards for finding both intent and materiality in order to redirect [the inequitable conduct] doctrine that has been overused to the detriment of the public.” Slip Op. at 24.

The Federal Circuit created an exception to the “but-for” materiality holding in the case of “affirmative egregious misconduct.” Id. at 29. One example of such egregious misconduct would be the filing of an unmistakably false affidavit. The Federal Circuit pointed out that the egregious misconduct exception provided a measure of flexibility to capture extraordinary circumstances.

In the Therasense case, the alleged misconduct had been the failure to disclose briefs that the patent applicant had submitted to the European Patent Office regarding the European counterpart of a related patent owned by the patent applicant. The District Court had found the patent unenforceable due to this failure to disclose. The Federal Circuit reversed and remanded and instructed the District Court to determine whether the PTO would not have granted the patent but for the failure to disclose the European Patent Office briefs. The Court also vacated the District Court finding of intent to deceive because it had decided this issue under the wrong standard. The District Court was instructed to determine whether there was clear and convincing evidence demonstrating that the patent applicant knew of the European Patent Office briefs, knew of their materiality and made the conscious decision not to disclose them in order to deceive the PTO.

The four judge dissent stressed that the “but-for” test of materiality departed from Federal Circuit precedent and was inconsistent with the PTO’s standard set forth in PTO Rule 56. The majority opinion’s response to the dissent was that the PTO’s Rule 56 standard was one of the major causes of the rampant use of the inequitable conduct defense.

The Patent and Trademark Office was quick to react to the decision. On May 26, 2011 it announced that it was “carefully studying the important en banc decision by the U.S. Court of Appeals for the Federal Circuit in the case of Therasense v. Becton, Dickinson to assess how it may impact agency practices and procedures.The agency also announced that it expects to soon issue guidance to applicants related to the prior art and information they must disclose to the Office in view of Therasense.” As the press release noted, the Therasense “decision resolves uncertainties in many aspects of how district courts must apply the inequitable conduct doctrine.”