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Non Practicing Entities in Europe

Sun, 01/11/2015 - 21:00

Guest Post by Peter Arrowsmith. Arrowsmith is a patent attorney and partner at the London based firm Cleveland IP.

Non practicing entities (NPEs) are a familiar part of the IP landscape in Europe, just as they are in the US. However, NPE activity has historically been lower in Europe. This article analyses the present situation in Europe compared to the US. In addition, we analyse how NPE activity might develop in Europe with the anticipated arrival of the Unified Patents Court (UPC).

 Factors that encourage NPE activity

There are various factors in a patent system that might influence or encourage activity by a NPE.  A non-exhaustive list of possible factors is outlined below, and Europe is compared against the US.

1. Low cost risk in litigation

A NPE is likely to be encouraged to litigate if they can initiate infringement proceedings without incurring a significant cost risk. In the US this is often possible because the losing side does not typically pay the winner’s legal costs. Additionally, NPEs can often find a law firm willing to take the case on a conditional fee basis. In Europe, by contrast, the losing side is typically required to pay at least a portion of the winner’s legal costs. Conditional fee arrangements are also less common.

Verdict: US more favourable to NPEs

2. High costs in litigation for the other side

A NPE is likely to benefit in a system where the opposing side will incur high costs in defending themselves. In such a system the pressure to settle will be significant, simply to avoid the costs involved in litigation. In Europe the cost of multi-jurisdictional litigation is likely to be high, but not necessarily higher than the costs involved in US litigation.

Verdict: Dead heat

3. Uncertainty

A NPE is likely to benefit in a patent system where the outcome of a case is difficult to predict, especially if this is coupled with high costs in litigation. This is likely to encourage a NPE to bring more cases on the basis that they are statistically likely to register some wins. In turn, this will increase pressure to settle before trial. Europe may be considered more predictable than the US in this comparison, simply because decisions are made by experienced patent judges, rather than lay juries.

Verdict: US more favourable to NPEs

 4. Size of Market

A NPE is likely to benefit if their patent has a wide geographical scope in an important market because a single adverse decision could have a large economic impact on the other side. In the US a single decision can be effective across the entire country, whereas in Europe it is necessary to enforce patents country-by-country.

Verdict: US more favourable to NPEs

 5. Bifurcation

A system in which the issues of infringement and validity are considered separately is also likely to favour a NPE. In such a system the NPE can obtain a favourable decision on infringement before validity is even considered. This may increase pressure on the other side to settle following an initial decision, even in cases where the validity of the patent is questionable. Europe may be more attractive to NPEs in this comparison since certain countries (notably Germany) permit bifurcation.

Verdict: Europe more favourable to NPEs

 6. Speed

A fast system can allow a NPE to exert pressure on the other side, which can encourage early settlement. These systems are likely to favour NPEs. In this comparison there is little to choose between Europe and the US, since fast or slow decisions are possible in both systems, depending on the forum chosen to commence proceedings.

Verdict: Dead heat

Overall this analysis suggests that the US patent system is more attractive than Europe for NPEs, which is consistent with the reality that we see. The European system is, however, still viable for NPEs, although they may need to be more selective about the cases and targets they pursue.

The Unified Patents Court – a new opportunity for NPEs

NPEs have registered a number of recent successes in European Courts (see, for instance, Vringo vs. ZTE in the UK), demonstrating that the European patent system can support this business model. All of the factors above would need to be considered by a NPE to decide whether litigation would be worthwhile in each case.

Of course, the patent system in Europe is on the verge of significant change, and the Unified Patents Court (UPC) is close to becoming a reality. The introduction of this Court will significantly alter the litigation landscape, meaning that a change in NPE activity can be expected.

In the current European system only national courts of individual countries are competent to decide on the infringement of European patents. Once it is established, the UPC will be competent to decide on validity and infringement of patents across the cooperating states, which covers most of Europe. A significant motivation in the development of this Court has been the desire to increase simplicity and decrease the cost of pan-Europe patent litigation. If successful, the new Court is likely to have many advantages for conventional business. However, a side effect is that the new Court may increase the attractiveness of Europe from the perspective of a NPE.

In particular, the UPC would appear to present a number of potential advantages from the perspective of a NPE.

1. Size of Market

The UPC will issue decisions that are effective across most of the European continent. Thus, the economic impact of individual decisions is likely to be high for the losing party – much higher than in the present system.

2. Bifurcation

The UPC is likely to permit bifurcation in certain instances. This is likely to favour NPEs, since they may be able to obtain a favourable decision on infringement before validity is considered. This is likely to increase the pressure to settle, even in situations where a patent has questionable validity.

3. Uncertainty

There is currently a great deal of uncertainty about how the new Court will operate, especially in the early days, in the absence of a body of case law. This initial uncertainty is likely to favour NPEs, since it will be harder to predict how a case will be decided, increasing the pressure to settle before trial.

Once the UPC is established there will be a period during which patent owners can ‘opt out’ of the exclusive jurisdiction of the Court. During the early years, this will allow patent owners to continue to use national courts, while there is uncertainty over how the UPC will operate.  Many European practitioners anticipate that conventional applicants are likely to exercise this opt out, provided the fee for doing so is not exorbitant. For a NPE there are likely to be more advantages in the UPC than the current system, meaning that few are likely to opt out of the Court’s jurisdiction. This means that a significant number of early cases in the UPC may involve NPEs.

Promega v. Life Tech, pt. 2: Inducing Oneself

Fri, 01/09/2015 - 00:18

By Jason Rantanen

Promega Corp. v. Life Tech. Corp. (Fed. Cir. 2014) Download Promega v. Life Tech
Panel: Prost (dissenting-in-part), Mayer, Chen (author)

Before the holidays, I wrote about the enablement issue in this case.  Today I’ll talk about the inducement issue, which involves two significant—and probably erroneous—doctrinal developments.  I say “probably erroneous” because in my view at least one, if not both, would likely be reversed by the Supreme Court were it to grant cert.

The short version is that the majority held that in 35 U.S.C. § 271(f)(1), “induce” means “specific intent to cause” and “a substantial portion of the components” includes “a single important or essential component.”  The consequence of the former is that one can induce oneself; the consequence of the latter is that merely supplying a single “main” or “major” component of the claimed invention is sufficient for purposes to 271(f)(1).  Judge Prost dissented as to “induce” and would not have reached the “substantial portion” issue.

The patent claim: The asserted claim, claim 42 of patent No. RE 37,984, is directed to “[a] kit for analyzing polymorphism in at least one locus in a DNA sample.”  The claim limitations involve vessels containing a variety of materials: a mixture of primers, a “polymerizing enzyme suitable for performing a primer-directed polymerase chain reaction,” adenosine, guanine, cytosine and thymidine, a buffer solution, and template DNA.

LifeTech’s activities: LifeTech manufactured Taq polymerase in the United States and shipped it to its facility in the U.K. where it was combined with foreign-manufactured components to produce kits containing all the claimed elements.  While some of the kits were sold in the United States, the main issue on appeal involved kits that never entered the United States.  Taq is indisputably “a polymerizing enzyme suitable for performing a primer-directed polymerase chain reaction.”

Procedural History: At trial, the jury was instructed to consider liability for all “United States sales,” which included “all kits made, used, offered for sale, sold within the United States or imported in the United States as well as kits made outside the United States where a substantial portion of the components are supplied from the United States.” Id. at 11 (emphasis added).  LifeTech preserved its challenge to the italicized language.  The jury returned a verdict finding that “all of LifeTech’s worldwide sales were attributable to infringing acts in the United States.”  Id.  The district court subsequently granted JMOL in LifeTech’s favor.

On appeal, Promega challenged the court’s grant of JMOL as to both sales infringing under 271(a) and under 271(f)(1).  The Federal Circuit focused primarily on the 271(f)(1) issue. 35 U.S.C. § 271(f)(1) states:

Whoever without authority supplies or causes to be supplied in or from the United States all or a substantial portion of the components of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.

(emphasis added).  LifeTech raised two legal grounds for affirming the district court’s grant of JMOL.  First, it argued that 271(f)(1) requires inducement of another; one cannot induce oneself.  Thus, it could not be liable under 271(f)(1) for exporting the Taq polymerase to itself to combine with the other components.  Second, it argued that 271(f)(1) requires that a “substantial portion” of the components be exported; “one” component is not a “substantial portion” of the components.

For 271(f)(1), one can induce oneself: The majority first rejected LifeTech’s argument that 271(f)(1) should be interpreted as requiring another person to be induced.  Rather, it means “merely the specific intent to cause the combination of the components of a patented invention outside the United States.”  Slip Op. at 23.  In reaching this conclusion, it first looked to the dictionary definition of “induce,” observing that it means “to bring about, to cause.”  Id.  From this, it concluded that “[t]he object of the transitive verb ‘induce’ can either be a person or a thing, such as an activity or result.”  Id.  Here, it is the activity that is being “induce[d]”: “The statute is written such that an activity—”the combination”—is the object of “induce,” not a person.”  Id.  Thus, no third party is necessary.  Furthermore, “[h]ad Congress wanted to limit “induce” to actions contemplated by two separate parties, it could easily have done so by assigning liability only where one party actively induced another “to combine the [p]atented components.”  Id.  To bolster its conclusion, the majority drew upon its reading of the legislative history and what it divined as Congress’s intent in passing the statute.  The result is to effectively turn the word “induce” into word “cause.”

The majority’s pseudo-textualist analysis: I’m thoroughly unconvinced by the majority’s analysis.  Setting aside the majority’s reading of the legislative history, which Judge Prost criticizes in her dissent, its textual analysis is deeply flawed.  Proper textualism involves the consideration of the ordinary meaning of words, evaluated in context, and an application of the canons of statutory construction.  But just as in patent law, “ordinary meaning” doesn’t just mean “ordinary meaning.”  Rather, terms with a legal meaning (such as “person”) are given their ordinary legal meaning.   The problem with the majority’s analysis begins with its reliance on a general-purpose dictionary for a term that has a well-established legal meaning and goes downhill from there.

While “induce” might mean “to bring about, to cause” in the general-usage context, in the legal context—and particularly the patent law context—its meaning invariably involves a relationship between two separate persons.  I am not aware of any instances (but would be interested to learn of them) where courts have interpreted “induce”  as encompassing one’s own performance of the proscribed acts.  This is especially true with respect to 271(b), where both the Federal Circuit and the Supreme Court have written extensively about the requirements for the relationship to rise to the level of inducement.  One would not “induce” infringement of a patent by using a machine to carry out a claimed process; one would be liable for direct infringement.  To treat the word as if it were necessary to start from first principles, looking it up in a general purpose dictionary, is to ignore all of this well-established legal meaning.

As part of my background reading for this post, I took a look at Bryan Garner’s Black’s Law Dictionary.  Here’s his entry for “inducement” (there is no separate entry for “induce”), defining it as “The act or process of enticing or persuading another person to take a certain course of action”:

Congress did not have the benefit of Professor Garner’s text in 1984, when it passed 274(f); this definition comes from the 1999 version of Black’s.*  But my sense is that Garner’s definition is a lot closer to the legal meaning of “actively inducement” than “”  Slip Op. at 23.  And to the extent it is descriptive of the legal meaning, it unquestionably supports the interpretation as involving another person.

“Congress knows how to say…”: In addition to its dictionary definition, the majority also observed that Congress could easily have included the word “another” in the statute.  The main problem with this interpretative principle is that it only applies when it’s clear that Congress actually does know how to say something.  Typically, the principle is invoked in the context of a parallel statute in which Congress actually said it.  See, e.g., Limelight Networks, Inc. v. Akamai Technologies, Inc., 134 S. Ct. 2111, 2118 (2014) (“As this provision illustrates, when Congress wishes to impose liability for inducing activity that does not itself constitute direct infringement, it knows precisely how to do so.”) (emphasis added).  Here, however, there is no such contrasting statute that contains that “something;” worse, the closest parallel—Section 271(b)—does not contain the word “another.”  Rather, it says simply “Whoever actively induces infringement of a patent shall be liable as an infringer.”

Judge Prost’s Dissent: Judge Prost’s dissent identifies another problem with the majority’s interpretation: that interpretation is foreclosed by precedent.  “[W]e have never before held—in the context of either § 271(f) or § 271(b)—that a party can induce itself to infringe.  And for good reason: this conclusion runs counter to unambiguous Supreme Court precedent.”  Dissent at 2.

Twice the Supreme Court has held that inducement liability requires a third party. In interpreting the phrase “induces infringement” in § 271(b), the Supreme Court wrote that it requires “that the inducer lead another” or “persuade another.” Global-Tech Appliances, Inc. v. SEB SA, 131 S. Ct. 2060, 2065 (2011) (emphases added). Additionally, in Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., a case in the analogous copyright context, the Supreme Court stated that inducement is defined as “entic[ing] or persuad[ing] another” to infringe. 545 U.S. 913, 935 (2005) (emphasis added). The majority cannot point to a single case—from the Supreme Court or otherwise—that supports its contrary interpretation of inducement.

Id. at 2-3.

Judge Prost might go too far in arguing that the majority’s interpretation is foreclosed by precedent (As the majority points out, none of these cases directly confronted the question of whether one can “induce” oneself), but her underlying point is sound: these cases demonstrated that the meaning of “induce” is already well-established as requiring another person.

Multinational companies must be careful: As long as the accused party meets the “supplies…a substantial portion of the components” requirement, it will be liable for its own foreign combination of those elements.**   This has particular importance for multinational companies that engage in distributed manufacturing.  As a policy matter, the court’s decision pushes those companies towards one of two alternatives: purchasing their components from another (possibly US) supplier or simply making the components abroad.  Perhaps the lack of liability in this situation was an oversight in the statute, a statutory loophole.  But if so, the appropriate response would be—as was the case following Deepsouth—legislative action.  (I’m not convinced that it’s necessarily a loophole, but need to think further on that point.)

Every “essential” component is a “substantial portion of the components.”  The majority also interpreted the requirement that “all or a substantial portion of the components of a patented invention” be supplied, concluding that “substantial portion of the components” includes “a single important or essential component.”  Slip Op. at 27.  Here, that component was the Taq polymerase, a widely-used enzyme for polymerase chain reaction.  The court concluded that supplying Taq was enough based on the following evidence: “Without Taq polymerase, the genetic testing kit recited in the Tautz patent would be inoperable because no PCR could occur.  LifeTech’s own witness admitted that the Taq polymerase is one of the “main” and “major components of the accused kits.”  Id. at 32.  As the Taq example demonstrates, under the court’s interpretation any component of a patented invention is an essential component.  If one removes Taq, the kit won’t work; if one removes the primers, the kit won’t work; if one removes the nucelotide bases, the kit won’t work.  This has the potential to greatly expand liability under 271(f)(1).

Rendering 271(f)(2) superfluous: In my view, the majority’s textual analysis of  “substantial portion” suffers from similar flaws as its analysis of “induce.”   The deepest, however, is that by reading “substantial portion” as it does, the majority renders 271(f)(2) superfluous.  That section states:

(2) Whoever without authority supplies or causes to be supplied in or from the United States any component of a patented invention that is especially made or especially adapted for use in the invention and not a staple article or commodity of commerce suitable for substantial noninfringing use, where such component is uncombined in whole or in part, knowing that such component is so made or adapted and intending that such component will be combined outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.

Under the majority’s interpretation of “substantial portion,” 271(f)(1) reads:

“Whoever without authority supplies or causes to be supplied in or from the United States an important or essential component of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.”

The only differences between the two are that (f)(2) is limited to components that are “especially made or especially adapted for use in the invention and not a staple article or commodity of commerce suitable for substantial noninfringing use;” a knowledge of infringement requirement in (f)(2); and the “intending that such component will be combined” language of (f)(2) versus the “in such manner as to actively induce the combination” language of (f)(1).  The first two differences make (f)(2)’s scope narrower than that of (f)(1), and the third does not constitute a meaningful difference under the majority’s interpretation of “actively induces.”***  The result is that, under the majority’s interpretation, I can’t envision any conduct that would fall within (f)(2) that would not also fall within (f)(1).

*The older definition of “induce” from Black’s doesn’t provide much interpretative help in my view.  See Black’s Law Dictionary, Fourth Edition (West 1951) (defining “induce” as “to bring on or about, to affect, cause, to influence to an act or course of conduct, lead by persuasion or reasoning, incite by motives, prevail on”) (this definition was carried forward through at least the 1990 version). Part of my ambivalence is that without looking at the source of the definition, it’s not clear that another party isn’t required.  And once you look at the source of the definition, it’s apparent that the case wasn’t talking about the legal meaning of “induce” but it’s general purpose meaning.  See State v. Stratford, 55 Idaho 65 (Idaho 1934).

**Nor does the argument that the majority’s interpretation still imposes an “intent” requirement change the analysis.  The majority concludes that “actively induce the combination” means “merely the specific intent to cause the combination of the components of a patented invention outside the United States.”  Slip Op. at 23.  This is nothing more than a volitional conduct requirement: a person that combines the elements will necessarily have the “specific intent to cause the combination” except in very rare, very unusual circumstances.  And the jury instruction discussed above did not mention any requirement of intent.

***If “actively induce” were interpreted as requiring the participation of a third party, then there might be a difference between the two in that a reasonable reading of 271(f)(2) is that it covers one’s own combination of the components.

Side note: This appeal is one of the two that were at the heart of In re Reines; Ed Reines represents LifeTech.  In the other appeal, the district court’s judgment in favor of Promega was summarily affirmed in March.

Comments are welcome.  My comment moderation policy is in effect. 

Erich Spangenberg’s predictions for 2015 Patent Law

Wed, 01/07/2015 - 12:49

With his usual precision, Erich Spangenberg highlights the new lows for patent law in 2015 on his IPNav Blog.

Vringo v. ZTE: Troll Status is Irrelevant

Wed, 01/07/2015 - 12:29

Guest Post by Peter Arrowsmith. Arrowsmith is a patent attorney and partner at the London based firm Cleveland IP

In a recent judgment from the High Court in England & Wales, a Vringo patent was found valid and infringed by ZTE, the Chinese telecommunications giant.  This case involved an interesting combination of parties: Vringo, an alleged patent troll, against ZTE, a leading Chinese innovator.  The case is also of interest because the relevant patent was deemed essential to the 3GPPP telecommunications standard, which means that hardware produced according to the standard would inevitably infringe the patent.

Vringo is a US company headquartered in New York City.  Its website says the following about its activities:

Vringo, Inc. is engaged in the innovation, development and monetization of intellectual property and mobile technologies. Vringo’s intellectual property portfolio consists of over 500 patents and patent applications covering telecom infrastructure, internet search, and mobile technologies. The patents and patent applications have been developed internally, and acquired from third parties.

In this case the relevant patent was filed by Nokia, and acquired by Vringo after grant.

Vringo’s website has details of various patent enforcement activities around the world against companies such as ZTE, ASUS, Google and AOL.  Despite their global activities and sizeable patent portfolio, Vringo employ only 27 people, and do not produce any physical products.  As such, Vringo could reasonably be called a non-practicing entity (NPE), or even a patent troll, if one wanted to be pejorative.

The judgment dealt with Vringo’s business model directly, as follows:

Although they never say so bluntly, ZTE contend that Vringo are ‘patent trolls’.  They contend that Vringo have conducted themselves in various inappropriate ways around the world against ZTE.  However ZTE have not alleged or pleaded that any of this conduct amounts to a defence relevant to the issues I have to decide at this trial.  For example, no defence in competition law is relied on.  Vringo do not accept that ZTE’s allegations are correct.  Whether ZTE are right or wrong about this is irrelevant and I will ignore these allegations.

Thus, the case was correctly decided without reference to Vringo’s business model.  This seems just, especially given the difficulty in agreeing upon a definition of a NPE or patent troll.

ZTE is a Chinese telecommunications company with around 70,000 employees.  They have grown into one of the largest telecommunications companies in the world, and are also very active users of intellectual property.  In fact, ZTE filed more PCT applications than any other company in the world in 2011 and 2012.

It is not straightforward to identify the bad guys and good guys in patent litigation.  In general, this is simply a matter of perspective.  However, Chinese companies are often cast in the role of bad guys, due to a reputation of disregard for IP rights.  Meanwhile, US companies are often cast as the good guys, as they pioneer new technologies for the benefit of humanity.  In this case it is clear that the stereotypic labels do not apply.  Indeed, it is an indication of evolution in the IP landscape to see a Chinese innovator being sued by a Manhattan company, which did not contribute to the patented technology but acquired it from overseas.

The technology in this case relates to the handover of mobile phone calls from one cell to another.  In particular, it relates to a ‘soft’ handover between cells.

The invention was developed by Nokia during a rapid period of development in 1999.  At this time Nokia were involved in the process for establishing the 3GPP standard and met regularly with contributors from the other leading telecommunications companies of the day.  The patent is relevant to one specific working group, which was involved in issues relating to the handover of calls.  The working group, WG3, produced various memoranda and papers regarding the progress of their work.  These papers formed part of the prior art, against which the validity of the patent was assessed.

Nokia developed the invention while discussions regarding the standard were ongoing, and they filed a patent application.  The invention was subsequently disclosed to the working group, and was eventually adopted as part of the finalised standard.  As a consequence, equipment produced in accordance with the standard would inevitably infringe the patent.  The key question in this case was therefore whether the patent is valid over the papers produced by the working group before the date of filing.

In this case the judge was not persuaded by ZTE’s case that the invention was obvious.  Therefore, the patent was found to be valid and infringed by ZTE.

This decision is also the first of a series of patent trials scheduled to be heard in the UK between these parties in the next year or so.  It will be fascinating to follow this intriguing battle in the coming months.

2015 Updates to Eligibility Guidelines

Wed, 01/07/2015 - 10:31

The most impactful patent decision in 2014 looks to be Alice Corp. In that case, the Supreme Court outlined its jurisprudential steps for determining whether a claimed innovation is patent eligible. In the process, the court narrowed the scope of eligibility (implicitly invalidating many issued patents) and also seemingly unified the approach to eligibility across the potential subject matter. Alice Corp. applies equally to USPTO administrative procedures as well as to patent challenges in federal courts.

Gaps in the Process: Although the court created a framework for decisionmaking, it also left a number of important gaps that make it quite difficult for a bureaucrat patent examiner to follow the steps without substantial creative legal thinking.

To help fill this whole, in mid-December the USPTO released its 2014 Interim Guidance on Patent Subject Matter Eligibility.  The guidelines where released in “interim-but-final” form and I expect that some amendments to those will come in 2015 in response to both advances in case law as well as commentary from interested parties.  To that end, the USPTO has requested feedback by March 15, 2015 sent to

FORUM: The Office is also holding an public forum on the guidlines at the USPTO main campus in Alexandria on Jan 21, 2015.  Anyone wanting to attend and/or present at the event needs to contact the USPTO (at the same email address above) by Friday January 9, 2015. More info here. According to the release, “only those with an accepted attendance request will be permitted to attend.”

The forum will provide an opportunity to provide specific examples of how the USPTO should be drawing the line between eligible and ineligible subject matter.

The Federal Circuit and Judicial Transparency

Tue, 01/06/2015 - 13:58

By Jason Rantanen

Last week, in writing about the Federal Circuit’s grant of en banc review in SCA Hygiene Products v. First Quality Baby Products, I observed that the order was not yet available on the court’s website.  Upon checking again this morning, I noted that it continues to be unavailable.

As a general matter, I tend to favor the existence of the Federal Circuit and believe that the judges who sit on that court are largely just folks who are trying to do the best they can in deciding very challenging cases.  I don’t always agree with the judges’ reasoning, but I appreciate the difficulty of what they are called upon to do (as well as how much easier it is to criticize an analysis than it is to assemble an analysis).

Where I tend to be most disappointed is with those aspects of the court that do not operate at this high level; or even at a “pretty good” level.  In particular, I am routinely unimpressed with the lack of public transparency when it comes to information about the court’s decisions.  One example is the court’s statistics page, which contains data that can be difficult to interpret because no methodology is provided.  Worse, the variety of statistics that the court has publicly released has shrunk over the years.  The court used to provide data on the dispositions of patent infringement cases, for example; that data is no longer provided by the court.

Much greater than problems with the court’s statistical data, however, is the lack of transparency in connection with the court’s decisions themselves.  This is not to say that there is no information: the court deserves credit for deciding, several years ago, to post its opinions on the Federal Circuit webpage.   These opinions are published at throughout the day.  Since around the middle of 2007, the material released at this location has included summary affirmances under Rule 36, and for the past few years “selected” orders have been published there as well.

Unfortunately, no criteria for which orders are “selected” for publication on the website are provided, and extremely significant and important orders are sometimes not released there.  For example, even though the Federal Circuit’s announcements page contains an announcement about the grant of en banc review in SCA Hygiene and an invitation for amicus participation, the order itself (which contains the questions presented) is not available on the court’s website.  Instead, users are directed to download the order from PACER, a registration-required, fee-based system that is routinely criticized on access to justice grounds.  Surely, such an important order would be easily available to the interested public.  It is not.

In addition, as Hal Wegner recently pointed out in his email newsletter, the court’s public revelation of its decisions via PACER creates a second, possibly more significant, issue: those folks who do have PACER access will know about the court’s decisions before those who merely follow its public website.  This is because the decisions can appear on PACER up to two hours before they appear on the Federal Circuit’s website.  The result is that those who follow that particular docket on PACER will gain first knowledge about the outcome of the case, something that may have significant financial implications.

There are some actions that followers of the Federal Circuit can take if they want to stay on the cutting edge of the court’s dispositions.  First, the court has an RSS feed through which it announces releases of opinions on PACER.  You can subscribe to the RSS feed here: (thanks to Hal Wegner for the tip!).  I’m told, but haven’t yet confirmed, that this feed updates at the same time that an opinion is released on PACER.  Second, if you have access to a document monitoring service, such as BNA, you can set it to alert you when individual dockets are updated.  Again, I haven’t yet confirmed how “real time” the alert is.  Both approaches have drawbacks, but they do provide partial solutions.

But the bigger problem remains: the challenge of gaining access to all of the court’s theoretically “public” decisions.  PACER is not like, say, the USPTO‘s trademark search system, which a model of transparency and ease of use.  Instead, it is the electronic equivalent of the warehouse at the end of Indiana Jones and the Raiders of the Lost Ark, with the addition of a fee to open each box.  And the court’s recent elimination of the “daily disposition sheet” has only made it more difficult to even know what’s kept in that warehouse.

With all the technological and political issues surrounding PACER, figuring out how to open up all the court’s judicial decisions to greater public access is, perhaps, not an easy problem to solve.  But given the court’s ability to address complex issues of fact and law in its decisions, it’s rather disappointing that it hasn’t applied that same ability to releasing those decisions in a more transparent way.

One possible start might be to ensure that court opinions and orders are released simultaneously on the court’s website and PACER.  Another would be to post all the court’s orders on the website, not just those that are “selected.”  And a third would be to create an electronic, publicly-available historic set of all the court’s decisions, not just the incomplete set that is currently provided.  All three would  would go a substantial way to ensuring greater judicial transparency and to avoid any more embarrassing lapses like the SCA Hygiene snafu.

By the way – if you are looking for that particular order, you can download it here: SCA Hygiene en banc order

My moderation policy is in effect for comments on this post.  Off-topic, excessive and abusive comments will be removed.

Edit to add a reference to the elimination of the daily disposition sheet after the comment from Pilgrim.  Some additional minor edits for clarification.

Federal Circuit: A hole is not “water-permeable”

Tue, 01/06/2015 - 12:48

by Dennis Crouch

In Teashot v. Green Mountain Coffee, the Federal Circuit has affirmed the lower court determination that tea-filled K-Cups do not infringe T-Shot’s Patent No. 5,895,672.

K-Cups originally included only disposable coffee pods for use in Keurig machines, but now also include tea-pods for quickly brewing tea.  T-shot’s patent covers a disposable tea-pod, but the asserted claims require that the pod be a “sealed body . . . constructed of a water-permeable material which allows flow of a fluid through said sealed body to produce a tea extract from said tea composition.”  The figures from the patent look like the disposable coffee-pods that you might find in a hotel room – essentially tea wrapped and sealed within a coffee filter.  One feature of the patent is that the pod include both tea leaves as well as some instant tea powder that allows for very quick brewing.

At first glance, K-Cups do not appear to be made of a water-permeable membrane but rather are constructed of a impermeable combination of plastic and metal foil.  The Keurig machines operate by first puncturing a hole in both the top and bottom of the K-Cup and then sending water through the holes as shown in the schematic below.


T-shot’s infringement argument was that – once punctured – the K-cup also becomes water permeable. (Of course, the patentee couched this as a claim-construction issue in order to receive de novo review).  On appeal, the Federal Circuit rejected the argument, finding that the claim requires the pod to simultaneously be a “sealed body” and “water permeable” and that the hole-puncturing scheme does not fit within that requirement.

Doctrine of Equivalents: In a move that is seemingly increasingly common, the Colorado district court refused to allow the patentee to amend its infringement contentions following the claim construction decision in order to include allegations of infringement under the doctrine of equivalents.

The proposed doctrine of equivalents claim was not disclosed in the patentee’s original or supplemental infringement contentions nor in response to any interrogatory.   As a discovery sanction under Fed. R. Civ. Pro. 37, the district court refused to allow the new infringement theory to be presented — writing “Plaintiff
waived its right to raise the doctrine of equivalents by failing to timely disclose it as an infringement theory.”  On appeal, the Federal Circuit affirmed that holding.

[As a side-note, the doctrine of equivalents theory here might have been viable given that the patent was issued without amendment.]


Financing Patent Litigation: Insurance Troubles

Mon, 01/05/2015 - 11:11

Personal loans – such as a mortgage or automobile purchase financing – require that the borrower purchase insurance to cover at least some of the lender’s risk.  Business loans and venture investments are no different and a variety of insurance products are available to ensure a wide variety of entrepreneurial endeavors.

Although the particular order is rather mundane, the factual background of the investment/insurance in ABC v. Ironshore Speciality Ins. (2nd. Cir. 2014) is quite interesting.

Eidos holds several patents, including the U.S. Patent No. 5,879,958 covering certain LCD displays.  In 2010, Eidos obtained financing from Stairway Capital in order to fund its patent enforcement litigation campaign.  As part of the deal, Eidos also obtained insurance from Ironshore to cover the loan payable if the campaign fails to recoup at least the loan amount.  The infringement litigation was still ongoing in 2013, but Ironshore must have predicted a bad outcome and filed a demand for arbitration of its contention that the insurance policy was void ab initio.  And, the appellate order linked-to here affirms the lower court order requiring non-binding mediation followed by arbitration if necessary (as spelled out by the contract).  The patentee had raised a new argument on appeal that the panel refused to hear.   

In the parallel infringement litigation, the patent has now been found invalid as indefinite.  That decision is apparently on still appeal to before the Federal Circuit.

J.Pasky on the Need for Patent Reform

Mon, 01/05/2015 - 11:01

Happy New Year

Mon, 01/05/2015 - 10:08

Happy New Year from us at Patently-O. This is year eleven for the site and we are looking forward to a great new start! Later this week I’ll see some of you in Vail at the annual Ski-CLE put on by the Colorado Bar.  Check-out the new quasi-sponsor of the Ethics site: Levin-Crouch IP Mediation.

Halo v. Pulse: Escaping Willfulness with Ex Post Reasoning

Sun, 01/04/2015 - 10:17

by Dennis Crouch

Halo has petitioned the Federal Circuit to rehear its electronics patent case against Pulse with two questions presented:

  1. Willfulness: Whether an infringer who subjectively knew pre-suit that it was infringing a valid patent (after being given notice of the patent, and failing to design around, seek a license, or stop infringing) can use an unsuccessful defense developed post-suit as a per se bar to liability for pre-suit willful infringement, despite the flexible text of 35 U.S.C. § 284.
  2. Sale/Offer for Sale: Whether a requirements contract for a patented product that is negotiated and executed in the U.S., subject to California law, and includes binding pricing and quantity terms constitutes a “sale” and “offer for sale” under 35 U.S.C. § 271(a).

The petition is well designed and holds a strong possibility of review.  In the original panel decision, Judge O’Malley (joined by Judge Hughes) called for en banc review of the court’s willfulness jurisprudence. Jason Rantanen wrote more here.  The case also has interesting links with Commil v. Cisco that is now pending before the Supreme Court.

Regarding the Sale issue, I see less merit. As Lucas Osborne writes, although the contract was negotiated and signed within the US, the actual performance was to be done outside of the US.  In the litigation, the patentee was able to capture royalties for all of the products imported into the U.S., but here is seeking damages for worldwide sales.

Patent Cases Pending as of January 1, 2015

Fri, 01/02/2015 - 15:19

By Jason Rantanen

In November, I wrote about a decline in patent suits pending in district court.  Using Lex Machina, I recently put together an updated set of data that includes patent cases pending as of December 1 and January 1.  The figure below shows a continued drop in cases through November, followed by no real change in December.   The lack of movement for December is the result of a modest increase in new case filings and a substantial drop in terminations relative to the previous month.  (Keep in mind that the underlying data is highly dynamic: in December, for example, there were about 380 new case filings and about 400 terminations of existing cases.)

Some folks have asked about the effect of co-pending PTO proceedings.  Lex Machina doesn’t presently offer a way to easily determine whether a proceeding is stayed pending an administrative proceeding at the PTO, so I can’t directly count these stays in the graph.  But my intuition is that they aren’t going to make an enormous difference.  Love & Ambwani report that between September 2012 and September 2014, courts granted litigation stays in 140 suits where there was a co-pending instituted inter partes review.  For comparison, the drop in pending I just don’t see these stays making a significant impact on the above graph regardless of whether they are counted as open cases or terminated cases.

Thanks to my research assistant, Alex Lodge, for collecting the data for the above chart. 

Comment policy: At the suggestion of a few folks, I will try an active moderation policy on this post.  Posts containing name calling, character attacks, or an unnecessarily aggressive tone will be deleted, as will excessive commenting.

Unreasonable Prejudicial Delay in Filing Patent Infringement Suits: Why the Federal Circuit Should Not Overrule Aukerman

Fri, 01/02/2015 - 11:30

Guest Post by Donald S. Chisum

On December 30, 2014, the Federal Circuit granted en banc review in a case (SCA Hyiene), to consider whether to overrule the 1992 A.C. Aukerman decision, which upheld the defense of laches (unreasonable, prejudicial delay) for patent infringement damage claims, in light of the Supreme Court’s 2014 Petrella decision, which held that laches did not apply to claims for damages for acts of copyright infringement occurring within the Copyright Act’s three year statute of limitations.

For a variety of reasons, it is absolutely clear (to me) that neither the Federal Circuit nor the Supreme Court should alter Aukerman.  Here are some of those reasons.

At first blush, the argument for applying the holding and reasoning of Petrella to patent cases to overturn A.C. Aukerman is strong.   Petrella reasoned that Congress established three years as a reasonable period for recovering for pre-suit infringements and courts should not “second-guess” Congress in that respect. Similarly, for patents, Congress set a six-year period for recovering for pre-suit infringements.  In Petrella, the Supreme Court stated, in general terms, that it had never “approved the application of laches to bar a claim for damages brought within the time allowed by a federal statute of limitations.” It reiterated that it had “never applied laches to bar in their entirety claims for discrete wrongs occurring within a federally prescribed limitations period.”  The Section 286 six-year period is not, in technical terms, a “statute of limitations.” Nevertheless, it is a Congressionally prescribed period for recovering for patent infringement.

However, there are stronger arguments for distinguishing patent suits from copyright suits.

First, the history of the Section 286 six year limit for patent infringement damages is considerably different from that of the three year statute of limitations for copyright infringement.  Congress added the copyright limitation in 1957 and codified it without change in 1976. There was, apparently, no consistent interpretation of the statute by the lower courts as either permitting or precluding laches; a split arose among the circuits.  In contrast, Congress enacted the six-year limitation for patent infringement in 1897.  As discussed in Aukerman, the courts continued after 1897 to apply laches in patent suits.  In 1952, Congress codified the statute, presumably thereby approving the prior practice. The legislative history states as much, as noted in Aukerman.

Second, unlike the copyright statute as to which there was a split among the circuits, a split the Supreme Court was obliged to resolve, the Federal Circuit has consistently interpreted the patent statute as permitting laches to restrict damages under carefully defined circumstances. The Federal Circuit has virtually exclusive jurisdiction over appeals in patent infringements. Hence, there is no danger of a split arising.

In recent years, the Supreme Court has, with some regularity, repudiated Federal Circuit positions as unsound.  Often, the Court found that the Federal Circuit had not adequately considered prior, binding Supreme Court precedent on an issue.  Also, Federal Circuit panels decisions reached inconsistent results as to the issue.

None of these criticisms can be fairly directed to the Federal Circuit’s Aukerman decision on laches. Aukerman was an en banc decision, that is, one by the full complement of judges. Judge Helen Nies wrote a thorough, lengthy opinion exploring history, policy and precedent.  It was unanimous on the basic issue of the viability of  laches as a defense; Judge Plager dissented only in regard to the operation of a presumption.  And, the Federal Circuit has consistently followed Aukerman since 1992.

Guest Post by Prof. Chiang: A Response to Hrdy and Picozzi

Wed, 12/31/2014 - 10:44

Professor Tun-Jen Chiang is an Associate Professor of Law at the George Mason University School of Law.  Below, he responds to Camilla Hrdy and Ben Picozzi’s commentary on The Interpretation-Construction Distinction in Patent Law.  As with the previous two posts in this series, the real name policy applies to comments on this post. 

Thanks to Jason and Dennis for inviting me to post, and to Jason for the extremely flattering introduction. I should make clear at the outset that I am only speaking for myself, not my coauthor, on this blog, though of course the article represents our joint views.

A brief recap for those who have not read (or only skimmed) the article. The article’s primary claim is conceptual. The claim is that in making decisions pursuant to text, courts necessarily engage in a two-step process: (1) they read the text and try to discern its linguistic meaning, i.e. the meaning of the language, qua language, to members of the intended audience, and (2) they determine the legal effect of the text by rendering a decision. We call the former “interpretation” and the latter “construction.” The key point is that linguistic meaning and legal effect are not always the same, and therefore uncertainty over the legal scope of patent claims does not necessarily arise because of linguistic ambiguity.

A couple of clarifications at the outset. The first is that our definition of “construction” is simply giving text a legal effect—it does not care whether that legal effect is consistent with statute, precedent, and text or not. Camilla’s articulation (where judges “‘construe’ the claims according to their normative beliefs about what the claims’ legal effect should be”) potentially gives the impression that we define construction as only when judges act as super-regulators who engage in free-floating first-order policy analysis. This is not correct. Even the most restrained judge who makes decisions strictly in accordance with statute, precedent, and/or claim text engages in construction, because his decisions necessarily give the claim text a legal effect.

Second, our claim is conceptual, not normative. Our claim is not that interpretation is good or that construction is bad; our claim is that both are intrinsic to the activity of claim analysis, so there is really no “good” or “bad” about the matter. And because our claim is conceptual, our doctrinal prescriptions are very limited. We do not opine, for example, whether courts should give more or less weight to dictionaries, or specifications, or anything else.

The sum is that we are not trying to push a textualist or plain meaning agenda, and we are not trying to suggest that judges who engage in construction are judicial activists who ought to be impeached. Our goal is to simply provide more clarity in analysis and a better diagnosis for what ails patent claims. Specifically, we argue that the uncertainty in patent claims is not caused by linguistic ambiguity, but by methodological disagreement among judges about whether to construe claims according to the patentee’s actual inventive contribution, or instead according to the linguistic meaning of claim text written by the patentee (which is likely to be broader than the real invention).

It is at this point that Hrdy and Picozzi’s response comes in. Hrdy and Picozzi agree with us that methodological disagreement, rather than linguistic ambiguity, underlies disagreements over claim construction. But, they argue, the root source of methodological disagreement in patent law is more narrow than in other areas of law. That is, according to Hrdy and Picozzi, in areas such as constitutional law, “judges are relatively free to interpret and construct the text based on their prior beliefs about which policy outcomes or which form of interpretive methodology (e.g., textualism or anti-textualism) is superior.” But in patent law, they argue, judges are constrained by the Patent Act, and so disagreements over claim construction do not stem from free-floating beliefs about desirable policy outcomes, but instead are tethered to more mundane and legalistic disagreements about the proper statutory construction of the disclosure requirements of 35 U.S.C. § 112. In particular, they argue that “judges’ approaches to claim construction closely followed—and were likely influenced by—their constructions of section 112(a)’s written description requirement and section 112(b)’s definiteness requirement.”

It might perhaps surprise Hrdy and Picozzi to discover that I agree that judges’ approaches to claim construction largely parallel, and are likely influenced by, their positions on § 112. Yet I do not think this defeats my argument. As an initial matter, I would note that, even if Hrdy and Picozzi are correct that disagreements over claim construction stem from narrow legalistic disagreements about the proper understanding of § 112, that would not contradict the core claims of the article—the basic point that disputes about claim analysis are mostly disputes about legal methodology rather than linguistic meaning would still stand. In that sense Hrdy and Picozzi’s argument is less a refutation and more in the nature of a follow-on contribution. But I also think there is a deeper disagreement: Implicit in Hrdy and Picozzi’s con-law-is-different argument seems to be the contention that disagreements about § 112 are not based on beliefs about desirable policy but instead are narrow, mundane, and legalistic debates unencumbered by ideological priors. I think this contention is flawed and that their evidence is more consistent with an alternative hypothesis, namely that judges show a consistent pattern across several doctrinally-distinct issues—claim construction, § 112(a), § 112(b)—because they are influenced by their underlying beliefs about desirable policy (specifically, beliefs about desirable patent scope) in all of them. Judges who favor broad patents tend to construe claims broadly and read § 112 narrowly; judges who favor narrow patents tend to do the opposite. Rather than proving that patent law is not like con law, I submit that the Hrdy and Picozzi’s evidence tends to show that it is.


Federal Circuit to Review Defense of Laches in Patent Law

Tue, 12/30/2014 - 12:20

By Jason Rantanen

This morning, the Federal Circuit issued an Order granting en banc review in SCA Hygiene Prods. Aktiebolag v. First Quality Baby Prods., LLC.  (Dennis’s  commentary on SCA here: The central issue involves the impact of the Supreme Court’s decision earlier this year in Petrella v. Metro-Goldwyn-Mayer (holding that laches does not apply to copyright infringement occurring within the window provided by the statute of limitations) on patent law.

The issues presented:

(a) In light of the Supreme Court’s decision in Petrella v. Metro-Goldwyn-Mayer, 134 S. Ct. 1962 (2014) (and considering any relevant differences between copyright and patent law), should this court’s en banc decision in A.C. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020 (Fed. Cir. 1992), be overruled so that the defense of laches is not applicable to bar a claim for damages based on patent infringement occurring within the six-year damages limitations period established by 35 U.S.C. § 286?

(b) In light of the fact that there is no statute of limitations for claims of patent infringement and in view of Supreme Court precedent, should the defense of laches be available under some circumstances to bar an entire infringement suit for either damages or injunctive relief? See, e.g., Lane & Bodley Co. v. Locke, 150 U.S. 193 (1893).

The order is not yet available on the Federal Circuit’s website, but can be read here: Download SCA en banc order. Thanks to Hal Wegner for bringing it to my attention.

Guest Post by Camilla Hrdy on The Interpretation-Construction Distinction in Patent Law

Tue, 12/30/2014 - 10:09

Camilla Hrdy is the Center for Technology, Innovation & Competition Fellow at the University of Pennsylvania Law School and a Visiting Fellow at the Yale Law School Information Society Project.  Below, she comments on The Interpretation-Construction Distinction in Patent Law by Professors Chiang and Solum. The “real name” rule applies to comments on this post.

Uncertainty and unpredictability in claim construction outcomes is one of the most important problems in patent litigation today. But patent law isn’t the only context in which judges struggle to determine the meaning of legal texts. In a recent article in the Yale Law Journal, The Interpretation-Construction Distinction in Patent Law, T.J. Chiang and Lawrence Solum argue that construing a patent is no different from any other form of legal analysis performed by judges, whether in constitutional law, statutory law, or contract law. As in these contexts, judges proceed in two distinct stages when determining the legal meaning of a patent’s claims. First, they “interpret” the claims’ linguistic meaning. Second, they “construe” the claims according to their normative beliefs about what the claims’ legal effect should be. According to Chiang and Solum, uncertainty in claim construction outcomes is caused mainly by judges’ disagreements in the “construction” phase, not the “interpretation” phase. In other words, judges disagree over policy, not language.

In a response in the Yale Law Journal Forum, Ben Picozzi and I argue that the “interpretation-construction distinction” does not fully capture how judges construe patent claims because it does not take into account the difference between the statutory context in which claim construction occurs and the constitutional context in which the interpretation-construction distinction evolved. In constitutional analysis, judges are relatively free to interpret and construct the text based on their prior beliefs about which policy outcomes or which form of interpretive methodology (e.g., textualism or anti-textualism) is superior. In contrast, when judges construe the terms of a patent, they must do so in light of the requirements of the Patent Act – in particular, 35 U.S.C. § 112. Section 112 imposes several requirements for minimum disclosure and definiteness. If a patent does not meet these requirements, judges are obligated to find it invalid under one of several doctrines.

We agree with Chiang and Solum, as well as other commentators such as Thomas Krause and Heather Auyang, that significant policy disagreements underlie judges’ divergent views on the legal meaning of patent claims, and that one of the major debates is whether claims should be interpreted broadly, according to how a patentee wrote them, or narrowly, according to what the judge finds to be the “real invention.” But in our view, these debates are based on judges’ disagreements over the precise levels of disclosure and definiteness that section 112 requires. Simply put, what Chiang and Solum call “claim construction” versus “claim interpretation” is actually statutory construction. In our response, we analyze the major claim construction cases that Chiang and Solum use as examples of their theory and show that in each of these examples, the judges’ disagreement over the meaning of the claims at issue was motivated by their disagreement over the meaning of the statute. Specifically, judges’ approaches to claim construction closely followed—and were likely influenced by—their constructions of section 112(a)’s written description requirement and section 112(b)’s definiteness requirement.

Our disagreement with Chiang and Solum is not just theoretical. It is highly relevant for the Supreme Court’s upcoming decision in Teva v. Sandoz, where the Court will decide what standard the Federal Circuit must apply in reviewing district courts’ claim construction decisions. Is claim construction a purely legal question that must be reviewed de novo? Or should at least some aspects of claim construction be reviewed under the more deferential “clear error” standard ordinarily applied to district courts’ factual findings? Most commentators—and the Solicitor General—argue that many issues that arise in claim construction, such as expert testimony on the level of ordinary skill in the art, are factual issues that should be reviewed deferentially. Chiang and Solum disagree, arguing that claim construction should be treated as a question of law and reviewed without deference. The reason they give for their somewhat unusual stance is their view that many important disputes over claim meaning involve construction, not interpretation of claims. If district courts were free to engage in construction without significant oversight from courts of appeal, this would increase, not reduce, uncertainty in outcomes, with “hundreds of district court judges across the nation each following their own individually preferred methodologies in the individual cases that come before them.”

We agree with Chiang and Solum’s conclusion that some purely legal questions underlie judicial disagreements over the meaning of patent claims and that many of these questions are in need of appellate review. But this is because they are questions of statutory construction. Judges disagree over issues like the contours of section 112’s disclosure and claim definiteness requirements, and consequently disagree over the proper construction of claims.

On this view, granting deference to district courts with respect to questions that do not involve statutory construction would not necessarily increase uncertainty and disuniformity in claim construction outcomes. Moreover, even if the Federal Circuit must review many facets of district courts’ claim construction decisions under the more deferential clear error standard, the Federal Circuit could still do much to increase certainty by resolving a number of outstanding statutory debates. For instance, does section 112(a), which the Federal Circuit has held contains a separate written description requirement, also require claims to be construed according to what the inventor “actually invented,” as Judge Lourie and other members of the court have suggested in several claim construction decisions? Does section 112(b), as construed by the Supreme Court in Nautilus v. Biosig, require courts to review more expert evidence in order to determine whether a patent’s claims would inform those skilled in the art “with reasonable certainty” about the scope of the invention?

If the Federal Circuit or the Supreme Court cannot resolve such issues, then Congress should amend the statute to provide greater clarity. This is how patent law has historically progressed and, we believe, is how lawmaking should work within a well-functioning statutory framework. Chiang and Solum’s analysis is a good start, but it doesn’t take this framework into account. Doing so would lead to conclusions that are less pessimistic and more complete.

Comments on the “Real Name” Experiment

Mon, 12/29/2014 - 16:26

By Jason Rantanen

I’ve created this post so that folks can comment on the “real names only” rule that I’m applying in the Interpretation-Construction Distinction threads.  I’ll continue to delete posts under pseudonyms in that thread.

As a point of clarification: Your “real name” is the name that you would use when filling out documents that include the language “under penalty of perjury.”

And a second clarification: I’m only applying this rule to this series of posts.  It is *not* a general policy change.


The Interpretation-Construction Distinction in Patent Law

Mon, 12/29/2014 - 11:30

By Jason Rantanen

Last week, I wrote about my view that patent rights are malleable; that is, their scope and strength can be altered by the parties who interact with them after their issuance.  Malleability is different from ideas that patent rights are simply uncertain; that the scope and strength of patents that revolve around chance or indeterminacy, as it involves changes to the patent right rather than resolution of an unknown variable.

In connection with that work, I’ve recently had several valuable exchanges with Professor Tun-Jen Chiang, whose ability to articulate theoretical concepts in patent law is possibly without equal.  This is not to say that I agree with Chiang’s perspectives; I frequently do not.  But his work bears strong traces of both Richard Epstein and Timothy Dyk in the rigor of its analysis and lucidity of its explanations.

One of Professor Chiang’s most recent works, The Interpretation-Construction Distinction in Patent Law, 123 Yale L. J. 530 (2013), co-authored with Professor Lawrence Solum, takes head-on the issue of indeterminacy in claim scope.  Chiang and Solum argue that this indeterminacy is not so much due to linguistic ambiguity as it is to “a conflict about the underlying goal of claim construction: is it to give effect to the linguistic meaning of text, or is it to tailor patent scope to the real invention?”  Id. at 536.  This conflict, they argue, involves two fundamentally different goals, and determining claim meaning is an incoherent inquiry when judges move between them.  The result is indeterminacy not due to linguistic ambiguity but due to an inability to resolve whether to apply linguistic analysis in the first place.

I’ve provided the abstract below; the full article is here:

The ambiguity of claim language is generally considered to be the most important problem in patent law today. Linguistic ambiguity is believed to cause tremendous uncertainty about patent rights. Scholars and judges have accordingly devoted enormous attention to developing better linguistic tools to help courts understand patent claims.

In this Article, we explain why this diagnosis is fundamentally wrong. Claims are not often ambiguous, and linguistic ambiguity is not a major cause of the uncertainty in patent law today. We shall explain what really causes the uncertainty in patent rights, how the erroneous diagnosis of linguistic ambiguity has led the literature off track, and what will get us back on track to solving the uncertainty problem.

Tomorrow, Camilla Hrdy will guest-blog about her response to The Interpretation-Construction Distinction in Patent Law.  For this series of posts, we’ll be doing something a bit different for comments.  Only comments with the author’s real name will be permitted; all others will be removed.

What Makes a Proper “Error” for a Reissue Application?

Sat, 12/27/2014 - 11:15

Hoyt Fleming v Escort (Fed. Cir. 2014)

The GPS patents in suit are Fleming’s Reissue Nos. RE39,038 and RE40,653.  Although several of the asserted claims were found invalid due to Escort’s prior invention, some of the claims were found both infringed and not invalid.

Part of the appeal involves the question of whether reissue was proper.  Under Section 251 of the Patent Act, a reissue must be based upon an “error” in the original.  Reissues granted where there was no “error” can be invalidated for improper reissue.  Thus, the dividing line between error and no-error is important.  Here, the court repeats is prior precedent that errors include both slips of the pen errors as well as those arising from a deficient understanding of law or fact.  However, a drafting choice is not an error simply because it is later regretted.

Fleming apparently drafted the original patent claims from his perspective as a computer programmer rather and that led to him not appreciating the full scope of his patentable invention.  In the appeal, the Federal Circuit agreed with the patentee that this is “a classic reason that qualifies as error” under the reissue statute.

It identifies a deficient understanding of some combination of fact and law bearing on the meaning of claim language, the inventions disclosed in the written description, and how particular language does or does not map onto products or processes that could be claimed under section 251 consistent with the written description.

One important factor in why Fleming wanted the reissue was to capture later developments in the marketplace that were disclosed in the application but not captured in the original claims. Although that appears akin to ‘regret’ rather than original error, the Federal Circuit ruled that the market reason for the change will not disqualify an otherwise proper reissue.

[T]he fact that it was marketplace developments that prompted Fleming to reassess his issued claims and to see their deficiencies, does not alter the qualifying character of the reason for reissue. Erroneous understandings of the written description or claims are just that, regardless of what triggered the recognition of error in those understandings.

Verdict Affirmed.

The Malleability of Patent Rights

Tue, 12/23/2014 - 14:41

By Jason Rantanen

Folks who write about patents commonly explain the concept by drawing an analogy to real property rights, with the metes and bounds of a patent set out in the claims rather than a deed description.  Drawing upon this analogy, a common critique of by scholars such as Jim Bessan and Mike Meurer is that patent boundaries are much less clear than those of deeds.  Related to this uncertainty in scope is the fact that the very existence of the rights themselves is hardly certain.  While issued patents come with a presumption of validity, it is only that: a presumption.  Patent claims can be and are invalidated by courts.  Commentators have used various terms to describe these attributes, terms that when unpacked mean somewhat different things.  Indeterminacy and probabilistic rights are two of the most common.  Regardless of the terminology, the core idea is that that patent rights are characterized by a degree of uncertainty.

In my most recent long-form work, I describe another important characteristic of patent rights: their malleability.  By malleable, I mean that the scope and strength of the right can be changed after the patent is issued through an array of mechanisms, thus allowing actors operating within the patent system the ability to change the very contours of the right.  In other words, not only can patent rights involve something akin to a roll of the dice or an inability to definitively pin down their scope, but the outcome of that roll or the contours of the uncertainty can be changed by the actions of the parties involved.  An obvious example is the role that skilled counsel play in litigation, but that’s not the only way that patent rights can be altered after issuance.

Over the past few months, we’ve seen quite a few manifestations of this malleable nature of rights; most recently in the Federal Circuit’s decision this morning in Content Extraction v. Wells Fargo Bank invalidating an issued patent on section 101 grounds.  The rise in importance of Section 101 is in large part the result of individual actions pushing and pulling on patent rights using those tools at their disposal, as attorneys develop creative new ways to deploy the legal precedent and policy arguments.  The consequence in this case is that the patent rights are eliminated well after the patent issued.  There are, of course, better examples of malleability than invalidation: claim construction is the one that most quickly comes to mind.

Ultimately, it’s not clear to me that malleability is a desirable characteristic.  Although there are individual doctrines where malleability may be necessary, I have yet to come up with a good theoretical justification for it on a broad scale.

Read The Malleability of Patent Rights here:  The article is still a draft, so well thought out comments and responses are particularly welcome.