By Kevin E. Noonan --
Diligence is a patent concept whose applicability was severely restricted under the changes in U.S. patent law created under the Leahy-Smith America Invents Act. Diligence is important when determining whether an invention was invented prior to an act intervening between invention and patent application filing, in a "first-to-invent" regime. There is much less for the principle to do when patentability is judged under a first-inventor-to-file rubric (although there may be instances when the process from conception through reduction to practice may be subject to a diligence inquiry even under the revised law). Nevertheless, because there are millions of patents in force that were obtained under the traditional invention standard, diligence issues have not yet been relegated to the dustbin of history, a circumstance illustrated by the Federal Circuit's decision in Perfect Surgical Techniques, Inc. v. Olympus America, Inc. Particularly relevant is the differing opinions on the proper diligence standard taken by the majority and by one of the panel judges.
The case arose as an inter partes review of U.S. Patent No. 6,030,384 directed to a surgical instrument; claim 1 illustrates the technology (which is otherwise not particularly relevant to the issues before the Court):
A bipolar surgical instrument comprising:
a shaft having a proximal end and a distal end;
a pair of opposed jaws at the distal end of the shaft;
a first electrode member on one of the jaws;
a second electrode member on one of the jaws, wherein the first and second electrode members are electrically isolated from each other; and
an actuating mechanism for moving the jaws between an opened and closed configuration, wherein electrode members lie parallel to and laterally spaced-apart from each other when the jaws are closed, wherein at least one of the electrode members comprises a plurality of tissue penetrating elements which project toward the opposed jaw.
The PTAB invalidated this and other claims in the '384 patent for anticipation or obviousness over Japanese Application Publication No. H10- 33551 A , a prior art reference under 35 U.S.C. § 102(a). The lynchpin of the Board's decision was diligence -- were the patentees diligent between a time just prior to the publication date of the reference and the date when they reduced their invention to practice? The PTAB decided they were not, and thus the Japanese patent publication was prior art and the claims were invalid variably for anticipation or obviousness.
The Federal Circuit vacated and remanded, in an opinion by Judge Moore joined by Judge O'Malley and in part by Judge Schall, who also dissented in part. The panel first dismissed as harmless error a procedural argument under 37 C.F.R. § 42.63(b) raised by the patentee regarding whether the requestor had properly filed a translation of the reference (finding against the patentee). Turning to the diligence issue, the opinion notes that pre-AIA § 102(g) provided that a patentee could antedate a reference by showing "earlier conception and reasonable diligence in reducing to practice." (To be precise, diligence in this context is used to show entitlement to earlier conception when the inventor did not "abandon, suppress or conceal" her invention.) The facts considered by the Board and reviewed by the panel were as follows (and are important in assessing the implications of the panel's decision so are set forth in detail here). The inventor hired a patent attorney (Mr. Heslin) to draft and file the application that resulted in the '384 patent. The attorney sent the inventor an initial draft on January 28, 1998, and the application was filed on May 1, 1998 (providing the constructive reduction to practice date). The critical period began on February 9, 1998 (one day prior to the publication date of the Japanese application). Thus, a little more than three months (93 days) constitute the time that the Board and the panel considered whether the inventor and attorney's actions were diligent.
The inventor's testimony and evidence regarding his diligence was summarized in the opinion as follows. The inventor testified that he worked diligently "within the reasonable limits of my busy medical practice and teaching schedule." That schedule included working "roughly 80 hours per week, during which he would perform approximately four to six surgeries." As for the dates having evidentiary support, the inventor stated that he "submitted comments on the initial draft application on March 2, received questions from Mr. Heslin on or around March 4 and 12, participated in a conference with Mr. Heslin on March 16, and received second draft application from Mr. Heslin on April 13." The inventor also testified that he carefully reviewed this draft prior to its filing on May 1st.
The corroborating evidence to this testimony (required to support any inventor's testimony in a priority dispute; Brown v. Barbacid, 436 F.3d 1376, 1380 (Fed. Cir. 2006)) included a declaration from Attorney Heslin, his billing records and letters between inventor and attorney. Attorney Heslin's testimony was consistent with and corroborated the inventor's statements and diligence timeline. He also included letters and other exhibits consistent with his testimony. The Board found no fault or deficiency with this evidence; however, in its view these activities were not sufficient to establish diligence to defeat the Japanese application as an invalidating reference, particularly with regard to three time periods: from "(1) February 10 to March 1; (2) March 12 to March 15; and (3) April 13 to May 1."
In reviewing this conclusion, the panel noted that whether a patentee can antedate a reference under §102(g) is a question of law based on underlying facts, citing In re Steed, 802 F.3d 1311, 1316–17 (Fed. Cir. 2015). Insofar as the factual inquiry is concerned, the Federal Circuit reviews the PTAB's determinations for substantial evidence. Here, the opinion notes that the Board "repeatedly characterized" the diligence burden as being "continuous exercise of reasonable diligence" (emphasis in opinion), citing several instances from the Board's final written decision. This standard was "too exacting and in conflict with our precedent" according to the majority; indeed, the opinion goes on to expressly repudiate this standard, saying "[a] patent owner need not prove the inventor continuously exercised reasonable diligence throughout the critical period; it must show there was reasonably continuous diligence" (a distinction apparently with a difference, at least for the majority), citing Tyco Healthcare Grp. v. Ethicon Endo-Surgery, Inc., 774 F.3d 968, 975 (Fed. Cir. 2014) (emphasis in the opinion). The opinion goes on to state that there is no requirement, under the proper standard, that an inventor work every day during the diligence period, and moreover that "periods of inactivity" during the period do not "automatically vanquish" a claim to reasonable diligence. Rather, it is the totality of the evidence of diligence (as illustrated in Monsanto Co. v. Mycogen Plant Sci., Inc., 261 F.3d 1356, 1362 (Fed. Cir. 2001)) that must show reasonable diligence, evaluated under the "rule of reason," citing Price v. Symsek, 988 F.2d 1187, 1195 (Fed. Cir. 1993). In the majority's opinion:
Our holdings in these cases are consistent with the purpose of the diligence inquiry. In determining whether an invention antedates another, the point of the diligence analysis is not to scour the patent owner's corroborating evidence in search of intervals of time where the patent owner has failed to substantiate some sort of activity. It is to assure that, in light of the evidence as a whole, "the invention was not abandoned or unreasonably delayed. . . . That an inventor overseeing a study did not record its progress on a daily, weekly, or even monthly basis does not mean the inventor necessarily abandoned his invention or unreasonably delayed it. The same logic applies to the preparation of a patent application: the absence of evidence that an inventor and his attorney revised or discussed the application on a daily basis is alone insufficient to determine that the invention was abandoned or unreasonably delayed. One must weigh the collection of evidence over the entire critical period to make such a determination.
The opinion distinguishes the facts here (and the standard generally) from those in In re Mulder 716 F.2d 1542, 1542–46 (Fed. Cir. 1983), cited by the Board in support of its decision, on the basis that in Mulder the patentee showed no evidence whatsoever for diligence, even though the critical period was for only two days.
The Board erred, according to the majority, by fixating on those periods of inactivity and chiding the patentee for not providing specific evidence of his activities (regarding the patent or otherwise) that would carry its erroneously enhanced burden of continuous activity to establish diligence. Moreover, the majority found fault with the Board's summary dismissal of Attorney Heslin's evidence, which the opinion expressly characterizes as error because he was acting as the inventor's agent and his activities should have been attributed to and inured to the benefit of the inventor.
While being sharply critical of the Board's findings regarding the inventor's diligence, the majority vacated and remanded to give the Board the opportunity to review the record using the correct standard (and thus provided the required deference to the Board's fact-finding under Dickenson v. Zurko and other Supreme Court precedent), while specifically mandating the evidence the Board should consider on remand. The panel also unanimously vacated the Board's claim construction and directed that the art be applied to the claims on remand consistent with the claim construction provided in the opinion.
Judge Schall dissented only to the extent that the majority's views on the diligence issues required vacatur and remand of the Board's invalidity determinations. He took the view that the Board's determination was supported by substantial evidence; as is frequently the case, the dissent and the majority opinions review (and cite) the same factual evidence and come to completely opposite conclusions. As the majority notes in a footnote, it is only the first alleged period of lack of diligence -- between February 10 to March 1 -- that convinced Judge Schall that the Board's decision was correct (he states later in his dissent that he finds the Board's handling of the other two periods to be "troubling"). And Judge Schall's view of the Federal Circuit's case law on diligence is that only some of the cases support the majority's standard. Others, including Griffith v. Kanamaru, 816 F.2d 624, 629 (Fed. Cir. 1987) more expressly require continuous diligence consistent with the Board's view. But regardless of how various decisions frame the standard, Judge Schall believes that the test is whether a "party seeking priority 'account for the entire period during which diligence is required,'" relying on Gould v. Schawlow, 363 F.2d 908, 916 (C.C.P.A. 1966). Put simply, "establishing diligence requires that the inventor account for his or her activities during the entire critical period. Where there are stretches of inactivity, the inventor must provide a reasonable justification for those gaps with corroborating evidence."
The inventor here did not meet that standard according to Judge Schall's dissent, and he would have affirmed the Board's invalidity decision on that basis (although his analysis in the opinion is focused on the "contours of [the Board's] methodology" in arriving at his conclusion). And he also disagrees with Perfect Surgical's contention that the Board erred in not considering the evidence as a whole, because Judge Schall's understanding of the law is that what a patentee must do is account for each period of inactivity in order to establish diligence. Ultimately the dissent faults Precision Surgical for not providing the evidence Judge Schall believes was necessary to establish diligence and thus for failing to carry its burden as the party attempting to show prior invention.
This opinion, and particularly the dissent, provides a nice synopsis of Federal Circuit case law and examples of instances where the Court found, or did not, that diligence had been established in various circumstances and periods of delay. While the sun shining on the value of this law is a setting one, until diligence issues have been permanently extinguished it provides a valuable resource for a rather arcane area of the patent law.
Perfect Surgical Techniques, Inc. v. Olympus America, Inc. (Fed. Cir. 2016)
Panel: Circuit Judges Moore, Schall, and O'Malley
Opinion by Circuit Judge Moore; opinion concurring in part and dissenting in part by Circuit Judge Schall