The Supreme Court issued an order this morning denying certiorari in Sequenom, Inc. v. Ariosa Diagnostics, Inc. Patent Docs will provide more analysis of the Court's denial of certiorari in a subsequent post.
The Supreme Court issued an order this morning denying certiorari in Sequenom, Inc. v. Ariosa Diagnostics, Inc. Patent Docs will provide more analysis of the Court's denial of certiorari in a subsequent post.
By Andrew Williams --
In other Supreme Court news from Monday, June 20, 2016, the Court invited the Solicitor General to file briefs in the Sandoz v. Amgen (No. 15-1039) and Amgen v. Sandoz (No. 15-1195) appeals to express the views of the United States. As we previously reported, Sandoz petitioned the Court on February 16 for a writ of certiorari to review one of the issues decided by the Federal Circuit on July 21, 2015, specifically:
Whether notice of commercial marketing given before FDA approval can be effective and whether, in any event, treating Section 262(l)(8)(A) as a stand-alone requirement and creating an injunctive remedy that delays all biosimilars by 180 days after approval is improper.
Since that time, Amgen filed a brief in opposition on March 21 asking the Court to deny Sandoz's petition. At the same time, Amgen filed a conditional cross-petition asking the Court for a writ of certiorari to review a second question in the event it granted the Sandoz Petition, because both questions relate to the "patent-resolution scheme of the BPCIA." Specifically, the question posed in the conditional cross-petition was:
Is an Applicant required by 42 U.S.C. § 262(l)(2)(A) to provide the Sponsor with a copy of its biologics license application and related manufacturing information, which the statute says the Applicant "shall provide," and, where an Applicant fails to provide that required information, is the Sponsor's sole recourse to commence a declaratory-judgment action under 42 U.S.C. § 262(l)(9)(C) and/or a patent-infringement action under 35 U.S.C. § 271(e)(2)(C)(ii)?
Nevertheless, Amgen stressed that this petition was expressly conditional on the grant of Sandoz's petition, and that it ultimately urged the Court to deny both petitions.
The Supreme Court's action on Monday can be seen as a delay tactic on the part of the Court. Obviously, no decision on whether the Court will hear this case will be made before the Court's next term. Moreover, the Solicitor General does not have a deadline for expressing the views of the United States. Nevertheless, this still can be seen as a positive for Sandoz. It would not have been surprising for the Court to deny the petition outright; especially considering the Federal Circuit opinion was the first significant interpretation of the BPCIA by a Court of Appeals. In fact, Amgen argued in its opposition brief that this case was a poor vehicle for review because the issues are still be developed by the lower courts. However, the Supreme Court did not wait for the case law to develop at the PTAB and the Federal Circuit regarding the new IPR proceedings, but instead took up the first appeal it could, which culminated in the Court's opinion in Cuozzo v. Lee on Monday. As a result, a lot could hinge on the views of the United States, which we will likely see later this year. Patent Docs will continue to monitor this case and provide updates as necessary.
By Andrew Williams --
The saga of the first-filed IPR petition (IPR2012-00001) came to a close today when the Supreme Court decided the Cuozzo Speed Technologies, LLC v. Lee case. We have been following this case ever since the PTAB issued its Final Written Decision -- the first that the PTAB ever issued. On the first question, the Court unanimously approved of the USPTO's decision to use the "broadest reasonable interpretation" standard for claim construction in IPR proceedings. This question will be addressed in a separate post. On the second question, six members of the Court agreed that the statute mandated that the decision to institute an IPR was not subject to judicial review. Justice Breyer authored the decision of the Court, with Justice Alito penning a dissent on the second question, which was joined by Justice Sotomayor.
The second question centered on the correct interpretation of 35 U.S.C. § 314(d) ("No appeal. -- The determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable."). Cuozzo took the position that the Board's institution of the IPR proceeding in this case was contrary to the statute. Specifically, the PTAB had instituted trial for at least some of the claims on grounds that were not explicitly identified in the petition. According to Cuozzo, this violated § 312(a)(3), which requires that the petition set forth the grounds for challenge "with particularity." The Patent Office instead took the position that any issue related to institution cannot be reviewed. Following oral argument, it was difficult to predict how the Court would resolve this question, particularly because very little of the time was dedicated to this issue. Justice Breyer resolved the question by looking to the congressional objective in passing the AIA -- to give "the Patent Office significant power to revisit and revise earlier patent grants." As a result, he concluded that Congress intended to bar review of the Board's decisions about whether the "reasonable likelihood" standard of ultimately prevailing in the case had been met. Justice Breyer also believed that cases "where a patent holder grounds its claim in a statute closely related to that decision to institute" the IPR proceedings cannot be reviewed.
This did not mean that Justice Breyer believed that all questions related to institution should be unreviewable. For example, the decision states that the Justices "need not, and do not, decide the precise effect of §314(d) on appeals that implicate constitutional questions, that depend on other less closely related statutes, or that present other questions of interpretation that reach, in terms of scope and impact, well beyond 'this section.'" Therefore, according to the Court, constitutional questions related to due process could still be appealed. In addition, if the Patent Office were to partake in "shenanigans," the Federal Circuit could set aside the decision as "'contrary to constitutional right,' 'in excess of statutory jurisdiction,' or 'arbitrary [and] capricious.'" Justice Breyer used as an example the invalidation of a claim as indefinite under § 112, which would be a clear violation of statutory authority for IPR proceedings. Justice Alito's dissent-in-part disagreed with the majority. Under his understanding, many more institution decisions would be reviewable because of the strong presumption favoring judicial review. This dictated his conclusion that this statutory provision did not prevent any review, but merely channeled any appeal though the Board's final written decision.
While the majority appears to have drawn a bright line between what is and is not reviewable, the line gets fairly blurry when considering some of the questions that the Federal Circuit has determined are unreviewable. At first glance, the new standard looks similar to the "authority to invalidate" test articulated by the Federal Circuit appeared in Versata Dev. Grp., Inc. v. SAP America, Inc. In that case, the Federal Circuit reviewed whether the patent at issue was a proper CBM patent -- whether it was a patent covering a financial product or service, and whether the patent was for a technological invention. The Federal Circuit distinguished this case from its Cuozzo case (In re Cuozzo) by pointing to the distinction between institution and invalidation. Because the determination whether the patent at issue was a covered business method patent related to the Board's "authority to invalidate," review of the decision was found to be appropriate. In other words, if the patent at issue was not a proper CBM patent, it would be outside the statutory jurisdiction of the Board. Therefore, without necessarily using the same terminology, the Cuozzo v. Lee decision is consistent with allowing review of CBM patent determinations.
The difficulties arise because the "authority to invalidate" standard did not take hold at the Federal Circuit outside the context of CBMs. Many hypotheticals have been posited about the horrors that could result from the Federal Circuit's refusal to review any institution decision. Probably the most concrete example was when the Court refused to review whether a third-party was a real party in interest. This case, Achates Reference Publ'g, Inc. v. Apple Inc., did not rest on that singular question, however, but rather the Federal Circuit concluded it could not review any decision related to the statutory time-bar -- whether a petitioner was barred from filing an IPR petition because it had been sued in district court more than one year beforehand. Justice Breyer's decision suggests that this situation would fall within the "shenanigans" standard and thus allow review of such cases. However, because of the broad language used by the Supreme Court, this decision means that only time will tell if the Federal Circuit agrees. Therefore, even though we won't have any more Cuozzo decisions, the fallout from Cuozzo v. Lee is likely to be felt for years to come.
By Kevin E. Noonan --
In its first pronouncement regarding the post-grant reviewing proceedings established by the America Invents Act ("AIA"), the Supreme Court ruled that the Patent and Trademark Office's positions on two of the law's provisions regarding inter partes review ("IPR") were correct. First, the Court held unanimously that the USPTO properly applied the "broadest reasonable interpretation" standard for claim construction for IPRs. Second, six members of the Court also agreed that the statute mandated that the decision to institute an IPR was not subject to judicial review. Justice Breyer authored the decision of the Court, with Justice Thomas authoring a concurring opinion to voice his continued displeasure with judicial deference to administrative agencies under Chevron USA Inc. v. Nat'l Defense Council, Inc. On the second question Justice Alito penned a dissent, which was joined by Justice Sotomayor. This post will discuss the Court's first holding regarding the standard of review for claim construction; a related post will discuss the unreviewability of the Office's decision to institute an IPR in the first place (found in Section II of the opinion).
Section I of Justice Breyer's opinion provides a detailed review of patent examination and reexamination procedures, up to an including IPRs under the AIA. This synopsis contains a highly simplified description of the invention (bordering on trivializing it) but then references an Appendix, which "offer[s] a less simplified (and more technical) description" of the invention.
Section III is directed to the claim construction standard used by the PTAB in deciding IPRs. Cuozzo argued that the Office did not have the legal authority to issue its regulations using the "broadest reasonable interpretation" (BRI) claim construction standard. But the Court found otherwise, that Congress gave the Office this authority is 35 U. S. C. §316(a)(4): "a provision that grants the Patent Office authority to issue 'regulations . . . establishing and governing inter partes review under this chapter'" -- just like the Federal Circuit. This conclusion was expressly based on the following rubrics from Chevron: where a statute is clear, the agency must follow the statute, but where a statute leaves a "gap" or is "ambigu[ous]," the Court will "typically interpret it as granting the agency leeway to enact rules that are reasonable in light of the text, nature, and purpose of the statute." Such a "gap" is found here, because "[n]o statutory provision unambiguously directs the agency to use one standard or the other." In addition, "the statute 'express[ly] . . . authoriz[es] [the Patent Office] to engage in the process of rulemaking' to address that gap" in the Court's opinion, citing United States v. Mead Corp., 533 U. S. 218, 229 (2001).
The opinion addresses the dissent at the Federal Circuit: that the Office has authority only to issue procedural rules under §2(b)(2)(A), citing Cooper Technologies Co. v. Dudas, 536 F. 3d 1330, 1335 (Fed. Cir. 2008). But the Court believes § 316 expressly gives the Office rulemaking authority that authorizes using the BRI standard. In interpreting these two parts of the Patent Act, the opinion distinguishes the language of § 2(b)(2)(A), which gives "the Patent Office authority to issue 'regulations' 'which . . . shall govern . . . proceedings in the Office'" (emphasis in opinion) with the statutory language of §316(a)(4), which gives the Office the authority to promulgate regulations "establishing and governing inter partes review." According to the Court, "[t]he Circuit's prior interpretation of §2(b)(2)(A) cannot magically render unambiguous the different language in the different statute before us."
The opinion also addresses, and rejects, Cuozzo's argument (supported by certain amici) that Congress intended the IPR procedure to be adjudicatory in nature. Instead, the Court states that "inter partes review is less like a judicial proceeding and more like a specialized agency proceeding," on the basis that petitioners need not have standing, citing Consumer Watchdog v. Wisconsin Alumni Research Foundation, 753 F. 3d 1258, 1261–1262 (Fed. Cir. 2014); the parties may settle yet the PTAB may continue to a decision; and the Office's capacity to intervene, as it did in this case, in later judicial review of the PTAB's decisions. The opinion also notes the difference in the burden of proof in IPR (preponderance) versus at trial (clear and convincing evidence) as an indication that Congress did not intend an IPR to be a substitute for district court litigation.
The Court also was not persuaded that Congress changed the fundamental nature of the proceedings when it changed the name from "reexamination" to "review"; in the Court's view the essence of all these proceedings is to provide "a second look at an earlier administrative grant of a patent." "Thus, in addition to helping resolve concrete patent-related disputes among parties, inter partes review helps protect the public's 'paramount interest in seeing that patent monopolies . . . are kept within their legitimate scope," said the Court, citing Precision Instrument Mfg. Co. v. Automotive Maintenance Machinery Co., 324 U. S. 806, 816 (1945).
Finally, the Court found nothing in "the statutory language, its purpose, or its history" that suggested Congress had contemplated the claim construction standard the PTAB should apply. In reaching this conclusion, the Court rejected Cuozzo's contention that intent could be found in § 301(d), in mandating that the Office should "determine the proper meaning of a patent claim," in view of "a background of language and practices indicating that Congress designed a hybrid proceeding the Court found ambiguous statutory language regarding the "proper standard" of claim construction. Accordingly:
The upshot is, whether we look at statutory language alone, or that language in context of the statute's purpose, we find an express delegation of rulemaking authority, a "gap" that rules might fill, and "ambiguity" in respect to the boundaries of that gap. Mead Corp., 533 U. S., at 229; see Chevron U. S. A. Inc., 467 U. S., at 843.
This conclusion led the Court to consider whether, and conclude that, the regulation the Office has adopted is reasonable. Given primacy of place is the effect that using the BRI standard protects the public from "[a] reasonable, yet unlawfully broad claim [that] might discourage the use of the invention by a member of the public." The Court recognizes that "an examiner's (or reexaminer's) use of the broadest reasonable construction standard increases the possibility that the examiner will find the claim too broad (and deny it)" but that "use of that standard encourages the applicant to draft narrowly" (an outcome the Court, or at least Justice Breyer, clearly believes is desirable). The opinion is equally clear regarding its basis for believing this outcome is desirable: "[t]his helps ensure precision while avoiding overly broad claims, and thereby helps prevent a patent from tying up too much knowledge, while helping members of the public draw useful information from the disclosed invention and better understand the lawful limits of the claim." Moreover, the Court finds ample evidence of "past practice" before the Office applying the BRI standard, including in earlier reexamination proceedings and interferences (a position advocated by the Generic Pharmaceutical Association and friends as amici). And the Court rejected Cuozzo's arguments that Congress intended IPRs to be different in kind from inter partes reexaminations (for many of the same reasons enunciated by the Court earlier in the opinion). Importantly the Court also rejects the principal complaint by many commentators regarding the lack of the ability to amend claims that during ex parte examination provides the justification for using the BRI standard. According to the Court, "[t]he process  is not as unfair as Cuozzo suggests" because "[t]he patent holder may, at least once in the process, make a motion to do just what he would do in the examination process, namely, amend or narrow the claim" (and the opinion "counts" in favor of this "fairness" the opportunity to amend present during ex parte examination, seemingly content to ignore the basis for instituting IPRs, that the art presented was not considered during initial examination of the application that granted, improvidently or not, into the patent challenged in the IPR). The opinion also elides the statistical evidence regarding the chimera that is the ability to amend claims in an IPR proceeding, saying "that question is not before us" (but "if not you, who? And if not now, when?" is a fair question in response). And finally, the Court is not disturbed by the issue of inconsistent outcomes between the PTAB and district court, saying "[t]his possibility  has long been present in our patent system."
Lead PTAB Judge Michael Tierney remarked, at this year's BIO International Convention, that he believed cases where the standard of review would make a difference in the outcome of an IPR would be exceedingly rare.* It has certainly been the experience of most patent practitioners that in certain cases before certain examiners the reach of the "broadest" reasonable interpretation can seem strained. See, for example, In re Suitco Surface, Inc. Perhaps the PTAB will be more inclined to grant motions to amend as it (and practitioners) become more experienced in IPR proceedings, and as the likelihood increases that such amendments may in fact recite patentable claims. But what is clear is that the Court believes that the Office has properly exercised the authority it was given by Congress. Left untested is the question of whether this particular exercise of authority contravenes the separation of powers between Article I courts (such as the PTAB) and Article III courts that has been raised in other cases, but this is a question most decidedly not before the Court in this case.
*"Will the PTAB be a Road Block for Biotech? Lessons Learned from the First Three Years of Inter-Partes Review and Future Prospects."
Cuozzo Speed Technologies LLC v. Lee (2016)
Opinion by Justice Breyer, joined as to Part II by Chief Justice Roberts and Justices Kennedy, Thomas, Ginsburg, and Kagan; concurring opinion by Justice Thomas; opinion concurring in part and dissenting in part by Justice Alito, joined by Justice Sotomayor
By Donald Zuhn --
In March, following the Federal Circuit's denial of Sequenom's petition for rehearing en banc, Sequenom filed a petition for certiorari for Supreme Court review of the Federal Circuit's decision in Ariosa Diagnostics, Inc. v. Sequenom, Inc. In response to that petition, twenty-two amicus briefs were filed encouraging the Supreme Court to grant certiorari. With the Court scheduled to consider Sequenom's petition in conference on Thursday, Patent Docs will examine selected amicus briefs in the coming week. Today, we review the amicus curiae brief submitted by Dr. Ananda Mohan Chakrabarty. Dr. Chakrabarty is most recognizable to those in the patent community for developing a genetically engineered organism using plasmid transfer, for which he obtained U.S. Patent No. 4,259,444, which in turn was the subject of the landmark Supreme Court case, Diamond v. Chakrabarty, 447 U.S. 303 (1980).
Dr. Chakrabarty (at left) begins his brief by arguing that "the current direction for addressing the issue [of what constitutes patentable subject matter under U.S. patent law], represented by the Mayo/Myriad/Alice framework of analysis, has failed and will continue to fail all stakeholders in the United States patent system," and therefore, "this Court should reconsider the basic issue of how to handle the judicial exceptions to § 101, particularly as [it] relates to the judicial exception categories of 'natural phenomena' and 'law of nature,'" adding that the Ariosa v. Sequenom case "offers an excellent opportunity to do so." According to Dr. Chakrabarty, the Mayo/Myriad/Alice analytic framework "has turned § 101 into a needle's eye that must be traversed, rather than the broad open archway it was intended to be." Dr. Chakrabarty acknowledges that "dealing with the judicial exception categories of 'natural phenomena' and 'laws of nature' requires different thinking than dealing with the more ambiguous category of 'abstract concept,'" and contends that for the first two exceptions "the proper analysis should focus on determining whether the thing covered by the patent claims involves an alteration or manipulation by the hand of man and, if so, whether that alteration or manipulation has created useful qualities or characteristics that did not exist in the thing's natural state."
In a section of the brief entitled "A Scientist's View," Dr. Chakrabarty states that "[i]n this case, the Federal Circuit's adherence to Mayo, rather than following its own conviction that Sequenom's significant invention is worthy of patent protection, was exceptionally disappointing to scientists." Contrasting the Federal Circuit's decision in Ariosa with the Supreme Court's decision in Mayo, Dr. Chakrabarty explains that "[s]peaking as a scientist, it was not surprising that the Mayo patent was held invalid," but suggests that "the Sequenom technology is altogether different, involving innovative and novel ideas for a technology that no longer requires the isolation of rare whole fetal cells."
Quoting from Diamond v. Chakrabarty, Dr. Chakrabarty reminds that "[i]t is beyond dispute that 35 U.S.C. § 101 includes 'anything under the sun that is made by man,'" arguing that "[t]his principle is fully consistent with the judicially created exceptions of natural phenomena and laws of nature because those items -- properly interpreted -- are not new and not made by man." Turning to his '444 patent, Dr. Chakrabarty posits that while the '444 patent "is unequivocally proper and valid[,] . . . it is easy to realize that the outcome might have been different under the Mayo/Myriad/Alice framework of analysis." He suggests that "in that altered world of analysis, my patent would have been attacked as merely applying the basics of the genetic code, extracting a known natural DNA sequence from point A and inserting it into another known natural DNA sequence at point B using previously established (read 'conventional') techniques."
Dr. Chakrabarty also asserts that:
[T]he most far-reaching role of patentability in the modern life of a technical economy is to incentivize the formation of capital which leads to invention. The sophistication of current science requires large amounts of capital to fuel the fire of invention. The process takes years. And unless the Mayo/Myriad/Alice framework is revised significantly and soon, its disastrous effect will harm the U.S. (and world) economies for a long time [emphasis in brief].
For Dr. Chakrabarty, Step 1 of the Mayo/Myriad/Alice framework "is distinctly unhelpful," "provid[ing] no guidance on what that statement means or how to do it," and Step 2 of the Mayo/Myriad/Alice framework "is no better." The whole framework "inherently conflates § 101 with §§ 102-103, if for no other reason than that terms such as 'inventive concept' and 'conventional steps' have a 200 year history of use in the context of distinguishing claimed inventions from the prior art." Dr. Chakrabarty argues that "[t]he proper application of § 101 should be formulated in a manner that is separate and independent from §§ 101-103 and 112, just as those sections should be left free to do their jobs separate and independent from § 101." He suggests that Sequenom's petition for certiorari presents "a perfect vehicle to re-define the proper framework of analysis of § 101, at least for the area of life sciences," arguing that:
[T]he proper § 101 analysis should provide that, if the inventor claims a material -- or a process using a material -- that has been altered or manipulated by the hand of man and, if as a result of that alteration or manipulation, the claimed subject matter is shown to have qualities, characteristics, or properties that did not exist in the natural material, then that claimed subject matter passes muster under § 101 and is worthy of being considered under §§ 102-103 and 112.
Applying his proposed analytic framework to Sequenom's invention, Dr. Chakrabarty explains that "the starting point is a sample of maternal blood (claim 21), serum (claim 1), or plasma (claim 1)," that "[t]he sample is altered and manipulated, as disclosed in the patent, with the result of yielding information about sex and genetic deformities of a fetus," and that "[t]here is no dispute in this record that this manipulation by the hand of man is novel, nonobvious, and properly disclosed in the specification." He then asks "[h]ow can that not be patentable?"
By Donald Zuhn --
In March, following the Federal Circuit's denial of Sequenom's petition for rehearing en banc, Sequenom filed a petition for certiorari for Supreme Court review of the Federal Circuit's decision in Ariosa Diagnostics, Inc. v. Sequenom, Inc. In response to that petition, twenty-two amicus briefs were filed encouraging the Supreme Court to grant certiorari. With the Court scheduled to consider Sequenom's petition in conference next Thursday, Patent Docs will examine selected amicus briefs in the coming week. Today, we review the amici curiae brief submitted by Eli Lilly and Company, Eisai Inc., Upsher-Smith Labroatories, Inc., Pfizer Inc., and Etiometry, Inc.
The amici begin by noting that the Supreme Court has applied a nonstatutory "implicit exception" to patentability to ensure that patents cannot be granted for "concepts" (which, according to the amici, refer to laws of nature, natural phenomena, and abstract ideas), and that "[t]he Court has applied the implicit exception as part of a 'threshold test' for patentability that operates before other patentability requirements may be considered." The amici contend, however, that the implicit exception "does no more than duplicate the [Patent Act's] effects when statutory provisions would also invalidate the same patent," and ask:
Given the current explicit statutory limitations on patenting in the Patent Act—and the proper interpretation of those limitations—should the Court's judicially imposed implicit exception to subject matter considered to be eligible for patenting be abrogated, such that patentability and patent validity are to be determined solely under such explicit statutory provisions?
Citing the amicus brief of Paul Gilbert Cole, the amici point out that "[t]he most pointed criticism of the Court's implicit exception is that the Court's recent jurisprudence has expanded the reach of the exception such that today it applies to invalidate U.S. patents that would be clearly eligible for patenting under international norms." The amici note that the analytical framework devised by the Court for applying the threshold test for patentability is "intended to operate as a surrogate for the broader policy question of whether a patent claim is so conceptual that rights under the patent might dominate or otherwise preempt access to a law or product of nature, a natural phenomenon, or an abstract idea." The amici suggest, however, that "[l]ike many surrogate tests, it risks overreaching its policy objectives." Stating that "the Court has never considered whether the proper interpretation of the current statutory requirements, considered together rather than piecemeal, would fully address the policy considerations that caused the Court to mandate the non-statutory implicit exception," the amici argue that "it is now essential as an exercise of judicial restraint for the Court to consider whether to abrogate the implicit exception in deference to the present explicit statutory scheme" (emphasis in brief).
The amici spend the remaining pages of their brief explaining how the statutory patentability requirements prevent valid claims from protecting or dominating a law of nature, natural phenomenon, or abstract idea, or covering or otherwise precluding access to naturally-occurring subject matter. Noting that 35 U.S.C. § 101 requires that a valid claim must be drafted in terms of a "process, machine, manufacture, or composition of matter" or an improvement thereto, the amici contend that "[t]hese four statutory categories, by forcing valid patent claims to be expressed in terms of the applications that physically embody an invention, represent subject matter that is mutually exclusive with respect to mere concepts—such as laws, phenomena, and ideas." According to the amici, "the patent statute explicitly limits patenting to physical embodiments, things and act-based processes that can only ever be applications of any related concept and can never be the concept itself" (emphasis in brief). The amici argue that when 35 U.S.C. §§ 101, 103 and 112(a) are considered together, these statutory requirements, which limit valid patent claims to inventive and useful applications of any related concept, "operate to limit valid patent claims to inventive and practically useful applications of any law, phenomenon, or idea to which a claimed invention relates" (emphasis in brief).
The amici acknowledge, however, that "[w]hile these various statutory provisions address whether valid patent claims can literally cover a law, phenomenon or idea, they do not necessarily foreclose resort to patent drafting techniques that might be used to craft valid patent claims preempting access to such concepts." Nevertheless, the amici argue that "[t]he Patent Act of 1952 contains two provisions that, if properly interpreted and applied, fully negate the potential effectiveness of such drafting techniques: § 112(a) and § 112(f)." According to the amici, "the combination of § 112(a) and § 112(f) forecloses the possibility that patent drafting techniques might secure protection over a concept to which an invention relates beyond the physical embodiments of the invention as set out in terms of the specific structures, materials, or acts disclosed in the patent."
With respect to the statutory requirement for novelty, the amici argue that this requirement -- and more specifically the "inherent anticipation" aspect of this requirement -- "bars the patenting of any subject matter that exists or operates in nature," and "assures that patent rights cannot impair access to the basic tools of science or technology or in any other way impede the ability of the patent system to promote progress in the useful arts."
The amici conclude their brief by declaring that:
Interpreting the current statutory provisions in a manner consistent with the Court's precedents makes it impossible to identify any scenario under which a valid patent could provide protection for a law of nature, a natural phenomenon, or an abstract idea—either directly or through drafting techniques aimed at yielding a valid patent claim that might dominate or otherwise preempt access to such a law, product, phenomenon, or idea. The same applies with respect to patents relating to entirely mental processes and products of nature.
Given the manifest difficulties that the implicit exception presents to the proper functioning of the patent laws, the Court should address whether judicial restraint now dictates deference to the statutory framework.
By Kevin E. Noonan --
The aphorism that "[t]he race is not always to the swift nor the battle to the strong, but that's the way to bet," variously attributed to Damon Runyon, Franklin P. Adams, and Hugh Keough, could readily be updated to include that "Federal Circuit opinions are not always overturned by the Supreme Court" because recently that is decidedly the way to bet. And had anyone bet on the Court reversing (formally, vacating and remanding) the Federal Circuit's In re Seagate Tech. LLC jurisprudence they would have been in the money, because that is just what the Court did today in Halo Electronics, Inc. v. Pulse Electronics, Inc. and a companion case, Stryker Corp. v. Zimmer, Inc.
To recap, the statute (35 U.S.C. § 284) provides that a district court "may increase the damages [awarded to a patentee against an infringer] up to three times the amount found or assessed." The Federal Circuit's Seagate test created a two-pronged analysis for deciding willfulness, wherein a district court was instructed to find that infringement occurred "despite an objectively high likelihood" that the accused infringer's actions constituted infringement, as well as a subjective component, that the risk of infringement "was either known or so obvious that it should have been known to the accused infringer." Moreover, the evidentiary standard under the Seagate test was, for each prong, clear and convincing evidence. As a consequence, Seagate also provided a "trifurcated" standard of appellate review: de novo for the objective prong, substantial evidence for the subjective prong, and abuse of discretion for the overall determination of whether willful infringement would lie under particular circumstances.
Regarding the cases at bar, in Halo a jury found infringement but the District Court refused to award enhanced damages, despite evidence that defendant Pulse knew of the patents (because Halo had written, twice, offering a license), because Halo had not established the objective recklessness prong of the Seagate test. The Federal Circuit affirmed. In Stryker, the District Court enhanced a jury award against defendant Zimmer from $76.1 million to over $228 million based on willful infringement. But the Federal Circuit reversed the enhanced award, holding that Zimmer had asserted "reasonable defenses" at trial and despite a jury finding that Zimmer had "all-but instructed its design team to copy Stryker's products" and had adopted an aggressive stance in competing with Stryker while "opt[ing] to worry about the potential legal consequences later."
Chief Justice Roberts delivered the opinion of the unanimous Court that swept away these complexities for a simple discretionary standard to be applied by district courts and the Federal Circuit. The Court' s opinion first focused on the language of the statute itself, wherein a court "may" award enhanced damages but was not required to do so ("we have emphasized that the 'word "may" clearly connotes discretion,'" citing Martin v. Franklin Capital Corp., 546 U. S. 132, 136 (2005) (quoting Fogerty v. Fantasy, Inc., 510 U. S. 517, 533 (1994)). However, in the very next sentence the opinion cautions that "discretion is not a whim," according to Martin, and that this discretion is dependent on a district court's judgment "guided by sound legal principles." While eschewing any "precise rule or formula" the Court directs district courts to exercise its discretion "'in light of the considerations' underlying the grant of that discretion," citing Octane Fitness, LLC v. ICON Health & Fitness Inc., 572 U. S. ___, ___ (2014). The Court emphasizes that enhanced damages should not be "meted out in the typical infringement case" but are warranted only for "egregious infringement behavior" (providing a host of synonyms for such behavior, including "willful, wanton, malicious, bad-faith, deliberate, consciously wrongful, flagrant, or -- indeed -- characteristic of a pirate"). While acknowledging "180 years" of patent decisions regarding enhanced damages the Court also recognizes that "the channel of discretion ha[s] narrowed," citing Friendly, Indiscretion About Discretion, 31 Emory L.J. 747, 772 (1982), and that enhanced damages "are generally reserved for egregious cases of culpable behavior."
The Court found precedent for its decision in its case law going back to the beginning of the U.S. patent system, wherein the initial provision of treble damages for all infringement was changed (in the 1836 Patent Act) to be limited to cases of infringement by the "wanton and malicious pirate." Seymour v. McCormick, 16 How. 480, 488 (1854). This provision was expressly punitive, and as such not warranted by infringement undertaken in "ignorance or good faith." This cabining of enhanced damage award to cases of egregious conduct found support in Dean v. Mason, 20 How. 198, 203 (1858) ("aggravated circumstances"), contrasted with unintentional infringement due to ignorance regarding the patent (Hogg v. Emerson, 11 How. 587, 607 (1850). This limit on enhanced damages was maintained in the 1870 Patent Act as interpreted by the Court, including cases where enhanced damages were justified, Tilghman v. Proctor, 125 U. S. 136, 143–144 (1888); Topliff v. Topliff, 145 U. S. 156, 174 (1892), and those where they were not, Cincinnati Siemens-Lungren Gas Illuminating Co. v. Western Siemens-Lungren Co., 152 U. S. 200, 204 (1894). The opinion further distinguished apparently contrary precedent as being "not for the ages," Clark v. Wooster, 119 U. S. 322, 326 (1886), or being more properly directed to attorneys' fees awards, which are now the province of Section 285 of the Patent Act, such as Day v. Woodworth, 13 How. 363, 372 (1852), and Teese v. Huntingdon, 23 How. 2, 8–9 (1860). Finally, the Court found support for its interpretation of Section 284 in earlier cases directed to its proper ambit, such as Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U. S. 476, 505, n. 20 (1964); Dowling v. United States, 473 U. S. 207, 227, n. 19 (1985); and Florida Prepaid Postsecondary Ed. Expense Bd. v. College Savings Bank, 527 U. S. 627, 648, n. 11 (1999).
With this backdrop, the opinion states that the Seagate test "reflects, in many respects, a sound recognition that enhanced damages are generally appropriate under §284 only in egregious cases." But, as has so frequently been the case, the Court concludes that the test "is unduly rigid, and it impermissibly encumbers the statutory grant of discretion to district courts," just as it did in Octane Fitness in 2014. One example of this rigidity is the Court's apprehension that the test might "insulat[e] some of the worst patent infringers from any liability for enhanced damages"; in the Court's view, the objective prong precluded a finding of willfulness categorically provided that the accused infringer could mount a colorable challenge at trial to a patent's validity or the infringer's non-infringement of it (regardless of whether the infringer appreciated these grounds when commencing infringement) as being one example of this risk. This "threshold requirement" for finding willfulness liability under the Seagate test "excludes from discretionary punishment many of the most culpable offenders, such as the 'wanton and malicious pirate' who intentionally infringes another's patent -- with no doubts about its validity or any notion of a defense -- for no purpose other than to steal the patentee's business." Under these circumstances the Court can see no basis for requiring an "independent showing" of objective recklessness (by clear and convincing evidence no less) in the face of evidence of intentional infringement. In this regard the Court cites its recent decision in Octane Fitness for the principle that "subjective willfulness of a patent infringer, intentional or knowing, may warrant enhanced damages, without regard to whether his infringement was objectively reckless." This standard of "knowledge of the actor at the time of the challenged conduct" is also consistent with traditional tort law principles according to the Court.
Nevertheless, the opinion is also careful to state that merely finding egregious misconduct does not require a district court to award enhanced damages. The lodestar is discretion, wherein a district court "take[s] into account the particular circumstances of each case in deciding whether to award damages, and in what amount."
The opinion also disagrees with the Federal Circuit's clear and convincing evidence standard for recklessness, finding no basis in the statutory language (and particularly with reference to other statutory provisions that recite the clear and convincing evidentiary standard).
Finally, consistent with its rejection of the Seagate test, the opinion also rejects the Federal Circuit's "tripartite" nature of appellate review. The proper standard is abuse of discretion, following the Court's similar rejection of multipart standards of review in Highmark Inc. v. Allcare Health Management System, Inc., 572 U. S. ___ (2014). And while the Court recognizes the Federal Circuit's concerns ("The appellate review framework adopted by the Federal Circuit reflects a concern that district courts may award enhanced damages too readily, and distort the balance between the protection of patent rights and the interest in technological innovation") the Court also believes that "[n]early two centuries of exercising discretion in awarding enhanced damages in patent cases  has given substance to the notion that there are limits to that discretion."
With regard to the concerns of Respondents and certain amici, that "allowing district courts unlimited discretion to award up to treble damages in infringement cases will impede innovation as companies steer well clear of any possible interference with patent rights," particularly from the dreaded "trolls," the Court acknowledges the risk that the "careful balance" between the need for patents to promote innovation and the importance of encouraging "imitation and refinement" could be disrupted "if enhanced damages are awarded in garden-variety cases." But "they should not be," says the Court, providing the most certain instruction to district courts and limitations of enhanced damages awards that the Court believes to be consistent with traditional application of the statute.
Justice Breyer concurred, in an opinion joined by Justices Kennedy and Alito. The concurrence gave voice to Justice Breyer's well-worn concerns regarding the burden on innovation occasioned by the need for due diligence in the form of a clearance opinion, bolstered by several amici who would rather not be bothered by patenting in the first place. One particular concern for the concurring Justices is that the Court's opinion should not be taken by district courts to mean willful misconduct can be established by knowledge of the patent "and nothing more." In this regard the concurrence stresses the "context" of the behavior as contributing to its characterization as "willful" or "wanton":
I describe these limitations on enhanced damages awards for a reason. Patent infringement, of course, is a highly undesirable and unlawful activity. But stopping infringement is a means to patent law's ends. Through a complex system of incentive-based laws, patent law helps to encourage the development of, disseminate knowledge about, and permit others to benefit from useful inventions. Enhanced damages have a role to play in achieving those objectives, but, as described above, that role is limited.
Once again Justice Breyer resorts to the balance between the "helpfulness" of an opinion of counsel to "help draw the line between infringing and noninfringing uses" and "the costs and consequent risk of discouraging lawful innovation," concerns accentuated by several amici. Also of concern is the "troll" question, with the Justice citing the practice of using patents to obtain licensing fees (and, curiously citing Thomas Jefferson regarding "the abuse of frivolous patents"). The Justice draws the conclusion, assuming that letters offering licenses are somehow an abuse of the patent system, that "[t]he more that businesses, laboratories, hospitals, and individuals adopt this approach, the more often a patent will reach beyond its lawful scope to discourage lawful activity, and the more often patent-related demands will frustrate, rather than 'promote," the "Progress of Science and useful Arts'" (in rhetoric thus "begging the question").
As for the majority opinion, to some degree the Court has made less burdensome a patentee's task of establishing willful infringement, by lowering the evidentiary standard ("patent-infringement litigation has always been governed by a preponderance of the evidence standard"; Octane Fitness) and by eliminating the "high bar" of establishing objective recklessness. However the Court was just as adamant that enhanced damages should not be available for "garden-variety infringement" and thus the Federal Circuit's Seagate standard as been supplanted (as in so many other areas of the patent law) by a much less defined, "totality of the circumstances" test. While Justice Breyer may admonish the Federal Circuit to "take advantage of its own experience and expertise in patent law" in reviewing a district court's performance in awarding enhanced damages, it will be interesting to see the extent to which the Court is willing to give credence to the Federal Circuit in doing so.
Halo Electronics, Inc. v. Pulse Electronics, Inc. and Stryker Corp. v. Zimmer, Inc. (2016)
Opinion by Chief Justice Roberts; concurring opinion by Justice Breyer, joined by Justices Kennedy and Alito
By Kevin E. Noonan --
In a recent book entitled Imbeciles: The Supreme Court, American Eugenics, and the Sterilization of Carrie Buck, author Adam Cohen examines the case of Buck v. Bell, where Justice Oliver Wendell Holmes wrote that "[t]hree generations of imbeciles are enough" to justify the forced sterilization of a woman the State of Virginia had labeled "feebleminded." This term was used to identify immigrants, epileptics, and women of "loose morals," among others, deemed to be a blight on America's genetic heritage, and cast as a societal threat by the American eugenics movement.
The tragedy, first explored by Stephen Jay Gould in "Carrie Buck's Daughter," The Flamingo's Smile (1985), was that not only was Carrie not an imbecile but neither were her mother nor her daughter (who was less than one year old at the time). Justice Holmes rendered his opinion based on this factual inaccuracy and, according to Mr. Cohen, his own prejudices about race and class as a Boston Brahmin of the turn of the 20th Century. While the Justice had more than adequate help in coming to the wrong conclusion, ultimately Mr. Cohen shows that the combination of predilection and factual error informed one of the cruelest aphorisms in American jurisprudence (which remains good law today).
It is easy for this example to come to mind when reading the questions and assertions from current Associate Justice Stephen Breyer, author of the Court's unanimous decision in Mayo v. Prometheus, regarding his understanding and concerns with the patent system and its discontents. A sampling of these quotations illustrate the point:
But there is another way to look at it. And the other way to look at it -- and that's what I would like your comment about -- is that there are these things, for better words, let's call them patent trolls, and that the Patent Office has been issuing billions of patents that shouldn't have been issued. I overstate but only some. And what happens is some person in business gets this piece of paper and looks at it and says, oh, my God, I can't go ahead with my invention.
And so what we're trying to do with this process is to tell the Office, you've been doing too much, too fast. Go back and let people who are hurt by this come in and get rid of those patents that shouldn't have been issued. Now, we will give you, again, once the same chance we gave you before, and that is you can amend it once if you convince the judge you should have done it before. But if, on the broadest possible interpretation, you know, reasonable interpretation, it shouldn't have been issued, we're canceling it. And that is for the benefit of those people who were suffering from too many patents that shouldn't have been issued in the first place. I don't know.
(Oral Argument, Cuozzo Speed Technologies v. Lee, April 25, 2016)
Today's patent world is not a steam engine world. We have decided to patent tens of thousands of software products and similar things where hardly anyone knows what the patents really about. A company that's a startup, a small company, once it gets a letter, cannot afford to pay $10,000 to $100,000 for a letter from Counsel, and may be willing to run its chances.
You start saying, little company, you must pay $10,000 to $100,000 to get a letter, lest you get willful damages against you should your bet be wrong.
We have one more path leading us to national monopoly by Google and Yahoo or their equivalence, and the patent statute is not designed to create monopolies throughout the United States. It's designed to help the small businessman, not to hurt him. So leave those words for interpretation to the expert court, and in this area it may well be the Federal Circuit.
We have all kind of amicus briefs that say that's the truth. And indeed, thousands and thousands and thousands of small businessmen are trying to break into businesses that they just can't do without software. And when you have tens or hundreds of thousands of patents on software by other companies, that means we can't break in.
(Oral Argument, Halo Electronics v. Pulse Electronics and Stryker Corp. v. Zimmer, Inc., February 26, 2016)
Can you in fact now, this is -- look, there are 42 briefs in this case. I actually read them and I found them very, very helpful up to the point where I have to make a decision, because they're serious. I mean, you know now, the problem that I came away with is the one that you're beginning to discuss, that if you simply say, take an idea that's abstract and implement it on a computer, there are -- you're going to get it much faster, you're going to be able to do many, many things, and if that's good enough, there is a risk that you will take business in the United States or large segments and instead of having competition on price, service and better production methods, we'll have competition on who has the best patent lawyer. You see where I'm going on that one?
And if you go the other way and say never, then what you do is you rule out real inventions with computers.
And so in those 42 briefs, there are a number of suggestions as to how to go between Scylla and Charybdis. Now, I would like to know -- I don't know if you can step back from your representational model. That's a problem. But you're all we have now. And from my point of view, I need to know what in your opinion is the best way of sailing between these two serious harms.
(Oral Argument, Alice Corp. v. CLS Bank Int'l., March 31, 2014)
It's highly abstract language. I gather you, like I, have read some of these claims. They are very hard to understand and when you get to the bottom of it, the abstract nature of the language, plus the fact that it has something to do with computer input, plus the fact that, you know, you suspect very strongly it's baseless, but you really don't like to say something that isn't true and you can say, well, I could see how somebody might think there was something to this claim, just in that tone of voice, which you can't write down that tone of voice.
(Oral Argument, Octane Fitness LLC v. Icon Health and Fitness, Inc., February 26, 2014)
Well, how what do you do with the government's argument here, which I take it as being on page 17, they make an argument which, as I understood it, which is a big qualification, that some of these things are awfully complicated.
You might have a a claim or, really, it's a set of claims that cover 48 pages with all kinds of symbols and 42 different sort of division possibilities.
And then the so called infringer, or the person who falls outside the coverage, is looking at his product, and it's one of the most complex things you've ever seen. And he has to think to himself, well, how am I supposed -- how does the claim cover this? And it's -- there are many, many, many possibilities. I take it that's what they mean when they say it makes sense to put the burden of demonstrating how the claim limitations map onto the accused product because infringement may be found only when the product falls within the scope of the asserted claim or claims in every respect.
Your client, who's the patentee, knows how. Otherwise, he wouldn't be bringing this infringement suit or the inside the coverage suit or responding to someone who says it's outside the coverage. But the person who is the alleged infringer might not know it, and therefore, it makes sense to put everything in the same place; notice of infringement, burden of production, burden of proof. And that way, it will be easier to focus on what's at stake.
(Oral Argument, Medtronic Inc. v. Boston Scientific Corp., November 5, 2013)
Now it is certainly the case that Justice Breyer is fond of outrageous hypotheticals to probe the parties' positions and there is nothing wrong with that. (At least we should hope that his reference to billions of patents being improvidently granted by the USPTO was an exaggeration; after all, the Office has issued only about 9,000,000 patents in its 220 year history, and the Justice should know this.) But behind the quoted statements is a clear concern about the possibly pernicious effects of patents, and it is fair to ask whether these concerns are grounded in reality. While there certainly are those who agree with the Justice, there are also clear disconnects between these sentiments and how patents play out in the real world.
For example, it isn't generally the case that large companies use patents to intimidate or inhibit innovation by small companies. They don't need to: large companies have the wherewithal to ignore small companies and on some occasions simply expropriate whatever innovation those smaller companies have disclosed in their patents. No, the rise in patent litigation has been by "trolls," as that term has been applied to small companies, universities, and patent aggregators to whom these entities have turned when they have lost their technologies to larger companies, in an attempt to recoup through litigation what could not be obtained by the traditional route, licensing. There is not (although some large companies will portray things this way) a drag on innovation; indeed, the term "patent troll" was invented by a Cisco employee on an anonymous blog several years ago. This situation is illustrated by the long history of patent litigation involving Data Treasury, a small Long Island firm that invented methods for electronic check cashing. The banking industry not only didn't license Data Treasury's patents but, after adopting these method with a license attempted to absolve themselves of infringement liability in the court of public opinion, labeling the company as a patent troll, and getting their elected representatives to do the same. When that didn't work, a provision that would have exempted the banks from their liability was introduced at the eleventh hour as part of S.1145, a predecessor to the America Invents Act debated by the Senate in 2008. This provision was scuttled only when the Bush Administration realized that, as an Act of Congress any such exemption would cost the American people upwards of $1 billion as a taking (see "The (Un)intended Consequence of the Law").
In actuality, the need for and reaction to "trolls" is related to the short obsolescence horizon for most non-pharma innovation, and also its interrelatedness; an advantageous, patented feature of a product can become widespread, and there does not seem to be a universal standard setting body to referee these situations (unlike patents for prior like inventions, such as connectivity protocols for modems a generation ago). But, particularly in view of the history of Data Treasury and other small firms trying to protect their technology, the concerns voiced by Justice Breyer seem at best misplaced and yet clearly inform his thinking.
Similarly, the idea that patent claims are a complicated tangle is inconsistent with the patent statute and how it is applied by the PTO and (at least the inferior) courts. Certainly the subject matter can be complex to a layman, no matter what the technology. But there is no mystery (and, insofar as the Court's Nautilus decision remedies any laxity in how 35 U.S.C. §112(b) is applied, no uncertainty) about what a claim means. Satisfying § 112 has, over the past twenty years, become a major question in patent litigation and a resource for challenging patents, and a patentee who does not "particularly point out and distinctly claim" what is her invention is at a serious disadvantage in enforcing her claims. It can even be said that in some instances the strictures of § 112 have ensured a heightened level of clarity and disclosure: in the genomic era at the turn of this century it was certainly possible to publish a scientific paper identifying a newly discovered gene (found in a database of human gene sequences elucidated inter alia by the Human Genome Project) distinguished merely by homology to other genes and speculation about what such a gene might do. Not so at the Patent Office: the Office required disclosure of the function of the protein product of such a gene, relying on the Court's decision in Brenner v. Manson that "a patent is not a hunting license." This points to the different functions of a patent and a scientific paper, but also illustrates that the patent system requires a practically effective level of disclosure. This is consistent with the understanding that Congress has delegated its Article I power to grant patents only to promote progress, and that progress is promoted not only by invention but disclosure thereof "in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains . . . to make and use the same." Which is not how Justice Breyer apparently sees the situation, but that doesn't mean that there has been a wholesale abandonment of these requirements, by the Office, the courts, or the inventing community.
Finally, perhaps it is appropriate to close with another quote from Justice Breyer, during oral argument in Bowman v. Monsanto:
MR. WALTERS: Mr. Bowman went to a grain elevator and he bought from the grain elevator without restriction seeds to -- and it was his purpose to plant them. Now, the only way that he can make use –- if you assume in the first instance that there is exhaustion to the seeds that Mr. Bowman purchased from the grain elevator, you are taking away any ability for him to use that seed or use the invention . . . .
Now, if you say that there is exhaustion in the seeds that Mr. Bowman purchased from the grain elevator, but you say it doesn't apply to the progeny, you are not allowing him to actually practice the invention to grow more seeds.
JUSTICE BREYER: No, but you are allowing him to use those seeds for anything else he wants to do. It has nothing to do with those seeds.
There are three generations of seeds. Maybe three generations of seeds is enough.
JUSTICE BREYER: It is for this example. First of -- you have the Monsanto, the first generation they sold. They have children, which is the second generation. And those children have children, which is the third generation, okay? So bad joke.
By Andrew Williams --
Earlier today, the Supreme Court heard oral arguments in the Cuozzo Speed Technologies, LLC v. Lee appeal (Supreme Court docket number 15-466). The Court was considering two issues related to the recently implemented IPR proceedings from the Patent Trial and Appeal Board ("PTAB" or "Board"). The two questions presented were:
1. Whether the court of appeals erred in holding that, in IPR proceedings, the Board may construe claims in an issued patent according to their broadest reasonable interpretation rather than their plain and ordinary meaning.
2. Whether the court of appeals erred in holding that, even if the Board exceeds its statutory authority in instituting an IPR proceeding, the Board's decision whether to institute an IPR proceeding is judicially unreviewable.
This is, or course, the first opportunity the Supreme Court has had to consider these new proceedings, as well the Board's implementation of them. And, as Justice Breyer pointed out near the outset, it is how you view these proceedings that will likely influence your answer to these questions:
[Y]ou could look at this new law as you [Cuozzo] were looking at it, as trying to build a little court proceeding. If I thought it was just doing that, I would say you were right. But there is another way to look at it. And the other way to look at it . . . is that there are these things, for better words, let's call them patent trolls, and that the -- the Patent Office has been issuing billions of patents that shouldn't have been issued -- I overstate -- but only some. . . . And so what we're trying to do with this process is to tell the office, you've been doing too much too fast. Go back and let people who are hurt by this come in and get rid of those patents that shouldn't have issued. . . . If it's that second purpose, then I would think, well, maybe this is right, what they [the PTAB] are doing.
And, not surprisingly, during the oral argument, the Justices appeared to be struggling with just what these proceedings are, and what the intent of Congress was in creating them.
The overwhelming majority of the time spent during oral argument was dedicated to the question of whether the Broadest Reasonable Interpretation ("BRI") standard for claim construction was the proper one for the Board to be applying in IPR proceedings. And, even though the questions asked by the Justices during oral argument do not necessarily broadcast which direction they are leaning, it would appear that Chief Justice Roberts and Justice Breyer have diametrically opposed views on this question. Justice Breyer gave away his bias when he suggested that the Patent Office has been issuing "billions" of bad patents. This was further exemplified in a series of questions related to appeals from the Patent Office -- whether from initial prosecution or from a Final Written Decision in an IPR proceeding. The example that Justice Breyer used superficially mirrored the Cuozzo patent. Simply put, the Cuozzo patent claims technology directed to indicating speed limits at particular locations on a GPS unit. A GPS receiver is used to track the location of a vehicle, and the speed limit indicator correlates the vehicle's position with a database containing the speed limit for that location. As the database is accessed, the colored filter adjusts so that speeds above the legal speed are displayed in red, while legal speeds are displayed in white. Justice Breyer got a laugh when he created his own hypothetical patent:
I apply for a patent because I have this thing that instead of putting red cellophane on the speedometer, I put purple cellophane on the speedometer. It signals the presence of a hot dog stand. All right. [Laughter] I -- I then try to patent it. And they look at this patent and, no, absolutely not.
Of course, Justice Breyer was not accurately portraying Cuozzo's patent with this example, because it was not as simplistic as simply selecting a particular color for the indicator. Instead, this example more betrays Justice Breyer's distrust of the Patent Office and the patents they have issued. This, unfortunately, may also be a signal how he would decide the issue.
On the other end of the spectrum, Chief Justice Roberts seemed persuaded that IPR proceedings are an alternative to district court litigation, and as such, the rules should be as similar as possible in both forums. For example, he questioned the Assistant to the Solicitor General regarding the Patent Office's position that the BRI standard is proper because it is the standard used in its other proceedings. Picking up on a comment made earlier by Justice Ginsburg, Chief Justice Roberts noted that IPR proceedings are "a hybrid entity with characteristics of the PTO and the district court." He continued: "So why -- why should we be so wedded to the way they do business in the PTO with respect to the broadest possible construction when the -- the point is not to replicate PTO procedures. It's supposed to take the place of district court procedures." More importantly, he observed that "it's a very extraordinary animal in legal culture to have two different proceedings addressing the same question that lead to different results." And, finally, after discovering that the district court's interpretation of a claim is not binding on the Patent Office, and vice versa, Chief Justice Roberts complained: "It just seems to me that that's a bizarre way to conduct legal -- decide a legal question."
The remaining Justices that asked questions appeared to be struggling with how these IPR proceedings operated, and how they fit into the context of the Patent Office overall (not surprising, Justice Thomas did not ask any questions). Again, the resolution of this struggle will likely impact the outcome of the case. But at least Justice Sotomayor seemed to pick up on the fact that regardless of which particular standard is used, it will not be outcome determinative in the large majority of cases. For example, after Cuozzo's counsel explained how a district court determines the plain and ordinary meaning of a claim term, Justice Sotomayor asked:
Aren't those tools used in determining the broadest -- the broadest reasonable reading, meaning how can the PTO decide what a broad reasonable reading is unless it looks at all those factors and decides that the specifications and all the other things don't cure, continue to provide ambiguity in the patent?
Justice Sotomayor appeared to point to the prosecution history as the potential source of this confusion. Cuozzo's counsel noted that the Patent Office does not look to the prosecution history during initial examination -- because it obviously does not exist yet. The implication appeared to be that the PTAB also does not look to the initial prosecution history. However, the Assistant to the Solicitor General disabused the Justices of this impression. He stated: "It's true in the initial examination context that the PTO does not use prosecution history, but it has expressly noted that it will use prosecution history in a proceeding like this the IPR -- because it's already in existence." It will be interesting to see how the resolution of this question will influence Justice Sotomayor's thinking (and possibly the thinking of the Justices) on the outcome of the case.
A decision in this case is expected by the end of June. At that time, we will report on the conclusion of the Court and any potential implications the decision will have on IPR and other post-grant proceedings before the PTAB.
By Coalition for 21st Century Medicine* --
The collective experience of the Members of the Coalition for 21st Century Medicine in trying to obtain much needed patent protection for their novel, life-saving technologies has led to one inescapable conclusion: It is critical to the future of precision medicine that the Supreme Court review the Federal Circuit's decision in Ariosa Diagnsotics, Inc. v. Sequenom, Inc.
When Mayo Collaborative Servs. v. Prometheus Labs, Inc. first came down from the Court, after the initial shock wore off, some in the innovation community were optimistic any problems could be corrected through district court and Federal Circuit cases. While some of the dicta in Mayo was sweeping, the facts of the case and the holding were quite narrow. After all, the claims literally "told" doctors about what the Court deemed a law of nature without incorporating that law into the claimed process. Thus, there was reason to hope that the higher number of "shots on goal" in the lower courts and the Patent Office would lead to an appropriately measured application of Mayo.
This optimism proved to be correct but very short-lived. In Ass'n for Molecular Pathology v. Myriad Genetics, Inc., the Federal Circuit twice upheld the patent eligibility of a biotech invention even in view of a Supreme Court GVR based on Mayo. And the Supreme Court's decision in Myriad was even narrower than in Mayo, including the Court going out of its way to emphasize its limits ("We merely hold . . ."). But like a high-stakes version of the children's game "telephone," the lower courts and the U.S. Patent and Trademark Office apparently received a very different message from what the Supreme Court transmitted.
Rather than engaging in a careful study of the facts in Mayo and Myriad and a principled, contextual application of these to new facts, former Federal Circuit champions of the narrow application of § 101 started expanding on isolated commentary from these cases. Then Judge Rader, one of the other primary defenders against the evisceration of the patent system by metastasizing application of § 101, stepped down as Chief Judge of the Federal Circuit. The Federal Circuit has now ruled against eligibility in every case where § 101 was at issue except one.
District courts in turn appear to have amplified the Federal Circuit's signal to a troubling extent. They began not only invalidating nearly everything that came before them, but invalidating at the pleadings stage. Thus, in the space of a couple years we went from the Federal Circuit upholding the Mayo claims to a patent statutorily presumed valid being struck down on a 12(b)(6) motion.
Completing the circle of feedback distortion, the USPTO has gone even further by issuing examination guidance that significantly expands on Mayo and its progeny such that obtaining meaningful patent protection in molecular diagnostics has become nearly impossible. Though the USPTO facially retreated from some of the more controversial elements of its first round of guidance, the reality is that examiners steadfastly reject nearly all diagnostic claims and the atmosphere feels to stakeholders like one of "reject first, ask questions later."
In short, optimism that the lower courts and the USPTO could or would correct any problems in Mayo was misplaced. The natural question, then, is what else can be done. The opposite approach now appears to be our best bet—i.e., appeal to the Supreme Court to reiterate the narrow nature of its § 101 jurisprudence and direct lower courts and the USPTO to faithfully interpret such. The primary cause of the devastation of life science patenting over the last few years is the failure of these lower courts and the USPTO to correctly interpret the Supreme Court's decisions. But the Court must be helped to see the role its broad statements of general principles have played in this tragedy. We must move the Court not to abandon its recent decisions, since this is not necessary. We must instead urge the Court to mandate a course correction in the application of those decisions.
Ariosa may offer the best chance to do this for the foreseeable future. First, Ariosa is cleaner and more sympathetic than past cases and other current cases. Sequenom's invention represents a profound innovation in molecular diagnostics that gave rise to a whole new type of diagnostic activity. Of course, so did the discovery of the BRCA genes at issue in the Myriad case. But Sequenom does not have a history that can be twisted by anti-patent folks so as to turn the Ariosa case into a referendum on breast cancer or patenting "the blueprint of life" (Myriad) or on patent trolls (the up and coming Genetic Technologies Limited v. Merial L.L.C. case). Prenatal testing has had its share of controversy, but the controversy is unrelated to the patents or Sequenom.
Second, Ariosa has been served up as best as can be hoped to maximize the odds that the Supreme Court both takes the certiorari petition and dials back Mayo and the devastation it has wrought in diagnostic patents. The panel decision itself in Ariosa begs to be overturned due to its lack of clear or convincing reasoning alone. The chances of the Supreme Court taking notice are further increased by Ariosa's frightening implications and the Federal Circuit commentary surrounding it.
As to implications, Ariosa shows the Supreme Court just how broadly and badly Mayo has been interpreted and expanded. The innovation in Ariosa is not an example of what the courts have accepted as implicitly excluded from the patent system for over a hundred years. It is instead precisely the kind of technical advance the patent system was intended to protect. Ariosa takes the Supreme Court's loose language from Mayo regarding "well understood, routine and conventional" and extends it to convert § 101 eligibility into a bizarre obviousness test that, taken to its logical conclusion, virtually every claim could fail. The Ariosa panel decision thus effectively requires two independent inventions in the life sciences, the discovery of a new biomarker or a new utility for a known biomarker coupled to an independent advance in the technical art of assaying biomarkers that is unrelated to the specific biomarker at issue.
Perhaps more influential in spurring Supreme Court review, however, are the Federal Circuit voices who practically beg the Court to take up Ariosa. At least three and arguably four Federal Circuit judges were quite vocal in expressing their concern over Ariosa as an indicator of just how far afield we have been driven by Mayo and its down-stream interpretation. In the original panel decision, Judge Linn bemoaned the pernicious effects of Mayo and the fact that, in his view, it required him to reject what he felt was clearly patent eligible. En banc, Judge Lourie returned to defend innovation by echoing Judge Linn's sentiment. Even Judge Dyk, who has done at least as much damage to life science patenting as any other Federal Circuit judge through his opinions in In re BRCA1- & BRCA2-Based Hereditary Cancer Test (improperly extending Mayo and Myriad) and In re Roslin Inst. (improperly extending Myriad), admitted in Ariosa:
I worry that method claims that apply newly discovered natural laws and phenomena in somewhat conventional ways are screened out by the Mayo test. In this regard I think that Mayo may not be entirely consistent with the Supreme Court's decision in Myriad.
Many in the life science community have for years suffered with the same worries at which Judge Dyk appears to have finally arrived.
Judge Newman's en banc opinion in Ariosa may have set up the case best for Supreme Court review. While she was critical of Mayo, she astutely and forcefully argued that Sequenom's claims are patent eligible in full view of Mayo and Myriad.
I agree with my colleagues that this case is wrongly decided. However, I do not share their view that this incorrect decision is required by Supreme Court precedent. The facts of this case diverge significantly from the facts and rulings in [Mayo] and in [Myriad]. […] Precedent does not require that all discoveries of natural phenomena or their application in new ways or for new uses are ineligible for patenting; the Court has cautioned against such generalizations. (Emphasis added.)
It is not necessarily Mayo itself, but judicial interpretation of Mayo that has swept away Sequenom's claims and those of dozens of other issued patents. Likewise the USPTO's application of Mayo has categorically excluded thousands of meritorious technological advances from the patent system specifically designed to protect them. Ariosa, with its relatively clean profile, sub-par panel decision, and coalition of dissenting voices at the Federal Circuit, presents what may well be the best chance we will ever have to correct the damage done to life science innovation by errant lower court and USPTO application of Mayo and its progeny.
* According to the group's website, the Coalition for 21st Century Medicine represents more than two dozen of the world's most renowned diagnostic technology companies, clinical laboratories, researchers, physicians, venture capitalists, and patient advocacy groups. The Coalition works to ensure that high quality, innovative diagnostic tests -- necessary to assure that timely and accurate information is available when diagnosis, prognosis, and therapy decisions need to be made -- are available to patients and their physicians. To that end, the Coalition works with policymakers to maintain the balance between regulation and innovation and to ensure that regulatory policy promotes rapid access to new diagnostic information.
By Kevin E. Noonan --
Sequenom filed its anticipated petition for certiorari today for Supreme Court review of the Federal Circuit's decision in Ariosa v. Sequenom. The petition advises the Court that it "should take this opportunity to provide the guidance the Federal Circuit is openly seeking, and avoid a result neither it nor Congress could have intended."
The "Question Presented" reads as follows:
In 1996, two doctors discovered cell-free fetal DNA (cffDNA) circulating in maternal plasma. They used that discovery to invent a test for detecting fetal genetic conditions in early pregnancy that avoided dangerous, invasive techniques. Their patent teaches technicians to take a maternal blood sample, keep the non-cellular portion (which was "previously discarded as medical waste"), amplify the genetic material within (which they alone knew about), and identify paternally inherited sequences as a means of distinguishing fetal and maternal DNA. Notably, this method does not preempt other demonstrated uses of cffDNA.
The Federal Circuit "agree[d]" that this invention "combined and utilized man-made tools of biotechnology in a new way that revolutionized prenatal care." Pet.App. 18a. But it still held that Mayo Collaborative Servs. v. Prometheus Labs., 132 S. Ct. 1289 (2012), makes all such inventions patent-ineligible as a matter of law if their new combination involves only a "natural phenomenon" and techniques that were "routine" or "conventional" on their own. Multiple judges wrote separately below to explain that while this result was probably not intended by Mayo, it controlled, and only this Court could now "clarify" Mayo's reach to prevent a "crisis" in life-science innovation.
The Question Presented is: Whether a novel method is patent-eligible where: (1) a researcher is the first to discover a natural phenomenon;(2) that unique knowledge motivates him to apply a new combination of known techniques to that discovery; and (3) he thereby achieves a previously impossible result without preempting other uses of the discovery?
The Petition asserts three grounds: that:
• The Decision Below Has Dangerously Overextended Mayo, and the Court needs to clarify that its precedents permit patenting meritorious inventions like this one.
• This Issue is Vitally Important.
• This Case Is An Ideal Vehicle.
The Statement of the Case recites the inventiveness of the claimed invention, including that the fraction of maternal blood from which the cffDNA was detected was routinely discarded. It recounts the surprise and acclaim with which the invention was greeted in the art, and the application of human ingenuity required to make a practical genetic test from their discovery that cffDNA could be found in maternal blood, i.e., specifically targeting paternally derived portion of the cffDNA. Specifically recited in this regard are the utilities of detecting Downs syndrome, fetal gender and Rh disease using a simple blood test instead of invasive conventional methods (amniocentesis, e.g.). The Petition also mentions the parsimoniousness of the claimed invention, being limited to the test and not including the cffDNA itself or having claims that would preempt all uses of cffDNA by others, citing peer-reviewed journal articles describing alternative methods that would not infringe the claims invalidated by the inferior courts. Tellingly, the Petition asserts that what is inventive is the combination, not the individual steps which were all well known.
The Petition also recites the procedural history of the case and the decisions of the courts below, making special mention of Judge Linn's "remarkable" concurrence. It characterizes the panel decision as being based on "evident rationale was that, because the discovery of cffDNA in maternal plasma directly motivated the '540 patent's new combination of known techniques, that invention merely reflected that patent-ineligible discovery itself. According to the majority, that rendered the patent ineligible under Section 101 as a matter of law, even though it 'agree[d]' that the patent 'combined and utilized man-made tools of biotechnology in a new way that revolutionized prenatal care.' Id. (emphasis added)." It further characterizes (as error) the panel's treatment of the preemption issue as "a one-way ratchet: It 'may signal patent ineligible subject matter,' but 'the absence of complete preemption does not demonstrate patent eligibility.'" Finally the Petition notes that Judge Linn's concurrence, as well as the concurrences to the Federal Circuit's decision denying rehearing en banc, evince the conclusion that "despite this patent's inventive merit, the case would have to be resolved in this Court because Mayo tied the Federal Circuit's hands."
The Petitioner then boldly states that "[t]his is as straightforward a certiorari candidate as any patent case can be," because the judges below clearly stated that only correction by the Court would remedy the situation. The practical effect is clear: "Right now, Section 101 doctrine lacks any discernable limits, and so no company can trust in the patent system when deciding whether to invest in bringing an invention to market." How to do so is simple, according to Petitioners: "this case allows the Court to emphasize that a new combination of otherwise conventional techniques is patent-eligible even if it is straightforwardly motivated by a patentee's unique discovery of a natural law or phenomenon." In this regard, the Petition cites Justice Breyer's dicta in Mayo that "a new use for a known drug" should remain patent eligible, and Justice Thomas's citation in Myriad with approval Judge Bryson's view that the party who discovers a natural phenomenon would be in the best position to claim applications of that knowledge." -- which is just the case here.
This portion of the Petition recites a litany of horrors if the Court does not review (and reverse) the decision below -- from preventing patenting (and development) of vaccines against, for example, the Zika virus, to the conclusion that prior inventions would be patent-ineligible on drugs like aspirin, and even PCR itself, which in Kary Mullis's own words was "a simple idea that 'lay unrecognized for more than 15 years after all the elements for its implementation were available.'" As a consequence, "anyone who would invest in making, validating, or commercializing inventions like these for human medical use must invite others along for the free ride, with predictably unfortunate results."
Worse, according to petitioners, the Federal Circuit's decision "jettison[ed]" the one objective basis for making a Section 101 determination: preemption. "An approach to Section 101 that reduces such a critical fact to a 'moot' afterthought is too badly broken to let lie."
The Petitioners further note that that Justice Breyer himself did not intend the Mayo decision to be the end of the development in the law, but to merely "sketch the outer shell of the content" of Sec 101.
The Petition cites Diehr, Mayo, and Myriad for the proposition that a new combination of old steps should be enough to pass Section 101 muster, illustrating the principle with the statements from Mayo regarding new uses of an old drug:
[T]he Court intimated that "a new way of using an existing drug" would be patent eligible. But that can be true only if patent eligibility extends to new combinations of routine steps that would be self-evident to researchers who knew about a new discovery: After all, the drug is known, the means of administering it are known, and the only new insight is the natural law that the drug treats a disease no one previously knew it treated. So, unless the "inventive concept" that Mayo requires can be found in combining existing techniques in a new way to capitalize on a newly discovered natural phenomenon, Mayo itself is wrong about the patent eligibility of new uses for existing drugs. Conversely, if Mayo (like Diehr) is better understood to permit patenting unconventional combinations of known techniques and materials to accomplish new results that capitalize on newly discovered natural phenomena, the invention at issue here is patent-eligible, because that description fits it to a T.
And regarding preemption:
[T]he preemption concern is not that the patent covers all the immediately useful ways in which an insight known only to the inventor can be harnessed right now. . . . Instead, the concern is that a patent covers all the ways a natural discovery might ever be put to use, including highly innovative ones the patentee does not know and cannot teach.
Finally in this section Petitioner outlines the dangers to innovation that the decisions below create, including invalidation of almost all prior patents including the first one ever granted, on a method for making potash, and otherwise comprising an exhaustive list of suddenly and retrospectively patent ineligible inventions.
With regard to the importance of the issue the Petition cites the twelve "trustworthy amici" who participated at the en banc rehearing stage, as well as the Solicitor General's similar warnings in Mayo. The "suddenly muddled" state of Section 101 law discourages innovation in the life sciences according to the Petition and, ironically, "now affirmatively encourages researchers to keep as secret as possible those very 'basic tools of scientific and technological work' that Section 101 doctrine is designed to render into a public good for the benefit of scientific progress." Repeating a meme developed below:
After the decision below, those seeking new vaccines, new uses for existing drugs, and even holy grail insights like early, non-invasive cancer screens, may conclude that the game isn't worth the candle. And who could blame them: They could revolutionize their field, teach their colleagues a method that is the diametric opposite of conventional wisdom, create a practical, non-invasive test that confers enormous medical benefits on society, have their research cited a thousand times, and yet still lose their patent (after incurring a huge expense in reliance on its protection) because their previously unknown method relies on too fundamental an insight they alone had into the natural world. If this is the permanent reality, neither aspiring scientists nor venture capitalists may see much to gain in developing or commercializing biomedical research.
And then there are the international obligations (ironic in light of Justice Breyer's recent exposition on how the laws of other nations can inform the interpretation of American law, albeit to be fair not patent law; see, The World and the Court: American law and the New Global Realities) that are contravened by the suddenly limited view of patent eligibility that distinguishes what it eligible in the U.S. from what is eligible in the rest of the world.
The section arguing why this case as an ideal vehicle for review repeats the mantra that even the Federal Circuit recognized that it rendered the "wrong" decision but felt hamstrung by Mayo. Accordingly only the Court can correct this error. The Petition ends on three final points:
• The record below, which includes a preliminary injunction motion, claim construction and inter partes review is better developed than most Section 101 cases;
• The claims at issue include independent and dependent claims, down to the scope of individual tests, which imposes particular granularity for the Court to consider in deciding what should be patent eligible; and
• Finally, this may be the last chance for the Court to correct the situation, because left intact this decision will turn genetic diagnostic inventions into trade secrets and other forms of protection when available, and will preclude certain innovations entirely.
Amicus briefs are due in 30 days, and as stated in the Petition are expected to encourage the Court to grant certiorari.
By Andrew Williams --
On March 4, the Supreme Court announced that the Cuozzo Speed Technologies, LLC v. Lee appeal would be argued on April 25, 2016 (the last week of oral hearings for the October Term 2015). As we reported previously, the Supreme Court granted certiorari in this case to address two questions:
1. Whether the court of appeals erred in holding that, in IPR proceedings, the Board may construe claims in an issued patent according to their broadest reasonable interpretation rather than their plain and ordinary meaning.
2. Whether the court of appeals erred in holding that, even if the Board exceeds its statutory authority in instituting an IPR proceeding, the Board's decision whether to institute an IPR proceeding is judicially unreviewable.
Petitioner Cuozzo filed its merits brief on February 22, 2016, followed by fifteen amicus/amici briefs filed by February 29, 2016 in support of petitioner or neither party. At least three amicus/amici briefs were subsequently filed on Monday, March 7 (including by the IPO and the AIPLA). Respondent's merits brief is due later this month, with the possibility of amicus briefs in support of respondent to follow. Interestingly, of the first fifteen filed amicus/amici briefs, only five addressed the second question (and only two solely addressed the second question). This post will examine the second question, and the positions expressed in these five amicus briefs.
As a review, Congress established the new post-grant review proceedings in the Leahy-Smith America Invents Act ("AIA), at least partially in response to the concerns that the Patent Office was issuing too many invalid patents. The AIA conferred authority on the Director to institute IPR proceedings at 35 U.S.C. § 314(a):
Threshold. – The Director may not authorize an inter partes review to be instituted unless the Director determines that the information presented in the petition filed under section 311 and any response filed under section 313 shows that there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition.
The Director has delegated this responsibility to the Patent Trial and Appeal Board (PTAB or Board). Once instituted, the proceedings progress, culminating in a final written decision in which either some or all of the claims are cancelled or the patent emerges unscathed. Congress provided that any party dissatisfied with the final result could appeal the decision directly to the Federal Circuit. 35 U.S.C. § 319. At the same time, the AIA explicitly precluded review of decisions to institute: "No appeal. – The determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable." 35 U.S.C. § 314(d). It is the scope of this unreviewability provision that is at issue in Question 2.
In the Federal Circuit Cuozzo case, the Court held that the statute barred any review related to institution, even when it is contrary to the requirements outlined by the statute. Specifically, in this case, the Board instituted review of a patent on grounds not specifically identified in the petition. Instead of adopting the grounds presented in the petition, the Board recombined art found therein to craft its own obviousness ground of unpatentability. The Federal Circuit held that § 314(d) prevented its review of this action by the PTAB. However, the Court did not stop there, indicating that even if the Board went beyond its statutory authority in its institution decision, such action would not be appealable. This has been borne out by subsequent cases, in which issue such as whether a petition is time barred or whether all real parties in interest have been identified have been deemed unreviewable by the Federal Circuit. In fact, the only situation in which the Court has reviewed decisions outside of the merits of the case has been in the CBM context. In Versata Dev. Group, Inc. v. SAP Am., Inc., 793 F.3d 1306 (Fed. Cir. 2015), the Federal Circuit reviewed the decision whether a patent is properly a covered business method patent, or whether it claims a "technological invention," because (according to the Court) these issues go to the Board's ultimate authority to invalidate.
The Biotechnology Innovation Organization (BIO) and the Association of University Technology Managers (AUTM) Brief
The BIO and AUTM brief alleged that the Federal Circuit had "abdicated its judicial-review responsibilities" in the Cuozzo decision and its progeny. They referred to these ancillary questions as the "who," "what," and "when" of IPRs. A decision on any of these issues, the argument goes, is not a determination whether to institute, and therefore review should not be barred by § 314(d). Instead, the amici asserted that there is a reading of the provision that fulfills the statutory purpose while preserving meaningful judicial review -- that the only bar on challenges should be on the question whether there is or is not a reasonable likelihood that the petitioner would prevail with respect to at least one claim challenged in the petition. As support, they point to the language "under this section" in the statutory provision -- and if looking "under" § 314, the only issue that cannot be reviewed is the threshold determination as found in § 314(a). The other questions are found outside this section.
The ultimate problem with this abdication by the Federal Circuit, according to BIO and AUTM, is that "[t]he absence of review has left PTAB decision-making arbitrary, ad hoc, panel-dependent, and unpredictable." This is exacerbated by the fact that there are very few precedential decisions, and the informative papers from the Board are not considered to be binding authority. The ultimate problem is that "because of the PTAB's erratic, unpredictable, and unreviewed application of that provision, innovators lack any reasonable certainty about whether their valuable intellectual property remains exposed to PTAB proceedings."
The New York Intellectual Property Law Association Brief
One of the themes that flowed through almost all of the briefs on this issue was that the Supreme Court "applies a 'strong presumption' favoring judicial review of administrative action," citing a Supreme Court case from last year, Mach Mining, LLC v. E.E.O.C., 135 S.Ct. 1645 (2015). That case continued, stating that an "agency bears a 'heavy burden' in attempting to show that Congress 'prohibited all judicial review' of the agency's compliance with the legislative mandate." The New York Intellectual Property Law Association's brief also cited Lindahl v. OPM, 470 U.S. 768 (1985), for the proposition that "[e]ven statutory language that 'plausibly can be read as imposing an absolute bar to judicial review' does not overcome the 'usual presumption favoring judicial review of administrative action' if there is another natural reading of the statute that permits some level of review." Therefore, according to the argument, the only issue that should be unreviewable is the decision to institute itself, not the ancillary issues that might need to be decided at the institution stage.
The Intellectual Ventures Management LLC Brief
The section of the Intellectual Ventures amicus brief dealing with Question 2 framed the issue as the Federal Circuit rule foreclosing judicial review undermines Congress's careful and balanced design. This rule, according to amicus, "undermines the integrity of the statutory scheme and threatens to distort the IPR process into an inefficient, unpredictable free-for-all." The brief identifies a laundry list of statutory requirements that this rule allows the PTAB to ignore: (1) earliest possible timing (because IPRs can only be filed nine months after grant of a post-AIA patent), (2) petition requirements, (3) time bar for earlier-filed civil action, (4) time bar for infringement defendants, (5) joinder limitation, and (6) estoppel. In other words, "[t]hey become guidelines for the agency to follow only when it feels like it." The end result is the encouragement of gamesmanship, "turning IPRs into a kind of Wild West system of patent invalidation where no patent or district court victory is ever truly safe."
The Sightsound Technologies, LLC Brief and the Medtronic, Inc. Brief
Finally, the two briefs that deal solely with Question 2 have something else in common. They both have cases pending at different stages that have been impacted by the outcome in the Cuozzo case. Therefore, these briefs serve to highlight the real-world implications of the Federal Circuit's decision.
The case involving Sightsound is very similar to the Cuozzo case itself. The petitioner, in this case Apple, filed a CBM patent review against one of Sightsound's important patents. The PTAB rejected all but one anticipation ground found in the petition, but devised its own obviousness rejection, combining the main reference with "twelve disparate references relating to CompuSonics." According to the brief, "the Board claimed 'discretion' to posit, initiate, and conduct this review sua sponte -- a discretion that the Board has explicitly claimed not to have in other proceedings." The ultimate problem, according to Sightsound, was that in the limited time for the CMB to proceed, they never fully understood the position of the Board until the Final Written Decision. And, to add insult to injury, the Board rejected the anticipation challenge. Therefore, all of the grounds found in the original petition were rejected, but the ground put together by the Board sua sponte invalidated the patent. The Federal Circuit relied on Cuozzo to refuse to hear the appeal.
In the Medtronic case, amicus requests that the Supreme Court not include broad language in its decision (regardless of which way it decides) that would suggest that the Federal Circuit lacks jurisdiction to review post-institution decisions related to the termination of IPR proceedings. In this case, Medtronic had acquired another party (Cardiocom) as a wholly-owned subsidiary, which itself had been sued by Bosch. Medtronic was also independently concerned about Bosch's patents, so it filed IPR petitions against the patents, but also identified Cardiocom and their relationship. However, based on previous guidance from the Board, Medtronic did not list Cardiocom as a real-party-in-interest. The Board instituted over Bosch's objections on this issue, but on the eve of the oral hearing, that decision was reversed. The PTAB decided that Cardiocom was a real-party-in-interest, and since it wasn't classified as such in the petition, it terminated the proceedings. And, because Cardiocom was not time-barred, Medtronic could not refile. Medtonic is currently seeking relief from the Federal Circuit and a district court, but so far has been unsuccessful, in part because the Federal Circuit views this issue as tied to institution (even though it occurred after institution).
We will continue to preview the Supreme Court Cuozzo case leading up to its April 25 oral hearing date.
By Andrew Williams --
Earlier today, the Supreme Court heard oral arguments in two related cases: Halo Electronics, Inc. v. Pulse Electronics, Inc. (Supreme Court docket number 14-1513) and Stryker Corp. v. Zimmer, Inc. (Supreme Court docket number 14-1520). The issue on appeal in the Halo case was limited to Question 1 presented in the petition:
1. Whether the Federal Circuit erred by applying a rigid, two-part test for enhancing patent infringement damages under 35 U.S.C. § 284, that is the same as the rigid, two-part test this Court rejected last term in Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014) for imposing attorney fees under the similarly-worded 35 U.S.C. § 285.
In the Stryker case, the questions that will be considered are:
1. Has the Federal Circuit improperly abrogated the plain meaning of 35 U.S.C. § 284 by forbidding any award of enhanced damages unless there is a finding of willfulness under a rigid, two-part test, when this Court recently rejected an analogous framework imposed on 35 U.S.C. § 285, the statute providing for attorneys' fee awards in exceptional cases?
2. Does a district court have discretion under 35 U.S.C. § 284 to award enhanced damages where an infringer intentionally copied a direct competitor's patented invention, knew the invention was covered by multiple patents, and made no attempt to avoid infringing the patents on that invention?
As suggested by the question in the Halo case, issues in these two cases are similar to those decided by the Court in the Octane Fitness and Highmark cases from the 2013-2014 term. The relevant text of this section of the statute reads: "In either event the court may increase the damages up to three times the amount found or assessed." An important distinction between these cases and the prior ones is that any change in the way that this statute is applied will only benefit patent owners. As a result, not surprisingly, a theme that permeated throughout the argument today was whether pirates, or willful infringers, are as dangerous as the so-called trolls. How the various Justices view this dichotomy will likely be determinative of the outcome of these cases.
Jeffrey Wall, counsel for Stryker Corp., argued on behalf of both petitioners. The position of both patent owners in this case was that the Federal Circuit had developed a test for enhanced damages that is too rigid. According to In re Seagate Technologies, the currently controlling en banc Federal Circuit decision, a patent owner needs to show both (1) an alleged infringer acted despite an objectively high likelihood it was infringing the patent, and (2) the infringer knew or should have known of the risk. As Mr. Wall put it, instead of focusing exclusively on "the nature of the infringement," the district courts also look to defenses developed by litigation counsel to get the accused infringer "off the hook." Mr. Wall even quoted Justice Breyer from the Octane case in saying that "a patent lawyer can virtually always come up with some non-frivolous defense in litigation."
This was an opening for Justice Breyer to begin his questioning. In what will not be a surprise to anyone, Justice Breyer began his comments with the following observation: "Today's patent world is not a steam-engine world." Unfortunately, this was followed up with:
We have decided to patent tens of thousands of software products and similar things where hardly anyone knows what the patent's really about. A company that's a start-up, a small company, once it gets a letter, cannot afford to pay 10,000 to $100,000 for a letter from counsel, and may be willing to run its chances.
Mr. Wall responded a little later:
Because on the other side of the parade of horribles you're worried about are the people who can infringe, knowing that they can discount by the probability that they'll be found to have infringed in litigation with virtually no back-end penalty, even if they were a very bad infringer . . . .
When pressed for how to articulate a test by Justice Sotomayor, Mr. Wall again pointed to the nature of the infringement, and added "[t]hat needs to be intentional or reckless based on the facts as they were known to the infringer." Moreover, Mr. Wall suggested taking into account the strength of the notice, such as "what kind of notice were they on the patent, and what would have been commercially reasonable in the industry as it exists."
The United States
Roman Martinez argued on behalf of the United States as amicus curiae. He took the position that the Federal Circuit moved in the right direction with the Seagate case, but that they made two mistakes: (1) when "they said that in a case where you have subjective intent, that, in and of itself, is not enough to establish a case for enhanced damages," and (2) "with respect to how the recklessness inquiry is supposed to happen." The problem with the latter is because the analysis is from the reasonable man with "the benefit of omniscience, giving him the benefit of hindsight and saying, what facts do we know at the time of trial?"
In what seemed uncharacteristic, Justice Breyer basically said that we should trust the Federal Circuit, because "we're not leaving it up to the 475 trial judges  because those 475 trial judges don't see patent cases very much." Justice Breyer again made his concern clear, this time speaking in the shoes of the Federal Circuit: "And we are afraid that if we do not use this objective standard, what we will see is a major effect discouraging invention because of fear that if we try to invent, we'll get one of these letters and we can't afford $100,000 for an opinion."
Carter Phillips, counsel for Pulse Electronics, argued on behalf of the Respondents in this case. For their part, Mr. Phillips argued to maintain the status quo. In fact, Mr. Phillips highlighted two areas that he did not think should change: (1) the de novo standard of review, and (2) the clear and convincing evidence standard. Specifically, Mr. Phillips did not want to see discretion afforded to the lower court's decisions. His reason was that whether there is an objectively reasonable basis for what has been done is basically a question of law. With regard to maintaining the clear and convincing evidence standard, he provided two reasons. First, the standard was in existence in 1985, and Congress didn't modify it with the America Invents Act. Second, Mr. Phillips pointed out that they are talking about punitive damages, which should have a higher standard.
Justice Sotomayor took the counterpoint to Justice Breyer during Mr. Phillips argument. After noting that "there's a whole lot of worry articulated by Justice Breyer," she went on to note that "there's not a whole lot of worry about protecting the patent owner." She continued:
I can't forgot that historically enhanced damages were automatic, and they were automatic because of a policy judgment that owning a patent entitled you to not have people infringe willfully or not willfully. And I accept that at some point there was a different judgment made that -- that good-faith infringers should be treated differently than other infringers, willful infringers.
But I don't know that that swung so far the other way that it can only be that, if you come up with something, any defense whatsoever in the litigation that's not frivolous, that that gets you out of enhanced damages.
It will clearly be the difference in this policy consideration will be determinative of how the Court will decide -- will the Court favor the pirates or the trolls.
On a final note, Justice Breyer attempted to provide a historical example:
[T]here was a company. And the company made, I think, cotton goods. And an individual thought that he could make a lot of money by taking those cotton goods and the machinery that they were used and selling it all over the United States. And so he did it. I think it was Alexander Hamilton.
Even though it is not clear that Justice Breyer had the correct historical figure in mind, it was a nice shout-out to Lin-Manual Miranda and his blockbuster hit on Broadway. In fact, Justice Breyer is on record as being a fan of the show. It was only too bad that Mr. Miranda didn't include a song about Thomas Jefferson helping to create the original patent system in his musical score.
By Kevin E. Noonan --
As reported earlier today in IP Law360, Sandoz has petitioned the U.S. Supreme Court for certiorari to review the Federal Circuit's decision that reversed the District Court in Amgen v. Sandoz. In its decision, two members of the Federal Circuit panel (Judges Lourie and Newman) held that the BPCIA required notice of commercial marketing of a biosimilar product be given by the biosimilar applicant to the reference product sponsor only after the FDA had given regulatory approval for the biosimilar. Judge Chen dissented, on the grounds that this constituted an extra 180 days of regulatory exclusivity beyond the 12 years expressly set forth in the statute.
Sandoz argues that this decision was outside the scope of the plain meaning of the statutory language, was inconsistent with the policy objectives of the BPCIA and in conflict with Supreme Court decisions on statutory interpretation. Specifically, Sandoz argues that Amgen's remedy to prevent commercial marketing immediately upon approval was to ask a district court for an injunction based on patent infringement, which Amgen has not done (and Sandoz pointed out to the Court). Indeed, Sandoz inferred that Amgen could not do so, based on SEC filings concerning whether Amgen owned an unexpired patent related to filgrastim.
Sandoz's petition also argues that the decision "disrupts the careful balance struck by Congress by delaying the launch of every biosimilar product by six months" (emphasis added). Again in this argument Sandoz maintains that the only remedy in the statute providing for an injunction was based on patent litigation, either pursuant to the "patent dance" or, according to its successful arguments below, as provided by the "remedies" in the statute when a biosimilar applicant refuses to provide the reference product sponsor with its application or relevant manufacturing methods. According to Sandoz, the statute is clear that "once the expressly granted [12 year] exclusivity period has run, the FDA's approval is 'made effective,' and the biosimilar applicant should be able to market immediately, absent the successful assertion by the sponsor of any valid patent claims."
The last portion of Sandoz statutory arguments contends that the Federal Circuit's interpretation "erroneously divorced the notice of commercial marketing provision from the patent resolution scheme and created an extra-textual injunctive remedy to enforce it." Sandoz characterizes the Federal Circuit's action as an extra-statutory judicial intervention into the process, by granting an injunction against commercial marketing (that was lifted 180 days after FDA approval, on September 4, 2015). Sandoz's point is that an "already approved biosimilar" was (and will be, for other biosimilars) kept off the market for an additional 180 days "without regard to whether the sponsor could show any valid patent rights or any irreparable harm." The argument with regard to the statutory scheme is as follows:
With the exception of the confidentiality provision -- which is not applicable here -- Congress did not make the provisions in Section 262(l) specifically enforceable. In other words, it created no cause of action for either the applicant or the sponsor to obtain an injunction to compel the other party to comply with any of the provisions in that subsection. In contrast, Congress expressly made the confidentiality provision enforceable by an injunction -- and that provision proves that Congress knew how to provide an injunctive remedy when it wished to do so.
As particularly relevant here, and consistent with the BPCIA's overall patent-based remedial approach, the remedy Congress provided for the failure to provide the notice of commercial marketing under subsection (l)(8)(A) is the ability to bring an artificial infringement suit. Specifically, when an applicant engages in the patent exchange process, yet does not provide notice of commercial marketing: "the reference product sponsor, but not the subsection (k) applicant, may bring" an action for a "declaration of infringement, validity, or enforceability" with respect to certain patents identified earlier in the patent exchange process.
Sandoz also noted that the Federal Circuit did not consider the "traditional equitable factors" involved in a decision to grant an injunction, which decision is in conflict with the Court's eBay decision.
The petition also makes the public policy argument that, left intact, the Federal Circuit's decision will impact not only Sandoz but every biosimilar applicant, supporting this argument with citations to the FTC's Report on biosimilars and other references regarding the importance of biosimilar drugs to patient accessibility to biologic drugs. This outcome will "disrupt the careful balance struck by Congress between competition and innovation" Sandoz asserts, in language certain to get the attention of at least some members of the Court.
The Court will take up the petition in due course (and in view of the public policy implications may solicit the Solicitor General's views), and of course Amgen will have the opportunity to oppose. There were a few amici who filed briefs supporting Sandoz's position on these issues in its petition for rehearing en banc, and briefs from those and any other amici will be due in the coming weeks.