Patent Docs

Teva Pharms. Inc. v. Amneal Pharms. LLC (D.N.J. 2024)

By Kevin E. Noonan --

The Federal Circuit has been petitioned by plaintiff Teva Branded Pharmaceutical Products R&D, Inc. to reverse a decision in favor of Defendant Amneal Pharmaceuticals wherein the District Court entered an injunction ordering Teva to delist five Orange Book-listed patents, in Teva Pharms. Inc. v. Amneal Pharms. LLC.

To recap, the issues arose in litigation over Amneal's ANDA directed to its generic version of Teva's ProAir® HFA (albuterol sulfate) Inhalation Aerosol product.  In this litigation, Teva asserted five Orange Book-listed patents:  U.S. Patent Nos. 8,132,712 ("the '712 patent"), 9,463,289 ("the '289 patent"), 9,808,587 ("the '587 patent"), 10,561,808 ("the '808 patent"), and 11,395,889 ("the '889 patent") having these representative claims:

8,132,712:

1.  A dose counter for a metered-dose inhaler, the counter comprising: an actuator; a rotary gear; a driver for driving the rotary gear in a step-wise fashion in response to displacement of the actuator, the rotary gear comprising a wheel mounted on a spindle which wheel having a plurality of ratchet teeth around its periphery; a pawl to prevent reverse rotation of the rotary gear; and a display coupled to the rotary gear, the display having a visible array of incrementing integers on a surface thereof indexable by a single integer in response to each step of the step-wise rotary motion of the rotary gear; wherein the pawl comprises at least two ratchet teeth each for engaging with the ratchet teeth of the wheel to prevent reverse rotation of the rotary gear, the at least two ratchet teeth being radially spaced such that one of the at least two ratchet teeth of the pawl engages with the ratchet teeth of the wheel following each step of the step-wise rotary motion of the rotary gear.

18.  The use of a dose counter for preventing miscounting in a metered dose inhaler, the dose counter comprising: an actuator; a rotary gear; a driver for driving the rotary gear in a step-wise fashion in response to displacement of the actuator, the rotary gear comprising a wheel mounted on a spindle which wheel having a plurality of ratchet teeth around its periphery; a pawl to prevent reverse rotation of the rotary gear; and a display coupled to the rotary gear, the display having a visible array of incrementing integers on a surface thereof indexable by a single integer in response to each step of the step-wise rotary motion of the rotary gear; wherein the pawl comprises at least two ratchet teeth each for engaging with the ratchet teeth of the wheel to prevent reverse rotation of the rotary gear, the at least two ratchet teeth being radially spaced such that one of the at least two ratchet teeth of the pawl engages with the ratchet teeth of the wheel following each step of the step-wise rotary motion of the rotary gear.

9,463,289:

1.  An inhaler for metered dose inhalation, the inhaler comprising:
    a main body having a canister housing,
    a medicament canister, which is moveable relative to the canister housing and retained in a central outlet port of the canister housing arranged to mate with a canister fire stem of the medicament canister, and
    a dose counter having an actuation member having at least a portion thereof located in the canister housing for operation by movement of the medicament canister,
    wherein the canister housing has an inner wall, and a first inner wall canister support formation extending inwardly from a main surface of the inner wall, and
    wherein the canister housing has a longitudinal axis X which passes through the center of the central outlet port,
    the inner wall canister support formation, the actuation member, and the central outlet port lying in a common plane coincident with the longitudinal axis X.

9,808,587:

1.  An inhaler for metered dose inhalation, the inhaler comprising:
    a main body having a canister housing,
    a medicament canister, which is moveable relative to the canister housing and retained in a central outlet port of the canister housing arranged to mate with a canister fire stem of the medicament canister, and
    a dose counter having an actuation member having at least a portion thereof located in the canister housing for operation by movement of the medicament canister,
    wherein the canister housing has an inner wall, and a first inner wall canister support formation extending inwardly from a main surface of the inner wall,
    wherein the canister housing has a longitudinal axis X which passes through the center of the central outlet port, and
    wherein the first inner wall canister support formation, the actuation member, and the central outlet port lie in a common plane coincident with the longitudinal axis X such that the first inner wall canister support formation protects against unwanted actuation of the dose counter by reducing rocking of the medicament canister relative to the main body of the inhaler.

10,561,808:

1.  A dose counter for an inhaler, the dose counter having a counter display arranged to indicate dosage information, a drive system arranged to move the counter display incrementally in a first direction from a first station to a second station in response to actuation input, wherein a regulator is provided which is arranged to act upon the counter display at the first station to regulate motion of the counter display at the first station to incremental movements.

11,395,889:

1.  An incremental dose counter for a metered dose inhaler having a body arranged to retain a canister for movement of the canister relative thereto, the incremental dose counter having a main body, an actuator arranged to be driven and to drive an incremental output member in a count direction in response to canister motion, the actuator being configured to restrict motion of the output member in a direction opposite to the count direction, such that the actuator acts as an anti-back drive member when the actuator is in a non-depressed position, and wherein the incremental dose counter further comprises a second anti-back member configured to restrict motion of the output member in a direction opposite to the count direction when the actuator is disengaged from the output member by a bump surface.

The District Court granted Amneal's motion on the pleadings (asserted in its counterclaims as required by statute) that these patents were improperly listed in the Orange Book as not being directed to an FDA-approved drug nor method of using such a drug for treating a disease or disorder, and granted an injunction compelling Teva to delist these patents.  Teva appealed, the Federal Circuit entering a stay on the order to delist during pendency of the appeal.

On appeal, Teva makes two arguments:  the first is based on a legal and technical definition of how the term "drug product" is defined in the statute, and the second is whether the District Court erred procedurally, including whether claim construction was required to properly determine the  first question.  That first question is the more difficult one, to the extent to which Teva must convince the Court that the 1st Circuit erred in the Lantus decision and the District Court erred in interpreting the 2nd Circuit's decision in the Takeda case, both of which were decided consistently with the decision against Teva by the District Court.

With regard to its statutory construction argument, Teva maintains that not only did it comply with the listing statute but that it was compelled by the statute to do so.  "A drug product patent must be listed in the Orange Book for a specific NDA (i.e., a brand-name product) if the patent 'claims the drug for which the applicant submitted the application'" under 21 U.S.C. § 355(b)(1)(A)(viii)(I) according to Teva's brief.  This argument can only be persuasive should "the drug for which the applicant submitted the application" be interpreted to encompass per se the inhaler device (and related administration-related accoutrement and not need to include express recitation of the drug administered thereby).  That interpretation further depends on the Federal Circuit being persuaded that the drug itself is impliedly contained in the claims to the "drug product," as interpreted by Teva, analogously to recitations of either genus claims to particular classes of drugs or more broadly to formulation claims reciting excipients and the like.  Teva argues that accepting the arguments by Amneal (and their supportive amici) would greatly reduce the number of Orange Book-listed patents in ways that would harm the careful "balance'" struck under the Hatch-Waxman framework in disclosing to generic competitors (and the public) what patents could be asserted against ANDA-seeking drugmakers under 35 U.S.C. § 271(e)(2).

According to Teva, the District Court erred in what it means to claim a drug product, focusing not on that is recited in the claim but what generic drug product would be adjudged to be infringed.  In the context of Orange Book listing, Teva argues that under the statute, that definition "includes not just an 'article' that treats an illness or affects the body's functioning, but also any 'component' of such an 'article'" under 21 U.S.C. § 321(g)(1)(B)-(D).  This is because "FDA's rulemaking expressly contemplates that patents claiming a 'dosage form' will be listed in the Orange Book and identifies 'metered aerosols' like those at issue here as one example of a 'dosage form.'"

The brief relies on this definition of the term "drug" in the statute:

(A) articles recognized in the official United States Pharmacopoeia, official Homeopathic Pharmacopoeia of the United States, or official National Formulary, or any supplement to any of them; and (B) articles intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease in man or other animals; and (C) articles (other than food) intended to affect the structure or any function of the body of man or other animals; and (D) articles intended for use as a component of any article specified in clause (A), (B), or (C).

21 U.S.C. § 321(g)(1) (italics emphasizing the portion of the statute expressly relied upon by Teva).  This definition is both "express" and "expansive," Teva argues, and applies to the listing statute as well, according to the brief.  Teva acknowledges that mere packaging cannot be listed but contends that its inhalers are part of the approved "finished dosage form" of the approved product and therefore the asserted patents to such inhalers et al. were properly listed.  Inclusion of subsection (D) above "ensures that the term 'drug' will reach the entirety (any 'component') of any drug product (any 'article[]' used to treat disease)," Teva argues.

Relying on FDA regulations (68 Fed. Reg. 36,676, 36,680 (June 18, 2003)), the brief asserts that metered aerosols are "expressly categorized" as a dosage form, wherein 'drug delivery systems used and approved in combination with a drug'—a category that includes 'metered dose inhalers'—are distinguishable from the type of 'packaging and containers' that are not properly listed in the Orange Book," Teva citing Orange Book, Appendix C, at C- 1 (44th ed. 2024) in support for this argument.  Moreover, Teva argues that "FDA classifies MDIs [metered dose inhalers] like ProAir as "single-entity combination products," meaning a drug and a device "combined or mixed and produced as a single entity," wherein "[c]ombination products 'constitute a combination of a drug, device, or biological product'" under 21 U.S.C. § 353(g)(1)(A)" that are "regulated either as a drug or a device" under 21 U.S.C. § 353(g)(1).  Regarding MDIs, Teva argues that FDA has classified them as "drug-device combination products for which 'the primary mode of action . . . is attributable to the drug component,'" citing FDA guidance from 1993 (which states that "an aerosol delivery device will be considered a drug product . . . when the primary purpose of the device is delivering or aiding in the delivery of a drug and the device is distributed with the drug").  (This determination also applies to dose counters according to the brief.).  In this way Teva contends the Court must treat the inhaler as it would an excipient or other component of a drug formulation covered under the statute and relevant FDA regulations because that is how FDA approved the combination.

The District Court, in Teva's telling, erred in ruling that the asserted claims must be delisted because none of those claims expressly recited the active ingredient of the drug product, albuterol sulfate, and did so without claim construction (despite the decision depending on whether the drug was claimed in any of the asserted claims).  The brief also asserts that the District Court apparently vacillated "between stating that the claims must recite the active ingredient and stating that the claims must recite the full product itself," finally resting on the purported need for the claims to recite expressly albuterol sulfate.  But Teva asserts another interpretation of the District Court's holding would require a properly Orange Book-listed patent would need to "recite every aspect of a drug (active ingredients, inactive ingredients, excipients, etc.)" which would permit listing only of "claim[s] with limitations explicitly directed to every part of the drug product [that] would satisfy the opinion," which would be "a dramatic narrowing of the scope of the Listing Statute and contrary to established law, citing in this regard Cadence Pharms. Inc. v. Exela PharmSci Inc., 780 F.3d 1364, 1369 (Fed. Cir. 2015), as an example.

Teva asserts that the statute requires that its claims must, under 21 U.S.C. § 355(b)(1)(A)(viii), claim "the drug for which the applicant submitted the application" and the test for whether this is the case is if the accused product would infringe the asserted claims ("The scope of what a patent 'claims' is effectively coterminous with the products that infringe a patent.").  "Critically," the brief asserts (and this is the crux of whether Teva will be successful before the Federal Circuit), a "patent need not read on the entirety of a product to 'claim[]' the product," citing SunTiger, Inc. v. Sci Rsch. Funding Grp., 189 F.3d 1327, 1336 (Fed. Cir. 1999)("[i]f a claim reads merely on a part of an accused device, that is enough for infringement"), "[n]or, in the case of pharmaceuticals, must a patent recite the active ingredient by name in order to claim the drug" (basing this assertion on generic claims "whose active ingredient is one species within the genus," citing In re Omeprazole Patent Litig., 536 F.3d 1361, 1365-66 (Fed. Cir. 2008), and Indivior Inc. v. Dr. Reddy's Lab'ys, S.A., 930 F.3d 1325, 1349-50 (Fed. Cir. 2019)).  Thus, Teva argues that the Federal Circuit has held that a patent that "'claims the drug for which the applicant submitted the application'—and therefore 'must be listed'— if it contains a product claim that reads on the drug that is the subject of the NDA,'" citing Apotex, Inc. v. Thompson, 347 F.3d 1335, 1343-44 (Fed. Cir. 2003).  And under 21 U.S.C. § 321(g)(1)(D), that would include the claims Teva asserted before the District Court (because the term "drug" "covers the entirety of the drug product and any component thereof—not just the active ingredient").  This is because, Teva argues, the FDA-approved "drug product" is the ProAir HFA (the device in combination with albuterol sulfate) -- and "[t]he statutory scheme treats combination products like ProAir HFA as drug products where—as is the case with ProAir HFA—the product's 'primary mode of action' is that of a drug" under 21 U.S.C. § 353(g)(1)(D)(i).

The two "out-of-circuit" cases the District Court relied upon for its contrary determination -- United Food & Commercial Workers Local 1776 v. Takeda Pharmaceutical Co., 11 F.4th 118 (2d Cir. 2021), and In re Lantus Direct Purchaser Antitrust Litigation, 950 F.3d 1 (1st Cir. 2020) – either actually supported Teva's position (Takeda) or were wrongly decided (Lantus), the brief asserts.  In the former case the court used an "infringement-type [judicial] analysis," which Teva argues was required but not performed by the district court.  And the latter case (as did the District Court here) equated "claims" for a drug with "mention[ing]," the drug in the claims, which is Teva's basis for asserting error.  The brief also notes that these were both antitrust cases, not patent cases, and as such did not address patent-specific issues important in this case.  In Takeda, according to Teva, the Second Circuit adopted the approach Teva espoused, that "a patent claims any product that falls within the bounds of the claim—a determination that must be made through an infringement-type analysis."  And that case was directed to a combination product, with the Second Circuit holding that a patent on only one component of the combination did not "read on" the approved drug comprising the combination.  Regarding Lantus, which held that "if a patent 'do[es] not mention the drug for which the sNDA was submitted, the patent does not "claim the drug" under the Listing Statute,'" the District Court also did not perform claim construction.  Moreover, Teva's brief contends "Lantus's reasoning is inapplicable by its own terms to Teva's claims directed to the entire inhaler product [because the] patent at issue in Lantus did 'not include a claim for an injector pen more broadly,' but rather 'mention[ed] that the drive mechanism is intended for use in a "drug delivery device"'" and in that case the listed claim, despite claiming "a device intended for use as an injector pen [did] not claim any injector pen" (rather it claimed merely a component part of the injector pen).  In this case, "three of the Asserted Patents plainly claim the entire inhaler . . . and thus claim the equivalent of the injector pen—precisely what the court in Lantus thought was missing."

At a minimum, Teva argues, the District Court's decision was error because it was decided on the pleadings and not properly supported by claim construction, because the listing question is one of patent law needing "ordinary claim construction principles" to be applied in making a determination whether an accused infringing product infringes (and there is more to this analysis than "whether a claim name-checks the active ingredient or the drug" according to the brief).  The brief cites several Federal Circuit decisions and those from other circuit courts, including Jazz Pharms., Inc. v. Avadel CNS Pharms., LLC, 60 F.4th 1373 (Fed. Cir. 2023); Biogen Int'l GmbH v. Mylan Pharms. Inc., 18 F.4th 1333, 1336 (Fed. Cir. 2021); Teva Pharmaceuticals USA, Inc. v. Leavitt, 548 F.3d 103 (D.C. Cir. 2008); Am. Bioscience, Inc. v. Thompson, 269 F.3d 1077, 1080 (D.C. Cir. 2001), for the primacy of this principle.  Teva argues that the asserted claims in fact contain terms that encompass the active drug -- albuterol sulfate -- including "[a]n inhaler for metered dose inhalation" recited in the '289 and '587 patents; "medicament canister" recited in the '289, 587, and '712 patents; "an inhaler" recited in the '808 patent; "a metered dose inhaler" recited in the '889 and '712 patents; and "cannister" recited in the '889 patent.

These errors by the District Court require the Federal Circuit to vacate the judgment and remand for further consideration, Teva argues.  Further Teva asserts that this would pose no burden on the District Court, which is construing claims in these patents during the litigation that has proceeded on other grounds not affected by the order to delist.  And doing so would help clarify circumstances like this under the Hatch-Waxman framework, Teva argues, which is beneficial because it "facilitate[s] a scheme that allows the parties to obtain patent certainty before the launch of a drug, thereby supporting the development of both brand and generic medicines" (emphasis in brief); without doing so the consequence of the District Court's decision will result in "significant uncertainty and risk" because "many more infringement disputes would be resolved only after launch of a generic product, including preliminary injunction proceedings, a post-launch jury trial, and an award of money damages."

Teva concludes these arguments by imploring the Federal Circuit not to "disrupt" the balance struck by Congress that "[a]ll drug product patents must be listed in the Orange Book for every drug they claim, for as long as a claim of infringement can reasonably be made under those patents," and that "[t]raditional Paragraph IV invalidity and noninfringement challenges to those listed patents provide an expeditious pathway toward patent certainty."  It must be said that the highest burden towards that end will be the ineluctable lure of the more simple-minded concept that claims not reciting the drug product should not be Orange Book listed, regardless of the nuances found in Teva's explication of the statute and FDA ruled implementing its provisions.  The arguments against such statutory interpretations, by Amneal and almost all the amici, will be set forth in later posts.

Andersen v. Stability AI: Defendants' Motion to Dismiss Narrows the Case, But Only Slightly

By Joshua Rich --

In the lawsuit brought against them for using visual artists' work to teach their large language model, and producing near-identical copies in response to prompts, Stability AI, Midjourney, DeviantArt, and Runway AI moved to dismiss almost all of the claims asserted against them.  Those claims include copyright infringement, violations of the Digital Millenium Copyright Act ("DMCA"), unjust enrichment, violation of the Lanham Act for false endorsement and trade dress infringement, and, against DeviantArt alone, breach of contract.  Judge Orrick of the U.S. District Court for the Northern District of California, although seemingly skeptical of the merits of some of the other claims, dismissed only the DMCA and breach of contract claims with prejudice and the unjust enrichment claims without prejudice and with leave to amend.  Thus, the sprawling, heavily litigated case will go forward based on many different theories for recovery (including quite a few novel ones).

The case began when visual artists Sarah Andersen, Kelly McKernan, and Karla Ortiz[1] sued Stability AI, Midjourney, and DeviantArt on various claims arising out of the creation and use of the Stable Diffusion large language model.  Allegedly, Stability AI developed Stable Diffusion and trained it through the use of LAION ("Large-Scale Artificial Intelligence Open Network") datasets that include the plaintiffs' artwork.  Each of the defendants has then allegedly employed Stable Diffusion as the engine for the AI engine for its proprietary artwork-producing product, including in creating images "in the style" of the plaintiffs' art (some of which are nearly identical copies of existing works).  The plaintiffs asserted claims against all three defendants for copyright infringement (both direct and inducement), violations of the DMCA, violation of the right of publicity, unfair competition, and declaratory relief, as well as breach of contract claims against DeviantArt.

All three of the initial defendants separately filed motions to dismiss the original Complaint, but raised similar arguments.  As it turned out, Kelly McKernan and Karla Ortiz had not registered any of their copyrights, so they had to concede that they could not assert such claims.  The court also narrowed Sarah Anderson's copyright claims to those that she had registered, but allowed those to go forward.  However, the court had ruled that the factual pleadings for inducement of copyright infringement were too conclusory to support the claim, so dismissed those with leave to file an amended complaint with more factual basis.  The same was true for the claims based on the DMCA, right to publicity, unfair competition, and breach of contract; Judge Orrick explained at length how the original Complaint had too little factual explanation for a defendant to identify whether there was a plausible cause of action stated in any of the claims, but allowed the plaintiffs to replead their allegations with more factual support so as to identify such claims.

Rather than merely adding more factual averments in support of the claims they already pled, the plaintiffs fundamentally changed the pleadings.  They added seven more named plaintiffs and a new defendant, Runway AI, who they accuse of developing Stable Diffusion with Stability AI.  They also changed the asserted causes of action, dropping some (right of publicity and declaratory relief) and adding others (violation of the Lanham Act).  The ten named plaintiffs then averred additional facts in support of the claims, albeit not in all of the ways Judge Orrick identified the claims to be deficient.

Once again, each of the defendants moved to dismiss the claims asserted against them.[2]  While most of the arguments overlapped, there were some differences based on the claims asserted against each defendant and their factual circumstances.  Ultimately, based on the defendants' motions to dismiss, Judge Orrick dismissed the DMCA and breach of contract claims with prejudice and the unjust enrichment claims without prejudice and with leave to amend.

The first argument raised by Stability AI and DeviantArt was that adding more plaintiffs and new claims was not what Judge Orrick gave leave to do.  Judge Orrick acknowledged that to be true and, while leave to amend is freely given, noted that the proper course of action would have been to request leave to add the new plaintiffs and claims.  But after rapping the plaintiffs' knuckles for not doing so, he found that he would have granted leave for those changes had he been asked and allowed the new plaintiffs and claims to proceed.

Substantively, Midjourney raised an argument that bridged all of the copyright claims -- that certain plaintiffs' copyright registrations were insufficient to support the claims of infringement.  Namely, two plaintiffs (Sarah Anderson and Julia Kaye) registered some their works as part of compilations and plaintiff Gerald Brom registered some of his works as text rather than artwork.  But every plaintiff had at least one visual work (that is, a work of visual art) registered and asserted.  Midjourney also argued that the plaintiffs had not identified all of the copyright registrations that were being asserted.  But the Federal system requires only notice of plausible claims, not identification of all supporting facts.  Therefore, Midjourney's arguments were not a basis for dismissing any claim (although any copyright not properly registered cannot be the basis for a claim of infringement).

Only one party, DeviantArt, argued that the First Amended Complaint completely failed to make out a claim for direct copyright infringement against it.  It did not train the Stable Diffusion model and the plaintiffs had failed to identify facts sufficient to tie it to any infringement in the original Complaint.  However, to do so it required the court to rely on a review of academic articles cited but not incorporated in the First Amended Complaint to determine the plausibility of the plaintiffs' allegations.  That is simply asking too much of the court to demand a deep dive into the technology, far beyond the face of the First Amended Complaint, to determine the veracity of the allegations.  Similarly, DeviantArt asked the court to find that use of the plaintiffs' works in Stable Diffusion was fair use.  Those fact-based arguments are suited for a motion to dismiss, not a motion for summary judgment.

Although it did not contest that the plaintiffs had stated a claim for direct infringement through teaching the Stable Diffusion tool, Runway AI argued that certain theories of direct infringement related to Stable Diffusion 1.5 (namely that the model itself, after training, was an infringing copy of plaintiffs' works or that distributing Stable Diffusion 1.5 violated the plaintiffs' distribution rights) failed to state a claim.  Since there was no dispute that at least one theory of direct infringement (that training Stable Diffusion on the plaintiffs' works infringed their copyrights) stated a claim, the court had no need to address other theories.  However, it noted that proof of the theories was based on what facts could be proven, which is improper to resolve on a motion to dismiss.

All of the defendants argued that the claims for inducing copyright infringement were deficient.  Two theories of induced infringement were advanced.  First, as alleged against Stability AI and Runway AI, the Stable Diffusion models themselves were infringing works and their distribution (such as to Midjourney and DeviantArt) constitutes infringement.  The defendants argued that was just a direct infringement claim repackaged under a different theory.  Judge Orrick found, however, that the plaintiffs were entitled to plead the two forms of infringement in the alternative and to determine how Stable Diffusion works and is implemented by users.  Any potential overlap can be resolved later, after discovery.

Second, the defendants argued that the plaintiffs failed to aver facts that would support a claim that that are encouraging others to use Stable Diffusion to create infringing outputs.  The plaintiffs had identified a statement by Stability AI's CEO indicating that Stable Diffusion could "recreate" any of the images on which it had been taught,[3] as well as articles by academics and others identifying the fact that training images could sometimes be reproduced as outputs.  Those facts took the case out of the VCR paradigm of Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417 (1984), under which the marketing of a product that could be easily used to infringe copyrights -- but also capable of substantial noninfringing use -- would not create a presumed intent to cause infringement.  That is, here, there was actual evidence that the marketing of Stable Diffusion was being done with the knowledge that it would likely facilitate infringement by others.  Thus, Judge Orrick found that the plaintiffs had averred facts sufficient to go forward with a claim for inducement of copyright infringement.

Under the DMCA, the plaintiffs brought two different claims.  Under § 1202(a), they asserted that the defendants were falsely alleging that they owned the copyrights in the plaintiffs' copyrighted works by claiming copyright in the Stability Diffusion large language model.  The defendants countered by arguing that a claim of copyright in the Stable Diffusion large language model was not a claim of copyright "in connection with" any works produced by the large language model and that there was no allegation that they knowingly provided false copyright management information ("CMI") with the intent to induce copyright infringement.  Under § 1202(b)(1), they argued the defendants intentionally removed or altered CMI.  Judge Orrick found neither claim plausible.  He found a viewer would not read the copyright license governing the Stable Diffusion model to necessarily apply to works produced by the model.  And, consistent with earlier precedent in the same district,[4] he found none of the defendants "removed" or "altered" any CMI, they just did not affix CMI to AI-generated works nearly identical to existing works.  Because the newly-generated works are not truly identical to the works used to train the model, he found § 1202(b)(1) did not require ensuring the CMI was on the works.  Thus, Judge Orrick dismissed all of the DMCA claims with prejudice.

The defendants next moved to dismiss the plaintiffs' unjust enrichment because, they argued, the claims are preempted by the Copyright Act.  To survive preemption, a state law cause of action (like unjust enrichment) must have some additional element that makes the protected rights qualitatively different from copyright rights.  As the claims were pled, there was little dispute that the unjust enrichment claims did not include any extra elements beyond copyright infringement.  Instead, the plaintiffs argued in briefing that the defendants were profiting off of the plaintiffs' reputations by mimicking their works based on prompts using the artists' names.  While that theory might not be preempted, because it did not appear in the First Amended Complaint the parties did not have a fair opportunity to address it.  Accordingly, Judge Orrick dismissed the unjust enrichment claim with leave to replead in a Second Amended Complaint, if the plaintiffs chose to do so.

Midjourney argued that the Lanham Act claim asserted by five of the plaintiffs, claiming that Midjourney falsely claimed that the artists had endorsed its product by Midjourney's CEO including them on a list of artists on the Discord platform that its tool could mimic and the company itself included user-created works incorporating the artists' names in its showcase.  Midjourney argued that the plaintiffs failed to show falsity, relying on portions of a Discord thread not relied upon by the plaintiffs and requesting judicial notice of the evidence.  That type of disputable evidence is exactly what judicial notice is not intended to permit.  But more fundamentally, the fact that there is disputed evidence shows that dismissal is not appropriate; that argument is better presented at the summary judgment stage.  Midjourney makes two other arguments that suffer the same deficiencies: that invocation of the plaintiffs' names to identify their styles have no artistic relevance to the underlying works and that it cannot be liable for vicarious trade dress infringement because the plaintiffs have not identified all of the hallmarks of their works.  Again, these are factual arguments not resolvable as a matter of law, the standard at the motion to dismiss phase.

DeviantArt also moved to dismiss the breach of contract claim asserted against it.  Essentially, the plaintiffs argued that the contractual provision between them indicating that it did not claim copyright in any of the artists' works was breached when DeviantArt incorporated Stable Diffusion into its own AI tool.  Just as he had done before, however, Judge Orrick rejected the argument that DeviantArt had breached that provision, even if third parties (whether Stability AI and Runway AI in teaching Stable Diffusion or end users in using DeviantArt's tool) were potentially infringing.  DeviantArt itself had not exceeded the scope of its limited license by them doing so.  The plaintiffs further argued that DeviantArt had breached an implied covenant of good faith and fair dealing, but could not tie it to a specific contractual provision that was frustrated by DeviantArt's conduct.  The breach of contract claims were therefore dismissed with prejudice.

The motions to dismiss were notable for being supported by requests from Runway AI and Midjourney (and DeviantArt, albeit informally) for the court to take judicial notice of briefing from other cases and academic articles mentioned in the First Amended Complaint.  Judicial notice of pleadings is proper only to prove they exist and were filed, not to incorporate the arguments made in them.  But that is exactly what the defendants were trying to do -- supplement their arguments with those made in the briefing and articles.  Judge Orrick therefore refused to take judicial notice of the requested documents.

All in all, the proceedings on the motions to dismiss reveal quite a bit about the case.  First, current statutory law and precedent is poorly fitted for the resolution of disputes over ownership of AI-generated non-textual creative works.  The plaintiffs here have struggled to identify the appropriate claims to assert and the defendants have struggled to find good defenses to undercut them.  Second, both plaintiffs and defendants will be throwing every argument they can at the other side, regardless of the strength of the argument, hoping the court will leverage it in their favor.  Finally, Judge Orrick has made it clear that the critical inflection point in the case will be summary judgment, at which point it should be clear to everyone how he will rule on the merits.

[1] The lawsuit is brought as a putative class action, but there were only three named plaintiffs in the original Complaint.  There are six different classes identified in the First Amended Complaint based on relief sought (injunctive relief or damages) and which dataset class members' works are found in.  Given that class certification requires questions or law or fact common to the class(es) and the representative parties having claims typical of the class(es), the number of different subclasses is a bad omen for class certification.  See Fed. R. Civ. P. 23(a).

[2] Other than DeviantArt, none of the defendants moved to dismiss the direct copyright infringement claims.

[3] Runway AI tried argue that Stability AI’s CEO’s remarks pointed a finger only at Stability AI, but since the two worked together on Stable Diffusion and there was other evidence of intent, Judge Orrick rejected that argument.

[4] Doe 1 v. GitHub, Inc., No. 22-CV-06823-JST, 2024 WL 235217 (N.D. Cal. Jan. 22, 2024) (Tigar, J.).  Judge Orrick noted that other districts have found that large language models have and obligation to maintain the original creators' CMI on nearly identical works.

Ryan LLC v. FTC: Texas Federal Court Strikes Down FTC's Prohibition on Non-Competes

By Joshua Rich --

On August 20, 2024, Judge Ada E. Brown of the U.S. District Court for the Northern District of Texas issued an order granting summary judgment to the plaintiffs in Ryan LLC v. Federal Trade Commission, a lawsuit challenging the legality of the FTC's Final Rule prohibiting non-compete agreements.  Judge Brown found that the Final Rule both exceeded the FTC's statutory authority and was arbitrary and capricious because it "is unreasonably overbroad without a reasonable explanation."  Her decision is the Federal courts' first final decision on the Final Rule, but it conflicts with a Pennsylvania decision on preliminary injunction proceedings, issued just last month.  Thus, we haven't seen the last decision on the FTC's non-compete rule.

On April 23, 2024, the FTC issued its Final Rule prohibiting non-compete agreements, which would take effect 120 days later, on September 4, 2024.[1]  The Final Rule prohibited new non-compete agreements entered into after the effective date and freed employees other than "senior executives" from existing non-compete agreements.  The same day the Final Rule was issued, however, Ryan LLC (a tax services firm with its headquarters in Dallas, Texas) sued the FTC, seeking to prevent the Final Rule from ever going into effect.  Ryan was later joined by a number of intervenors, including the U.S. Chamber of Commerce and the Business Roundtable.  Ryan's lawsuit was based on the Administrative Procedure Act ("APA") and argued: (1) the FTC exceeded its statutory authority by issuing the Final Rule, (2) the FTC's Final Rule was an unconstitutional usurpation of Congressional power, and (3) the Final Rule was arbitrary and capricious.

The plaintiffs (both Ryan and the intervenors) filed a motion for preliminary injunction in June, and Judge Brown granted the preliminary injunction on July 3, 2024, enjoining the FTC from implementing the Final Rule against the plaintiffs and staying the effective date of the Final Rule.  But the injunction applied only with regard to the named plaintiffs, not to all parties.  Then, less than three weeks later, Judge Kelley B. Hodge of the U.S. District Court for the Eastern District of Pennsylvania entered an order in ATS Tree Services, LLC v. FTC denying a motion for preliminary injunction against the enforcement of the Final Rule.  There was therefore some question whether Judge Brown might reconsider her stance.

She did not, and instead granted summary judgment to the plaintiffs, finding that the Final Rule violated the APA and "shall not be enforced or otherwise take effect on September 4, 2024, or thereafter."  Her review started with the text, structure, and history of enforcement under the FTC Act.  Section 5 of the FTC Act empowers the FTC to "prevent persons, partnerships, or corporations . . . from using unfair methods of competition in or affecting commerce and unfair or deceptive acts or practices in or affecting commerce."[2]  Section 6 of the Act then provides the Commission the power to make rules and regulations to carry out the purposes of § 5.[3]  Further, § 18 provides the FTC the power to promulgate "interpretive rules and general statements of policy with respect to unfair or deceptive acts or practices in or affecting commerce."[4]  In the context of the FTC Act, however, Judge Brown found that those rulemaking provisions allow making only interpretive or procedural, not substantive, rules with regard to unfair methods of competition.  She further found that the lack of statutory sanction provisions for violation of rules and the FTC's practice under the Act (promulgating no substantive unfair competition rules for more than the past 50 years and instead enforcing its mandate judicially) confirm her interpretation of the rulemaking provisions of the FTC Act.  Thus, Judge Brown found the enforcement mechanism of the FTC Act allows only adjudicative, not rule-based, enforcement.  As a result, any substantive rulemaking with regard to unfair competition, including the Final Rule would exceed the FTC's statutory authority.

Judge Brown also found the Final Rule to be arbitrary and capricious, despite the FTC's consideration of over 26,000 comments and over 500 pages of explanation of why the Final Rule was adopted.  In one of the first applications of the Supreme Court's Loper Bright case,[5] which overturned Chevron deference, Judge Brown independently considered both the support provided by the underlying studies and comments and whether the remedies adopted by the Final Rule were properly scoped.  She found neither to be the case.  First, quoting the standard established by the Supreme Court, she found, "The Rule imposes a one-size-fits-all approach with no end date, which fails to establish a 'rational connection between the facts found and the choice made.'"[6]  Second, she found that the record did not support the Final Rule because no state has enacted a non-compete rule as broad as the Final Rule,[7] and the FTC failed to explain why a less broad prohibition would be insufficient to satisfy the needs of the public.  Thus, considering the evidence essentially de novo, Judge Brown found the Final Rule to be unsupported by the record.

Notably, Judge Brown did not rule on the constitutional arguments raised by the plaintiffs.  It is not clear if she did so under the Last Resort Rule (under which courts avoid resolving constitutional questions if there is some other ground sufficient to support the court's decision) or some other reason.  But those questions still lurk in the background, and may be resuscitated if an appellate court overturns Judge Brown's decision.

In addition to a possible direct appeal from the decision in the Ryan case, the FTC is continuing to litigate the Final Rule in the ATS Tree Services case.  Since the ATS Tree Services case is pending in the Third Circuit, seen as less conservative than the Fifth Circuit in which an appeal of the Ryan case would lie, the FTC may prefer that forum for appellate review.  However, wherever an appeal is heard, it is not unlikely the case ends up before the Supreme Court, which would have an opportunity not only to drive a stake deeper into the heart of Chevron deference by clarifying (and narrowing) the scope of the FTC Act, but also to narrow deference to agencies on the basis for their decisions.  Judge Brown limited the FTC's arguments against her ruling that the Final Rule was arbitrary and capricious to those set forth in the Final Rule, but allowed the plaintiffs to introduce additional evidence to rebut the factual record set forth therein.  As a result, under the analytical framework applied here, the FTC is fighting with one hand tied behind its back.

The Ryan District Court's decision will not be the final word on the FTC's non-compete rule, but it creates a difficult hill for the government to climb.  Indeed, under the reasoning set forth, the FTC cannot adopt any substantive rule to diminish unfair competition -- regardless of whether it is tied to restrictive covenants or otherwise.  But even if the FTC can adopt substantive competition rules on other topics, it appears the eight years of work and thousands of comments from the public on non-compete agreements may be all for naught.

[1] For a discussion of the FTC rule, including the possibility that it would be struck down by the courts, see https://www.patentdocs.org/2024/04/ftc-bans-non-compete-agreements.html.

[2] 15 U.S.C. § 45(a)(2).

[3] 15 U.S.C. § 46(g).

[4] 15 U.S.C. § 57a.

[5] Loper Bright Enters. v. Raimondo, 144 S. Ct. 2244 (2024).

[6] Quoting Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S. Ct. 2856, 2867, 77 L. Ed. 2d 443 (1983) (quoting Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168, 83 S. Ct. 239, 246, 9 L. Ed. 2d 207 (1962)).

[7] As a practical matter, California's ban on non-compete agreements between employers and employees is as broad as the FTC Final Rule.  But Judge Brown relies on her preliminary injunction opinion rather than performing a state-by-state analysis here.

The New York Times Case against OpenAI is Different. Here's Why.

By Michael Borella --

On December 27, 2023, The New York Times Company ("The Times") sued several OpenAI entities and their stakeholder Microsoft ("OpenAI") in the Southern District of New York for copyright infringement, vicarious copyright infringement, contributory copyright infringement, violation of the Digital Millennium Copyright Act (DMCA), unfair competition, and trademark dilution (complaint).  Unlike other high profile copyright actions brought against OpenAI (e.g., by the Author's Guild, Julian Sancton et al., Michael Chabon et al., Sarah Silverman et al., Paul Tremblay and Mona Awad, et al.), The Times' allegations exhibit a remarkable degree of specify.  This will make it difficult for OpenAI to establish that (i) its generative AI models were not trained on copyrighted content of The Times, and (ii) that OpenAI was engaging in fair use if and when it did so.

The complaint centers around OpenAI's large language model (LLM) chatbot, ChatGPT.  As described by The Times:

An LLM works by predicting words that are likely to follow a given string of text based on the potentially billions of examples used to train it . . . .  LLMs encode the information from the training corpus that they use to make these predictions as numbers called "parameters."  There are approximately 1.76 trillion parameters in the GPT-4 LLM.  The process of setting the values for an LLM's parameters is called "training."  It involves storing encoded copies of the training works in computer memory, repeatedly passing them through the model with words masked out, and adjusting the parameters to minimize the difference between the masked-out words and the words that the model predicts to fill them in.  After being trained on a general corpus, models may be further subject to "finetuning" by, for example, performing additional rounds of training using specific types of works to better mimic their content or style, or providing them with human feedback to reinforce desired or suppress undesired behaviors.

Once trained, LLMs may be provided with information specific to a use case or subject matter in order to "ground" their outputs.  For example, an LLM may be asked to generate a text output based on specific external data, such as a document, provided as context.  Using this method, Defendants' synthetic search applications: (1) receive an input, such as a question; (2) retrieve relevant documents related to the input prior to generating a response; (3) combine the original input with the retrieved documents in order to provide context; and (4) provide the combined data to an LLM, which generates a natural-language response.

Put another way, the parameters of an LLM like ChatGPT can be thought of as a compressed amalgam of its training data, represented in a way that preserves the wording, grammar, and semantic meaning of the original works.  When queried, ChatGPT produces output consistent with this compressed representation.

Based on publicly available information, The Times alleges that a relatively large portion of the content used to train various versions of GPT were from its web site, an estimated millions of individual works.  Further, and even more compelling, The Times provides numerous samples of ChatGPT being able to generate near verbatim copies of its articles. One such example is reproduced below:

This comparison is stunning.  The Times alleges that it got ChatGPT to produce the output with "minimal prompting" but did not provide a specific prompt or series of prompts that it used to do so.[1]  The output suggests that prominent training data that is emphasized in the training process can be represented in a nearly-uncompressed fashion in the resulting model.  Thus, even if it is hard to point to exactly where the "copy" of an article resides amongst the 1.76 trillion parameters, the existence of such a copy should not be in question.

OpenAI responded publicly to the complaint in a January 8, 2024 blog post, stating that:

Memorization is a rare failure of the learning process that we are continually making progress on, but it's more common when particular content appears more than once in training data, like if pieces of it appear on lots of different public websites.  So we have measures in place to limit inadvertent memorization and prevent regurgitation in model outputs.  We also expect our users to act responsibly; intentionally manipulating our models to regurgitate is not an appropriate use of our technology and is against our terms of use.

Interestingly, the regurgitations The New York Times induced appear to be from years-old articles that have proliferated on multiple third-party websites.  It seems they intentionally manipulated prompts, often including lengthy excerpts of articles, in order to get our model to regurgitate.  Even when using such prompts, our models don't typically behave the way The New York Times insinuates, which suggests they either instructed the model to regurgitate or cherry-picked their examples from many attempts.

This is a strange response.  It is essentially admitting to copying The Times' articles in question, but makes the non-legal arguments of "Hey, it was just a bug," and "The Times had to work hard and manipulated our model."  Like saying "the dog ate my homework," neither of these excuses are likely to hold up under scrutiny.

Why is OpenAI seemingly shooting itself in the foot regarding actual copying?  Because it is putting all of its eggs in the fair use basket.

Fair use is an affirmative defense written into the copyright statute that allows limited use of copyrighted material without permission from the copyright holder.  It recognizes that rigid copyright laws can stifle dissemination of knowledge.  Therefore, it attempts to balance copyright holders' interests in their creative works with the public's interest in the advancement of knowledge and education.  Thus, the fair use doctrine acknowledges that not all uses of copyrighted material harm the copyright owner and that some uses can be beneficial to society at large.

Even so, OpenAI has a long and uncertain road ahead of it.  Fair use is a notoriously malleable four-factor test that can be applied inconsistently from court to court.  Furthermore, the interpretive contours of the test have evolved since its first appearance in the statute almost 50 years ago.  Even the U.S. Copyright Office admits that "[fair use] fact patterns and the legal application have evolved over time . . . ."[2]

Predicting the outcome of a fair use dispute is often a fool's errand, even for those well-versed in copyright law.  For example, the Supreme Court recently found fair use in the copying of 11,500 lines of computer code but not in the artistic reproduction of a photograph.[3]  The outcome of a case can ride on which fair use factors the judge or judges find to be most relevant to the facts of the case and how they interpret these factors.

Fair use might not be a legal sniff test but it comes close.  Nonetheless, let's take a look at each of the factors in order to understand the difficulties that OpenAI might run into when relying on this defense.

(1) The purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes.

Courts often view unlicensed copying for nonprofit education or noncommercial purposes as more likely to be fair use than those that are for commercial gain.  In doing so, courts look to whether the use is transformative, in that it changes the original work in some manner, adding new expression or meaning, and does not just replace the original use.

OpenAI runs a for-profit business and charges for end-user access to its models.  Further, the examples provided by The Times are much closer to verbatim copying than any type of transformative use.  Therefore, this factor weighs against OpenAI.

(2) The nature of the copyrighted work.

This factor examines how closely the use of the work aligns with copyright's goal of promoting creativity.  So, using something that requires a lot of creativity, like a book, film, or music, might not strongly back up a fair use claim compared to using something based on facts, like a technical paper or a news report.

Here, OpenAI has an angle as The Times produces a great deal of news reporting and cannot claim a copyright over basic facts.  However, The Times' content includes many detailed articles explaining events and other facts in its writers' ostensibly creative voices.  Moreover, investigative reporting is the uncovering and tying together of facts, which requires creative effort.  At best, this factor is neutral for OpenAI.

(3) The amount and substantiality of the portion used in relation to the copyrighted work as a whole.

In considering this factor, courts examine how much and what part of the copyrighted work is used.  If a significant portion is used, it is less likely to be seen as fair use.  Using a smaller piece makes fair use more probable, though copying even a minute portion of a work might not qualify as fair use if it includes a critical or central part thereof.

This factor also weighs against OpenAI if we take as given The Times' allegations and evidence of almost-exact reproduction of its works.

(4) The effect of the use upon the potential market for or value of the copyrighted work.

This fourth factor may end up being the most important.  The inquiry is whether the unauthorized use negatively affects the market for the copyright owner's original work.  Courts look at whether the use decreases sales relating to the original work or has the potential to cause significant damage to its market if such use were to become common.

OpenAI will have a tough time establishing that it is not effectively free-riding off of The Times' investment in journalism.  Especially since GPT-4 is being integrated into its minority owner Microsoft's Bing search engine.  Once this integration matures, Bing will generate answers to search queries, and might not even link back to web sites (like that of The Times) from which it gleaned the underlying information used to formulate its answers.  This could be devastating blow to The Times' revenue, as the company relies on subscriptions that allow users unlimited access to paywalled articles going back decades as well as advertising to these users.

To reiterate, fair use analyses are unpredictable.  Judges can place virtually all of their emphasis on as little as one factor.  Still, it is hard to imagine a scenario in which OpenAI wins a fair use dispute if the facts cited in the complaint hold up.  A more likely result is that The Times and OpenAI quietly settle before such a decision is made.

[1] Trying to get the current versions of ChatGPT to produce this or any article from The Times is quite difficult and may not be possible.  This may be due to OpenAI recently putting in place guardrails that prevent the model from producing near-verbatim output.

[2] https://www.copyright.gov/fair-use/

[3] See Google LLC v. Oracle Am., Inc., 141 S. Ct. 1183 (2021) and Andy Warhol Found. for the Visual Arts, Inc. v. Goldsmith, 143 S. Ct. 1258 (2023).

RegenxBio Inc. v. Sarepta Therapeutics, Inc. (D. Del. 2024)

By Kevin E. Noonan --

A consequence (predominantly negative) of the Supreme Court's recent foray into defining (however inadequately) the contours of patent-eligible subject matter is to give the district courts (and to a somewhat lesser extent, the Patent and Trademark Office) free rein to apply any Supreme Court precedent (no matter how archaic, ill-defined or incoherently reasoned) in invalidating claims on Section 101 grounds.  This tendency was exhibited in the district court invalidation of the Sequenom patent portfolio (Ariosa Inc. v. Sequenom, Inc.), and has arisen, phoenix-like in a decision in the District Court of Delaware, based on of all things, Funk Bros. Seed Co. v. Kalo Inoculant Co. (see RegenexBio Inc. v. Sarepta Therapeutics Inc., Civil Action No. 20-1226 RGA).

The case arose over Sarepta's use of an adeno-associated virus variant disclosed and claimed in RegenxBio's U.S. Patent No. 10,526,617* to make a gene therapy product to treat Duchenne's muscular dystrophy.  The '617 patent considered claim 1 to be representative:

1.  A cultured host cell containing a recombinant nucleic acid molecule encoding an AAV vp1 capsid protein having a sequence comprising amino acids 1 to 738 of SEQ ID NO: 81 (AAVrh.10) or a sequence at least 95% identical to the full length of amino acids 1 to 738 of SEQ ID NO: 81, wherein the recombinant nucleic acid molecule further comprises a heterologous non-AAV sequence.

The District Court considered the parties' arguments regarding subject matter eligibility by applying the tests enunciated in Mayo Collaborative Services v. Prometheus Laboratories, Inc. as further explicated in Alice Corp. v. CLS Bank International.  According to the District Court, Defendants asserted that the claims were directed to "naturally occurring rh.10 sequences," which were not patent eligible thereby, and further that the claims "monopolize" the use of these sequences in cultured host cells "for any research or commercial application" (perhaps supplying all the motivation the court needed for invalidating them).  Having "established" satisfaction of step 1 of the Mayo/Alice test as being directed to naturally occurring sequences, the District Court accepted that under step 2 of that test, the skilled worker would have had "all the tools needed to make and use cultured host cells containing nucleic acids encoding the full scope of the claimed capsid proteins."  (This argument echoes the rationale  enunciated successfully in In re Kubin, and unsuccessfully in In re Bell and In re Deuel, that having a method for making something was equivalent to having the composition itself, in the obviousness context.)  Generically, Defendants argued that "cultured host cells, recombinant nucleic acid molecules, heterologous non-AAV sequences" and other components were all well-known and hence fail step 2 of the test, illustrating the lessons of Sequenom and other instances where broad claiming and disclosure are used against a patentee in the eligibility context.  Defendants concluded their argument (and the District Court seemed to accept it) by asserting that the combination of the elements do not add an "inventive concept" that amounts to the requisite (and undefined) "significantly more" needed to confer eligibility in the face of the naturally occurring rh.10 sequences themselves.

Plaintiffs argued that the proper test was the "markedly different" test, satisfied here by the claim elements considered as a whole, i.e., the recombinant host cells that  was not naturally occurring and indeed were "structurally and functionally different."  Defendants limited their counter argument, according to the opinion, on the straw man that the rh.10 sequences were not themselves markedly different, rather than the recombinant cell that is the proper subject of the claim.

The District Court's rationale centered on whether the resulting cell represented a "change" from what occurred in nature, concluding it did not.  Relying on Funk Bros., the District Court opined that "taking 'two sequences from two different organisms and put[ting] them together' is no different than taking two strains of bacteria and mixing them together."  According to the opinion, the inventors here "have not changed any of the claimed invention's naturally occurring components" and "[w]ithout some change, the mere fact that the '617 patent's inventors combined natural products  and put them in a host cell does not make the invention patentable [(sic, patent eligible)] under §101" (ignoring that the combination is itself a change in the properties of the cell transformed into a recombinant cell).

The remainder of the District Court's analysis under step 2 followed the familiar regimen of selecting statements in the '617 patent specification relating to ways of producing the components of the claimed invention to illustrate the "well-known, routine, and conventional" nature thereof in support of the District Court's non-eligibility conclusion (as well as a short detour regarding whether use of the claimed invention for gene therapy, as used by Defendants, would make a difference, the District Court concluding that it would not).

The analysis applied by the District Court exemplifies how the complicated "framework" set forth under the Supreme Court tests in Mayo and Alice can (and in this case did) encourage courts to lose the forest for the trees.  This is illustrated by the District Court's reliance on Funk Bros., wherein the combination of two naturally occurring species of bacteria was held to be ineligible for patenting.  The difference, of course, is there was no change in either species of bacteria in that case.  In this case, the cells have been transformed by introduction of the AAV vector ("a recombinant nucleic acid molecule," per se non-naturally occurring) that further comprises "a heterologous non-AAV sequence," which combination does not occur in nature and is "a non-naturally occurring manufacture or composition of matter and a product of human ingenuity 'having a distinctive name, character and use'" under Chakrabarty.  The District Court founders on the specifically recited AAV sequence (encoding AAV vp1 capsid protein) being itself naturally occurring, another example of a court cherry-picking the elements of a claim despite avowing to be considering the claim "as a whole," as the District Court does here (Defendants encouraging such foundering by their arguments set forth in the opinion.)

Ironically, the District Court's decision is contrary to Justice Thomas's opinion in AMP v. Myriad Genetics, which it purports to apply.  Specifically the opinion states:

[T]his case does not involve patents on new applications of knowledge about the BRCA1 and BRCA2 genes.  Judge Bryson aptly noted that, "[a]s the first party with knowledge of the [BRCA1 and BRCA2] sequences, Myriad was in an excellent position to claim applications of that knowledge. Many of its unchallenged claims are  limited to such applications" [emphasis in opinion].

The meaning of Funk Bros. is similarly misunderstood (albeit a misunderstanding shared by most in view of the sparse nature of Justice Douglas's language in the Court's opinion).  As explained by Justice Frankfurter's concurring opinion:

Insofar as the court below concluded that the packaging of a particular mixture of compatible strains is an invention and as such patentable, I agree, provided not only that a new and useful property results from their combination, but also that the particular strains are identifiable and adequately identified.  I do not find that Bond's combination of strains satisfies these requirements.  The strains by which Bond secured compatibility are not identified and are identifiable only by their compatibility.  . . .  [The patentee] appears to claim that since he was the originator of the idea that there might be mutually compatible strains and had practically demonstrated that some such strains exist, everyone else is forbidden to use a combination of strains whether they are or are not identical with the combinations that Bond selected and packaged together.  It was this claim that, as I understand it, the District Court found not to be patentable, but which, if valid, had been infringed.  . . .  The consequences of such a conclusion call for its rejection.  Its acceptance would require, for instance in the field of alloys, that if one discovered a particular mixture of metals, which when alloyed had some particular desirable properties, he could patent not merely this particular mixture but the idea of alloying metals for this purpose, and thus exclude everyone else from contriving some other combination of metals which, when alloyed, had the same desirable properties.  In patenting an alloy, I assume that both the qualities of the product and its specific composition would need to be specified.  The strains that Bond put together in the product which he patented can be specified only by the properties of the mixture.

The careless, improvident, and unnecessary resurrection of Funk Bros. in the Supreme Court's Myriad decision, indicating the Court's desire to re-impose its own jurisprudence over that developed by the Federal Circuit, thus bears fruit here.  As noted by a former Solicitor General, the Federal Circuit spent 30 years "quietly walking away from" Supreme Court decisions it found to have been wrongly reasoned or decided, but the consequence of the correction is shown in this case, where such a decision is used in the broader context of subject matter eligibility to invalidate heretofore conventionally eligible claims.

It should also be noted that co-plaintiff in this case is the University of Pennsylvania, which along with the Biden administration's equally ill-considered effort to warp the march-in rights provisions of the Bayh-Dole Act into a basis for the government to set drug prices threatens to throw a spanner into the engine of innovation (at least for biotechnology and pharmaceuticals).  The Twentieth Century gave us all an object lesson in governmental overreach in managing an economy and those whose inventive efforts provide the basis for real-world advances in technology, the economy, and citizens' lives.  One would think (incorrectly, it would seem) that lesson having been learned the hard way would inform governmental actions in the Twenty-First century.

* The '617 patent had an earliest priority date of November 12, 2002 and thus expired on November 12, 2022.

United Therapeutics Corp. v. Liquidia Technologies, Inc. (Fed. Cir. 2023)

By Kevin E. Noonan --

One of the most notable consequences (intended or not, for good or ill) of the Leahy-Smith America Invents Act (AIA) has been the possibility (now likelihood, if only in frequency) that the decisions of the Patent Trial and Appeal Board and district courts will be different (typically to the detriment of patent holders).  This outcome Is at least in part the result of differences in the burdens of proof between the two fora, specifically the preponderance of the evidence before the Board and the clear and convincing evidence in court.  These circumstances have raised concerns (most notably by now-suspended, Federal Circuit Judge Pauline Newman) regarding the constitutional propriety of an Article I court being able to overrule an Article III court on separation of powers grounds (see "XY, LLC v. Trans Ova Generics, L.C. (Fed. Cir. 2018)").  Another example of such an outcome arose in the Federal Circuit's affirmance of the PTAB decision that the claims of an asserted patent that had already been held not invalid in litigation were invalidated by the Board, in United Therapeutics Corp. v. Liquidia Technologies, Inc.

The case arose in litigation between NDA holder United Therapeutics Corp. ("UTC") and Liquidia, who filed its own NDA (under § 505(b)(2) of the Food, Drug, and Cosmetic Act).  Both regulatory approval applications were directed towards inhaled formulations of treprostinil for treating pulmonary hypertension (UTC's Tyvaso®, Liquidia's Yutrepia™).  UTC asserted two Orange Book-listed patents, U.S. Patent Nos. 9,593,066 and 10,716,793 in the litigation.  The District Court found that the '066 patent claims were invalid albeit infringed and are not at issue here.  For the '793 patent, the District Court found the asserted claims not to be invalid and that Liquidia's competing product would infringe (having not yet obtained FDA approval), and enjoined Liquidia from marketing its version of the drug until after expiration of the '793 patent (expected on May 14, 2027).  However the District Court noted that Liquidia had challenged the validity of the '793 patent in an ongoing IPR (No. IPR2021-00406) and that, should the PTAB hold the asserted claims of this patent to be invalid Liquidia would be able to seek having the injunction lifted (for further details, see "United Therapeutics Corp. v. Liquidia Technologies, Inc. (Fed. Cir. 2023)").

All claims of the '793 patent were challenged in the IPR, with claim 1 being representative:

1.  A method of treating pulmonary hypertension comprising administering by inhalation to a human suffering from pulmonary hypertension a therapeutically effective single event dose of a formulation comprising treprostinil or a pharmaceutically acceptable salt thereof with an inhalation device, wherein the therapeutically effective single event dose comprises from 15 micrograms to 90 micrograms of treprostinil or a pharmaceutically acceptable salt thereof delivered in 1 to 3 breaths.

The opinion also sets forth relevant dependent claims 4, 6, and 7:

4.  The method of claim 1, wherein the inhalation device is a dry powder inhaler.

6.  The method of claim 4, wherein the formulation is a powder.

7.  The method of claim 6, wherein the powder comprises particles less than 5 micrometers in diameter.

Liquidia's IPR petition asserted obviousness of all '793 claims based on U.S. Patent No. 6,521,212 ("the '212 patent") in combination with two scientific abstracts to Voswinckle (termed "JESC" and "JAHA").  The '212 patent described methods for delivering benzindene prostaglandins (of which treprostinil sodium is one) by inhalation to treat pulmonary hypertension, while the Voswinckle references described studies using various amounts of treprostinil (16, 32, 48, and 64 μg/mL) (JESC) and wherein patients in the study were administered the drug in three breaths (JAHA).  UTC responded to Liquidia's obviousness allegation by challenging the status of the Voswinckle references as prior art.  The basis for this assertion was that Liquidia had not established that the Voswinckle references were printed publications under pre-AIA 35 U.S.C. § 102(b).  Liquidia relied upon the Voswinckle references having been stored in libraries but it had not (according to UTC) shown that "both [had] been available at the library and sufficiently indexed or categorized by priority date" (see In re Hall, 781 F.3d 897, 898–99 (Fed. Cir. 1986)).  In rejecting this challenge, the Board noted that each of the Voswinckle references were presented at a public conference attended by 20,000 people (including "scientists, physicians, and nurses, as well as journalists") (emphasis in opinion).  In addition, the Board recognized that the Voswinckle references were cited in other documents available to the public prior to the '793 priority date.  On these bases the Board concluded that the combination of the Voswinckle references and the '212 patent rendered obvious the invention claimed in the '793 patent.  The Board also held that the objective indicia asserted by UTC ("unexpected results, copying, and long-felt and unmet need") did not overcome their prima facie obviousness determination.

UTC petitioned for rehearing (including an appeal to the PTO's Precedential Opinion Panel) on the question of whether the Voswinckle references were prior art.  While the Panel did not deign to review the decision, it did direct the Board to reconsider because in its judgment the Board had failed to determine whether the "other publications" (identified as "research aids") that purportedly disclosed the Voswinckle references had themselves had been available to the public before the critical date.  In addition, the Panel determined that the Board had not "adequately addressed" whether the Voswinckle references "were publicly accessible by way of their presentation and/or inclusion in distributed materials, such as at a conference or library."  The Board dutifully reconsidered the evidence and maintained its decision that the references were prior art.  Admitting it had not recognized that the research aids had not been publicly available before the priority date, the Board nevertheless found that the Voswinckle references had been distributed at conferences prior to that date (including in an "abstract book" provided to attendees).  Having dispensed with any deficiencies in its reasoning on this issue, the Board held the asserted claims of the '793 patent to be invalid for obviousness and UTC appealed.

The Federal Circuit affirmed in an opinion by Judge Lourie joined by Judges Prost and Reyna.  With regard to the prior art status of the Voswinckle references, the Court first addressed whether the Board's analysis "improperly exceeded the prior art theories set forth in Liquidia's petition" under 35 U.S.C. § 312(a)(3) as interpreted by the Supreme Court in SAS Inst. Inc. v. Iancu, 138 S. Ct. 1348, 1357 (2018).  UTC argued that the Board's reasoning regarding the prior art patency of the Voswinckle references that depended on their inclusion of the abstract books at conferences exceeded Liquidia's arguments in its petition.  The panel held that Liquidia's position in its petition was that the Voswinckle references were prior art because they had been publicly disclosed, and that the Board properly found Liquidia's later arguments in its Reply to be timely under the statute because they were asserted "in direct response" to UTC's contrary arguments first raised in its Response.  This reasoning was not an abuse of discretion, according to the panel, under inter alia Anacor Pharms., Inc. v. Iancu, 889 F.3d 1372, 1380–82 (Fed. Cir. 2018), because Liquidia's arguments in its Reply were not inconsistent with its position in its Petition (i.e., that the Voswinckle references were prior art under pre-AIA 35 U.S.C. § 102(b)).

The panel also agreed with the Board's substantive determination that the Voswinckle references were prior art.  UTC argued that the Board's reasoning regarding the references was entirely "hypothetical" and only supported by "conclusory expert testimony."  In this regard, the Court rejected UTC's assertion that "evidence of actual existence or dissemination" was required, saying this was "not the proper standard" (emphasis in brief).  Rather, the opinion asserts that "[o]ur cases have consistently held that the standard for public accessibility is whether a person of ordinary skill in the art could, after exercising reasonable diligence, access a reference," citing Samsung Elecs. Co. v. Infobridge Pte. Ltd., 929 F.3d 1363, 1374 (Fed. Cir. 2019) (emphasis in brief).  But once such public accessibility has been established "there is no requirement to show that particular members of the public actually received the information," according to the opinion citing Jazz Pharms., Inc. v. Amneal Pharms., LLC, 895 F.3d 1347, 1356 (Fed. Cir. 2018), quoting Constant v. Adv. Micro-Devices, Inc., 848 F.2d 1560, 1569 (Fed. Cir. 1988) (emphasis added).  On this basis, the panel held that the Board relied on substantial evidence that the Voswinckle references were prior art.

Turning to the ultimate question of obvious for sole independent claim 1, the Court held that the Board had relied on substantial evidence in concluding that, while no one reference explicitly taught the recited administered range of a therapeutically effective single event dose that comprises from 15 micrograms to 90 micrograms of treprostinil, the skilled worker would have understood that the JESC reference disclosed solutions within this range.  This reference taught administration of treprostinil in various concentrations (16, 32, 48, and 64 μg/mL) but did not disclose explicitly recited administered dosage volumes.  However, according to the Federal Circuit the Board properly relied on expert testimony regarding such volumes (ranging from at least 1 mL and up to 5 mL of solution), which would deliver 16–80, 32–160, 48–240, or 64–320 μg, each of which contained a value falling within the dose recited in claim 1.  The panel considered UTC's challenges to these calculations on technical grounds, finding that the Board had heard and rejected these same arguments.  Accordingly, the panel accepted the Board's conclusions to be supported by substantial evidence on the obviousness question.

Regarding the objective indicia of non-obviousness, the panel found that the Board's rejection of UTC's arguments was also supported by substantial evidence (noting that UTC's assertions regarding unexpected results were included in "only a single paragraph in UTC's opening brief, [which] borders on waiver").  On the merits the Court held that UTC provided assertions but not evidence of any such unexpected results.

Finally, the Federal Circuit upheld the Board's obviousness determination of dependent claims 4, 6, and 7.  UTC's arguments regarding these claims were that the recitation therein of dry power administration of treprostinil was a "separated invention" not disclosed in any of the asserted prior art references.  Thus, UTC argued that the Board failed to explain how the ordinarily skilled worker would have had any reasonable expectation of success in administering treprostinil as a dry powder.  The panel first held that UTC had waived this argument because it had not raised it (at least in this form) before the Board.  And on the merits, the panel held that as with independent claim 1 the Board's decision on these dependent claims was supported by substantial evidence (including the unrebutted testimony of Liquidia's experts) and thus affirmed.

United Therapeutics Corp. v. Liquidia Technologies, Inc. (Fed. Cir. 2023)
Nonprecedential disposition
Panel: Circuit Judges Lourie, Prost, and Reyna
Opinion by Circuit Judge Lourie

Top Stories of 2023: #5 to #7

By Donald Zuhn –-

After reflecting upon the events of the past twelve months, Patent Docs presents its 17th annual list of top patent stories.  For 2023, we identified ten stories that were covered on Patent Docs last year that we believe had (or are likely to have) a significant impact on patent practitioners and applicants.  On Monday, we counted down stories #10 to #8, and today we count down stories #7 to #5, as we work our way towards the top four stories of 2023.  As with our other lists (2022, 2021, 2020, 2019, 2018, 2017, 2016, 2015, 2014, 2013, 2012, 2011, 2010, 2009, 2008, and 2007), links to our coverage of these stories (as well as a few links to articles on related topics) have been provided in case you missed the articles the first time around or wish to go back and have another look.  As always, we love to hear from Patent Docs readers, so if you think we left something off the list or disagree with anything we included, please let us know.  In addition, we will be offering a live webinar on the "Top Patent Law Stories of 2023" on January 23, 2024 from 10:00 am to 11:15 am (CT).  Details regarding the webinar, which will focus on a few of the most important stories on this year's list, can be found here.

7.  University of California/Berkeley Appeals PTAB Ruling in CRISPR Interference; FDA Approves CRISPR Gene Editing Treatment

In December 2022, the Patent Trial and Appeal Board rendered its decision on Preliminary Motions in Interference No. 106,133 between Senior Party Sigma-Aldrich and Junior Party The Broad Institute, Harvard University, and MIT (collectively, "Broad").  As with the priority phase in co-pending Interference Nos. 106,126, No. 106,127, and No. 106,132, the Board suspended the priority phase in Interference No. 106,133 until the appeal in Interference No. 106,115 has been decided by the Federal Circuit.  2022 and 2023 saw briefing in that appeal.

Meanwhile, the significance of the final outcome in the CRISPR interferences was demonstrated last fall, when the U.S. Food and Drug Administration's Cellular, Tissue, and Gene Therapies Advisory Committee announced on October 27 that exagamglogene autotemcel (exa-cel), which was the subject of biologics license application (BLA) 125787 from Vertex Pharmaceuticals, Inc. in collaboration with CRISPR Therapeutics (Zug, Switzerland) and provides for the first time gene therapy for sickle cell anemia, was shown to be effective, having 29 of 30 patients stay pain-free for 18 months.  On October 31, the Advisory Committee issued its recommendation that exa-cel is safe for clinical use, and the FDA then approved the treatment on December 8.  The treatment, being marketed as CASGEVY, is the first CRISPR-based gene-editing therapy to be approved in the U.S.

For information regarding this and other related topics, please see:

• "FDA Signals Willingness to Approve CRISPR-Based Treatment for Sickle Cell Anemia," November 2, 2023
• "Broad Files Reply Brief in Interference No. 106,115 Cross-Appeal," September 7, 2023
• "CVC Files Response and Reply Brief in Interference No. 106,115 Appeal," August 27, 2023
• "Amici Support Reversal of PTAB Decision in CRISPR Interference," July 25, 2023
• "Broad Files Opening Brief and Cross-Appeal in CRISPR Interference," July 23, 2023
• "CVC Appeals PTAB Decision in CRISPR Interference," July 12, 2023
• "PTAB Rules on Preliminary Motions in Interference No. 106,133," January 22, 2023

6.  Judicial Council of Federal Circuit Suspends Judge Newman

Efforts to have Judge Pauline Newman, Circuit Judge on the Court of Appeals for the Federal Circuit, removed from the Federal Circuit for being unfit or guilty of misconduct were the subject of several reports in mid-2023.  In September, the Judicial Council of the Federal Circuit ordered Judge Newman to be suspended from the court for one year.  The Judicial Council's Order repeated allegations made previously against Judge Newman, supplemented with 16 (sometimes) heavily redacted Exhibits and notations and other supporting exhibits that were redacted in their entirety for confidentiality purposes.  The arguments and supporting exhibits were apparently provided to justify the grounds for the decision, which were Judge Newman's purported refusal to cooperate with the Special Committee's investigation into her competency (despite the Judge having provided medical and psychological results from her own doctors rather than the Committee's hand-picked ones).  The suspension remains subject to Judge Newman's on-going lawsuit in the D.C. District Court asserting that the Council's suspension is unconstitutional and a violation of Judge Newman's due process rights.

For information regarding this and other related topics, please see:

• "Judge Newman Suspended for One Year by Federal Circuit," September 20, 2023
• "Federal Circuit Special Committee Recommends One-Year Suspension of Judge Newman," August 6, 2023
• "Federal Circuit Special Committee Responds to Judge Newman's Counsel's Request for Clarification Regarding Misconduct Hearing," June 21, 2023
• "Judge Newman Matter Continues," June 20, 2023
• "Judge Newman and the On-Going Attempts to Remove Her from the Federal Circuit," May 21, 2023

5.  Supreme Court Denies CareDx Petition; Senators Coon & Tillis Try to Fix Patent Eligibility (Again)

In May, CareDx and Stanford University filed a petition for certiorari in CareDX, Inc. v. Natera, Inc. and CareDx, Inc. v. Eurofins Viracor, Inc.  At the time, we noted that the arguments in the petition threaded a very narrow needle in giving the Court a reason to grant certiorari and emphasize (as has been emphasized before) the need to do so.  In particular, the petition directed the Court's attention to the "heav[y] investment CareDx made in bringing this technology to market" and infringing behavior of both Natera and Eurofin in bringing their own "copycat" products to market.  Those hoping for a certiorari grant (and positive outcome), however, were frustrated (yet again) when the Court denied the patentees' petition in October.

Given the refusal of the Supreme Court to wade back into the subject matter eligibility waters, Senators Coons and Tillis, who chaired a series of Congressional hearings on patent eligibility in 2019, who have asked the U.S. Patent and Trademark Office for its statistics and other information on patent eligibility, and who have proposed several bills providing various iterations of legislative solutions, proposed their latest attempt to provide a legislative solution in June when they introduced "The Patent Eligibility Restoration Act of 2023."  As we noted at the time, this proposal marks the third time that one or both of the Senators have proposed or introduced a bill to revise § 101.  The first two attempts garnered discussion but little tangible progress, leaving the patent community feeling like Charlie Brown repeatedly getting the football yanked away.

In one bit of good news on the subject matter eligibility front, the storied case of American Axle v. Neapco Holdings entered a new chapter in July -- not the final chapter, but the plot thickened considerably.  We provided a recap at the time, noting that Judge Stark, then of the District Court for the District of Delaware, had found all asserted claims of U.S. Patent No. 7,774,911 invalid under 35 U.S.C. § 101 as being directed to a law of nature implemented by well-understood, routine, and conventional means, a decision that was affirmed by the Federal Circuit, with the majority subsequently withdrawing its original opinion and handing down a revised opinion (finding claim 22 still ineligible but vacating and remanding the District Court's decision on claim 1) in response to a petition for en banc rehearing, and the Supreme ultimately denying American Axle's petition for certiorari.  On remand, Judge Williams (who had taken on the case given Judge Stark's promotion to the Federal Circuit), denied Neapco's motion for summary judgment of invalidity pursuant to § 101 and granted American Axle's motion for summary judgment of no invalidity.

For information regarding this and other related topics, please see:

• "American Axle's Claims Found Eligible on Remand," August 1, 2023
• "Senators Tillis and Coons Once More Attempt to Fix Patent Eligibility," June 25, 2023
• "Senate Bill Proposed to Provide Subject Matter Eligibility Solution," June 22, 2023
• "Can Judge Michel and John Duffy Convince the Supreme Court to Revisit Subject Matter Eligibility?" May 31, 2023
• "Stanford Asks Supreme Court to Revisit Subject Matter Eligibility on Diagnostic Claims," May 3, 2023
• "Sequoia Technology LLC v. Dell Inc. (Fed. Cir. 2023)," April 23, 2023
• "On Alice Rejections per USPTO Technical Center," March 6, 2023
• "ITC Takes Section 101 to Its Illogical Extreme," March 1, 2023
• "Chromadex, Inc. v. Elysium Health, Inc. (Fed. Cir. 2023)," February 15, 2023
• "PTAB Remains Hostile to Section 101 Appeals," January 31, 2023
• "The Mental Process Exception to Patent Eligibility is Remarkably Brainless," January 9, 2023

Judges Issue Standing Orders Regarding the Use of Artificial Intelligence

By Michael Borella --

The impact of generative artificial intelligence (AI) is unsurprisingly significant in the field of education, with some teachers and professors responding by instituting oral examinations, handwritten essays, or requiring that first drafts of written material can only be composed on "locked down" computers with no access to AI tools.  But as the education system (as just one example) is wrestling with the implication of these tools, so is the legal community.

In a recent case that has rocketed into infamy, two lawyers filed a brief in the Southern District of New York that had been written at least in part by the large language model (LLM) ChatGPT.[1]  After opposing counsel and the judge determined that the brief cited to case law that did not exist and the quotes from these fictitious cases were fabrications by ChatGPT, the court imposed sanctions under Rule 11 for purposes of deterrence.  The lawyers were ordered to pay a $5,000 penalty.  Their infraction, which was described in detail by the court, was not the mere use of generative AI, but failing to properly cite check and otherwise vet a brief in a judicial proceeding.

Perhaps in response to this case, we have seen a number of judges issue standing orders on how AI can and cannot be used in proceedings before them.

Eastern District of Pennsylvania Judge Michael M. Baylson published an order on June 6 which states:

If any attorney for a party, or a pro se party, has used Artificial Intelligence ("AI") in the preparation of any complaint, answer, motion, brief, or other paper, filed with the Court, and assigned to Judge Michael M. Baylson, MUST, in a clear and plain factual statement, disclose that AI has been used in any way in the preparation of the filing, and CERTIFY, that each and every citation to the law or the record in the paper, has been verified as accurate.[2]

While Judge Baylson is engaging in an earnest attempt to avoid a mess like the one in New York, his order is overly broad.  Using AI tools such as ChatGPT, Bard, and the like is currently an intentional act on the part of the user.  In the near future, however, as these tools are integrated into legal search and word processing software, lawyers may not know -- and have no reasonable way of finding out -- whether AI has been used at any point during preparation.  For example, are the case summaries provided by your favorite search engine the result of human effort, AI, or both?  Likewise, is the grammar suggestion provided by your word processor the output of AI or a rules-based algorithm?

When considering these issues, it is important to keep in mind the differences between traditional AI and generative AI.  Traditional AI is trained to address specific fields or problems and typically is a form of classifier.  Examples include spam filtering, image classification, speech recognition, and recommendation systems.  Generative AI, on the other hand, is capable of creating new content that is open ended and often not limited to any particular field.  Current generative AI tools include ChatGPT and Bard, but also image generation tools (Dall-E, Stable Diffusion, and Midjourney), as well as music composition tools (no suggestions here as I've yet to find one that allows the non-musician to generate high quality music of a variety of styles from a simple prompt).

In short, traditional AI and generative AI are different animals.  Traditional AI is everywhere already but useful only in limited ways, whereas we are collectively kicking the tires of generative AI but its eventual footprint is likely to be enormous.

In not differentiating between traditional and generative AI, Judge Baylson's order -- if read strictly -- puts a significant burden on lawyers appearing in his court, especially those without a technical background.  Luckily, two other judges have issued orders that are more focused.

U.S. Court of Trade Judge Stephen Alexander Vaden is concerned with the risk of disclosing confidential information to the entities operating generative AI tools.  His order reads:

Generative artificial intelligence programs that supply natural language answers to user prompts, such as ChatGPT or Google Bard, create novel risks to the security of confidential information.  Users having "conversations" with these programs may include confidential information in their prompts, which in turn may result in the corporate owner of the program retaining access to the confidential information.  Although the owners of generative artificial intelligence programs may make representations that they do not retain information supplied by users, their programs "learn" from every user conversation and cannot distinguish which conversations may contain confidential information . . .

Because generative artificial intelligence programs challenge the Court's ability to protect confidential and business proprietary information from access by unauthorized parties, it is hereby:

ORDERED that any submission in a case assigned to Judge Vaden that contains text drafted with the assistance of a generative artificial intelligence program on the basis of natural language prompts, including but not limited to ChatGPT and Google Bard, must be accompanied by:

(1) A disclosure notice that identifies the program used and the specific portions of text that have been so drafted;

(2) A certification that the use of such program has not resulted in the disclosure of any confidential or business proprietary information to any unauthorized party.[3]

These two requirements are simple -- lawyers can use LLMs to assist with submissions, but must notify the court that they did so and attest to not having disclosed a party's confidential information to such tools.  This will incentivize the lawyers to think twice before they submit a ChatGPT prompt such as "Write a legal argument that [trade secret] was improperly obtained by John Smith based on [factual allegations]."

Finally, Judge Arun Subramanian of the Southern District of New York has issued a simple yet balanced and effective order:

Use of ChatGPT and Other Tools.  Counsel is responsible for providing the Court with complete and accurate representations of the record, the procedural history of the case, and any cited legal authorities.  Use of ChatGPT or other such tools is not prohibited, but counsel must at all times personally confirm for themselves the accuracy of any research conducted by these means.  At all times, counsel—and specifically designated Lead Trial Counsel—bears responsibility for any filings made by the party that counsel represents.[4]

In a minimally restrictive fashion, Judge Subramanian reminds lawyers that they are ultimately responsible for the veracity and accuracy of their filings.  This is not unlike reminding senior lawyers that they need to review and check the work of their junior associates.

To be certain, these are not the only standing orders on generative AI that we will see.  Within a few months it may be rare for any judge not to have such an order in place.  Eventually, the gist of such orders will likely be synthesized into a standard of practice adopted by the vast majority of the judiciary.

Of course, this begs the question of whether such a standard of practice will also put disclosure, confidentiality, and veracity requirements on judges' use of generative AI as well.

[1] https://storage.courtlistener.com/recap/gov.uscourts.nysd.575368/gov.uscourts.nysd.575368.54.0_2.pdf.

[2] https://www.paed.uscourts.gov/documents/standord/Standing%20Order%20Re%20Artificial%20Intelligence%206.6.pdf.

[3] https://www.cit.uscourts.gov/sites/cit/files/Order%20on%20Artificial%20Intelligence.pdf.

[4] https://www.nysd.uscourts.gov/sites/default/files/practice_documents/AS%20Subramanian%20Civil%20Individual%20Practices.pdf.

American Axle's Claims Found Eligible on Remand

By Michael Borella --

The storied case of American Axle v. Neapco Holdings has entered a new chapter -- not the final chapter but the plot has thickened considerably.  As a recap, Judge Stark, then of the District Court for the District of Delaware, found all asserted claims of U.S. Patent No. 7,774,911 invalid under 35 U.S.C. § 101 as being directed to a law of nature implemented by well-understood, routine, and conventional means.

The main thrust of this opinion and those that follow was focused on claims 1 and 22, which read:

1.  A method for manufacturing a shaft assembly of a driveline system, the driveline system further including a first driveline component and a second driveline component, the shaft assembly being adapted to transmit torque between the first driveline component and the second driveline component, the method comprising:
    providing a hollow shaft member;
    tuning at least one liner to attenuate at least two types of vibration transmitted through the shaft member; and
    positioning the at least one liner within the shaft member such that the at least one liner is configured to damp shell mode vibrations in the shaft member by an amount that is greater than or equal to about 2%, and the at least one liner is also configured to damp bending mode vibrations in the shaft member, the at least one liner being tuned to within about ±20% of a bending mode natural frequency of the shaft assembly as installed in the driveline system.

22.  A method for manufacturing a shaft assembly of a driveline system, the driveline system further including a first driveline component and a second driveline component, the shaft assembly being adapted to transmit torque between the first driveline component and the second driveline component, the method comprising:
    providing a hollow shaft member;
    tuning a mass and a stiffness of at least one liner, and
    inserting the at least one liner into the shaft member;
    wherein the at least one liner is a tuned resistive absorber for attenuating shell mode vibrations and
    wherein the at least one liner is a tuned reactive absorber for attenuating bending mode vibrations.

A Federal Circuit majority affirmed Judge Stark, adding their observation that the specification of the '911 patent does not disclose how to achieve the claimed goals as further grounds of ineligibility.  Judge Moore penned a vociferous dissent questioning the majority's reading of the record and application of the Alice Corp. v. CLS Bank Int'l two-part eligibility test.

Less than a year later, in response to a petition for en banc rehearing, the majority withdrew its original opinion and handed down a revised opinion finding claim 22 still ineligible but vacating and remanding the District Court's decision about claim 1.  The majority also took the opportunity to express its disagreement with Judge Moore's view of the facts and relevant law.

American Axle filed a petition for Writ of Certiorari with the Supreme Court.  After a long wait, the Court denied the petition.  Thus, the majority's reasoning is still good law.  More correctly, it is still binding precedent -- whether the decision was good is still hotly debated.  Indeed, the reasoning of American Axle was instrumental in an abomination of an ITC decision finding a diamond-encrusted drill bit to be an abstract idea.

Today, we have a decision on remand to the District Court.  Judge Williams has taken on the case, given Judge Stark's promotion to the Federal Circuit.  The issues under dispute were cross-motions related to the eligibility of claim 1 and its dependent claims under § 101, as well as validity under § 102 and non-infringement.  Here, we focus just on the § 101 dust-up.

As an initial matter, the parties disagreed as to whether the Federal Circuit's invalidation of claim 22 could be imputed to claim 1.  Judge Williams quickly put this matter to rest, finding that:

[T]he Federal Circuit expressly stated that "Claim 1 is different than claim 22," and "that the 'characteristics' that can be 'tuned' in claim 1 include variables other than mass and stiffness," which were the variables the Federal Circuit relied on in finding that claim 22 was directed to a natural law, i.e., Hooke's law.

Another preliminary motion went in the other direction, with Judge Williams ruling that the issue of whether claim 1 is directed to an abstract idea (as opposed to a natural law) was not waived by Neapco's lack of contentions on that point until now.  Notably, "the Federal Circuit explicitly remanded the case for the district court to address this alternative eligibility theory, i.e., the abstract idea theory, in the first instance."

Addressing the substance of claim 1 under Alice, Judge Williams started with the premise that "[t]he Alice step one inquiry considers what the patent asserts to be the focus of the claimed advance over the prior art."  He wasted no time concluding that the claimed invention was "directed to a method of designing and manufacturing a tangible propshaft with reduced vibration that includes tuning and  positioning a liner within a propshaft to attenuate bending and shell mode vibration."  According to the judge, this is "[f]ar from an abstract idea," as the claims involve a tangible system and had "an observable real-world impact."

In this regard, Neapco's position that the claims merely recite a "desired result of attenuating certain vibration modes and frequencies" based on abstract concepts of tuning and positioning failed to consider the claims as a whole.  Judge Williams went back to Diamond v. Diehr's prohibition on dissecting claims in the § 101 calculus to support this point.

For further support, Judge Williams appears to agree with Judge Moore in principle that the specification describes "a meaningful improvement to the design and manufacturing of propshafts."  He also notes that "the specification provides the design parameters a person of ordinary skill in the art should use to tune a liner to reduce propshaft vibration . . . [o]ther embodiments illustrate how tuned liners may be physically structured in several distinct ways."  Moreover, the dependent claims explicitly recite how to achieve the specific damping of two modes of vibration.

Neapco's attempt to bifurcate the claims under part one of Alice in order to ignore the "conventional" tangible aspects was, in the opinion of the judge, blurring the line between part one and part two of the test.  Moreover, he was skeptical of Neapco's contentions as improperly incorporating arguments against novelty rather than eligibility.

Accordingly, the District Court found claim 1 and its dependents to not be non-abstract and eligible under part one of Alice.  This obviated the need for a part two analysis.

While this opinion is a breath of fresh air in the patent eligibility swamp (if for no other reason than it simply making sense), the story is still not over.  It is almost inevitable that Neapco will appeal again to the Federal Circuit.  And, it is likely that the appellate proceeding will go against American Axle.

Judge Williams relies heavily on the principles of Diehr, which were modified if not overruled by Alice.  There are numerous precedential Federal Circuit opinions that can be used to counter his findings on the combining of parts one and two of Alice (the Federal Circuit routinely bends it's understanding of Alice to fit its desired outcome), as well as his comments on whether novelty can be considered under part one (it can and has been in many cases including some that Judge Williams quotes for other purposes).  Additionally, if Judge Stark ends up on the panel that hears the appeal, it is unlikely that he will be willing to contradict what he initially concluded about the eligibility of claim 1 over five years ago.

Memorandum Order by District Judge Gregory B. Williams

Moderna Sues Pfizer and BioNTech over mRNA Vaccine Technology

By Kevin E. Noonan --

On Friday, August 26th, Moderna Tx, Inc. and Moderna US, Inc. filed a complaint for patent infringement in Federal district court for the District of Massachusetts against Pfizer, Inc., BioNTech SE, BioNTech Manufacturing GmbH, and BioNTech US, Inc.  (A parallel suit was filed in Germany asserting Moderna's corresponding German patents.)  There are several interesting aspects to this complaint, and perhaps of even greater interest has been the reaction to the filing in light of Moderna's earlier "pledge" to refrain from asserting any of its patents "during the pandemic."

The complaint asserts three patents, identified herein in the context of the claims set forth in the complaint itself:

U.S. Patent No. 10,898,574

Claim 2.  A pharmaceutical composition comprising:
    a plurality of lipid nanoparticles comprising a cationic lipid, a sterol, and a PEG-lipid,
    wherein the lipid nanoparticles comprise an mRNA encoding a polypeptide,
    wherein the mRNA comprises one or more uridines, one or more cytidines, one or more adenosines, and one or more guanosines and wherein substantially all uridines are modified uridines.

Claim 9.  The pharmaceutical composition of claim 2, wherein the modified uridine is 1-methyl-pseudouridine.

U.S. Patent No. 10,702,600

Claim 1.  A composition, comprising:
    a messenger ribonucleic acid (mRNA) comprising an open reading frame encoding a betacoronavirus (BetaCoV) S protein or S protein subunit formulated in a lipid nanoparticle.

U.S. Patent No. 10,933,127

Claim 1.  A method comprising administering to a subject
    a messenger ribonucleic acid (mRNA) comprising an open reading frame encoding a betacoronavirus (BetaCoV) S protein or S protein subunit formulated in a lipid nanoparticle
    in an effective amount to induce in the subject an immune response to the BetaCoV S protein or S protein subunit
    wherein the lipid nanoparticle comprises 20-60 mol% ionizable cationic lipid, 5-25 mol% neutral lipid, 25-55 mol% cholesterol, and 0.5-15 mol% PEG-modified lipid.

Of these three asserted patents, the '574 patent has the broadest claims, not being limited to a particular virus or antigenic protein thereof, while the '600 and '127 patents expressly recite mRNAs encoding a b-coronavirus Spike protein; these claims would encompass vaccines to SARS-CoV-1 (the original SARS pandemic vaccine) as well as MERS and SARS-CoV-2 (COVID19).  These claims in particular form a basis for Moderna's allegations of infringement by the Pfizer/BioNTech Comirnaty® vaccine, as recited in several paragraphs in the complaint.  In particular, Moderna alleges that the Comirnaty® vaccine was a direct copy of their vaccine (a path taken over three other competing candidate vaccines), citing public statements by Pfizer CEO Albert Bourla on June 9, 2020, at Goldman Sachs Virtual 41st Annual Global Healthcare Conference (¶20 of the complaint).

Perhaps in recognition of the post-pandemic patent zeitgeist, the complaint has two remarkable features.  The first is a long expostulatory section explaining the long antecedents of the technology Moderna was able to apply towards making its Spike mRNA SARS-CoV-2 vaccine (and the skepticism those efforts elicited pre-pandemic).  This portion of the complaint includes a history of Moderna's development of the underlying mRNA technology as well as its efforts to develop its vaccine (unnoted is that Moderna abjured participation in "Operation Warp Speed" with its attendant Federal government financial support) during the pandemic (and makes the point that their technology is not limited to vaccines against COVID infections).  The complaint also makes the case that the company's IP was both the technical foundation for its successful and rapid development of the COVID vaccine and provided protection against the significant financial and investment risk occasioned by Moderna's development of its vaccine.

The second remarkable feature of the complaint, and Moderna's strategy in bringing suit, is in the Prayer for Relief (and certain sections explaining the limitations of the remedy Moderna asks the Court to grant).  In addition to a judgment that Pfizer and BioNTech infringe by sales of its Comirnaty® vaccine (and that such infringement was willful), Moderna seeks money damages that expressly exclude damages it would be entitled to from "sales to the U.S. government that are subject to 28 U.S.C. § 1498 or to the 92 low- and middle-income countries in the Gavi COVAX Advance Market Commitment (AMC)."  And in the litany of other remedies routinely requested in patent infringement cases (a finding that this is an exceptional case, with an award of attorneys' fees, costs, and expenses under 35 U.S.C. § 285, and treble damages for willful infringement under 35 U.S.C. § 284), expressly excluded is an injunction from "such other relief the Court may deem just and proper."  Deigning to forego compensation for sales to the government under 28 U.S.C. § 1498 is likely done in an effort to avoid any attempt by Pfizer or BioNTech to have the case adjudicated under the statute in the Court of Federal Claims; disclaiming any interest in sales outside the U.S. to countries falling within the scope of the COMAX AMC avoids (or at least tries to) allegations that Moderna is putting its profits and patent rights over the health and lives of the citizens of those countries.

The complaint also addresses Moderna's promises regarding assertion of its IP, specifically quoting its October 8, 2020 press release stating that "while the pandemic continues, Moderna will not enforce our COVID-19 related patents against those making vaccines intended to combat the pandemic" (italics in original) (¶22).  The complaint also provides Moderna's rationale and justification for filing this complaint at this time:

By early 2022, however, the collective fight against COVID-19 had entered a new endemic phase and vaccine supply was no longer a barrier to access in many parts of the world, including the United States.  In view of these developments, Moderna announced on March 7, 2022, that it expected companies such as Pfizer and BioNTech to respect Moderna's intellectual property and would consider a commercially-reasonable license should they request one.  This announcement was widely publicized, including through coverage in The Wall Street Journal.  Critically, however, and to further its belief that intellectual property should never be a barrier to access, as part of this announcement, Moderna committed to never enforce its patents for any COVID-19 vaccine used in the 92 low- and middle-income countries in the Gavi COVAX Advance Market Commitment ("AMC").  This includes any product manufactured outside the AMC countries, such as the World Health Organization's project in South Africa, with respect to COVID-19 vaccines destined for and used in the AMC-92 countries.  Although they have continued to use Moderna's intellectual property, Pfizer and BioNTech have not reached out to Moderna to discuss a license.  (¶23)

The complaint has nonetheless raised the issue of the status of Moderna's promise in the context of patent pledges in other industries, notably for standard-essential patents (SEP) and FRAND ("fair, reasonable, and non-discriminatory") agreements.  Academics (in particular, Jacob Sherkow from the University of Illinois Law School and Jorge Contreras, S.J. Quinney College of Law, University of Utah Law School) have raised the specter of successful suit by Moderna in the face of its earlier promise as creating a challenge threatening the substantial edifice of patent pledges used in these other contexts.  Some distinctions immediately come to mind, however.  One is that the patent pledges in the SEP/FRAND context are associated with consideration for the pledging party, that consideration consisting of, inter alia, compliance by companies licensing SEPs owned by the pledging patentee that provide stability and consistency in licensing regimes and create impediments against non-compliant companies.  Moderna received no such consideration for its pledge (and the effects of any "good will" it might have hoped to gain was ephemeral; after all, all the pledges in the world did not deter the WTO from adopting a patent waiver agreement at the behest of India, South Africa, and other countries who could expect to benefit and did benefit from agreements like the one in Moderna's complaint exempting sales to the COVAX AMC countries from any damages claims sought by Moderna).  Another distinction is that a fair reading of Moderna's promise-by-press-release was its essentially contingent nature; forgoing (or postponing exercise of) its patent rights was always limited to during the pandemic (although it is a fair question to ask who decides when the pandemic is over).  Finally it is not unfair to say that the SEP/FRAND situation is vastly different from patenting vaccines against a pandemic virus; there is, after all, no analogous risk to global health and welfare arising from patent pledges relating to such patents.

On the other hand, if a court does hold Moderna's patent promise to be enforceable (under the doctrine of promissory estoppel, for example), it most likely will be the last time any biotechnology or pharmaceutical company makes such a promise.

There is one other consideration here that may explain Moderna's willingness to file suit at this time that abjures the lion's share of any damages it could reasonably have expected to receive.  Moderna has achieved something of a Holy Grail of patenting:  true platform patents that can be and will be used for the next vaccine, and the one after that, etc.  Bringing a successful suit might result in a healthy damages award but these may pale compared with what could happen during the ~10 -15 years of patent life remaining.  Of course, any suit brings risks and it is not unlikely that Pfizer/BioNTech will petition for inter partes review; indeed, at least one patent owned by the University of Pennsylvania, U.S. Patent No. 8,691,966 (naming BioNTech principal Katalin Kariko as an inventor), discloses and claims mRNA modifications comprising 1-methylpseudouridine (albeit outside the SARS context); this patent has an earliest priority date about 4 years prior to Moderna's patents asserted in the litigation.

All these considerations make for a compelling story that will almost certainly be the subject of future posts.

District Court Rules PureCircle Steviol Glycoside Patents Invalid

By Kevin E. Noonan --

On May 23rd, U.S. District Court Judge James V. Selna of the Central District of California granted summary judgement to Defendant Sweegen, Inc. on its motion that Plaintiff Pure Circle USA Inc.'s claims in suit were invalid for reciting patent ineligible subject matter and for failing to satisfy the written description and enablement requirements of 35 U.S.C. § 112(a), in PureCircle USA Inc. v. SweeGen, Inc.  Neither judgment was surprising in the current patent environment, but the District Court's reasoning is illustrative of the current state of U.S. patent law.

The suit involved methods for making particular glucosylated forms of the natural sweetener steviol obtained from the Stevia rebaudiana plant.  The plant produces a variety of rebaudioside variants having various levels of glycosylation; the most predominant of these in the plant is termed "RebA" but this is not the most commercially valuable form.  That form, termed variably "RebX" and "RebM" contains six glucose residues on the steviol core, illustrated in the opinion by this diagram:

(As will become evident from the claims, there are several intermediate glycosylated rebaudioside derivatives, termed RebB, RebC, RebD, etc.)  The opinion sets forth that RebM is preferred due to its sweetness but that it only exists as "less than about 0.1% by weight of the total steviol glycoside content . . . in the natural stevia plant."

PureCircle asserted all claims in U.S. Patent Nos. 9,243,273 (claims 1-14) and 10,485,257 (claims 1-7), and Sweegen moved for summary judgment that the '257 patent and '257 patent were invalid under 35 U.S.C. § 101 and § 112(a); the opinion set forth these claims as representative:

Claim 1 of the '257 patent:

1.  A method for adding at least one glucose unit to a steviol glycoside substrate to provide a target steviol glycoside, comprising contacting the steviol glycoside substrate with a recombinant biocatalyst protein enzyme comprising UDP-glucosyltransferase, wherein the target steviol glycoside is Rebaudioside X.

Claim 1 of the '273 patent:

1.  A method for making Rebaudioside X comprising a step of converting Rebaudioside D to Rebaudioside X using a UDP-glucosyltransferase, wherein the conversion of Rebaudioside D to Rebaudioside X is at least about 50% complete.

As stated in the opinion, "the method of the Asserted Patents makes Reb M by using UGT enzymes to add sugar units to a steviol glycoside with less than six sugar units until it has six, thereby converting it to Reb M," wherein the UGT-glucosyltransferase enzymes used in the claimed methods are produced recombinantly in yeast cells.

The District Court granted PureCircle's motion that Sweegen's commercial product, Bestevia Reb M, infringed claims 1-7 of the '257 patent, which Sweegen did not dispute "to the extent that the claims are valid."  With regard to invalidity, Sweegen contended that the product of the claims was naturally occurring and that the method for making them merely replicated what occurs natively in the stevia plant.  Accordingly, Sweegen maintained, the claims were invalid for being direct to laws of nature under the Supreme Court's subject matter eligibility jurisprudence, which the District Court recognized to include Alice Corp. Pty. Ltd. v. CLS Bank Int'l, 134 S. Ct. 2347, 2350 (2014); Ass'n for Molecular Pathology v. Myriad Genetics, Inc., 569 U.S. 576, 577 (2013); Mayo Collaborative Servs. v. Prometheus Labs., Inc., 566 U.S. 66, 89 (2012); and Diamond v. Diehr, 450 U.S. 175, 185 (1981).  In addition, Sweegen asserted that the claims lacked an inventive concept base on five distinctions asserted in response by PureCircle:

1) the use of "recombinant" UGT enzymes in Claims 1-7 of the '257 Patent;
2) the use of "host microorganisms" to "express" the UGT enzymes in Claims 6-7 of the '257 Patent and Claims 12-13 of the '273 Patent;
3) the purity percentages for Reb M in Claims 3-5 of the '257 Patent and Claims 4-6 of the '273 Patent;
4) the conversion percentages of Reb D to Reb M in Claims 1 and 7-11 of the '273 Patent; and
5) the use of the UGT76G1 UGT enzyme in Claim 14 of the '273 Patent.

For the first two of these, Sweegen contended that the structure and function of the UDP-glucosyltransferases recited in the claims were identical to these enzymes as they exist in nature and did not recite "any non-natural role the enzyme plays in the claimed process" (which is a frequent source of invalidating comparison for any naturally occurring compound, insofar as changing the structure and/or function reduces or eliminates the desired biological activity).  Regarding the third and fourth allegations of subject matter eligibility, Sweegen argued that the asserted claims contained no "steps or methods for achieving the claimed purity or completion percentages" (although this argument appears more fitting for a non-enablement or indefiniteness arguments).  Finally, as to the fifth allegation, Sweegen argued that the disclosed enzyme, termed UGT76G1 was also naturally occurring.

PureCircle argued that the preparation methods did not occur in nature, with regard to taking an isolated RebA preparation and using a recombinant UDP-glucosyltransferase, analogizing these claims to the claims found patent-eligible in Rapid Litig. Mgmt Ltd. v. CellzDirect, Inc., 827 F.3d 1042, 1047 (Fed. Cir. 2016), and Illumina, Inc. v. Ariosa Diagnostics, 967 F.3d 1319, 1325-29 (Fed. Cir. 2020).  PureCircle also pointed out that, in nature, the plant contains enzymes that deglucosylate steviol glycosides, thus making impossible production of RebM in quantities achieved using the claimed methods.

Sweegen countered by arguing that claims reciting man-made elements can be ineligible under Federal Circuit precedent, citing Athena Diagnostics, Inc. v. Mayo Collaborative Servs., LLC, 915 F.3d 743, 750, 753-54 (Fed. Cir. 2019); Roche Molecular Systems, Inc. v. CEPHEID, 905 F.3d 1363, 1371-73 (Fed. Cir. 2018); Ariosa Diagnostics, Inc. v. Sequenom, Inc., 788 F.3d 1371, 1373-74, 1376-77 (Fed. Cir. 2015), and further that the recited enzymes are "structurally and functionally identical to the naturally occurring UGT enzymes" and accordingly do not overcome patent-ineligibility of the asserted claims.  Moreover, Sweegen argued that the purity and percentage of conversion to RebM do not in themselves change the "underlying natural process[es]."  Finally, Sweegen argued that "methods of preparation" are not per se patent-eligible under the cited precedent.

The District Court agreed with Sweegen, finding claims 1-5 of the '257 patent and claims 1-11 and 14 of the '273 patent invalid for reciting patent-ineligible subject matter.  According to the Court, the claims were directed to the natural law of converting rebaudiosides, and specifically RebD, into RebM.  In the Court's view, "there is no dispute that the conversion of steviol glycosides and Reb D to Reb M using UGT enzymes is a natural process."  The Court found this characterization to be supported by disclosure in the specification, which was expressed as disclosing a "biocatalytic process," defined as "the use of natural catalysts, such as protein enzymes, to perform chemical transformations on organic compounds" (emphasis added).  The Court relied on Athena for the proposition that "[s]ynthetically-created chemical compositions that are structurally and functionally identical to their naturally-occurring counterparts . . . are not patent eligible" and the admission in the specification that the recombinant enzymes were structurally and functionally "identical" to the naturally occurring enzymes.  The District Court rejected the distinction PureCircle attempted to draw for "method of preparation" claims analogous to CellzDirect and expressly with regard to any suggestion that such claims are per se patent eligible, as being inconsistent with precedent particularly the Supreme Court's rationale in Alice.

The claims of the '257 patent not invalidated on Section 101 grounds recited:

6.  The method of claim 1, wherein the UDP-glucosyltransferase is expressed in a host microorganism.

7.  The method of claim 6, wherein the host microorganism is selected from the group consisting of: Escherichia coli, Saccharomyces species, Aspergillus species, and Pisehia species.

And the claim of the '273 patent not invalidated on Section 101 grounds recited:

13.  The method of claim 12, wherein the UDP-glucosyltransferase host microorganism is selected from the group consisting of: Escherichia coli, Saccharomyces species, Aspergillus species, and Pischia species.

The District Court recognizing these recited limitations as providing "something more" than the natural law as required under Supreme Court and Federal Circuit precedent, that something being in this case "a particular step performed by a human for achieving a particular result," which the Court finds "takes those claims beyond the natural law itself."

Turning to Sweegen's motion for an invalidity finding on written description grounds, the District Court agreed with Sweegen that the recited claim element "UDP-glucosyltransferase" is a "broad, functionally-defined genus" and thus can embrace "not just naturally occurring UDP-glucosyltransferases, but 'any' UDP-glucosyltransferase mutant, fusion, and UDP-glucosyltransferase known or discovered after the patents' . . . filing date" (estimated by Sweegen to encompass a trillion (1012), molecules, "a limitless number," citing Juno Therapeutics, Inc. v. Kite Pharma, Inc., 10 F.4th 1330, 1337 (Fed. Cir. 2021)).  The District Court also agreed with Sweegen that the specification does not recite a "a representative number of species or identify any common structural features for UGT enzymes" and that the sequence similarities between different UDP-glucosyltransferase were not correlated with enzymatic activity.  In evidence was a comparison between 12 UGT enzymes wherein only 4 had shown an enzymatic activity that added glucose to steviol glycoside molecules.  PureCircle countered this evidence by asserting that the term ""UDP-glucosyltransferase" is structural because, inter alia, there are other UGT enzymes that do not add glucose residues to rebaudiosides and that the Court's claim construction limits the scope of the claims to those UGT enzymes that do transfer glucose moieties into rebaudiosides as disclosed and claimed.  Finally, PureCircle argued that there are disputed material facts that preclude summary judgment, including that the term "UDP-glucosyltransferases" was itself structural and the structure of functional UGT enzymes had been determined by crystallographic comparisons (unfortunately for PureCircle, the District Court found that none of these crystallographically determined common structural features were disclosed in the specification).  Sweegen countered that the specification did not provide (express) written description support for "every" UGT enzyme capable of converting inter alia RebD to RebM (which was the construction the Court gave to the claim element "UDP-glucosyltransferase").  In addition, Sweegen asserted that neither of the specifications disclosed structural features common to members of the genus of UDP-glucosyltransferases.

The District Court considered the issue to be whether the genus of UDP-glucosyltransferases was defined (and described) structurally or functionally and, deciding it was the latter, found that the claims did not provide adequate written description support.  This determination was supported by the stipulated meaning of the term, i.e., "[a] type of enzyme that is capable of transferring a glucose unit from a uridine diphosphate glucose molecule to a steviol glycoside molecule."  Accordingly, the fact that these claims reciting this limitation were "original" claims they were not entitled to a presumption of adequate written description support.  Under these circumstances, the Court held, precedent requires a showing that "the applicant has invented species sufficient to support a claim to the functionally-defined genus," citing Juno, or "structural features common to the members of the genus so that one of skill in the art can 'visualize or recognize' the members of the genus," citing Ariad Pharma. Inc. v. Eli Lilly & Co., 598 F.3d 1336, 1352 (Fed. Cir. 2010).  The opinion states that there is no dispute between the parties that the specification does not expressly disclose "structural features common to all UGT enzymes" having the recited function; in fact only 4 UGT enzymes are disclosed (UGT76G1, UGT91D2, UGT91D2e, and UGT91D11) and the specification further states that "the particular UDP-glucosyltransferase used in each reaction can either be the same or different, depending on the particular site on the steviol glycoside substrate where glucose is to be added."  Amino acid sequence comparisons, which had been sufficient to overcome a written description rejection before the Patent Office were not persuasive before the Court, based on an understanding that "[a]n enzyme's amino acid sequence does not necessarily predict the enzyme's activity (or functionality) and, therefore, testing is always required to determine the enzyme's activity (or functionality)," from which the Court concluded that "two enzymes with the similar sequences can have different functions and two enzymes with very different sequences can have the same function" (which, to be candid overstates what is a relatively weak biological rule of thumb).  But here, the Court found that a comparison of two of the disclosed UDP-glucosyltransferases (UGT76G1 and UGT91D2) did not disclose common structural features sufficient to satisfy the requirement for an adequate written description.  Finally, the District Court found that as of the filing date common structural features between different UDP-glucosyltransferases were not known in the art (and what features that were known were not universally associated with UDP-glucosyltransferase function).  Accordingly, the District Court granted Sweegen's motion that all asserted claims were invalid for failure to satisfy the written description requirement of 35 U.S.C. § 112(a).

The Court dismissed as moot a third ground of invalidity asserted by Sweegen, sounding in non-enablement.  However, in view of the District Court's rationale in its written description determination, and the recent trend at the Federal Circuit in applying the enablement standard in chemical, pharma, and biotechnology cases (see, e.g., Amgen Inc. v. Sanofi and Idenix Pharmaceuticals LLC v. Gilead Sciences Inc.) it is unlikely that PureCircle would have received any different outcome if the Court had considered this ground on the merits.

While the District Court's decision is likely to be followed by an appeal to the Federal Circuit, PureCircle should expect an uphill battle.  On the written description issue, as a question of fact the District Court is entitled to "clear error" deference which should prove difficult to overcome in view of the reasoning based on evidence cited in the opinion.  And no patentee having had their claims invalidated under Section 101 has had any reason to be sanguine on appeal for the past ten years (although the recent Solicitor General's amicus brief recommending the Supreme Court revisit the subject matter eligibility issue in Am. Axle & Mfg., Inc. v. Neapco Holdings LLC at least raises the possibility that there may be (perhaps just faint) hope for the standard to be reconsidered).

Epic Tech, LLC v. Fusion Skill, Inc. (S.D. Tex. 2021)

Electronic Gaming Patents Found Invalid under § 101

By Joseph Herndon --

In the U.S. District Court for the Southern District of Texas (Houston Division), Plaintiff Epic Tech, LLC (a seller of so-called "sweepstakes games") sued Defendants Fusion Skill, Inc. and Texas Wiz, LLC for infringement of U.S. Patent Nos. 9,589,423 and 8,545,315 with the distribution of gaming systems similar to Epic Tech's sweepstakes games.

The two patents at issue are related to the play of sweepstakes games.  The first patent (the '423 patent) is directed to a method of conducting a sweepstakes game in which a computer-based system operating the game immediately determines and credits a player's account with any prize earned before showing the user the results of the game.  According to Epic Tech, this method is beneficial because it "further reinforces to regulators that the prizes are predetermined and that there is no chance or skill involved in the simulated game."

This is important because gambling is illegal in many states, but various methods of evading this prohibition now exist, including converting a gambling-machine-like game into a lottery-like game.  In this method, the result of the game is not determined by random.  Instead, the system is loaded with a finite number of results—i.e., some number of winning tickets and a larger number of losing tickets—from which a ticket is randomly selected upon initiation of the game.  In other words, whereas in a traditional gambling machine game it would be mathematically possible for a player to lose—or win—one trillion times in a row, the precise number of winners and losers over the long run is predetermined in a lottery-based slot machine.  Further distinguishing these sweepstakes games from gambling-like games is the payment method.  Whereas a traditional gambling machine game is played by inserting a payment directly into the machine, a sweepstakes game might be initiated with a token that is given away for free along with an ostensibly unrelated purpose.  Because such a game does not technically require consideration on the part of the player, it can be defined as something other than gambling.

The second patent (the '315 patent) describes a method for conducting computer-based sweepstakes bonus games, or "game-in-games" in the patent's lexicology.  The '315 patent claims a method whereby the playing of a game-in-game is triggered automatically, without player interference, upon the selection of a winning ticket for the initial game.

The Defendants argued that each patent is invalid because it claims an abstract idea as proscribed by 35 U.S.C. § 101.

1.  The '423 patent

The '423 patent is directed to a method of dispensing prizes in an electronic sweepstakes game.  Its purported innovation is for the computer server on which the game is played to credit a player's account with the prize corresponding to the selected sweepstakes entry prior to displaying the results.  This innovation apparently makes the game more appealing to regulators.

Claim 1 of the '423 patent is set forth here:

1.  A method of providing a sweepstakes prize, the method comprising:
    a.  facilitating, by one or more processors, selection of a first plurality of sweepstakes tickets from a second finite plurality of sweepstakes tickets in response to a request from a user;
    b.  prior to a visual display of the results of the first plurality of tickets to a user account, determining, by the one or more processors, a prize associated with each of the first plurality of sweepstakes tickets and a total value for the prizes associated with the first plurality of sweepstakes tickets;
    c.  prior to a visual display of the results of the first plurality of tickets to a user account, crediting to an account for the user, by the one or more processors, the total prize value associated with the first plurality of sweepstakes tickets; and
    d.  providing to the user a visual display of the results of the first plurality of sweepstakes tickets.

The Court followed the two-step Alice test, asking first whether the patent is "directed to a patent-ineligible concept," such as an "abstract idea," and second whether, "if so, the particular elements of the claim, considered both individually and as an ordered combination, do not add enough to transform the nature of the claim into a patent-eligible application."

The Court stated that the '423 patent "flunks" Alice step one because it is directed to an abstract idea.  When computer-related patents are at issue, the critical distinction is whether the focus of the claims is on the specific asserted improvement in computer capabilities or, instead, on a process that qualifies as an abstract idea for which computers are invoked merely as a tool.

Here, the '423 patent claim merely deploys computers as a tool to implement a novel method of executing a sweepstakes game—specifically, in Epic Tech's own words, a new "method for awarding a sweepstakes prize developed by the patentee."  The '423 patent does not describe, and Epic Tech does not claim, any innovation in computer software; instead, the patent merely sets out a new method for using computers to award sweepstakes prizes.  Thus, the Court found the focus of the claims is not on such an improvement in computers as tools, but on certain independently abstract ideas that use computers as tools.

Because the '423 patent was found to be directed to an abstract idea, the Court proceeded to step two of the Alice test.

The Court viewed step two as deciding whether this case is closer to DDR Holdings or Electric Power.  In DDR Holdings, the court held valid a patent that described a novel method for Internet advertising because its claims specified how interactions with the Internet are manipulated to yield a desired result—a result that overrides the routine and conventional sequence of events ordinarily triggered by the click of a hyperlink.  DDR Holdings, LLC v. Hotels.com, LP, 773 F.3d 1245 (Fed. Cir. 2014).

In Electric Power, the patent claimed a method of gathering and displaying information for electric power grid operators, but lacked details for how to accomplish those functions.  The claims alternatively were directed to the solution itself.  Electric Power Group, LLC v. Alstom, S.A., 830 F.3d 1350 (Fed. Cir. 2016).

The Court here found the '423 patent to be more like that in Electric Power.  The '423 patent was found to offer no "arguably inventive" method; rather, it simply instructs a computer to send information to another computer at an earlier step than it otherwise would in the normal course of a sweepstakes game.  The claims were found to lack meaningful details that would save them from § 101 destruction.

2.  The '315 patent

The '315 patent describes a method for operating sweepstakes bonus games, or "game-in-games."  The '315 patent describes its invention as "a method of playing a game-within-a-game" and "a method . . . providing a plurality of gaming terminals within a network."  Specifically, the '315 patent claims two networked computer terminals that simultaneously play a first game and, if the player wins the first game, trigger the playing of a second game.  Notably, the '315 patent does not claim any specific software or hardware necessary to implement this system.

Claim 1 of the '315 patent is set forth here:

1.  A computer-implemented method, comprising:
    a.  providing a plurality of gaming terminals linked together via a network, the plurality of gaming terminals comprising at least a first gaming terminal;
    b.  receiving a first request from a first player to play a first sweepstakes game on the first gaming terminal, wherein the first request qualifies the first player to be eligible to win an award associated with the first sweepstakes game;
    c.  in response to receiving the first request:
        i.  receiving a participation credit to play the first sweepstakes game;
        ii.  presenting an option to the first player to participate in a first sweepstakes game-in-game on the first gaming terminal so that the first player can play the first sweepstakes game and concurrently be eligible to win one or more prizes from the first sweepstakes game-in-game, wherein an outcome of the first sweepstakes game-in-game is independent of the outcome of the first sweepstakes game;
        iii.  receiving a second request; and
        iv.  in response to receiving the second request within a predetermined time limit, granting the first player eligibility to win one or more prizes from the first sweepstakes game-in-game;
    d.  triggering a play of the first sweepstakes game-in-game; and
    e.  notifying the first player of their eligibility to win one or more prizes from the play of the first sweepstakes game-in-game,
    wherein once the second sweepstakes game-in-game is triggered to play, the second sweepstakes game-in-game automatically plays on a server without input from the first gaming terminal.

Again, the Court found that the '315 patent "flunks" Alice step one.  Like the '423 patent, the '315 patent expressly describes itself as directed to methods, but does not claim any novel usage or configuration of computer hardware or software.

Next, under Alice step two, the Court found that the '315 patent cannot survive.  Here, the '315 patent merely describes a set of steps that could be performed by any computer—or a fast-moving store clerk—without adding any novel or inventive step.

The '315 patent claims a method of operating two games simultaneously in which the second game is triggered by certain conditions in the first game.  If the '315 patent described some technologically innovative mechanism by which the second game is triggered, it might well be inventive.  But, it does not.  Rather, it simply claims the idea of putting two computers next to each other and having the second computer initiate a game if the first computer produces a winning result.  That idea is abstract and thus unpatentable.

Epic Tech contended that the '315 patent's processes cannot be performed solely by humans because the patent claims a system that "independently control[s]" the game-in-game and "takes no input from the individual human players playing on the gaming terminals."

But the Court found that a human is perfectly capable of independently running a basic game of luck without taking input from a human player—in fact, that is what a casino's croupiers do every day.  In any event, the question is not whether the patent claims a process that cannot be performed by a human, but whether the patent claims a non-ordinary process.

Thus, Defendants' Motion for Partial Summary Judgment on Invalidity was granted as to both patents.

Epic Tech, LLC v. Fusion Skill, Inc. (S.D. Tex. 2021)
Memorandum and Order by U.S. District Judge Ellison

VLSI Technology, LLC v. Intel Corp. (W.D. Texas 2021)

By Michael Borella --

There is an undercurrent in patent law these days that litigation favors the defendant.  Rather than contending infringement of a few claims of one patent, plaintiffs are now advised to assert multiple claims across several patents.  After 35 U.S.C. § 101 challenges, IPR filings, and summary judgment motions, plaintiffs are lucky if they are left with a few claims of one patent to bring to trial.  Analogies have been made that patent portfolios are like Swiss cheese.

But every so often, a patentee wins big, giving the viability of patent assertion campaigns a much-needed shot in the arm.

To that point, patent holder VLSI has won a whopping $2.175 billion jury verdict in the Western District of Texas.  VLSI is the owner of U.S. Patent Nos. 7,523,373 and 7,725,759.  Claim 1 of the '373 patent involves determining the minimum operating voltage of a memory and storing this value in non-volatile memory.  Two voltage sources are provided, and the second is selected to operate the memory if the first is below the minimum value.  Claim 14 of the '759 patent involves a programmable clock controller that can receive a request from a first device coupled to a variable clock frequency bus.  The controller then changes the frequency of a high-speed clock that is used to control the clock frequency of a second device coupled to the bus as well as the bus itself.  Both patents purport to reduce the power consumption of chips.

The jury found that Intel literally infringed claims 1, 5, 6, 9, and 11 of the '373 patent, and infringed claims 14, 17, 18, and 24 of the '759 patent under the doctrine of equivalents.  The jury also found that this infringement was not willful and that Intel had failed to establish anticipation of '759 patent (the validity of the '373 patent was apparently not at issue).

All said, the jury found Intel on the hook for $1.5 billion due to its infringement of the '373 patent and $675 million for its infringement of the '759 patent.  The main justification for damages of this magnitude is that Intel has sold billions of devices infringing the patents.

VLSI is a non-practicing entity, which Intel attempted to use against it at trial.  These efforts fell on deaf ears, but along with the 10-figure sum is likely to drive the ongoing "patent troll" narrative.

This is the second largest patent infringement verdict ever, and it will be the largest if it holds.  A $2.5 billion award to Idenix Pharmaceuticals in 2016 was overturned on invalidity grounds.  Here, an Intel appeal is inevitable, so VLSI will not be counting its money any time soon.

Personalized Media Communications, LLC v. Apple, Inc. (E.D. Tex. 2021)

Signal Processing Claims for Decrypting Encrypted Information Found Patent Eligible

By James Korenchan --

Last week, the U.S. District Court for the Eastern District of Texas, Marshall Division ruled that Defendant Apple, Inc. (hereinafter "Apple") failed to show that claims related to signal processing are patent ineligible under 35 U.S.C. § 101.

Plaintiff Personalized Media Communications, LLC (hereinafter "PMC") asserted that Apple infringed PMC's U.S. Patent. No. 8,191,091 (the '091 patent).  Apple had moved to dismiss all claims of the '091 patent as directed to ineligible subject matter.  The Court denied this motion to dismiss, finding that the '091 patent claims to be patent-eligible.  Apple then moved for summary judgement that all the claims of the '091 patent are invalid under § 101.  (Apple's motion also moved for relief under § 101 with respect to PMC's U.S. Patent Nos. 8,559,635 and 7,752,649, but only the '091 patent was addressed by the Court in the present decision due to it being the only patent set for trial at the time.)

The '091 patent includes four independent claims, including claim 13, which Apple asserted as being representative of all of the claims of the '091 patent.  The Court's decision thus addressed only claim 13.

Claim 13 is as follows:

13.  A method of decrypting programming at a receiver station, said method comprising the steps of:
    receiving an encrypted digital information transmission including encrypted information;
    detecting in said encrypted digital information transmission the presence of an instruct-to-enable signal;
    passing said instruct-to-enable signal to a processor;
    determining a fashion in which said receiver station locates a first decryption key by processing said instruct-to-enable signal;
    locating said first decryption key based on said step of determining;
    decrypting said encrypted information using said first decryption key; and
    outputting said programming based on said step of decrypting.

The '091 patent generally aims to provide an integrated multimedia system in which a "receiver station" can, among other things, combine various types of programming (e.g., television, radio, computer communications), generate user-specific information related to such programming, identify and block those who pirate programming, and -- in the case of the invention of claim 13 -- identify, and then decrypt, programming and instruction signals that are encrypted.

The Court began its analysis by determining whether claim 13 as a whole is directed to an abstract idea.  In its motion for summary judgement and in the previous motion to dismiss, Apple argued that the '091 patent is directed to the abstract idea of "using an instruct-to-enable signal to decrypt (convert from unintelligible to intelligible) information," and asserted that claim 13 claim "focuses on the abstract idea of decrypting encrypted information, rather than the physical system or the specific software that processes and decrypts the information."  Apple argued that this alleged abstract idea is akin to the "manipulation of data" and other abstract ideas that the Federal Circuit found to be patent ineligible in the likes of Intellectual Ventures I LLC v. Symantec Corp., 838 F.3d 1307 (Fed. Cir. 2016), and Digitech Image Techs., LLC v. Elecs. For Imaging, Inc., 758 F.3d 1344, 1351 (Fed. Cir. 2014).  Additionally, Apple argued that all but the decrypting and outputting steps were known in the art before the priority date of the '091 patent.

Apple also noted that the Federal Circuit previously affirmed invalidity of other PMC patents that are "closely related" to the '091 patent under § 101.  Lastly, Apple cited to a deposition of a named inventor in an attempt to demonstrate that the concepts of encryption and decryption were well-known before the '091 patent and fail to render the claims eligible.

In response to Apple's motion to dismiss, the Court had concluded that that the claims of the '091 patent are directed to methods of using an instruct-to-enable signal included in digital information to determine a fashion in which a station locates a decryption key that can decrypt encrypted information.  The Court had also concluded that claim 13 "describes an improvement to the delivery of 'instruct-to-enable signals' and a technical way to decrypt transmitted information.  In support of this improvement, the Court cited to the specification of the '091 patent:

[T]he '091 patent says that transmitting the "instruct-to-enable signal" in the "information transmission" improves the reliability of the signal's delivery.  The patent states the improved delivery process increases the number of functions the "instruct-to-enable signal" can control because the signal can "occur at precise times in programming and can synchronize the operation of receiver station apparatus to the timing of programming transmission."  Second, the claim requires a "receiver station" that is able to "locate[] a first decryption key" by processing the "instruct-to-enable signal."  The specification shows that decrypting "digital programming" "based on" the "control signal" can be a technical solution for causing a receiving device to decrypt a transmission.  [Citations omitted.]

Here, PMC indicated that it agreed with the Court's previous analysis, and the Court indicated that Apple provided no contrary evidence.

The Court nevertheless proceeded with its § 101 analysis, referring yet again to its previous finding that, even if the claims were directed to an abstract idea, additional elements in the claims would transform them into patent-eligible applications of that idea:

Claim 13 of the '091 Patent is a patent-eligible application at least because of its arrangement of steps.  "[A]n inventive concept can be found in the nonconventional and non-generic arrangement of known, conventional pieces."  Bascom Glob. Internet Servs. v. AT&T Mobility LLC, Case No. 2015-1763, 2016 WL 3514158, at *6 (Fed. Cir. Jun. 27, 2016).  Although some of the pieces in the '091 Patent are perhaps known and conventional—such as encryption and decryption—the '091 Patent arranges them in a way that is sufficient to confer an inventive concept, including "determining a fashion in which [a] receiver station locates a first decryption key by processing [an] instruct-to-enable signal" and "locating said first decryption key based on said step of determining."  [Citations omitted.]

The Court thus found that the '091 patent is directed to patent eligible subject matter.

Personalized Media Communications, LLC v. Apple, Inc. (E.D. Tex. 2021)
Report & Recommendation by Magistrate Judge Payne