1

Patent Year 2011 in Review

Edward D. ManzoNovember 4, 2011

© 2011

2

New Developments

• Developments re patent eligibility–Subject matter eligibility §101: Research

Corp., Prometheus, Myriad, Hulu, CyberSource, Classen Fed.Cir.

• Developments re proving infringement– Inducement §271(b): Global-Tech, S.Ct.

3

New Developments, ctd.• Developments re defenses

–Standard of proof §282: i4i, S.Ct.– Inequit. conduct-Therasense, Fed.Cir. en

banc–On sale §102(b)-August v. Camtek, Fed.Cir.

• Developments re remedies–Damages §284 – Uniloc, Fed.Cir.– Injunctions – Tivo, Fed.Cir. en banc

• Developments re patent statute --America Invents Act (Congress)

4

Future Developments

• Supreme Court• Federal Circuit en banc

5

Developments re Patent Eligibility

Patent Subject Matter Eligibility - Section 101

Developments

6

Research Corp. 12-8-10• Research Corp. v. Microsoft, 627 F.3d

859 (Fed. Cir. 12-8-10) (Rader, Newman, Plager)

• subject matter is a process for rendering a halftone image.

• A “process” qualifies under §§101, 100. • Proceed next to examine the 3 S.Ct.

exceptions.• Issue is abstractness.

7

Research Corp.• No rigid formula for abstractness• A claim is abstract when it

“exhibit[s] itself so manifestly as to override the broad statutory categories of eligible subject matter and the statutory context that directs primary attention on the patentability criteria of the rest of the Patent Act.”

8

Research Corp. • Nothing is abstract in “rendering a

halftone image of a digital image by comparing, pixel by pixel, the digital image against a blue noise mask.”

• “The invention presents functional and palpable applications in the field of computer technology.”

• §101 categories are only a “coarse eligibility filter.” 627 F.3d at 869.

9

Prometheus 12-17-10Prometheus Labs v. Mayo, 628 F.3d 1347

(Fed. Cir. 12-17-10), cert. granted(2010) (Rader, Lourie, Bryson)

• On remand from S.Ct. for reconsideration in light of Bilski

• Claims are not for a law of nature but instead to a particular application of naturally occurring correlations

10

PrometheusRepresentative Claim 1 ('623 patent):1. A method of optimizing therapeutic

efficacy for treatment of … [a] disorder, comprising:

• (a) administering a drug [containing a substance]…; and

• (b) determining the level of [the substance] in said subject having said immune-mediated gastrointestinal disorder– [wherein a level below A indicates need to

increase the drug and a level above B indicates need to decrease the drug]

11

Prometheus, ctd.• application of a law of nature or math-

ematical formula to a known structure or process may be patent-eligible.

• This claim does not preempt all uses• Does not encompass laws of nature• Methods of treatment are always

transformative when one of a defined group of drugs is administered to the body to ameliorate the effects of an undesired condition.

12

Myriad 7-29-11• Ass’n for Molecular Pathology v. USPTO,

__ F.3d __, 2011 WL 3211513 (Lourie, Bryson, Moore)

• patent-eligible: (1) composition claims to isolated DNAs, (2) method for screening potential cancer therapuetics via changes in cell growth rates

• Ineligible: method claims to comparing or analyzing gene sequences

13

Myriad• Test re composition & products of nature

turns on whether there is a change in the claimed composition’s identity compared to what exists in nature.

• Are the characteristics similar; or are they “markedly different” or “distinctive?”

• These molecules are markedly different and have distinctive chemical identity and nature from those found in nature.

14

Myriad• Distinctive chemical form:

–Free-standing, cleaved from the molecule by having its covalent bonds severed.

• Not a purified DNA but a manipulated product that is markedly different

• These do not exist in nature.• The govt’s “visualization” approach does

not cleave and isolate the particular DNA.

15

Myriad• Method claims for comparing: ineligible-

claim only abstract mental processes.• do not recite isolating or cleaving steps.• Different from Prometheus, where the

“determining” step required a transformation.–Was not just insignificant extra-solution

activity but instead was central to the claims.

16

Myriad• Method claims for screening• Involve growing host cells transformed

with an altered gene in the presence or absence of a potential cancer therapeutic, plus other steps.

• “growing” is inherently transformative.• The “determining” part of the claim

involves physical manipulation of cells.• These are central to the process.

17

Myriad• Method for screening claim is not

so “manifestly abstract” as to claim only a scientific principle.

• J. Moore has separate opinion concurring in part.

• J. Bryson dissents in part: says the gene fragment claims are not patent-eligible.

18

CyberSource 8-16-11CyberSource v. Retail Decns., __F.3d__,

2011 WL 3584472 (Fed.Cir. 8-16-11) (Bryson, Dyk, Prost)

• held method claim and Beauregardclaim non-statutory.

19

CyberSource-method claim

3. A method for verifying the validity of a credit card transaction over the Internet comprising the steps of:

a) obtaining information about other transactions ***;

b) constructing a map of credit card numbers based upon the other transactions and;

c) utilizing the map of credit card numbers to determine if the credit card transaction is valid.

20

CyberSourceSyllogism by Fed. Cir.:•Gottschalk v. Benson (1972) says mentally-performable methods are unpatentable abstract ideas.•All 3 method steps here can be performed in the human mind.•Therefore, this claim is for an abstract idea and is not patent-eligible.

21

CyberSource-Beauregard claim

• 2. A computer readable medium containing program instructions for …

• Not enough that this claim is directed to a “manufacture”

• Per In re Abele (CCPA 1982), we “look to the underlying invention for patent-eligibility purposes.”

22

CyberSource• Per Abele, an invention’s basic character

is not changed by claiming only its performance by computers or by claiming program instructions on a medium.

• Caveat by the Court: this is “entirely unlike” cases where a computer is required to perform the claimed method.

• could perform this method entirely in the human mind.

23

Classen v. Biogen 8-31-11• __F.3d__, 2011 WL 3835409 (Rader,

Newman, Moore) (2-1 dec’n.)• 3 patents re determining a schedule for

immunizing patients.• representative claim (2 patents):

method of immunizing that (I) screens immunization schedules, by identifying 2 groups…and comparing effectiveness of the schedules; and (II) immunizes per the lower risk schedule.

24

Classen v. Biogen• Having mental steps is not fatal –• consider claims as a whole.• No definition of “abstract” in Bilski.• Research Corp. test is “so manifestly

as to override …”• Physical step of immunization on the

determined schedule makes the claims of the 1st two patents directed to a specific, tangible application.

25

Classen v. Biogen• 3rd patent claims the idea of

comparing known immunization results that are found in scientific literature, w/o requiring use of the information for immunizing. – just reviewing and comparing published

info re effects of immunization schedules in 2 groups (treated vs. control).

• Claims do not put knowledge to practical use.

26

Classen v. Biogen• 3rd patent is directed to abstract

principle that variation in immunization schedules may have consequences for certain diseases.

• 3rd pat. claims not patent eligible.• Rader, C.J. concurs; Moore, J. dissents.

27

Ultramercial v. Hulu 9-15-11__F.3d __, 2011 WL 4090761 (Fed. Cir.

9-15-11) (Rader, Lourie, O’Malley)• Claims to a method for distributing

copyrighted products over the Internet where:–consumer receives a copyrighted product

for free – in exchange for viewing an advertisement, –advertiser pays for the copyrighted content.

28

Ultramercial v. Hulu• Fed. Cir.: the claims are eligible under

the “coarse gauge” rubric.• Congress intends wide scope, and

§101 is merely a threshold check.• Look to the “so manifest” test from

Research Corp., Id. at *4.

29

Ultramercial v. Hulu• Inventions with specific applns. or

improvements to technologies in the marketplace are not likely to be abstract enough to fail this test. Id.

• Agree that the mere idea of using advertising as a form of currency is abstract. However …

• This patent discloses a practical application of this idea.

30

Ultramercial v. Hulu• Claims a particular method for

monetizing copyrighted products. • Many recited steps require intricate and

complex computer programming.• Some steps require specific appln to the

Internet and a “cyber-market environment.”

• Involves an extensive computer interface.

31

Developments re Proving Infringement

Global-Tech Appliances, Inc. v. SEB S.A.,

131 S.Ct. 2060 (2011)

32

Global-Tech: Case History• Pentalpha obtained an SEB fryer in Asia

w/o U.S. patent markings and copied it.• P obtained a favorable right-to-use atty

opinion: –P did not tell the atty it had copied;–atty did not locate SEB’s US patent.

• SEB sued and settled with Sunbeam, P’s U.S. customer.

• After that, P continued to sell the copied fryers to others.

33

Global-Tech: Case History• SEB sued P for active inducement under

35 U.S.C. §271(b).– “Whoever actively induces infringement of

a patent shall be liable as an infringer.”

• P argued that w/o knowledge of SEB’spatent, P could not be an active inducer.

• jury found infringement.• DCt denied motions for JNOV.• Fed. Cir. affirmed on basis of P’s

deliberate disregard.

34

Global-Tech- IssuesIssues at Supreme Court: •Is more than deliberate indifference to a known risk that the induced acts may violate patent enough to show active inducement under §271(b)? •Is actual knowledge of the patent required?

35

Global-Tech - Opinion• S.Ct. opinion by J. Alito, 5-31-11:• “actively” calls for some intent• Aro II (S.Ct. 1964) held a violator must

know that his product was bothpatented and infringing).

• S.Ct. now rules:–“… we now hold that induced

infringement under §271(b) requires knowledge that the induced acts constitute patent infringement.”

36

Global-Tech - Opinion• No remand. Judgment sustained by

doctrine of willful blindness.• “… a willfully blind defendant … takes

deliberate actions to avoid confirming a high probability of wrongdoing and who can almost be said to have actually known the critical facts.”

• S.Ct. affirms: jury could have found that P willfully blinded itself to infringing nature of its sales.

37

Global-Tech - Opinion• Not just recklessness

–defendant merely knows of a substantial and unjustified risk of wrongdoing.

• Not just deliberate indifference:–Could find knowledge when there is merely a

known risk that the acts are infringing.–does not require active efforts to avoid

knowing about the infringing nature of the activities.

• Dissent by J. Kennedy: remand so Fed.Cir. can decide in 1st instance.

38

Developments re Patent Defenses

Burden of proof - i4iInequitable Conduct – Therasense

On sale bar – August v. Camtek

39

Microsoft v. i4i• Microsoft v. i4i Ltd. Partnership, 131

S.Ct. 2238 (2011)• June 9, 2011 opinion by J. Sotomayor.• The burden of proof for invalidity

defenses in court remains “clear and convincing evidence.”

• §282 does not state explicitly that the standard is “clear and convincing.”

40

Microsoft v. i4i

• Long history of S.Ct. and Fed. Cir. precedent says the standard of proof is “clear and convincing.”

• Specific issue here concerned evidence that never was before the USPTO–Concerns an on-sale bar issue.

41

Microsoft v. i4i• True that in KSR v. Teleflex, S.Ct. said

that in these circumstances the rationale underlying the presumption seems much diminished.

• However, the issue is whether Congress has specified a different std. of proof.

• Nothing in §282 suggests that Congress meant to depart from the standard applied until then in the cases.

42

Microsoft v. i4i• If the USPTO did not have all the

material facts before it, its judgment may lose significant force. Id. at 2251.

• Challenger’s clear + convincing burden may be easier to sustain.

• Jury instruction on new evidence, if requested, usually should be given.

• Jury can be instructed that PTO had no opportunity to evaluate some evidence before granting patent.

43

Microsoft v. i4i• Breyer, Justice, concurring opinion:

–This goes to facts, not questions of law.–Courts can help draw the line by using,

e.g., appropriate instructions and/or interrogatories or special verdicts.

44

Therasense v. Becton, Dickinson

• 649 F.3d 1276 (Fed. Cir. 2011) (en banc)• Opinion by C.J. Rader (5-25-11).• D.Ct. -- patent unenforceable:

–patentee failed to disclose briefs it had filed at EPO re the meaning of a reference

–Contained different statements re the meaning of the same reference

• Fed.Cir. panel aff’d, J. Linn dissenting.• Rehearing en banc

45

Therasense• Historical basis of inequitable conduct is 3

S.Ct. cases which involved:– manufacture and suppression of evidence– a corrupt transaction between a patentee and

a prior user– a fabricated article by an expert in the field– perjury.

• “particularly egregious misconduct”• Deliberately planned and carefully executed

schemes to defraud the PTO and courts.

46

Therasense• Held: must prove the patentee

acted with specific intent to deceive the PTO.

• Gross negligence is not enough to prove “intent.”

• Need clear and convincing evidence:–That the applicant knew of the reference–Knew it was material–Made a deliberate decision to withhold it.

47

Therasense• Intent and materiality are separate

requirements • Both must be proven.• no “sliding scale” approach• Cannot infer intent solely from

materiality, nor vice versa• D.Ct. must weigh the evidence of

intent to deceive independent of its analysis of materiality.

48

TherasenseProof of knowledge of a reference, that applicant should have known of materiality,

and decision not to submit it to the PTO

•Does not prove specific intent to deceive.

49

Therasense• Proof of intent:

– can be inferred from indirect and circumstantial evidence.

–BUT, to meet “clear and convincing”standard, specific intent to deceive must be the “single most reasonable inference able to be drawn from the evidence.”

–The evidence must require a finding of deceitful intent in light of all circumstances.

– If there are multiple reasonable inferences, intent to deceive cannot be found.

50

Therasense• Evidence of good faith

– the challenger has the burden of proof, not the patentee.

–Patentee “need not” offer any good faith explanation unless the challenger proves a threshold level of intent to deceive by clear, convincing evidence.

–Absence of a good faith explanation for withholding a material reference does not by itself prove intent to deceive.

51

Therasense• Test for materiality is “but-for” materiality

– I.e., the PTO would not have allowed a claim if it had known of the undisclosed prior art.

• Prove by preponderance of evidence.• broadest reasonable claim construction.• Art making a claim invalid is material.• Not vice versa: even if a D.Ct. does not

find a claim invalid under the clear, convincing standard, the art may be material under the PTO’s different evidentiary standard.

52

Therasense• Court does not change the penalty of

rendering the whole patent unenforceable.

• BUT, should not strike down a whole patent where the patentee “committed only minor missteps or acted with minimal culpability.”

53

Therasense• Alternatives to “but-for” are the truly

egregious facts in S.Ct. cases striking down patents:

• Court wants to punish affirmative egregious acts w/o penalizing failure to disclose info that would not change PTO’s issuance decision.

54

Therasense• Won’t use PTO Rule 56 as materiality std.• Vacate and remand for 2 reasons:

– Re materiality, D.Ct. used Rule 56 std., not the “but-for” materiality std.

– Re intent, D.Ct. relied on absence of good faith explanation, and relied on “should have known,” not the “knowing and deliberate” std.

• On remand: decide if clear, convincing evidence shows that the 2 individuals knew of the EPO briefs, knew of their materiality, and made a conscious decision not to disclose them in order to deceive the PTO.

55

TherasenseConcurring opinion by J. O’Malley:• Would give D.Ct. flexibility to decide

a remedy appropriate to the conduct. (IPLAC urged that)

• Would affirm materiality finding under the majority’s “but-for plus”standard.

56

TherasenseDissenting opinion by J. Bryson, joined

by Gajarsa, Dyk, and Prost• Would follow PTO Rule 56 on materiality• “but for” is too narrow

–Comes close to abolishing the doctrine of inequitable conduct

–This is not a “tweak”–Fed. Cir. has repeatedly rejected “but for”

test as too restrictive.

• Would affirm.

57

August Tech.• August Tech. Corp. v. Camtek, Ltd., __

F.3d __, 2011 WL 3659357 (Fed. Cir. 8-22-11) (Dyk, Moore, O’Malley)

• §102 does not require an invention to be ready for patenting at time an offer for sale is made. Id. *8 and n.5.

• Pfaff says not prior art unless invention ready for patenting before critical date.

• “… an invention cannot be offered for sale until its conception date.” Id.

58

Developments re Remedies

59

Uniloc – 25% rule• Uniloc USA, Inc. v. Microsoft Corp.,

632 F.3d 1292 (Fed.Cir., 3-22-11) (Rader, Linn, Moore)

• Jury found that Microsoft infringed. • Microsoft filed motion in limine to

exclude testimony by Uniloc’sdamages expert because it relied in part on a 25% rule of thumb.

60

Uniloc – 25% rule• Uniloc’s expert began with applying a

25% rule of thumb under which 25% of the profit is designated for the patent owner, using this as a baseline rate.

• Then he adjusted the baseline using Georgia-Pacific factors.

• He said that courts had accepted 25% rule as an appropriate methodology.

61

Uniloc – 25% rule• S.Ct. law from Kumho Tire and Daubert

requires a judge to ensure that expert testimony is “based on a firm scientific or technical grounding.” Id. at 1315.

• The 25% rule of thumb “is a fundamentally flawed tool for determining a baseline royalty rate in a hypothetical negotiation.”

62

Uniloc – 25% rule• 25% rule fails to satisfy basic req’mt.

that rates used in prior licenses must bear a relationship to the particular hypothetical negotiation.

• Garbage-in; garbage-out:–No matter that this is just a starting point.–Beginning at wrong place leads to a

fundamentally flawed outcome.

63

Uniloc – 25% rule• No testimony here that the parties

actually began negotiations with a 25/75% split or that the contribution of this feature to WORD or OFFICE required such a split.

• No relation to facts of the case.• MS entitled to a new trial re damages

64

TiVo- Enforcing Injunctions• TiVo v. Echostar, 646 F.3d 869, en

banc. Opinion by Lourie, J. (4-20-11)• TiVo won an injunction against Echo.• Echo had appealed issues of claim

construction + infringement. Did not appeal from the form of injunction.

• listed “Infringing Products” by model nos.

65

TiVo- The Injunction• enjoined Echo from making, etc. the

Infringing Products “and all other products that are only colorably different therefrom in the context of the Infringed Claims...”

• ordered Echo to “disable the DVR functionality ... in … Infringing Products that have been placed with an end user or subscriber ...”

66

TiVo• Following Fed. Cir. decision on appeal,

D.Ct. held Echo in contempt of both the infringement provision and the disablement provision.

• On appeal, Fed. Cir.– changed the law and vacated finding re the

“infringement” contempt; and–affirmed the “disablement” contempt.

67

TiVoRe contempt generally:• good faith is not a defense • lack of intent is not a defense.• But these can be considered in

assessing penalties.

68

TiVo• Prior law of KSM v. Jones (Fed. Cir. 1985)

called for two steps:– 1. a threshold inquiry on whether a contempt

proceeding is the appropriate setting to judge infringement by a redesigned product.

– If more than colorable differences exist, i.e., substantial open issues re infringement, then contempt is not appropriate, need a new trial.

– 2. if threshold is met, then consider whether redesigned product continues to infringe.

• This causes confusion; now overruled.

69

TiVo• No further req’mt of a separate

determination of whether contempt proceedings are proper.

• But courts should continue to employ a “more than colorable differences” standard.

70

TiVo

• contempt is inappropriate if differences from old product are significant

• means the new product as a whole is deemed more than colorably different from the one found earlier to infringe.

71

TiVo• Court reviews factors that can be

considered. –See written materials for listing.

• Patentee’s burden to prove violation by clear, convincing evidence. –burden applies to both infringement and

colorable differences.

• Unanimous Court so far.

72

TiVo• 7-5 majority on the following:• Remand for D.Ct. to consider the

modified devices. • As to the Disablement Provision, Fed.

Cir. affirms contempt on basis that Echo waived its arguments re vagueness and overbreadth. –Cannot collaterally attack it now. –They did not appeal it before.

73

TiVo• Dissent by Dyk, joined by Rader,

Gajarsa, Linn, & Prost• Disagree that the Injunction Order is

beyond review. • Always been the law that one cannot be

held in contempt of an unclear order.• Majority cites law that is not current or

inapposite.• Would not give damages and would not

affirm the “disablement” contempt.

74

Developments re the Patent Statute

America Invents Act2011

75

America Invents Act• Being covered in this afternoon’s

session re “In-House Perspectives on Patent Law Reform.”

• Several important changes to the patent statute.

• Some changes are effective already, others occur on 9-16-12, and others take effect on 3-16-13.

76

AIA – General Reference

• See Manzo et al., Patent Reform 2011 The Leahy-Smith America Invents Act: Commentary and Analysis (Thomson Reuters/West 2011).

77

Future Developments

• Supreme Court granted cert. in:– Prometheus (§101)– Caraco v. Novo Nordisk(counterclaim provision of Hatch-Waxman Act)

– Kappos v. Hyatt (new evidence in 35 USC 145 action)

78

Future Developments-2

• Federal Circuit en banc rehearings:–Akamai v. Limelight (divided infringement)

–McKesson Tech. v. Epic Sys. (divided infringement inducement or contrib. infr.)

79

Thank you!

• Edward D. ManzoPartnerHusch Blackwell LLPChicago, IL312-526-1535www.huschblackwell.comEdward.Manzo@huschblackwell.com