patent law developments Dec. 2010-Nov. 2011

1. Patent Year 2011 in
Review
Edward D. Manzo
November 4, 2011
© 2011
1

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.
2

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)
3

4. Future Developments
• Supreme Court
• Federal Circuit en banc
4

5. Developments re Patent
Eligibility
Patent Subject Matter
Eligibility - Section 101
Developments
5

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.
6

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.”
7

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.
8

9. Prometheus 12-17-10
Prometheus 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
9

10. Prometheus
Representative 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]
10

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.
11

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
12

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.
13

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.
14

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.
15

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.
16

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.
17

18. CyberSource 8-16-11
CyberSource v. Retail Decns., __F.3d__,
2011 WL 3584472 (Fed.Cir. 8-16-11)
(Bryson, Dyk, Prost)
• held method claim and Beauregard
claim non-statutory.
18

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.
19

20. CyberSource
Syllogism 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.
20

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.”
21

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.
22

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.
23

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.
24

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.
25

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.
26

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.
27

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.
28

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.
29

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.
30

31. Developments re
Proving Infringement
Global-Tech Appliances,
Inc. v. SEB S.A.,
131 S.Ct. 2060 (2011)
31

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.
32

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’s
patent, 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.
33

34. Global-Tech- Issues
Issues 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?
34

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 both
patented and infringing).
• S.Ct. now rules:
– “… we now hold that induced
infringement under §271(b) requires
knowledge that the induced acts
constitute patent infringement.”
35

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.
36

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.
37

38. Developments re Patent
Defenses
Burden of proof - i4i
Inequitable Conduct – Therasense
On sale bar – August v. Camtek
38

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.”
39

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.
40

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.
41

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.
42

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.
43

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
44

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.
45

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.
46

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.
47

48. Therasense
Proof 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.
48

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.
49

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.
50

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.
51

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.”
52

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.
53

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.
54

55. Therasense
Concurring 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.
55

56. Therasense
Dissenting 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.
56

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.
57

58. Developments re
Remedies
58

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’s
damages expert because it relied in
part on a 25% rule of thumb.
59

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.
60

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.”
61

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.
62

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
63

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.
64

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 ...”
65

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.
66

67. TiVo
Re contempt generally:
• good faith is not a defense
• lack of intent is not a defense.
• But these can be considered in
assessing penalties.
67

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.
68

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.
69

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.
70

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.
71

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.
72

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.
73

74. Developments re the
Patent Statute
America Invents Act
2011
74

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.
75

76. AIA – General Reference
• See Manzo et al.,
Patent Reform
2011 The Leahy-
Smith America
Invents Act:
Commentary and
Analysis (Thomson
Reuters/West
2011).
76

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)
77

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.)
78

79. Thank you!
• Edward D. Manzo
Partner
Husch Blackwell LLP
Chicago, IL
312-526-1535
www.huschblackwell.com
Edward.Manzo@huschblackwell.com
79