Monday, 27 April 2015

Federal Circuit’s Initial Reaction to Teva: “Clearly Erroneous” Review Standard Not Implicated In Most Cases

In the nearly three months since the U.S. Supreme Court ruled that subsidiary factual findings in claim construction proceedings must be reviewed for clear error, the U.S. Court of Appeals for the Federal Circuit has decided a handful of cases requiring it to review claim construction rulings by a district court or the U.S. Patent and Trademark Office. The Federal Circuit has declined to extend deference in any of those cases, and by all indications it is unlikely to do so in many future cases.

Prior to January 20, 2015, the Federal Circuit reviewed claim construction rulings – including subsidiary factual findings – de novo, without affording any deference to the findings or reasoning of the lower court. See Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448 (Fed. Cir. 1998) (en banc). In Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc., ___ U.S. ___ (Jan. 20, 2015), the Supreme Court held that district court factual findings based on extrinsic evidence are subject to “clearly erroneous” review under Fed. R. Civ. P. 52(a)(6). This more deferential standard applies even if the fact finding is “nearly dispositive” of the ultimate legal question of claim interpretation.

The Teva Court indicated that in reviewing claim construction rulings, the Federal Circuit should review the ultimate ruling on claim construction de novo. If the district court only considered intrinsic evidence (the claim language, specification, and prosecution history), then the entire question of claim construction is subject to de novo review. If, however, the district court ventured into extrinsic evidence (such as expert or inventor testimony), then those specific factual findings are entitled to deference and must be reviewed for clear error. Despite that deference, however, the Federal Circuit still reviews the ultimate claim construction ruling de novo.

In practice, Teva’s effect on Federal Circuit review of claim construction rulings may prove to be limited. The appeals court has held that extrinsic evidence – the only type of finding now afforded any deference – is much less significant in the claim construction analysis than intrinsic evidence. See Phillips v. AWH Corp., 415 F.3d 1303, 1318 (Fed. Cir. 2005) (“We have viewed extrinsic evidence in general as less reliable than the patent and its prosecution history in determining how to read claim terms”). In fact, the Federal Circuit has rarely, if ever, expressly relied on extrinsic evidence when interpreting a claim. It is not likely to start relying on extrinsic evidence following Teva. A review of Federal Circuit cases since Teva illustrates the decision’s limited impact to date.

PTAB Ex Parte Proceedings

The Federal Circuit has addressed Teva in two cases arising from ex parte appeal proceedings before the USPTO Patent Trial and Appeal Board. In In re Imes, 778 F.3d 1250 (Fed. Cir. Jan. 29, 2015), the Federal Circuit reversed a PTAB ruling cancelling claims in a reexamination. The court rejected the USPTO’s construction of the term “wireless” based on an express and unambiguous definition of the term provided in the specification. As a result, the court noted that, “Nothing in this case implicates the deference to fact findings contemplated by the recent decision in Teva[.]” 778 F.3d at 1252 n.1.

In a more recent case involving an ex parte appeal from a final rejection, the Federal Circuit also stated that its review of the USPTO’s claim interpretation did not implicate the Teva standard. In re Bookstaff, No. 2014–1463 (Mar 26, 2015). The court reversed the USPTO’s construction of the term “data that is indicative of a gratuity to be charged” based on the specification and disclosed embodiments, without considering any extrinsic evidence.

PTAB AIA Proceedings

The Federal Circuit addressed the standard for reviewing claim interpretation during an AIA post-grant proceeding in one case, In re Cuozzo Speed Technologies, LLC, 778 F.3d 1271 (Fed. Cir. 2015). After holding that the Teva decision is applicable to PTAB trial appeals, the Federal Circuit proceeded to exercise de novo review. The PTAB based its interpretation of the challenged claim on the patent specification and prosecution history. As a result, the Federal Circuit noted that, “Because there is no issue here as to extrinsic evidence, we review the claim construction de novo.”

District Court Actions

In two appeals from district court judgments, the Federal Circuit also declined to apply Teva’s clearly erroneous standard. In Fenner Investments, Ltd. v. Cellco Partnership, 778 F.3d 1320 (Fed. Cir. 2015), the court noted the Teva standard, but affirmed the district court’s construction of the term “personal identification number” based on the specification and statements made in the prosecution history.

In Enzo Biochem Inc. v. Applera Corp., ___ F.3d ___, (Fed. Cir. Mar 16, 2015), the court considered an appeal from a jury verdict of infringement. The district court ruled that the asserted claim covered both direct and indirect modes of detecting nucleotide probes, based in part on expert testimony that a figure in the patent specification disclosed an example of direct detection. On appeal, the Federal Circuit reversed in a 2-1 decision, relying on claim language and statements in the specification. The majority considered arguments based on the expert testimony to be waived on appeal, but noted that, “Nevertheless, even if we were to consider the district court’s finding, which would be subject to review for clear error under Teva, this sole factual finding does not override our analysis of the totality of the specification, which clearly indicates that the purpose of this invention was directed towards indirect detection, not direct detection.” In a dissent, Judge Newman argued that the district court’s construction was based on specific findings, including those based on expert testimony, and that, “These factual findings are entitled to deference, in accordance with the Court’s instruction in Teva[.]” She accused the majority of “ignoring the testimony and the district court’s findings and the jury verdict based on the evidence at trial.”

In Teva, the Court established that, when construing claims, appropriate deference must be given to the findings of the district court. The district court received some conflicting testimony, along with concessions on cross-examination, from which the court concluded that “at least one component” may include “the whole signaling moiety.” My colleagues show error of neither fact nor law in the court’s findings and conclusions.


 It is difficult to predict the long-term impart of Teva based on the limited number of Federal Circuit decisions applying it. The cases suggest, however, that the Federal Circuit likely will continue to apply de novo review when it resolves claim construction issues based on intrinsic evidence. In addition to situations where the USPTO or district court only considered intrinsic evidence, this approach may extend to situations in which courts considered extrinsic evidence, including expert testimony, but the Federal Circuit views the evidence to be insubstantial to the claim construction analysis.

Friday, 24 April 2015

Data Shows Spike In Patent Attorney Fee Motions And Awards After Octane

Prior to last year’s U.S. Supreme Court decisions in Octane Fitness LLC v. Icon Health & Fitness, Inc, 134 S. Ct. 1749 (2014) and Highmark, Inc. v. Allcare Health Mgmt. Sys., 134 S. Ct. 1744 (2014), district courts in the United States awarded attorney fees in patent cases only in extreme circumstances. In Octane, however, the Court lowered the bar for fee awards. Furthermore, in Highmark, the Court made it clear that district court judges have broad discretion in awarding fees for litigation misconduct.

The Octane Court focused on the plain meaning on 35 U.S.C. § 285, which simply states that, “The court in exceptional cases may award reasonable attorney fees to the prevailing party.” The Court noted that, “This text is patently clear. It imposes one and only one constraint on district courts' discretion to award attorney's fees in patent litigation: The power is reserved for ‘exceptional’ cases.” 134 S. Ct. at 1755-56. In turn, the Court held that an “exceptional” case within the statute is “simply one that stands out from others with respect to the substantive strength of a party's litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated. District courts may determine whether a case is ‘exceptional’ in the case-by-case exercise of their discretion, considering the totality of the circumstances.” Id. at 1756.

The combination of Octane and Highmark has had a significant effect on attorney fee awards in patent cases. According to a recent report by the Federal Circuit Bar Association submitted to Congress earlier this year, motions for fees filed by accused infringers were granted 36 percent of the time following Octane, compared to only 13 percent of the time in the one year prior to the decision. In addition, Octane apparently has resulted in a sharp increase in the number of fee motions. In the one year prior to Octane, accused infringers filed an average of approximately four fee motions per month. That rate increased to over seven motions per month in the months following the decision.

The new Octane standard’s effect on attorney fee awards is illustrated by a recent Federal Circuit decision, Olpus Technologies, Ltd. v. Vizio, Inc., Case No. 2014-1297 (Fed. Cir. Apr. 10, 2015). In Olpus, the district court granted summary judgment of noninfringement in favor of the defendant-alleged infringer. The defendant then moved for an award of attorney fees under § 285, 28 U.S.C. § 1927, and the district court’s inherent equitable powers, citing a long pattern of vexatious conduct by the patentee prior to and during the litigation. The district court reviewed the parties’ conduct and found that, among other things, the patentee had engaged in an “abusive discovery strategy,” had used “inappropriate, unprofessional, and vexatious” litigation tactics, and had manipulated its expert testimony and infringement contentions so that the defendant faced “a frustrating game of Whac-A-Mole throughout the litigation.” Nonetheless, under the pre-Octane standard, the district court declined to award fees, mainly because case had “been fraught with delays and avoidance tactics to some degree on both sides” and the court could not say that the patentee’s tactics resulted in increased legal costs.

On appeal, the Federal Circuit vacated the denial of fees. After cataloging the patentee’s misconduct and expressing skepticism that those antics did not escalate the defendant’s legal fees, the appeals court remanded with instructions to apply the Octane standard:

Although the award of fees is clearly within the discretion of the district court, when, as here, a court finds litigation misconduct and that a case is exceptional, the court must articulate the reasons for its fee decision. In light of the court’s fact findings regarding the extent of harassing, unprofessional, and vexatious litigation, the change in legal standard by the Supreme Court, and the lack of sufficient basis to deny fees under § 285, we vacate and remand for the district court to consider whether and the extent to which fees are warranted.

Slip op. at 8.

The Olpus case is a clear example of circumstances where a fee award now is likely, even though the district court’s denial of fees would not have been disturbed prior to Octane. Although attorney fee awards are not available in all cases, district courts and the Federal Circuit have greater power under Octane to award them in cases involving bad conduct by either party, including vexatious litigation tactics and unfounded claims.

Monday, 20 April 2015

Purposive use of Information Modelling may be Patentable

The decision T 0049/99 relates to a patent application relating to a method for modelling a physical system in a computer. Inputs are various data describing the physical system and the output is an object-oriented model thereof.

The question arose under which conditions such kind of information modelling may contribute to the technical character of the invention and consequently be accounted for when assessing the inventive step.

Here is the catchword of the decision:
Information modelling is an intellectual activity and should be treated like any other human activity in a non-technical field, which is, as such, not an invention for the purposes of Article 52(1) EPC. Only the purposive use of information modelling in the context of a solution to a technical problem may contribute to the technical character of an invention.
While the first sentence is not very surprising, the second sentence might be a pointer to what could have been patentable if properly claimed.

The applicants/appellants had apparently argued that the link to the tangible application of power systems lends some technical character to the features. The BoA responds as follows:

The claimed invention, however, is not restricted to power systems; as expressly indicated in the description the invention may be applied to various types of systems, "large, complex systems" including manufacturing plants and other physical systems (see description, page 30, lines 10 ff.). Claim 1 uses the generic expression "physical system", which is actually a term including any real world system, even business and administrative organisations. 
In the light of the broad meaning of the expression "physical system", information modelling in terms of the first part of claim 1 has to be construed as an abstract non-technical activity using abstract constructs like objects, types, attributes, and relationships.

Eventually, a more specific definition of the purposive use would have helped to classify the feature as a technical one.

Friday, 17 April 2015

Self-sealed mailer patent comes unstuck

Everseal Stationery Products Ltd v Document Management Solutions Ltd & Others [2015] EWHC 842 (IPEC) is a decision of Judge Hacon in the Intellectual Property Enterprise Court, England and Wales, dating back to the beginning of this month.

Everseal had a patent for a product which still has some currency, even in the age of the internet: this product was a "mailer", this being a business communication which was folded, sealed by an adhesive around its periphery and sent through the terrestrial post. Claim 1 of Everseal's patent disclosed a mailer including an adhesive which self-sealed irreversibly under "finger pressure" namely pressure of 500 kPa or less. Claim 7 disclosed a mailer in which the adhesive was a natural rubber latex adhesive stabilised with ammonia.

DMS developed mailers which were referred to in the judgment as Mailer 1, Mailer 2 and Mailer 3. Everseal sued DMS for infringement of its patent; DMS counterclaimed for invalidity. The court had to decide whether (i) DMS's mailers fell within claims 1 and 7, and in particular whether DMS's adhesives sealed "irreversibly" and (ii) whether the patent was invalid for lack of novelty or inventive step over three pieces of prior art (Viking mailer, Faltin, and Johnsen).

Judge Hacon held for DMS. In his view:

* an adhesive self-sealed "irreversibly" if the recipient, receiving the mailer, could tell from both the adhesive structure and the appearance of the base material that it had previously been opened. If the fact that it had previously been opened was not betrayed by each of those criteria taken separately, the adhesive did not self-seal irreversibly when the mailer was first closed.

 * it could be assumed that anyone who had previously opened the mailer without permission would have taken some limited effort to hide the fact that he had done so.

* the seals on Mailer 1 were irreversible within that meaning; mailer 1 infringed claim 1 of the patent.

* infringement of claim 7 would have required Everseal to show that the adhesive used for Mailer 1 was a natural rubber adhesive stabilised with ammonia, but there was no evidence to that effect.

* experiments carried out by DMS did not enable the court to reach any conclusion as to whether opening Mailers 2 or 3 resulted in the disruption in the mailer's base material so as to demonstrate that their adhesives sealed irreversibly, and Everseal had chosen not to conduct its own experiments.

* the burden rested on Everseal to prove infringement, but it had not done so regarding Mailers 2 and 3.

* turning now to the counterclaim, claim 1 of the patent lacked novelty over the Viking mailer which had an irreversible seal and had self-sealed under finger pressure. Claim 7 did not however lack novelty over the Viking mailer.

* where lack of novelty turned on whether an alleged prior use had particular features, it was sufficient to adduce evidence which proved, on the balance of probabilities, facts establishing that the prior use had those features. In contrast, where the court was invited to infer that prior use had one or more features on the basis of primary facts proved, the invention would lack novelty only if the inference was inevitable.  Here the evidence -- that it was likely that the adhesive in the Viking mailer was a natural rubber latex stabilised with ammonia -- was not enough to establish lack of novelty regarding claim 7.

* the patent did not lack novelty over Faltin or Johnsen, since neither of them explicitly disclosed an irreversible seal.

* Claim 1 did however lack inventive step over Faltin and Johnsen, and over the Viking mailer if it did not anticipate the invention. Everseal had suggested no technical prejudice which would have deterred a skilled team, working prior to the claimed invention, from using an adhesive which self-sealed under finger pressure to create an irreversible seal.

* Claim 7 also lacked inventive step, the evidence being that a skilled person would have been expected to find a suitable formulation without difficulty.

This is a curious case, in that the litigation over this patent was commenced in the Patents County Court (PCC) in February 2010, before that court's rules were radically overhauled with effect from 1 October. The PCC then gave separate rulings on two preliminary points; the ownership of the patent was disputed; there were also a Tomlin Order, allegations of unlawful threats and two separate applications to amend the patent before the infringement action was finally heard by the IPEC.   One might be tempted to wonder whether the sequential segmenting of issues is always more efficient than trying to hear as many things as possible all in one go.

Monday, 13 April 2015

Mere Disagreement with Reasons of a Decison is not a Sufficent Ground of Appeal

The appeal in the case T 0972/13 has been held inadmissible because the grounds were considered insufficiently substantiated.

The appellant had filed grounds of appeal merely stating "We disagree with the OD [Opposition Division] in that ..... " followed by a repetition of the reasons of the decision given by the Opposition Division. No whatsoever reasons for the disagreement were given. The board concluded that the statement of the grounds of appeal did not comply with Rule 99(2) EPC because no reasons (other than plain disagreement) why the decision should be set aside were given.

After the decision reported here, the decision T 0972/13 puts further emphasizes the importance of discussing the reasons given the decision impugned in detail and not to merely re-iterate one's own arguments from the first instance or  state one's dissatisfaction with the reasons.

A further interesting point in this decision is that an order on apportionment of costs was issued, which is a fairly rare event. The appellant had indicated that it would not be represented in the oral proceedings without withdrawing its request to hold oral proceedings. This left open whether the appellant would attend to the oral proceedings without being represented by a representative or whether the appellant would not attend at all such that the defendants had to prepare and attend to the oral proceedings as a matter of due diligence. The board found that this justified an order that the appellant had to bear the costs for the defendant's preparation and attendance to the oral proceedinsg for reasons of equity (Art. 104(1) EPC).

Thursday, 9 April 2015

Plants or Plant Material are Neither Process nor Plant Variety

The Enlarged Board of Appeal has written a new chapter in the Tomato- Broccoli Saga and confirmed the narrow interpretation of Art. 53(b) EPC.

The following is a quote from the EPO-website:
In the referral cases G 2/12 and G 2/13, which were considered in consolidated proceedings, the Enlarged Board of Appeal has decided that the exclusion of essentially biological processes for the production of plants in Article 53(b) EPC does not have a negative effect on the allowability of a product claim directed to plants or plant material such as a fruit or plant parts. This applies even if the only method available at the filing date for generating the claimed plants or plant material is an essentially biological process for the production of plants, and also if the claimed product is defined in terms of such a process (product-by-process claim). In this context it is of no relevance that the protection conferred by the product claim encompasses the generation of the claimed product by means of an essentially biological process for the production of plants. Product claims or product-by-process claims directed to plants or plant material other than a plant variety thus are not excluded from patentability under Article 53(b) EPC and are allowable if they fulfil the formal and substantive requirements of the EPC (emphasis added).
The term 'plant variety' is defined in R. 26(4) EPC in the same way as in Directive 98/44/EC on the legal protection of biotechnological inventions, namely as "any plant grouping within a single botanical taxon of the lowest known rank, which grouping, irrespective of whether the conditions for the grant of a plant variety are fully met, can be:
  • (a) defined by the expression of the characteristics that results from a given genotype or combination of genotypes,
  • (b) distinguished from any other plant grouping by the expression of at least one of the said characteristics, and
  • (c) considered as a unit with regard to its suitability for being propagated unchanged.
Importantly, this definition excludes hybrid seed or plants lacking stability in some trait or generation as well as plant cells which can be nowadays cultured like bacteria and yeasts.

The full text of the decisions can be found here and here.

Tuesday, 7 April 2015

Parallel proceedings in the UK courts and the EPO: a new article

"Parallel patent proceedings between the European Patent Office and UK courts" is the title of a recent article by Paul England (Taylor Wessing) in the Journal of Intellectual Property Law & Practice (2015). The print version is not yet out but you can access it online via the JIPLP website. Subscribers to the online edition can access it as part of their subscription, while non-subscribers can purchase limited-time access from the same site.

 According to the abstract
In the European patent system, proceedings concerning patent validity can run concurrently in both the European Patent Office (EPO) and a number of national courts. In the UK, a number of cases have addressed the details of how the relationship should be managed between the courts and the EPO when such parallel proceedings are on foot.

Until recently, this had appeared to be settled by rules and guidelines that were logical, if not ideal in all their implications. However, a series of recent cases concerning the revocation and amendment of patents in the EPO have now posed difficult questions for judges at first instance and on appeal.

The solutions have required a significant shift in the UK and EPO relationship and raise awkward questions of their own about the possibility of patents being re-litigated between the same parties. This matters at another level, because the UK experience may inform the relationship between the Unified Patent Court (UPC) and the EPO in similar circumstances.