Why The Supreme Court and Federal Circuit Are Vying To Control The U.S. Patent System

Robin Feldman, a professor at University of California Hasting Law School, has just published an interesting paper discussing recent U.S. Supreme Court cases almost uniformly rejecting the Federal Circuit’s view on many important patent law issues. The paper, “Coming of Age for the Federal Circuit,” [LINK] will be published in an upcoming issue of The GreenBag. In a recent interview, Feldman explained her thesis:

For decades, the Federal Circuit operated with little oversight from the Supreme Court. For example, in the first 15 years [after 1982], the Supreme Court decided a total of only five cases from the Federal Circuit. That's a remarkably small number compared to cases the Supreme Court took from other circuits. In addition, other circuits have the disciplining effect of different judges, different circuits coming to different opinions and conclusions. The Federal Circuit acted alone. 

In that time, it developed a habit of relying on rules of convenience. That is, they may have reached the right result for the particular case, but they lacked a coherent logical base. With little oversight from the Supreme Court, little dialog from other circuits, it was easy for the Federal Circuit to operate in that manner.

See “Why The SupremeCourt Keeps Smacking Down America's Top Patent Court” for the full interview.

Abstract ideas and patentability: what about animating lip synchronization and facial expressions?

© Frank Hellard

Following the ruling of the US Supreme Court in Alice v CLS Bank, several courts all over the US are contributing to refining the approach to the provision of 35 USC s 101, interpreting (sometimes quite creatively) the Supreme Court's teaching. This time, it is the turn of the District Court for the Central District of California, which published its judgment in McRO Inc. (Planet Blue) v Activision Publishing Inc. et al. on Monday. The two consolidated patent infringement cases decided by Judge George H. Wu concerned the alleged infringement of McRO's US Patents No. 6,307,576 and 6,611,278, disclosing methods to animate lip synchronisation and facial expression in animated characters. The court found the patents to be invalid under s 101, holding that the claims were directed to abstract ideas and failed to disclose an 'inventive concept'.

The two patents at issue, according to their descriptions, addressed issues in animating lip synchronisation and facial expression through the use of 'weighted morph targets and time aligned phonetic transcriptions of recorded text'. To overcome the tedious work of inputting keyframe data for every different facial expression, the invention employed a set of rules that applied a stream of morph weight sets in the presence of a sequence of timed phonemes or other timed data. Essentially, by rendering this process automatic, the patents aimed to significantly improve the efficiency, in terms of costs and time, of the animating process. The alleged patent infringers, however, argued that the patents were invalid under s 101, maintaining that they merely 'set forth the previously-known animation method as a series of mathematical steps, and instruct[ed] the user to perform those steps on a computer'. Consequently, the defendants filed a motion for judgment on the pleadings based on unpatentability.

The court first reconstructed the principles and tests to be applied in the context of a s 101 analysis. It recited the teaching of Mayo Collaborative Services v Prometheus Laboratories Inc., where the Supreme Court detailed a two-step inquiry to evaluate whether an invention is an unpatentable law of nature, physical phenomenon or abstract idea. Such inquiry comprises the assessment of (i) whether the claims at issue are directed to one of the patent-ineligible concepts, and (ii) if there is any additional element that transforms the nature of the claim, by adding a meaningful 'inventive concept' to it. The judge noted, however, that the Supreme Court never fully delineated the contours of this test, using, instead, secondary considerations to corroborate its findings: 'thus [...], the two-part test for identifying an abstract idea appears to be of limited utility, while comparisons to previously adjudicated patents - or more precisely, to past cases’ characterizations of those patents - have done the heavy lifting'. Perhaps with a touch of irony, he recited the famous observation of Oliver Wendell Holmes: '[t]he life of the law has not been logic: it has been experience'.

The court then provided an interesting overview of the principle enshrined in s 101 ('patents should not "foreclose more future invention than the underlying discovery could reasonably justify"', quoting Mayo). It argued that this provision cannot be regarded as the only tool available to fine tune the balance between patent protection and follow-on innovation, but acknowledged that, according to several scholars, s 101 should be the pivotal mechanism to this aim, an opinion shared by the Supreme Court. Lower courts, therefore, 'are now left with the task of figuring out when the "two-part" test is satisfied'. The judge evaluated the possibility of using the function-way-result test, to enrich the two-step enquiry. According to this test, infringement depends upon the performance of a substantially equivalent function, 'in substantially the same way to obtain the same result' (Union Paper-Bag Mach. Co. v Murphy). The court explained that the analysis frequently focuses on the identity of the 'way' in which the patent and accused product work, as identity of function and result is easier to assess. 'Similarly', it added, 'the question in the abstract idea context is whether there are other ways to use the abstract idea in the same field': '[i]f so, the Supreme Court has expressly encouraged others to find those other ways, without being held back by patents that preempt the whole concept'. In this evaluation, care should be taken to avoid linking unpatentability to lack of inventive effort on the side of the infringer.

Assessing the defendants' argument that the claims at issue dealt with the abstract idea of rules-based lip synchronisation, the decision noted that, taken in isolation, the claims do not seem directed to an abstract idea. However, Judge Wu clarified that, when conducting the s 101 analysis , courts must factor out 'conventional activity', and consider the claims as an 'ordered combination'. Citing General Electric Co. v Wabash Appliance Corp., he noted that 'where a claim recites tangible steps, but the only new part of the claim is an abstract idea, that may constitute a claim to an abstract idea'. Applying this principle to the case in hand, he observed that the claims merely added to the prior art the use of rules, rather than artists, to set the morph weights and transitions, leaving to the user the task of providing the rules. Keeping into account the recent ruling in Alice, according to which the 'mere recitation of a generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention' (on which see, for example, the recent ruling of the Federal Circuit in buySAFE Inc. v Google Inc., commented in an earlier post), the court concluded that '[b]ecause the claim purports to cover all such rules, in light of the prior art, the claim merely states "an abstract idea while adding the words 'apply it'"'. The court also explained that the assessment of novelty should not be conflated with the analysis under s 101:

Defendants argue that a "patentee simpl[y] does not waste the time, money and effort to prosecute a patent application for an invention they casually indicate was known in the art." [...] But a § 101 defect does not mean that the invention was in the prior art. The invention here may have been novel, but the claims are directed to an abstract idea. And the patent’s casual - and honest - description of the prior art was made at a time when, under the then-prevalent interpretation of the law, such admissions were unlikely to be harmful. One unintended consequence of Alice, and perhaps of this and other decisions to come, is an incentive for patent applicants to say as little as possible about the prior art in their applications.

Plaintiff points to one Defendant’s contemporaneous characterization of Plaintiff’s system as "revolutionary." [...] This argument is unpersuasive in this context for two reasons. First, for purposes of the § 101 inquiry, which is different from the § 103 inquiry, the revolutionary nature of an abstract idea does not weigh in favor of patentability. [...] Second, there has been no showing that the cited praise relates to the claims in all their breadth, rather than to a particular implementation that is not specified by the claims. Thus, the inventor’s specific implementation of the abstract idea represented by the claim may have been of significant value beyond that of the abstract idea itself.

In light of the above mentioned reasons, Judge Wu found the claims to be unpatentable under s 101.

First study on new Canada - EU trade agreement discusses consequences of increased protection for pharmaceutical innovation

Today, the Canadian Centre for Policy Alternatives (CCPA) released a new report entitled 'Making Sense of the CETA', providing the first in depth analysis of the new Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union. On 5 August, the parties announced the successful conclusion of the negotiations, and the beginning of the phase of legal scrubbing and translations leading to final approval, but the actual text of the agreement remained secret, until it was leaked in Germany a few weeks later. CCPA's analysis discusses, in a neat 128 page long document, all the aspects of the agreement, including the provisions related to intellectual property rights. Inter alia, it also comments on the enhanced standards of protection for pharmaceutical innovation embodied in Articles 9 - 10 of the draft agreement. These provisions, which implement TRIPS-plus proposals, already attracted significant criticism during earlier stages of the negotiations; the concerns generally mirror those expressed in relation to similar provisions adopted or negotiated in other free trade agreements (e.g. UNITAID's report on the Trans-Pacific Partnership Agreement, commented in a previous post).

Article 9.2 of the draft CETA states that each party should provide a period of sui generis protection for pharmaceutical products that have received marketing approval, determining its duration in relation to the period of time elapsed between the date of the patent application and the date of the first marketing authorisation, reduced by a period of five years. The parties are free to set the maximum period of additional protection (which can only be granted once), provided it does not exceed a term of 2 to 5 years, and may reduce the period of protection in relation to any unjustified delays resulting from the inactions of the applicant. The sui generis protection covers only the pharmaceutical product that has received the marketing authorisation, and confers the same rights and obligations arising from a patent, although the parties may limit the scope of the additional protection by providing exceptions for making, using, offering for sale, selling or importing of products for the purpose of export during the period of protection. If the product is protected by more than one patent, the additional protection applies only once, but the agreement allows the patent holder to choose a single patent whose expiration date will be the starting date for the sui generis right. There is also a mechanism that essentially withdraws the protection in case of revocation or expiration of the underlying patent or of the market authorisation.

Article 9 bis briefly provides that, if any of the parties employs a 'patent linkage' mechanism to link generic marketing authorisation to the expiration of the patent protecting the brand drug, all litigants should be afforded equivalent and effective rights of appeal. CCPA explained that, in Canada, originator companies may prevent the granting of marketing approval for generic drugs by initiating a special procedure described in the Patented Medicines (Notice of Compliance) Regulations and proving the existence of a valid, non-expired patent; however, if they lose the summary proceedings, they have no right to appeal (while, in the opposite situation, generic companies can appeal the unfavourable decision).

Article 10 contains provisions on the protection of undisclosed test or other data submitted during the process of marketing approval for pharmaceutical products that use new chemical entities, requiring the parties to protect the data against disclosure, if their origination involved considerable effort. Exceptionally, the parties may allow disclosure if necessary to protect the public, or if accompanied by measures to protect the data against unfair commercial use. The draft agreement adds that (i) no one, unless authorised by the right holder, can rely on such data to support an application for marketing approval for a period of not less than six years (not from the submission of such data, but from the date of marketing approval of the application of the right holder), (ii) the parties cannot grant marketing approval to any person that relies on such data during a period of not less than eight years. Interestingly, the provision also clarifies that, beyond the regime for data protection, there shall be no limitation on the parties in relation to the implementation of accelerated marketing approval procedures based on bioequivalence and bioavailability studies.

The report of the Canadian Centre for Policy Alternatives highlighted, first of all, that Canada currently has the second highest per capita drug expenditures in the world, and that the changes embedded in the CETA Agreement would further increase health care expenses in Canada, delaying the availability of cheaper generic drugs. The organisation cited a study according to which the agreement would extend the average market exclusivity for patented drugs by 383 days, increasing costs by $850 million each year. It also claimed that any increase in R&D expenditure by pharmaceutical companies in Canada, as a result of enhanced patent protection, is unlikely to offset the effects of the higher health care costs. Further, CCPA noted that 'Canadian negotiators made unilateral concessions in the CETA that will only affect Canada and will not require changes to the intellectual property rights regime for pharmaceuticals in the European Union', and observed that the draft agreement includes court decisions on patents among those that can be challenged through the CETA’s contentious investor-state dispute settlement mechanism. Although implicitly recognising that the measures proposed by the United States in the negotiations for the Trans-Pacific Partnership (TPP) Agreement aim at an even stricter regime of patent protection for pharmaceutical products, the report argued that the entry into force of the CETA would weaken Canada's position in the TPP negotiations.

Analysing the key provisions on patents, the CCPA took issue with a number of controversial issues, including (i) the possibility of extending patent protection 'even if the patent holder itself is responsible for the delay' (although a draft provision allows the parties to curtail the sui generis right in case of inactions leading to delayed marketing approval), (ii) the right of the patent holder to choose the most favourable patent for extension, in case of multiple patents on the same pharmaceutical product, (iii) the re-affirmation of the eight year period of protection for undisclosed data, first enacted in Canada in 2006, a commitment that would make 'it virtually impossible for any future government to shorten this time period', which extends beyond the term required by the TRIPS Agreement, (iv) the uncertainty surrounding the extension of the eight year data protection period 'to include products representing a minor change to an existing drug' (although recognising this case as unlikely).

Commenting on the provision concerning patent linkage, the report noted that the recognition of an equal right of appeal means 'that under CETA there could be a further delay of 6–18 months before generics appear, as the appeal makes its way through the court system' (citing an earlier scholarly comment). Finally, the CCPA observed that Canada appears to have dropped its request for the exclusion of court and administrative tribunal decisions related to IPRs from investor-state challenge, resorting, instead, to a declaration that is 'little more than a face-saving gesture for Canada, which provides no substantive protection for court decisions related to IPRs'.

Myriad Down Under - The Federal Court of Australia has a message for the US Supreme Court: "You were wrong (with respect)!"

© Robert Johnson 

The Federal Court of Australia has recently published its judgment in the case of D'Arcy v Myriad Genetics Inc.: while the issues examined by the Australian court mirror those considered by the US Supreme Court in its landmark decision last year (Association for Molecular Pathology v Myriad Genetics), the outcome certainly does not. In its decision, published on the 5th of September, the Federal Court of Australia openly criticized the Supreme Court's opinion, endorsing, instead, the conclusions reached in the partly-reversed Federal Circuit's decision. The judges found the relevant claims of Australian Patent No 686004 to be patentable, as within the meaning and boundaries of section 6 of the Statute of Monopolies. The dispute primarily concerned the patentability of nucleic acid sequences that have been isolated from the cell nucleus.

The judgment starts with an indication of the theoretical approach of the court to the interpretation of s 6 of the Statute of Monopolies, a provision that is almost 400 years old. First, the judges noted that, in order to define whether an invention is patentable, the interpreter should not focus on the verbal or linguistic meaning of the words 'manufacture' or 'manner of manufacture' (see National Research Development Corporation v Commissioner of Patents), but on whether the invention 'is a proper subject' for a monopoly, in accordance with the principles developed for the application of s 6. The court also warned against the use of metaphors, observing that they can 'blind the eye of the mind by oversimplification': in particular, it took issue with the representation of the process of isolation of the nucleic acid as equivalent to the creation of a metaphorical microscope enabling one to see into a gene and view the exon sequence in the subject person. Finally, it listed the principles and considerations relevant to the applicability of s 6 of the Statute of Monopolies:

First, the boundaries of the conception of patentability are not dictated only by deductive logic from the linguistic premises formulated in the scientific knowledge of a particular age; rather, the boundaries must be such as to be apt to encompass the development of science and technology, and human ingenuity. This explains the broadening concept of patentability since the first quarter of the 17th century.
Secondly, human intervention that creates an artificial state of affairs that has some discernible effect is essential.
Thirdly, whilst notions of utility, ingenuity and invention have their place after one concludes that the claim is within the field of s 6, such notions also inform the context of analysis of patentability by assisting in describing the claims to processes or products that are claimed new results of principles carried into practice through human intervention and that create some claimed useful result by involving an artificial state of affairs.
Fourthly, expressions such as “the work of nature” or “the laws of nature” are not found in the statute; nor are they useful tools of analysis.
Fifthly, the distinction between discovery of a scientific principle or fact and a deployment of such to a useful end by a procedure is real.

After discussing the scientific background of the invention, the court examined the decision of the primary judge, according to which, Myriad's patent did not concern genetic information per se, but isolated chemical composition, thus advancing no claim in relation to 'naturally occurring DNA and RNA as they exist in cell'. The court engaged in, essentially, a reconstruction of the fine line between discovery and invention: inter alia, the court observed that the distinction between the two concepts is primarily concerned with the creative dimension of an invention ('the suggestion of an act to be done, an act which results in a new product, or a new result, or a new process or a new combination for producing an old product or an old result', according to Reynolds v Herbert Smith & Co Ltd), and that an invention that super-adds something to the existing knowledge is patentable, with the fine line being embodied by the existence of an enabling disclosure that departs from what the public already knows (Hill v Evans).

The most interesting part of the decision, however, concerns the court's discussion of the decisions of the Supreme Court and of the Federal Circuit in the similar US case. The analysis moved from the observations made by the High Court in Apotex Pty Ltd v Sanofi-Aventis Australia Pty Ltd, where their Honors noted that, in the US, 'composition claims to a naturally occurring deoxyribonucleic acid (DNA) segment, focusing on the genetic information encoded in two genes associated with certain cancers, have been held to claim subject matter falling within the exception [to patentability], even though such important and useful genes had never before been located, or isolated from surrounding genetic material' (emphasis added). Then the court turned its attention, in particular, to the decision of the Federal Circuit, reversed, in part, by the landmark decision of the Supreme Court. It found that Judge Lourie, who had delivered the opinion for the Court of Appeals for the Federal Circuit, had properly identified (i) the economic significance of the isolated genes as diagnostic tools, (ii) the distinction between products/laws of nature and products of man, (iii) the difference, in chemical structure and potential use, between naturally occurring and isolated DNA sequences. The court explained that the reasoning of the Federal Circuit, which distinguished between a product and the information contained therein, was 'consistent with patent law, and persuasive', as well as in line with the teaching of National Research Development Corporation v Commissioner of Patents.

The judges established that Myriad's claims concern tangible materials, specifically isolated chemicals, whose structure, uses or functions are different from those of the chemicals in situ. They added that genetic code, in itself, is not claimed in the patent, noting the distinction 'between a claim to an isolated nucleic acid comprised in part of a sequence of nucleotide bases and a claim to a written sequence of nucleotides which may be identical to the corresponding sequence in the natural cell'. In particular, they highlighted that, while the gene that contains the mutation exists in nature, it cannot be used to identify the mutation until it is isolated, a situation that, according to the court, 'reflects a difference between the gene in its natural state and after isolation'.

Tackling the different interpretation given by the US Supreme Court, the judges critically observed that the US decision erred in (i) relying on an analysis of similarities/differences in the location and order of the nucleotides, rather than in the chemical structure, (ii) interpreting Myriad's claim as directed to information contained in the genetic sequence, (iii) finding that the isolated nucleic acid was a product of nature. The relevant passages are reproduced below:

It is difficult to reconcile that Court’s endorsement of the reasoning in Chakrabarty, with its rejection of isolated nucleic acid as eligible for patentability. With respect, the Supreme Court’s emphasis on the similarity of ‘the location and order of the nucleotides’ existing within the nucleic acid in nature before Myriad found them is misplaced. It is the chemical changes in the isolated nucleic acid which are of critical importance, as this is what distinguishes the product as artificial and economically useful. 

[...] Following Chakrabarty and NRDC, the isolated nucleic acid has ‘markedly different characteristics from any found in nature’; Myriad did not merely ‘separate that gene from its surrounding genetic material’. It should make no difference that in Chakrabarty there was an “addition” (of the plasmids) to the natural product (the bacterium); this is not the appropriate test. Myriad’s claim, properly considered is not, as the US Supreme Court considered, concerned ‘primarily with the information contained in the genetic sequence [rather than] with the specific chemical composition of a particular molecule’.

The reasoning of Lourie and Moore JJ of the Federal Circuit is persuasive. It accords with the High Court’s reasoning in NRDC and Microcell. The US Supreme Court accepted that cDNA is patentable. It rejected the isolated nucleic acid of claim 1 because it accepted wrongly, with respect, that the isolated nucleic acid is a “product of nature”. In any event, that exclusion is not in accordance with the principles of patent law in Australia and has been specifically rejected as a reason for exclusion in NRDC.

Thus, the court concluded that Myriad's claim is a patentable invention and the proper subject of letters patent. The isolated nucleic acid 'has resulted in an artificially created state of affairs for economic benefit', and the related invention is as worthy of reward as inventions that use other synthetic versions of DNA (e.g. cDNA, which the US Supreme Court held to be patentable, as a non-naturally occurring DNA sequence, due to the removal of the non-expressing portion of the sequence).

Patents and patent litigation in the EU: a multidisciplinary approach

"The EU Patent Package: Multidisciplinary and International Perspectives" is the title of an event jointly organised by the University of Antwerp and the Centre for Intellectual Property Rights (CIR) at the University of Leuven. In the charming venue of the Royal Flemish Academy of Belgium for Science and the Arts (Academy Palace, Hertogsstraat 1, 1000 Brussels). According to the organisers:

The conference starts off with a presentation on the latest developments concerning the implementation of the Patent Package from the perspective of the EPO by Margot Fröhlinger (Principal Director Patent Law and Multilateral Affairs EPO) followed by an update on the progress regarding the Unified Patent Court by Paul van Beukering (Chair of the Preparatory Committee of the Unified Patent Court). These developments will then be examined critically from an economic perspective by Bruno van Pottelsberghe (ULB, former Chief Economist of the EPO), a legal perspective by Matthias Lamping (MPI) and a governance perspective by Ingrid Schneider (University Hamburg).

In the afternoon, the European patent reforms will be reviewed by two high-level international keynote speakers, Rochelle C. Dreyfuss (New York University) and Yoshiyuki Tamura taking into consideration the patent reforms in the US and Japan. Esther van Zimmeren (University of Antwerp) will focus on the international trend to establish specialized IP courts and the lessons to be drawn from other jurisdictions. This session will be followed by another critical feedback session with practitioners with an impressive track record from university, different industry sectors and legal practice: Nicole Antheunis, TTO Université de Liège, Emil Pot, ActoGeniX, David Laliberté, Microsoft, Bart Van den Hazel, GSK and Eric De Gryse, Simont Braun.

Even better news is that there will be ample time for discussion and extensive networking opportunities.

PhD students can register for just 150 euro, while everyone else pays 200 euro (inclusive of lunch and reception).

The organisers ask you to register online by 3 October here.

This blogger would only add that the multidisciplinary approach has much to commend it and he would like to see it extended to disciplines other than law and economics.  The psychology of litigation and dispute resolution would be one worthy topic, as well as the sociology of crowd behaviour in response to patent law challenges -- for example, the establishment of patent pools and the collective aggregation of defensive patents.   Let's go for it!

Dividing the costs: is there an interface between justice and surmise?

Baxter Healthcare UK Ltd v Fresenius Kabi is a 17 September ruling of Judge Richard Hacon in the Intellectual Property Enterprise Court, England and Wales, delivered extempore on 17 September. This blogger found the case noted on Lawtel's subscription-only service.

In March 2014, without issuing a letter before action, Baxter issued patent revocation proceedings against Fresenius, alleging lack of novelty and inventive step. Fresenius did not counterclaim for infringement and in May 2014, as part of its defence, said that it would not assert the patent against Baxter. No, said Baxter in June, that wasn't good enough: it would still leave Fresenius free to sue Baxter's customers and could cause problems if the patent came into the hands of assignees. After an amendment of the pleadings was ordered, Fresenius itself applied on 1 August for unconditional amendment of the patent that whittled it down to just one claim, effectively giving Baxter everything it wanted. Baxter then sought costs up to 1 August.

Fresenius didn't see why it should have to shoulder the costs. After all, if Baxter had only written a letter before action, the parties would have resolved their differences and arrived at the same point without the need for proceedings and without therefore incurring consequent cost. Fresenius said that it would have offered Baxter a contractual undertaking not to bring infringement proceedings, extended that offer to cover Baxter's customers, and would have agreed to extract an undertaking from any assignee to give the same protection.

Baxter maintained that this was unrealistic: after all, it was only the filing of Fresenius's unconditional amendments to the patent and acknowledgement of non-infringement on 1 August 1 that dealt with its concerns and resulted in its entire protection. Fresenius asserted that it had taken that long for it to realise that Baxter would be content with a patent with only one claim.

Judge Hacon ordered Fresenius to pay 50% of Baxter's costs up to 1 August. In his view:

* It was not easy to draw any sensible conclusion as to what would have happened, had Baxter issued a letter before action, since there was fault on both sides.

* It was virtually always appropriate for a claimant to write a letter before action -- even if there was no reasonable expectation that there would be any sensible response. In this case, Baxter's failure to do so meant that it was not possible to say how matters would have been resolved; the court was thus required to speculate.

* It was likely that there would have been an exchange of correspondence resulting in Fresenius making it clear to Baxter that it did not wish to engage in litigation against it, and that Fresenius would have offered the commitment not to assert the patent against Baxter. It was, however, likely that Baxter would not have been satisfied with that, as it needed protection for its customers and from any assignee of the patent.

* When Baxter had raised its concerns initially in May 2014, Fresenius had not responded with speed and Baxter had only become satisfied with the position on 1 August. Had the letter before action been written, it was possible that matters would have been resolved, but equally possible that they would not  --  so that litigation would have started and costs would have been incurred in any event.

This blogger is prepared to accept that the judge has made the correct decision on the facts before him, but he feels some unease at the amount of speculation and surmise on which the determination of the allocation of the costs burden was based. Judges are expected to know the law and to be able to establish facts, either in absolute terms or on a balance of probabilities. However, they do not come equipped with retrospective crystal balls and reasoning of this nature would, it seems to him, be vulnerable to challenge if closely scrutinised by an appellate court.

Biogen v Medeva: historical patent litigation landmark recognised

"Biogen v Medeva 20 years on" is the title of a seminar organised by Rouse for Thursday 16 October in the Crisis Skylight London Café (64 Commercial Street London, E1 6LT). You can check out the details here.  According to the rubric:

"Biogen v Medeva occupied the English patent courts for much of the early 1990s and the ‘Biogen insufficiency’ principle is still applied today [for a view of some applications of that decision in recent years, noted by the IPKat, click here]. Twenty years later, Rouse is bringing the protagonists of this landmark case together again...

We would be delighted if you would join us to hear about the impact this case had on the commercial, legal and scientific arenas as well as the personal recollections of the individuals involved. Our distinguished panellists include one of the expert witnesses in the case: Professor Jeffrey Almond; members of the parties’ in-house teams: Peter Cozens, Marcus Dalton and Bill Tyrrell; as well as a number of the external solicitors, barristers and US lawyers who acted in the litigation: Jim Haley, John Ilett, Professor Sir Robin Jacob, Leslie McDonell, Mark Hodgson, Adrian Speck QC and Diana Sternfeld".

This blogger is delighted to see an event that records the significance of a decision which, over the years, has remained centre stage and has fostered so much debate and sometimes fierce argument.

You can read the October 1996 decision of the House of Lords here

Cautionary Tale: CAFC Rules That Delay Resulting From Reexamination Can Trigger Litigation Laches

Defendants accused of patent infringement sometimes raise the equitable doctrines of laches and estoppel as affirmative defenses. Although the defenses often appear to be linked, they are actually quite separate. As the Supreme Court explained last term, laches arises from an unreasonable delay in commencing suit that resulted in prejudice to the defendant, while equitable estoppel requires some action by the patentee, combined with reasonable reliance on that action by the defendant. See Petrella v. Metro-Goldwyn-Mayer, Inc., ___ U.S. ___, 134 S. Ct. 1962 (2014)

This week, the U.S. Court of Appeals for the Federal Circuit applied laches to bar a patentee’s infringement suit. SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC, No. 2013-1564 (Fed. Cir. Sept. 17, 2014). The patentee, SCA Hygiene Products, owns a patent for adult incontinence products. On October 31, 2003, it notified First Quality Baby Products, LLC that First Quality appeared to be infringing the patent. SCA and First Quality exchanged letters for eight months. Then SCA requested ex parte reexamination of the patent based on a reference identified by First Quality. SCA did not notify First Quality of the reexamination proceedings. The U.S. Patent and Trademark Office issued a reexam certificate confirming the original claims and adding additional claims on March 27, 2007. SCA immediately began preparing to sue, but did not actually file suit until August 2, 2010 – six years and nine months after SCA’s first letter. During the pendency of the reexam, First Quality made substantial investments relating to the accused products, including purchasing a division from another diaper manufacturer and spending $10 million to expand production.

First Quality raised both laches and estoppel as defenses to SCA’s action. The Federal Circuit reviewed the elements of laches, as laid out in A.C. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020 (Fed. Cir. 1992) (en banc):

Laches is an equitable defense to patent infringement that may arise only when an accused infringer proves by a preponderance of evidence that a patentee (1) unreasonably and inexcusably delayed filing an infringement suit (2) to the material prejudice of the accused infringer. If these prerequisite elements are present, a court must then balance “all pertinent facts and equities,” including “the length of delay, the seriousness of prejudice, the reasonableness of excuses, and the defendant’s conduct or culpability” before granting relief. . . Delays exceeding six years give rise to a presumption that the delay is unreasonable, inexcusable, and prejudicial. Under this presumption, the burden of evidentiary production shifts from the accused infringer to the patentee. Both of these presumptions disappear if the patentee can identify evidence sufficient for a reasonable jury to conclude either that the delay was excusable or not unreasonable, or that it was not materially prejudicial. If the patentee meets this burden of production, the accused infringer must prove both elements of laches by a preponderance of evidence.

SCA, Slip op. at 5-6 (citations omitted).  

Since SCA’s delay in filing suit was more than six years, the delay was presumed to be unreasonable, inexcusable, and prejudicial. SCA attempted to rebut the presumption by pointing out that three years of the delay was due to the reexam, which was a public proceeding. The Federal Circuit was not impressed. First, it rejected SCA’s argument that the time spent in reexam should not count toward the six year presumption trigger. Second, it ruled that SCA’s overall conduct , including its delay in filing suit after the reexam, could not rebut the presumption:

Under such circumstances, SCA was not required to provide notice of the reexamination to First Quality. But even though SCA’s delay may have been excusable when viewed in isolation, we must examine whether SCA’s delay, viewed as a whole, was excusable. The district court found that “SCA admitted that it has continuously tracked First Quality’s activity since 2003 and has an entire department dedicated solely to competitive intelligence.” SCA then continued to evaluate First Quality’s products during the reexamination period. SCA was also represented by U.S. patent counsel when it sent letters to First Quality in 2003 and 2004 and during the reexamination proceedings between 2004 and 2007. No evidence suggests that SCA was unable to find counsel or reinitiate contact with First Quality shortly after the reexamination ended. Moreover, “personal lack of familiarity with the patent system . . . does not excuse . . . failure to file suit.” Given the circumstances, SCA should have been prepared to reassert its rights against First Quality shortly after the ’646 patent emerged from reexamination. [Cites] But SCA remained silent for more than three years after the patent came out of reexamination. Accordingly, SCA has failed to raise a genuine issue of material fact regarding the reasonability of its delay. Viewing all of the facts in the light most favorable to SCA, no reasonable fact-finder could conclude that SCA’s delay, viewed as a whole, was reasonable. 

Slip op. at 11-12. Since First Quality was able to establish prejudice due to the delay, laches barred SCA’s claim. 

One fascinating aspect of the SCA decision is the Federal Circuit’s treatment of SCA’s argument that the entire laches defense, as well as the Aukerman case on which it rests, was severely undermined by the Supreme Court last term in Petrella, a copyright case. In Petrella, the Supreme Court ruled 9-0 that although laches sometimes is adopted as a “gap filling” doctrine when a federal statute omits any limitations period, it has a limited role when Congress provides a statutory limitation period. “[L]aches is a defense developed by courts of equity; its principal application was, and remains, to claims of an equitable cast for which the Legislature has provided no fixed time limitation.” 134 S. Ct. at 1973. The Court noted that laches’s role is “gap-filling, not legislation-overriding,” and the Court has “never applied laches to bar in their entirety claims for discrete wrongs occurring within a federally prescribed limitations period.” Id. at 1774-75. This view of laches is squarely contrary to the Federal Circuit’s reasoning in Aukerman. Since SCA's claim was timely under the Patent Act's limitations provision, 35 U.S.C. § 286, laches would appear to be unavailable as a defense.

Nonetheless, the Federal Circuit in SCA considered itself bound by Aukerman, wounded though it may be:

But Petrella notably left Aukerman intact. See 134 S. Ct. at 1974 n.15 (“We have not had occasion to review the Federal Circuit’s position.”). Because Aukerman may only be overruled by the Supreme Court or an en banc panel of this court, Aukerman remains controlling precedent.

Slip op. at 8. 

The Federal Circuit reversed the district court’s ruling that SCA’s conduct also created an estoppel, since there was no affirmative act, or failure to act, that First Quality could reasonably have relied upon.  The full decision is available HERE.

UPC Roadmap updated

Anglo-German law firm Taylor Wessing has just published an updated version of its Roadmap for the UPC is published. According to the rubric on the firm's website:

The Preparatory Committee of the Unified Patent Court has published a September 2014 update on the progress of its work towards the opening of the court. The key milestones in the update are:

The Committee will continue to work on the basis that "the Court will not be ready before the end of 2015", although it acknowledges that this is "ambitious";

Following a hearing of user organisations in November 2014 and then further review, the Committee expects there to be agreement on the Rules of Procedure in May 2015;

A draft schedule of court fees – fixed fee, and calculation method for value based fees in matters above the defined ceiling of the fixed fee – is being considered by the Finance Group. A second draft is expected to be discussed at the beginning of 2015;

A revised draft of the rules on the litigation certificate for patent attorneys is expected in early 2015;

The procurement process for the electronic filing and case management system of the UPC is expected to take place in autumn 2014. Development and testing of this system is expected to be finalised by the last quarter of 2015;

Work on the number and qualifications of local staff is due to be finalised in March 2015;

A provisional list of legally and technically qualified judges has been approved by the Preparatory Committee. The first training programmes for those judges deemed to require training will begin in December 2014. The Committee aims to appoint a sufficient number of part-time and full-time judges before the entry into operation of the UPC and to create a reserve list of judges who could be appointed should the case law increase more than expected.

The six-page document, which you can read here, has a handy list of 13 tasks completed by the Regulatory Committee over the past 12 months. Some of these tasks are not particularly onerous or significant, but there is a certain pleasure in placing little ticks next to activities that have been dealt with.

Our good friend and occasional contributor both to this blog and to the IPKat, Paul England, is the person to contact if you want any further information.

Hijacked book-launch? Or two for one ...

This blogger attended a very pleasant event at London's Oxford and Cambridge Club yesterday afternoon, this being the launch of Angela Fox's new tome, Intellectual Property Enterprise Court: Practice and Procedure (already noted here on PatLit and soon to be reviewed on the IPKat).  To his delight he was able to exchange some amicable words not only with the excellent Angela herself but also with that court's Enterprise Judge, Richard Hacon, plus a brace of more senior judges who creditably support numerous IP events in their own spare time and make themselves generally visible, demonstrating the fact that they are not remote from society but an active component of it.

To his surprise, though, this blogger discovered that Angela's was not the only new book on the block, as it were.  On display, indeed on the same table as Angela's book, were copies of the second edition European Unitary Patent and Unified Patent Court, an agreeably short softback by Angela's fellow Jenkins partner Hugh Dunlop that apparently had rolled off the presses earlier in the day.  This text is the second edition, a year later than its predecessor, and it includes a brief commentary on the structure, the legislation and the draft 16th revision of the Rules of Procedure of the Unified Court.  You can get a bit more information from this book, plus an order form and, if further temptation were needed, a review of the 2013 edition, from the website of publishers CIPA here.

Oktoberfest and Patented Technology

While Munich is pleasantly anticipating the forthcoming Oktoberfest season, the EPO has produced really fancy movie on patented technology at the Oktoberfest.

Have a look! This blogger really appreciates the efforts of the EPO to create positive headlines (other than ones involving mutant tomatoes) in relation to patents.

Enablement to USE drugs vs. enablement to PRODUCE drugs

The decision T 1616/09 deals with an application including both claims directed to pharmaceutical compositions and claims directed to the medical use of such compositions. The application had been rejected based on lack of enabling disclosure. The arguments of the examining division were based on an alleged lack of evidence in the application showing that the technical problem as stated in the application - synergistic improvement of the effectiveness of antineoplastic agents - had indeed been solved, especially in view of all possible anti-neoplastic agents encompassed in the claims.

The decision contains interesting notes on the level of disclosure required for the different categories of claims. Here are the headnotes:

For the purposes of Article 83 EPC, the level of disclosure in the application which is required for claims directed to pharmaceutical compositions or kits is not the same as that which is required for medical-use claims. For claims directed to pharmaceutical compositions or kits it is in principle sufficient that the application provides information which allows the skilled person to produce the composition or kit, and that there are no substantiated doubts that it could indeed be used in therapy. For second-medical-use claims on the other hand it is required not only that the composition itself is disclosed in an enabling way but also that its suitability for the claimed treatment is plausibly disclosed in the application (Reasons 6).

In the case of a claim directed to a pharmaceutical composition comprising two classes of compounds which have both already been used in therapy in the prior art, there is a priori no reason to doubt that such a pharmaceutical composition can be produced; no specific functional effect has to be demonstrated (Reasons 6.1.1 and 6.1.2).

In the case of second-medical-use claims, if the claimed therapeutic effect was already known to the skilled person at the priority date, it is not necessary to demonstrate it in the application (Reasons 6.2.2).

Broad Claims with narrow support – Vorrichtung zur Schwingungserzeugung

The decision 4 Ni 16/11 of the 4th senate of the Bundespatentgericht (BPatG) is worthwhile noting because it approaches the jurisdiction of the BPatG with a jurisdiction of the Technical Boards of Appeal of the EPO.

The patent subject to the nullity action had claimed a direct power transmission of power created by reaction torques (reactive power) using servo motors in a very general way. The claim was much broader than the specific solution described in the documents as a whole, which described a hydraulic solution without overlapping drive.

The Court finds that the generalized solution of the claim is no longer represented by the disclosed way of solving the problem and that, as a consequence, the patent protection extended beyond the contribution of the invention to the prior art. As a consequence, the requirement of the enabling disclosure is not met (§ 21, paragraph 1, number 2 and § 22, paragraph 1 PatG).

BPatG notes that the balancing assessment (wertende Betrachtung) should account for the facts that the electronic solution - which was covered by the claim but not disclosed in an enabling way - does not only require an autonomous technical development starting from the prior art but further that this embodiment has considerable economic importance and that the patentee had explicitly noted the existence of such an embodiment engrafting the application and claimed this alternative embodiment in a dependent claim without, however, being able to disclose a way to reproduce the embodiment.

After “Okklusionsvorrichtung” and “Diglycidverbindung”, this is a further example of the case where the abstract mentioning of possible embodiments without detailed support is detrimental rather than helpful for the scope of protection.
The full text (in German) can be found here, the headnote here.

Posted by. M. Thesen

Do people know that patents exist? A judge opines

OOO Abbott & Another v Design & Display Ltd & Another [2014] EWHC 2924 (IPEC) is a 4 September 2014 ruling of Judge Hacon in the Intellectual Property Enterprise Court, England and Wales, on the subject of calculation of an account of profits after a patent has been held infringed.

This blog post focuses on just one small issue arising in this case: the availability of the remedies of damages and an account of profits against an ostensibly innocent infringer.

1. Section 62(1) of the Patents Act 1977 states:

"In proceedings for infringement of a patent damages shall not be awarded, and no order shall be made for an account of profits, against a defendant or defender who proves that at the date of the infringement he was not aware, and had no reasonable grounds for supposing, that the patent existed; and a person shall not be taken to have been so aware or to have had reasonable grounds for so supposing by reason only of the application to a product of the word "patent" or "patented", or any word or words expressing or implying that a patent has been obtained for the product, unless the number of the patent accompanied the word or words in question."

So, to what extent is a person said to be unaware, and of having no reasonable grounds for supposing, that an infringed patent existed?  Judge Hacon had this to say:

1. ... I am not satisfied that Design & Display has established the necessary lack of knowledge or reasonable grounds for supposing that the Patent existed. In cross-examination Mr Lloyd [managing director of Design & Display] said that he had only heard of patents because he was a local historian and he did not know whether his colleagues knew what a patent was. While it is easy for those whose working lives are concerned with patents to over-assume how much the general public know about patents, I think most individuals, such as Mr Lloyd and presumably his colleagues, will have heard of the concept of patents and will have on board the basic notion that you can get one to protect your idea. It seems to me unlikely that an interest in local history is needed to know that much".

Duly noted!

NPEs in the US: who's doing the suing?

Which non-practising entities (NPEs) are filing patent infringement suits in the United States? We have found a great table depicting new NPE litigation over the past eight months thanks to Article One Partners, whose crowd-sourcing of devastating prior art to blast unpopular patents off the face of the Earth looks must seem particularly attractive if one of these businesses comes knocking at your door:

This information comes from PatentFreedom, whose chairman and founder is Daniel McCurdy, whose patent risk management company RPX Corporation acquired it earlier this year.

Disclosure without disruption? Finding the least bad option

Vringo Infrastructure Inc v ZTE (UK) Ltd is a Patents Court, England and Wales, ruling of Mr Justice Birss which is unlikely to reach BAILII since it's a fairly small procedural matter -- but it's still interesting enough to note here, this blogger having spotted it on the Lawtel subscription-only service.

In short, Vringo sued ZTE for patent infringement [on which see Annsley Merelle Ward's earlier Katposts here, and here on whether the trial of patent infringement issues should take place ahead of the trial of FRAND issues, or vice versa]. In the proceedings noted here, Vringo applied for disclosure in its infringement claim. Vringo produced a mobile handset, the standard for which stated that it supported a certain multimedia handover technology. If this were so, argued Vringo, that meant that ZTE's product had to infringed its patent, which covered that technology. ZTE had provided a product description which stated that the relevant infrastructure and handsets did not in fact have that function.

According to Vringo, although that function was initially switched off, it would be open to ZTE to switch it on later and make the multimedia handover function available. ZTE however denied that its product could be reconfigured so as to support the function. Vringo then sought clarity as to how that was the case when it had been stated as a feature in ZTE's standard, seeking an order for disclosure on that point in order to support its claim that ZTE was committing a "secondary infringement" by supplying means of infringement under the Patents Act 1977 section 60(2) which states:

" ... a person (other than the proprietor of the patent) also infringes a patent for an invention if, while the patent is in force and without the consent of the proprietor, he supplies or offers to supply in the United Kingdom a person other than a licensee or other person entitled to work the invention with any of the means, relating to an essential element of the invention, for putting the invention into effect when he knows, or it is obvious to a reasonable person in the circumstances, that those means are suitable for putting, and are intended to put, the invention into effect in the United Kingdom".

The disclosure application was made approximately six weeks before the date of the trial of the matter. This trial looked like being a big one, since it also involved three other infringement claims, not to mention the predictable challenge by ZTE to the validity of the patent.

On Tuesday Birss J agreed to let Vringo obtain disclosure. In his view:

* It was plain that, if the court acceded to Vringo's application, it would not be possible to try the multimedia handover technology point at the listed trial date. While the court could determine that Vringo had not properly pleaded its case and simply dismiss the point, that gave rise to a possible grave injustice if Vringo was correct and if there had been a properly pleaded case.

* Another option was to adjourn the trial altogether, including the other matters.

* On balance, the least bad option was to permit Vringo to amend its pleadings and to ensure that there was proper disclosure by ZTE so as to deal with this issue. That meant that the multimedia handover point could not be dealt with at the listed trial -- but all the other matters could still be determined.

* There was no need to hear ZTE's section 60(2) defence at the same time as the validity challenge.

Birss J added that an advantage of his chosen course of action was that the multimedia handover point would be left to one side until the trial was resolved: three different patent infringement claims in one trial was already quite enough.

Brits go Bolar, with some helpful guidelines

"Changes to the patents research exceptions" is the title of a media release issued by the UK Intellectual Property Office which has some cheery news for researchers who lose sleep over the prospect of their laboratory work leading them into the uncomfortable position of being defendants in patent infringement proceedings.   The good news reads thus:

Guidance on changes to patent law made by the Legislative Reform (Patents) Order 2014 which will come into force on 1 October 2014.

The Legislative Reform (Patents) Order 2014 No.1997 was approved by Parliament in July 2014 and will come into force on 1 October 2014. The Order clarifies that activities relating to medicinal product assessments are within scope of the experimental use exception (also known as the research exception).

The changes will allow companies to use a patented product, when carrying out medicinal product assessments, either to provide information to the regulatory authorities or for health technology assessment.

The changes meet a government commitment to ensure the IP system supports the life sciences sector.

Changes to patent law

The Legislative Reform (Patents) Order introduces changes to the Patents Act which clarifies that medicinal product assessments are exempt from patent infringement by virtue of the existing research exception.

Supporting information

Further information can be found in our guide.on changes to patents legislation made by the Legislative Reform (Patents) Order 2014.

The guide contains, inter alia, the following information:

Is work done to obtain approval for a drug abroad covered by the change? 
Yes. If the purpose of the work is medicinal product assessment, as defined in the Order, it is within scope of the amendment.  

Which activities are covered by the new exception?
Although the exact scope of the new exception to infringement will be a decision for the Courts [this is an important caveat], the following activities are considered to be in its scope:
• Activities carried out to provide data on new medicines to UK or non-UK regulatory
authorities.
• Activities carried out to provide data on new medicines to UK or non-UK bodies carrying out health technology assessments.
• Post approval studies to comply with UK or non-UK regulatory requirements.
• Activities carried out to amend a UK or non-UK authorisation for a medicine.
• Activities done to obtain a UK or non-UK authorisation for a new indication of an existing drug.
• Any tests or studies required by UK or non-UK regulatory bodies.
• Activities carried out for the purposes of obtaining full authorisation in the EU of a generic drug or biosimilar i.e. where the abridged procedure exempted by section 60(5)(i) of the Patents Act (the "Bolar exception" is not used).
• Activities related to health technology assessment of a generic or biosimilar product.
• Activities carried out to provide data for obtaining regulatory approval outside of the EU for a generic or biosimilar product.  

Does the amendment cover commercial use of a patented drug in a product?
The new provisions do not extend to commercial activities, such as sale, commercial supply, or manufacture in preparation for sale or supply. A licence, or other agreement, will be required from the patent holder before a product can be sold or supplied commercially. 

Does the amendment cover the use of a patented medicine as a comparator?
Yes. The use of a patented medicine as a comparator in a medicinal product assessment, as defined in the Order, is covered by the amendment. 

Are combination products covered by the amendment?
Medicinal product assessments on a combination are within the scope of the new provision. This includes instances where a patented drug is part of the combination.  

Can I supply a patented drug to a person for use in a medicinal product assessment without a licence from the patent owner? 
Sections 60(2) and (6) of the Patents Act 1977 have not been amended. The consent of the patent owner would be needed to supply a patented drug to a person for use in a medicinal product assessment.

Specialised IP court for China: what will it mean for patent litigation?

"China establishes specialised intellectual property courts" is the title of the news flash from Rouse, which reached this blogger as an email today but can also be read in full online here. It states, in relevant part:

" ... Following key indications in the last 12 months of the central government’s intention to establish a specialised IP Court, the National People’s Congress Standing Committee issued the draft Decision on Establishing Intellectual Property Rights Courts in Beijing, Shanghai, and Guangzhou (the Decision).

The Decision establishes the IP Courts as of 31 August 2014 [in other words, they are already presumably up and running in one form or other]. The Decision provides some useful insight into the proposed jurisdiction, staffing, and supervision of the IP Courts, which are intended to further the efficiency and consistency of China’s IP enforcement regime.

Jurisdiction

The IP Court sits within the judicial hierarchy in a position equivalent to the local Intermediate People’s Court. It will be a court of first instance with respect to ‘technically complex’ civil matters relating to patents, technical trade secrets, plant varieties, and semiconductor layout designs.

The Decision indicates that this jurisdiction will become cross-territorial within three years. In addition, the IP Court will also have original jurisdiction over administrative appeals and invalidation actions stemming from decisions issued by SIPO [State Intellectual Property Office] and the CTMO [China Trade Mark Office].

The IP Court will also serve as a court of appeal for trade mark and copyright matters originating in the basic level court in its municipality or province. Foreign parties typically initiate civil matters in the Intermediate People’s Court or higher, so it is likely that the IP Court will serve as a court of first instance in most cases where a trade mark or copyright matter involves a foreign party. Decisions of the IP Court will be reviewed by at least one appellate court, the first of which is the high court of the province or municipality where the IP Court is located. The three IP Courts will not be the ultimate appellate courts for IP matters, so their role in harmonising IP jurisprudence will be limited.

Staffing

The Standing Committee of the local People’s Congress will have the power to appoint and dismiss key positions within the IP Courts, including the President, Deputy President, Chief Judge, Judicial Officer, and Judicial Committee.

Supervision

The IP Courts will have a number of interested stakeholders. They will be supervised by the Supreme People’s Court (the SPC), the local High People’s Court, and the procuratorate, although no particular procuratorate is specified. In particular, the SPC will regulate the workload of the IP Courts, including the type and number of cases heard. The Standing Committee of the local People’s Congress in its supervisory role will have significant influence on the functioning of the IP Courts. The IP Courts will also receive operational guidance and trial supervision from the Higher People’s Court of the district where the IP Court is located. ...".

It's clear that, at this early stage, a good deal of detail remains to be hammered out. It will be good to know whether the court will do little more than enable judges to gain greater expertise through hearing a more concentrated diet of patent cases or whether it will evolve IP-specific rules for dealing with evidence, witnesses and so on. PatLit welcomes this development and awaits further news with eager interest.

The Federal Circuit closely follows the Supreme Court's recent ruling in Alice

Last Wednesday, the Court of Appeals for the Federal Circuit published its judgment in the case of buySAFE Inc. v Google Inc., discussing and applying the Supreme Court's recent ruling in Alice Corp. v CLS Bank. As noted by David in a previous post, in Alice the Supreme Court Justices 'ruled that claims directed to computer-implemented methods and related systems are not eligible for patenting under 35 U.S.C. § 101 unless they contain a non-conventional "inventive concept," and that a generic reference to a general purpose computer, or even "purely functional and generic" hardware components, does not make an otherwise ineligible invention patentable'.

Cloudy skies ahead!

The present case concerned the alleged infringement, by Google, of claims 1, 14, 39 and 44 of the US Patent No. 7,644,019, owned by buySAFE, which discloses a method and system designed to provide a guaranty service for online commercial transactions. In particular, independent claim 1 recites a method in which a computer program, running on a computer of a safe transaction service provider, (i) receives a request for a transaction performance guaranty service with respect to an online commercial transaction, (ii) processes such request in order to provide the guaranty service, and (iii) provides, via a computer network, the service, binding a transaction performance guaranty to the online commercial transaction involving the party that requested it. Dependent claim 14 narrows the method to a guaranty in the form of either a surety bond, a specialized bank guaranty, a specialized insurance policy, or a safe transaction guaranty. The parties agreed that the analysis of claims 1 and 14 would control the analysis of the two other claims asserted by buySAFE.

At first instance, ruling on Google's motion for judgment on the pleadings as to invalidity, the District Court for the District of Delaware had held that the asserted claims were ineligible for patent protection under 35 U.S.C. § 101. Discussing the applicability of the machine-or-transformation test (under this test, as articulated in In re Bilski, following the so-called patent-eligibility trilogy, a process claim is eligible for patent protection if (i) it is tied to a particular machine or apparatus, or (ii) it transforms a particular article into a different state or thing), the court had found that, as acknowledged by buySAFE itself, the method could potentially be performed entirely in the human mind, if the transaction was not online, and was thus ineligible for patent protection, despite its taking place online and involving use of a computer (citing CyberSource v Retail Decisions). In this perspective, the judge had observed that 'the '019 patent describes a well-known, and widely-understood concept - a third party guarantee of a sales transaction - and then applies that concept using conventional computer technology and the Internet', concluding that '[m]erely using a computer to perform more efficiently what could otherwise be accomplished manually does not confer patent-eligibility' (especially as the patent claims were not directed to any specific way of using such computer). Evaluating the abstract nature of the claims, the court had found that they were not directed to any specific device or system, nor limited to a concrete application or to any specific industry. Consequently, it had granted Google's motion for judgment on the pleadings, holding the ineligibility of the asserted claims.

On appeal, the Federal Circuit upheld the judgment of the district court, engaging in an interesting review of the interpretative paths taken by the Supreme Court in the recent Alice ruling and in the previous Mayo Collaborative Servs. v Prometheus Labs Inc. judgment. The panel observed that the Supreme Court has always interpreted § 101 as containing an important implicit exception, namely the exclusion of laws of nature, natural phenomena and abstract ideas from patent protection. It then retraced the steps taken by the Supreme Court Justices in their analysis of the three types of excluded matter, describing both the underying concern and the framework designed to evaluate patent-eligibility. The former is 'that patent law [should] not inhibit further discovery by improperly tying up the future use of these building blocks of human ingenuity' (Alice, quoting Mayo), regardless of the narrowness of the law of nature, natural phenomenon or abstract idea involved. The latter excludes the patentability of claims that directly read on the three excluded matters, as well as of any claim that 'read[s] on a human-made physical thing ("machine, manufacture, or composition of matter") or a human-controlled series of physical acts ("process") [...] if (a) it is "directed to" matter in one of the three excluded categories and (b) "the additional elements" do not supply an "inventive concept" in the physical realm of things and acts - a "new and useful application" of the ineligible matter in the physical realm - that ensures that the patent is on something "significantly more than" the ineligible matter itself'.

The panel also reviewed the Supreme Court's approach to the category of abstract ideas, particularly relevant in the context of the case. In particular, it looked at two fundamental questions, respectively concerning the matter identified by the Supreme Court as falling within the mentioned category, and the cases in which the invocation of a computer in a claim is sufficient to supply an "inventive concept" that attracts patent protection:

As to the first question: The relevant Supreme Court cases are those which find an abstract idea in certain arrangements involving contractual relations, which are intangible entities. Bilski v. Kappos, 561 U.S. 593 (2010), involved a method of entering into contracts to hedge risk in commodity prices, and Alice involved methods and systems for "exchanging financial obligations between two parties using a third-party intermediary to mitigate settlement risk,". More narrowly, the Court in both cases relied on the fact that the contractual relations at issue constituted "a fundamental economic practice long prevalent in our system of commerce." In simultaneously rejecting a general business method exception to patent eligibility and finding the hedging claims invalid, moreover, Bilski makes clear that the recognition that the formation or manipulation of economic relations may involve an abstract idea does not amount to creation of a business-method exception. [...] If enough extra is included in a claim, it passes muster under section 101 even if it amounts to a "business method."

As to the second question: The Court in Alice made clear that a claim directed to an abstract idea does not move into section 101 eligibility territory by "merely requir[ing] generic computer implementation." In so holding, the Court in Alice relied on Mayo for the proposition that "[s]imply appending conventional steps, specified at a high level of generality," was not "enough" to supply an "inventive concept.". Neither "attempting to limit the use of [the idea] to a particular technological environment" nor a "wholly generic computer implementation" is sufficient.

The Federal Circuit noted that the Supreme Court had found the invocation of the use of a computer in Alice's method claims, and of other components used to 'perform the basic calculation, storage, and transmission' tasks in the system claims, to be insufficient to qualify as an "inventive concept", having a mere functional, unspecified or generic function.

Applying this teaching to the case in hand, the panel concluded that '[t]he claims are squarely about creating a contractual relationship - a "transaction performance guaranty" - that is beyond question of ancient lineage'; as held at first instance, the narrowing of the idea to particular types of relationship, or to a particular technological environment, does not affect patent (in)eligibility. Similarly, the court clarified that 'the invocation of computers adds no inventive concept', as their function remains generic and unspecified, just as in Alice.

British Columbia gives go-ahead to consumers' class action for patent abuse

Via Toronto law firm Fleck & Chumak LLP's IP Address newsletter comes news of Low v Pfizer Canada Inc., 2014 BCSC 1469, a Supreme Court of British Columbia ruling which certified a class action on behalf of those who purchased Pfizer's erectile dysfunction drug between 2006 and its subsequent invalidation by the Supreme Court of Canada in 2012. The class seeks to pursue a claim bases on the allegation that Pfizer obtained a patent wrongfully, used it to keep generic competition off the market, and thereby inflated prices. The ground of invalidation was that Pfizer failed to disclose the invention adequately. The Viagra sildenafil patent was litigated in many jurisdictions, and with a variety of outcomes. As the newsletter notes:

In deciding the preliminary question of whether the class action against Pfizer could proceed at all, the Court considered three legal theories put forward by lawyers representing the consumers: (1) unlawful interference with economic relations, (2) waiver of tort and (3) unjust enrichment. The court applied the "plain and obvious" test: whether it was plain and obvious each cause of auction could not succeed.

The Court concluded that the causes of action in intentional interference with economic relations and unjust enrichment could proceed. The Court held that if Pfizer obtained the patent fraudulently or via an abuse of the patent procedures, then the elements of the test for unjust enrichment - including an absence of a juristic reason for the enrichment - would be met. As well, the Court held that the consumers would have standing to pursue the interference tort on the theory that Pfizer inflicted actionable injury on the generic competition to the detriment of the consumers.

The Court's decision is ground-breaking as it was previously believed that the federal patent legislation and accompanying regulations made up a "complete code" with respect to patent rights and remedies. With this decision, the court has opened up the possibility of a new, direct remedy available to consumers against patent owners.

It should be stressed that the permission given to the class to bring the action does not give an indication of the likelihood that it will succeed when it gets to trial.  The "plain and obvious" test looks rather like the test of whether there exists a triable issue in British case law.  Given the frequency with which commercially successful patents are subsequently invalidated for one reason or another, patent owners may be watching for the outcome of this action with more than a little interest,