Federal Circuit Rules That No Private Cause of Action Exists to Correct Inventorship Until a Patent Has Issued
July 22, 2010
The U.S. Court of Appeals for the Federal Circuit ruled July 22 that a district court should have found that trailer hitch lock patents asserted against Master Lock Co. are invalid for obviousness because they claim merely “common sense” improvements to the prior art under the Supreme Court’s 2007 KSR International Co. v. Teleflex Inc. decision (Wyers v. Master Lock Co., Fed. Cir., No. 2009-1412, 7/22/10).
Reversing the district court’s denial of a motion for a judgment as a matter of law as to invalidity, the Federal Circuit found that it would have been obvious to combine prior art references to arrive at the invention in two patents claiming a hitch pin lock having a removable sleeve to increase the shank’s diameter, and obvious to combine prior art references to form the invention in a third patent featuring a locking device with an external seal designed to insulate the locking mechanism from contaminants.
Hitch Lock Patents.
Philip Wyers is the inventor of three patents 6,672,115; 7,165,426; and 7,225,649 covering hitch pin locks that secure trailers to cars and sport utility vehicles. The ’115 and ’426 patents (sleeve patents) claim a hitch pin lock having a removable sleeve to increase the shank’s diameter, while the ’649 patent claims an improved locking device with an external seal designed to insulate the locking mechanism of the lock from contaminants.
Wyers and his company, Wyers Products Group Inc., brought this infringement suit against Master Lock Co.
A jury found Master Lock liable for infringement and awarded Wyers $5.35 million in damages as a reasonable royalty. Post-trial, the district court denied Master Lock’s motion for a judgment as a matter of law (JMOL) that the patents were invalid for obviousness under Section 103 of the Patent Act.
Master Lock appealed.
‘Common Sense’ to Combine Sleeve With Prior Art Barbell Locks.
The Federal Circuit reversed and held that Wyers’s patents were invalid for obviousness.
“The use of a lock in a trailer hitch receiver was well known in the prior art to the ‘115 and ‘426 patents,” Judge Timothy B. Dyk said, citing the Chang patent (5,664,445) disclosing a lock with a lock head, a shackel with a stop member, a shank, and a latch, and the Johnson patent (4,711,106) featuring a barbell-shaped hitch pin lock. At trial, he noted, Wyers admitted that both the Chang and Johnson references disclosed every limitation of the ’115 and ’426 patent claims except the use of the sleeve to adjust the shank’s operative thickness. Thus, with regard to the ‘115 and ‘426 sleeve patents, Dyk said that the case came down to whether Master Lock presented clear and convincing evidence that the use of a sleeve to adjust the operative thickness of a shank would have been obvious.
Although the district court found that the jury could implicitly find that the Down patent (3,963,264) was outside the scope of the relevant art, the Federal Circuit quoted that patent’s statement that it was directed to “a motor vehicle such as an automobile for towing by fitting a rear towing attachment for releasably attaching the tow-bar of a trailer such as a boat trailer, horse box, caravan or other vehicle.” Given that language, “the Down patent is clearly within the same field of endeavor as the sleeve patents,” Dyk wrote.
Looking then to the factual question of whether there was a motivation to combine a sleeve with the prior art barbell locks, the court noted that expert testimony on motivation to combine may be unnecessary in cases like this, where the technology involved is straightforward. In such cases, “the legal de-termination of obviousness may include recourse to logic, judgment, and common sense, in lieu of expert testimony,” Dyk observed, citing KSR International Co. v. Teleflex Inc., 550 U.S. 398 (2007), Perfect Web Techs. Inc. v. InfoUSA Inc., 587 F.3d 1324 (Fed. Cir. 2009), and Ball Aerosol & Specialty Container Inc. v. Limited Brands Inc., 555 F.3d 984 (Fed. Cir. 2009). Thus, in certain cases, the ultimate inference as to the existence of a motivation to combine references may boil down to a question of “common sense,” appropriate for resolution on summary judgment or JMOL, the appellate court stated.
Applying this rationale, the court stated:
The existence of different aperture sizes in standard hitch receivers was a known problem: as the sleeve patent acknowledge, industry standards require hitch receivers to use pins of different sizes for different applications, thus resulting in inconvenience and added expense. …Moreover, as Philip Wyers himself acknowledged, it was also a known problem that among mass retailers such as Wal-Mart, space is at a premium. … The Down patent clearly teaches that sleeves of different external diameter “may be provided for the attachment of trailer towing eyes of different internal diameter.” … When the sleeve is used, the pin accommodates larger diameter towing eyes; without the sleeve, the pin fits smaller ones. It is simply a matter of common sense that the sleeve used in Down, in a towing attachment quite similar to a hitch receiver/tow bar arrangement, could be combined with a barbell-shaped hitch pin lock in order to address the known problem of different aperture sizes in standard hitch receivers and the shelf-space problem experienced by retailers. …
We conclude that it was a matter of common sense to combine the Down patent with the prior art barbell locks in order to arrive at the invention claimed in the ’115 and ’426 patents, and that one of ordinary skill in the art would have had a reasonable expectation of success in doing so.
External Seal of ‘649 Patent Also a ‘Common Sense’ Addition.
Continuing, the appellate court noted that the external seal of the ’649 patent was the only feature distinguishing that patent from the Chang patent and Wyers’ own earlier patent (6,055,832). It agreed with Master Lock’s argument that the ’649 patent would have been obvious over the combination of the prior art locking devices that included the Master Lock Model 6121 padlock covered by the Heald patent (5,156,029), the Hampton patent (3,858,419), and the Manuel patent (3,848,440).
“[A]t the time of the invention, there were two known ways to protect a lock’s locking head from the ingress of contaminants—an external or an internal seal—and both design options were common and widely used in locks in the prior art,” Dyk wrote. He continued:
It is a matter of common sense that a flat external seal used in the prior art padlocks could be combined with a barbell-shaped hitch pin lock. Indeed, the district court described the difference between the invention of the ’649 patent and the prior art as “slight indeed.” … Wyers himself admitted that an external flange seal would work the same way on a padlock as it does on a barbell-shaped lock, and that the purpose of the seals was the same in the prior art padlocks as in the patented device. We conclude that the invention of the ’649 patent represents no more than “the predictable use of prior art elements according to their established functions,” KSR, 550 U.S. at 417, and as such, the claims of the ’649 patent are obvious as a matter of law.
Accordingly, the Federal Circuit reversed the district court’s holding that the asserted claims of the ’115, ’426, and ’649 patents were nonobvious.
The opinion was joined by Judge Alan Lourie and Judge Richard Linn, who filed a concurring opinion.
Mark Lee Hogge of Greenberg Traurig, Washington, D.C., represented Wyers. Aldo Noto of Andrews Kurth, Washington, D.C., represented Master Lock.
Read the Wyers v. Master Lock opinion
U.S. District Court Upholds $26 Million Jury Award in International
Espionage Case Involving Copyright Infringement of Tire Blueprints
July 21, 2010
The U.S. District Court for the Eastern District of Virginia July 21 upheld a jury award of $26 million in damages against companies based in China and Dubai found liable in a corporate espionage case for infringing copyrights in mining tire blueprints owned by a Florida inventor and his tire manufacturing company (In re Outsidewall Tire Litigation, E.D. Va., No. 1:09cvl217, 7/21/10).
Espionage Conspiracy Claimed Against International Figures.
This case was brought by Jordan Fishman and his companies that included Tire Engineering & Distribution LLC and centered on conduct that began in 2005 at a Virginia hotel, where former employee Sam Vance met Surender Kandhari and John Canning, both representing Al Dobowi Ltd. and other companies from United Arab Emirates.
The court found that the jury had sufficient evidence to find that the three men discussed how the Al Dobowi companies could begin manufacturing a line of tires based on Fishman’s line of “Alpha” mining tires. The jury also found evidence that Vance shortly thereafter similarly contacted representatives of Shandong Linglong Rubber Co., Ltd. and Shandong Linglong Tire Co., Ltd., which are both based in China. The jury further found that Vance retained blueprints of the Fishman tire designs without permission “even though a warning on the drawings indicated that they were confidential, and that reproduction or other use must be expressly authorized in writing,” Judge T.S. Ellis III wrote. “By September 2005, Vance was working with Linglong defendants to adapt the Alpha tire blueprints into drawings for Al Dobowi defendants' new ‘Infinity Mining tires’ series,” Ellis said. He added that “Vance, Canning, and Linglong defendants proceeded to design new tire blueprints and molds based on the Alpha tire blueprints, despite having ample notice—including several communications from plaintiff Jordan Fishman—that the blueprints contained protected intellectual property.”
Jurisdiction Over Foreign Defendants.
With this factual background, “it was entirely reasonable for the jury to conclude from the evidence presented at trial that the primary purpose of that meeting was to conspire to convert plaintiffs' property and to infringe on their trademarks and copyrights,” Ellis continued. As the claims here arose out of the May 2005 meeting at the Jefferson Hotel in Richmond, “the jury reasonably could have concluded that personal jurisdiction existed over Al Dobowi defendants,” the court said. While the Linglong defendants insisted that they were not subject to personal jurisdiction in Virginia because they were not present at that meeting, the district court stated:
Nonetheless, the evidence was plainly sufficient to prove that Linglong defendants in China participated in the conspiracy knowing that Vance would perform acts in furtherance of the conspiracy in Virginia and indeed, the evidence further showed that Linglong defendants collaborated directly with Vance to commit these acts in Virginia. Specifically, the evidence showed that Linglong defendants worked closely with Vance via e-mail and telephone while Vance was at his home office in Tazewell, Virginia. Vance's e-mail communications reflect that he collaborated with Merry Wang and Linglong defendants' engineering department in performing some of the work of modifying the Alpha tire blueprints so that they "would not look like the AA (Awful Alpha)" from his home office in Tazewell, Virginia, and additionally, Vance told Wang that he was working on the blueprints from Tazewell. … The evidence in this case was plainly sufficient to show that Linglong defendants purposefully availed themselves of the benefits and protections of the Commonwealth through their participation in the conspiracy here in issue and accordingly, the motion must be denied on the personal jurisdiction issue.
Predicate-Act Doctrine Applied to Extraterritorial Conduct.
Continuing, the court rejected the defendants’ argument that the claims for civil conspiracy, trademark infringement, and conversion were preempted by Section 301 of the Copyright Act, 17 U.S.C. §301. “This contention is plainly meritless,” the court said, noting that those claims do not assert rights “equivalent to those listed in § 106 of the Copyright Act.”
The court went on to find that the defendants were entitled to a judgment as a matter of law on the charge that they infringed the registered “Mine Mauler” trademark by using the “Mine Handler” mark. Here, Ellis agreed that these two marks are not confusingly similar.
As to Fishman’s copyright infringement claim, the defendants argued that any claims not barred by the Copyright Act’s three-year limitations period were barred because they occurred in China, not in the United States. They argued that any conduct by Vance occurred in the United States and that they produced no tires and sold to no customers in the United States.
For the district court, “the question, not yet resolved in this circuit, is whether extraterritorial exploitation of a copyright originally infringed inside the United States falls within the jurisdiction of the Copyright Act.” Citing Subafilms, Ltd. v. MGM-Pathe Comms. Co., 24 F.3d 1088 (9th Cir. 1994) and Update Art Inc. v. Modiin Pubs., Ltd., 843 F.2d 67 (2d Cir. 1988), it noted that Second and Ninth Circuits have held that a copyright infringement plaintiff may only recover damages for extraterritorial conduct if the plaintiff pleads and proves "an act of infringement within the United States."
Update Art held that a plaintiff may recover for a foreign act of infringement where that foreign act "depends on the occurrence of a predicate act [of infringement] in the United States." There, the Second Circuit found that that because the original act of illegal reproduction of a poster may have occurred in the United States before the illegal copy was exported to Israel and reprinted in a newspaper, the plaintiff had stated a valid prima facie claim for copyright infringement by the Israel newspaper.
Applying that reasoning, Ellis stated:
Contrary to defendants' assertions, this predicate-act doctrine has not been repudiated in the Ninth Circuit nor anywhere else. Indeed, the Second Circuit's rule strikes the proper balance by ensuring that domestic copyright infringers may not seek refuge for their acts of infringement within the United States by exploiting those infringing acts in foreign countries. Thus, application of the Second Circuit's rule yields the result that plaintiffs may recover for extraterritorial infringing acts that occurred within the three-year limitations period, as plaintiffs have also adequately proven that a predicate infringing act occurred within the United States. That the predicate act occurred outside the limitations period is ultimately irrelevant as plaintiffs do not seek to recover for that specific infringing act, and it is well settled that the Copyright Act's statute of limitations is a limit on the remedy only, and not on the substantive right.
Further, the court rejected the defendants’ argument that Fishman did not prove the elements of a copyright infringement claim. Finally, the court upheld the $26 million jury verdict award as reasonable, noting that “the jury reduced the award by over 25 percent from plaintiffs' request, and this reduction appears to correlate to the percentage of infringing sales that likely occurred outside the copyright infringement limitations period.”
The defendants’ motion for judgment as a matter of law was denied, except as to the claim regarding infringement of the registered trademark.
The Shandong Linglong defendants were represented by Brandon Hall Elledge of Holland & Knight, McLean, Va. The Al Dobowi defendants were represented by Laura Nicolle Fellow, Brett Heather Freedson, and Shelby Jeanne Kelley of Bracewell & Guiliani Washington, D.C.
Fishman and his companies were represented by August J. Matteis Jr. and William Edgar Copley of Gilbert Oshinsky, Washington, D.C. In a press release on the firm’s website, the jury award is touted as “One of the Largest Individual Copyright Infringement Awards in U.S. History.” Matteis is quoted as saying: “This case should serve as a bellwether for foreign multinational corporations who believe they can act with impunity, stealing intellectual property from a small U.S. business, and then avoid the reach of our judicial system.”
Read the In re Outsidewall Tire Litigation opinion.
CAFC Denies Avid’s Motion to Join the Pending En Banc Review of the Inequitable Conduct Standard in Therasense
July 16, 2010
The U.S. Court of Appeals for the Federal Circuit in a per curiam decision denied a motion by Avid Identification Systems Inc. to join the en banc review of the inequitable conduct standard that is pending before the court in Therasense v. Becton Dickinson and Co. (Avid Identification Systems Inc. v. Crystal Import Corp., Fed. Cir., No. 2009-1216, 7/16/10).
Dissenting from the denial of Avid’s request to stay the panel judgment in April holding its patent unenforceable for inequitable conduct, Judge Pauline Newman argued that the earlier judgment found inequitable conduct “although the patent was found valid on the same prior art that is the basis for its unenforceability.” Noting that the appeal in Therasense v. Becton Dickinson and Co, Fed. Cir., No. 2008-1511, 4/26/10, will address a “broad range” of issues, Newman said that “it is grievously unjust to eradicate this patent on grounds that may soon be changed by the en banc court.”
Panel Ruling Widened Duty of Candor to Include Company President.
In the April ruling in Avid Identification Sys., Inc. v. Crystal Import Corp., 603 F.3d 967 (Fed. Cir. 2010), the 2-1 panel found that Avid’s patent (5,235,326) on a short-range electronic system for identifying fish, birds, animals, and inanimate objects was unenforceable because of conduct by its founder and president, Dr. Hannis Stoddard. Avid had challenged the district court’s finding that the undisclosed trade show demonstration was material and that Dr. Stoddard had a duty of candor to disclose this information. Avid had insisted that the trade show information could not have been material because it related to a precursor product that did not contain all of the elements of the ’326 patent claims and the jury considered it and still found the patent not invalid under 35 U.S.C. § 102(b).
However, the Federal Circuit panel agreed with the district court that this trade show information was material and that Dr. Stoddard owed a duty of candor to the PTO under 37 C.F.R. § 1.56(a). First, as to materiality, the court quoted authority stating that information is material if there is a “substantial likelihood that a reasonable examiner would consider it important in deciding whether to allow the application to issue as a patent.” J.P. Stevens & Co. v. Lex Tex Ltd., 747 F.2d 1553 (Fed. Cir. 1984). Then saying that Avid was confusing the concepts of “material” and “invalidating,” it cited a line of cases for the proposition that a reasonable examiner may find a particular piece of information important to a determination of patentability, even if that piece of information does not actually invalidate the patent. Praxair Inc. v. ATMI Inc., 543 F.3d 1306 (Fed. Cir. 2008); Upjohn Co. v. Mova Pharm. Corp., 225 F.3d 1306 (Fed. Cir. 2000); and Molins PLC v. Textron Inc., 48 F.3d 1172 (Fed. Cir. 1995). Thus, the Federal Circuit found no clear error in the district court’s conclusion that the precursor product, while not invalidating, reflected the closest prior art, and thus was highly material to patentability.
Further, Judge Sharon Prost, joined by Judge Haldane Robert Mayer, noted that Rule 56 defines “individual[s] associated with the filing or prosecution of a patent application” as (1) each named inventor, (2) each attorney or agent that prepares or prosecutes the application, and (3) every other person who is substantively involved in the preparation or prosecution of the application and who is associated with the inventor or assignee. To the majority, Dr. Stoddard was “substantively involved” with the patent in suit and thus owed the PTO a duty of disclosure. The majority read “substantively involved” to mean a person whose “involvement relates to the content of the application or decisions related thereto, and that the involvement is not wholly administrative or secretarial in nature.” Prost went on to note that Avid is a closely held company, that Stoddard hired the inventors to reduce his encrypted chip concept to practice, and cited the district court’s finding that Stoddard was “involved in all aspects of the company’s operation, from marketing and sales to research and development.”
Voices Against a Broad Reading of the Rule 56.
However, dissenting from the majority’s inequitable conduct ruling, Judge Richard Linn argued against the majority’s “expansive reading of Rule 56(c)(3).” He faulted the majority for imposing the duty of candor on “corporate officers, managers, employees, and all other individuals who are neither aware of the technical details or legal merits of the application nor engaged in the preparation or prosecution thereof. Simply having a general interest or even a financial interest in the invention or a general awareness of the application is not enough.”
In opposing the decision not to stay Avid’s case in light of Therasense, Newman echoed Linn’s concern. Newman stressed that Question 3 in the order granting en banc review in Therasense asks:
What is the proper standard for materiality? What role should the United States Patent and Trademark Office’s rules play in defining materiality? Should a finding of materiality require that but for the alleged misconduct, one or more claims would not have issued?
Newman faulted the majority for applying the materiality standard of J.P. Stevens & Co., which she said “was abandoned by the PTO in 1992.” To Newman, “[t]he law as applied in Avid is subject to conflicting precedent, a conflict whose resolution is reasonably likely to alter the result,” and “it is prudent, and just, to hold Avid’s petition while the law is clarified.”
The information here criticized does not appear to violate the current Rule 56 standard, and Dr. Stoddard is not within the cadre upon whom is placed the obligation of understanding the patent law, as Judge Linn explained in his dissent. I must, respectfully, dissent from the court’s refusal to stay this appeal in view of the en banc proceeding in Therasense.
John W. Thornburgh of Fish & Richardson, San Diego, represented Avid.
Read the July 16 order denying Avid’s combined petition for panel rehearing and rehearing en banc, or, alternatively, to stay the mandate of this case.
Federal Circuit Finds Claims on Storage Cache Method Anticipated by Patent With Earlier U.S. Provisional Filing Date
July 7, 2010
The U.S. Court of Appeals for the Federal Circuit ruled July 7 that claims in a patent application on a method of electonic data storage were anticipated under Section 102(e) of the Patent Act by a patent claiming priority from a U.S. provisional application with an earlier filing date (In re Giacomini, Fed. Cir., No. 2009-1400, 7/7/10).
The court agreed with the Board of Patent Appeals and Interferences’s ruling that this patent qualified as prior art even though it was filed after the application at issue. Interpreting Section 102(e)(2), the court stressed that “an applicant is not entitled to a patent if another’s patent discloses the same invention, which was carried forward from an earlier U.S. provisional application or U.S. non-provisional application.”
Caching Claims Rejected by BPAI.
Peter Giacomini, Walter Pitio, Hector Rodriguez, and Donald Schugard (Giacomini) filed a U.S. patent application (Serial No. 09/725,737) claiming a “Method and Apparatus for Economical Cache Population,” which involves a technique for selectively storing electronic data in a readily accessible memory called a “cache.” When a system retrieves requested data from a source, it stores the data in its cache so that it can retrieve the data more quickly next time. Because the cache has a limited space, the system must selectively store data. Giacomini’s technique populates the cache with data only when the system receives a certain number of requests for that data.
However, the Board of Patent Appeals and Interferences found that certain claims of Giacomini’s application were anticipated by the Tran patent (7,039,683). Giacomini argued that his application—filed on November 29, 2000—could not be anticipated by the Tran patent—filed on December 29, 2000. Still, the BPAI found that Tran was indeed prior art because it claims priority in a provisional application filed on September 25, 2000.
Patent-Defeating ‘Application for Patent’ in §102 Covers U.S. Provisionals.
Giacomini does not dispute all of the claimed features in his application are taught in Tran, Chief Judge Randall R. Rader observed. The central issue is whether the Tran patent has the “patent-defeating effect as of the filing date of the Tran provisional application,” Rader said.
35 U.S.C. § 102(e)(2) states, in part, that:
[A] person shall be entitled to a patent unless . . . the invention was described in . . . (2) a patent granted on an application for patent by another filed in the United States before the invention by the applicant for patent . . . .
An application that a patent was “granted on” is the first U.S. application to disclose the invention claimed in the patent, Rader noted, quoting In re Klesper, 397 F.2d 882 (CCPA 1968). “The provisions of this title relating to applications for patent shall apply to provisional applications for patent, except as otherwise provided, and except . . . [in] sections 115, 131, 135, and 157 of this title,” he added, quoting Patent Act Section 111(b)(8).
Under this encompassing rule, “applications for patent” under section 102 includes both provisional and non-provisional patent applications. Therefore, an applicant is not entitled to a patent if another’s patent discloses the same invention, which was carried forward from an earlier U.S. provisional application or U.S. non-provisional application.
As noted, Giacomini does not dispute that the Tran patent describes the invention claimed in Giacomini’s application. Also, the Tran provisional, which antedates Giacomini’s filing date, was the first U.S. application to describe the invention.
§119(e) Gives Tran’s U.S. Provisional a Patent-Defeating Effect.
Giacomini went on to insist that Section 119(e) could only give Tran’s patent priority—not a patent-defeating effect—based on the earlier the Tran provisional.
The Federal Circuit disagreed.
Quoting Section 119(e), the court said that the Tran patent “shall have the same effect,” including a patent-defeating effect, as to the claimed invention as though it was filed on the date of the Tran provisional. Thus, “Giacomini, who filed his application after Tran filed his provisional application, cannot receive a patent covering the same subject matter under 35 U.S.C. § 102(e),” the court reasoned. This conclusion comports with “[t]he fundamental rule . . . that the patentee must be the first inventor,” it said, quoting language in Alexander Milburn Co. v. Davis-Bournonville Co., 270 U.S. 390 (1926).
In Milburn, the Supreme Court held that a patent applied for before but not granted until after a second patent is sought bars the issuance of the second patent. … The rule stems from the principle that, subject to certain exceptions, “one really must be the first inventor in order to be entitled to a patent.” ... Although Milburn concerned a non-provisional application, a provisional application similarly shows that someone else was the first to invent. The Tran provisional evinces that Tran, and not Giacomini, was the first to invent the claimed subject matter. Allowing Giacomini’s application would create an anomalous result where someone who was not the first to invent in the United States receives a patent.
Finally, the court turned to Giacomini’s reliance on the statement in In re Hilmer, 359 F.2d 859 (CCPA 1966), that “Section 119 only deals with ‘right of priority.’ The section does not provide for the use of a U.S. patent as an anticipatory reference as of its foreign filing date.”
Rader found Giacomini’s reliance on this statement “misplaced.” At the time Hilmer was decided, Section 119 only governed the benefit of claiming priority to an earlier filing date in foreign countries, he explained. However, since Congress added Section 119(e) in 1994, the “broad language in Hilmer concerning Section 119 is not applicable to provisional applications,” Rader wrote. Further, he noted that Hilmer, whichinvolved an earlier foreign application, is distinguishable from the present case, which deals with an earlier U.S. provisional application.
The court summed up as follows:
Accordingly, the Tran patent has a patent-defeating effect as of the filing date of the Tran provisional, or September 25, 2000. Giacomini did not file his application until months after Tran filed his provisional application. Giacomini is not the first to invent in the United States and thus is not entitled to a patent.
The BPAI’s ruling was affirmed.
The opinion was joined by Judges Arthur Gajarsa and Timothy Dyk.
Giacomini was represented by Jason Paul DeMont of DeMont & Breyer, Holmdel, N.J. The PTO, Arlington, Va., was represented by Thomas L. Stoll, associate solicitor.
Read the In re Giacomini opinion
In Bilski, the Supreme Court Rejects the CAFC’s Machine-or-Transformation Test as Sole Way of Deciding if a ‘Process’ Is Patentable
June 28, 2010
The U.S. Supreme Court June 28 rejected the Federal Circuit’s machine-or-transformation test as the sole test for determining what is a patentable “process” under Section 101 of the Patent Act, but it upheld the appellate court’s ruling that the patent applicants’ claimed method of managing the consumption risk costs of a commodity is an unpatentable abstract idea (Bilski v. Kappos, U.S., No. 08-964, 11/9/09).
Writing the opinion for the high court, Justice Anthony Kennedy said that the en banc Federal Circuit below in In re Bilski, 545 F. 3d 943 (Fed. Cir. 2008) violated basic principles of statutory construction in adopting its test that an invention is a “process” under Section 101 only if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing. While “the machine-or transformation test is a useful and important clue, an investigative tool, for determining whether some claimed inventions are processes under §101,” it is “not the sole test,” Kennedy wrote. However, Kennedy did agree with the appellate court’s rejection of the claims in the disputed patent application, finding that “[t]he concept of hedging, described in claim 1 and reduced to a mathematical formula in claim 4, is an unpatentable abstract idea.”
The court’s opinion was joined in full by Chief Justice John Roberts, Justices Clarence Thomas and Samuel Alito, and joined in part by Justice Antonin Scalia.
While there were no dissenting opinions, this decision did not lack conflicting views.
In a concurring opinion joined by Justices Ruth Bader Ginsburg, Stephen Breyer, and Sonia Sotomayor, Justice John Paul Stevens said that the court’s opinion “never provides a satisfying account of what constitutes an unpatentable abstract idea,” and “does not even explain if it is using the machine-or-transformation criteria.” Further, taking issue with the statement in the court’s opinion that business methods cannot be categorically excluded from Section 101 eligibility,” Stevens boldly stated that the Patent Act’s history “strongly supports the conclusion that a method of doing business is not a `process’ under §101.”
While Justice Kennedy indicated the Supreme Court’s openness to patent-eligibility for “Information Age” innovations, such as “software, advanced diagnostic medicine techniques, and inventions based on linear programming, data compression, and the manipulation of digital signals,” the picture was clouded by the fact that Justice Antonin Scalia did not join that section. Thus, while Justice Scalia gave no reason for refusing to do so, that portion of the opinion is merely a plurality opinion.
Method of Hedging Commodities Risk Rejected Under §101.
The Patent Act at 35 U.S.C. §101 states that:
Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.
The Act at Section 100(b) states that “process” means “process, art or includes a new use of a known process, machine, manufacture, composition of matter, or material."
In this case, a patent application (Serial No. 08/833,892) filed by Bernard Bilski and Rand Warsaw (Bilski) claimed a method of managing the consumption risk costs of a commodity sold by a commodity provider at a fixed method, and price. The Board of Patent Appeals and Interferences sustained the examiner’s rejection of all 11 claims of the application as not directed to patent-eligible subject matter under 35 U.S.C. §101. Though Bilski’s appeal was first argued before a panel of the Federal Circuit, the court sua sponte took the appeal en banc.
The en banc court in 2008 affirmed the rejection of all 11 claims, ruling that they “are not directed to patent-eligible subject matter” under Section 101 of the Patent Act since they (1) are not tied to a particular machine or apparatus or (2) do not transform a particular article into a different state or thing. This “machine-or-transformation test” is the only test to be used in determining whether a claimed process is eligible for patenting under § 101, the court held, citing Supreme Court authority.
In so doing, the Federal Circuit also concluded that its test for patentability under Section 101 based on whether a process leads to a “useful, concrete and tangible result,” as set forth in State Street Bank & Trust Co. v. Signature Financial Group, 149 F.3d 1368 (Fed. Cir. 1998), is no longer applicable. Moreover, the 9-3 majority opinion rejected a “technological arts” test that would deny patentability to a claimed process unless it is directed to an advance in science or technology, In his dissenting opinion, Judge Haldane Robert Mayer offered this test as a higher barrier to the “legal tsunami” of business method patents spawned by State Street.
Two Questions Taken by the High Court.
Bilski petitioned to the U.S. Supreme Court, asking the following questions:
1. Whether the Federal Circuit erred by holding that a “process” must be tied to a particular machine or apparatus, or transform a particular article into a different state or thing … despite this Court’s precedent declining to limit the broad statutory grant of patent eligibility for “any” new and useful process beyond excluding patents for “laws of nature, physical phenomena, and abstract ideas.”
2. Whether the Federal Circuit’s “machine-or-transformation” test for patent eligibility, which effectively forecloses meaningful patent protection to many business methods, contradicts the clear Congressional intent that patents protect “method[s] of doing or conducting business.” 35 U.S.C. § 273.
The Supreme Court granted certiorari on June 1, 2009, and heard oral arguments on November 9, 2009.
As noted in our earlier story, this case has drawn intense interest from stakeholders from fields such as pharmaceuticals, medical diagnostics, and financial services, and it represents the first time that the high court has decided Section 101 patentability since the decades-old rulings in Parker v. Flook, 437 U. S. 584 (1978), Diamond v. Chakrabarty, 447 U.S. 303 (1980) and Diamond v. Diehr, 450 U.S. 175 (1981).
Machine-or-Transformation Is Not the Sole Test.
In the highly anticipated June 28 ruling, Kennedy announced that “[t]he Court of Appeals incorrectly concluded that this Court has endorsed the machine-or-transformation test as the exclusive test. As Section 101 sets out four broadly worded, independent categories of inventions or discoveries that are eligible for protection, “Congress plainly contemplated that the patent laws would be given wide scope,” Kennedy observed, quoting Chakrabarty. However, Section 101’s patent-eligibility principles are not boundless, he continued, noting that Supreme Court precedents have three specific exceptions—“laws of nature, physical phenomena, and abstract ideas.”
Kennedy went on to state the following:
This Court has not indicated that the existence of these well-established exceptions gives the Judiciary carte blanche to impose other limitations that are inconsistent with the text and the statute’s purpose and design. Concerns about attempts to call any form of human activity a “process” can be met by making sure the claim meets the requirements of §101.
Adopting the machine-or-transformation test as the sole test for what constitutes a “process” (as opposed to just an important and useful clue) violates these statutory interpretation principles. Section 100(b) provides that “[t]he term ‘process’ means process, art or method, and includes a new use of a known process, machine, manufacture, composition of matter, or material.” The Court is unaware of any “‘ordinary, contemporary, common meaning,’” … of the definitional terms “process, art or method” that would require these terms to be tied to a machine or to transform an article. Respondent urges the Court to look to the other patentable categories in §101—machines, manufactures, and compositions of matter—to confine the meaning of “process” to a machine or transformation, under the doctrine of noscitur a sociis. Under this canon, “an ambiguous term may be given more precise content by the neighboring words with which it is associated.” …This canon is inapplicable here, for §100(b) already explicitly defines the term “process.” …
The Court of Appeals incorrectly concluded that this Court has endorsed the machine-or-transformation test as the exclusive test. It is true that Cochrane v. Deener, 94 U. S. 780, 788 (1877), explained that a “process” is “an act, or a series of acts, performed upon the subject-matter to be transformed and reduced to a different state or thing.” More recent cases, however, have rejected the broad implications of this dictum; and, in all events, later authority shows that it was not intended to be an exhaustive or exclusive test. Gottschalk v. Benson, 409 U. S. 63, 70 (1972), noted that “[t]ransformation and reduction of an article ‘to a different state or thing’ is the clue to the patentability of a process claim that does not include particular machines.” At the same time, it explicitly declined to “hold that no process patent could ever qualify if it did not meet [machine or transformation] requirements.” … Flook took a similar approach, “assum[ing] that a valid process patent may issue even if it does not meet [the machine-or-transformation test].” …
This Court’s precedents establish that the machine-or transformation test is a useful and important clue, an investigative tool, for determining whether some claimed inventions are processes under §101. The machine-or transformation test is not the sole test for deciding whether an invention is a patent-eligible “process.”
Hedging Method Unpatentable Under Benson, Diehr and Flook.
Continuing, Kennedy said that “all members of the Court agree that the patent application at issue here falls outside of §101 because it claims an abstract idea.” The justices here decided that, [r]ather than adopting categorical rules that might have wide-ranging and unforeseen impacts, it was more appropriate to resolve this case narrowly based on the decisions in Benson, Flook, and Diehr.
The Court here in Bilski stated:
In Benson, the Court considered whether a patent application for an algorithm to convert binary-coded decimal numerals into pure binary code was a “process” under §101. … The Court first explained that “‘[a] principle, in the abstract, is a fundamental truth; an original cause; a motive; these cannot be patented, as no one can claim in either of them an exclusive right.’”… The Court then held the application at issue was not a “process,” but an unpatentable abstract idea. “It is conceded that one may not patent an idea. But in practical effect that would be the result if the formula for converting . . . numerals to pure binary numerals were patented in this case.”... A contrary holding “would wholly pre-empt the mathematical formula and in practical effect would be a patent on the algorithm itself.”...
In Flook, the Court considered the next logical step after Benson. The applicant there attempted to patent a procedure for monitoring the conditions during the catalytic conversion process in the petrochemical and oil-refining industries. The application’s only innovation was reliance on a mathematical algorithm. … Flook held the invention was not a patentable “process.” The Court conceded the invention at issue, unlike the algorithm in Benson, had been limited so that it could still be freely used outside the petrochemical and oil-refining industries. …Nevertheless, Flook rejected “[t]he notion that post-solution activity, no matter how conventional or obvious in itself, can transform an unpatentable principle into a patentable process.” … The Court concluded that the process at issue there was “unpatentable under §101, not because it contain[ed] a mathematical algorithm as one component, but because once that algorithm [wa]s assumed to be within the prior art, the application, considered as a whole, contain[ed] no patentable invention.” … As the Court later explained, Flook stands for the proposition that the prohibition against patenting abstract ideas “cannot be circumvented by attempting to limit the use of the formula to a particular technological environment” or adding “insignificant postsolution activity.” …
Finally, in Diehr, the Court established a limitation on the principles articulated in Benson and Flook. The application in Diehr claimed a previously unknown method for “molding raw, uncured synthetic rubber into cured precision products,” using a mathematical formula to complete some of its several steps by way of a computer. … Diehr explained that while an abstract idea, law of nature, or mathematical formula could not be patented, “an application of a law of nature or mathematical formula to a known structure or process may well be deserving of patent protection.” … Diehr emphasized the need to consider the invention as a whole, rather than “dissect[ing] the claims into old and new elements and then . . . ignor[ing] the presence of the old elements in the analysis.” … Finally, the Court concluded that because the claim was not “an attempt to patent a mathematical formula, but rather [was] an industrial process for the molding of rubber products,” it fell within §101’s patentable subject matter. …
In light of these precedents, it is clear that petitioners’ application is not a patentable “process.” Claims 1 and 4 in petitioners’ application explain the basic concept of hedging, or protecting against risk: “Hedging is a fundamental economic practice long prevalent in our system of commerce and taught in any introductory finance class.” … The concept of hedging, described in claim 1 and reduced to a mathematical formula in claim 4, is an unpatentable abstract idea, just like the algorithms at issue in Benson and Flook. Allowing petitioners to patent risk hedging would preempt use of this approach in all fields, and would effectively grant a monopoly over an abstract idea. …
Today, the Court once again declines to impose limitations on the Patent Act that are inconsistent with the Act’s text. The patent application here can be rejected under our precedents on the unpatentability of abstract ideas. The Court, therefore, need not define further what constitutes a patentable “process,” beyond pointing to the definition of that term provided in §100(b) and looking to the guideposts in Benson, Flook, and Diehr.
And nothing in today’s opinion should be read as endorsing interpretations of §101 that the Court of Appeals for the Federal Circuit has used in the past. … It may be that the Court of Appeals thought it needed to make the machine-or-transformation test exclusive precisely because its case law had not adequately identified less extreme means of restricting business method patents, including (but not limited to) application of our opinions in Benson, Flook, and Diehr. In disapproving an exclusive machine-or-transformation test, we by no means foreclose the Federal Circuit’s development of other limiting criteria that further the purposes of the Patent Act and are not inconsistent with its text.
Business Methods Put Breadth of Decision in Question.
While the high court was clearly in agreement that machine-or-transformation test is not the sole test for patentability and that the asserted claims were unpatentable, some fissures are still apparent.
Stevens’ concurring opinion agrees with the Court’s holding that the machine-or transformation test is not the sole test for what constitutes a patentable process; rather, it is a critical clue. However, he said that the Court’s opinion here never provides a satisfying account of what constitutes an unpatentable abstract idea,” and “does not even explain if it is using the machine-or-transformation criteria. “This mode of analysis (or lack thereof) may have led to the correct outcome in this case, but it also means that the Court’s musings on this issue stand for very little,” Stevens complained.
Continuing, Stevens argued that “the Court is quite wrong … to suggest that any series of steps that is not itself an abstract idea or law of nature may constitute a ‘process’ within the meaning of §101.” Insisting that the Court’s language “can only cause mischief,” Stevens said that “[t]he wiser course would have been to hold that petitioners’ method is not a “process” because it describes only a general method of engaging in business transactions—and business methods are not patentable.” Even with Stevens’ retirement from the bench, his opinion has the full support of Justices Ginsburg, Breyer, and Sotomayor.
In his own concurring opinion, Breyer stated “[t]his Court has never before held that so-called ‘business methods’ are patentable, and, in my view, the text, history, and purposes of the Patent Act make clear that they are not.” Moreover, Justice Scalia did not endorse the portion of the opinion which stated that categorical rules should not be adopted to bar patentability for unforeseen innovations. Just how broadly Section 101 will be read in future cases seems a very open question.
Read the Bilski v. Kappos opinion
Ninth Circuit Rules That Copyright Office’s Receipt of a Complete
Application Satisfies § 411(a) Registration Requirement
May 25, 2010
The U.S. Court of Appeals for the Ninth Circuit May 25 ruled that the Copyright Act’s requirement at 17 U.S.C. § 411(a) that a copyright be registered before an infringement suit can be filed is satisfied when the Copyright Office receives a complete application (Cosmetic Ideas Inc. v. IAC/InteractiveCorp, 9th Cir., No. 08-56079, 5/25/10).
In adopting the application approach, the Ninth Circuit joined the Fifth and Seventh Circuits in rejecting the position that registration under § 411(a) occurs only after the Copyright Office has affirmatively granted a registration.
Suit Against HSN Over Necklace Is Dismissed.
Cosmetic Ideas Inc. brought a copyright infringement suit against IAC/InteractiveCorp, Home Shopping Network, Inc., HSN LP, and others (collectively HSN), alleging that HSN infringed the copyright in its “Lady Caroline Lorgnette” necklace by selling a “virtually identical” necklace. Although the Copyright Office ultimately issued Cosmetic a registration certificate for its copyright in the necklace, it did not do so before Cosmetic Ideas filed its complaint.
The U.S. District Court for the Central District of California dismissed the claims for lack of subject-matter jurisdiction, ruling that 17 U.S.C. § 411(a) bars jurisdiction for suits where the plaintiff lacks a copyright registration and that Cosmetic Ideas did not possess a valid copyright registration when it commenced its action.
Cosmetic Ideas appealed.
Ruling in Reed Elsevier Removes Jurisdictional Bar.
As an initial matter, the Ninth Circuit observed the U.S. Supreme Court’s recent ruling in Reed Elsevier Inc. v. Muchnick, 130 S. Ct. 1237 (2010), which held that, although “[s]ection 411(a)’s registration requirement is a precondition to filing a claim,” it “does not restrict a federal court’s subject-matter jurisdiction.”
Given that statement by the Reed Elsevier court, the Ninth Circuit found that “the district court’s dismissal of Cosmetic’s complaint on the basis of lack of subject-matter jurisdiction—which must have been predicated on a conclusion that Cosmetic had not registered its copyright—was error.”
Court Finds Application Approach Better.
However, the Ninth Circuit said that Reed Elsevier did not conclude the inquiry here because the district court could have dismissed the suit on another ground, specifically on HSN’s argument based on Fed.R.Civ.P. Rule 12(b)(6) that the complaint failed to state a claim as Cosmetic Ideas failed to register the necklace.
So, David G. Trager of the U.S. District Court for the Eastern District of New York, sitting by designation, queried “What does it mean to “register” a copyrighted work?, and post-Reed Elsevier, registration is an element of an infringement claim, rather than a jurisdictional bar.” Putting it another way, Trager asked: is a copyright registered at the time the copyright holder’s application is received by the Copyright Office (the “application approach”), or at the time that the Office acts on the application and issues a certificate of registration (the “registration approach”)?
The Ninth Circuit noted that the federal appellate circuits are split on this issue, with the Fifth and Seventh Circuits authority adopting the application approach and the Tenth and Eleventh Circuit cases adopting the registration approach.
In resolving this issue, the Ninth Circuit first looked to the language of Section 411(a) of the 1976 Copyright Act, which states:
[N]o civil action for infringement of the copyright in any United States work shall be instituted until preregistration or registration of the copyright claim has been made in accordance with this title.
It is of no help that “registration” is defined as “a registration of a claim in the original or the renewed and extended term of copyright,” Trager said. With no guidance from the statute itself, he then looked to the Copyright Act as a whole and found much ambiguity, saying “we that not persuaded that the plain language of the Act unequivocally supports either the registration or application approach.” Ultimately, the court concluded that “the application approach better fulfills Congress’s purpose of providing broad copyright protection while maintaining a robust federal register.”
Trager first noted that the application approach “avoids unnecessary delay in copyright infringement litigation” and “avoids delay without impairing the central goal of copyright registration,” which is a voluntary procedure that Congress encouraged to create a robust national register of copyrights. Further, he said that “[t]he registration approach’s added requirement of affirmative approval or rejection before suit thus amounts to little more than just the type of needless formality Congress generally worked to eliminate in the 1976 Act.”
The Ninth Circuit concluded:
We therefore hold that receipt by the Copyright Office of a complete application satisfies the registration requirement of § 411(a). This interpretation ensures the broad copyright protection that the 1976 Act provided. It “best effectuate[s] the interests of justice and promote[s] judicial economy.” … This approach also fully accomplishes the central purpose of registration—the compilation of a robust national register of existing copyrights—and at the same time avoids unfairness and waste of judicial resources. …
Under the application approach, Cosmetic satisfied § 411(a)’s registration requirement before it instituted this action. Cosmetic alleged in its complaint that the Copyright Office received its complete application on March 12, 2008, weeks before Cosmetic filed its complaint. Thus, § 411(a) does not bar Cosmetic’s infringement claim, which should proceed on its merits.
The district court’s dismissal was vacated and reversed, and the case was remanded.
The opinion was joined by Judges Andrew J. Kleinfeld and Richard C. Tallman.
Cosmetic Ideas was represented by Evan S. Cohen and S. Martin Keleti of Cohen & Cohen, Los Angeles. HSN was represented by Edward T. Colbert, William H. Merone, and Erik C. Kane of Kenyon & Kenyon, Washington, D.C.
Read the Cosmetic Ideas Inc. v. IAC/InteractiveCorp opinion.
U.S. Supreme Court Rules That NFL’s Intellectual Property
Licensing Decisions Are Not Immune From Antitrust Scrutiny
March 24, 2010
The U.S. Supreme Court ruled May 24 that the National Football League’s decisions about licensing its 32 teams’ separately owned intellectual property are concerted activity covered by §1 of the Sherman Act (American Needle Inc. v. National Football League, U.S., No. 08-661, 5/24/10).
In its unanimous 9-0 ruling, the high court rejected the NFL’s argument that, through National Football League Properties, the 32 teams act as a single entity immune from antitrust scrutiny. In reversing the U.S. Court of Appeals for the Seventh Circuit, the justices ruled that the league and NFLP are capable of engaging in a “contract, combination . . . , or conspiracy” as defined by §1 of the Sherman Act, 15 U. S. C. §1.
League’s IP Licensing Policy Challenged.
The NFL is an unincorporated association of 32 separately owned professional football teams, each of which owns its own name, colors, logo, trademarks, and related intellectual property. The teams formed NFLP in 1963 to develop, license, and market that property.
NFLP had granted nonexclusive licenses to American Needle Inc. and other vendors to manufacture and sell team labeled apparel. However, in 2000, the teams authorized NFLP to grant exclusive licenses. NFLP then granted an exclusive license to Reebok International Ltd. to produce and sell trademarked headwear for all 32 teams.
When American Needle’s license was not renewed, it filed this action alleging that the agreements between the teams, the league, NFLP, and Reebok violated the Sherman Act, §1 of which makes “[e]very contract, combination . . . or, conspiracy, in restraint of trade” illegal.
However, the respondents answered that they were incapable of conspiring within the meaning of §1 because the NFL and its teams are a single entity with respect to the alleged conduct and thus immune from §1 analysis.
The district court granted summary judgment to the respondents, and the Seventh Circuit affirmed.
American Needle appealed.
League Is Not a Single Entity.
Justice John Paul Stevens, writing for the court, quoted authority stressing that “substance, not form, should determine whether a[n] . . . entity is capable of conspiring under §1.” Copperweld Corp. v. Independence Tube Corp., 467 U. S. 752 (1984). The question is not whether the defendant is a legally single entity or has a single name, nor is it whether the parties involved “seem” like one firm or multiple firms in any metaphysical sense, Stevens said. Rather, the question is whether the agreement joins together “independent centers of decisionmaking,” he pointed out, again, quoting Copperweld. If it does, the entities are capable of conspiring under §1, and the court must decide whether the restraint of trade is an unreasonable and therefore illegal one, he explained.
Turning away the notion that the league is a single entity, Stevens found that the “[t]he NFL teams do not possess either the unitary decisionmaking quality or the single aggregation of economic power characteristic of independent action,” but are instead competitors. He reasoned as follows:
Each of the teams is a substantial, independently owned, and independently managed business. “[T]heir general corporate actions are guided or determined” by “separate corporate consciousnesses,” and “[t]heir objectives are” not “common.” … The teams compete with one another, not only on the playing field, but to attract fans, for gate receipts and for contracts with managerial and playing personnel. ….
Directly relevant to this case, the teams compete in the market for intellectual property. To a firm making hats, the Saints and the Colts are two potentially competing suppliers of valuable trademarks. When each NFL team licenses its intellectual property, it is not pursuing the “common interests of the whole” league but is instead pursuing interests of each “corporation itself,” … ; teams are acting as “separate economic actors pursuing separate economic interests,” and each team therefore is a potential “independent cente[r] of decisionmaking,” … . Decisions by NFL teams to license their separately owned trademarks collectively and to only one vendor are decisions that “depriv[e] the marketplace of independent centers of decisionmaking,”…, and therefore of actual or potential competition. …
In defense, respondents argue that by forming NFLP, they have formed a single entity, akin to a merger, and market their NFL brands through a single outlet. But it is not dispositive that the teams have organized and own a legally separate entity that centralizes the management of their intellectual property. An ongoing §1 violation cannot evade §1 scrutiny simply by giving the ongoing violation a name and label. “Perhaps every agreement and combination in restraint of trade could be so labeled.” …
The NFL respondents may be similar in some sense to a single enterprise that owns several pieces of intellectual property and licenses them jointly, but they are not similar in the relevant functional sense. Although NFL teams have common interests such as promoting the NFL brand, they are still separate, profit-maximizing entities, and their interests in licensing team trademarks are not necessarily aligned. … Common interests in the NFL brand “partially unit[e] the economic interests of the parent firms,”…, but the teams still have distinct, potentially competing interests.
It may be, as respondents argue, that NFLP “has served as the ‘single driver’’ of the teams’ “promotional vehicle,” “‘pursu[ing] the common interests of the whole.’” … But illegal restraints often are in the common interests of the parties to the restraint, at the expense of those who are not parties. It is true, as respondents describe, that they have for some time marketed their trademarks jointly. But a history of concerted activity does not immunize conduct from §1 scrutiny.“ Absence of actual competition may simply be a manifestation of the anticompetitive agreement itself.”
Though also recognizing the Seventh Circuit’s point that the teams in the league cooperate with each other for economic survival, Stevens said that this justification “is not relevant to whether that cooperation is concerted or independent action.” For many joint ventures, he said, “the participation of others is necessary. But that does not mean that necessity of cooperation transforms concerted action into independent action; a nut and a bolt can only operate together, but an agreement between nut and bolt manufacturers is still subject to §1 analysis.”
While Raising a ‘Closer’ Question, NFLP Also Is Not a Single Entity.
The high court acknowledged that the question of whether NFLP decisions can constitute concerted §1 activity “is closer than whether decisions made directly by the 32 teams are covered by §1.” On this point, Stevens noted that NFLP is a separate corporation with its own management and that most of the revenues generated by NFLP are shared by the teams equally.
“Nevertheless we think it clear that for the same reasons the 32 teams’ conduct is covered by §1, NFLP’s actions also are subject to §1, at least with regards to its marketing of property owned by the separate teams,” Stevens said. He wrote:
NFLP’s licensing decisions are made by the 32 potential competitors, and each of them actually owns its share of the jointly managed assets. … Apart from their agreement to cooperate in exploiting those assets, including their decisions as the NFLP, there would be nothing to prevent each of the teams from making its own market decisions relating to purchases of apparel and headwear, to the sale of such items, and to the granting of licenses to use its trademarks.
We generally treat agreements within a single firm as independent action on the presumption that the components of the firm will act to maximize the firm’s profits. But in rare cases, that presumption does not hold. Agreements made within a firm can constitute concerted action covered by §1 when the parties to the agreement act on interests separate from those of the firm itself, and the intrafirm agreements may simply be a formalistic shell for ongoing concerted action. …
For that reason, decisions by the NFLP regarding the teams’ separately owned intellectual property constitute concerted action. Thirty-two teams operating independently through the vehicle of the NFLP are not like the components of a single firm that act to maximize the firm’s profits. The teams remain separately controlled, potential competitors with economic interests that are distinct from NFLP’s financial well-being. … Unlike typical decisions by corporate shareholders, NFLP licensing decisions effectively require the assent of more than a mere majority of shareholders. And each team’s decision reflects not only an interest in NFLP’s profits but also an interest in the team’s individual profits. … The 32 teams capture individual economic benefits separate and apart from NFLP profits as a result of the decisions they make for the NFLP. NFLP’s decisions thus affect each team’s profits from licensing its own intellectual property. “Although the business interests of” the teams “will often coincide with those of the” NFLP “as an entity in itself, that commonality of interest exists in every cartel.” … In making the relevant licensing decisions, NFLP is therefore “an instrumentality” of the teams. …
If the fact that potential competitors shared in profits or losses from a venture meant that the venture was immune from §1, then any cartel “could evade the antitrust law simply by creating a ‘joint venture’ to serve as the exclusive seller of their competing products.” … “So long as no agreement,” other than one made by the cartelists sitting on the board of the joint venture, “explicitly listed the prices to be charged, the companies could act as monopolies through the ‘joint venture.’” … However, competitors “cannot simply get around” antitrust liability by acting “through a third-party intermediary or ‘joint venture’.”
The decision of the Seventh Circuit was reversed, and the case was remanded.
Glen D. Nager of Jones Day, Washington, D.C., argued for American Needle. Gregg H. Levy of Covington Burling, Washington, D.C., argued for the respondents.
Read the American Needle Inc. v. National Football League ruling
CAFC Will Decide En Banc Whether Contempt Proceeding Is Proper Setting for Resolving Infringement by Newly Accused Devices
May 14, 2010
The U.S. Court of Appeals for the Federal Circuit May 14 issued an order agreeing to decide en banc whether a contempt proceeding is the proper setting for determining whether a newly accused device infringes a patent in violation of an injunctive order (TiVo Inc. v. EchoStar Corp., Fed. Cir., No. 09-1374, en banc order 5/14/10).
March 4 Ruling Against EchoStar Vacated.
In deciding to take this case en banc, the court vacated its March 4 opinion which affirmed a $90 million judgment against EchoStar Corp. In doing so, the court denied EchoStar’s petition for panel rehearing and reinstated its appeal.
As reported in an earlier Intellirights story, the appellate court in March agreed that EchoStar was in contempt of a district court’s permanent injunction order barring further infringement of TiVo Inc.’s “Multimedia Time Warping System” patent (6,233,389).
This is the second case that the appellate court has taken en banc in less than a month. On April 26, the court issued an order in which it agreed to address en banc whether the materiality-intent balancing standard for inequitable conduct should be modified or abandoned altogether. Therasense Inc. v. Becton, Dickinson and Co., Fed. Cir., No. 2008-1511, 4/26/10). (See our earlier story).
Issues for Briefing.
The per curiam court asked the parties to address the following issues:
a) Following a finding of infringement by an accused device at trial, under what circumstances is it proper for a district court to determine infringement by a newly accused device through contempt proceedings rather than through new infringement proceedings? What burden of proof is required to establish that a contempt proceeding is proper?
b) How does “fair ground of doubt as to the wrongfulness of the defendant’s conduct” compare with the “more than colorable differences” or “substantial open issues of infringement” tests in evaluating the newly accused device against the adjudged infringing device? See Cal. Artificial Stone Paving Co. v. Molitor, 113 U.S. 609, 618 (1885); KSM Fastening Sys., Inc. v. H.A. Jones Co., 776 F.2d 1522, 1532 (Fed. Cir. 1985).
c) Where a contempt proceeding is proper, (1) what burden of proof is on the patentee to show that the newly accused device infringes (see KSM, 776 F.2d at 1524) and (2) what weight should be given to the infringer’s efforts to design around the patent and its reasonable and good faith belief of noninfringement by the new device, for a finding of contempt?
d) Is it proper for a district court to hold an enjoined party in contempt where there is a substantial question as to whether the injunction is ambiguous in scope?
EchoStar, Dish Network, and the other defendants must file their en banc brief within 42 days from the date of filing of the court’s May 14 order. TiVo’s response brief is due within 42 days from the date of service of that brief.
Read the TiVo Inc. v. EchoStar Corp. order.
CAFC Affirms Ruling That Photocure Was Entitled to Hatch-Waxman
Term Extension for Patent Covering Metvixia Skin Cancer Drug
May 10, 2010
The U.S. Court of Appeals for the Federal Circuit May 10 affirmed a ruling that the Patent and Trademark Office improperly denied Norwegian pharmaceutical maker Photocure ASA a patent term extension for its Metvixia skin cancer drug (Photocure ASA v. Kappos, Fed. Cir., No. 2009-1393, 5/10/10).
In its decision, the appellate court rejected the PTO’s interpretation that the patented compound did not qualify as an “active ingredient” of a “new drug” product under 35 U.S.C. §156 because it is an ester of a drug previously approved by the Food and Drug Administration for the same therapeutic use.
PTO Denies Term Extension.
Norway’s Photocure ASA is a pharmaceutical drug maker with a patent (6,034,267) covering the chemical compound methyl aminolevulinate hydrochloride (MAL hydrochloride), which is the active ingredient in the brand name drug Metvixia® for treating precancerous cell growths on the skin. After the Food and Drug Administration approved MAL hydrochloride as a treatment, Photocure applied for the statutory extension of the term of the ’267 patent to restore a portion of the patent life lost during the period of regulatory review pursuant to 35 U.S.C. §156.
However, the Patent and Trademark Office denied the extension, ruling that MAL hydrochloride was not an “active ingredient” of a “new drug” product under § 156(f)(2) because it is an ester of the known compound aminolevulinic acid hydrochloride (ALA hydrochloride), which had previously received FDA approval for the same therapeutic use. To the PTO, MAL hydrochloride is the same “product” as ALA hydrochloride because the “underlying molecule” of MAL is ALA, and ALA was simply being formulated differently in the two drugs.
The U.S. District Court for the Eastern District of Virginia, however, found that the PTO misread the statute and that MAL hydrochloride is indeed the active ingredient of a new drug product that required FDA approval.
The PTO appealed.
PTO’s Flawed Reading of §156.
The PTO argued that “active ingredient” does not mean the product that is present in the approved drug, but only the “active moiety” of the product—the part responsible for the pharmacological properties.
The Federal Circuit disagreed. Judge Pauline Newman first observed authority holding that “product” in §156(a) means the product that is present in the drug for which federal approval was obtained. Glaxo Operations UK Ltd. v. Quigg, 894 F.2d 392 (Fed. Cir. 1990). While the PTO put great weight on Pfizer Inc. v. Dr. Reddy’s Laboratories Ltd., 359 F.3d 1361 (Fed. Cir. 2004), that case did not involve Glaxo’s ruling that the active ingredient is the ingredient in the drug product as administered, Newman said. Rather, she explained that Pfizer held that infringement of an extended patent on the drug amlodipine could not be avoided by changing the salt.
Pfizer did not hold that extension is not available when an existing product is substantively changed in a way that produces a new and separately patentable product having improved properties and requiring full FDA approval. To the contrary, the disputed product in Pfizer was a salt that was included in the Pfizer patent claims and for which Pfizer had provided data to the FDA. The decision in Pfizer did not change the law of §156, and Pfizer did not concern a different, separately patented product requiring full regulatory approval.
The PTO argues that even if its view of Pfizer is not accepted, the agency’s interpretation is entitled to deference in accordance with the persuasiveness of the agency’s reasoning, citing Skidmore v. Swift & Co., 323 U.S. 134 (1944). In the district court, the Director also cited Chevron U.S.A., Inc. v. Natural Resources Defense Council Inc., 467 U.S. 837 (1984), for the rule that when a statute is ambiguous the court should defer to the interpretation by the agency charged with administering the statute. The district court observed that Chevron does not apply because the statute is unambiguous, and that Skidmore deference is not warranted because the PTO’s interpretation is neither persuasive nor consistent. We agree with the district court. As this court held in Glaxo, “section 156(f)(2)’s operative terms, individually and as combined in the full definition, have a common and unambiguous meaning, which leaves no gap to be filled in by the administering agency.” … Even if some level of deference were owed to the PTO’s interpretation, neither Chevron nor Skidmore permits a court to defer to an incorrect agency interpretation.…
The PTO’s statutory interpretation, which would exclude MAL hydrochloride from term extension, is contrary to the statutory purpose, for MAL is the active ingredient of a new and improved drug product. The district court correctly applied 35 U.S.C. §156 to extend the term of the patented product that is subject to regulatory review. We affirm the ruling that the patent on MAL hydrochloride is subject to term extension.
The opinion was joined by Judges Randall R. Rader and Richard Linn.
Photocure was represented by John W. Bateman of Kenyon & Kenyon, Washington, D.C. The PTO was represented by Scott R. McIntosh of the U.S. Department of Justice, Washington, D.C.
Read the Photocure ASA v. Kappos opinion
En Banc CAFC Will Address Materiality
-Intent Standard for Inequitable Conduct
April 26, 2010
The U.S. Court of Appeals Apr. 26 issued a per curiam order agreeing to hear en banc whether the materiality-intent balancing standard for inequitable conduct should be modified or replaced altogether (Therasense Inc. v. Becton, Dickinson and Co., Fed. Cir., No. 2008-1511, 4/26/10).
Abbott’s Test Strip Patent Found Unenforceable.
Inequitable conduct has been long viewed as a problematic and troublesome defense for patent holders in infringement cases. This defense places patents in jeopardy of being held unenforceable where an affirmative misrepresentation of a material fact, a failure to disclose material information, or a submission of false material information is coupled with the intent to deceive the Patent and Trademark Office during prosecution.
The party asserting inequitable conduct must prove a threshold level of materiality and intent by clear and convincing evidence. A court must then determine whether the questioned conduct amounts to inequitable conduct by balancing the levels of materiality and intent, “with a greater showing of one factor allowing a lesser showing of the other.” Digital Control Inc. v. Charles Mach. Works, 437 F.3d 1309 (Fed. Cir. 2006).
The requisite level of intent is “specific intent”—not simple negligence, or even gross negligence—as the en banc Federal Circuit ruled in Kingsdown Med. Consultants Ltd. v. Hollister Inc., 863 F.2d 867 (Fed. Cir. 1988), that even gross negligence insufficient to prove intent to deceive. Still, the balancing test has vexed many in the patent bar who consider inequitable conduct a “plague” that is asserted too frequently in patent cases.
As reported in an earlier story, a glucose test strip patent (5,820,551 of Abbott Diabetes Care Inc. and Abbott Laboratories was found unenforceable where Abbott’s patent attorney and its head of research and development withheld from the Patent and Trademark Office contradictory statements that they made regarding relevant company prior art in proceedings at the European Patent Office. “An applicant’s earlier statements about prior art, especially one’s own prior art, are material to the PTO when those statements directly contradict the applicant’s position regarding that prior art in the PTO,” the Federal Circuit wrote. To the majority, “[t]his is one of those rare cases in which a finding of inequitable conduct is appropriate, particularly in light of the critical nature of the representations to the PTO in securing allowance of the ’551 patent and the district court’s careful and thorough findings as to materiality and intent.”
However, Judge Richard Linn strongly disagreed, insisting that the majority ignored evidence that it was plausible for these representatives to subjectively believe that the withheld information was immaterial when they withheld it.
Linn stated his argument this way:
Far from a mere blanket denial of deceptive intent, the individuals’ explanation includes specific, detailed reasons as to why they subjectively believed that the withheld information was immaterial during prosecution. Such an explanation will defeat a charge of inequitable conduct if it is “plausible.” The question, thus, is not whether it is plausible that the information is immaterial—a question asked under the objective materiality prong—but rather, whether it is plausible that the individuals subjectively believed that the reference was immaterial at the time they withheld it—a question presented under the subjective intent prong.
Abbott petitioned for a panel rehearing and a rehearing en banc, and many amici filed briefs in support of addressing the law of inequitable conduct en banc. In response, the Federal Circuit denied the petition for panel rehearing but agreed to address the inequitable conduct conundrum en banc. In doing so, the court has vacated the January 25 panel decision and reinstated Abbott’s appeal.
Questions for Briefing.
The parties are requested to file new briefs addressing the following issues:
1. Should the materiality-intent-balancing framework for inequitable conduct be modified or replaced?
2. If so, how? In particular, should the standard be tied directly to fraud or unclean hands? See Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806 (1945); Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238 (1944), overruled on other grounds by Standard Oil Co. v. United States, 429 U.S. 17 (1976); Keystone Driller Co. v. Gen. Excavator Co., 290 U.S. 240 (1933). If so, what is the appropriate standard for fraud or unclean hands?
3. What is the proper standard for materiality? What role should the United States Patent and Trademark Office’s rules play in defining materiality? Should a finding of materiality require that but for the alleged misconduct, one or more claims would not have issued?
4. Under what circumstances is it proper to infer intent from materiality? See Kingsdown Med. Consultants, Ltd. v. Hollister Inc., 863 F.2d 867 (Fed. Cir. 1988) (en banc).
5. Should the balancing inquiry (balancing materiality and intent) be abandoned?
6. Whether the standards for materiality and intent in other federal agency contexts or at common law shed light on the appropriate standards to be applied in the patent context.
Abbott’s brief is due 45 days from the date of this order, and Becton Dickinson and Co.’s response brief is due within 30 days of service of that brief. Read the Federal Circuit’s per curiam order.
Federal Circuit Rules That No Private Cause of Action Exists to Correct Inventorship Until a Patent Has Issued
March 31, 2010
The U.S. Court of Appeals for the Federal Circuit ruled Mar. 31 that there is no private cause of action to correct inventorship until a patent has issued (HIF Bio Inc. v. Yung Shin Pharms. Indus. Co. Ltd., Fed. Cir., No. 2006-1522, 3/31/10).
In a case remanded from the U.S. Supreme Court, the appellate court found that there was federal jurisdiction under 28 U.S.C. § 1338(a) as to two state law causes of action because they both involved inventorship—a unique question of federal patent law. However, the court held that both causes of action should be dismissed under Fed.R.Civ.P. 12(b)(6) because no private right of action exists to challenge inventorship of a pending patent application.
Applications Lead to Inventorship Suit in State Court.
This suit was brought in state court by HIF Bio Inc. and BizBiotech Co. Ltd., assignees of a U.S. patent application filed by professors Jong-Wan Park and Yang-Sook Chun, which is titled “Method for Inhibiting Tumor Angiogenesis and Tumor Growth.” Park and Chun began studying a chemical, YC-1, and its effect on protein complex known as HIF-1. They hypothesized that YC-1 “could be used to inhibit the activity of HIF-1, which would have the effect of suppressing …the growth of blood vessels into animal tumors, and thereby kill[ing] the tumor by starving it of oxygen and nutrients.”
HIF Bio Inc. and BizBiotech pursued a declaratory judgment of inventorship and various state law causes of action against Yung Shin Pharmaceuticals, a Taiwanese drug maker that acquired a U.S. Provisional Patent application titled “Angiogenesis Inhibitors” from another scientist, Che-Ming Teng. Park and Chun had trusted Teng with information about their research when he agreed to provide them with the YC-1 necessary for their experiments.
In addition to Teng and Yung Shin, the suit named Fang-Yu Lee, Yung Shin’s president, and Carlsbad Technology Inc., a California company engaged by Yung Shin to commercialize the use of YC-1 as an anti-angiogenic, anti-cancer drug in the United States. The suit also named Yung Shin’s patent counsel, Y. Rocky Tsao and Fish and Richardson, P.C., and alleged Taiwanese co-conspirator, Yung Zip Chemical Co., Ltd.
In November 2005, Carlsbad removed the suit to a federal district court, which granted Carlsbad’s dismissal motion and remanded the case to state court. In remanding the case, the district court held that the causes of action claiming rights of inventorship and ownership of inventions are valid state law claims. It then declined to exercise supplemental jurisdiction and remanded those claims along with the remaining nine claims to California state court.
On appeal, the Federal Circuit held that 28 U.S.C. § 1447(d) barred appellate review of a remand order based on declining supplemental jurisdiction and dismissed the appeal for lack of jurisdiction. HIF Bio Inc. v. Yung Shin Pharms. Indus. Co. Ltd., 508 F.3d 659 (Fed. Cir. 2007). The U.S. Supreme Court Court reversed that ruling, holding that § 1447(d) did not bar appellate review. Carlsbad Tech. Inc. v. HIF Bio Inc., 129 S. Ct. 1862 (2009).
Inventorship Is Federal Issue, But No Private Right of Action Exists.
On remand from the Supreme Court, the Federal Circuit said that “[t]he sole remaining issue is whether the district court abused its discretion in remanding plaintiffs’ amended complaint to California state court.”
Whether the district court possessed jurisdiction here is a question of law that this court reviews without deference, Judge Arthur J. Gajarsa observed. A district court’s jurisdiction under 28 U.S.C. § 1338(a) “extend[s] only to those cases in which a well-pleaded complaint establishes either that federal patent law creates the cause of action or that the plaintiff’s right to relief necessarily depends on the resolution of a substantial question of federal patent law, in that patent law is a necessary element of the well-pleaded claims,” he said, quoting authority. Christianson v. Colt Indus. Operating Corp., 486 U.S. 800 (1988).
Looking at the complaint, the appellate court found that the cause of action for a declaratory judgment that Park and Chun are the true “inventors/discoverers of the INVENTION” raises a substantial question of federal patent law supporting jurisdiction under § 1338. The only possible theory upon which relief could be granted to the plaintiffs would be one in which determining the true inventor(s) of competing patent applications is essential, the appellate court reasoned. “Because inventorship is a unique question of patent law, the cause of action arises under § 1338(a),” it said, citing Christianson.
As this cause of action raises a unique question of patent law, the district court erred in concluding that it presented a valid state law claim, Gajarsa stated. Here, he quoted the statement in Univ. of Colo. Found. v. Am. Cyanamid Co., 196 F.3d 1366 (Fed. Cir. 1999), that “the field of federal patent law preempts any state law that purports to define rights based on inventorship."
Still, despite the federal jurisdiction over this cause of action, Gajarsa said that the relief sought by Park and Chun was very limited because it “is tantamount to a request for either a modification of inventorship on pending patent applications or an interference proceeding.” Their relief can only be granted by the Director of the United States Patent and Trademark Office, he said, citing the Patent Act at 35 U.S.C. § 116 and §135(a). Section 116 authorizes the Director of the Patent and Trademark Office to take certain actions concerning pending patent applications, but “plainly does not create a cause of action in the district courts to modify inventorship on pending patent applications,” Gajarsa continued, quoting Eli Lilly & Co. v. Aradigm Corp., 376 F.3d 1352 (Fed. Cir. 2004).
Gajarsa concluded that neither Section 116 nor Section 135(a) could help Park and Chun in this case because they are disputing inventorship in pending patent applications. He explained:
Similarly, § 135(a) provides the PTO with the exclusive right to conduct an interference proceeding. … While the question of who invented an invention disclosed in pending patent applications is a question of federal patent law, Congress, through §§ 116 and 135(a), has limited the avenues by which such inventorship can be contested.
Despite the statute’s language, some district courts have held that § 116 provides a private right of action to challenge inventorship of a pending patent application. … Other district courts, following our decision in Eli Lilly, have interpreted § 116 as foreclosing private actions in district court. ..
To the extent Eli Lilly failed to resolve this issue, we expressly hold that § 116 does not provide a private right of action to challenge inventorship of a pending patent application. Once a patent issues, however, 35 U.S.C. § 256 provides a private right of action to challenge inventorship, and such a challenge arises under § 1338(a).
Given their proper import, §§ 116 and 135(a) preclude the district court from granting plaintiffs’ requested relief – a declaration of the “true” inventor of a pending patent application. Accordingly, while the district court has jurisdiction over the cause of action, it should have dismissed the claim under Rule 12(b)(6) because no private right of action exists.
Slander of Title Also Involves Inventorship.
Continuing, the court examined the remainder of the state law claims and found that slander of title was the only other than involved federal patent law. The sole theory of this claim requires a determination of who invented the “INVENTION,” Gajarsa stressed. Again noting that “inventorship is indisputably a question of federal patent law,” he concluded that this cause of action invokes federal jurisdiction and that the district court’s decision to remand it was an abuse of discretion.
However, as with the other inventorship cause of action, the court ruled that while one also invokes federal jurisdiction and should not have been remanded, the district court should dismiss it under Rule 12(b)(6) for failure to state a claim for which relief may be granted.
Because the remaining state law claims do not arise under federal law, the district should remand them to California state court, Gajarsa stated.
The district court’s ruling was reversed and remanded.
The opinion was joined by Chief Judge Paul Michel and Chief Judge James F. Holderman of the U.S. District Court for the Northern District of Illinois, sitting by designation.
HIF Bio and BizBiotech were represented by Bub-Joo S. Lee of Lee Anav Chung, Los Angeles. Carlsbad was represented by Glenn W. Rhodes of Howrey LLP, San Francisco.
Read the HIF Bio Inc. v. Yung Shin Pharms. Indus. Co. Ltd. opinion
Claim Reading Wrongly Based on Structures Not in Specification
March 24, 2010
The U.S. Court of Appeals for the Federal Circuit ruled Mar. 24 that a district court’s claim construction of a term in a means-plus-function claim in patents covering surgical tools was erroneously based on structures found in the prior art but not described in the specification (Pressure Products Medical Supplies Inc. v. Greatbatch Ltd., Fed. Cir., No. 08-1602, 3/24/10).
Accordingly, the appellate court vacated and remanded the infringement finding for a determination based on the proper claim construction.
However, Judge Pauline Newman dissented in part, arguing that the patents fully disclosed the structures and that those from the prior art were simply incorporated by reference to illustrate “known structures that are known alternatives or equivalents to those in the specification.”
Patents on Surgical Introducers Found Infringed.
In this case, a jury found that Enpath Medical Inc. infringed two patents (5,125,904 and 5,312,355) covering a medical device known as an introducer. This device permits a surgeon to place and remove catheters or pacemaker leads into blood vessels during surgical procedures, and Pressure Products Medical Supplies, Inc. is the exclusive licensee of both patents.
Enpath appealed the district court’s final judgment, its construction of the claim term “score line,” and the denials of its motions for judgment as a matter of law as to invalidity and its motion to amend its answer to assert the inequitable conduct defense.
Prior Art Structures Erroneously Included.
The prior art had no convenient way to remove the valve along with the sheath, and almost any procedure to remove the valve would cause considerable blood loss during a surgical procedure. This invention devised a way to remove both the valve and the sheath by a splitting process, as exhibited in Figure 1.
Claim 1 of each of the ’904 and ’355 patents requires a:
“means for permitting removal of said hemostatic valve and introducer sheath from said lead or catheter disposed therethrough without requiring said introducer sheath and hemostatic valve to be removed from an end of said lead or catheter.”
Interpreting the “means for permitting removal” limitation under Patent Act Section 112, ¶6, 35 U.S.C. § 112, ¶6, the district court identified the “score line” recited in the specification as the structure for performing this function. However, the trial court supplemented its definition of “score line” with structures disclosed within the list of prior art references cited in the patents.
While agreeing with the trial court’s decision to supplement the definition of “score line,” the Federal Circuit ruled that it was improper to do so based on structures not disclosed in the specifications of the patents. Section 112 requires that the corresponding structure must be “described in the specification,” Judge Randall R. Rader stressed, quoting the statute. Here, he said, “the trial court impermissibly expanded the corresponding structure of claim 1 to include structures not described in the specification.”
Trial courts cannot look to the prior art, identified by nothing more than its title and citation in a patent, to provide corresponding structure for a means-plus-function limitation. In this case, these references provide alternatives to scoring. Although many of the disclosed alternatives may well be determined to be structural equivalents permitted by section 112, paragraph 6—a question of fact for the jury—these alternative methods of splitting or peeling cannot be treated as the disclosed structures for the removal means. Simply mentioning prior art references in a patent does not suffice as a specification description to give the patentee outright claim to all of the structures disclosed in those references.
The trial court erroneously used structures from the prior art references listed in the patent to provide a definition for score lines encompassing structures not disclosed expressly in the patent specification. As such, this court detects error in the trial court’s definition. Score lines are “one or more lines defined in the hemostatic valve and introducer sheath” as supported by the specification. This court remands for further proceedings in light of the proper construction of the term “score lines.”
Citing Atmel Corp. v. Info. Storage Devices Inc., 198 F.3d 1374 (Fed. Cir. 1999), Rader said that authority “refused to utilize the concept of incorporation by reference to include a structure in the prior art as a corresponding structure for a means-plus-function claim element.”
While the appellate court vacated and remanded the infringement finding for a determination based on the proper claim construction, it did affirm the district court’s judgment on the issues of validity and inequitable conduct.
The district court’s ruling was affirmed in part, reversed in part, and remanded.
The opinion was joined by Judges Arthur J. Gajarsa and Kimberly A. Moore.
Dissenting View: Structure Was Disclosed in Patents.
Judge Pauline Newman concurred with the decision to affirm the district court’s judgment on validity and inequitable conduct, but insisted that the claim construction should have also been affirmed.
Newman said that the majority gave an “incorrect generalization” of Atmel’s holding. “In Atmel, the flaw was that no structure at all was described to perform the claimed function apart from the incorporated reference, and that this description could not come solely from the incorporated reference,” but that situation is far different from this case, she insisted. “T]he ’904 and ’355 patents fully describe structures that perform the claimed function of removal of the valve and sheath, describing splittable sheaths of various forms, and explaining that there are many known ways of splitting or peeling plastic.”
Citing a host of cases, including Telemac Cellular Corp. v. Topp Telecom Inc., 247 F.3d 1316 (Fed. Cir. 2001) and Multiform Desiccants Inc. v. Medzam Ltd., 133 F.3d 1473 (Fed. Cir. 1998), Newman continued:
No blanket rule prohibits reliance on prior art for known information. Precedent is contrary. … This expedient is not without logical limitations, but incorporated material is viewed as it would be treated by a person experienced in the field of the invention. … Information is incorporated by reference into patent specifications for various purposes, and known information may usefully be incorporated by reference, to illustrate known structures that are known alternatives or equivalents to those in the specification. This enables patents to remain concise statements of what is new, not cumbersome repetitions of what is already known and readily provided by reference. …
Pressure Products was represented by Richard H. Zaitlen of Pillsbury Winthrop Shaw Pittman, Los Angeles. Enpath was represented by David G. Henry of Patton Boggs, Dallas.
Read the Pressure Products Medical Supplies Inc. v. Greatbatch Ltd. opinion
En Banc Federal Circuit Rules That Written Description Requirement of §112, ¶1, Is Separate From Enablement
March 22, 2010
The en banc U.S. Court of Appeals for the Federal Circuit Mar. 22 ruled that the Patent Act at 35 U.S.C. § 112, ¶ 1, contains a written description requirement that is separate and distinct from the statute’s enablement requirement (Ariad Pharms. Inc. v. Eli Lilly & Co., Fed. Cir., No. 2008-1248, 3/22/10).
However, Judge Richard Linn, joined by Judge Randall R. Rader, argued that the majority’s “creation of a separate, additional requirement—with a poorly defined standard—is unnecessary and ill advised.” Forcing original claims over an additional hurdle beyond enablement “perpetuates an unnecessary tension between the claims and the written description as the definition of a patented invention,” Linn argued.
Briefs Addressed if Written Description Is Separate Requirement.
As reported in an earlier Intellirights story, the parties in this appeal to the Federal Circuit were asked to brief:
a. Whether 35 U.S.C. § 112, paragraph 1, contains a written description requirement separate from an enablement requirement?
b. If a separate written description requirement is set forth in the statute, what is the scope and purpose of the requirement?
On Aug. 21, 2009, the per curiam court issued an order that vacated the April 3 invalidity ruling in favor of Eli Lilly & Co., which was sued for infringing a patent (6,410,516) directed to gene regulation. Ariad Pharms. Inc. licensed the patent from Harvard University, the Massachusetts Institute of Technology, and the Whitehead Institute for Biomedical Research.
A jury had found the patent on “Nuclear factors associated with transcriptional regulation” valid and infringed by Lilly's sales of Evista® and Xigris®, and the district court had ruled that the asserted claims were directed to patentable subject matter and that the patent was not unenforceable due to inequitable conduct or prosecution laches.
The Federal Circuit’s April 2009 decision found that the claims failed to satisfy the written description requirement at 35 U.S.C. § 112, ¶ 1, but affirmed the ruling that the patent was not unenforceable for inequitable conduct.
The ’516 patent specification hypothesizes three classes of molecules potentially capable of reducing NF-κB activity: specific inhibitors, dominantly interfering molecules, and decoy molecules. To Lilly, this disclosure amounts to little more than a research plan, and does not satisfy the patentee’s quid pro quo as described in Univ. of Rochester v. G.D. Searle & Co., 358 F.3d 916 (Fed. Cir. 2004).
In the panel decision, Judge Kimberly A. Moore agreed with Lilly’s argument that the asserted claims are not supported by written description because the specification fails to adequately disclose how the claimed reduction of NF-κB activity is achieved.
However, Judge Richard Linn argued in a dissenting opinion that neither case relied on by the majority—Univ. of Rochester or Regents of the University of California v. Eli Lilly & Co., 119 F.3d 1559 (Fed. Cir. 1997)—mandates a separate and distinct written description requirement. Linn said that “our engrafting of a separate written description requirement onto section 112, paragraph 1 is misguided” because “the claims—not the specification—define the invention.”
The en banc court heard oral arguments on December 7, 2009.
En Banc Court Finds Written Description a Separate Requirement.
The Patent Act at 35 U.S.C. §112, ¶1 states that:
The specification shall contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same, and shall set forth the best mode contemplated by the inventor of carrying out his invention.
Judge Alan D. Lourie, writing for the majority, agreed with Lilly’s position and read the “shall contain a written description of the invention” language to mean that the statute has two separate description requirements: a “written description [i] of the invention, and [ii] of the manner and process of making and using [the invention]. “If Congress had intended enablement to be the sole description requirement of § 112, first paragraph, the statute would have been written differently,” Lourie said. “Furthermore, since 1793, the Patent Act has expressly stated that an applicant must provide a written description of the invention, and after the 1836 Act added the requirement for claims, the Supreme Court applied this description requirement separate from enablement.”
[A] separate requirement to describe one’s invention is basic to patent law. Every patent must describe an invention. It is part of the quid pro quo of a patent; one describes an invention, and, if the law’s other requirements are met, one obtains a patent. The specification must then, of course, describe how to make and use the invention (i.e., enable it), but that is a different task. A description of the claimed invention allows the United States Patent and Trademark Office (“PTO”) to examine applications effectively; courts to understand the invention, determine compliance with the statute, and to construe the claims; and the public to understand and improve upon the invention and to avoid the claimed boundaries of the patentee’s exclusive rights.
Lourie went on to explain that “[t]he written description requirement also ensures that when a patent claims a genus by its function or result, the specification recites sufficient materials to accomplish that function—a problem that is particularly acute in the biological arts.” Paralleling this case to Rochester and Eli Lilly, he stated:
In Rochester, we held invalid claims directed to a method of selectively inhibiting the COX-2 enzyme by administering a non-steroidal compound that selectively inhibits the COX-2 enzyme. … We reasoned that because the specification did not describe any specific compound capable of performing the claimed method and the skilled artisan would not be able to identify any such compound based on the specification’s function description, the specification did not provide an adequate written description of the claimed invention. … Such claims merely recite a description of the problem to be solved while claiming all solutions to it and, as in Eli Lilly and Ariad’s claims, cover any compound later actually invented and determined to fall within the claim’s functional boundaries—leaving it to the pharmaceutical industry to complete an unfinished invention.
Impact on Universities Addressed.
In response to Ariad’s argument that this new requirement would adversely impact universities’ work in basic research, Lourie said that “the patent law has always been directed to the “useful Arts,” U.S. Const. art. I, § 8, cl. 8, meaning inventions with a practical use.” He continued:
Much university research relates to basic research, including research into scientific principles and mechanisms of action, … and universities may not have the resources or inclination to work out the practical implications of all such research, i.e., finding and identifying compounds able to affect the mechanism discovered. That is no failure of the law’s interpretation, but its intention. Patents are not awarded for academic theories, no matter how groundbreaking or necessary to the later patentable inventions of others. “[A] patent is not a hunting license. It is not a reward for the search, but compensation for its successful conclusion.” … Requiring a written description of the invention limits patent protection to those who actually perform the difficult work of “invention”—that is, conceive of the complete and final invention with all its claimed limitations—and disclose the fruits of that effort to the public.
That research hypotheses do not qualify for patent protection possibly results in some loss of incentive, although Ariad presents no evidence of any discernable impact on the pace of innovation or the number of patents obtained by universities. But claims to research plans also impose costs on downstream research, discouraging later invention. The goal is to get the right balance, and the written description doctrine does so by giving the incentive to actual invention and not “attempt[s] to preempt the future before it has arrived.” … As this court has repeatedly stated, the purpose of the written description requirement is to “ensure that the scope of the right to exclude, as set forth in the claims, does not overreach the scope of the inventor’s contribution to the field of art as described in the patent specification.” … It is part of the quid pro quo of the patent grant and ensures that the public receives a meaningful disclosure in exchange for being excluded from practicing an invention for a period of time.
The en banc court reversed the ruling of no invalidity for inadequate written description, but affirmed the finding of no inequitable conduct.
The opinion was joined by Chief Judge Paul Michel and Judges Haldane Robert Mayer, William C. Bryson, Arthur J. Gajarsa, Timothy B. Dyk, Sharon Prost, Kimberly A. Moore, and Pauline Newman, who filed an opinion expressing “additional views.”
Linn Reiterates That Claims Define the Invention.
As in the panel decision, Judge Richard Linn agreed that there was no inequitable conduct, but argued that “the majority’s creation of a separate, additional requirement—with a poorly defined standard—is unnecessary and ill advised.” Since the 1836 Patent Act, claims have served the purpose of “distinguishing” the invention, while the specification as a whole must “enable,” Linn stressed.
In my view, there is no justification for reading the statute, beyond the priority context suggested by 35 U.S.C. § 120, as requiring anything other than a written description sufficient to enable a skilled artisan to make and use the invention particularly pointed out and distinctly recited in the claims.
The enablement requirement provides an established standard for the propriety of the written description offered to support a set of claim. ... The enablement requirement also ensures that the full extent of claims asserted by an applicant have utility, such that the public can make and use the invention recited therein.
Forcing original claims over an additional hurdle beyond enablement “perpetuates an unnecessary tension between the claims and the written description as the definition of a patented invention,” Linn insisted.
Linn’s opinion was joined by Judge Randall R. Rader.
Ariad was represented by John M. Whealan of Silver Spring, Md. Eli Lilly was represented by Charles E. Lipsey of Finnegan, Henderson, Farabow, Garrett & Dunner, Reston, Va. Mark R. Freeman of the U.S. Department of Justice, Washington, D.C., represented amicus curiae United States. Amicus curiae Roberta J. Morris, of Menlo Park, Calif., represented herself. Kenneth J. Burchfiel of Sughrue Mion, Washington, D.C., represented amicus curiae Novozymes A/S. Amicus curiae Christopher M. Holman of the University of Missouri-Kansas City School of Law represented himself. Amicus curiae Mark D. Janis of the Indiana University Maurer School of Law, Bloomington, Ind., represented himself and Timothy R. Holbrook. Charles A. Weiss of Kenyon & Kenyon, New York, represented amicus curiae New York Intellectual Property Law Association. Lynn H. Pasahow of Fenwick & West, Mountain View, Calif., represented amici curiae The Regents of the University of California and others. Charles Lee Thomason of Spalding & Thomason, Bardstown, Ky., represented amici curiae The University of Kentucky Intellectual Property Law Society and others. Amicus curiae Christopher A. Cotropia, professor, Intellectual Property Institute, University of Richmond Law School, Richmond, Va., represented himself. Amicus curiae Intellectual Property Owners Association, Washington, D.C., was represented by Herbert C. Wamsley, Intellectual Property Owners Association. William P. Atkins of Pillsbury Winthrop Shaw Pittman, McLean, Va., represented amicus curiae Medtronic Inc. Amicus curiae Oskar Liivak of Cornell Law School, Ithaca, N.Y., represented himself. Robert F. Kramer of Howrey, San Francisco, represented amicus curiae RealNetworks Inc. Amicus curiae Federal Circuit Bar Association was represented by James E. Brookshire, Federal Circuit Bar Association. Walter Dellinger of O’Melveny & Myers, Washington, D.C., represented amicus curiae Hynix Semiconductor Inc. R. Carl Moy of the William Mitchell College of Law, St. Paul, Minn., represented amicus curiae William Mitchell College of Law, Intellectual Property Institute. William F. Lee of Wilmer Cutler Pickering Hale and Dorr, Boston, represented amicus curiae Abbott Laboratories. Nancy J. Linck of Rothwell, Figg, Ernst & Manbeck, Washington, D.C., represented amicus curiae Monsanto Co. Amicus curiae GlaxoSmithKline, King of Prussia, Pa., was represented by Sherry M. Knowles, GlaxoSmithKline. Constantine L. Trela Jr. of Sidley Austin, Chicago, represented amicus curiae Microsoft Corp. Amicus curiae Washington Legal Foundation, Washington, D.C., was represented by Richard A. Samp, Washington Legal Foundation. Lloyd R. Day Jr. of Howrey, East Palo Alto, Calif., represented amicus curiae Amgen Inc. Teresa Stanek Rea of Crowell & Moring, Washington, D.C., represented amicus curiae American Intellectual Property Law Association. Paul D. Clement of King & Spalding, Washington, D.C., represented amici curiae Google Inc. and Verizon Communications Inc. Joshua D. Sarnoff of the Glushko-Samuelson Intellectual Property Law Clinic, Washington College of Law, American University, Washington, D.C., represented amicus curiae Public Patent Foundation.
Read the Ariad Pharms. Inc. v. Eli Lilly & Co. opinion.
Ajinomoto’s Patents on Genetically Engineered Lysine Are Invalid for Failing to Disclose Best Mode Under 112, ¶ 1
March 8, 2010
The U.S. Court of Appeals for the Federal Circuit ruled March 8 that the International Trade Commission correctly found two Ajinomoto Co. patents on genetically engineered lysine invalid for failure to meet the best mode requirement of 35 U.S.C. § 112, ¶ 1 (Ajinomoto Co. v. International Trade Commission, Fed. Cir., No. 2009-1081, 3/8/10).
Production of Genetically Engineered Lysine.
Lysine is an essential amino acid, which means that most animals cannot synthesize it but must obtain it directly from their diets. Feed producers and farmers consequently add lysine as a necessary dietary supplement to low-protein grass feed for livestock. To supply this worldwide, billion dollar lysine market, the industry employs microorganisms such as Escherichia coli (E. coli) that can synthesize lysine from a carbon source (e.g., a sugar such as glucose) through a well-known biosynthetic pathway.
Ajinomoto Co. has two patents 5,827,698 and 6,040,160 for relating to improved methods of producing L-lysine (“lysine”) by cultivating E. coli bacteria that have been genetically engineered to produce and accumulate greater quantities of lysine than naturally occurring bacterial strains.
Ajinomoto filed a complaint with the U.S. International Trade Commission, charging that Global Bio-Chem Technology Group Co. Ltd. and others violated Section 337 of the Tariff Act of 1930, 19 U.S.C. § 1337, through the importation and sale of certain lysine feed products made by the methods claimed in the ’698 and ’160 patents.
However, the ITC found both patents invalid for failing to comply with the best mode requirement of 35 U.S.C. § 112 and found the ’698 patent unenforceable due to inequitable conduct.
Best Mode Requirement Not Satisfied.
The Patent Act at 35 U.S.C. § 112, ¶ 1 states that the patent specification “shall set forth the best mode contemplated by the inventor of carrying out his invention.” This requirement “comprises part of the quid pro quo of the patent grant, prohibiting inventors from receiving the benefit of the right to exclude while at the same time concealing from the public preferred embodiments of their inventions,” Judge Alan D. Lourie said.
Lourie explained that the two-prong best mode inquiry first requires a court to determine whether, at the time the patent application was filed, the inventor possessed a best mode of practicing the claimed invention. If the inventor has a subjective preference for one mode over all others, he noted, the court must then determine whether the inventor “concealed” the preferred mode from the public.
On appeal, Ajinomoto did not contest that (1) the inventors had a best host strain for practicing claim 15 of the ’698 patent, WC80-196S, which they failed to disclose and deposit and which contained two additional genetic modifications not disclosed in the specification; (2) the inventors had a best host strain for practicing claim 15 of the ’160 patent, AE-70, which they failed to disclose; (3) the inventors preferred but failed to disclose sucrose as a carbon source for practicing the ’698 patent; and (4) the inventors identified their host strains by different names than those disclosed in the ’698 patent’s specification. Rather, Ajinomoto argued that the ITC erred in applying the best mode requirement beyond the patents’ “innovative aspects”—the claimed genetic mutations in the ldc or dapA genes—and applying it to cover unrelated and non-novel subject matter, including the creation and use of unclaimed host strains and, for the ’698 patent, an unclaimed carbon source.
The Federal Circuit rejected Ajinomoto’s argument. “[W]hile not every preference constitutes a best mode for purposes of § 112, the preferred embodiment of the invention must be disclosed, Lourie said. He continued:
Again, the invention is the invention claimed. … It is not limited, as Ajinomoto asserts, to vague “innovative aspects” or “inventive features” of the invention, terms that appear nowhere in our best mode case law.
We also agree that, focusing on the inventions recited in the asserted claims, the Commission correctly included within the scope of the best mode requirement an obligation to disclose the inventors’ preferred host strains. Both of the asserted claims relate to methods of producing lysine by cultivating genetically engineered Escherichia bacteria. Claim 15 of the ’698 patent recites a “method for producing L-lysine,” the method comprising “cultivating an isolated microorganism” of the species Escherichia coli containing mutant ldc. Similarly, claim 15 of the ’160 patent recites a “method of producing L-lysine,” the method comprising “cultivating a bacterium belonging [to] the genus Escherichia” containing mutant dapA. Thus, the scope of the invention as defined by the claims covers more than the specific ldc and dapA mutations; the invention includes the cultivation of a bacterial host strain containing those mutations.
By defining the invention to include the host strains, we do not read the Commission’s decision as requiring the disclosure of any and all preferences related to the production of lysine, as Ajinomoto claims. The Commission simply defined the scope of the claimed invention to include “cultivating a bacterium” as recited by the asserted claims. Also, the Commission did not, as Ajinomoto asserts, require the disclosure of all subject matter having to do with the claim term “bacterium.” The Commission simply required the disclosure of the preferred and, for the ’698 patent, only bacterial strain that the inventors used to practice the claimed invention.
Such an analysis does not, contrary to Ajinomoto’s assertion, conflict with the “two-way street” of the best mode obligation. ... Ajinomoto argues that because it cannot exclude others from cultivating lysine-producing strains without the claimed ldc or dapA mutations, its best mode obligations extended only to those mutations. But Ajinomoto also cannot exclude others from using its mutations absent some bacterium and that bacterium’s cultivation. Infringement requires all claim limitations to be present, not just those that distinguish the claim from the prior art. So too with the best mode requirement, which applies to the invention claimed, with all its limitations, not just the novel ones. Ajinomoto claimed the right to exclude competitors from practicing a method of producing lysine by cultivating a bacterium with an ldc or dapA mutation. Thus, the “two-way street” of the best mode requirement obligated Ajinomoto to disclose its best bacterium for carrying out those inventions.
Having found that Ajinomoto indeed had a best mode for carrying out its claimed inventions, the court readily found that the inventors engaged in concealment. Further, it pointed out that the best mode requirement could not be satisfied by the deposit of a non-preferred host strain. “It is undisputed that the host strain deposited by Ajinomoto lacked the sucrose utilization genes and thus was not the host strain into which the inventors inserted an ldc mutation,” Lourie said, adding:
Furthermore, while the deposited strain contained the lysC variant, the specification contains no disclosure of that fact, and one of skill in the art would not know that the strain had such an alteration. As such, the deposit failed to enable one of skill in the art to practice the inventors’ preferred embodiment and thus concealed the best mode.
The inventors could not, consistent with the best mode requirement, claim the cultivation of a bacterium containing an ldc mutation while simultaneously keeping from the public the identity of the one and only bacterium they used to practice that cultivation.
Accordingly, the court affirmed the determination of no violation of Section 337 based on the invalidity of Claim 15 of the ’698 patent for failure to comply with the best mode requirement.
Finally, as to the ’160 patent, Ajinomoto argued that even if the best host strain was concealed as of the filing date of its 1993 Japanese application, it was still entitled to the November 1994 filing date of its Patent Cooperation Treaty application and to a finding of infringement.
Lourie rejected the argument, noting that Ajinomoto did not raise this “attempted bait-and-switch tactic” until after trial. A patentee may seek to rely on an earlier priority date to overcome intervening prior art, and it may argue in the alternative for different priority dates at trial, Lourie noted. “But a patentee cannot, as Ajinomoto attempts here, reverse a finding of invalidity by unveiling after trial an alternative priority date on which it would now like to rely.”
Accordingly, the court agreed that Claim 15 of the ’160 patent was also invalid for failing to satisfy the best mode test.
The ITC’s ruling was affirmed.
Ajinomoto was represented by Joseph M. Malkin of Orrick, Herrington & Sutcliffe, San Francisco. James A. Worth, Office of the General Counsel, represented the U.S. International Trade Commission, Washington, D.C. Claire Laporte of Foley Hoag, Boston, represented Global Bio-Chem Technology Group and other intervenors.
The opinion was joined by Judges Pauline Newman and Richard Linn.
Read the Ajinomoto Co. v. International Trade Commission ruling
SC: Copyright Registration Is Not a Jurisdictional Requirement
March 2, 2010
The U.S. Supreme Court on Mar. 2 ruled that the copyright registration requirement at Section 411(a) of the Copyright Act is a precondition to filing an infringement suit, but that the fact that a plaintiff lacks a registration does not deprive a federal court of jurisdiction over the suit (Reed Elsevier Inc. v. Muchnick, U.S., No. 08-103, 3/2/10).
Relying on its 2006 ruling in Arbaugh v. Y & H Corp., the high court found that the statute does not clearly state that it is jurisdictional. Quoting that decision, it said that “when Congress does not rank a statutory limitation on coverage as jurisdictional, courts should treat the restriction as nonjurisdictional in character.”
CA 2: Jurisdiction Is Lacking in Suit Involving Unregistered Works.
This copyright suit between publishers and freelance authors had been stayed pending the U.S. Supreme Court’s ruling in New York Times Co. v. Tasini, 533 U.S. 483 (2001), which held that several owners of online databases and print publishers had infringed the copyrights of six freelance authors by reproducing the authors’ works electronically without first securing their permission. This suit was consolidated with others, with the complaint alleging that the named plaintiffs own at least one copyright, typically in a freelance article written for a newspaper or a magazine, that they had registered pursuant to 17 U.S.C. §411(a). After several years of negotiation, the parties reached a settlement agreement. When the parties moved the district court to certify a class for settlement and to approve the settlement agreement, 10 freelance authors, including Irvin Muchnick, objected. The district court overruled the objections and certified the class, and Muchnick appealed
Before oral argument, the Second Circuit sua sponte ordered briefing on the question whether §411(a) deprives federal courts of subject-matter jurisdiction over infringement claims involving unregistered copyrights.
Section 411(a) provides that:
Except for an action brought for a violation of the rights of the author under section 106A(a), and subject to the provisions of subsection (b), no civil action for infringement of the copyright in any United States work shall be instituted until preregistration or registration of the copyright claim has been made in accordance with this title. In any case, however, where the deposit, application, and fee required for registration have been delivered to the Copyright Office in proper form and registration has been refused, the applicant is entitled to institute a civil action for infringement if notice thereof, with a copy of the complaint, is served on the Register of Copyrights. The Register may, at his or her option, become a party to the action with respect to the issue of registrability of the copyright claim by entering an appearance within sixty days after such service, but the Register’s failure to become a party shall not deprive the court of jurisdiction to determine that issue.
In reversing the district court, the Second Circuit Court ruled that jurisdiction was lacking to certify a class of claims arising from the infringement of unregistered works, and that there was no jurisdiction to approve a settlement with respect to those claims. Because no party supported the Second Circuit’s jurisdiction holding, the Supreme Court appointed an amicus curiae to defend that judgment.
Registration Requirement More Akin to a Claim-Processing Rule.
The Supreme Court reversed the Second Circuit’s decision.
“Jurisdiction” refers to “a court’s adjudicatory authority,” Justice Clarence Thomas observed, quoting the high court’s ruling in Kontrick v. Ryan, 540 U. S. 443 (2004). Writing for the high court, he said that resolving a case such as this requires distinguishing between “true jurisdictional conditions” and “claim-processing rules.” Concluding that the registration requirement falls into the latter category, Thomas followed the ruling in Arbaugh v. Y & H Corp., 546 U. S. 500 (2006), which found that the requirement under 42 U. S. C. §2000e(b) that employees bring Title VII claims for sex discrimination only against employers with “fifteen or more employees” did not impose a jurisdictional limit.
Quoting Arbaugh, Thomas stressed the following:
“If the Legislature clearly states that a threshold limitation on a statute’s scope shall count as jurisdictional, then courts and litigants will be duly instructed and will not be left to wrestle with the issue. But when Congress does not rank a statutory limitation on coverage as jurisdictional, courts should treat the restriction as nonjurisdictional in character.”
Section 411(a), he said, “does not” clearly state that its registration requirement is “jurisdictional” under Arbaugh. While the last sentence of §411(a) uses the term “jurisdiction,” that sentence was added to clarify that a federal court can determine “the issue of registrability of the copyright claim” even if the Register does not appear in the infringement suit, Thomas insisted, quoting the statute. “That clarification was necessary because courts had interpreted §411(a)’s precursor provision, which imposed a similar registration requirement, as prohibiting copyright owners who had been refused registration by the Register of Copyrights from suing for infringement until the owners first sought mandamus against the Register,” Thomas explained. The term “jurisdiction” as used here, “says nothing about whether a federal court has subject-matter jurisdiction to adjudicate claims for infringement of unregistered works,” Thomas insisted.
Further quoting Arbaugh, Thomas noted that the registration requirement of §411(a), like Title VII’s numerosity requirement, is located in a provision “separate” from those granting federal courts subject matter jurisdiction over those respective claims.
Federal district courts have subject-matter jurisdiction over copyright infringement actions based on 28 U. S. C. §§1331 and 1338. But neither §1331, which confers subject-matter jurisdiction over questions of federal law, nor §1338(a), which is specific to copyright claims, conditions its jurisdictional grant on whether copyright holders have registered their works before suing for infringement. …
Nor does any other factor suggest that 17 U. S. C. A. §411(a)’s registration requirement can be read to “‘speak in jurisdictional terms or refer in any way to the jurisdiction of the district courts.’” … First, and most significantly, §411(a) expressly allows courts to adjudicate infringement claims involving unregistered works in three circumstances: where the work is not a U. S. work, where the infringement claim concerns rights of attribution and integrity under §106A, or where the holder attempted to register the work and registration was refused. Separately, §411(c) permits courts to adjudicate infringement actions over certain kinds of unregistered works where the author “declare[s] an intention to secure copyright in the work” and “makes registration for the work, if required by subsection (a), within three months after [the work’s] first transmission.” 17 U.S.C. §§411(c)(1)–(2). It would be at least unusual to ascribe jurisdictional significance to a condition subject to these sorts of exceptions.
Court Leaves Unanswered Questions.
In reversing the Second Circuit, the Supreme Court confirmed that the district court had jurisdiction to approve the settlement even though it involved disputes over unregistered works. However, the high court expressed no opinion on the settlement’s merits. It also declined to address whether §411(a)’s registration requirement is a mandatory precondition to suit or whether the registration requirement is met by filing an application.
Thomas’s opinion was joined by Chief Justice John Roberts, and by Justices Antonin Scalia, Anthony Kennedy, and Samuel Alito. Justice Ruth Bader Ginsburg filed a concurring opinion that was joined by Justices John Paul Stevens and Stephen Breyer. Justice Sonia Sotomayor took no part in the consideration of this case.
Reed Elsevier was represented by Charles S. Sims of Proskauer Rose, New York. Ginger Anders, Assistant to the Solicitor General, U.S. Department of Justice, Washington, D.C., argued on behalf of the United States as amicus curiae, supporting Reed Elsevier and the other petitioners. Deborah Jones Merritt, Columbus, Ohio, appointed as amicus curiae, argued in support of the judgment below.
Read the opinion
in Reed Elsevier Inc. v. Muchnick.