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The 13 Hottest Patent Law Issues Of 2015

Posted on Dec 21, 2015 in Article

This article originally appeared in Law360 on December 18, 2015.

What were the most significant issues that shaped patent law in 2015? As the year draws to a close, here is a look back, in no particular order, at the topics that received the most attention. The information is presented summarily in table form. Immediately following the table are brief explanations of each topic.

GENERAL TOPIC CASE SUMMARY
Software Patents Alice Corp. v. CLS Bank Patent claims directed towards a generic computer implementation of an abstract idea are not patent eligible
Licensing Terms for Technical Standards N/A Licensing rates for IEEE standards must exclude “the value, if any, resulting from the inclusion of that essential patent claim’s technology in the IEEE standard.”
Trans-Pacific Partnership (TPP) N/A If approved, the TPP will be the largest trade deal in history. Provides at least a five-year exclusionary period for drugs having genetically engineered proteins.
Venue In Re TC Heartland The parties are arguing over whether the interpretation of the patent infringement venue statute needs to be changed
Means Plus Function Claims Williamson v. Citrix “The standard [for determining whether 35 U.S.C. 112(6) applies] is whether the words of the claim are understood by persons of ordinary skill in the art to have a sufficiently definite meaning as the name for structure.”
Exhaustion Lexmark v. Impression The parties are arguing over whether a first sale of a patented product outside of the United States terminates the patent owner’s ability to claim infringement damages.
Patent Reform N/A Various Congressional proposals including fee shifting, heightened pleading requirements, limiting discovery, demand letter restrictions, end-user stays and party identification
Claim Construction Standards In Re Cuozzo Broadest Reasonable Interpretation (BRI) is the correct claim construction standard in Patent Trial and Appeal Board (PTAB) America Invents Act (AIA) proceedings
Post Patent Expiration Royalties Kimble v. Marvel Royalties based on an expired patent are not available
Induced Patent Infringement Commil v. Cisco A defendant’s belief that a patent is invalid is not a defense to a claim of induced infringement
Deference to Lower Court Claim Construction Teva Pharmaceutical v. Sandoz Factfinding of evidence intrinsic to a patent is reviewable de novo. Extrinsic evidence, however, must be reviewed for clear error on appeal.
Divided Infringement Akamai Technologies v. Limelight Networks When two or more parties are involved in an infringing activity, direct infringement can be found if “the acts of one [party]are attributable to the other [party] such that a single entity is responsible for the infringement.”
Injunctive Relief Apple v. Samsung Injunctive relief is proper if the eBay factors have been met. “Some connection” between the patented features and the demand for the infringing product is sufficient to show the necessary “causal nexus [that] relates the alleged harm to the alleged infringement.”

 

1. Alice Fallout

When Alice Corporation v. CLS Bank International[1] was decided in 2014, the intellectual property bar braced itself for the firestorm to follow. Alice held that patent claims directed toward a generic computer implementation of an abstract idea were not patent-eligible. Barely a day went by in 2015 without either the federal courts or the Patent Trial and Appeal Board determining that a patent was invalid under the so called Alice guidelines. In the U.S. Patent and Trademark Office, some patent examiner allowance rates for business software patent applications dropped into the single digits. One business methods patent examiner shared with this author that she had only allowed one patent application in the past six months. Intellectual property attorneys struggled to find allowable subject matter in computer-related business method applications. Some applicants are holding out for a policy change that will allow more patents to either issue or be reaffirmed as valid. Perhaps 2016 will bring the relief they are waiting for.

2. Licensing Terms for Technical Standards

The Institute of Electrical and Electronics Engineers establishes technical standards that include detailed specifications and procedures. Manufacturer compliance with IEEE standards ensures device interoperability. For example, IEEE standards ensure that devices that include Wi-Fi are able to communicate with each other. Many standards, however, are covered by U.S. patents. Before approving a standard, the IEEE asks owners of relevant patents to agree to license their patented technology at reasonable and nondiscriminatory rates. In 2015, the IEEE revised the definition of RAND so that RAND licensing rates must exclude “the value, if any, resulting from the inclusion of that essential patent claim’s technology in the IEEE standard.” Patent owners may thus no longer include in their licensing rates the value of having their technology covered by a patent. Companies that typically pay RAND licensing fees applauded the change. Some patent owners that develop the technologies used in various technical standards have stated they will refuse to honor the IEEE’s new RAND terms.

3. Trans-Pacific Partnership

If approved, the Trans-Pacific Partnership will be the biggest trade deal in history — affecting over 40 percent of the world’s GDP. The text of the TPP was officially made available to the public in November of 2015. One of the most controversial parts of the TPP is the section on intellectual property rights that relates to biologics (drugs having genetically engineered proteins) and biosimilars (drugs having chemical structures similar to biologics from which they are created). Biologics and their corresponding biosimilars receive 12 years of exclusivity in the United States. A version of the TPP that was leaked to the public before its official release included a 12-year exclusivity term across all member countries. As can be imagined, pharmaceutical companies have been in favor of a lengthy exclusivity term while patient health lobbyists have argued for terms as short as possible. The version of the TPP now awaiting U.S. congressional approval sets a data exclusivity period of at least five years across all member countries.

4. Venue

In the first six months of 2015, almost half of all new patent infringement suits were filed in the Eastern District of Texas. Why so many? Because that jurisdiction is patent plaintiff “friendly” and the federal venue statutes permit a suit to be filed anywhere infringement has occurred. Perhaps the law will be changing. The general venue statute (28 U.S.C. § 1391) and the patent infringement venue statute (28 U.S.C. § 1400) are currently read together so that venue is established based on where a company is doing business. A writ of mandamus was filed by TC Heartland[2] challenging that interpretation, and although TC Heartland is in a struggle with Kraft Foods over whether the case should be heard in Delaware or Indiana, the outcome of the petition could have far-reaching effects. In 1988, 28 U.S.C. § 1391 was amended to include “For purposes of venue under this chapter.” The statute further stated that a defendant resided where it was subject to personal jurisdiction. 28 U.S.C. § 1400 permitted venue in patent litigation to be established where the defendant “resides.” Therefore, a patent litigation defendant did not need to be incorporated or have a place of business in a jurisdiction for venue to exist. In 2011, the language “for purposes of venue under this chapter” was replaced with the language “except as otherwise provided by law.” TC Heartland has argued in its petition that the statute had changed and merely committing an infringing act does not establish venue. Kraft has filed a brief disputing Heartland’s position. Several amici briefs have since been filed.

5. Means-Plus-Function Claims

In the past, whether a claim was a means-plus-function claim was determined by whether the claim included the word “means.” A patent having such claim language was required to meet the requirements of 35 U.SC. 112(6) by disclosing structure corresponding to functional claim language. Whether 35 U.S.C. 112(6) applies is a significant question, because if 35 U.S.C. 112(6) applies to claim language, and the patent specification lacks corresponding structure, then the claim is invalid as indefinite. The presumption had been strong that claims lacking the word means were not subject to 35 U.S.C. 112(6). Williamson v. Citrix[3] changed that presumption by concluding that “[t]he standard [for determining whether 35 U.S.C. 112(6) applies] is whether the words of the claim are understood by persons of ordinary skill in the art to have a sufficiently definite meaning as the name for structure.” Claims having functional claim language and lacking the word “means” are now more vulnerable to attack when corresponding structure is absent from the patent specification.

6. Exhaustion

A patent owner’s ability to claim infringement damages is terminated by “exhaustion” — the first authorized sale of a patented product. What if the first authorized sale is outside the United States. Does the first authorized sale of a product outside the United States exhaust the patent right? In Lexmark v. Impression,[4] Lexmark has argued that Fuji Photo Film v. Jazz Photo, relating to the recycling of single use disposable film cameras, is controlling law. Fuji held that U.S. patent rights are exhausted only by sales within the United States. Impression has argued that Kirtsaeng v. John Wiley & Sons controls, for in that case foreign sales exhausted rights under copyright law. Also at issue is whether selling a product with restrictions prevents patent exhaustion. Various parties including the United States government have filed briefs. The case is pending before the Federal Circuit.

7. Patent Reform

Your position on this subject might depend on whether you represent a plaintiff or a defendant. On the one hand, there has been a public outcry that nonpracticing entities are abusing the patent system by forcing settlements over dubious patents. On the other hand, attempts to curtail frivolous patent suits are feared to interfere with the rights of patent owners to assert legitimate patents. Congress has introduced several bills that provide for fee-shifting, requiring heightened pleading requirements, limiting discovery, specifying requirements in patent infringement demand letters, providing end-user stays while a product manufacturer and a patent holder address an accusation of patent infringement, and clearly identifying the party behind an assertion of patent infringement. On Dec. 1, 2015, the U.S. Supreme Court’s decision to abolish the use of Form 18 to assert a claim of direct patent infringement went into effect. Form 18 was often criticized for permitting pleading of a patent infringement claim without a sufficient factual basis. Patent reform will capture significant attention in 2016.

8. Claim Construction Standards

What is the proper claim construction standard in Patent Trial and Appeal Board America Invents Act proceedings? The current standard is broadest reasonable interpretation. In re Cuozzo,[5] decided by a three-judge panel of the Federal Circuit on Feb. 4, 2015, ruled that it was correct for the PTAB to use the BRI standard. Cuozzo filed a petition for en banc review, which was denied on July 8, 2015. Now a writ of certiorari has been filed for U.S. Supreme Court review, with arguments (from both Cuozzo and amici) that the claim construction standard being used by the PTAB is wrong. District courts use the Phillips[6] claim construction standard: “[T]he words of a claim are generally given their ordinary and customary meaning” which is “the meaning that the term would have to a person of ordinary skill in the art in question at the time of the invention.” The BRI standard, compared with the Phillips standard, results in a broader interpretation of the claim. The use of the BRI standard by the PTAB thus makes it is easier to find invalidating prior art. Cuozzo argued in its petition for en banc review that AIA proceedings are similar to infringement litigation, and thus the Phillips standard used in the district courts should apply. But Circuit Judge Timothy B. Dyk, in his opinion for the court, wrote that the BRI standard “has been applied in every PTO proceeding involving unexpired patents” and “[t]here is no indication that the AIA was designed to change the claim construction standard that the PTO has applied for more than 100 years.” The U.S. Supreme Court will decide if they wish to adjudicate this issue.

9. Post-Patent Expiration Royalties

Can a patentee charge royalties for the use of his invention after his patent expires? Kimble v. Marvel[7] concluded that royalties based on an expired patent are not available. The genesis of Kimble began in 1997, when Kimble sued Marvel for patent infringement relating to a Spider-Man toy. The parties settled for a lump sum payment and a royalty agreement with no end date. Marvel later discovered the case Brulotte v. Thys Co., 379 U.S. 29 (1964) which “held that a patent holder cannot charge royalties for the use of his invention after its patent term has expired.” Kimble at 1. Marvel filed a declaratory judgment action seeking to stop paying royalties at the end of the term of Kimble’s patent. The district court ruled in Marvel’s favor and the Court of Appeals for the Ninth Circuit affirmed. In also affirming, the U.S. Supreme Court noted “This Court has carefully guarded [the patent expiration] date, just as it has the patent laws’ subject-matter limits. In case after case, the Court has construed those laws to preclude measures that restrict free access to formerly patented … inventions.” They also wrote that the doctrine of stare decisis prohibits Brulotte from being overturned. Furthermore they asserted “[I]f Kimble thinks patent law’s insistence on unrestricted access to formerly patented inventions leaves too little room for pro-competitive post-expiration royalties, then Congress, not this Court, is his proper audience.” A patentee seeking post patent term royalties must thus base the payments on something other than the expired patent.

10. Induced Patent Infringement

The question addressed by the U.S. Supreme Court in Commil v. Cisco[8] was “whether a defendant’s belief regarding patent validity is a defense to a claim of induced infringement. It is not.” Direct infringement is a strict-liability offense, and the intent of the defendant is irrelevant. With induced infringement, however, the defendant must know of the patent and that the induced act results in patent infringement. The validity of a patent, however, is irrelevant to the issue of induced infringement. The court so held for multiple reasons including: (1) “infringement and invalidity are separate matters under patent law,” (2) “infringement and validity appear in separate parts of the patent act;” and (3) a belief of patent invalidity as a defense to patent infringement would weaken the presumption that a patent is valid. Therefore, a defendant’s belief that a patent is invalid is not a defense to a claim of induced infringement.

11. Deference to Lower Court Claim Constructions

District courts conduct fact-finding in order to perform claim construction as part of the task of determining whether infringement has occurred. If the case is appealed, however, what deference should be given to the lower court’s fact-finding? In Teva Pharmaceuticals USA Inc. v. Sandoz Inc.,[9] on the issue of claim construction, the U.S. Supreme Court asked, “Should the Court of Appeals review the district court’s factfinding de novo as it would review a question of law? Or, should it review that factfinding as it would review a trial judge’s factfinding in other cases, namely by taking them as correct ‘unless clearly erroneous?’” After explaining why clear error review was required, the court explained how to apply clear error review. District court review of evidence intrinsic to a patent (claims, specification, and prosecution history) is a determination of law, and fact-finding in that situation is reviewable de novo. When, however, extrinsic evidence needs to evaluated (for example “the meaning of a term in the relevant art during the relevant time period”), these are “evidentiary underpinnings” of claim construction and “must be reviewed for clear error on appeal.” Thus the court concluded, “The appellate court can still review the district court’s ultimate construction of the claim de novo. But to overturn the judge’s resolution of an underlying factual dispute, the Court of Appeals must find that the judge, in respect to those factual finding, has made a clear error.”

12. Divided Infringement

As stated in Akamai Technologies Inc. v. Limelight Networks Inc.,[10] “Direct infringement under § 271(a) occurs where all steps of a claimed method are performed by or attributable to a single entity.” So, what if there are multiple parties performing separate steps that combined infringe a method claim? The en banc Federal Circuit (following a remand from the U.S. Supreme Court) stated that “to determine direct infringement, we consider whether all method steps can be attributed to a single entity.” However, even if there are two parties involved in an infringing activity, direct infringement can still be found if “the acts of one are attributable to the other such that a single entity is responsible for the infringement.” There are three situations in which a single entity can be “responsible for the infringement” even though different entities are involved in performing different steps: (1) when one entity directs or controls the actions of another; (2) when two parties form a joint enterprise; and (3) “when an alleged infringer conditions participation in an activity or receipt of a benefit upon performance of a step or steps of a patented method and establishes the manner or timing of that performance.” Whether the requisite control exists is a question of fact.

13. Injunctive Relief

The Federal Circuit in Apple v. Samsung[11] addressed the issue of whether injunctive relief was proper. The appropriateness of injunctive relief is decided based on the four eBay[12] factors: (1) whether the plaintiff has suffered an irreparable injury; (2) whether remedies available at law are inadequate to compensate the plaintiff for the injury sustained; (3) the balance of hardships between the plaintiff and defendant for a remedy in equity; and (4) a public interest factor. This is well-established law. The controversial part of the Apple decision, however, was the court’s determination that “some connection” between the patented features and the demand for the infringing product was sufficient to show the required “causal nexus [that] relates the alleged harm to the alleged infringement.” Samsung phones have thousands of features, and only three of them were covered by Apple patents in this civil action. The dissent argued that the correct standard is “the patentee must rather show that the infringing feature drives consumer demand for the accused product.” Samsung’s petition for en banc rehearing argued that “some connection” could be an “insignificant connection.” The Federal Circuit will decide whether to grant en banc rehearing. 2015 has been a year filled with topics of extreme interest to the intellectual property patent community. The issues described above will certainly influence the procurement, assertion and defense of patent rights in 2016.

—By Lawrence E. Ashery

Lawrence Ashery is a partner in Caesar Rivise’s Philadelphia office. The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] Alice Corporation Pty. Ltd. v. CLS Bank International, et al., 134 S.Ct. 2347 (June 19, 2014).

[2] In re TC Heartland LLC, 16-105 (Fed. Cir.)

[3] Williamson v. Citrix Online, LLC, 792 F.3d 1339 (Fed. Cir. 2015) (en banc)

[4] Lexmark International Inc. v. Impression Products Inc., 14-1617 (Fed. Cir. 2015)

[5] In re Cuozzo Speed Techs., LLC, 793 F.3d 1268 (Fed. Cir. 2015)

[6] Phillips v. AWH, 415 F. 3d 1303 (Fed. Cir. 2005)

[7] Kimble v. Marvel Enterprises, Inc., No. 13-720 (Supreme Court 2015)

[8] Commil USA, LLC v. Cisco Systems, Inc., 135 S. Ct. 1920 (2015)

[9] Teva Pharmaceuticals USA, Inc. v. Sandoz Inc., No. 13-854 (Supreme Court 2015)

[10] Akamai Technologies, Inc.,et al. v. Limelight Networks, Inc., No. 2009-1372 (Fed. Cir. 2015)

[11] Apple v. Samsung Electronics, No. 2014-1802 (Fed. Cir. 2015)

[12] eBay Inc. v. Mercexchange, L.L.C., 547 U.S. 388 (2006)

 

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