The Hottest Patent Law Issues of 2017

Posted on Jan 8, 2018 in Articles

This article originally appeared in Law360 on January 2, 2018.

As we start the new year, let’s look back at the most important patent law opinions of 2017.

LACHES

In 2014, the U.S. Supreme Court decided in Petrella v. Metro-Goldwyn-Mayer[1] that laches could not be asserted for a copyright claim within the three-year statute of limitations period. In 2017, in SCA v. First Quality[2] the court held that the reasoning in Petrella applied to patent cases. SCA accused First Quality of patent infringement in 2003 and filed suit in 2010. (In the interim SCA filed for re-examination — the validity of SCA’s patent was affirmed). First Quality moved for summary judgment based on laches, and the district court granted the motion. The Federal Circuit affirmed the lower court, and affirmed again sitting en banc. The U.S. Supreme Court reversed and held that SCA’s suit was not barred by laches. “[A]pplying laches within a limitations period specified by Congress” the court wrote “would give judges a ‘legislation-overriding’ role that is beyond the Judiciary’s power.” Because Congress provided a fixed time limit, a laches defense may not be used within six years of the filing of a patent infringement claim.

INTERNATIONAL SUPPLY CHAINS

In 1972, the U.S. Supreme Court ruled that it was “not an infringement to make or use a patented product outside of the United States.”[3] In response to that decision, Congress expanded the definition of infringement to include supplying (or causing to supply) from the United States “all or a substantial portion of the components of a patented invention … to induce the combination of such components outside of the United States” 35 U.S.C. 271(f)(1).

In 2017, the Supreme Court concluded in Life Technologies v. Promega[4] that, as a matter of law, a single component can never constitute a “substantial component.” Life Technologies manufactured “all but one component” of a patented genetic testing kit in the United Kingdom. The one component was manufactured in the United States and then shipped to the United Kingdom, where Life Technologies combined that component with the other components and then sold the completed product internationally. Promega sued Life Technologies for infringement of its patent. Because Life Technologies manufactured (and shipped to the U.K.) only a single component of the invention claimed in Promega’s patent, the court ruled that patent infringement had not occurred.

SOFTWARE PATENTS

Intellectual property attorneys rejoice any time a “business method” software patent is found to be valid in federal court. Since the Alice[5] opinion was handed down in 2014, huge numbers of software patents have been invalidated as being directed to patent ineligible abstract ideas. Therefore, when a federal court finds a business method patent to be valid, the opinion is significant because it can provide important guidance for arguing the validity (or patentability) of business method patent claims in the future.

Thales v. United States[6] was an infringement suit regarding a patent for an inertial tracking system (such as for aircraft navigation and virtual reality simulation). After the U.S. Court of Federal Claims ruled that the litigated claims were directed to patent ineligible subject matter (because they were directed to the abstract idea of using laws of nature), the Federal Circuit reversed in 2017. The court reiterated the Alice two-step analysis to determine patent eligibility: (1) Are the claims directed to a patent-ineligible concept? (2) If so then does the claim contain “an inventive concept” sufficient to ‘transform’ the claimed abstract idea into a patent-eligible application? While the claims included an abstract idea — mathematical equations — the court found that the claims included other features so that a patent-eligible concept was present. “That a mathematical equation is required to complete the claimed method and system does not doom the claims to abstraction.”

OBVIOUSNESS

Obviousness rejections are sometimes refuted by arguing that two cited references cannot be combined. Arguing, however, that the combination is improper because the modification completely changes “the fundamental principle of operation” can be a particularly tough sell. In 2017, in University of Maryland v. Presens,[7] the claims were found to be obvious despite the plaintiff’s “changes the principle of operation” argument. The court noted that a person of ordinary skill is “not an automaton” limited to physically combining references. Rather, the two cited references “taught every element of the claimed invention and the combination of the references accords with their teachings.” Therefore, the court concluded that the patent in suit was invalid as being obvious over the prior art.

BROADEST REASONABLE INTERPRETATION OF CLAIM LANGUAGE

In re Smith[8] was an appeal from a Patent Trial and Appeal Board decision that invalidated a patent based on the interpretation of claim language. The Federal Circuit reversed the PTAB’s decision because the PTAB’s interpretation was “unreasonably broad.” The U.S. Patent and Trademark Office interprets claim language using the “broadest reasonable interpretation” standard. However, “the Board cannot construe the claims ‘so broadly that its constructions are UNREASONABLE under general claim construction principles.’” (citing Microsoft Corp. v. Proxyconn Inc., 789 F.3d 1292 (Fed. Cir. 2015) emphasis in original). Rather, the correct interpretation of claim language is (1) “an interpretation that corresponds with what and how the inventor describes his invention in the specification” and (2) consistent with the specification.

PROSECUTION DISCLAIMER ARISING FROM INTERPARTES REVIEW

The doctrine of prosecution disclaimer prevents a patentee from reclaiming an interpretation of claim language that has been surrendered (or disclaimed). The disclaimer may occur through a claim amendment or an argument, and either preissuance or post-issuance. In Aylus Networks v. Apple Inc.,[9] Aylus made statements during an inter partes review that the district court relied upon in ruling in favor of Apple. On appeal, the Federal Circuit ruled that statements made during an IPR constitute prosecution disclaimer, and thus affirmed the decision of the lower court: “Extending the prosecution disclaimer doctrine to IPR proceedings will ensure that claims are not argued one way in order to maintain their patentability and in a different way against accused infringers.”

ON-SALE BAR

In Helsinn v. Teva,[10] suit was filed under the Hatch-Waxman Act after Teva filed an abbreviated new drug application seeking the right to market a generic drug. At issue was a supply and purchase agreement that Helsinn agreed to more than one year before its patent application was filed. The agreement was conditional on U.S. Food and Drug Administration approval, and while most parts of the agreement were publicly available, the dosage of the formulations covered by the agreement and the price terms were redacted. The court found that despite the conditional nature of the agreement, a “sale” had occurred more than one year before the filing date of Helsinn’s patent, and thus the patent was invalid under 35 U.S.C. 102: ”[A]n agreement contracting for the sale of the claimed invention contingent on regulatory approval is still a commercial sale.” Furthermore, the fact that the dosage had been redacted was irrelevant to the fact that the agreement invalidated the patent: “[A]n invention is made available to the public when there is a commercial offer or contract to sell a product embodying the invention and that sale is made public. Our cases explicitly rejected a requirement that the details of the invention be disclosed in the terms of the sale.”

VENUE

TC Heartland[11] is a landmark U.S. Supreme Court case that addressed the following questions: In patent infringement litigation, how is venue established? Is venue based on where the corporation is incorporated? Or, is venue based on where the corporation does business? Prior to the opinion being published for TC Heartland, venue could be established anywhere the defendant was doing business, which caused a majority of infringement suits to be filed in the patent plaintiff-friendly Eastern District of Texas. The primary issue in TC Heartland was how to interpret the language of the patent venue statute (28 U.S.C. 1400(b)) in view of the language of the general venue statute (28 U.S.C. 1391(c)). In a unanimous decision (Justice Neil Gorsuch did not participate) the court held that, as applied to domestic corporations, venue is based on the residence of the defendant, which according to the patent venue statute “refers only to the State of incorporation.”

BIOLOGICS AND BIOSIMILARS

The Biologics Price Competition and Innovation Act was designed so that generic biosimilars could be marketed more quickly after patent issues are resolved. The BPCIA provides a carefully crafted list of steps that a biosimilar manufacturer must follow if it wish to market a biosimilar that corresponds to a patented biologic. In Sandoz v. Amgen[12] the U.S. Supreme Court held that (1) the BPCIA’s requirement that, to market a biosimilar the applicant must provide the manufacturer of the reference biologic with application and manufacturing information, is not enforceable by injunction under Federal law (although it may be enforceable under state law); and (2) the applicant may give the biologic manufacturer notice of commercial marketing prior to FDA approval (which allows faster generic biosimilar launch). On remand,[13] the Federal Circuit held that a remedy was not available under state law: “Contrary to Amgen’s assertions, its state law claims clash with the BPCIA, and the differences in remedies between the federal scheme and state law claims support concluding that those claims are preempted.”

INEQUITABLE CONDUCT

Inequitable conduct occurs when a patent applicant, with specific intent, deceives the USPTO during patent procurement. In Regeneron,[14] inequitable conduct was inferred based on litigation misconduct, and the asserted patent was found to be unenforceable. The Federal Circuit wrote: “Regeneron’s behavior in district court was beset with troubling misconduct… . In light of the appellant’s widespread litigation misconduct … the district court did not abuse its discretion by drawing an adverse inference of specific intent to deceive the PTO.”

COVERED BUSINESS METHOD PATENTS

The post-grant procedure called covered business method review enables the USPTO to review the validity of a patent that meets CBM requirements. America Invents Act 18(a)(1)(E) defined a CBM patent as one “that claims a method … for performing data processing or other operations used in the practice, administration, or management of a financial product or service.” In Secure Axcess[15] the Federal Circuit concluded that “the statutory definition of a CBM patent requires that the patent have a claim that contains, however phrased, a financial activity element. … [J]ust because an invention could be used by various institutions that include a financial institutions, among others, does not mean a patent on the invention qualifies under the proper definition of a CBM patent.”

PATENT EXHAUSTION

The first authorized sale of a patented product “exhausts” the patent rights. As a result, the patent owner’s ability to pursue patent infringement damages for that product is terminated with respect to sales subsequent to the first authorized sale. Patent exhaustion thus prevents the average consumer from being sued for patent infringement by the reselling of a patented product.

In Impression[16] the U.S. Supreme Court wrote that “for over 160 years the doctrine of patent exhaustion has imposed a limit on the right to exclude by asserting a patent … The limit functions automatically: When a patentee chooses to sell an item, that product is no longer within the limits of the patent monopoly …. A patentee … may not, by virtue of his patent, control the use or disposition of the product after ownership passes to the purchaser.” Plaintiff Lexmark’s sale in the United States exhausted its patent rights for print cartridges included in that sale. The court also concluded that international sale of print cartridges exhausted Lexmark’s patent rights.

[1] Petrella v. Metro-Goldwyn-Mayer, Inc., et al., 572 U.S. _____(2014)

[2] SCA Hygiene Products Aktiebolag et al. v. First Quality Baby Products, LLC, et al., 580 U.S. _______ (2017)

[3] Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518 (1972)

[4] Life Technologies Corp. et al. v. Promega Corp., 580 U.S. _______ (2017)

[5] Alice Corporation Pty. Ltd. v. CLS Bank International et al., 573 U.S. ________ (2014)

[6] Thales Visionix Inc. v. United States, 2015-5150 (Fed. Cir. 2017)

[7] University of Maryland Biotechnology Institute v. Presens Precision Sensing GmbH, 2016-2745 (Fed. Cir. 2017)

[8] In re: Smith International, Inc., 2016-2303 (Fed. Cir. 2017)

[9] Aylus Networks, Inc., v. Apple Inc., 2016-1599 (Fed. Cir. 2017)

[10] Helsinn Healthcare S.A., v. Teva Pharmeceuticals Usa, Inc., Teva Pharmaceutical Industries, Ltd., 2016-1284 (Fed. Cir. 2017)

[11] TC Heartland v. Kraft Foods Group Brands LLC, 581 U.S. _____ (2017)

[12] Sandoz Inc. v. Amgen Inc., 582 U.S. _____ (2017)

[13] Amgen Inc., Amgen Manufacturing Limited, v. Sandoz Inc., 2015-1499 (Fed. Cir. 2017)

[14] Regeneron Pharmaceuticals, Inc., v. Merus N.V., 2016-1346 (Fed. Cir. 2017)

[15] Secure Axcess, LLC, v PNC Bank National Association, et al., 2016-1353 (Fed. Cir. 2017)

[16] Impression Products, Inc. v. Lexmark International, Inc., 581 U.S. _______ (2017)

– By Lawrence E. Ashery