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PA Bar: Removing the Exclusivity of "Patent Attorney"

By Stephen B. Schott

The Pennsylvania Bar Association, following the American Bar Association's adoption of new Model Rules in August 2018 (deleting earlier Rule 7.4) and  seeking to conform Pennsylvania's Rules to follow the ABA, has proposed eliminating the exclusivity of the term "patent attorney."

Currently, a "patent attorney" in Pennsylvania is exclusively limited to attorneys registered to practice before the United States Patent and Trademark Office. The PA Bar Association Legal Ethics and Professional Responsibility Committee proposes a change that would permit a broader definition of "patent attorney" that encompasses other attorneys, as long as the term is not misleading.

Specifically, the IP Law Section opposes a revision to Rule 7.2(c)(1):

Rule 7.2 

(c) A lawyer may communicate the fact that the lawyer does or does not practice in particular fields of law. A lawyer shall not state or imply that the lawyer is certified as a specialist in a particular field, except as follows: 

(1) a lawyer admitted to engage in patent practice before the United States Patent and Trademark Office may use the designation “patent attorney” or a substantially similar designation; 

Only Pennsylvania attorneys who are registered to practice before the USPTO may currently use the term "patent attorney." This helps clients identify lawyers who are registered to practice before the USPTO and can help them navigate proceedings before it, including the most sought-after service provided by many patent attorneys, that of helping a client obtain a patent.

USPTO registration for an attorney has several requirements including:

(1) Passing the USPTO Registration Examination (commonly referred to as the "Patent Bar Exam"), which traditionally has a pass rate of less than 50%;

(2) Submission of an education transcript showing a degree or large number of courses reflecting an expertise in science or engineering, which demonstrates that a practitioner will serve their clients with an appropriate level of technical expertise; and

(3) Following the USPTO Rules of Ethics, which are much more strict than state bar rules in many instances, and include a prohibition against sharing referral fees for work done before the USPTO ("A practitioner shall not give anything of value to a person for recommending the practitioner’s services" 37 CFR 11.702).

These requirements and more set a "patent attorney" apart from attorneys who are otherwise engaged in licensing and litigation related to patents, but the proposed deletion of Rule 7.2(c)(1) would allow for those not admitted to practice before the USPTO to designate themselves as "patent attorney." Some in the patent attorney community are concerned the objective standard associated with "patent attorney" will be diluted among the bar and for clients.

The IP Law Section of the PA Bar opposes the deletion of Rule 7.2(c)(1). The proposed change will be voted on at the May 17, 2019 PA Bar Delegates meeting.

If you have questions, contact me.

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US Patent and Trademark Office revises guidance for determining subject matter eligibility

By Stephen B. Schott

To start the new year, Director Iancu and the US Patent and Trademark Office continue what most people see as an acceleration of the pendulum towards a broader, and hopefully clearer, definition of patentable subject matter eligibility. The new Section 101 guidelines "aim to improve the clarity, consistency, and predictability of actions across the USPTO," according to Iancu who added that "The USPTO will provide training to examiners and administrative patent judges on both documents to ensure that guidance is being properly administered."

The guidelines make two primary changes to how patent examiners apply the first step of the U.S. Supreme Court’s Alice/Mayo test, which determines whether a claim is “directed to” a judicial exception.

First, the revised guidance extracts and synthesizes key concepts identified by the courts as abstract ideas to explain that the abstract idea exception includes certain groupings of subject matter: mathematical concepts, certain methods of organizing human activity, and mental processes.

Responding to subject matter rejections in the future should cite these guidelines and argue that their inventions, especially if they are software, do not fall into these categories.

Second, the revised guidance includes a two-prong inquiry for whether a claim is “directed to” a judicial exception. In the first prong, examiners will evaluate whether the claim recites a judicial exception and if so, proceed to the second prong. In the second prong, examiners evaluate whether the claim recites additional elements that integrate the identified judicial exception into a practical application. If a claim both recites a judicial exception and fails to integrate that exception into a practical application, then the claim is “directed to” a judicial exception. In such a case, further analysis pursuant to the second step of the Alice/Mayo test is required.

The second step should be familiar to most practitioners at this point because it's been the focus of articles in this blog, as well as many other commentator's advice for responding to actions.

If you have questions, contact me.

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A Renewed Call: Repeal the Single Sentence Rule for Patent Claims

By Stephen B. Schott
Like all elementary school graduates, I learned that a single sentence should be short. One source suggests that a well-written work should average 20 to 25 word sentences.[1] With that as the guide, sentences averaging 50 words would raise the ire of a 3rd grade teacher. Those averaging 100 words would drive a sane person mad. And a 250 plus word sentence would drive even Proust to distraction.
But sentences of such prodigious lengths are commonplace in patent law. The offending sentences are patent claims.[2] These claims are a U.S. patent’s most important feature. It is here that the inventor, or more likely the inventor’s attorney, sets forth the “metes and bounds” that define the invention. The claims serve as property lines: Cross into those lines with your product and you infringe the patent.
With such importance placed on claims, you would expect them to be readable. You would at least expect them to have been the subject of the “plain English” movement, perhaps best summed up by Albert Einstein when discussing science: “Most of the fundamental ideas of science are essentially simple, and may, as a rule, be expressed in language comprehensible to everyone.” But the claims—despite the substantial time spent drafting and interpreting them—are not a place where the discerning reader finds linguistic respite.
Why do patent attorneys write claims this way? The simple answer is that even in a plain English advocate’s hands, patent claims are doomed to obfuscation by the very authorities that require them. The U.S. Patent and Trademark Office (USPTO) almost insists that claims be unreadable. In the USPTO’s own words: “Each claim begins with a capital letter and ends with a period. Periods may not be used elsewhere in the claims except for abbreviations.”[3] Thus, the plain English drafter can painstakingly weed every occurrence of “utilize.” And excise “said,” replacing it properly with “the.” And even strike “of the” in favor of possessives. But after all this careful work, the drafter may be left with an impenetrable sentence of a length not seen since Matthew begatted Jesus’s lineage back to Abraham.
The consequence of the USPTO’s “single sentence rule” requires the patent drafter to cram several paragraphs of description into a single sentence. The rule forces claim drafters to convert otherwise sensible sentences into multiple clauses beginning “wherein,” such as: “wherein the stringed instrument includes a vibrato bridge movable to vary the tension of each of said one or more strings wherein each of said one or more strings is connected at one end to the actuating means and wherein the actuating means is carried by the vibrato bridge.” In a patent attorney’s hands, the above clause contains reasonable usage. In the hands of any other person, that clause—part of the lengthier entirety of the claim—justifiably drives them apoplectic.
Your next question will probably be: “Why doesn’t someone do something about this clearly outdated rule?” Alfred A. Fressola, patent attorney, inventor, and principled-writer did. During his application’s prosecution, Mr. Fressola, equal parts aware of and perturbed by the USPTO’s single sentence rule, wrote a claim in verboten multi-sentence form. Upon examination, the USPTO examiner formally objected to the claim but also admitted that it was “clearer” than a similar single sentence variant.
Armed with the examiner’s admission and the knowledge that he was on the side of right-writing English peoples, Mr. Fressola petitioned the then-Commissioner of the USPTO, Harry F. Manbeck, Jr., to review the examiner’s objection to his multi-sentence claim. In denying Mr. Fressola’s petition, the Commissioner quoted the Manual of Patent Examination and Procedure (MPEP) and further drew on the weight of 150-plus years of singe sentence tradition. In doing so, he concluded that the single sentence nightmare is “the proper and only way of drafting a claim in compliance with the statutory requirement of 35 USC 112, paragraph 2.”
In addition to 150 years of single sentence history, the Commissioner stated that “the courts do not appear to have had any difficulty dealing with long claims.” The Commissioner went on to argue that “[t]he single sentence requirement promotes clarity and precision…by eliminating…multiple complete sentences.”[4] With such defenses of run-on sentences, it’s no wonder Mr. Fressola (according to him, to his partners’ bemusement) appealed the Commissioner’s decision from the USPTO to the U.S. District Court for the District of Columbia.
The D.C. Circuit gave Mr. Fressola’s case short shrift, deciding that the single sentence requirement was nothing more than a formal—not a substantial—requirement, and thus properly administered by the USPTO. Mr. Fressola—still the inventor here as well as defender of English and patent attorney—tired of his appeals on this point and eventually secured US Patent 5,617,332.[5]
It is a rare situation that someone would take the time to appeal the single sentence rule, allowing their patent application to languish for years in the administrative and court processes while challenging a clearly written—if wrong—requirement. But kudos to Mr. Fressola for being in the unique position to take up the challenge and follow it through.
Mr. Fressola’s position that Section 112 is best-served not by tradition, but by clarity in writing that “particularly” and “distinctly” describes the invention, makes sense. With the potential arrival of a new USPTO Director, I hope that Mr. Fressola’s sensible position becomes the rule. Writing claims in multiple sentences, while perhaps flouting 150-plus years of claim-drafting tradition, promotes clarity. It further complies with the statutory requirement that claims be “particular” and “distinct.” That such claims would differ from the international one-sentence norm would only place the United States at the forefront of a sensible change in patent claim-drafting rules. Not only would the patent bar be happier for it,[7] but so would the examiners who are charged with interpreting needlessly unreadable claims, as well as the judges and juries who examine claims in excruciating detail.
___
[1] Garner, Bryan. Garner’s Modern American Usage, 3rd Ed. 2009.
[2] To spare you some frustration, I have not included the entire text of one of these monstrosities in this article and for that, I accept your thanks.
[3] Manual of Patent Examination and Procedure (MPEP) Section 608.01(m) (the MPEP is guidebook that provides the procedure to be used by examiners when they examine patent applications).
[4] Section 112 requires that “[t]he specification shall conclude with one or more claims particularly pointing out and distinctly claiming the subject matter which the applicant regards as his invention.” The Commissioner stated that courts “do not have difficulty” parsing long claims, and as proof, noted a civil action involving a 268-word claim.
[5] I beg to differ: I have often heard judges beg on their own and on their juries’ behalves for patent attorneys to take mercy on them and not overcomplicate things with dense writing.
[6] Mr. Fressola unsuccessfully appealed another aspect of his patent application, an omnibus claim, to the Court of Appeals for the Federal Circuit.
[7] A version of this article originally published in 2009. The bar's response to it then was skeptical, so maybe I'm wrong and patent attorneys want less clarity. If so, it may put them at odds with their clients' wishes.

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Where do ideas come from?

Chauvet Cave art


From nothing came Let It Be, Starry Night, calculus, East of Eden, Star Wars, the Taj Mahal, Oreos, the Internet. Somehow we look into the grey unformed nothingness clay in our heads--and we create. No one can explain how we do it--what makes this mundane sentence that I'm writing even possible--and yet we have been doing it for a long time. The Chauvet Caves in France hold cave paintings that date back almost 40,000 years with hints of art in bits of sculpture and paint dating back over 150,000 years. So even when humans would have struggled to find food, when were as often the hunted as the hunter, and had only a limited understanding and time for medicine, we found time to create.
How is it that we access our ability to create? Neuroscience can help identify the areas of the brain that are activated as we create. Someone coined a right brain/left brain dichotomy early on but the most in depth studies show this to be a myth. In fact, during creation many areas of the brain light up and talk. A creative idea inside the brain is therefore a neural network of electro-biological signals that has never been formed before. But what caused this network to form? And how can we form more? Neuroscientists can only hint at environs that help creativity--and not at its ultimate root cause. Which leaves science without a lot of insight into how we render a painting, write a song, make a new food combination.
Other scientists like Steven Johnson note that ideas are rarely the epiphany-eureka moment of literature. The apple doesn't hit Isaac Newton on the head. Instead, he says, our most creative ideas arise from a "slow hunch." One example is from Charles Darwin, who for years in his personal diaries was deeply pondering the tenets of natural selection, without linking together the simple over-arching theory. In his diaries, he is consumed with changes in birds due to environment over time. That certain birds of certain characteristics would not survive long-term and others would. These deep observations link to other insights he's having, and yet he lacks the certainty to espouse his theory of natural selection until each piece of his network forms.
And when we think of creation as a network, we can then look at ideas as needing a culture to help form those connections. Is it a coincidence then that right now, the most networked place on earth is the Silicon Valley, our innovation hub. It became a hub of coffee house idea culture. It has an abundance of shared workspaces. Employees moving between companies act like bees spreading the pollen of ideas from one innovative place to another. Companies like Google recognize the huge benefit of idea-spreading so much that they encourage their employees to spend 20% of Google time on their passions--recognizing that a network administrator may create AdSense, Gmail, Google Maps, Google News, Google Talk--to name a few outgrowths of Google's 20-% policy--if they follow their own passions instead of the corporate mandate. With policies like this, is it any wonder that the Silicon Valley is a cradle of ideas?
But even if scientists conceive of ideas as a neural network,  and even if we can form a petri dish of the idea coffee house as a place for the ideas to form, who can answer the title question of this article: Where do ideas come from?
If the scientists fall short, maybe we can ask the artists. When we do, we find that their answers provide fewer concrete answers, but they do give us a welcome poetical vagueness. Vague because in the end these artistic minds give no more surety than neuroscience's "ideas come from all over the brain." Welcome because their answers provide a metaphorical framework that feels relatable. And poetical because, well, you be the judge.

[The idea pool is] the pool where we all go down to drink, to swim, to catch a little fish from the edge of the shore; it's also the pool where some hardy souls go out in their flimsy wooden boats after the big ones. It is the pool of life, the cup of imagination, and ... different people see different versions of it, but with two things ever in common: it's always about a mile deep in the Fairy Forest, and it's always sad. Because imagination isn't the only thing this place is about.

- Stephen King, Lisey's Story

Startled by God
Not like
A lone beautiful bird
These poems now rise in great white flocks
Against my mind’s vast hills
Startled by God
Breaking a branch
When his feet
Touches
Earth
Near
Me

King's and Hafiz's otherworldy-sounding descriptions of where ideas come from, however, lodge sideways in a scientist's mind. And being one, I get that. But consider a few spooky coincidences in the fields of scientific discovery: The 17th-century independent formulation of calculus by Isaac Newton, Gottfried Wilhelm Leibniz and others; the 18th-century discovery of oxygen by Carl Wilhelm Scheele, Joseph Priestley, Antoine Lavoisier and others; the theory of evolution of species, independently advanced in the 19th century by Charles Darwin and Alfred Russel Wallace. This coincident invention and discovery is so commonplace that it has been studied under a term called Multiple Discovery.
And consider Eat, Pray, Love author Elizabeth Gilbert's story in Big Magic: Creative Living Beyond Fear about an idea she had. Gilbert had an idea about a midwestern pharmaceutical executive that goes to the Amazon searching for a drug, but gets tangled in a murder. Gilbert was sketching out the plot but eventually didn't see it through. A few months later, she was talking to her friend, the author Anne Patchett, who told her she was working on a book about--wait for it--a midwestern pharmaceutical executive that goes to the Amazon searching for a drug and who gets tangled in a murder. When the authors compared notes, Patchett got her inspiration for her State of Wonder at the precise moment when Gilbert gave up on her own idea.
The Gilbert-Patchett story reminded interviewer and author Krista Tippett of Roseanne Cash's description of how ideas are around us all ready to be caught, but "you have to have your catcher's mitt on." As Cash went on to playfully say, "I don't want [fellow country music singer] Lucinda [Williams] to get this one."
All this leaves the title question unanswered. And given science's failure to uncover where ideas come from, and the discoverer's own poetic answers, that gives some comfort: Maybe human creativity is a body of water whose depths we cannot fathom.


Closing such an exploration on an IP note may seem out of place, but this blog has a theme, and there may be some on-point advice to give. The multiple discovery phenomenon is well-known and documented. Why it happens is anyone's guess but that it happens is beyond doubt. From an IP attorney perspective, the takeaway is: File now. Protect your ideas before Lucinda does.
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Patent Damages for Infringing Acts Outside of the US

One of the bedrock principles of patent law is that it only applies territorially: A US patent holder cannot sue for infringing acts in Nepal. But there are some grey areas. Specifically, US laws provide that a party can be liable for patent infringement where they make components in the US for assembly outside the US:

(1) Whoever without authority supplies or causes to be supplied in or from the United States all or a substantial portion of the components of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.
(2) Whoever without authority supplies or causes to be supplied in or from the United States any component of a patented invention that is especially made or especially adapted for use in the invention and not a staple article or commodity of commerce suitable for substantial noninfringing use, where such component is uncombined in whole or in part, knowing that such component is so made or adapted and intending that such component will be combined outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.

35 USC 271(f)
The notable thing about the above-quoted law is that it is specifically written to apply to domestic parties acting extra-territorially. This leaves open the question of whether other--non-specific patent laws--also apply extra-territorially.  Yesterday the Supreme Court took up the question of whether the patent damages statute, 35 USC 284, can apply to capture international profits under the infringing acts under 35 USC 271(f) noted above.
Writing for the 7-2 majority in WesternGeco LLC v. Ion Geophysical Corp., Justice Thomas wrote that the patent damages statute applies outside the US because it works in tandem with the infringement statute above. The Court's rationale is that "When determining the focus of a statute, we do not analyze the provision at issue in a vacuum. If the statutory provision at issue works in tandem with other provisions, it must be assessed in concert with those other provisions. Otherwise, it would be impossible to accurately determine whether the application of the statute in the case is a 'domestic application.' And determining how the statute has actually been applied is the whole point of the focus test."
The Court's conclusion is limited to the damages statute's application in conjunction with 35 USC 271(f), so its expansion from the damages statute to other statutes may be challenging.

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New USPTO Director Andrei Iancu's Pro-innovation Remarks

Following the last several years where Congress, the courts, and even the former U.S. Patent and Trademark Office Director were accused of being anti-innovation, the new director Andrei Iancu delivered these pointedly pro-innovation remarks yesterday. Innovators should applaud what some believe is an overdue return of a painful pendulum swing. Here is his introduction:

Dr. Eli Harari, an electrical engineer, always tinkered and invented things. He tells, for example, that he invented a new type of fishing rod, although he never fished.
“Imagine how much more successful you’d be,” his wife said, “if you’d invent in a field you knew something about.”
And so he did. Dr. Harari is credited with inventing the Electrically Erasable Programmable Read-Only Memory, also known as EEPROM, or “E-squared PROM.” This was in the 1970s, when Harari was working at a major corporation, where he was a star. But a few years later, he wanted to be on his own, to invent, to perfect, to commercialize. In his late 30s, he was also married and had a child. So in the prime of his career, with a family at home, Harari left his comfortable life with major corporations.
Seeding it in part with his own money, Harari started a company of his own. And he did not even draw a salary the first several months. He risked everything: his career, his finances, and his family. That first company actually did not work out well, but a few years later, Harari risked it all again and co-founded a new company, which he ultimately called SanDisk.
At SanDisk, Harari built upon his EEPROM technology, added critically important new inventions, and perfected flash memory data storage. And he obtained patents, including on how to turn memory chips into reliable systems. Harari’s flash technology came to be used almost universally in devices like digital cameras and cell phones. In 2016, Western Digital acquired SanDisk for $19 billion.
But think about it: without patents, how could someone like Dr. Harari risk everything, put aside his secure career at an established company, and strike it on his own?
As Dr. Harari told me, “The only asset you have is your idea. If you have no way to protect your idea, you are at the mercy of the next bad guy. The U.S. patent system is genius, really the bedrock foundation of capitalism.” Harari’s sentiment was echoed by President Ronald Reagan, who said in 1982: “Throughout our nation’s history, the patent system has played a critically important role in stimulating technological advances.”
How true that is.
Yet today, our patent system is at a crossroads. For more than just a few years, our system has been pushed and pulled, poked and prodded. The cumulative result is a system in which the patent grant is less reliable today than it should be. This onslaught has come from all directions. There has been major reform legislation, and proposed legislation. There have been massive changes brought about by major court cases. And the USPTO itself has taken a variety of actions in an effort to implement these changes. Plus, importantly, the rhetoric surrounding the patent system has focused relentlessly on certain faults in, or abuses of, the system—instead of the incredible benefits the system brings to our nation. We see the result of this years-long onslaught in your own study, the U.S. Chamber’s 6th Annual International IP Index.
I don’t need to tell this audience that the American patent system, which in prior years was deservedly ranked as the number one system in the world, in 2017 fell to number 10. And this year it fell further, tied for number 12. But make no mistake: we are still an elite system, a mere ¼ point away from the systems ranked 2-11.  And the United States remains the leader for overall IP rights.
Still, we are at an inflection point with respect to the patent system. As a nation, we cannot continue down the same path if we want to maintain our global economic leadership. And we will not continue down the same path. This administration has a mission to create sustained economic growth, and innovation and IP protection are key goals in support of that mission.
So, how do we reverse the trend? The good news is that reclaiming our patent leadership status is within reach.
For today, let me focus on two principal points:
  1. 1. Creating a new pro-innovation, pro-IP dialogue, and
  2. 2. Increasing the reliability of the patent grant.
First, we must change the dialogue surrounding patents. Words have meaning. Words impact perception and drive public policy. And for too long, the words surrounding our patent system have been overly-focused on its faults. A successful system cannot be defined by its faults. Rather, a successful system must be defined by its goals, aspirations, and successes. Obviously, errors in the system should be corrected. And no abuse should be tolerated. Errors and abuse should be identified and swiftly eliminated. However, the focus for discussion, and the focus for IP policy, must be on the positive. We must create a new narrative that defines the patent system by the brilliance of inventors, the excitement of invention, and the incredible benefits they bring to society. And it is these benefits that must drive our patent policies.
At my swearing-in, I remarked that through the doors of the U.S. Patent and Trademark Office comes our future. And indeed it does, and it always did. We must celebrate that. From Thomas Edison to the Wright Brothers, from Stanley Cohen and Herbert Boyer to Steve Jobs, American inventors have fueled the imagination of our people for generations. We are a pioneering people who overcome large obstacles in order to realize our dreams and create prosperity. Inventors help make dreams reality, and American invention changes the world. Indeed, with American patents, humans made light, began to fly, treated disease, and enabled instant communications across the globe from tiny devices in our pockets.
And those patents also enabled these inventors to start companies and grow our economy. Our dialogue and policies need to be focused on these amazing achievements, and how we can encourage more of them. Take Walter Hawkins as another example: Hawkins, who in 1942 became the first African American scientist on staff at AT&T’s Bell Labs, developed the plastic coating that covers telephone wires, a more versatile, durable and eco-friendly alternative to the lead standard at the time. It was so durable, in fact, and so effective, that Hawkins’ invention enabled huge investments to bring affordable phone service across America, including rural areas, and to millions of people in the 20th century.
Inventor stories like Hawkins’ and Harari’s are those we need to tell.
This is the American patent system. This is the dialogue we need to have. And this should be the focus of our patent policy. This is how we incentivize innovation and growth. But, how exactly do we translate this into a better patent system?
Here’s a start: when we write, interpret, and administer patent laws, we must consistently ask ourselves "Are we helping these inventors?" Whether it’s an individual tinkering in her garage, or a team at a large corporation, or a laboratory on a university campus, we must ask ourselves "Are we helping them? Are we incentivizing innovation?
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Criteria for Patent Law Injunctions

(Presented at the Joint Patent Practice Continuing Legal Education Seminar in May 2018)

I. THE PERMANENT INJUNCTION STANDARD IN PATENT LAW

The Patent Act provides for granting injunctive relief at the district court “in accordance with the principles of equity,” which means that courts apply the injunction at their discretion. “The several courts having jurisdiction of cases under this title may grant injunctions in accordance with the principles of equity to prevent violation of any right secured by patent, on such terms as the court deems reasonable.”[1]
A patent owner’s right to exclude others from making, using, or selling an invention is distinct from its right to stop others from violating its patent rights. Because of this distinction, the patent owner must establish its right to a permanent injunction by meeting a four-factor test set forth by the Supreme Court in its 2006 eBay Inc. v. MercExchange, L.L.C. decision.

A plaintiff must demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.[2]

The eBay decision came as a surprise to some, as the Federal Circuit had stated that “the general rule is that a permanent injunction will issue once infringement and validity have been adjudged.”[3] Following this perceived general rule, patentees had confidently threatened injunctions against potential infringers. Removal of injunctions from what some thought of as a statutory requirement has given rise to several Federal Circuit cases that cast further light on applications for injunction.

II. PROOF OF ALL FACTORS REQUIRED

Nicha Corporation v. Everlight America et al. [4]

The Federal Circuit reviewed the eBay so-called four-factor test and found that it was not actually a factor test, but instead a four-element test, requiring the presence of all elements. The court acknowledged that injunctions are “one of the most essential sticks in the bundle of rights that are commonly characterized as property” but further stated that “the moving party must satisfy the court that relief is needed.”[5] In making this distinction, the Federal Circuit found that Nichia had failed to prove eBay element (1) showing irreparable harm.
With respect to this irreparable harm requirement, the Federal Circuit followed the district court’s finding of facts. “The record shows an absence of meaningful competition.” It agreed with the district court that Nichia had “failed to establish past irreparable harm, or the likelihood of irreparable harm in the future based on lost sales” or “based on price erosion,” and that Nichia's licensing of the patents to major competitors suggested that harm from “infringement of the patents-in-suit is not irreparable.” It also found that Nichia's licensing practices have made “multiple low-priced non-infringing alternatives from competitors available to replace the accused Everlight products if such products were not available.”[6]
The absence of meaningful competition in particular weighed heavily against Nichia because it could not show irreparable harm should Everlight continue selling the infringing products. Specifically, the Federal Circuit, following the district court’s findings of fact, found several factors dispositive of there being no irreparable harm:

  • Lack of meaningful competition between the parties. The Federal Circuit found that (a) Nichia was an LED supplier and packager, and Everlight was merely a packager, and (b) although there was some competition, it was not meaningful (“a proverbial drop in the bucket”).
  • No risk of future harm where there was no evidence of past harm. “Nichia did not prove that it had suffered even a single lost sale from Everlight’s infringement.”[7]
  • No evidence of price erosion. Although there was some evidence of price erosion in general, “Nichia “cannot establish that Everlight was the ‘but for’ cause of its claimed price erosion.”[8]
  • Licensing activities precluded a finding of irreparable harm. While evidence of licensing activities cannot establish a lack of irreparable harm per se, the Federal Circuit stated “that the fact of the grant of previous licenses, the identity of the past licensees, the experience in the market since the licenses were granted, and the identity of the new infringer all may affect the district court's discretionary decision concerning whether a reasonable royalty from an infringer constitutes damages adequate to compensate for the infringement.”[9]

Reviewing these factors, the court found that Nichia could not show irreparable harm and having failed to meet one of the four elements of the eBay test, the district court’s denial of the injunction against Everlight was proper.

III. PRELIMINARY INJUNCTIONS STANDARDS

Mylan Institutional LLC et al. v. Aurobindo Pharma Ltd. et al.[10]

A plaintiff seeking a preliminary injunction must establish that it is likely to succeed on the merits, that it is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in its favor, and that an injunction is in the public interest.[11] On appeal, Aurobindo challenged three district court findings related to a preliminary injunction against: 1) the likelihood that Aurobindo infringed; 2) whether Aurobindo failed to raise a substantial question of validity; and 3) whether there was irreparable harm to Mylan.

  1. Likelihood of Infringement

Mylan asserted three patents against Aurobindo, two claiming a process for making a compound, and one claiming the actual compound. Aurobindo did not appeal the preliminary injunction with respect to the infringement analysis of the compound claim patent, and thus it only considered the process claiming patents in determining the likelihood of infringement.[12]
To establish a likelihood of success on the merits for a patent infringement claim, a patentee must show that it will likely prove infringement of the asserted claims and that its infringement claim will likely withstand the alleged infringer's challenges to patent validity and enforceability.[13] A preliminary injunction should not issue if the accused infringer “raises a substantial question concerning either infringement or validity.[14]
As a matter of perspective, the Federal Circuit acknowledged that there are few cases where a preliminary injunction was granted where the infringement asserted was under the doctrine of equivalents, and even fewer in the field of chemical materials. This paucity of precedent is due to “the fact that equivalents cases are “highly factual inquir[ies] [that] rarely come[ ] clear on a premature record.”[15]
Despite a lack of precedence, the district court applied the function-way-result (FWR) test in its doctrine of equivalents analysis for the process claims, looking to whether Aurobindo’s product performs “substantially the same function in substantially the same way to obtain the same result”[16] over its alternative doctrine of equivalents insubstantial differences test (whether the accused product or process is substantially different from what is patented).[17]
The Federal Circuit found that the FWR test in chemical cases was lacking because there is often no “function” or “way” for a claim limitation. “Especially when evaluating an equivalents dispute dealing with chemical compositions having many components, chemical compounds with many substituents (which are usually claimed as separate limitations), and those having a medical or biological use, it is often not clear what the “function” or “way” is for each claim limitation.”[18] It went on to conclude that although the “result” can be easily identified, simply finding identity in the result is not how the Supreme Court mandated application of the FWR test. “The “result” of using a claimed compound may be more easily evaluated, as the structure and uses of one compound may be directly compared with those of another. But...that is not how infringement under FWR is determined. It must be determined on a limitation-by-limitation basis.”[19]
When reviewing the district court’s application of the FWR test, the Federal Circuit found that it misapplied the test and ignored the “way” prong. “Aurobindo argued before the district court that the “function” prong of the FWR test was not met because of the difference in oxidation strength between silver oxide and manganese dioxide. But the court did not seem to address that argument, which in actuality related to the “way” component of the FWR test.”[20]
The court concluded that the district court abused its discretion in granting the preliminary injunction of the process patents because of this flaw in its infringement analysis and suggested that the district court consider the substantial differences infringement test on remand. This infringement holding did not affect the single remaining patent with the compound claim—for that, Aurobindo relied on an invalidity argument.
2. Validity
Mylan’s ‘050 patent claim 1 states:

A compound N-[4-[[4-(diethylamino)phenyl] (2,5-disulfophenyl)methylene]-2,5-cyclohexadien-1-ylidene]-N-ethylethanaminium, sodium salt having a purity of at least 99.0% by HPLC.[21]

Aurobindo argued that prior art rendered the claims invalid as anticipated and obvious, and also that “by HPLC” was indefinite.
The Federal Circuit deferred to the district court’s anticipation and obviousness analysis because Aurobindo argued that the district court made a factual error. “Aurobindo points to no legal error in the district court's analysis of the record evidence; rather, it argues only that the court erred in ‘misreading the factual content of the prior art.’ However, what the prior art teaches is a question of fact that we review with deference, especially at the preliminary injunction stage. We do not ‘reweigh evidence on appeal.’”[22]
The Federal Circuit also agreed that the district court properly rejected Aurobindo’s assertion that “by HPLC” was indefinite. “The [district] court found that the phrase ‘by HPLC’ was a ‘common and well understood way of designating purity in publications and patents that are relied upon by the scientific and technical community.’...The court found that ‘numerous sources’ support that determination.”[23]
Based on this, the Federal Circuit upheld the district court’s conclusions regarding the ‘050 compound claim as not invalid.
3. Irreparable Harm
The Federal Circuit finally turned to whether the district court erred in finding a likelihood that Mylan would sustain “substantial and immediate irreparable injury” without preliminary relief. Aurobindo argued that the district court erred in finding a causal nexus between Mylan’s alleged harm and the patented features. Aurobindo contends that the patented features are the use of silver oxide to oxidize isoleuco acid, and that the ISB employed in the finished drug product is at least 99.0% pure by HPLC. Aurobindo argued that there was no evidence that the consumer demand for Mylan's product arises from the fact that the ISB it contained was synthesized using silver oxide or that the ISB is at least 99.0% pure.
The Federal Circuit, however, did not find clear error in the district court’s findings that Aurobindo's causal nexus argument was flawed because it improperly focused on a subset of the relevant customers (physicians) and ignored all others (active pharmaceutical ingredient (“API”) suppliers, pharma companies, hospitals, the FDA, etc.). Mylan maintained that its harm was directly caused by Aurobindo's infringement because ample evidence showed that Aurobindo gained a competitive advantage by copying its patented process.
With one patent surviving the noninfringement argument, all patents not found invalid, and with evidence of irreparable harm, the Federal Circuit upheld the preliminary injunction, with respect at least to the compound-claiming ‘050 patent.

IV. PROVING IRREPARABLE HARM’S CASUAL NEXUS RELATING THE ALLEGED HARM TO THE ALLEGED INFRINGEMENT

Genband US LLC v. Metaswitch Networks Corp.[24]

A plaintiff seeking a preliminary injunction must show that it has suffered irreparable harm. The irreparable harm requirement can be met when “a sufficiently strong causal nexus relates the alleged harm to the alleged infringement.”[25] The irreparable harm requirement can further be met with “some causal nexus between [defendant’s] infringing conduct and [patentee’s] alleged harm” and “a causal nexus linking the harm and the infringing acts.”[26]
The Federal Circuit found that the district court relied on a too stringent interpretation of the causal-nexus requirement “[b]ut we cannot be sure that the district court, in demanding such proof, used the standard for causal nexus now established to be the governing standard.”[27] The standard the district court relied upon was the “drive demand test” that requires proof of a relationship between a claim feature and sales of an accused product.
The challenge of the “drive demand” test is that it may be open to different interpretations, “some stricter, some more flexible, at least in situations where the product at issue has multiple purchasers and multiple features that different purchasers might assign different weights in their purchasing decisions.”[28]  The “drive demand” formulation could require that the infringing feature be “the driver” of decisions by consumers treated collectively as a kind of unit, even requiring proof that no or almost no buyers would buy the product but for the infringing feature. Or the infringing feature may be “a driver” of decisions by a substantial number of individual consumer decision-makers considering multiple features.
The Federal Circuit clarified that the correct standard is based on “‘a driver’ as opposed to ‘the driver,’ as applied in the multi-consumer, multi-feature context.”[29] Rather than show that a patented feature is the exclusive reason for consumer demand, a patentee must show some connection between the patented feature and demand for the infringer’s accused products. There might be a variety of ways to make this required showing, for example, with evidence that a patented feature is one of several features that cause consumers to make their purchasing decisions. It might also be shown with evidence that the inclusion of a patented feature makes a product significantly more desirable. Conversely, it might be shown with evidence that the absence of a patented feature would make a product significantly less desirable.[30]
The district court, however, referred to the standards only by stating that Genband argued for them and the Federal Circuit saw “no sufficient basis for inferring that the district court actually used those standards, rather than an unduly stringent test, to interpret and apply the ‘drive demand’ standard.” Given this unclear reasoning, the Federal Circuit vacated the permanent injunction and remanded the case for further consideration.
[1] 35 U.S.C. 283.
[2] 547 U.S. 388, 391 (2006).
[3] MercExchange, LLC v. eBay Inc.,401 F. 3d 1323, 1338 (Fed. Cir. 2005).
[4] 855 F.3d 1328 (Fed. Cir. 2017).
[5] Id. at 1341.
[6] Id. at 1342-1343.
[7] Id. at 1343.
[8] Id.
[9] Id.
[10]Mylan Institutional LLC v. Aurobindo Pharma Ltd., 857 F.3d 858 (Fed. Cir. 2017).
[11] Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 20, (2008).
[12] Mylan at 861–62 and U.S. Patent 8,969,616.
[13] Sciele Pharma, Inc. v. Lupin Ltd., 684 F.3d 1253, 1259 (Fed. Cir. 2012) (citing Amazon.com, 239 F.3d at 1350).
[14] Mylan at 866.
[15] Jeneric/Pentron, Inc. v. Dillon Co., Inc., 205 F.3d 1377, 1384 (Fed. Cir. 2000).
[16] Graver Tank & Mfg. Co. v. Linde Air Prod. Co., 339 U.S. 605, 608-609 (1950).
[17] Mylan at 866–67.
[18] Mylan at 868.
[19] Id.
[20] Id.
[21] U.S. Patent 9,353,050.
[22] Mylan at 870.
[23] Mylan at 871.
[24] 861 F.3d 1378, 1379 (Fed. Cir. 2017).
[25] Apple, Inc. v. Samsung Electronics Co. (Apple II), 695 F.3d 1370, 1374-5 (Fed. Cir. 2012).
[26] Apple, Inc. v. Samsung Electronics Co. (Apple III), 735 F.3d 1352, 1364 (Fed. Cir. 2013) and Apple, Inc. v. Samsung Electronics Co. (Apple IV), 809 F.3d 633, 641–42 (Fed. Cir. 2015) respectively.
[27] Genband at 1381.
[28] Id.
[29] Genband at 1382.
[30] Apple IV.

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Top Patent Cases of 2017
Supreme Court: Patent Infringement Lawsuits Only in State of Incorporation or Regular Place of Business
The Supreme Court issued a unanimous decision (it does happen) TC Heartland LLC v Kraft Food Group Brands LLC. The Court found that a plaintiff must bring patent infringement suits in the defendant’s state of incorporation or where the defendant has committed acts of infringement and has a regular and established place of business. This holding overturns almost 30 years of precedent in the federal courts and should put an end to the odd popularity of geographically inconvenient districts like the Eastern District of Texas.
Supreme Court: No Laches Defense in Patent Infringement Actions
Equity aids the vigilant, not those who slumber on their rights. This is a legal maxim that speaks to fairness, and in the courts, the maxim finds its roots in the equitable defense of laches.
The Supreme Court's 7-1 SCA Hygeine Products AKT vs. First Quality Products, LLC (S. Ct. 2017) decision considered whether laches could be used as a defense when 7 years had passed from when a party first received notice of potential infringement and the date a patent owner filed an infringement complaint. Returning to the maxim, the Court concluded that “Laches cannot be interposed as a defense against damages where the infringement occurred within the [statute of limitations].”
En banc Federal Circuit OKs Amending Patents in AIA Post Grant Proceedings
The En Banc Federal Circuit gave patent owners a win late this year, shifting the burden of proof to patent challengers in Post Grant Proceedings in In Re Aqua Products, Inc. Before Aqua Products, patent owners bore the burden of proof to show that their amendments were unpatentable; now, challengers must show that such amendments are not patentable. This shift tips the scale in favor of patent owners and is a win for parties subject to post grant challenges.
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Alice / Patentable Subject Matter set to Hamilton

Attending the Benjamin Franklin Inn of Court meeting this week, I was witness to this program winning the Inn of Court National Award for Best Program.
I cannot imagine a more deserving presentation: Congratulations to its creator Stewart Weiner and the many performers.

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Recent International Decisions: IP Getting Stronger Outside the US

Recent IP decisions reinforce the view that outside the US, IP decisions more often favor patent and trademark holders.
China: One on the patent side, one on the trademark
Before 1985, China had no patent system, and many people have been skeptical of what system there is since then. But China recognizes the importance of protecting IP rights, and has even created an IP court in Beijing.
A patent holder, Iwncomm, is the owner of a standards essential patent (SEP), which means that it holds a patent for a technology that is required by any mobile operator that uses one of the essential standards (like 3G, 4G LTE for example). In a recent holding, an IP court ordered Sony to pay Iwncomm $1.3 million in damages and stop selling certain mobile devices that infringe Iwncomm's patent.
Iwncomm's injunction applies not just to products sold in China but also to exports of goods made in that country. Erick Robinson, the director of patent litigation at Beijing East IP Ltd., summed up the holding's broader implications. “Enforcement of standard-essential patents is an important issue throughout the world, specifically whether injunctions should be available in such cases...In China, the answer to this question is a definitive ‘yes.’”
A trademark ruling in favor of Under Armour ordered a knock off clothing maker called Uncle Martian (!) to pay $300,000 in damages, destroy its products, and cease infringing manufacture. The interesting thing to note here is that this result issued from the People’s Higher Court of Fujian Province, which a local provincial court. This gives rise to a growing belief that IP owners may find support to enforce their IP rights in Chinese courts, even outside the specialty ones.
UK: Easier to find equivalence infringement
To find infringement, an accused product must fall within the scope of the patent claims. The infringement can be literal, meaning the claims literally read on the accused product, or equivalent, meaning the claims don't literally read on an accused product but the difference between the accused product and claims is insubstantial (this last word being the US test). In the UK, proof of equivalents, until recently, required that a patent owner overcome the Improver inquiry.

The variant will not infringe if any of the following are true:

  • The variant has a material effect on the way the invention works.
  • The fact that the variant has no material effect on the way the invention works would not have been obvious to an expert in the field.
  • That an expert in the field would have taken from the language used in the patent that strict compliance with the primary meaning was an essential requirement of the invention.

The UK Supreme Court struck down this decision in Activis UK Ltd. v. Eli Lilly and Company. In an interesting decision that explores how other countries approach equivalents, the UK Supreme Court fount that "The second Improver question is more problematic. In my view, it imposes too high a burden on the patentee to ask whether it would have been obvious to the notional addressee that the variant would have no material effect on the way in which the invention works, given that it requires the addressee to figure out for himself whether the variant would work." In taking this position, the Court strengthened the perception that the EU in general and UK in particular, is a patent-holder friendly venue.

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