The question of what software is patent-eligible subject matter is still evolving. The Federal Circuit in Visual Memory v. NVIDIA, recently weighed in with another guidepost on the way to patent eligibility.
Claim 1 reads:
A computer memory system connectable to a processor and having one or more programmable operational characteristics, said characteristics being defined through configuration by said computer based on the type of said processor, wherein said system is connectable to said processor by a bus, said system comprising:
a main memory connected to said bus; an
a cache connected to said bus;
wherein a programmable operational characteristic of said system determines a type of data stored by said cache.
In the lower court decision, the district court concluded that the “abstract idea of categorical data storage” was something that humans had been doing for many years. For this reason, the claim ran afoul of the Supreme Court’s Alice rationale that claims cannot “tend to impede innovation more than it would tend to promote it.” This captures the challenges that courts and USPTO examiners currently face from the limited guidance given in the Supreme Court’s Alice decision.
The Federal Circuit rejected the district court’s reasoning in a split decision. The reasoning was mostly limited to the facts of the case, “Our review of the ’740 patent claims demonstrates that they are directed to an improved computer memory system, not to the abstract idea of categorical data storage.” The court expanded on this to conclude, with reference to its earlier Enfish and Thales cases, “As with Enfish’s self-referential table and the motion tracking system in Thales, the claims here are directed to a technological improvement: an enhanced computer memory system.”
The split decision, unfortunately, adds limited clarity for future cases, since the dissenting opinion expresses what others on the Federal Circuit still believe, “Because the ’740 patent does not describe how to implement the “programmable operational characteristic” and requires someone else to supply the innovative programming effort, it is not properly described as directed to an improvement in computer systems.”
You sell something but keep the details of the sale a secret. Is this still a sale that bars issuance of a patent under 35 USC 102: “A person shall be entitled to a patent unless the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention?” The Federal Circuit Helsinn Healthcare SA v Teva Pharmaceuticals, Inc. case answers yes: Secret sales bar issuance of a patent.
Before the American Invents Act (AIA) passed in 2011, the law regarding secret sales was well-settled:
- In re Caveney rejected the argument that a sale or offer for sale did not trigger the on-sale bar when it had been “kept secret from the trade,” concluding that “sales or offers by one person of a claimed invention . . . bar another party from obtaining a patent if the sale or offer to sell is made over a year before the latter’s filing date.”
- Woodland Trust v. Flowertree Nursery, Inc. stated that “an inventor’s own prior commercial use, albeit kept secret, may constitute a public use or sale under § 102(b), barring him from obtaining a patent.”
- J.A. LaPorte, Inc. v. Norfolk Dredging Co. stated that the on-sale bar “is not limited to sales by the inventor or one under his control, but may result from activities of a third party” and rejecting the argument that “secret commercialization by a third party” is not invalidating since “the invention . . . was discoverable from the device which was sold” and the “device . . . embodie[d] the invention.”
These cases relied on pre-AIA 35 USC 102, which read: “A person shall be entitled to a patent unless (a) the invention was known or used by others in this country, or patented or described in a printed publication in this or a foreign country, before the invention thereof by the applicant for patent….” The difference between pre- and post AIA 35 USC 102, for secret sales, turns on one clause emphasized as follows: “A person shall be entitled to a patent unless the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention.”
Following passage of the AIA, some commentators and organizations (a few gathered in this excellent Patently-O article), argued that “non-public offers for sale (and non-public uses) would not qualify as prior art under the AIA,” quoting the American Bar Association IP Law Section.
The ABA’s and others’ interpretation may have been bolstered by remarks made by Senator Kyl (R-Utah): “And the current on-sale bar imposes penalties not demanded by any legitimate public interest. There is no reason to fear ‘‘commercialization’’ that merely consists of a secret sale or offer for sale but that does not operate to disclose the invention to the public.” Congressional Record at S1371.
The Federal Circuit Helsinn panel considered this and found that Senator Kyl’s remarks addressed the “public use” exception and not the “on-sale” bar. Helsinn instead chose to follow older Supreme Court precedent in Penneck v. Dialogue, which held that a public sale that did not publicly disclose an invention “would materially retard the progress of science and the useful arts, and give a premium to those who should be least prompt to communicate their discoveries.” The Supreme Court justified its decision by relying on the public service that a patent serves:
If an inventor should be permitted to hold back from the knowledge of the public the secrets of his invention; if he should for a long period of years retain the monopoly, and make, and sell his invention publicly, and thus gather the whole profits of it, relying upon his superior skill and knowledge of the structure; and then, and then only, when the danger of competition should force him to secure the exclusive right, he should be allowed to take out a patent, and thus exclude the public from any farther use than what should be derived under it during his fourteen years; it would materially retard the progress of science and the useful arts, and give a premium to those who should be least prompt to communicate their discoveries.
The Federal Circuit agreed, stating, “A primary rationale of the on-sale bar is that publicly offering a product for sale that embodies the claimed invention places it in the public domain, regardless of when or whether actual delivery occurs…Thus, our prior cases have applied the on-sale bar even when there is no delivery, when delivery is set after the critical date, or, even when, upon delivery, members of the public could not ascertain the claimed invention. There is no indication in the floor statements that these members intended to overrule these cases.”
Helsinn is likely on its way to appeal to the Supreme Court because of the potential conflict between its holding and the statute, but for now, secret sales still trigger the on-sale bar.
USPTO Director Michelle Lee abruptly resigned today. There was speculation after President Trump’s election that she would not stay on or perhaps take another post in the administration, but after months of questions, she affirmed her role as USPTO Director in March. Just two months later, she has resigned, opening speculation as to who will fill her post. As yet, there are no early contenders.
UPDATE: Joseph Matal has been named Acting Director.
The Supreme Court issued a unanimous decision (it does happen) today in 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.
The statute in question is 28 USC 1400(b): “Any civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.”
The United States Federal Circuit Court of Appeals had interpreted this section in view of 28 USC 1391(c), which states that “[f]or purposes of venue under this chapter, a defendant that is a corporation shall be deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced.” VE Holding Corp. v. Johnson Gas Appliance Co., 917 F. 2d 1574 (Fed. Cir. 1990).
The Supreme Court rejected the Federal Circuit’s interpretation, “The current version of §1391 does not contain any indication that Congress intended to alter the meaning of §1400(b).”
This holding should give rise to increased patent litigation suits in Delaware and other states that are friendly to corporations.
Justice Thomas wrote the opinion for the Court.
I met Anne a few weeks ago at a Headroom event in Wayne. Her subject matter was news to me and seemed relevant to many readers of this blog so I invited her to write a column. Thankfully, she obliged my request. -Steve
There are nearly 2,000 different state incentives and thousands of federal programs currently available to businesses in the US. Many organizations miss out on substantial benefits that are in place specifically to support growth.
Pennsylvania has a variety of incentive programs available to for-profit companies. Two are mentioned below. In both cases, the benefits are given in the form of a sellable/transferable tax credit. This means that if a business is awarded one of these tax credits and does not need them to satisfy a liability, they can sell the credit to another entity. The credit is then monetized and provides an additional source of capital to their business.
Keystone Innovation Zone (KIZ) Tax Credit – PA
- Available to biotechnology, technology, life science or manufacturing focused businesses located in PA within one of 28 zones throughout PA.
- Established to foster innovation and create entrepreneurial opportunities throughout the state.
- There are 28 zones located throughout Pennsylvania.
- This tax credit is transferable and sellable for cash.
- Businesses in targeted industries must be involved in the creation of a product or process for commercialization.
- Company must be less than 8 years old.
- Located in KIZ for 2 consecutive years (the base year does not need to be a complete year).
- Demonstrate increasing gross revenues (including grants).
- Must have either payroll or property factor in both years.
- Complete required semi-annual KIZ Force reporting.
- Submit application by September 15th each year, award letters announced December 15
- Maximum tax credit award amount per year is $100,000 based on 50% of year over year increase in revenues.
- Available to companies who incur qualified research expenses within Pennsylvania.
- Program created to assist with the growth and development of technology-oriented businesses.
- Not zone related – available to all for-profit entities regardless of their age.
- Tax credit is transferable and sellable for cash.
- Qualified research expenses (QRE) to be incurred within PA.
- Minimum 2 years of QREs to apply for tax credit (base year does not need to be a complete year).
- QREs are defined by IRS Code and may include wages, disposable office supplies, contract research and patent costs.
- Submit application by September 15th each year, award letters announced December 15
- Companies valued at $5M or less receive 20% tax credit versus year over year increase in spending.
- Companies valued over $5M receive 10% award versus year over year increase in QREs.
- For US companies who incur qualified research expenses – permanent benefit beginning in 2016.
- Dollar for dollar reduction of liability, taken at tax filing.
- Special incentives for start-ups – can reduce payroll tax liability.
- Can be used to offset Alternative Minimum Tax – AMT.
- Tax credit is not transferable – can be carried forward 20 years.
Tax Credit Applications
- Use – apply credit against a state tax liability including personal income tax, corporate net income, capital stock and franchise tax. Federal tax credits can be used versus federal liabilities.
- Carry forward – use in future years versus tax liabilities according to guidelines which vary according to each program.
- Sell – if the tax credit is sellable/transferable, once you have deducted the state liability from the total award, the remainder can be sold for cash. Federal R&E tax credit is not sellable.
These credits are valuable benefits that can support growth by providing additional capital or reducing the tax burden on a business. However, capturing accurate data, especially when calculating R&D and R&E qualified expenditures, can be a complicated task best left to experts. At MVM Associates, they’ve simplified the process with a one page questionnaire that can gauge your eligibility. To find out more about these incentives and your opportunity, contact:
No Laches in Patent Infringement Cases
The Supreme Court addressed the distinction between laches and statutes of limitations in patent cases. Its 7-1 SCA Hygeine Products AKT vs. First Quality Products, LLC (S. Ct. 2017) considered whether laches could be used as a defense by defendant First Quality when 7 years had passed from when it first received notice of potential infringement in 2003 and the date that SCA filed an infringement complaint in 2010. Considering the Congress-passed statute for damages recovery in 35 USC 286 and the laches defense, the Court followed its 2014 Petrella decision in a similar case under copyright law, “Laches is a gap-filling doctrine, and where there is a statute of limitations, there is no gap to fill.”
Eligibility: Get Technical or Get Denied
Dennis Crouch summarized a nonprecendential opinion well with the above maxim to apply to subject matter eligibility questions. The Federal Circuit’s conclusion provides some guidance for future applicants and practitioners, “In contrast to Diehr, claim 1 recites a method that changes the way electronic information is displayed via an unknown and unclaimed process. Absent any limitation to how the data are changed, there is little, if any, transformative effect. Data are still data.” According to the court, the patent failed to show an inventive “technical manner” in which “data is gathered, analyzed, or output.”
 The machine or transformation test lives. See Older Supreme Court Cases Provide Guidance for Determining Patentable Subject Matter Post Alice
Assignment of Patent Alone May Not Extend to Child Applications
The Federal Circuit held that a party that had been assigned a parent patent lacked standing to sue for child patents issued from the parent patent. The assignment in question did not assign rights related to continuations, technical know how, or general IP rights.
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. Laches differs from a statute of limitations, which applies to particular situations.
The Supreme Court recently addressed the distinction between laches and statutes of limitations in patent cases. Its 7-1 SCA Hygeine Products AKT vs. First Quality Products, LLC (S. Ct. 2017) considered whether laches could be used as a defense by defendant First Quality when 7 years had passed from when it first received notice of potential infringement in 2003 and the date that SCA filed an infringement complaint in 2010. Returning to the maxim, the question before the Court was whether SCA slumbered on its rights by not bringing suit until 7 years after it knew of First Quality Products’ potential infringement.
The US Code provides a statute for damages recovery in patent infringement cases. “Except as otherwise provided by law, no recovery shall be had for any infringement committed more than six years prior to the filing of the complaint or counterclaim for infringement in the action.”
Considering this Congress-passed statute for damages recovery and the laches defense, the Court followed its 2014 Petrella decision in a similar case under copyright law, “Laches is a gap-filling doctrine, and where there is a statute of limitations, there is no gap to fill.” It went on to point out that there is not “a single federal statute that provides such dual protection against untimely claims.” It bolstered its reasoning with guidance from some older case law: Holmberg v. Armbrecht, 327 U. S. 392, 395 (1946) (“If Congress explicitly puts a limit upon the time for enforcing a right which it created, there is an end of the matter”); United States v. Mack, 295 U. S. 480, 489 (1935) (“Laches within the term of the statute of limitations is no defense at law”); Wehrman v. Conklin, 155 U. S. 314, 326 (1894).
It reached its conclusion that “Laches cannot be interposed as a defense against damages where the infringement occurred within the period prescribed by §286” in spite of Justice Breyer’s warning that the decision may set up this scenario.
[A] patentee might wait for a decade or more while the infringer (who perhaps does not know or believe he is an infringer) invests heavily in the development of the infringing product (of which the patentee’s invention could be only a small component), while evidence that the infringer might use to, say, show the patent is invalid disappears with time. Then, if the product is a success, the patentee can bring his lawsuit, hoping to collect a significant recovery. And if business-related circumstances make it difficult or impossible for the infringer to abandon its use of the patented invention (i.e., if the infringer is “locked in”), then the patentee can keep bringing lawsuits, say, in year 10 (collecting damages from years 4 through 10), in year 16 (collecting damages from years 10 through 16), and in year 20 (collecting any remaining damages). The possibility of this type of outcome reveals a “gap.” Laches works to fill the gap by barring recovery when the patentee unreasonably and prejudicially delays suit.
Justice Breyer’s warning may be prescient and something to watch for in coming years.
If you have questions, contact me.
Supplying a Single Part of Many in an Infringing Device Does not Give Rise to Infringement Liability
The Supreme Court weighed in on whether supplying a single part for export in a multi-part infringing assembly gave rise to liability in Life Technologies Corp. v. Promega Corp. (Supreme Court 2017). In finding no liability, its conclusion was succinct: “supply of a single component of a multicomponent invention for manufacture abroad does not give rise to §271(f)(1) liability.”
Board (and Examiners) Must Sufficiently Identify Elements in Prior Art and Justify Motivation to Combine References
Patent applicants sometimes feel frustrated by loose rejections where examiners don’t explicitly point out where each claim element may be found in a reference, or more often, what would motivate a person of ordinary skill in the art to combine references. In PersonalWeb Tech v. Apple (Fed. Cir. 2017), the Federal Circuit gave some support to the frustrated applicant, stating that “[t]he Board did not sufficiently explain and support the conclusions that (1) Woodhill and Stefik disclose all of the elements recited in the challenged claims of the ’310 patent and (2) a relevant skilled artisan would have been motivated to combine Woodhill and Stefik in the way the ’310 patent claims and reasonably expected success.”
“Consisting of” Still Sets of a Closed List
Careful claim drafters know that “comprising” and “comprised of” set off open lists that include the elements therein and others unidentified, and “consisting” sets off closed lists that are limited to the elements in the list and no others. Shire Development v. Watson Pharma (Fed. Cir. 2017) confirmed this reading on “consisting of:” “‘consisting’ creates a very strong presumption that that claim element is ‘closed’ and therefore excludes any elements, steps, or ingredients not specified in the claim.”
Sovereign Immunity Protects Public Universities from IPR Challenges
According to the Patent Trial and Appeals Board, the 11th Amendment shields public universities from IPR challenges. The 11th amendment reads, “The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.” The case has not gone higher than the PTAB at this point but this is good news for public universities with large patent portfolios. It will be interesting to see how this might apply to public university licensees. See Covidien LP v. University of Florida Research Foundation Inc., Case Nos. IPR 2016-01274, 01275, and -01276 (PTAB January 25, 2017).
Who is the Director of the USPTO: Solved
For reasons unknown, the identity of the USPTO director was unclear since President Trump’s inauguration. In response to FOIA requests from Patently-O’s Dennis Crouch, the USPTO now confirms that Michelle Lee is still Director.
[T]he Agency is responding that Michelle K. Lee is the Director of the United States Patent and Trademark Office and Anthony P. Scardino is the Acting Deputy Director of the United States Patent and Trademark Office.
If you have questions, contact me.
by Neil Gaiman
Odin, Thor, Loki. I knew the names but not the stories. Gaiman is a lover of myth and there could be no better guide to these tales than him. Enjoy hearing these tales sounding over hundreds of years echoing in Northern European fjords.
The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance
by Ron Chernow
This is a dense read that explores the story of the Morgan empire, and particularly the early years and the company’s adherence to its values. In later years, it was interesting and unfortunate to see the rapid culture shift in the Morgan companies.
The Path to Power (The Years of Lyndon Johnson #1)
by Robert A. Caro
Get this right: Caro has written, at least on volume 1, a five star bio. Tons of details. Well researched. Great quotes. Thorough timeline. Detailed settings. But read this though and ask: Did Johnson have a redeeming quality? At all? We all know what LBJ did on civil rights but that’s in a later volume: You may have to fortify yourself to get to that part of the story.
Lincoln at Gettysburg: The Words That Remade America
by Garry Wills
Deep treatment of the Gettysburg Address. Fun, stimulating, short read. Excellent exploration of the Address’s historical/philosophical echoes.