Review of Recently Decided Patent Cases

Robert Neuner, Esq.

6th Annual Patent Law Institute

February 16 – 17, 2012

Board of Trustees of the Leland Stanford Junior University v.

Roche Molecular Systems, Inc. et al., 563 U.S. ____ (2011)

• This case involved the interpretation of two competing assignments executed before the invention was conceived or reduced to practice. In the earlier assignment between one of the inventors and Stanford Junior University, the inventor (Dr. Holidniy) “agree[d] to assign” to Stanford the inventions he made during the course of his employment by Stanford. In the latter assignment, the same inventor agreed to assign and “do hereby assign” to Cetus (Roche’s predecessor) the inventions and improvements on those inventions he made as a result of the information imparted to him by Cetus.

• The Federal Circuit concluded that once the invention came into existence, the “do hereby assign” language trumped the earlier Stanford agreement because this language operated automatically to vest title in Roche. The Supreme Court agreed, stating that the Bayh-Dole Act, 35 U.S.C. §§ 200 et seq, did not automatically divest inventors of their rights in inventions conceived or reduced to practice with the help of federal funds. The dissent questioned whether in respect of inventions made in the future, there is a difference in the legal significance of the “do hereby assign” and “hereby agree to assign” undertakings.

Global-Tech Appliances Inc. v. SEB S.A. 131 S.Ct. 2060 (2011)

Section 271(b) of the Patent Act, 35 U.S.C., states: “Whoever actively induces improvement of a patent shall be liable as an infringer.”

• After parsing the words of the statute, the Supreme Court held that “induced infringement under §271(b) requires knowledge that the induced acts constitute patent infringement.” While rejecting the deliberate indifference test that had theretofore been adopted by the Federal Circuit, the Court nonetheless affirmed the judgment of the Court of Appeals because the evidence had established a case of willful blindness to a known risk of patent infringement. “A willfully blind defendant is one who takes deliberate actions to avoid confirming a high probability of wrongdoing and who can almost be said to have actually known the critical facts.”

• The fryer copied by Pentalpha was an overseas model of SEB's fryer. Pentalpha knew that the product it was designing was for the U.S. market. Mr. Sham, a named inventor on numerous U.S. patents, was well aware that products made for overseas markets usually did not bear U.S. patent markings.

• Even more telling was Sham's decision not to inform the attorney from whom Pentalpha sought a right-to-use opinion that the product to be evaluated was simply a knockoff of SEB's deep fryer. The court could not fathom what motive Sham could have had for withholding this information from his attorney other than to manufacture a claim of plausible deniability in the event that his company was later accused of patent infringement. Sham's testimony on this subject failed to provide any reason to doubt that inference. Asked whether the attorney would have fared better had he known of SEB's design, Sham was nonresponsive. All he could say was that a patent search is not an “easy job” and that is why he hired attorneys to perform them.

Microsoft Corp. v. i4i Ltd. Partnership, 131 S.Ct. 2238 (2011)

The Supreme Court ratified the Federal Circuit’s interpretation of 35 U.S.C. §282 that:

[Section] 282 creates a presumption that a patent is valid and imposes the burden of proving invalidity on the attacker. That burden is constant and never changes and is to convince the court of invalidity by clear evidence.

The Court left open the question of how juries should be charged when the prior art evidence varies from that before the PTO, but offered these suggestions:

we note that a jury instruction on the effect of new evidence can, and when requested, most often should be given. When warranted, the jury may be instructed to consider that it has heard evidence that the PTO had no opportunity to evaluate before granting the patent. When it is disputed whether the evidence presented to the jury differs from that evaluated by the PTO, the jury may be instructed to consider that question. In either case, the jury may be instructed to evaluate whether the evidence before it is materially new, and if so, to consider that fact when determining whether an invalidity defense has been proved by clear and convincing evidence.

Mayo Collaborative Servs. V. Prometheus Labs, Inc., No. 10-1150

The following is an illustrative claim:

1. A method of optimizing therapeutic efficacy for treatment of an immune-mediated gastrointestinal disorder, comprising:(a) administering a drug providing 6-thioguanine to a subject

having said immune-mediated gastrointestinal disorder; and(b) determining the level of 6-thioguanine in said subject having

said immune-mediated gastrointestinal disorder,wherein the level of 6-thioguanine less than about 230 pmol

per 8x108 red blood cells indicates a need to increase the amount of said drug subsequently administered to said subject and

wherein the level of 6-thioguanine greater than about 400 pmol per 8x108 red blood cells indicates a need to decrease the amount of said drug subsequently administered to said subject.

• The Federal Circuit found the claimed treatment and diagnostic method patentable because they transformed (1) the human body by administration of a drug and (2) the bodily sample itself by using purification and analytical tests to determine the drug metabolite’s concentration in the body. Indeed, the court found that methods of treatment are “always transformative when a defined group of drugs is administered to the body to ameliorate the effects of an undesired condition.”

• The Federal Circuit explained that when claims recite administering drugs to a subject, transformation necessarily occurs because the “drugs do not pass through the body untouched without affecting it,”, but rather transformation occurs as seen by “the effect on the body after metabolizing the artificially administered drugs.” Addressing the “natural phenomenon” arguments, the Federal Circuit stated, “Transformations operate by natural principles. The transformation here, however, is the result of the physical administration of a drug to a subject to transform – i.e., treat the subject, which is itself not a natural process.”

• With regard to claims that did not recite an “administering” step, the Federal Circuit found that the “determining” step also was transformative and central to the claimed methods. Specifically, the Federal Circuit found that determining the metabolite levels “necessarily involves transformation” because such levels “cannot be determined by mere inspection.” For example, physical manipulation and measurement must occur (e.g., by high-pressure liquid chromatography (HPLC) or other methods that involve transforming bodily samples). The Federal Circuit concluded that the “determining” step was not merely data-gathering, but rather central to the purpose of the claims because “[m]easuring the [metabolite] levels…is what enables possible adjustments to…drug dosage.” The Federal Circuit concluded that “[t]he determining step, by working a chemical and physical transformation on physical substances, likewise sufficiently confines the patent monopoly, as required by Bilski.”

Caraco Pharm. Labs., Ltd. V. Novo Nordisk A/S, No. 10-844

This case involves the construction of a section of the Hatch-Wayman Act, 21 U.S.C. §355(j)(5)(C)(ii)(1) that authorizes a generic manufacturer in a Paragraph IV infringement action to assert a counterclaim challenging the accuracy of the patent information submitted to the FDA on the grounds that the patent does not claim either (aa) the drug for which the application was approved; or (bb)

an approved method of using the drug.

• Novo Norkisk’s patent claims only one of the three approved methods of using PRANDIN (i.e., repaglinide in combination with metformin) to treat type 2 diabetes. Caraco submitted an ANDA asserting that Caraco was not seeking approval for the method claimed by Novo’s patent. The FDA indicated that it would approve Caraco’s proposed drug label carving out the Novo method. Novo then asked the FDA to broaden Novo’s use code narrative for its patent so that it would no longer be specific to the one method claimed by Novo. The FDA did so and then rejected Caraco’s carve-out label. Without the carve out, Caraco’s product would infringe Novo’s patent. Caraco counterclaimed, alleging that the new use code narrative was overbroad because it improperly suggested that Novo’s patent covered all three approved methods of using repaglinide to treat type 2 diabetes. Novo asserted that the counterclaim is available only if its patent does not claim any approved methods. Caraco argued that it is entitled to the counterclaim because Novo’s patent does not claim two of the approved methods of PRANDIN use. In other words, Novo reads “an approved method” in the counterclaim statute as “any approved method” while Caraco reads it as “all approved methods.”

• The Federal Circuit detected no ambiguity in the statutory language. When an indefinite article is preceded and qualified by a negative, standard grammar generally provides that “a” means “any.” It concluded then that the Hatch-Waxman Act authorizes a counterclaim only if the listed patent does not claim any approved methods of using the listed drug.

• The court also noted that the Act, by its terms, does not allow generic manufacturers to counterclaim unless the listed patent bears no relation to the listed drug and the terms of the counterclaim provision do not authorize an order compelling the patent holder to change its use code narrative. The counterclaim provision states that a generic manufacturer can request an order compelling “the holder to correct or delete the patent information submitted by the holder under subsection (b) or (c).” 21 U.S.C. § 355(j)(5)(C)(ii)(l) (emphasis added). Subsection (b) requires a pioneering manufacturer to submit “the patent number and the expiration date of any patent…which claims a method of using such drug.” 21 U.S.C. § 355(b)(1) (emphasis added). Subsection (c) states that “[i]f the patent information described in subsection (b) of this section could not be filled with the submission of an application,” the holder “shall file with the Secretary the patent number and the expiration date of any patent…which claims a method of using such drug.” 21 U.S.C. § 355(c)(2) (emphasis added).

• Thus, the court views the Act as defining the term “patent information” as “the patent number and the expiration date.” The reference in subsection (c) to “the patent information described in subsection (b)” could only mean the patent number and the expiration date, because no other “patent information” appears in the statute. Therefore, to maintain consistency in the statutory terms, “the patent information” in the counterclaim provision must also mean the patent number and the expiration date. Thus, the counterclaim provision only authorizes suits to correct or delete an erroneous patent number or expiration date. The authorization does not extend to the use code narrative.

• In a lengthy dissent, Circuit Judge Dyk disagreed with the majority, both in its statutory construction and the scope of the expression “patent information.”

Kappos v. Hyatt, No. 10-1219

Section 145 of the Patent Act allows a patent applicant dissatisfied with a decision of the Board of Patent Appeals and Interference to sue the Director of the United States Patent and Trademark Office in the District Court for the District of Columbia for an order overturning that decision and authorizing the Director to issue a patent on the patent applicant’s invention.

The questions that the Supreme Court has agreed to consider are:

(1) whether a plaintiff who files a civil action in federal district court against the Director of the United States Patent and Trademark Office

(“PTO”) pursuant to 35 U.S.C. § 145 may introduce new evidence that could have been presented to the PTO; and

(2) whether, if the plaintiff is allowed to introduce new evidence under Section 145, the district court may decide de novo the factual questions to which the evidence pertains, without giving deference to the PTO’s decision.

• An en banc Federal Circuit majority concluded that there is no limitation on an applicant’s right to introduce new evidence in district court (apart from the evidentiary limitations applicable in all civil actions) and that the district court may consider whether the new evidence is inconsistent with any evidence or proceedings before the PTO in determining what weight to give it. The majority additionally held that if the applicant does not introduce new evidence that was not before the PTO, the district court should apply the Administrative Procedure Act’s deferential “substantial evidence” standard.

• Circuit Judge Newman concurred as to the holding that an applicant may introduce new evidence in the district court, but dissented from the holding that if an applicant does not introduce new evidence, the “substantial evidence” standard of review should be applied. Instead, Judge Newman argued that the district court should decide the case de novo.

• Circuit Judges Dyk and Gajarsa dissented, arguing that a Section 145 proceeding allows only for introduction of live testimony that was presented in written form in the PTO and not to any other new evidence. Further, the dissent argued that the deferential “substantial evidence” standard applies in all Section 145 cases.

Federal Circuit Decisions – Inequitable Conduct

Therasense Inc. v. Becton Dickinson and Co. 99 USPQ2d 1065 (Fed. Cir. 2011)

• As to the intent element, the court held that in a case involving nondisclosure of information, clear and convincing evidence must show that “the applicant made a deliberate decision to withhold a known material reference.” In other words, the accused infringer must prove by clear and convincing evidence that the applicant knew of the reference, knew that it was material, and made a deliberate decision to withhold it. Proving that the applicant knew of a reference, should have known of its materiality, and decided not to submit it to the PTO does not prove specific intent to deceive. Stated differently, the fact that information later found material was not disclosed cannot, by itself, satisfy the deceptive intent element of inequitable conduct.

• The evidence “must be sufficient to require a finding of deceitful intent in the light of all the circumstances.” Hence, when there are multiple reasonable inferences that may be drawn, intent to deceive cannot be found. Whenever evidence proffered to show either materiality or intent is susceptible of multiple reasonable inferences, a district court clearly errs in overlooking one inference in favor of another equally reasonable inference.

• As to the materiality element, the court held that as a general matter, the materiality required to establish inequitable conduct is but-for materiality. When an applicant fails to disclose prior art to the PTO, that prior art is but-for material if the PTO would not have allowed a claim had it been aware of the undisclosed prior art. Hence, in assessing the materiality of a withheld reference, the court must determine whether the PTO would have allowed the claim if it had been aware of the undisclosed reference. In making this patentability determination, the court should apply the preponderance of the evidence standard and give claims their broadest reasonable construction.

• The court also recognized an exception to the “but-for proof of materiality.” It is where the patentee has engaged in affirmative acts of egregious misconduct, such as the filing of an unmistakably false affidavit. The court stated:

By creating an exception to punish affirmative egregious acts without penalizing the failure to disclose information that would not have changed the issuance decision, this court strikes a necessary balance between encouraging honesty before the PTO and preventing unfounded accusations of inequitable conduct.

Contempt Proceedings

Ti Vo, Inc. v. EchoStar Corp. 646 F.3d 869 (Fed. Cir. 2011) (en banc)

• As to procedure, the court overruled its own decision in KSM Fastening Sys., Inc. v. H.A. Jones Co., 776 F.2d 1522, 1530-32 (Fed. Cir. 1985), which had crafted a special rule for patent infringement cases. That rule required a threshold inquiry on the propriety of initiating a contempt proceeding. Here, the court concluded that this inquiry confused the merits of the contempt with the propriety of initiating contempt proceedings. As a practical matter, district courts do not separately determine the propriety of a contempt proceeding before proceeding to the merits of the contempt itself. As a result, the court telescoped the current two-fold KSM inquiry into one, eliminating the separate determination whether contempt proceedings were properly initiated. That question, it held, is left to the broad discretion of the trial court to be answered based on the facts.

• As to the burden of proof borne by the patent owner, the court stated that the party seeking to enforce the injunction must prove both that the newly accused product is only colorably different from the product found to infringe and that the newly accused product actually infringes. Instead of focusing solely on infringement, the contempt analysis must focus initially on the differences between the features relied upon to establish infringement and the modified features of the newly accused products.

• The analysis must focus not on differences between randomly chosen features of the product found to infringe in the earlier infringement trial and the newly accused product, but on those aspects of the accused product that were previously alleged to be, and were a basis for, the prior finding of infringement, and the modified features of the newly accused product. Specifically, courts should focus on those elements of the adjudged infringing products that the patentee previously contended, and proved, satisfy specific limitations of the asserted claims. Where one or more of those elements previously found to infringe has been modified, or removed, the court must make an inquiry into whether that modification is significant. If those differences between the old and new elements are significant, the newly accused product as a whole shall be deemed more than colorably different from the adjudged infringing one, and the inquiry into whether the newly accused product actually infringes is irrelevant. Contempt is then inappropriate.

Infringement of Method Claims Involving Multiple Entities

• The Federal Circuit is now considering en banc two cases which pose the issue of infringement of method claims when a step of the method is performed by an entity that is not controlled or directed by the entity that performs the other steps.

• In the first case, Akamai Techs, Inc. v. Limelight Nets., Inc., 629 F.3d 1311 (Fed. Cir. 2010), the court presented the following question for briefing:

If separate entities each perform separate steps of a method claim, under what circumstances would that claim be directly infringed and to what extent would each of the parties be liable?

• In the second case, McKesson Technologies Inc. v. Epic Systems Corp., 98 USPQ2d (Fed. Cir. Apr. 12, 2011), the court presented the following questions for briefing:

1. If separate entities each perform separate steps of a method

claim, under what circumstances, if any, would either entity or

any third party be liable for inducing infringement or forcontributory infringement? See Fromson v. Advance OffsetPlate, Inc., 720 F.2d 1565 (Fed. Cir. 1983).

2. Does the nature of the relationship between the relevant actors – e.g., service provider/user; doctor/patient – affect

thequestion of direct or indirect infringement liability?

• During the oral argument, Judge Newman remarked that since sections 271(b) and (c) of the Patent Act were intended to broaden the remedy for patent infringement, no excessive restrictions should be read into 271 (a) in the absence of an overriding policy. In regard to the possible application of sections 271 (b) and (c) to multiple infringement situations, Judge Moore indicated that perhaps when Congress enacted 271(b) and (c), it did not mean to speak to where each party has performed some steps of a method claim, but rather to the circumstances where a party has performed none of the steps.

Document Preservation in Patent Cases

It is settled law that the duty to preserve evidence first attaches when litigation becomes “reasonably foreseeable.” It necessarily follows and is equally well settled that there is an independent duty to preserve evidence during ongoing litigation.

• To the latter obligation in Eon-Net L.P. v. Flagstar Bancorp, 635 F.3d 1314 (Fed. Cir. 2011), the Federal Circuit upheld an award of attorney’s fees to the defendant under 35 U.S.C. § 285 based in part on the defendant’s failure to preserve evidence. As found by the district court, Eon-Net and its counsel destroyed relevant documents prior to the initiation of its lawsuit against Flagstar and that Eon-Net intentionally did not implement a document retention plan. As recounted by the district court, Eon-Net's principal testified with regard to document retention, collection, and production that “I don't save anything so I don't have to look” and further testified that Eon-Net and Millennium “have adopted a document retention policy which is that we don't retain any documents” because those companies have “evolved into patent enforcement companies which are involved in the business of litigation.” Pursuant to this policy, in 2003, Eon-Net discarded all documents from Millennium's infringement action against Readsoft involving the Patent Portfolio, even though Millennium had other pending cases. Eon-Net’s lawyer asserted on appeal that, after the Readsoft case settled, he only “discarded publicly available documents and non-essential documents such as travel-related receipts” and retained “all material non-public documents.” The court found it impossible to determine the veracity of this statement. And, even if the lawyer’s assertions were true, it is undisputed that Eon-Net had an independent duty to preserve evidence during the ongoing lawsuits.

• As to the reasonable foreseeability of litigation standard, the Federal Circuit issued twin opinions in Micron Tech. Inc. v. Rambus Inc., 645 F.3d 1311 (Fed. Cir. 2011) and Hynix Semiconductor Inc. v. Rambus Inc., 645 F.3d 1336 (Fed. Cir. 2011) in which the court concluded that the duty to preserve documents in the flexible one of reasonably foreseeable litigation, broader than those situations where the litigation is imminent or probable without significant contingencies and that Rambus had violated its duty to preserve evidence.

• First, the court explained that although document destruction may occur in the general course of a business “which may include a general concern for the possibility of litigation,” it was not clear error for the District of Delaware to find that the reason for Rambus’ document destruction was to further Rambus’ litigation strategy by frustrating the fact-finding efforts of parties adverse to Rambus. The court pointed to several actions taken by the company to support this finding, such as the fact that Rambus had instituted its document retention policy to make the company explicitly “battle ready,” had told employees to selectively keep “helpful documents,” and decided to keep back-up files for a shorter time than originally planned.

The Model Order on E-Discovery in Patent Cases Adopted by the Advisory Council

of the Federal Circuit

As introduced by Chief Judge Rader at the Federal District of Texas Judicial Conference on September 27, 2011, the Model Order provides:

• Exchange of core documentation: The parties begin by exchanging initial disclosures and documents concerning the patents at issue, the prior art, the accused instrumentalities and relevant finances. [iii]

• E-mail: After the initial exchange of core documentation, the parties may request limited e-mail discovery focused on specific issues.

• Each request shall name the custodian, search terms and date range. The parties must cooperate to identify the proper scope.

• Each requesting party shall limit the scope to five (5) custodians per producing party and five (5) narrowly tailored search terms per custodian.

• Cost-shifting: The parties can agree to expand the scope of custodians, but the requesting party pays at its own expense for this information. The Court may shift costs for disproportionate ESI requests pursuant to FRCP 26 or any dilatory discovery tactics. The Court will also consider a party’s compliance with the Order and its efforts to cooperate and contain costs.

• Metadata: The production shall not include metadata, except for the date and time a document was sent or received and the distribution list.

• Privilege: The inadvertent production of attorney-client communication or work product protected ESI will not be a waiver in the pending cases or any other proceeding following Federal Rule of Evidence (FRE) 502(d).

Public Law 111-349 January 4, 2011, Patent Cases Pilot Program

• Public Law 111-349 establishes a pilot program in certain United States district courts to encourage the enhancement of expertise in patent cases among district judges. The Administrative Office of the U.S. Courts selected 14 district courts to carry out the program. The participating courts are: Southern and Eastern District of New York; the Central, Northern and Southern Districts of California; the Eastern, Northern and Western Districts of Texas; the Western District of Pennsylvania; the Northern District of Illinois; the Southern District of Florida; the District of New Jersey; the District of Maryland; and the District of Nevada.

• Patent cases filed in the Southern District of New York will still be randomly assigned to all district judges, but a judge who is assigned a patent case and is not among the designated judges to hear patent cases has 30 days to decide whether to keep or decline the case, and if a case is declined, it then will be randomly assigned to one of the nine judges who has opted in to the program.

• The judges involved with the program are U.S. District Judges P. Kevin Castel, Denise Cote, Thomas Griesa, John Koeltl, Colleen McMahon, Jed Rakoff, Shira Scheindlin, Laura Taylor Swain and Robert Sweet.

Permanent Injunctions in Patent Cases

• Prior to the Supreme Court’s decision in eBay Inc. v. MercExchange, L.L.C.,547 U.S. 388, the Federal Circuit had followed the rule that absent a good reason not to, a permanent injunction will issue once infringement and validity had been adjucated. In eBay, the Supreme Court overruled Federal Circuit precedent, holding that a patentee seeking a permanent injunction must demonstrate entitlement to a permanent injunction by making a four-part showing:

1. that is 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 the defendant, a remedy in equity is warranted; and4. that the public interest would not be disserved by a permanent

injunction.

• The Federal Circuit applied the eBay ruling in Robert Bosch LLC v. Pylon Mfg. Corp, Case No. 2011-1096 (Fed. Cir. October 13, 2011) and concluded that an injunction was appropriate. It said:

While eBay may have changed the analytical approach to permanent injunctions, “it does not swing the pendulum the other way,” and that “it does not follow that courts should entirely ignore the fundamental nature of patents as property rights granting the owner the right to exclude.” As to the facts of the Bosch case, the court noted that the patentee need not prove the existence of a two-supplier market to establish irreparable harm. This is particularly true where the patent owner has been diligent in pursuing the defendant and other infringers. Second, “the fact that an infringer’s harm affects only a portion of a patentee’s business says nothing about whether that harm can be rectified.” Nor can a party escape an injunction simply because it is smaller than the patentee, or because its primary product is an infringing one.” On this issue, the fact that the defendant competes in markets where the patent owner also competes is highly relevant and tends to establish irreparable harm.

Patentable Subject Matter

Association for Molecular Pathology v. U.S.P.T.O.99 USPQ2d 1398 (Fed. Cir. 2011)

(request for rehearing en banc denied)

• For more than a decade, it had been the policy of the U.S.P.T.O. that “[a]n isolated and purified DNA molecule that has the same sequence as a naturally occurring gene is eligible for a patent because … that DNA molecule does not occur in that isolated form in nature….” 66 Fed. Reg. 1092, 1093 (Jan. 5, 2001). The explicit statement of the Patent Office's position on isolated DNA, however, is simply a continuation of a longstanding and consistent policy of allowing patents for isolated natural products. Since the early 1980’s, the Patent Office has granted patents to human genes, and has issued thousands of patents on “isolated DNA.” In fact, claims involving gene sequences at issue have been the focal point of important litigation.

• That policy and history were ratified by the Federal Circuit in this case. The court held as follows:

Composition claims directed to “isolated” gene sequences (BRCA1 and BRCA2), and mutations in those sequences associated with predisposition to breast and ovarian cancers, are drawn to patentable subject matter under 35 U.S.C. §101, even though isolated DNAs retain the same nucleotide sequence, or informational properties, as “native” DNAs, since it is distinctive nature of DNA molecules as isolated compositions of matter that determines their patent eligibility, rather than their physiological use or benefit, since genes are materials having chemical nature and, as such, are best described in patents by their structures rather than their functions, and since claimed DNA molecules are distinct from their natural existence as portions of larger entities, and their informational content is irrelevant to that fact;

Claims directed to methods of “comparing” or “analyzing” “isolated” gene sequences (BRCA1 and BRCA2) with normal sequences to identify cancer-predisposing mutations fail the “machine-or-transformation” test by claiming only abstract mental processes, and claims thus are not drawn to patentable subject matter under 35 U.S.C. §101, since claims recite nothing more than abstract mental steps necessary to compare two different nucleotide sequences, since restricting comparison solely to BRCA genes or to identification of particular alterations does not render claimed process patent-eligible. Since the claims do not apply the step of comparing two nucleotide sequences in any larger process, and since additional steps of “extracting” DNA from sample and “sequencing” BRCA DNA molecule cannot be read into claims so as to render them transformative; claims do not include step of “determining” sequence of BRCA genes or any other necessarily transformative step, since comparison between two sequences can be accomplished by mere inspection alone.

A claim directed to a method for screening potential cancer therapeutics via changes in cell growth rates satisfies “machine-or-transformation” test and thus is drawn to patentable subject matter under 35 U.S.C. §101, since the claim recites transformative steps of “growing” host cells transformed with altered BRCA1 gene in presence of absence of potential cancer therapeutic, “determining” growth rate of host cells with or without potential therapeutic, and “comparing” growth rate of host cells, since claim thus includes more than abstract mental step of looking at two numbers and “comparing” two host cells' growth rates, since such steps are central to purpose of claimed process, and since claim is not so “manifestly abstract” as to claim only scientific principle, in that it does not preempt all uses of natural correlation, and presents “functional and palpable applications” in field of biotechnology.

Cyber Source Corp. v. Retail Decisions, Inc. 99 USPQ2d 1690 (Fed. Cir. 2011)

• Two types of method claims were involved in this case. Each was written broadly and each purports to encompass any method for detecting credit card fraud which utilizes information which relates credit card transactions to particular internet addresses, as opposed to billing addresses and personal identification information.

The claims read as follows:

3. A method for verifying the validity of a credit card transaction over the Internet comprising the steps of:

a) obtaining information about other transactions that have

utilized an Internet address that is identified with the [ ] credit

card transaction;

b) constructing a map of credit card numbers based upon the

other transactions and;

c) utilizing the map of credit card numbers to determine if the

credit card transaction is valid.

2. A computer readable medium containing program instructions for detecting fraud in a credit card transaction between a consumer and a merchant over the Internet, wherein execution of the program instructions by one or more processors of a computer system causes the one or more processors to carry out the steps of:a) obtaining credit card information relating to the transactions from the

consumer; andb) verifying the credit card information based upon values of plurality of

parameters, in combination with information that identifies the consumer, andthat may provide an indication whether the credit card transaction is

fraudulent,wherein each value among the plurality of parameters is weighted in the verifying step according to an importance, as determined by the merchant, of that value to the credit card transaction, so as to provide the merchant with a quantifiable indication of whether the credit card transaction is fraudulent,wherein execution of the program instructions by one or more processors of a computer system causes that one or more processors to carry out the further steps of;a) obtaining information about other transactions that have utilized an Internet

address that is identified with the credit card transaction;b) constructing a map of credit card numbers based upon the other transactions;

andc) utilizing the map of credit card numbers to determine if the credit card

transaction is valid.

• A unanimous court of appeals found both patent claims to be drawn to patent-ineligible subject matter. As explained by Judge Dyk, with respect to the method of claim 3 simply requires one to “obtain and compare intangible data pertinent to business risks.” The mere collection and organization of data regarding credit card numbers and Internet addresses is insufficient to meet the transformation prong of the test, and the plain language of claim 3 does not require the method to be performed by a particular machine, or even a machine at all.

• Of greater interest is the court’s discussion of claim 2 which recites a so-called “Beauregard claim” directed to a computer readable medium containing program instructions for a computer to perform a particular process. Here, the court essentially rewrote the claim to find it directed to an abstract idea. The court looked to the underlying invention for patent-eligibility purposes. It then concluded that the invention underlying both claims 2 and 3 is a method for detecting credit card fraud, not a manufacture for storing computer-readable information, and one could mentally perform the fraud detection method that underlies both claims 2 and 3 of the ′154 patent, as the method consists of only the general approach of obtaining information about credit card transactions utilizing an Internet address and then using that information in some undefined manner to determine if the credit card transaction is valid. Because claims 2 and 3 attempt to capture unpatentable mental processes (i.e., abstract ideas), they are invalid under § 101.

Ultramercial LLC v. Hulu LLC 100 USPQ2d 1140 (Fed. Cir. 2011)

• This is a case involving a business method patent. As summarized by Chief Judge Rader, the patent does not simply claim the age-old idea that advertising can serve as currency. Instead the patent discloses a practical application of this idea. The patent claims a particular method for monetizing copyrighted products, consisting of the following steps: (1) receiving media products from a copyright holder, (2) selecting an advertisement to be associated with each media product, (3) providing said media products for sale on an Internet website, (4) restricting general public access to the media products, (5) offering free access to said media products on the condition that the consumer view the advertising, (6) receiving a request from a consumer to view the advertising, (7) facilitating the display of advertising and any required interaction with the advertising, (8) allowing the consumer access to the associated media product after such display and interaction, if any, (9) recording this transaction in an activity log, and (10) receiving payment from the advertiser.

• Judge Rader found the claim not so manifestly abstract that it overrode the statutory language of Section 101. According to the court, “[I]nventions with specific applications or improvements to technologies in the marketplace are not likely to be so abstract that they override the statutory language and framework of the Patent Act.” The patent-in-suit seeks to remedy problems with prior art banner advertising, such as declining click-through rates, by introducing a method of product distribution that forces consumers to view and possibly even interact with advertisements before permitting access to the desired media product. By its terms, the claimed invention purports to improve existing technology in the marketplace. By its terms, the claimed invention invokes computers and applications of computer technology. Of course, the patentability of the patent, though acknowledged by the U.S. Patent Office, would still need to withstand challenges that the claimed invention does not advance technology (novelty), does not advance technology sufficiently to warrant patent protection (obviousness), or does not sufficiently enable, describe, and disclose the limits of the invention (adequate disclosure).

Domestic Industry in 337 Cases

John Mezzalinqua Associates, Inc. v. U.S. International Trade Commission, 100 USPQ2d (Fed. Cir. 2011)

• In order to seek relief under Section 337 of the Tariff Act for patent infringement, a complainant must demonstrate that a domestic industry “relating to the articles protected by the patent…exists or is in the process of being established.” One of the ways a complainant can demonstrate the existence of a domestic industry is by showing substantial investment in the exploitation of the patent, including engineering, research and development or licensing.

• In this case, the Federal Circuit considered whether litigation expenses incurred in enforcing a patent may be used as evidence that the required domestic industry exists.

• The Federal Circuit agreed with the Commission that “expenditures on patent litigation do not automatically constitute evidence of the existence of an industry in the United States.” In doing so, the court concurred with the Commission’s conclusion that “allowing patent infringement litigation activities alone to constitute a domestic industry would place the bar for establishing a domestic industry so low as to effectively render it meaningless.” Thus, the court declined to adopt a per se rule that patent infringement litigation is an investment in the exploitation of a patent within the meaning of Section 337(a)(3)(C).

• However, the Federal Circuit agreed with the Commission that the domestic industry requirement can be satisfied if a complainant is able to demonstrate a “nexus” between its litigation expenses and licensing.

• The Federal Circuit also found that the complainant’s activities were insufficient to demonstrate substantial investment in “engineering, research and development.” The complainant had argued that research and development relating to a utility patent on the same product as protected by the asserted design patent should have been considered as part of the domestic industry.

• In his dissent, Judge Reyna thought that the majority took an unduly narrow view of what types of activities relate to licensing of a patent. His position is that “a patent right is…empty without the ability to meaningfully enforce it against infringers.” Accordingly, he would have concluded that “litigation undertaken to enforce patent rights and enhance the value of a patent or pave the way for a stronger competitive advantage constitutes an investment in exploitation under section 337(a)(3)(C), regardless of that activity’s relationship to licensing, engineering, research, or production.”

Intervening Rights

Marine Polymer v. HenconFed. Cir. No. 2010-1548, En Banc

• Pursuant to 35 U.S.C. § 252, an alleged infringer may continue its infringement of a reissued patent where the reissued clams are different from the originally issued claims. It may not do so when the claims are identical. Likewise, under the reexamination statute, 35 U.S.C. § 307(b), alleged infringers are granted the same intervening rights as are provided in Section 252.

• The question in this case is whether the narrowing of identical claims by attorney argument in a reexamination proceeding creates an intervening rights defense. In its earlier decision, a divided Federal Circuit panel concluded that it did. According to the dissent, the plain language of the statute intervening rights apply only to new or amended claims.