Sour Grapes: When Can a Thief Spoil an Inventor’s Right to a Patent?

By Thomas Carey. Chair of the Business Practice Group

 

Imagine that your company has developed a proprietary technology that it expects to license to several potential customers.  The technology has great commercial potential but its use is not easy to detect. It may consist of a chip, embedded software, a manufacturing process, or even a medical implant.

Unbeknownst to you, an employee has pilfered the details of this technology.  Before your company has even filed a patent application, the employee has disclosed it covertly to some potential customers, telling them to be quiet about their use of the technology.
While you are readying your patent application covering the technology, these customers are integrating it into their own products (or making products with this new process).   Soon after your patent application is filed, they start selling those products without disclosing their use of the technology.

After the patent issues, you license the technology to several customers.  Later, they learn that their competitors have been using the technology without a license, and that this use can be traced to development activity that predates your own patent application.  As a result, they bring a lawsuit asking the court to rule that the patent is invalid because the technology was in public use before the patent application was filed.   Section 102(a) of the Patent Act provides that such public use deprives the inventor of the right to a patent.

What is the outcome of this nightmare?  The recent Federal Circuit court ruling in Delano Farms Company v. California Table Grape Commission suggests that your patent may yet survive.  The context of this case is unusual, however, involving grapes, an older version of the Patent Act, and some skulduggery.

The United States Department of Agriculture developed new grape varieties that it called Scarlet Royal and Autumn King.  The USDA obtained patents on these plant varieties and licensed them exclusively to the California Table Grape Commission, an agency of the State of California.  The Commission sublicensed the patents to grape growers in California and collected royalties that it shared with the USDA.

But before the patent applications for these new grape varieties were filed (and indeed more than one year prior to that date), the USDA held an open house at the University of California at Fresno, at which the grapes (but not the vines) were displayed.  Visiting growers were not allowed to view the plants in the field, only the grapes on the table.

Enter Jim and Larry Ludy, cousins who shared an interest in grapes.  They struck up a conversation with a USDA employee, Rodney Klassen, and asked him if he could get them some plant material for these new varieties.  Klassen had done like favors for the Ludys before and he obliged again this time. A few months later, in early 2002, Klassen gave Jim Ludy some plant material from these grape varieties and told Ludy not to let the material “get away from him” and not to “put them in a box.”  Ludy understood the former comment to mean that he should keep his possession of the plants a secret and the latter to mean that he should not sell the grapes until the varieties were commercially released. (More)

DDR Holdings: The Federal Circuit Leaves a Software Patent Standing

By Bruce Sunstein. A member of our Patent Practice Group

 

A recent decision by the Federal Circuit, DDR Holdings, LLC v. Hotels.com, L.P, offers a glint of hope for protecting some software inventions after the same court’s discouraging decision  in Ultramercial Inc. v. Hulu, Inc. (our article here), which in turn followed the negative decision of the Supreme Court in Alice Corp. v. CLS Bank (our article here). Ultramercial and Alice held that computer programs that are deemed directed to an abstract idea are not eligible to be patented, and the decisions ruled that the patents in question were invalid.

If the decisions in Ultramercial and Alice were not bad enough, they followed two other Supreme Court decisions holding patents invalid: Mayo v. Prometheus (involving medical diagnostics), about which we wrote here, and Ass’n for Molecular Pathology v. Myriad (involving biotechnology; our article here). All of these rulings have furthered the judicial trend of narrowing the scope of 35 U.S.C. § 101, the provision by which Congress defined a vast universe of patent-eligible subject matter.

In DDR Holdings, the Federal Circuit ruled that the abstract-idea exception to patent eligibility created by the Supreme Court did not apply to the software inventions that were the subject of the litigation. The court reached this result even though the software patents—like the patents in Ultramercial and Alice—concerned a business method practiced over the Internet. The technology at issue has applicability to a host website that is made available to third party merchants, each of whom would place a link to its own site on the host website, allowing a user of the host website to conduct business with the merchant.

The concern of the host website owner is that when the user seeks to do business on the merchant site, the user experiences a shift away from the host website, and thus the host website loses the attention of the user. The solution offered by the patents at issue in DDR Holdings was that “instead of taking the visitor to the merchant’s website, the system generates and directs the visitor to a composite web page that displays product information from the third-party merchant, but retains the host website’s ‘look and feel.’”

The court held:

[T]hese claims stand apart because they do not merely recite the performance of some business practice known from the pre-Internet world along with the requirement to perform it on the Internet. Instead, the claimed solution is necessarily rooted in computer technology in order to overcome a problem specifically arising in the realm of computer networks. In particular, the ‘399 patent’s claims address the problem of retaining website visitors that, if adhering to the routine, conventional functioning of Internet hyperlink protocol, would be instantly transported away from a host’s website after “clicking” on an advertisement and activating a hyperlink.

 

The court distinguished these claims from those in Ultramercial as not “broadly and generically” claiming “‘use of the Internet’ to perform an abstract business practice (with insignificant added activity).” “Unlike the claims in Ultramercial, the claims at issue here specify how interactions with the Internet are manipulated to yield a desired result—a result that overrides the routine and conventional sequence of events ordinarily triggered by the click of a hyperlink.” (More)

How Broadly Should Patent Claims Be Construed in Inter Partes Reviews? The Federal Circuit Enters the Debate

By Robert Asher. Co-Chair of the Patent Practice Group

Challenges to issued U.S. patents have grown at an alarming rate since the advent of inter partes review (“IPR”) on September 16, 2012. IPR is a procedure introduced under the America Invents Act that allows for challenging the validity of an issued patent in the Patent Office rather than in the courts.

One of the driving forces behind the popularity of the new procedure is that the implementing rules require the Patent Trial and Appeal Board (“PTAB”) to use the “broadest reasonable construction in light of the specification of the patent” when evaluating patents whose validity is challenged. By construing the patent claims more broadly than is practiced in a court of law, the PTAB makes the patent claims more likely to read on the teachings of prior art references. The result? Claims are more likely to succumb to an anticipation or obviousness challenge.

The very first IPR, decided in November 2013 by the PTAB, has now become the first to be considered on appeal by the Federal Circuit. On February 4, the court’s 2-1 decision in Garmin v. Cuozzo Speed Technologies affirmed the PTAB in all respects, agreeing that three claims of the challenged patent were invalid for obviousness.

Cuozzo Speed Technologies held a patent for “a speedometer integrally attached to [a] colored display” that uses GPS signals to alert drivers to the speed limit at the driver’s location. The company was unsuccessful with its patent claims before the PTAB because “integrally attached” was construed to require “discrete parts physically joined together as a unit without each part losing its own separate identity.”

Cuozzo sought a broader construction that would cover a display that integrated the functions and structures of the two claimed parts in a single display structure.  To the PTAB and the court, such an integral structure lacked the required attachment of two parts.

Despite Cuozzo’s insistence on a broader claim construction, it paradoxically challenged the PTAB’s use of the “broadest reasonable interpretation” (BRI) standard for construction. Cuozzo argued that BRI was applicable only in an examination before a patent examiner, not in an adjudicative IPR procedure before the PTAB where only an extremely limited opportunity to amend the claims is available.  (more)

Supreme Court Reins in the Federal Circuit on Patent Claim Construction, Resulting in Greater Clarity for Litigants

By David Blau. A member of our Patent Practice Group

February 2015 IP Update
 

The Supreme Court recently issued its latest installment in a long-running debate over the deference that is due to a trial judge’s interpretation of patent claim language. The issue was whether the trial court’s interpretation can be reviewed entirely anew on appeal, or whether an appeals court must accept the factual findings that underlie the trial court’s interpretation of the claims.

Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc., decided on January 20, 2015, hinged on the question of whether the patent claims at issue were sufficiently clear and precise (or “definite”).  The requirement of claim definiteness provides a measure of certainty to the patent system.  It is part of the bargain struck between inventors and the market. Obtaining a patent grants an inventor the exclusive right to exclude others from making, using, selling, offering for sale, or importing her invention. However, she must communicate exactly what she is claiming as her invention, both for this right to be effectively enforceable by the inventor, and to inform other market participants of the behaviors proscribed by the right.

In Teva, the trial court had determined that the patent claims at issue, involving the MS drug Copaxone®, were sufficiently clear and precise so as to be valid.  In doing so, it resolved competing arguments as to whether the term “molecular weight” was ambiguous or whether its meaning would be clear to a skilled artisan.  Sandoz, the alleged infringer, pointed out that the term could have three different meanings.  The trial court, however, accepted an analysis of Teva’s expert, who explained that a key figure in the patent specification would be interpreted by a skilled artisan to imply one particular interpretation of “molecular weight.”

On appeal, the Federal Circuit, which hears all patent litigation appeals, disagreed.  It found the patent claims to be indefinite, and therefore unenforceable, because of the ambiguous nature of the term “molecular weight.”

In doing so, the Federal Circuit exercised authority granted to it by the 1996 Supreme Court ruling in Markman v. Westview Instruments, Inc., which held that interpretation of patent claims is not for the jury (the usual finder of facts in a case involving a jury) but exclusively for the trial judge to decide.  Ever since, the Federal Circuit has routinely considered the interpretation (or “construction”) of patent claims to be strictly a matter of law, not fact, and thus felt authorized in Teva (as it did in hundreds of prior cases) to review the question of claim construction afresh on appeal, with no deference to the findings of the trial court.

Since its 2005 decision in Phillips v. AWH Corp. that interpreted Markman, the Federal Circuit has directed trial courts to define words and phrases in patent claims by looking first to “intrinsic” sources of meaning.  These sources include the plain meanings of claim words, definitions of terms found in the non-claim parts of the application, and any admissions made during the patent application process.  If that review fails to resolve any alleged ambiguity, a trial court must next consider “extrinsic” sources of meaning, such as dictionaries, expert testimony, and scholarly journals.

The process of claim construction often results in a “duel of the experts,” in which each party to a suit offers expert testimony demonstrating why its claim construction is correct. In Teva, this duel focused on the meaning of “molecular weight.” (More)