Three New Federal Circuit Decisions Support Software Patents

By Bruce Sunstein. A member of our Patent Practice Group

The Supreme Court’s 2014 decision in Alice v. CLS Bank held that software claims to computer-based financial hedging were patent ineligible because they were directed to an abstract idea and, taken as a whole, they failed to define an inventive concept “significantly more” than the ineligible abstract idea of hedging.  Although Alice was viewed as potentially the death knell for software patents, a cluster of recent decisions by the Federal Circuit has made it less difficult to overcome challenges to software patents based on Alice.

In Alice, the Supreme Court adopted a two-step process for evaluating patent eligibility.  Under step one, a court is to determine whether the claims at issue are directed to an abstract idea.  If so, under step two, the court will next “examine the elements of the claim to determine whether it contains an ‘inventive concept’ sufficient to ‘transform’ the claimed abstract idea into a patent-eligible application.”

In Finjan, Inc. v. Blue Coat Systems, Inc., decided January 10, 2018, the Federal Circuit affirmed a trial court’s ruling that claims to “identifying and protecting against malware” are eligible for patenting, even in the face of the Alice decision.  In doing so, the Federal Circuit said that it did not even have to reach step two in the Alice patent eligibility analysis.

The Federal Circuit had previously held that “[b]y itself, virus screening is well-known and constitutes an abstract idea.”  Similarly, “performing the virus scan on an intermediary computer—so as to ensure that files are scanned before they can reach a user’s computer—is a ‘perfectly conventional’ approach and is also abstract.”  According to the Federal Circuit, the claimed method “does a good deal more” than these abstract ideas.

Normally, doing “a good deal more” would seem to take the analysis to step two of the Alice analysis. However, the Federal Circuit said that the analysis need not go beyond step one.  Because “the security profile ‘identifies suspicious code,’” it “allows the system to accumulate and utilize newly available, behavior-based information about potential threats.  The asserted claims are therefore directed to a non-abstract improvement in computer functionality, rather than the abstract idea of computer security writ large.”  As a result, the Court said that the eligibility analysis ends at step one.

In Core Wireless Licensing S.A.R.L. v. LG Electronics, Inc., decided on January 25, 2018, the Federal Circuit affirmed a trial court’s ruling that claims to a user interface, particularly useful for devices like smart phones that have limited screen real estate, define subject matter that is patent eligible.

The claimed interface enables faster access to desired data and applications.  An application summary window displays “a limited list of common functions and commonly accessed stored data which itself can be reached directly from the main menu listing some or all applications.”  The application summary window can be reached in two steps: “first, launch a main view which shows various applications; then, launch the appropriate summary window for the application of interest.” More...

Disclaimer Tactic Averts Facebook’s Patent Challenge

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

PTAB Alert   Skky, LLC avoided an attack on an important patent by using a creative defensive maneuver.  Facebook and Instagram had challenged all of eleven claims of Skky’s US Patent No. 9,037,502 in a petition for a covered business method patent review.

A covered business method (“CBM”) review is an America Invents Act (“AIA”) proceeding before the Patent Trial and Appeal Board. Thus, it is much like an inter partes review (IPR). But CBM’s have procedural advantages making it the preferred patent attack when available.

A CBM may be instituted only against “a patent that claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration or management of a financial product or service, except that the term does not include patents for technological inventions.” AIA §18(d)(1). Eligibility for a CBM requires that at least one of the claims be directed to a covered business method.

Facebook argued in its petition that claims 1, 6 and 8-11 were directed to covered business methods. Claim 6 added to claim 1, the only independent claim, a limitation including “charging a fee.” Claim 8 “pushed advertising content.” Claims 9-11 include “reporting for royalty determination.”

To reduce the risk of having the CBM proceeding instituted because of these claim limitations, Skky cleverly dropped claims 6 and 8-11 from the patent by filing a statutory disclaimer. The PTAB then treated those claims as if they had never existed.

This tactic left only claim 1 to be considered for whether it qualified as a covered business method. The claim was directed to using orthogonal frequency-division multiplex modulation to encode bits of audio and video files for wireless transmission. The final limitation in claim 1 required “tracking the selection of the requested compressed digital audio and/or visual files.”

Facebook argued that the patent specification made explicit that tracking was for the purpose of determining royalty payments and therefore qualified the claim as being directed to a financial product or service. Skky undermined the argument, pointing out that the specification made clear the invention could be used with noncopyrighted recordings, in which case royalties would not be involved.

More significantly, the claims contained no financial product–related language. It is not enough that the invention could be used in a financial service; a CBM is applicable only to patents with language relating to a financial product or service in at least one of the claims. The CBM was not instituted. Facebook, Inc. et al. v. Skky, LLC, CBM2016-00091, Paper No. 7. More...

Smoothing the Way for Appellate Success in the PTAB

PTAB Alert By Robert Asher. Co-Chair of our Patent Practice Group

While the Patent Trial and Appeal Board would prefer that its final written decision mark the last  it sees of an inter partes review or other AIA (America Invents Act) proceeding, the Federal Circuit Court of Appeals occasionally reverses and remands a case back to the PTAB for further consideration.  In the absence of rules and, in particular, without a statutory deadline for issuing a final decision following remand, confusion has reigned over cases returning to the PTAB from the Federal Circuit.

The PTAB recently announced Standard Operating Procedure (“SOP”) 9, which lays out procedures for handling remanded cases. The PTAB set a goal to issue a final written decision on remanded cases within six months of the Federal Circuit’s mandate.

To speed remanded cases, the chief judge of the PTAB and/or the deputy chief judge and/or a delegated judge will discuss issues raised in each remanded case with the panel that issued the original decision between the date of the appellate decision and the date the mandate issues.  (Mandate is the document by which an appellate court formally closes an appeal and transfers jurisdiction, in this case back to the PTAB.)

The focus of the judges’ meeting will be on the process to be applied and on the issues raised by the Federal Circuit, not on the substantive outcome of the case. For example, the PTAB must determine early on whether additional briefing or oral hearing will be required and whether new evidence may be introduced.

Since the panel will be primed to proceed, the parties must likewise be prepared to move quickly when a case has been remanded. They need to try negotiating agreement on procedures such as briefing, scheduling and additional evidence.

Then the parties must consult with the panel, no later than one month after the mandate, to have the PTAB finalize these procedures in light of its earlier discussions with the chief judge or his designee and the proposal of the parties.  SOP 9 provides the panel with guidance, based on previous panel decisions, as to the procedures to be followed.

A successful appeal of an adverse decision normally leads to a remand. A reversal that finally determines a case in favor of the appellant, as we were able to secure for our client in Arendi S.A.R.L. v. Apple Inc., 832 F.3d 1355 (Fed.Cir. 2016), is quite rare. More...

Corporations Cannot Be Sued for Patent Infringement in a Judicial District Simply Because Their Employees Happen to Work from Home There

By Brandon Scruggs. A member of our Litigation Practice Group

In its May 2017 decision in TC Heartland v. Kraft Foods, the Supreme Court dramatically restricted where patent lawsuits can be brought.  As we discussed at the time, patent owners had long been able to sue a corporation wherever  it was subject to personal jurisdiction, which often meant anywhere that products accused of infringement were sold.  In a shift, the court ruled that patent owners can file such suits only in a state: 1) where the defendant is incorporated; or 2) where the defendant has committed acts of infringement and has a regular and established place of business.

A study published by RPX Corporation, which offers protection against certain patent infringement suits, shows that patent litigation has undergone a sea change in the few months since TC Heartland was decided.  Before that decision, the Eastern District of Texas was the court in which by far most patent plaintiffs, particularly non-practicing entities (NPEs), chose to bring suit.

For example, in the 20 weeks before TC Heartland, the Eastern District of Texas accounted for 57% of new NPE litigation versus just 28% in the nine weeks after that decision.  By contrast, the District of Delaware, the Northern District of Illinois, and the Northern District of California have all seen a significant increase in patent case filings.

Shortly after TC Heartland, a judge in the Eastern District of Texas denied a corporate defendant’s motion to transfer the case to the Western District of Wisconsin where it maintains facilities related to its supercomputer business.  In that case, Raytheon Company v. Cray, Inc., Judge Gilstrap ruled that the presence in the Eastern District of Texas of two Cray employees who worked remotely from their homes was enough to establish venue.

The judge relied on the substantial amount of business attributable to those employees – over $345 million – to conclude that Cray maintained a place of business in his district. The judge suggested that, notwithstanding the Supreme Court’s TC Heartland decision despite, he would still allow many patent suits to be filed in his court.

The Federal Circuit hastened to set Judge Gilstrap straight. In In re Cray, it reversed Judge Gilstrap’s ruling and clarified that two working-from-home employees did not meet the “regular and established place of business” standard.  The case ultimately was transferred to the Western District of Wisconsin. More...

Rehearing Wins Institution of Inter Partes Review

PTAB ALERT By Christopher Lacenere, Ph.D.. A member of our Patent Practice Group

In a rare move, the Patent Trial and Appeal Board (“the Board”) granted the institution of an inter partes review (“IPR”) upon a request for rehearing after initially denying its institution.  IPR2017-00731 Paper No. 29.  However, don’t expect such reversals to become commonplace.  This case involved a panel of administrative patent judges who were not sufficiently familiar with negative limitations in a patent claim. Consequently, upon being denied institution, the petitioner needed a rehearing to educate the judges on how to correctly interpret such limitations.

Hospira, Inc. (“Petitioner”) filed a petition requesting that claims 1-14 of U.S. Patent No. 7,846,441 (“‘441 patent”), owned by Genentech, Inc. (“Patent Owner”), be reviewed as being obvious over the prior art.  The ‘441 patent relates to the treatment of disorders, such as breast cancer, characterized by the overexpression of ErbB2, a transmembrane protein related to the epidermal growth factor receptor. Claim 1 recites a method of treating a cancer patient with an anti-ErbB2 antibody and a taxoid, “in the absence of an anthracycline derivative.”

Petitioner argued that claims 1-14 of the ‘441 patent were unpatentable as being obvious over Baselga 1996 and Baselga 1994.  Baselga 1994 teaches that ErbB2-overexpressing tumors grown in mice resulted in 35% growth inhibition following a treatment with either the 4D5 anti-ErbB2 antibody or paclitaxel (a taxoid) alone, and a 93% growth inhibition following treatment with a combination therapy of the antibody and paclitaxel.  A combination treatment of the antibody and doxorubicin (an anthracycline derivative) resulted in 70% growth inhibition.

The Board initially declined to institute an IPR.  Although it acknowledged that Baselga 1994 teaches the combined treatment of an anti-ErbB2 antibody with either a taxoid or with an anthracycline, but not with both, the Board nonetheless reasoned that nothing in Baselga 1994 or Baselga 1996 suggests that a person of ordinary skill in the art would have avoided anthracyclines in pursuing a combination therapy with an anti-ErbB2 antibody and a taxoid.  Without additional evidence or argument that a skilled artisan would have avoided anthracyclines, the Board concluded that Petitioner had not established a reasonable likelihood it would prevail in showing that the challenged claims would have been obvious over Baselga 1994 and Baselga 1996. More...

Federal Circuit Tells Patent Office: Rejecting Claims for Obviousness Must Be Better Supported

By Thomas Tuytschaevers. A member of our Patent Practice Group

The Court of Appeals for the Federal Circuit had recent occasion to remind the U.S. Patent and Trademark Office (“USPTO”) to be rigorous in its examination of patent applications. Patent practitioners should take note of In Re: Stepan Company and use its teachings to rebut improper rejections.

Stepan had filed a patent application claiming a water-based herbicidal concentrate including an herbicide (glyphosate salt) in solution with a surfactant system having a “cloud point” above at least 70°C.  Surfactants are known to enhance glyphosate’s herbicidal efficacy by providing better adherence to plant leaves, and a high cloud point (the temperature below which a solution becomes cloudy due to the surfactants becoming insoluble) facilitates production of the herbicidal concentrate.

Stepan attributed its desirable cloud point to the unexpected synergy of three ingredients of its surfactant system and their specified quantitative ranges.

The patent examiner rejected Stepan’s application as obvious over a previous patent to Pallas, even though Pallas does not teach a formulation with the same ingredients or claimed quantitative ranges, and fails to teach a cloud point above 70ºC.

The examiner took a shortcut familiar to many patent practitioners: Rather than finding Stepan’s invention in the prior art, the examiner concluded that it would be “routine optimization” to select and adjust the surfactants to the claimed range since (a) Pallas teaches that the surfactant component comprises “any combination of surfactants,” and (b) achieving a cloud point above 70ºC would be a simple matter of optimizing such a formulation since Pallas teaches that the ideal cloud point should be above 60ºC.

The Patent Trial and Appeal Board (“Board”) affirmed the rejection by adopting the examiner’s argument and determining that Stepan failed to rebut the examiner’s prima facie case of obviousness.

The Federal Circuit disagreed, vacated the Board’s decision, and remanded, finding that “the Board failed to adequately articulate its reasoning . . . and improperly shifted to Stepan the burden of proving patentability.”  The opinion makes several noteworthy points.

First, even when an obviousness rejection combines multiple embodiments from a single prior art reference, the rejection still requires a motivation to make the combination and a reasonable expectation that such a combination would be successful.  More...

By Thomas Carey. Chair of our Business Practice Group

The America Invents Act contemplates the possibility of multiple inter partes review (IPR) challenges to the same patent.  However, it authorizes the Patent and Trademark Office, in considering whether to institute an IPR, to take into account whether the same or substantially the same prior art or arguments were presented to the PTO in an earlier petition and to reject the later petition on the grounds of this redundancy.

This language, from 35 USC §325(d), could be read as providing a single, narrow basis for rejecting a request for an IPR that challenges a patent that was previously the subject of an IPR petition.  If so, doesn’t it follow that, if the petitioner raises different prior art from before, or presents a new argument, this provision requires the PTO to initiate the IPR?

In September 2017, the Patent Trial and Appeal Board (PTAB), an administrative law body of the PTO, rejected that contention.  It pointed to a separate provision of the America Invents Act, 35 USC §314(a), which makes the decision of whether or not to initiate an IPR a matter of the PTO’s discretion.  According to the PTAB, this general rule applies in the case of follow-on petitions as well as initial petitions.  In October 2017, the PTAB designated its September 2017 opinion as precedential.

In that case, a PTAB judge had denied the request of General Plastic Industrial Co., Ltd. that the PTAB commence an IPR. The petitioner requested a rehearing.  A panel of seven PTAB judges, including the Chief Administrative Patent Judge, denied this request.

The opinion does more than assert the PTO’s right to reject IPR petitions in its discretion.  It also listed factors that it will consider when faced with a follow-on petition asserted by the same party that asserted the first petition.  Here are the factors:

1. Whether the same petitioner previously filed a petition directed to the same claims of the same patent;
2. Whether at the time the first petition was filed the petitioner knew or should have known of the prior art asserted in the second petition;
3. Whether at the time the second petition was filed the petitioner already received the patent owner’s preliminary response to the first petition or received the Board’s decision on whether to institute review in the first petition;
4. The length of time that elapsed between the time the petitioner learned of the prior art asserted in the second petition and the filing of the second petition;
5. Whether the petitioner provides adequate explanation for the time elapsed between the filings of multiple petitions directed to the same claims of the same patent;
6. The finite resources of the PTAB; and
7. The requirement under 35 U.S.C. § 316(a)(11) to issue a final determination not later than one year after the date on which the Director formally institutes the IPR. More...