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Takeaways from Seattle Summer 2014 Seminars

A guest post by Donald Chisum and Janice Mueller.

In August 2014 the Chisum Patent Academy held two back-to-back seminars in its Seattle, Washington facility to discuss and debate current developments in patent law. Each roundtable seminar group was limited to ten persons; sessions were led by treatise authors and educators Donald Chisum and Janice Mueller.

Attendees included experienced patent litigators and prosecutors from law firms and corporations in the U.S., Canada, Germany, and India. Each seminar met for three days. Seattle’s great summer weather, coffee, and lively discussion were enjoyed by all.

Here’s a recap of the takeaways from the seminars:

2014 Supreme Court Decisions: Moderation? The year 2014 was an undoubtedly high water mark in terms of the number of pertinent SCOTUS patent law decisions–six directly on patent law issues plus a copyright case (Petrella) that could alter the laches defense for patent infringement claims. Commentary and initial responses, including those by the PTO, suggest that the cases represent a significant move toward constricting the availability of patent rights. Yet, in-depth discussions of the cases during our seminars detected a tone of moderation. For example, Alice has been read as broadly precluding patents on “software.” However, language in Alice strongly suggests that claims to technical advances, even broad claims that involve computer implementation, remain patent eligible. Unfortunately for patent applicants and owners, it will take time and resources to establish such eligibility through appeals from PTO rejections and summary district court invalidations.

Claim Definiteness: SCOTUS in Nautilus v. Biosig rejected the Federal Circuit’s lenient “insolubly ambiguous” standard for holding a patent claim invalid for indefiniteness. Rather, the correct test is whether a person of ordinary skill in the art would be informed with “reasonable certainty” of the patent’s scope by reading the claims, the remainder of the specification, and the prosecution history. The “reasonable certainty” test will need to be fleshed out by the district courts and Federal Circuit, but the claims in Nautilus will likely survive under the SCOTUS test. The PTO’s use of a more searching standard that rejects application claims for indefiniteness when their terms are “unclear” (see In re Packard) is probably not in conflict with the separate standard set forth in Nautilus for invalidating indefinite claims in issued patents. Left open in Nautilus, the question whether definiteness incorporates factual matters and thus mandates deference to district courts (or juries) is currently pending before SCOTUS in Teva v. Sandoz.

Active Inducement: Criticality of Careful Claim Drafting: We reached two conclusions after reviewing a series of cases on active inducement under Section 271(b), stretching from DSU Medical (CAFC en banc 2006) through the SCOTUS decisions, Global-Tech (2011) and Limelight (2014). First, clear and thoughtful drafting of both method and system claims, with a view to the “who” as well as the “what,” can avoid problems with “divided” infringement and the necessity of showing intent to infringe. The objective is to define “direct” infringement in terms of the actions of single entity. Cases approving claims reciting relatively complex “environment” limitations in preambles vividly illustrate one drafting technique that can achieve this goal (see, e.g., HTC Corp. v. IPCom GmbH & Co., KG, 667 F.3d 1270 (Fed. Cir. 2012)). Second, questions about the intent requirement and other issues pertaining to active inducement continue to surface. For example, does a good faith belief in a patent’s invalidity negate intent? See Commil (Fed. Cir. 2013). Numerous problems with active inducement and contributory infringement doctrine suggest that SCOTUS erred in differentiating direct and indirect infringement in regard to knowledge and intent in Global-Tech (2011) and before that in Aro (1964). But SCOTUS will not overrule those decisions. Furthermore, Congress impliedly confirmed that intent is a requirement for active inducement when it enacted Section 289 in the America Invents Act, limiting the lack of an opinion of counsel as evidence to establish such intent.

▪ Inter Partes Review: Where Are We So Far? Hundreds of IPR petitions are now flooding into the PTO each month. Initial readings of PTAB IPR decisions suggest that the Board responds to obviousness challenges far more favorably would than lay jurors. For example, the Board gives minimal weight to secondary considerations evidence. The PTAB is quite comfortable in construing a patentee’s statements in foreign prosecution or litigation proceedings (parallel, related, or not) as admissions against interest, even when such statements do not appear to qualify as prior art. The PTAB is heavily influenced by patentee concessions that all elements of a claimed invention can be found in the prior art (despite the lack of persuasive reasons for combining the prior art teachings).

▪ Patent Practice Gone Wrong? Case Law on Patent Malpractice, Sanctions for Frivolous Litigation, and Inequitable Conduct: Our review of recent case law suggested that now more than ever, working patent professionals (including both prosecutors and litigators) need to be alert in navigating the complex and changing obstacle course that is patent law. The malpractice cases confirm that huge obstacles must be overcome to establish a case of malpractice given the “but for” causation requirement. Often the facts show an act of malpractice, such as failure to file a timely divisional application or the drafting of an unnecessarily narrow claim. However, would the plaintiff have had a valid and enforceable patent but for the malpractice? Nevertheless, the risk of a malpractice charge remains, especially when a former client raises it as a defense to a patent attorney’s suit to collect unpaid fees. With regard to sanctions for frivolous litigation, the SCOTUS decisions in Octane Fitness and Highmark eliminated the Federal Circuit’s restrictive Brooks Furniture standard for finding cases “exceptional” under the attorney fee award statute (Section 285). SCOTUS thus shifted power from the Federal Circuit to the district courts. However, discussion of specific cases during the seminar illustrated how difficult it is to differentiate (1) a patent’s assertion of infringement based on a certain claim construction that is wrong but reasonable and in good faith from (2) one that is frivolous. On the defense of unenforceability based on inequitable conduct in prosecution of a patent, our review of post-Therasense Federal Circuit cases suggested that reports of the defense’s demise are premature. Courts are finding inequitable conduct when the evidence on materiality and intent is clear. We also discussed the prospect that the SCOTUS rulings in Octane and Highmark may transfer to cases in which a prevailing accused infringer seeks attorney fees based on the patent owner’s misconduct in prosecution. The Octane decision’s emphasis on multiple factors and the totality of circumstances portends greater district court discretion to award fees even when the rigid requirements of the Federal Circuit’s Therasense decision are not met.

▪ Injunctive Relief: A series of three 2012-2013 Federal Circuit decisions in the ongoing Apple v. Samsung smartphone wars (a “coming out” party for design patents) have raised the bar for obtaining an injunction when a complex infringing product includes only a handful of patented features. In addition to showing that it will be irreparably harmed absent an injunction, a patentee seeking an injunction (preliminary or permanent) must now also establish a “causal nexus” between the harm and the infringement. A good way to establish this is with survey evidence showing that consumers are willing to pay significantly more for an accused product having one or a few infringing features (despite also having hundreds of non-infringing features). Earlier Federal Circuit cases that never mentioned any “causal nexus” requirement are not to the contrary; they merely involved less complex technology such that causation was implicitly conceded.

▪ Exhaustion of Method Claims: The ill-named doctrine of “exhaustion” traditionally applies when a patent owner (or its licensee) sells a product covered by the patent. Not surprisingly, the authorized sale “exhausts” the patent owner’s rights with regard to that particular sold item. But in Quanta Computer (2008), SCOTUS held that sales of components of a patented invention could exhaust a method claim as well as a system claim if the sold components “substantially embodied” the invention. After seminar discussion of two recent Federal Circuit exhaustion decisions, Keurig (2013) and Lifescan (2013), our consensus view was that SCOTUS’s Quanta decision was wrong and has created many uncertainties. For example, which components “embody” an invention? Rather than exhaustion, the implied license doctrine would have more cleanly addressed the problem of authorized sales of components useful in carrying out patented methods. Lastly, the Federal Circuit in Keurig created confusion by suggesting that exhaustion should be analyzed on a “whole patent” rather than claim-by-claim basis.



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