Monday, January 22, 2018

What happened in patent law in the past year?

Last Thursday I gave a 25-min recap patent law update to judges and practitioners at the Northern District Practice Program Patent Law Symposium, and I thought blog readers might be interested in my recap of highlights from the past year:

Patent Case Filings and Procedure: Venue, PTAB, and Stays

Lex Machina reports that there were 4057 cases filed in 2017, down 10% from the 4529 in 2016. The biggest procedural change was to venue. As I have explained, in its May 2017 decision in TC Heartland, the Supreme Court held that for purposes of the patent venue statute, a corporation only "resides" in its state of incorporation. The Federal Circuit has since held that this was a change in law, so the venue defense was not "available" under FRCP 12(g)(2), allowing district courts in pending cases to consider venue arguments that were not previously raised by defendants. And the Federal Circuit has offered guidance on the other possibility for proper venue—"where the defendant has committed acts of infringement and has a regular and established place of business"—saying that this requires (1) a fixed, physical presence that (2) is regular and established (not transient) and that (3) is a place of the defendant (not merely of an employee).

TC Heartland is likely responsible for the decline in cases filed in E.D. Tex. and the uptick in districts like D. Del. and N.D. Cal., though in neither of the latter have filings reached pre-2015 levels:

USPTO statistics show the continued popularity of post-grant PTAB proceedings. There are lots of interesting PTAB issues percolating. We are of course waiting for the Supreme Court's decisions in Oil States (on IPR constitutionality) and SAS Institute (on instituting "partial" IPRs). And there were two recent en banc Federal Circuit decisions related to PTABs: The fractured Aqua Products opinions held that while the patent owner has the burden of production on claim amendments, the petitioner has the burden of persuasion … but that the PTO could change this through rulemaking. And in Wi-Fi v. Broadcom, the court held that decisions that IPR petitions are time-barred (due to being filed >1 year after being sued for infringement) are appealable.

What happens in district court while these PTAB proceedings are pending? According to Managing Intellectual Property, the success rate for contested motions to stay dropped from 57% in prior years to 43% in the year ending Sept. 2017 (and for motions filed after institution, from 75% to 62%). Stays are more likely in certain districts (like N.D. Cal.) and less likely in others (like E.D. Tex. and D. Del.). Of course, as with all success-rate studies, note that changes may stem from differences in the cases and in the kinds of motions being filed rather than from different standards being applied.

Patent Validity: Subject Matter and the On-Sale Bar

Clarity on patentable subject matter under § 101 is still a concern for many litigators and prosecutors, although the Federal Circuit has continued to offer guidance, without outward evidence of significant disagreement within the court. According to this helpful spreadsheet by Michael Kwun at Keker & Van Nest, before 2017, the Federal Circuit held claims to be not invalid under § 101 in 6 out of 70 post-Alice decisions (DDR Holdings, Enfish, BASCOM, CellzDirect, McRO, and Amdocs), including 34 invalidity affirmances under Rule 36. (As Paul Gugliuzza and Mark Lemley have noted, ignoring the Rule 36 decisions can lead to a skewed sense of outcomes because the Fed. Cir. never uses R.36 when rejecting PSM challenges.) Since Jan. 2017, claims have been held not invalid in 4 out of 58 decisions, including the first non-precedential opinion to do so (Trading Techs. v. CQG).

The three new precedential opinions holding claims not invalid under § 101 all found the claims at issue to be not directed to an abstract idea under Alice step 1. In Thales Visionix, where the claims covered an inertial tracking system, the court stated: “Far from claiming the equations themselves, the claims seek to protect only the application of physics to the unconventional configuration of sensors as disclosed.” The other two cases involved claims that improve the functioning of a computer itself: In Visual Memory v. NVIDIA, the court noted that the claims “are directed to an improved computer memory system, not to the abstract idea of categorical data storage.” And just this month, in Finjan v. Blue Coat, the court concluded that a method that "enables a computer security system to do things it could not do before" (proactive virus scanning) are "directed to a non-abstract improvement in computer functionality, rather than the abstract idea of computer security writ large."

In an important development for novelty under post-AIA § 102, in Helsinn v. Teva, the Federal Circuit held that "the AIA did not change the statutory meaning of 'on sale' in the circumstances involved here," vindicating the view of many IP professors. The on-sale bar is triggered even when the offer is not accepted, when delivery is not made, and when the details of the invention are not disclosed (but need to look at all the circumstances). But the opinion was limited to the facts of Helsinn: "Th[e] public use issue [from cases like Egbert and Beachcombers] is not before us, and we decline to address it." On Jan. 16, the en banc petition was denied without dissent. In future cases, I expect we will see more guidance on the meaning of both "on sale" and "public use" post-AIA.

The Supreme Court denied cert on the Apple v. Samsung obviousness issue, on which the en banc Federal Circuit overruled the panel decision (which had held slide-to-unlock to be obvious) without briefing. But I don't think this is the last word on obviousness. I think many commentators would agree—some with glee, others with consternation—that Federal Circuit opinions over the past decade have slowly eroded the Supreme Court's 2007 KSR decision. So I would not be surprised if there is eventually another Supreme Court intervention to resolve this dispute.

Defenses to Patent Infringement: Laches and Exhaustion

The Supreme Court ended laches, and expanded exhaustion. But for exhaustion, as I have discussed with Daniel Hemel, sales may be able to be restructured as licenses that do not exhaust patent rights.

Patent Damages: Extraterritoriality and Apportionment

On Jan. 12, the Supreme Court added another patent case to this Term's docket: WesternGeco v. ION Geophysical, on whether a patentee may recover lost profits that it would have earned outside the United States if infringement had not occurred. Although the case only involves § 271(f) on supplying components from the United States (also at issue in Life Tech. v. Promega last Term), the SG's brief recommending cert seems to expand the issue to all damages.

Another case to watch is Mentor Graphics v. EVE-USA. In Mar. 2017, the Federal Circuit held that apportionment of lost profits is unnecessary for multicomponent products because they are already accounted for through the Panduit but-for requirement. On Jan. 17, the Supreme Court requested a response to the cert petition. (Kudos to my student Jason Reinecke, who first brought this case to my attention and who has written a great paper on the subject.)

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