The Uneasy Case for Ariosa Diagnostics v. Illumina

The Supreme Court's request for views from the Solicitor General in Ariosa Diagnostics v. Illumina has renewed interest in this nerdy issue of patent prior art. I appear to be in a very small minority that believes that Federal Circuit's rule on this may be right (or at least is not obviously wrong), so I thought I would discuss the issue.

Let's start with the (pre-AIA) statute. 35 U.S.C. 102(e) says that one type of prior art may be where:

the invention was described in ... a patent granted on an application for patent by another filed in the United States before the invention by the applicant for patent...

This is a pretty old rule, dating back to the Alexander Milburn case. The gist of the rule is that delays in the patent office should not deprive references of being prior art. Thus, even though the patent application is "secret" until published, we backdate the reference to the date of filing once the patent is granted (or the application published, which is covered in a subsection I do not reproduce above).

The issue in Ariosa v. Illumina is what to do with provisional patent applications. For the reference at issue, the prior art patent first relied on a provisional patent application, which is never published but becomes publicly available if a patent that relies on it is granted. Later, a regular patent application was filed and eventually issued. There is a dispute about whether the invention was even described in the provisional, but we'll assume that it was. However, the PTAB ruled (and the Fed. Cir. affirmed) that because the issued patent claims were not supported by the provisional patent disclosure, then the reference could not be backdated to the filing of the provisional patent, even if the invention was described in the final patent.

This is where the objections come in. If the patent relies on the filing date of the provisional patent (and incorporates it by reference), then surely it is described as of the provisional patent date and should be prior art. We are, after all, living in a first to invent world and it is unfair that the first inventor (in the provisional patent) should not count as prior art.

Let's start with Alexander Milburn. I love that case. I have assigned it to my students. I think it explains this statute well. But it is not controlling. It was an interpretation of the statute at that time. We have a later adopted statute that defines what is and is not prior art, and Alexander Milburn does not speak to the facts of the Ariosa dispute because there were no provisional patents at that time. This is not like, say, on sale (Section 102(b)) in Helsinn in which that statute remained unchanged and the meaning of the words remained unchanged. There were no provisional patents when Alexander Milburn was granted, and thus it has little to say; the statute was intended to deal with that (and even that has a difficult time).

As a corollary to this analysis, I want to put the rest that there is a problem with the Federal Circuit's rule because it rewards the second inventor. I would bet dollars to donuts that many people arguing this scoffed at complaints that the AIA's first to file rule was unconstitutional because it rewarded second inventors. Both arguments fail for the same reason - the patent system has a long history of allowing the second invention to issue as a patent under certain circumstances. Indeed, even the current version of 102(e) disallows many early foreign patent filings, even though such filings are clearly the first invention. Once again, we have to look at the statute.

So, let's look at the statute: "The invention is described in" - critics focus on this, saying it makes no sense to look at a patent's claims. We only care about whether the invention was described. Fair enough - I agree.

But what about the next part: "a patent granted on an application for patent by another filed in the United States before the invention." Looking at this in pieces, we see a few requirements. First, the description must be in the patent, not the provisional application. Thus, looking at what the provisional patent says should be irrelevant...for this piece.

Second, that description must be in a patent "granted on an application for patent...filed...before." This is where the action is. What does it mean for a patent to be granted on an application for patent filed? For a provisional application, means that the patent must satisfy Section 119(e). It must be filed within one year, and the final patent claim must be supported by the written description of the provisional patent. It is as simple as that - the plain words of the statute dictate the Federal Circuit's rule.

There is a policy benefit to this reading. I think that patentee's can take advantage of the jump from provisional to final patent disclosures, adding new matter while always claiming priority back to the provisional. The provisional patent is not easily obtained, and it takes work to parse out which claims are actually entitled to the earlier filing date. Enforcing the rules on prior art better incentivizes complete provisional patent disclosures.

Then why do I say this is an uneasy case? Well, did I mention that I like Alexander Milburn? The policy it states, that delay in the patent office shouldn't affect prior art can easily be applied here. So long as the description is in the provisional patent, and so long as that provisional patent is eventually publicly accessible, then the goal, even if not the strict language, of the statute is met.

Also, my reading leads to a potentially unhappy result. A party could file a provisional that supports invention A, and then a year later file a patent that claims invention A but describes invention B. The patent could then be asserted against B while relying on the earlier filing date of A, even though B was never described in the provisional as of the earlier date. Similarly, a provisional patent could describe B, and B could then be removed from the final patent application, and the patent would not be prior art because B was not described in the patent, even though B had been described in the earlier, now publicly accessible provisional application.

I don't know where I land on this - as readers of this blog know, I tend to be a textualist. Sometimes the Court has agreed with that, but sometimes (see patentable subject matter and patent venue) it does not.

Jake Sherkow Guest Post: What the CRISPR Patent Appeal Teaches Us About Legal Scholarship

Guest post by Professor Jake Sherkow of New York Law School, who is currently a Visiting Scholar at Stanford Law School.

Yesterday, the Federal Circuit heard oral argument in the dispute between the University of California and the Broad Institute over a set of fundamental patents covering CRISPR-Cas9, the revolutionary gene-editing technology. Lisa has been kind enough to invite me to write a few words here about the dispute, and I thought I’d take that generous opportunity to discuss two aspects of yesterday’s argument: the basics of the appeal and, given that this blog is devoted to legal scholarship about patent law, what the argument can teach us, if anything, about IP scholarship in general. I think the short answer to the second question is, Quite a lot, although perhaps not for obvious reasons.

Oracle v. Google Again: The Unicorn of a Fair Use Jury Reversal

It's been about two years, so I guess it was about time to write about Oracle v. Google. The trigger this time: in a blockbuster opinion (and I never use that term), the Federal Circuit has overturned a jury verdict finding that Google's use of 37 API headers was fair use and instead said that said reuse could not be fair use as a matter of law. I won't describe the ruling in full detail - Jason Rantanen does a good job of it at Patently-O.

Instead, I'll discuss my thoughts on the opinion and some ramifications. Let's start with this one: people who know me (and who read this blog) know that my knee jerk reaction is usually that the opinion is not nearly as far-reaching and worrisome as they think. So, it may surprise a few people when I say that this opinion may well be as worrisome and far-reaching as they think.

And I say that without commenting on the merits; right or wrong, this opinion will have real repercussions. The upshot is: no more compatible compiler/interpreters/APIs. If you create an API language, then nobody else can make a competing one, because to do so would necessarily entail copying the same structure of the input commands and parameters in your specification. If you make a language, you own the language. That's what Oracle argued for, and it won. No Quattro Pro interpreting old Lotus 1-2-3 macros, no competitive C compilers, no debugger emulators for operating systems, and potentially no competitive audio/visual playback software. This is, in short, a big deal.

So, what happened here? While I'm not thrilled with the Court's reasoning, I also don't find it to be so outside the bounds of doctrine as to be without sense. Here are my thoughts.

The Quest to Patent Perpetual Motion

Those familiar with my work will know that I am a big fan of utility doctrine. I think it is underused and misunderstood. When I teach about operable utility, I use perpetual motion machines as the type of fantastic (and not in a good way) invention that will be rejected by the PTO as inoperable due to violating the laws of thermodynamics.

On my way to a conference last week, I watched a great documentary called Newman about one inventor's quest to patent a perpetual motion machine. The trailer is here, and you can stream it pretty cheaply (I assume it will come to a service at some point):

The movie is really well done, I think. The first two-thirds is a great survey of old footage, along with interviews of many people involved in the saga. The final third focuses on what became of Newman after his court case, leading to a surprising ending that colors how we should look at the first part of the movie. The two acts work really well together, and I think this movie should be of interest to anyone, and not just patent geeks.

That said, I'd like to spend a bit of time on the patent aspects, namely utility doctrine. Wikipedia has a pretty detailed entry, with links to many of the relevant documents. The federal circuit case, Newman v. Quigg, as well as the district court case, also lay out many of the facts. The claim was extremely broad:

38. A device which increases the availability of usable electrical energy or usable motion, or both, from a given mass or masses by a device causing a controlled release of, or reaction to, the gyroscopic type energy particles making up or coming from the atoms of the mass or masses, which in turn, by any properly designed system, causes an energy output greater than the energy input.

Here are some thoughts:

First, the case continues what I believe to be a central confusion in utility. The initial rejection was not based on Section 101 ("new and useful") but on Section 112 (enablement to "make and use"). This is a problematic distinction. As the Patent Board of Appeals even noted: "We do not doubt that a worker in this art with appellant's specification before him could construct a motor ... as shown in Fig. 6 of the drawing." Well, then one could make and use it, even if it failed at its essential purpose. Now, there is an argument that the claim is so broad that Newman didn't enable every device claimed (as in the Incandescent Lamp case), but that's not what the board was describing. The section 101 defense was not added until 1986, well into the district court proceeding. The district court later makes some actual 112 comments (that the description is metaphysical), but this is not the same as failing to achieve the claimed outcome. The Federal Circuit makes clear that 112 can support this type of rejection: "neither is the patent applicant relieved of the requirement of teaching how to achieve the claimed result, even if the theory of operation is not correctly explained or even understood." But this is not really enablement - it's operable utility! The 112 theory of utility is that you can't enable someone to use and invention if it's got no use. But just about every invention has some use. I write about this confusion in my article A Surprisingly Useful Requirement.

Second, this leads to another key point of the case. The failed claim was primarily due to the insistence on claiming perpetual motion. Had Newman claimed a novel motor, then the claim might have survived (though there was a 102/103 rejection somewhere in the history). One of the central themes of the documentary was that Newman needed this patent to commercialize his invention, so others could not steal the idea. He could not share it until it was protected. But he could have achieved this goal with a much narrower patent that did not claim perpetual motion. That he did not attempt a narrower patent is quite revealing, and foreshadows some of the interesting revelations from the end of the documentary.

Third, the special master in the case, William Schuyler, had been Commissioner of Patents. He recommended that the Court grant the patent, finding sufficient evidence to support the claims. It is surprising that he would have issued a report finding operable utility here, putting the Patent Office in the unenviable position of attacking its former chief.

Fourth, the case is an illustration in waiver. Newman claimed that the device only worked properly when ungrounded. More important, the output was measured in complicated ways (according to his own witnesses). Yet, Newman failed to indicate how measurement should be done when it counted: "Dr. Hebner [of National Bureau of Standards] then asked Newman directly where he intended that the power output be measured. His attorney advised Newman not to answer, and Newman and his coterie departed without further comment." The court finds a similar waiver with respect to whether the device should have been grounded, an apparently key requirement. These two waivers allowed the courts to credit the testing over Newman's later objections that the testing was improperly handled.

I'm sure I had briefly read Newman v. Quigg at some point in the past, and the case is cited as the seminal "no perpetual motion machine" case. Even so, I'm glad I watched the documentary to get a better picture of the times and hooplah that went with this, as well as what became of the man who claimed to defy the laws of thermodynamics.

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:

Gugliuzza & Lemley on Rule 36 Patentable-Subject-Matter Decisions

Paul Gugliuzza (BU) and Mark Lemley (Stanford) have posted Can a Court Change the Law by Saying Nothing? on the Federal Circuit's many affirmances without opinion in patentable subject matter cases. They note a remarkable discrepancy: "Although the court has issued over fifty Rule 36 affirmances finding the asserted patent to be invalid, it has not issued a single Rule 36 affirmance when finding in favor of a patentee. Rather, it has written an opinion in every one of those cases. As a result, the Federal Circuit’s precedential opinions provide an inaccurate picture of how disputes over patentable subject matter are actually resolved."

Of course, this finding alone does not prove that the Federal Circuit's Rule 36 practice is changing substantive law. The real question isn't how many cases fall on each side of the line, but where that line is. As the authors note, the skewed use of opinions might simply be responding to the demand from patent applicants, litigants, judges, and patent examiners for examples of inventions that remain eligible post-Alice. And the set of cases reaching a Federal Circuit disposition tells us little about cases that settle or aren't appealed or in which subject-matter issues aren't raised. But their data certainly show that patentees have done worse at the Federal Circuit than it appears from counting opinions.

Perhaps most troublingly, Gugliuzza and Lemley find some suggestive evidence that Federal Circuit judges' substantive preferences on patent eligibility are affecting their choice of whether to use Rule 36: Judges who are more likely to find patents valid against § 101 challenges are also more likely to cast invalidity votes via Rule 36. When both active and senior judges are included, this correlation is significant at the five-percent level. The judges on either extreme are Judge Newman (most likely to favor validity, and most likely to cast invalidity votes via Rule 36) and Chief Judge Prost (among least likely to favor validity, and least likely to cast invalidity vote via Rule 36), who also happen to be the two judges who are most likely to preside on the panels they sit. Daniel Hemel and Kyle Rozema recently posted an article on the importance of the assignment power across the 13 federal circuits; this may be one concrete example of that power in practice.

Gugliuzza and Lemley do not call for precedential opinions in all cases, but they do argue for more transparency, such as using short, nonprecedential opinions to at least list the arguments raised by the appellant. For lawyers without the time and money to find the dockets and briefs of Rule 36 cases, this practice would certainly provide a richer picture of how the Federal Circuit disposes of subject-matter issues.

Judge Dyk on the Supreme Court and Patent Law, with Responses

Judge Timothy Dyk of the Federal Circuit has long welcomed the Supreme Court's involvement in patent law—see, e.g., essays in 2008 and 2014. In a new Chicago-Kent symposium essay, he states that he "continue[s] to believe that Supreme Court review of our patent cases has been critical to the development of patent law and likewise beneficial to our court," such as by "reconciling [Federal Circuit] jurisprudence with jurisprudence in other areas."

Four pieces were published in response to Judge Dyk, and while Michael previously noted Greg Reilly's argument that the Supreme Court does understand patent law, the others are also worth a quick read. Tim Holbrook (Emory) argues that some of the Court's interest reflects "suspicion about the Federal Circuit as an institution" but that the result is "a mixed bags" (with some interventions having "gone off the rails"). Don Dunner (Finnegan) is even more critical of the Supreme Court's involvement, arguing that "it has created uncertainty and a lack of predictability in corporate boardrooms, the very conditions that led to the Federal Circuit's creation." And Paul Gugliuzza (BU) argues that "the Supreme Court's effect on patent law has actually been more limited" because its decisions "have rarely involved the fundamental legal doctrines that directly ensure the inventiveness of patents and regulate their scope" and because its "minimalist approach to opinion writing in patent cases frequently enables the Federal Circuit to ignore the Court's changes to governing doctrine."

Apple v. Samsung, Part ?? (not the Supreme Court case)

I've lost count of the rounds back and forth in Apple v. Samsung. But another opinion issued today, and it was a doozy. When we last left our intrepid litigants in late March, the panel had reversed the $120m verdict in favor of Apple, ruling a) non-infringement of a patent, and b) obviousness of two patents (slide to unlock and autocorrect). These rulings were as a matter of law - that is, they reversed jury findings to the contrary.

Apple filed for an en banc hearing, and we never heard anything again...until today. The en banc Federal Circuit (except Judge Taranto, who did not participate) vacated the panel opinion. The decision came without briefing, and it was unanimous...except for the three members of the original panel, who all dissented.

The opinion begins with a statement (rebuke?) about what appellate review should do: take the facts as found by the factfinder, and then review them for substantial evidence. The opinion takes umbrage at the fact that substantial evidence is not really addressed by the original panel at all. The opinion also takes issue with "extra record" material being considered for claim construction on appeal. The opinion then goes through each patent and shows the substantial evidence that would support a verdict, even if the appeals court would disagree with it.

Perhaps most telling of the deferential approach is the slide to unlock patent, which I think is the weakest of the bunch. The prior art, when combined, clearly has all the elements. But in finding non-obviousness, the jury found that the person with skill in the art would not have combined the references. That might be wrong, but evidence was submitted to support it, and thus the claim is non-obvious. The dissent takes issue with this, saying that KSR loosened up the combination standard. More on this later.

This opinion has a lot of important aspects:
1. It is another en banc opinion without briefing. I am sure the litigants (especially the losing ones) hate that. As an observer, I'm not so bothered in this case. The briefing was full and complete, and there was little to add in the way of analysis.

2. Why is the en banc circuit showing up only now to defend substantial evidence? I can think of at least two prominent cases in which juries made non-obvious findings of fact that a Federal Circuit panel disregarded to find a patent obvious and the en banc request was denied. Why now?

3. Just what is the obviousness standard of review and who is supposed to make these decisions? In general, the final obviousness determination is one of law, based on underlying findings of fact. Many judges have juries decide those underlying findings of fact, such as the scope of the prior art or the motivations to combine references. Some jury instructions ask in detail, and some just say "is it obvious?" If it is the latter case, then any jury finding is entitled to all inferences on appeal - if the jury said non-obvious, then it must have found no motivation to combine. The problem with this approach (and even the specific question approach) is that it makes it hard to "loosen" a standard as KSR v. Teleflex says we should. KSR affirmed a grant of summary judgment by the district court - in other words, it affirmed a finding that references could be combined as a matter of law. It is unclear why an appellate court could not have made the same determination here. At the same time, why have trials and findings of fact if we are simply going to ignore them? Deciding how obviousness should get decided is almost as important as the obviousness standard itself.

4. This opinion shows the importance of which panel you draw at the Federal Circuit. Apple had the bad fortune to draw the only three judges to disagree here. Of course, we don't know how the en banc dynamics work, and perhaps some in the majority here would have concurred in the original panel opinion. To generalize, though, judicial preferences may drive the disparity in opinions in Section 101 right now. A couple cases that have just issued are ripe targets for en banc review as well to aid this.

This is my final takeaway - if any part of this case is to make it to the Supreme Court, it will be the slide to unlock patent. This is a patent where all the elements are in the prior art, and there is a real dispute about the procedure for determining obviousness. This question has been presented to the Court before, but perhaps this version will take hold.

Helsinn v. Teva Oral Argument Recap

In March, I posted about an amicus brief filed by 42 IP profs in Helsinn v. Teva, which argued that contrary to the district court's opinion and position taken by the USPTO, the America Invents Act (AIA) did not change the meaning of "on sale" and "public use" in 35 U.S.C. § 102(a)(1). The case was argued yesterday before the Federal Circuit, and the panel (Judge Dyk, Judge Mayer, and Judge O'Malley) didn't seem eager to conclude that the AIA wrought a significant change.

The appeal involves Teva's challenge to Helsinn's post-AIA patent on the nausea drug palonosetron, which was filed over a year after a secret licensing and supply contract for the drug. In Pfaff v. Wells Electronics (1998), the Supreme Court held that the on-sale bar applies when a product is (1) "the subject of a commercial offer for sale" and (2) "ready for patenting" as of the critical date (one year before filing). Both issues are contested here, as the district court said that the drug was neither ready for patenting nor on sale within the meaning of the post-AIA § 102. I'll focus here just on the AIA issue, but note that Judge O'Malley asked about remanding for further factfinding and whether it is necessary to reach the AIA issue.

The only line of questioning on the AIA issue for Teva was Judge Dyk's criticism of the dueling canons of statutory interpretation for figuring out what "or otherwise available to the public" means in the new § 102. Teva argued that under the "last antecedent" canon, "to the public" modifies only "otherwise available"; Helsinn countered that under the "series qualifier" canon, the concluding phrase "otherwise available to the public" qualifies everything in the series, including "on sale." But Judge Dyk stated that neither canon can apply because the modifier would be "available to the public," leaving just the word "otherwise," which doesn't make sense. Teva pivoted to its argument that "or otherwise available to the public" is a catchall category for new technologies, which the panel seemed comfortable with; Judge Dyk suggested "an oral description at a conference" as something that might fall into this bucket.

On Empirical Studies of Judicial Opinions

I've always found it odd that we (and I include myself in this category) perform empirical studies of outcomes in judicial cases. There's plenty to be gleaned from studying the internals of opinions - citation analysis, judge voting, issue handling, etc., but outcomes are what they are. It should simply be tallying up what happened. Further, modeling those outcomes on the internals becomes the realest of realist pursuits.

And, yet, we undertake the effort, in large part because someone has to. Otherwise, we have no idea what is happening out there in the real world of litigation (and yes, I know there are detractors who say that even this isn't sufficient to describe reality because of selection effects).

But as data is easier to come by, studies have become easier. When I started gathering data for Patent Troll Myths in 2009, there was literally no publicly aggregated data about NPE activity. By the time my third article in the series, The Layered Patent System, hit the presses last month (it had been on SSRN for 16 months, mind you) there was a veritable cottage industry of litigation reporting - studies published by my IP colleagues at other schools, annual reports by firms, etc.

Even so, they all measure things differently, even when they are measuring the same thing. This is where Jason Rantanen's new paper comes in. It's called Empirical Analyses of Judicial Opinions: Methodology, Metrics and the Federal Circuit, and the abstract follows:

Despite the popularity of empirical studies of the Federal Circuit’s patent law decisions, a comprehensive picture of those decisions has only recently begun to emerge. Historically, the literature has largely consisted of individual studies that provide just a narrow slice of quantitative data relating to a specific patent law doctrine. Even studies that take a more holistic approach to the Federal Circuit’s jurisprudence primarily focus on their own results and address only briefly the findings of other studies. While recent developments in the field hold great promise, one important but yet unexplored dimension is the use of multiple studies to form a complete and rigorously supported understanding of particular attributes of the court’s decisions.

Drawing upon the empirical literature as a whole, this Article examines the degree to which the reported data can be considered in collective terms. It focuses specifically on the rates at which the Federal Circuit reverses lower tribunals — a subject whose importance is likely to continue to grow as scholars, judges, and practitioners attempt to ascertain the impact of the Supreme Court’s recent decisions addressing the standard of review applied by the Federal Circuit, including in the highly contentious area of claim construction. The existence of multiple studies purportedly measuring the same thing should give a sense of the degree to which researchers can measure that attribute.

Surprisingly, as this examination reveals, there is often substantial variation of reported results within the empirical literature, even when the same parameter is measured. Such variation presents a substantial hurdle to meaningful use of metrics such as reversal rates. This article explores the sources of this variability, assesses its impact on the literature and proposes ways for future researchers to ensure that their studies can add meaningful data (as opposed to just noise) to the collective understanding of both reversal rate studies and quantitative studies of appellate jurisprudence more broadly. Although its focus is on the Federal Circuit, a highly studied court, the insights of this Article are applicable to virtually all empirical studies of judicial opinions.

I liked this paper. It provides a very helpful overview of the different types of decisions researchers make that can affected how their empirical "measurement" (read counting) can be affect and thus inconsistent with others. It also provides some suggestions for solving this issue in the future.

My final takeaway is mixed, however. On the one hand, Rantanen is right that the different methodologies make it hard to combine studies to get a complete picture. More consistent measures would be helpful. On the other hand, many folks count the way they do because they see deficiencies with past methodologies. I know I did. For example, when counting outcomes, I was sure to count how many cases settled without a merits ruling either way (almost all of them). Why? Because "half of patents are invalidated" is very different than "half of the 10% of patents ever challenged are invalidated" are two very different outcomes.

Thus, I suspect one reason we see inconsistency is that each later researcher has improved on the methodology of those who went before, at least in his or her own mind. If that's true, the only way we get to consistency now is if we are in some sort of "post-experimental" world of counting. And if that's true, then I suspect we won't see multiple studies in the first place (at least not for the same time period). Why bother counting the same thing the same way a second time?

Thoughts on Google's Fair Use Win in Oracle v. Google

It seems like I write a blog post about Oracle v. Google every two years. My last one was on May 9, 2014, so the time seems right (and a fair use jury verdict indicates now or never). It turns out that I really like what I said last time, so I'm going to reprint what I wrote at Madisonian.net a couple years ago at the bottom. Nothing has changed about my my views of the law and of what the Federal Circuit ruled.

So, this was a big win for Google, especially given the damages Oracle was seeking. But it was a costly win. It was expensive to have a trial, and it was particularly expensive to have this trial. But it is also costly because it leaves so little answered: what happens the next time someone wants to do what Google did? I don't know. Quite frankly, I don't know how often people make compatible programs already, how many were holding back, or how many will be deterred.

Google did this a long time ago thinking it was legal. How many others have done similar work that haven't been sued? Given how long has it been since Lotus v. Borland quieted things, has the status quo changed at all? My thoughts after the jump.

Galasso & Schankerman on the Effect of Patent Invalidation on Subsequent Innovation by the Patentee

In a paper previously featured on this blog, economists Alberto Galasso (Toronto School of Management) and Mark Schankerman (London School of Economics) pioneered the use of effectively random Federal Circuit panel assignments as an instrumental variable for patent invalidation. That paper looked at the effect of invalidation on citations to the patent; they now have a new paper, Patent Rights and Innovation by Small and Large Firms, examining the effect of invalidation on subsequent innovation by the patent holder. They summarize their results as follows:

Patent invalidation leads to a 50 percent decrease in patenting by the patent holder, on average, but the impact depends critically on characteristics of the patentee and the competitive environment. The effect is entirely driven by small innovative firms in technology fields where they face many large incumbents. Invalidation of patents held by large firms does not change the intensity of their innovation but shifts the technological direction of their subsequent patenting.

Their measure of post-invalidation patenting is the number of applications filed by the patent owner in a 5-year window after the Federal Circuit decision. They also present results suggesting that large firms tend to redirect their research efforts after invalidation of a non-core patent (but not for a core patent), whereas "the loss of a patent leads small firms to reduce innovation across the board, rather than to redirect it." (A "core" patent is one whose two-digit technology field accounts for at least 2/3 of the firm's patenting.)

This is a rich paper with many, many results and nuances and caveats—highly recommended for anyone interested in patent empirics.

42 IP Profs: AIA Didn't Change Meaning of "On Sale" and "Public Use" in § 102

Mark Lemley and Rob Merges just filed a Federal Circuit amicus brief on behalf of 42 IP professors in Helsinn v. Teva, arguing that the AIA did not change the meaning of "on sale" and "public use" in 35 U.S.C. § 102(a)(1). Under pre-AIA caselaw such as the classic Metallizing Engineering, secret commercial use is not prior art against a third party, but it does start a one-year clock for the inventor to encourage the inventor to disclose. The district court opinion in Helsinn held that the AIA changed this rule: sales and offers for sale only count as prior art if they are "available to the public."

The district court decision is based on the addition of "or otherwise available to the public" to § 102(a)(1), but the IP prof brief notes that this interpretation is hard to square with the statutory text of § 102(b)(1), which distinguishes between 102(a)(1) art that is (A) "disclosed" by the inventor (or those who obtained the subject matter from the inventor) versus (B) "publicly disclosed" by third parties. Under the district court's Helsinn's opinion, this distinction between disclosures and public disclosures becomes "nonsensical."

The legislative history of this provision is complicated. For the pro-overturning-Metallizing view, see p. 470-71 of this account by Joe Matal, who was a staffer to Senator Jon Kyl. But the IP profs argue that Senator Kyl tried and failed to make this change in the statutory text, and that the supporters of overturning Metallizing are now trying to use ambiguous statutory text and manufactured legislative history to accomplish what they didn't have the votes to accomplish by clear statutory amendment. Preventing this kind of gambit is the underlying rationale for statutory interpretation canons such as "Congress does not hide elephants in mouseholes."

The IP prof amicus brief concludes with a thorough explanation of how the district court's reading of § 102(a) "attributes a quite radical intent and effect to the new prior art provision" that "would sweep away scores of cases" and cause "decades of uncertainty as to the scope of prior art." Congress reenacted the same statutory terms—"on sale" and "public use"—which is normally presumed to ratify judicial interpretations of those terms. There were no legislative hearings on eliminating secret prior art, and the IP profs argue that it is implausible that Congress intended "a major sea change in this very old and very much relied-upon body of law" without clear notice or explanation.

Fed. Cir. Upholds Default of No International Patent Exhaustion in Lexmark

The Federal Circuit released its en banc decision in Lexmark v. Impression Products this morning, upholding the Mallinckrodt rule that patentees may place resale restrictions on their products and upholding the Jazz Photo rule that authorized foreign sales of U.S.-patented products do not exhaust the U.S. patent rights on those products. As regular Written Description readers know, I wrote an essay with Daniel Hemel before the Lexmark argument arguing that the briefing was ignoring the ways in which overturning Jazz Photo would harm foreign interests, and we thought these distributive tradeoffs were reflected in the Federal Circuit argument.

The Lexmark result is 10–2 and spans 129 pages, with Judge Taranto writing for the majority and Judge Dyk writing for himself and Judge Hughes in dissent (arguing for the government's presumptive exhaustion rule). None of the judges supported the argument of Impression and its amici that an authorized foreign sale should always exhaust U.S. patent rights.

Both opinions do discuss economic policy issues, and the majority cites Daniel's and my essay at p. 95 of the slip opinion as support for the statement that there is "no dispute that U.S.-patented medicines are often sold outside the United States at substantially lower prices than those charged here and, also, that the practice could be disrupted by the increased arbitrage opportunities that would come from deeming U.S. rights eliminated by a foreign sale made or authorized by the U.S. patentee." In addition to describing these problems with changing the rule, the opinion also notes that no one has presented evidence "that substantial problems have arisen with the clear rule of Jazz Photo."

McCarthy & Roumiantseva on Federal Circuit Exclusive Trademark Jurisdiction: "We Think Not"

Even though the Federal Circuit is often called "the patent court," it hears appeals in a wide variety of areas. Statistics on caseload by origin are available here; note that patent appeals have ballooned to 62% of the docket in FY2015 from 29% in FY2006.

A number of commentators have proposed "fixing" the Federal Circuit by adjusting its jurisdiction; for example, Paul Gugliuzza's creative suggestion has been discussed on this blog. One proposal has been to give the court exclusive jurisdiction over trademark cases. Tom McCarthy and Dina Roumiantseva think it is time to squelch any enthusiasm for this idea:

With some regularity over the years, a proposal is made to change the Lanham Act so that appeals in all Lanham Act trademark and false advertising cases from district courts across the United States will be diverted from the regional circuit courts of appeal to the Court of Appeals for the Federal Circuit. We think it is time to discuss this proposal head on and hopefully to convince the reader that this diversion is not a good idea and should never be implemented. Advocates of this proposal claim that trademark law would benefit from the consistency that a single appeals court could provide and that the Federal Circuit has exceptional expertise in trademark law. We believe, however, that trademark law does not suffer from the kind of circuit conflict that led to the channeling of all patent appeals to the Federal Circuit in 1982. Moreover, our review of case law suggests that some regional circuits have a comparable or greater experience with trademark law. We argue that no change in the present system of trademark appeals is needed.

Given the benefits of policy diversity and the lack of a compelling argument for centralizing trademark appeals, I tend to agree. Their full essay, Divert All Trademark Appeals to the Federal Circuit? We Think Not, is on SSRN.

Will there ever be changes to the Federal Circuit's jurisdiction? Given the lack of consensus on whether the current jurisdiction creates problems and if so, how best to fix it in a way that is both sound and politically palatable, I don't foresee any imminent changes.

Policy Issues in Lexmark Argument on International Patent Exhaustion

Last Friday, the Federal Circuit heard en banc argument on whether it should adopt a U.S. rule of international patent exhaustion in Lexmark v. Impression Products. This case has important distributive implications for foreign consumers, as Daniel Hemel and I describe in our new essay, Trade and Tradeoffs: The Case of International Patent Exhaustion (forthcoming in the Columbia Law Review Sidebar).

In a Patently-O post last week, we asked whether the Federal Circuit would recognize the U.S.–foreign tradeoff at stake. And the answer appears to be yes. Tony Dutra summed up the argument for Bloomberg (subscription required): Policy Focus in Fed. Cir. Patent Exhaustion Review. Here's an excerpt of his analysis:

Most members of the court appeared prepared to distinguish patent law because there is no Patent Act statutory equivalent to the Copyright Act's provision. However, the discussion turned more to policy questions as the 90-minute argument proceeded. Some judges essentially said that the harm to the copyright holder in Kirtsaeng—books priced more cheaply overseas and imported for less than the U.S. price—was minimal compared to the harm to, for example, AIDS patients in Africa, unless patentees can engage in drug price discrimination.

You can listen to the oral argument yourself here. (Bill Vobach also maintains a helpful key to judge voices.) The most extensive discussion of the issue of AIDS drugs starts at 1:16:02. Barbara Fiacco, arguing for BIO as amicus, discusses the importance of a no-exhaustion rule for allowing regional pricing and preventing arbitrage at 1:05:21.

Trade and Tradeoffs: The Case of International Patent Exhaustion

When I read all the briefs for Lexmark v. Impression Products—the en banc Federal Circuit case on patent exhaustion that will be argued Friday—it seemed like there were pieces missing, including related to an article Daniel Hemel and I are working on. So we've written and posted a short Essay about the case, Trade and Tradeoffs: The Case of International Patent Exhaustion. If ten pages is too long, we also have an even shorter guest post up at Patently-O today, Will the Federal Circuit Recognize the U.S.–Foreign Tradeoff in Friday’s Lexmark Argument? Comments welcome!

Laura Pedraza-Fariña on the Sociology of the Federal Circuit

The Federal Circuit has faced no shortage of criticism in its role as the expert patent court, including frequent Supreme Court reversals and calls for abolition of its exclusive patent jurisdiction (most prominently from Seventh Circuit Chief Judge Diana Wood, though she was far from the first). In Understanding the Federal Circuit: An Expert Community Approach, Laura Pedraza-Fariña (Northwestern Law) argues that the sociology literature on "expert communities" helps explain the Federal Circuit's "puzzling behaviors."

She suggests that "[t]he drive that expert communities exhibit for maximal control and autonomy of their knowledge base . . . explains why the Federal Circuit is less likely to defer to solutions proposed by other expert communities, such as the PTO," as well as "to defy non-expert superior generalists, such as the Supreme Court." Expert communities also engage in codification of their domains to demonstrate their expertise, manage internal dissent, and constrain subordinate communities, and Pedraza-Fariña argues that this tendency explains the Federal Circuit's frequent preference for rules over standards. (As she notes, this is related to Peter Lee's argument that the Federal Circuit adopts formalistic rules to limit the extent to which generalist judges must grapple with complex technologies.) Finally, expert communities seek to frame borderline problems as within their area of control, and to place inadequate weight on competing considerations outside their expertise—qualities that critics might also pin on the Federal Circuit.

Nothing is Patentable

I signed onto two amicus briefs last week, both related to the tightening noose of patentable subject matter. Those familiar with my article Everything is Patentable will know that I generally favor looser subject matter restrictions in favor of stronger patentability restrictions. That ship sailed, however; apparently we can't get our "stronger patentability restrictions" ducks in a row, and so we use subject matter as a coarse filter. It may surprise some to hear that I can generally live with that as a policy matter; for the most part, rejected patents have been terrible patents.

But, now that these weaker patents are falling like dominoes, I wonder whether subject matter rhetoric can stop itself. This has always been my concern more than any other: the notion of unpatentable subjects is fine, but actually defining a rule (or even a standard) that can be applied consistently is impossible.

This leads us to the amicus briefs. The first is in Sequenom, where the inventors discovered that a) fetal DNA might be in maternal blood, and b) the way you find it is to amplify paternal fetal DNA in the blood. The problem is that the discovery is "natural" and people already knew how to amplify DNA. As Dennis Crouch notes, this seems like a straightforward application of Mayo - a non-inventive application of the natural phenomenon. Kevin Noonan and Adam Mossoff were counsel of record on the brief.

But here's the thing: it's all in the way you abstract it. Every solution is non-inventive once you know the natural processes behind it. This argument is at the heart of a short essay I am publishing in the Florida L. Rev. Forum called Nothing is Patentable. In that essay, I show that many of our greatest inventions are actually rather simple applications of a natural phenomenon or abstract idea. As such, they would be unpatentable today, even though many of them survived subject matter challenges in their own day.

Returning to Sequenom, there were other ways to parse the natural phenomenon. For example, it is natural that there is fetal DNA in the mother's blood, but finding it by seeking out only the paternal DNA is a non-conventional application of that phenomenon. No one else was doing that. Or, it is natural that there is fetal DNA in the mother, but finding it within the blood is a non-conventional application of that phenomenon. After all, no one had been doing it before, and no one had thought to do it before. Either of these two views is different than the types of application in Mayo v. Prometheus, which simply involved giving a drug and then measuring the level of the drug in the system (something you would expect to find after giving the drug). In Mayo, the court commented on the bitter divide over what to do about diagnostics, and punted for another day. That day has come.


The second amicus brief is in Intellectual Ventures v. Symantec; Jay Kesan filed this brief. In the Symantec case, the district court ruled that unique hashes to identify files were like license plates, and therefore conventional. Further, it noted that the unique ids could be created by pencil and paper, given enough time. It distinguished virus signatures (an example in PTO guidance of something that is patentable) by saying that file ids were not really computer based, while virus signatures were. I mention this case in my Nothing is Patentable essay as well.

I have less to say about this ruling, but I think it is wrong on both counts. First, unique file id hashes are much more like virus signatures than they are like license plates. There is a rich computer science literature area in this field - solving problems by identifying files through codes associated with their content. Of course, computer science folks will say this is not patentable because it's just math. That's a different debate; but it is surely not the same thing as attaching a license plate to a car. Second, this notion that people can do it with a pencil and paper has got to go. As the brief points out, with enough people and enough time, you can simulate a microprocessor. But that can't be how we judge whether a microprocessor can be patented, can it?

These two cases show the pendulum swinging - and hard - toward a very restrictive view of patentability. Taken seriously and aggressively applied, they stand for the proposition that many of the fruits of current R&D are outside the patent system -- even though their historical analogues were patentable. Perhaps I'm being a pessimist; I sure hope so.

Dow v. NOVA: Maybe Nautilus Does Matter

In June 2014, the Supreme Court held in Nautilus v. Biosig that the Federal Circuit's "insolubly ambiguous" test for indefiniteness was "more amorphous than the statutory definiteness requirement allows," and that the proper test is whether the claims "fail to inform, with reasonable certainty, those skilled in the art about the scope of the invention." But is this actually a stricter test?

Jason Rantanen (Iowa Law) posted a nice essay this spring, Teva, Nautilus, and Change Without Change (forthcoming Stan. Tech. L. Rev.), arguing that in practice, the answer has been no: "The Federal Circuit continues to routinely reject indefiniteness challenges . . . . Indeed, with one exception, the Federal Circuit has not held a single claim indefiniteness under the Nautilus standard, and even that one exception would almost certainly have been indefinite [pre-Nautilus]." (Since then, the court also held the Teva v. Sandoz claims indefinite, but it had done the same pre-Nautilus.) Rantanen also noted that the Federal Circuit has failed to grapple with the meaning of Nautilus and has continued to rely on its pre-Nautilus cases when evaluating definiteness. In one case the court even reversed an decision that claims were indefinite for reconsideration after Nautilus—implying that the Nautilus standard might be less stringent! (I've noticed the Federal Circuit similarly undermine the Supreme Court's change to the law of obviousness in KSR.)

But the Federal Circuit's decision today in Dow Chemical Co. v. NOVA Chemicals Corp. carefully examines the change Nautilus has wrought. Dow's asserted claims cover an improved plastic with "a slope of strain hardening coefficient greater than or equal to 1.3," and NOVA argued that the patents fail to teach a person of ordinary skill how to measure the "slope of strain hardening." In a prior appeal (after a jury trial), the Federal Circuit had held the claims not indefinite under pre-Nautilus precedent. The district court then held a bench trial on supplemental damages, leading to the present appeal. In today's opinion by Judge Dyk, the Federal Circuit holds that Nautilus's change in law "provides an exception to the doctrine of law of the case or issue preclusion," and holds that the claims are indefinite under the new standard.

The Federal Circuit dismisses the hand-wringing over whether Nautilus really meant anything, stating that "there can be no serious question that Nautilus changed the law of indefiniteness." The court notes that "Nautilus emphasizes 'the definiteness requirement's public-notice function,'" and that "the patent and prosecution history must disclose a single known approach or establish that, where multiple known approaches exist, a person having ordinary skill in the art would know which approach to select. . . . Thus, contrary to our earlier approach, under Nautilus, '[t]he claims . . . must provide objective boundaries for those of skill in the art.'"

Examining the claims at issue, the court notes that the patents state that "FIG. 1 shows the various stages of the stress/strain curve used to calculate the slope of strain hardening," but the patents contain no figure showing the stress/strain curve. There were four ways to measure the slope, which could result in different results, but the patents provided no "guidance as to which method should be used or even whether the possible universe of methods is limited to these four methods." The claims thus fail the new test: "Before Nautilus, a claim was not indefinite if someone skilled in the art could arrive at a method and practice that method," but "this is no longer sufficient."