Boardside Chat Tomorrow

Tomorrow, Tuesday, September 12, 2017 from 12-1 p.m. ET the Patent Trial & Appeal Board (PTAB) will conduct a special “Boardside Chat” in which representatives from AIPLA, IPO, ABA, PTAB Bar Association, and Federal Circuit Bar Association will interview the Chief Judge on the 5th year anniversary of the PTAB.

The program is free to attend.  Discussion topics include PTAB procedures, the latest statistics, and new developments.  The program also will include an opportunity to “Ask the Chief Judge” your questions.

Webinar access information is below.

Event: PTAB Boardside Chat Webinar

Webinar Access link: https://uspto-events.webex.com/uspto-events/onstage/g.php?MTID=e5931807cab2f9531c78d30f611670e0f

Date and time:Tuesday, September 12, 2017 from 12-1 p.m. ET

Duration: 1 hour

Event number: 394 265 268

Event password: 3MfdVtba

Audio conference: Call-in toll number (US/Canada): 1-650-479-3208

Access code: 394 265 268

 

PatentsPostGrant.com Has a New Home and Look

As announced two weeks ago, I am thrilled to join the team at Ropes & Gray. With technical difficulties now resolved, PatentsPostGrant.com is back in business. While the graphics are a bit different, the content will continue as before.

First up, is the significant amount of fake news surrounding the PTAB….more tomorrow.

Judge Gilstrap Singled Out in Congressional Hearing as Defying SCOTUS

Yesterday, the House IP Subcommittee on the Courts, Intellectual Property and the Internet conducted a hearing entitled: The Impact of Bad Patents on American Businesses. During the hearing, Chairman Darrell Issa (R-Calif.) and House Judiciary Committee Chairman Bob Goodlatte (R-Va.) did not mince words expressing their displeasure with the EDTX’s handling of the Supreme Court’s recent decision in TC Heartland.

At the opening of the hearing, Chairman Issa explained that Judge Gilstrap’s interpretation of TC Heartland “rejects the Supreme Court’s unanimous decision” and is “an act I find reprehensible.”  It only got worse from there.
Chairman Issa explained that Judge Gilstrap may be more interested in serving the surrounding hotels and law firms, but that his recent decision outlining his TC Heartland analysis “does not serve justice” (ouch).  Then, Chairman Issa finished up with: “it is not common for a member of Congress to call out an individual judge or a district, but after a long period of enrichment of a community by judges who consider that community’s well being as part of their goal, I can reach no other conclusion “Comments by Representative Bob Goodlatte were more measured, but also strong, he stated:

Just a few weeks ago, the Supreme Court in its TC Heartland decision concurred with Congressional enactment of a patent specific venue provision in Title 18. This decision was expected to lead to a sharp reduction in cases being filed in one particular district in Texas that seems skilled at attracting patent trolls. Unfortunately, one judge in this district has already re-interpreted both the law and the unanimous Supreme Court decision to keep as many patent cases as possible in his district in defiance of the Supreme Court and Congressional intent.

While Congress seems unlikely to get to any significant patent reform given its current dance card, EDTX may have just invited a rifle-shot bill targeting its venue practices in the short term.

Symposium to Assess Trade Secrets

In tomorrow’s Federal Register, the USPTO is announcing a public symposium on issues relevant to the protection of trade secrets, and to assess recent developments such as the Defend Trade Secrets Act (DTSA). The symposium will be held on May 8, 2017, from 9 a.m. to 4 p.m. EDT.

Under U.S. law, trade secrets comprise commercially valuable information not generally known or readily ascertainable to the public, that are subject to reasonable measures to maintain confidentiality. In May 2016, the Defend Trade Secrets Act of 2016 (DTSA) established a federal private civil cause of action for the misappropriation of a trade secret, with the aim to provide businesses with a uniform, reliable and
predictable way to protect their valuable trade secrets anywhere in the country. Given this legislation and the continuing domestic and international attention to trade secrets, the USPTO symposium will discuss: (1) Measuring the Value of Secrecy; (2) Use of the DTSA in Practice; (3) Differences in Trade Secret Protection in Foreign Jurisdictions; and (4) Considerations of Business Owners in International Cases. Experts from academia, private legal practice, international organizations, and industry will serve as panelists.

Guest Post: SCA v. First Quality

With TC Heartland still on deck a the Supreme Court, a look back at the Court’s most recent patent decision SCA v. First Quality by guest poster, Gary Cohen. Some of my thoughts, are posted on IPwatchdog (here).  Back to PTAB news/notes next week.

SCA v. First Quality
: Limiting the Application of Laches

By Gary Cohen1

On March 21, 2017, the U.S. Supreme Court (“SCOTUS”), in SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC, No. 15-927 (2017), reversed an en banc opinion from the Federal Circuit holding that laches could be asserted against a claim for damages incurred within the Patent Act’s 6-year limitations period of 35 USC §286.  The SCOTUS asserted that the en banc opinion impermissibly invoked laches to bar legal relief, with such invocation being unwarranted in view of both the SCOTUS’ holding in Petrella v Metro-Goldwyn-Mayer, Inc., 572 U.S. _____ (2014) and the caselaw preceding the Patent Act of 1952.

The facts of the case are fairly straightforward: On October 31, 2003, SCA asserted that a First Quality product infringed U.S. Patent No. 6,375,646 (“’646 Patent”), and, on November 21, 2003, First Quality responded, indicating that the ‘646 Patent was invalid in view of U.S. Patent No. 5,415,649.  Subsequently, First Quality ceased communication regarding the ‘646 Patent, while SCA requested reexamination of the ‘646 Patent on July 7, 2004.

The original claims of the ‘646 Patent were confirmed on March 27, 2007 and, on August 2, 2010, SCA filed a complaint, alleging infringement by First Quality of the ‘646 Patent.  After some discovery and the issuance of a claim construction order, First Quality moved for Summary Judgement on the basis of noninfringement as well laches and equitable estoppel.  The SJ motion, as to laches and equitable estoppel, was granted and the motion for noninfringement dismissed as moot.

First Quality sought to distinguish the copyright statute of limitations §507 from 35 USC §286 by contending that “a true statute of limitations runs forward from the date a cause of action accrues, whereas §286’s limitations period runs backward from the filing of the complaint.”  However, this distinction was neither persuasive with the SCOTUS nor the Federal Circuit, with the latter indicating:

[B]ecause patent infringement is a continuous tort, there is no relevant functional difference between a damages limitation and a statute of limitations. We therefore see no substantive distinction material to the Petrella analysis between § 286 and the copyright statute of limitations considered in Petrella2.

Probably the most significant distinction between the en banc and SCOTUS holdings is found in their differing views of the significance of the caselaw preceding the 1952 Patent Act.  Both the majority of the en banc Federal Circuit decision and First Quality argued that the lower court cases decided prior to the 1952 Patent Act strongly supported an unambiguous consensus that the rule of Petrella, precluding the invocation of laches to bar a claim for damages incurred within a limitations period, should not be followed in patent cases – the SCOTUS disagreed.

More particularly, the majority of the en banc opinion determined that Congress, by way of the 1952 Patent Act, codified a laches defense in §282(b)(1)3, and that application of that defense would be controlled by the common law established prior to the enactment of the 1952 Patent Act4.  The SCOTUS, however, rejected the position that enough pre-1938 caselaw (preceding the merger of equity and law) or post-1938 caselaw (where, at least conceivably, laches could, as a result of the merger of equity and law, be applied to damages claims) existed to “. . . constitute a settled, uniform practice of applying laches to damages claims5.”

Moreover, the SCOTUS rejected First Quality’s argument that Congress implicitly ratified post-1952 Court of Appeals decisions holding that laches can be invoked as a defense against a damages claim since Congress amended §282 without altering the “unenforceability” language.  It is this language which is said to incorporate the laches defense6.

While the SCOTUS has clearly rejected the interposition of laches as a defense against damages where infringement occurred within the period prescribed by §286, it does not appear to preclude application of equitable estoppel to limit damages, when the circumstances are appropriate:

We note, however, as we did in Petrella, that the doctrine of equitable estoppel provides protection against some of the problems that First Quality highlights, namely, unscrupulous pa­tentees inducing potential targets of infringement suits to invest in the production of arguably infringing products.572 U. S., at ___ (slip op., at 19)7.

In conclusion, while the SCOTUS has clearly eliminated laches as one tool for limiting damages in copyright or patent infringement matters, it appears, for the time-being, to have left equitable estoppel, as a damages limiting tool, intact.


1 Cohen, formerly Senior Patent Counsel with Xerox Corp. is currently Of Counsel at Basch & Nickerson in Rochester, NY
2 SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC, 807 F.3d 1311, 1321 (2015) (en banc).
3 Id. at 1321-22.
4 Id. at 1326-28.
5 SCA v. First Quality, No. 15-927, slip op. at 11-15 (2017).
6 Id. at 15-16.
7 Id. at 16.

Recalibration of Venue Could Change Face of Patent Litigation

As most are well aware, the patent venue statute, 28 U.S.C. § 1400(b), provides that patent infringement actions “may be brought in the judicial district where the defendant resides . . . .” The statute governing “[v]enue generally,” 28 U.S.C. § 1391, has long contained a subsection (c) that, where applicable, deems a corporate entity to reside in multiple judicial districts. In Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957), the Supreme Court held that §1400(b) is not to be supplemented by § 1391(c), and that as applied to corporate entities, the phrase “where the defendant resides” in § 1400(b) “mean[s] the state of incorporation only.” Id. at 226. The Court’s opinion concluded: “We hold that 28 U.S.C. §1400(b) is the sole and exclusive provision controlling venue in patent infringement actions, and that it is not to be supplemented by the provisions of 28 U.S.C. § 1391(c).” Id. at 229.

In the dispute before the High Court in TC Heartland v. LLC D/B/A Heartland Food Products Group V. Kraft Foods Group Brands LLC., the court will consider the argument that Federal Circuit precedent contradicts Fourco.  The decision in TC Heartland could have a significant impact on patent litigation in this country given the disproportionate share of such cases now in Texas courts.

The petitioner briefing and amicus filings are now in, including the one I filed on behalf of Unified Patents.

Merits Briefs

Amicus Briefs

In Support of Petitioner:

In Support of Neither Party:

Long Awaited FTC Study Offers Little In Terms of New Ideas

Yesterday, the Federal Trade Commission released an extensive study on Patent Assertion Entities (PAEs) (here). Interestingly, the report segmented PAEs into two classes, Portfolio PAEs (100s of patents) and Litigation PEAs (10 patents or less).  

The study pointed out that Litigation PAEs filed 96% of the cases in the study and accounted for 91% of the reported licenses, but only 20% of the reported revenue. On the other hand, 93% of reported Litigation PAE licenses followed a lawsuit against the eventual licensee and 77% were valued at less than the estimated cost of defending a patent lawsuit through the end of discovery—a threshold below which litigation settlements might be considered nuisance value.  

To combat this behavior the FTC proposed familiar ideas.

1. Develop rules and case management practices to address discovery burden and cost asymmetries in PAE litigation;
2. Amend Federal Rule of Civil Procedure 7.1 to reach a broader range of non-party interested entities or persons;
3. Establish procedures encouraging courts to stay a PAE’s infringement action against a customer or end-user, where the PAE has also sued the manufacturer of the accused product under the same theory of infringement.; and
4. As courts continue to address the “plausibility” of pleadings in patent cases, ensure that patent infringement complaints provide sufficient notice to accused infringers.

Of course, (4) was already enacted last year in the heightened pleading requirements, (1) and (3) were proposed in the last round of patent reform legislation, and (2) was pursued by the USPTO with the nightmarish attributable ownership rules (that NOBODY, not even the PTO, wanted).

With a new administration coming in, patent reform legislation is likely to take a back seat to other legislative initiatives in 2017. Stay tuned.

Stagnant Patent Reform Bills More Appealing in Lame Duck Session

While early 2015 generated a number of competing “patent reform” bills in both the House and Senate, all have long since lost traction. The House Bill was pulled given the widening rift between Senate and House bills, and as a result of intense lobbying. Not much has happened on the legislative front since late summer 2015.

When questioned about the prospect of reform for 2016, The Hill reports that House Judiciary Chairman Bob Goodlatte (R-Va.) said that “timing is everything” for getting patent reform through the lower chamber.   The Chairman explained that the House Bill “was pulled from the floor to examine the appropriate time to do this and to have ongoing discussions with some of the folks that had concerns about various issues. And we believe the overwhelming support from the Congress is the reason to bring it to the floor. And to bring it to the floor at a time when the leadership will be looking for a bipartisan bill.”

Of course, the current House Bill will need to be rewritten/synced with the Senate Bill for any realistic chance of success in 2016. How much the current proposals will need to be watered down from present form is anyone’s guess. The Chairman’s statement: “leadership will be looking for a bipartisan bill,” interpreted, means Congress will want to show something for the lame duck session at some point.  If that happens, there might be enough political desperation to refocus again on patent reform.  Since patent reform isn’t sexy enough to sell to the average voter, you can bet that any such effort will be trumpeted as a “jobs bill“— much like the America Invents Act was in 2011.  That is, unless some other piece of legislation comes along sooner, and is an easier sell.

Patent Reform Effort Slides…as Expected

An update to today’s cheat sheet.
Given the burgeoning opposition to the “Innovation Act” (H.R. 9), the current bill was pulled from floor consideration this morning.  Back to the drawing board.

As to at least the PTAB changes, the focus can now appropriately turn to the imminent rule package of the agency.

USPTO, you are on now on deck.

PTAB Proposals on House Side

Last week, I summarized the PTAB modifications proposed in the Senate’s Patent Act” (S.1137).  While there is an expectation that at least the House will try to bring “Innovation Act” (H.R. 9). to the floor for a vote, meaningful progress seems unlikely. Opposition to the bills has ramped up in recent days from conservative groups, and proponents of competing bills.  Coupled with the looming five week summer recess, it is inevitable that  Congress will kick the proverbial can down the road.

As pointed out previously, a rule package from the USPTO is expected in the July-August time frame that could moot many of these issues.  With that in mind, a delay in legislative action would be prudent.

That said, here are the current proposals of H.R. 9 that are directed at PTAB practice.
1.      Scope of waiver – PGR
§ 325(e)(2) is modified so that a petitioner, RPI and privy are only barred, after a final written decision, from asserting in a US court any ground that the petitioner raised during the PGR, removing the existing bar that also covers any ground that “reasonably could have been raised.”

(Some feel that the estoppel provision of “raised or reasonably could have raised” is especially daunting for PGR given the ability to raise any ground of unpatentability (i.e., 112, 101, on sale bar, public use, patents and printed pubs.  it is also argued to be  “scrivener’s error” in the AIA.)

2.      Claim Construction – IPR(PGR)
§ 316(326) is modified to require claims be construed as in a civil action, i.e., apply Phillips, including construing according to the ordinary and customary meaning as understood by one of ordinary skill and prosecution history.

§ 316(326) is further modified to require the PTO to consider previous constructions by a US court.

(As I have pointed out repeatedly, this is likely to hurt patentees more than help them)

3.      Institution Decision – IPR(PGR)
§ 316(326) is modified to bar institution unless the petitioner certifies the petitioner and RPIs:

–          have no ownership and will not acquire a financial instrument designed to hedge or offset a decrease in market value of a patent owner’s equity security during a period following the filing of a petition (i.e., the hedge fund exception); and
–          have not demanded payment in exchange for not filing an IPR(PGR) unless the petitioner/RPI has been sued for infringement.

(Plainly targets hedge fund filings, but PTAB is likely to take care of that problem on its own. Can’t hurt. )

4.      Preliminary Response – IPR(PGR)
§ 313(323) is modified to enable a preliminary response to include affidavits/declarations of supporting evidence and opinions. 

§ 313 is further modified to allow the PTO to accept a reply by the petitioner to respond to new issues raised in the preliminary response.

(PTAB expected to propose a similar modification this summer)

5.      Due Process – IPR(PGR)
§ 316(b)(326(b)) is modified to require the PTO consider the due process rights of the patent owner and petitioner in prescribing regulations.

(The assumption here is that the PTO prescribes regulations that are unlawful, strange.  Due process = full fledged district court litigation to many critics.)
 
6.      Serial/Redundant Petitions – PGR
The following cases are designated as precedential with respect to § 325(d) and (e):

–          Dell (IPR2015-00549, Paper 10)
–          Zimmer Holdings (IPR2014-01080, Paper 17)
–          Prism Pharma (IPR2014-00315, Paper 14)
–          Unilever (IPR2014-00506, Paper 17)

(Interest is limiting “second bite at the apple” filings. PTAB has had some trouble designating cases precedential given the existing guidelines. That said, given the incoming workflow, these decisions are very closely followed.)

7.      Joinder – IPR
§ 315 is modified to add subsection (c), providing discretion for issue joinder.  

(Like the proposal above, this essentially makes the Destination Maternity decision precedential.)

You can expect all of these proposals to change significantly, or disappear altogether before these bills get anywhere near close to passage (if ever). Still, it is worthwhile to understand the aspects of PTAB practice being scrutinized by opponents.  My expectation is that the vast majority of these criticisms will be addressed by the PTAB in the expected rule package.