New Cancer Immunotherapy Pilot Program at the Patent Office

The United States Patent and Trademark Office (“USPTO”) recently announced the “Cancer Immunotherapy Pilot Program,” (“CIPP”) which will provide FREE accelerated examination for cancer immunotherapy patent applications. i   The goal of the program is to complete examination of an application within 12 months of qualifying for the program. ii

To qualify for the program, the application must be a non-provisional, non-reissue utility application with at least one claim directed to a method of ameliorating, treating, or preventing malignancy in a human subject wherein the steps of the method assist or boost the immune system in eradicating cancerous cells.iii  The claims are limited to twenty claims with no more than three independent claims.  The request must be filed before the issuance of any Office Action (including those with just a restriction requirement) or with a request for continued examination.  The program is slated to end on June 29, 2017; however, it may be extended or added as a permanent program as we have seen happen with other pilot programs.iv

One practical benefit of using this program is the potential increase in patent term extension (“PTE”).v  PTE extends the term of a patent beyond the 20 year limit to compensate patent owners for lost patent term due to pre-market approval requirements before a regulatory agency.vi  PTE only applies to the time from when a patent issues to when regulatory approval is granted.  Thus, the earlier your patent issues, the more potential PTE.

Another practical benefit of using this program is the increased value that an issued patent brings to a potential investor.  Issued patents are a commodity that can be licensed, enforced, traded, or contributed to a patent pool.  Pending patent applications are not.  Having an issued patent within one year as opposed to the standard three to five years may make all the difference in the success of a start-up company.

If you would like more information on the Cancer Immunotherapy Pilot Program or patent term extension, please contact Kathryn Hull or Susan Meyer of the Intellectual Property Practice Group at Gordon Rees Scully Mansukhani.

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[i] See Federal Register notice on 6/29/2016 (https://www.federalregister.gov/articles/2016/06/29/2016-15533/cancer-immunotherapy-pilot-program#page-42328)

[ii] Examination is complete upon the issuance of a final Office Action or Notice of Allowance

[iii] For example, this can include the administration of cells, antibodies, proteins, or nucleic acids that invoke an active (or achieve a passive) immune response to destroy cancerous cells. The Pilot Program also will consider claims drawn to the co-administration of biological adjuvants (e.g., interleukins, cytokines, Bacillus Comette-Guerin, monophosphoryl lipid A, etc.) in combination with conventional therapies for treating cancer such as chemotherapy, radiation, or surgery. Claims to administering any vaccine that works by activating the immune system to prevent or destroy cancer cell growth are included. The Pilot Program also will consider in vivo, ex vivo, and adoptive immunotherapies, including those using autologous and/or heterologous cells or immortalized cell lines.

[iv] Pilot programs that have been extended or made permanent include the After Final Consideration program, the Patent Prosecution Highway program, the Quick Path Information Disclosure Statement program, and the First Action Interview program.

[v] 35 U.S.C. § 156

[vi] Agencies include the Food and Drug Administration and the U.S. Department of Agriculture

Federal Circuit Clarifies “On Sale” for Purposes of 102(b)

On February 11, 2016, the Federal Circuit, sitting en banc, issued a precedential opinion in The Medicines Company v. Hospira, Inc., in which it clarified the meaning of “on sale” for purposes of 102(b). According to the Federal Circuit, to be “on sale,” a product “must be the subject of a commercial sale or offer for sale,” and that “a commercial sale is one that bears the general hallmarks of a sale pursuant to Section 2-106 of the Uniform Commercial Code.”1

The Dispute

Hospira had submitted two Abbreviated New Drug Applications (“ANDAs”) seeking FDA approval to sell bivalirudin – the generic form of Angiomax – before the expiration of two patents owned by The Medicines Company (“MedCo”).  MedCo sued Hospira, alleging that Hospira’s two ANDA filings infringed its patents. In response, Hospira asserted several grounds of invalidity. In one of these arguments, Hospira argued that the invention had been sold or offered for sale more than one year before MedCo had filed for patent protection.  Hospira contended that the on-sale bar was triggered when MedCo paid Ben Venue Laboratories (“Ben Venue”) to manufacture Angiomax before the critical date.2 Hospira also contended that the on-sale bar was triggered because MedCo offered to sell Angiomax produced according to the patents to its distributor, ICS, before the critical date.3

The District Court Decision

Applying the two-step framework of Pfaff v. Wells Electronics, Inc., 525 U.S. 55 (1998), the district court found that the Angiomax Ben Venue had manufactured for MedCo did not trigger the on-sale bar. Pfaff’s two-step framework requires that the claimed invention was (1) the subject of a commercial offer for sale; and (2) ready for patenting.4 While the district court concluded that the claimed invention was ready for patenting under the second prong of Pfaff – because MedCo had developed two enabling disclosures prior to the critical date, or, alternatively, reduced the invention to practice before the critical date – the court found that the first prong of Pfaff was not met because the claimed invention was not commercially offered for sale prior to the critical date. The district court agreed with MedCo that the transactions between MedCo and Ben Venue were sales of contract manufacturing services in which “title to the Angiomax always resided with MedCo.”5 Because the Angiomax made by Ben Venue were for “validation purposes,” the court held that they were not made for commercial profit, thereby avoiding the on-sale bar. The court also held that MedCo’s distribution agreement with ICS did not constitute an invalidating sale as the agreement was merely “an agreement for ICS to be the sole U.S. distributor of Angiomax.”6

The Appellate Decision

On appeal, Hospira’s argument concerning the application of the on-sale bar focused on whether the invention was the subject of a commercial offer for sale. Hospira took issue with the district court’s conclusion that no commercial sale or offer for sale had occurred. According to Hospira, “any transaction that provides a commercial benefit to the inventor is enough to trigger the on-sale bar.”7 In agreeing with Hospira, a three-judge panel of the Federal Circuit reversed the district court’s ruling regarding the applicability of the on-sale bar. Although the panel acknowledged that Ben Venue had invoiced the sale as manufacturing services and title to the pharmaceutical batches did not change hands, it disagreed with the district court’s conclusion that Ben Venue’s sale of services did not constitute a commercial sale of the claimed product. According to the panel, “where the evidence clearly demonstrated that the inventor commercially exploited the invention before the critical date, even if the inventor did not transfer title to the commercial embodiment of the invention,” the on-sale bar applies.8

En Banc Rehearing

On rehearing en banc, the Federal Circuit began by tracing the history of the on-sale bar. For many years the Federal Circuit had used a “totality of circumstances” standard in applying the on-sale bar. Under that test “no single finding or conclusion of law [was] a sine qua non” to a holding that the statutory bar arose.9 Rather, courts were to consider all the facts and circumstances surrounding any particular transaction in light of the policies underlying section § 102(b). Although a “definite offer for sale” was required, the Federal Circuit had found that this did not necessarily require commercial activity that rose to the level of a formal “offer” under contract law principles.10 This changed with Pfaff, when the Supreme Court replaced the “totality of the circumstances” test – which the Court noted had been criticized as “unnecessarily vague” – with a two-pronged test: § 102(b) applies when, before the critical date, the claimed invention (1) was the subject of a commercial offer for sale; and (2) was ready for patenting.11 Since Pfaff, the Federal Circuit has applied this two-part test without balancing the various underlying policies according to the totality of the circumstances.

The Federal Circuit has previously stated that “the question of whether an invention was the subject of a commercial sale or offer for sale … [should] be analyzed under the law of contracts as generally understood.12 In doing so, the Federal Circuit has said that a court should focus on those activities that would be understood to be commercial sales and offers for sale “in the commercial community.”13 And, as a general proposition, “we will look to the Uniform Commercial Code (‘UCC’) to define whether . . . a communication or series of communications rises to the level of a commercial offer for sale.”14 After Pfaff, “[t]he transaction at issue must be a ‘sale’ in a commercial law sense,” and that “[a] sale is a contract between parties to give and to pass rights of property for consideration which the buyer pays or promises to pay the seller for the thing bought or sold.”15

Applying § 102(b) in light of Pfaff, the Federal Circuit concluded that the transactions at issue between MedCo and Ben Venue did not constitute commercial sales of the patented product. According to the court, “the mere sale of manufacturing services by a contract manufacturer to an inventor to create embodiments of a patented product for the inventor does not constitute a ‘commercial sale’ of the invention.”16 Rather, the transaction must be one in which the product is “on sale” in the sense that it is “commercially marketed.”17 Further, the Federal Circuit explained that “stockpiling” by the purchaser of manufacturing services is not improper commercialization under § 102(b).18

The Federal Circuit offered three reasons for its conclusion: “(1) only manufacturing services were sold to the inventor – the invention was not; (2) the inventor maintained control of the invention; and (3) ‘stockpiling,’ standing alone, does not trigger the on-sale bar.”19 According to the court, Ben Venue acted as a pair of “laboratory hands” to reduce MedCo’s invention to practice in accordance with its instructions.20 The court noted that Ben Venue’s invoices for the manufacturing service stated, “Charge to manufacture Bivalirudin lot.”21 Moreover, the absence of title transfer further underscored that the sale was only of Ben Venue’s manufacturing services. Because Ben Venue never held title, “it was not free to use or sell the claimed products or to deliver the patented products to anyone other than MedCo, nor did it do so.”22 The Federal Circuit found the absence of title transfer significant “because, in most instances, that fact indicates an absence of commercial marketing of the product by the inventor.”23

Like the absence of title transfer, the Federal Circuit also considered the confidential nature of the transactions a factor weighing against the conclusion that the transactions were commercial in nature. In this case, the Federal Circuit found that the scope and nature of the confidentiality imposed on Ben Venue “supports the view that the sale was not for commercial marketing purposes.”24 Further, the Federal Circuit explained that stockpiling, “when not accompanied by an actual sale or an offer for sale of the invention, [is] mere pre-commercial activity in preparation for future sale.”25 According to the court, “the on-sale bar is triggered by actual commercial marketing of the invention, not by preparation for potential or eventual marketing.”26

In expressly overruling inconsistent language in prior decisions, the Federal Circuit took pains to note that it still does not recognize a blanket “supplier exception” to what would otherwise constitute a commercial sale.27 Although the fact that a transaction is between a supplier and inventor “is an important indicator that the transaction is not a commercial sale, it is not alone determinative.”28 According to the court, “the focus must be on the commercial character of the transaction, not solely on the identity of the participants.”29  In concluding its opinion, the Federal Circuit concisely restated its holding: “a contract manufacturer’s sale to the inventor of manufacturing services where neither title to the embodiments nor the right to market the same passes to the supplier does not constitute an invalidating sale under § 102(b).”30

Analysis

The Federal Circuit’s holding in this case provides important guidance in preserving the right to patent inventions to those whose development efforts involve contract manufacturing. While a wide variety of different industries employ contract manufacturers, they are commonly used by the pharmaceutical industry and especially by virtual and specialty pharmaceutical companies. For such companies, preserving the right to seek patent protection is essential. As a result, the lack of clarity as to how relationships with contract manufacturers should be structured can have devastating effects. But by applying the guidance now provided by the Federal Circuit, contract manufacturers may be used with greater confidence that patent rights will not be lost.

In order to benefit from this guidance, those who rely on the services of contract manufacturers should ensure that their agreements with such manufacturers recite the purchase of manufacturing services – not the goods themselves. Such agreements should also require confidentiality and should make clear that the contract manufacturer neither takes title to the goods it makes nor has the right to freely market such goods. By employing such terms and restrictions, transactions with contract manufacturers should not be viewed as commercial sales that trigger the on-sale bar of § 102(b).

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1 Meds. Co. v. Hospira, Inc., 2016 U.S. App. LEXIS 12667, at *3 (Fed. Cir. 2016).
2 Id. at *10.
3 Id.
4 Pfaff v. Wells Electronics, Inc., 525 U.S. 55, 67-68 (1998).
5 Meds. Co., 2016 U.S. App. LEXIS 12667, at *12.
6 Id. (quoting Meds. Co. v. Hospira, Inc., 2014 U.S. Dist. LEXIS 43126, at *38 (D. Del. 2014).
7 Id. at *14.
8 Id. at *15 (quoting Meds. Co. v. Hospira, Inc., 791 F.3d 1368, 1370-71 (Fed. Cir. 2015).
9 Lacks Indus. v. McKechnie Vehicle Components USA, Inc., 322 F.3d 1335, 1347 (Fed. Cir. 2003).
10 Lacks Indus., 322 F.3d at 1347 (citing RCA Corp. v. Data Gen. Corp., 887 F.2d 1056, 1062 (Fed. Cir. 1989)).
11 Pfaff, 525 U.S. at 67-68.
12 Group One, Ltd. v. Hallmark Cards, Inc., 254 F.3d 1041, 1047 (Fed. Cir. 2001).
13 Id.
14 Id.
15 Trading Technologies International, Inc. v. eSpeed, Inc., 595 F.3d 1340, 1361 (Fed. Cir. 2010).
16 Meds. Co., 2016 U.S. App. LEXIS 12667, at *25-26.
17 Id. at *26.
18 Id.
19 Id.
20 Id. at *29.
21 Id. (emphasis in original).
22 Id. at *30.
23 Id. at *32.
24 Id. at *34.
25 Id. at *36.
26 Id.
27 Id. at *43.
28 Id.
29 Id. at *44.
30 Id. at *46-47.

Is the Enfish Case “A New Hope” For Software Patents?

Since the Supreme Court’s Alice¹ decision in 2014, the courts have found many software patents to be invalid as simply being “abstract ideas.” The Patent Office has also been rejecting many new software patent applications as being abstract ideas. Such Patent Office rejections are coming both at the initial examination stage and under various post-grant review systems. Many software patent owners have been feeling rather defeated and frustrated at the odds they have been facing.

A new hope may have arisen. On May 12, 2016, a three-judge Federal Circuit panel offered much needed good news for software patent holders in the case of Enfish LLC v. Microsoft². The issue (as seemingly always for software patents) was whether the claims were patent eligible subject matter under S.101.

The Court held the claims to be patentable subject matter, and this was particularly important since Enfish, the patent applicant, simply claimed a “self-referential” database. There was no physical structure claimed. However, the Court held that this non-physical structure was not simply an abstract idea. The Court in Enfish stated: “[w]e do not read Alice to broadly hold that all improvements in computer-related technology are inherently abstract…”

To date, a common strategy among patent practitioners when writing software patent applications has been to try to claim a physical component of the surrounding computer system or otherwise try to make the claims look as “physical” or as “structural” as possible in an attempt to slip through Alice’s fingers.

Importantly, the Court found that the claims were directed to an improvement to computer functionality versus being directed to an abstract idea. The Court was both influenced by claim language and evidence in the patent’s detailed description that the claimed self-referential table functions differently than a conventional database. The specification described the specific advantages of faster search times, smaller memory requirements and improved flexibility in database configuration. Basically, the Court was convinced that the claimed database structure functioned differently from existing database structures. Moreover, the advantages all related to solving longstanding software problems. Notably, the described advantages were all technical solutions to computer problems.

Therefore, the takeaway from Enfish for patent drafters is that the specification can be as important as the claims. To the greatest degree possible, the specification should explain how the software invention improves the functioning of the overall computer system in which it operates.

The Court also noted that “fundamental economic and business practices are often found to be abstract ideas.” Therefore, it appears to be important to patentablility to not present claims where a general purpose computer is simply being added to a fundamental economic practice or a mathematical equation. The Court had no appetite for these sorts of claims.

Two days later, the Court in TLI Communications LLC v. AV Automotive³ invalidated software claims to a system of organizing digital images. The Enfish case was distinguished with the Court stating that the claims in TLI were not directed to a specific improvement in computer functionality. The Court pointed out that the “specification fails to provide any technical details for the tangible components”. In addition, the Court held that the claims were not directed to a “solution to a technical problem”. Instead, the claims simply described “physical components [that] behave exactly as expected according to their ordinary use.”

On May 19, 2016, the Patent Office issued a Memo4 to its examiners discussing both the Enfish and TLI cases. The Memo stated that the Enfish decision did not change the framework for determining subject matter eligibility, but instead provided “additional clarity” for identifying abstract ideas.

The Memo seemed to raise the bar for discarding software patents as simple abstract ideas. Specifically, it instructed examiners to first identify the abstract idea in the claim and then why it is considered to be abstract. Examiners should also explain their reasoning by reference to previous judicial decisions. The Memo also warned examiners against making sweeping, overbroad statements and requested that they consider the Applicants’ rebuttals.

The Memo urges examiners to look at “the character as a whole” of the claims, as opposed to dissecting the claims. As such, a claim is not doomed simply because it runs on a general-purpose computer. The Memo specifically notes that software can improve computer technology just as much as hardware can. Therefore, an examiner can determine that a claim is not an abstract idea without having to look at additional elements that would confer patentability in the two-part Alice test5. Importantly, the Memo urged examiners to look at the teachings of the specification. It also reminded them that an improvement does not need to be defined by “physical” components. The Memo stated that TLI only referred to “generalized steps to be performed on a computer”, and that is why it was not patentable.

So where does this leave us now?

When writing patent applications, one should focus the claims on the improvements to the computer functionality itself. Both the claims and the specification should preferably be directed to specific improvements to the way computers operate.

Patentable claims are not required to have a physical hardware component. A data structure may be all the “structure” that is required for patentability. That is the good news. However, one should always avoid claims of undue breadth. Also, the writing of the specification was very important in Enfish. A minimalistic specification that merely describes how the claims are enabled, or simply describes what the claims mean is to be avoided. Instead, the specification should be drafted to list advantages of the invention and show how the claimed software structure makes a computer system operate better. The specification is the place to tell a story. Tell a story about the benefits of the invention. Simple claims to business methods performed on computers with the computer operating in an ordinary capacity are still likely to be rejected.

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1 http://www.supremecourt.gov/opinions/13pdf/13-298_7lh8.pdf
2 http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/15-1244.Opinion.5-10-2016.1.PDF
3 http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/15-1372.Opinion.5-12-2016.1.PDF
4 http://www.uspto.gov/sites/default/files/documents/ieg-may-2016_enfish_memo.pdf
5 The Alice case which established a two-step test for patent eligibility, being: (1) determine if a patent-ineligible concept (i.e., law of nature, natural phenomena, or abstract idea) is claimed; and if so, (2) determine whether additional claim elements transform the claim into a patent-eligible application.

A Lasting Impression: Federal Circuit Credits Own Precedent More Than Recent Supreme Court Authority

In Lexmark International, Inc. v. Impression Products, Inc.,1 the Federal Circuit declined to follow the Supreme Court’s recent decisions in Quanta Computer, Inc. v. LG Electronics, Inc.2 and Kirtsaeng v. John Wiley & Sons, Inc.,3 but instead affirmed its long-standing precedent allowing limits on the post-sale use or resale of patented goods and held foreign sales of patented goods do not exhaust the patentee’s rights in the United States.

These questions arose in a dispute between Lexmark, the manufacturer of printers and ink cartridges, and Impression Products, the operator of a refurbished ink cartridge business. Lexmark manufacturers and sells two types of ink cartridges, a full-priced model that includes no use restrictions and a discounted model that limits the consumer’s right to refill and reuse the cartridge. Impression collects the used cartridges—both full-priced and discounted models—and modifies the hardware, allowing them to be reused, then imports and resells them in the United States.

1. Post-Sale Use Limits

In the first portion of its opinion, the Federal Circuit held a patentee’s single-use or no-resale restrictions were permissible limitations on the otherwise presumptive “patent exhaustion” doctrine.4 Specifically, the Court allowed the sales, so long as they were “made under a clearly communicated, otherwise-lawful restriction[.]”5 The Federal Circuit relied heavily on its decision in Mallinckrodt, Inc. v. Medipart, Inc.,6 which paved the way for patentee “single use” restrictions, in part because of the Patent Act’s explicitly grant of a “right to exclude.”7

In reaching its conclusion, the Federal Circuit also declined to follow the Supreme Court’s decision in Quanta.8 The Court noted that Quanta only addressed the sale of patented goods by a manufacturing licensee, not sales by the patentee, “[a]nd the patentee’s authorization to the licensee to make (the first) sales was not subject to any conditions, much less conditions to be embodied in those sales.”9 As such, it did not address a situation where, as here, the sale as made subject to a use restriction. Accordingly, Quanta did not hold an “authorized sale” exhausted patent rights because it, in fact, did not involve any limitations on the buyer’s use. The Quanta decision also implicitly rejected petitioner and amici’s requests that Mallinckrodt be overturned.10

Ultimately, the Federal Circuit rejected the notion that any sale, even when rights are expressly restricted, qualifies as an “authorized sale of a patented item terminat[ing] all patent rights to that item.”11

2. Foreign Sales and U.S. Patent Rights

Next, the Federal Circuit moved to square its decades-old decision in Jazz Photo v. ITC12 with the Supreme Court’s recent decision in Kirtsaeng, and decide if Lexmark’s foreign sales—made without an explicit reservation of U.S. patent rights—granted authorization to import and sell those goods in the United States.13 At the outset, the Court was clear to acknowledge that Jazz Photo held U.S. patent rights are exhausted by a first sale, but only when that initial sale is in the United States.14 Thus, the present situation—where disputed products were sold outside the United States, modified, then imported and sold in the U.S.—was not covered.

The focus then turned to reconciling Kirtsaeng, with the Federal Circuit first noting how patent rights are necessarily different from those granted by copyright.15 The Patent Act, for example, specifically grants a patentee the exclusive right to make, use, sell, or import goods covered by the patent, while no such exclusive right exists the copyright. Therefore, Kirtsaeng was limited because it relied, quite explicitly, on the text of the Copyright Act.16 Although the Copyright Act allows certain actions “without the authority of the copyright owner,” a patent grants its owner broad rights “to exclude.” Accordingly, the Federal Circuit strictly construed the decision, determining “Kirtsaeng is not controlling in this case.”17

Ultimately, patent exhaustion is territorial because “what the statute expressly provides to a U.S. patentee is the reward available from the right to exclude ‘in the United States.’”18 In support of this textual anchor, the Court explained how “American markets differ substantially from markets in many other countries” and, thus, foreign sales of patented goods are inherently different from their domestic counterparts.19 The unauthorized importation of patented articles sold abroad therefore constitutes infringement, because foreign sales do not amount to authority for “the buyer to import the article and sell and use it in the United States.”

3. Implications

Initially, it will behoove all patentees looking to implement post-sale restrictions to use explicit language, but the limitations will only apply to their domestic sales. Next, patentees are urged to keep globalization considerations in mind, but only in so far as foreign customers may be looking to import patented goods purchased abroad. In this regard, other factors may strongly influence the discussion, such as where the first sale actually occurred (i.e. was it domestic or abroad). Finally, caution is warranted for those engaged in foreign transactions because, despite the comprehensive analysis, the Federal Circuit did not address the question of whether U.S. rights may be exhausted by a licensed foreign sale as there was no such licensee before the Court.

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1 Nos. 14-1617, 14-1619, 2016 U.S. App. LEXIS 2452 (Fed. Cir. Feb. 12, 2016)
2 553 U.S. 617 (2008)
3 133 S. Ct. 1351 (2013)
4 Lexmark Int’l, Inc., 2016 U.S. App. LEXIS 3452, at *31-32.
5 Id. at *32.
6 976 F.2d 700 (Fed. Cir. 1992)
7 Lexmark Int’l, Inc., 2016 U.S. App. LEXIS 3452, at *31-40.
8 Id. at *36-40.
9 Id. at *37 (citing Quanta Comp., Inc., 553 U.S. at 636-37) (emphasis in original).
10 Id. at *40.
11 Id. at *41-42.
12 264 F.3d 1094 (Fed. Cir. 2001)
13 Lexmark Int’l, Inc., 2016 U.S. App. LEXIS 3452, at *80-82.
14 Id. at *82-85.
15 Id. at *86-89.
16 Id. at *89 (quoting Kirtsaeng, 133 S. Ct. at 1370) (noting the Supreme Court “stressed that it was determining ‘the best reading of [15 U.S.C.] § 109(a).”) (emphasis in original).
17 Id. at *98.
18 Id. at *98 (quoting 35 U.S.C. §§ 154(a)(1), 271(a)).
19 Id. at *100-03.

For Whom the Bell Tolls: The End of Rule 84 (and Form 18 Patent Pleading Standards)

December 1, 2015 marked the end of Rule 84 of the Federal Rules of Civil Procedure and the use of Forms, including various litigation documents, such as summonses, complaints, and answers in civil actions. Rule 84 was enacted in 1937 and simply stated, “The forms contained in the Appendix of Forms are intended to indicate, subject to the provisions of these rules, the simplicity and brevity of statement which the rules contemplate.” Rule 84 was amended in 1946 and 2007 to its current language, “The forms in the Appendix suffice under these rules and illustrate the simplicity and brevity that these rules contemplate.” But all good things must eventually come to an end. On April 29, 2015, the Supreme Court signed an order abrogating Rule 84, effective December 1, 2015.

Rule 84 and its Forms assisted many parties to bring suit under a simplified pleading as exemplified in Form 18. Using Form 18, a patent holder wishing to file a suit for direct patent infringement only needed to identify the infringing party, the infringed patent, the infringing device, and provide statements of jurisdiction and patent notice. Many have argued against the sufficiency of Form 18 based on the standard set out in Bell Atl. Corp. V. Twombly[1] and Ashcroft v. Iqbal.[2] Under Twombly and Iqbal, the Supreme Court held that to “survive a motion to dismiss a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’”[3] Further, “a claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”[4]

Nevertheless, the sufficiency of Form 18 has been upheld by the Court of Appeals for the Federal Circuit in K-Tech Telecommunications, Inc. v. Time Warner Cable, Inc.[5] and In re Bill of Lading Transmission and Processing System Patent Litigation.[6] Specifically, the Federal Circuit stated in those cases that “a proper use of a form contained in the Appendix of Forms effectively immunizes a claimant from attack regarding the sufficiency of the pleading,”[7] and “to the extent the parties argue that Twombly and its progeny conflict with the Forms create differing pleadings requirements, the Forms control.”[8] This double standard has allowed a patent holder to file a “bare bones” complaint through the use of Form 18 and use discovery to fill in the details. While most “bet the company” litigation probably would not rely on a bare bones infringement complaint, the simplified pleadings benefitted smaller companies or solo inventors who did not have the same resources as larger companies. The abrogation of Rule 84 may make it more difficult and expensive for a small company / solo inventor to bring a suit against an infringer, perhaps even making it impossible.

With the abrogation of Rule 84 and subsequently Form 18, the default patent pleading standard will be the standard set out in Twombly and Iqbal. However, the amount and type of factual matter needed to allow the court to draw the “reasonable inference” or “plausibility” for liability remains unclear. Prior to K-Tech and Bill of Lading, the district courts already varied in their pleading standards.  For example, the District Court for the Central District of California in Medsquire LLC v. Spring Medical Systems Inc., et al.[9] dismissed a Form 18 complaint for failing to recite any facts as to how the accused device infringed the patent. The court stated, “a complaint must contain sufficient factual matter to make its allegations plausible.” Furthermore, the court in Medsquire alluded to a different standard required for pleadings drafted by attorneys as opposed to pleadings drafted by pro se plaintiffs.[10] In contrast, the District Court for the Eastern District of Texas in Traffic Information, LLC v. Yahoo! Inc.[11] held that “Twombly and Iqbal have not affected the adequacy of complying with Form 18.” Yet, even after K-Tech and Bill of Lading, the District Court for the Eastern District of Virginia in Macronix International Co. Ltd. v. Spansion Inc.[12] dismissed a complaint for failing to meet the Twombly and Iqbal standards. The Macronix Court stated:

[B]efore filing a complaint, counsel must ascertain exactly what claims should alleged to be infringed and how they are infringed. That can be done with brevity and clarity if counsel know at the outset their theories of infringement and what can, and cannot, be said about allegedly infringing conduct.  That, in turn, may well, indeed likely will, require expert assistance. And, it will mean taking great care when crafting a succinct, but sufficient, patent complaint. But, that is not asking too much. Indeed, it is high time that counsel in patent cases do all of that work before filing a complaint.[13]

Additionally, the Federal Circuit in K-Tech alluded to a “sliding scale” standard based on the complexity of the case. Specifically, the K-Tech Court stated, “[t]he adequacy of the facts pled depends on the breadth and complexity of both the asserted patent and the accused product or system and on the nature of the defendant’s business activities.”[14] This opens the door for the Courts to implement their own standards. For example, the standard could vary depending on the technology field, claim type (e.g. composition, device, or method), or number of infringed claims. Some Courts could require infringement charts or other detailed analysis of the alleged infringement.

The patent pleading standards under Twombly and Iqbal in the aftermath of Rule 84’s abrogation will undoubtedly take years, if not decades, to develop. Until then, it would be prudent to do a little more homework before filing your patent infringement complaint, especially if you are filing in districts where the heightened pleading standards of Twombly and Iqbal have been applied to patent infringement complaints.


[1] Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007).
[2] Ashcroft v. Iqbal, 556 U.S. 662 (2009).
[3] Id. at 663.
[4] Id.
[5]K-Tech Telecommunications, Inc. v. Time Warner Cable, Inc., 714 F.3d 1277 (Fed. Cir. 2013).
[6] In re Bill of Lading Transmission and Processing System Patent Litigation, 681 F.3d 1323 (Fed. Cir. 2012).
[7] K-Tech, 714 F.3d at 1283.
[8] In re Bill of Lading, 681 F.3d at 1334.
[9] Medsquire LLC v. Spring Medical Systems Inc., et al., Case No. 2:11-cv-04504-JHN-PLA, Order granting Motion to dismiss, (C.D. Cal. August 31, 2011).
[10] Id. at 5. The Court stated, “McZeal dealt with a narrow circumstance, which is not at issue here: a lawsuit brought by a pro se plaintiff, who the Federal Circuit held to ‘less stringent standards than formal pleadings drafted by lawyers.’”
[11] Traffic Info., LLC v. Yahoo! Inc., Case No. 2:09-CV-246-TJW-CE, Magistrate Judge Report and Recommendation (E.D. Tex. Apr. 13, 2010).
[12] Macronix International Co. Ltd. v. Spansion Inc., 4 F. Supp. 3d 797 (E.D. Va. Mar. 10, 2014).
[13] Id. at 803.
[14] K-Tech, 714 F.3dat 1287.

Trade Dress and the Functionality Doctrine

The Fourth Circuit in McAirlaids Inc. v. Kimberly-Clark Corp., held this year that ownership of a utility patent does not necessarily preclude a claim in trade dress rights, particularly where the patent does not specifically cover the asserted trade dress.

This decision is of importance as it reviewed the Supreme Court’s holding in TrafFix Devices, Inc. v. Marketing Displays, Inc., stating that the presence of a utility patent is strong evidence of functionality, thus defeating a trade dress claim.

McAirlaids filed suit in the Western District of Virginia against Kimberly-Clark for trade dress infringement and unfair competition after Kimberly-Clark started using a similar pattern on one of its products.

The Fourth Circuit reversed the district court’s decision granting summary judgment after it found that McAirlaids had presented sufficient evidence to create genuine factual question as to whether its selection of pattern was purely an aesthetic choice among other options the company had considered.

The Circuit Court held that the existence of a utility patent is only one of several factors that the district court should have considered in evaluating the functionality of the dot pattern. Unlike TrafFix, where the dual-spring mechanism at issue was not registered as a trade dress, in the present case the pinpoint dot pattern allegedly infringed was subject to trade dress federal registration, thus shifting the burden to defendant to show functionality by preponderance of evidence.  Another distinguishable element is that the utility patent held by McAirlaids does not mention the specific dot pattern as a protected feature.

This latest decision on the subject shows that the crossroads of trademarks and patents are as interesting as ever, and that many different factors may ultimately determine the fate of a trade dress.

Routine Patent Litigation Giving Rise to Antitrust Liability

On Aug. 6, in Tyco Healthcare Group LP v. Mut. Pharm. Co., Case No. 2013-1386, the Federal Circuit looked at whether antitrust liability can arise from routine patent litigation and suggested that a patent owner can face antitrust liability resulting from bringing patent infringement claims and administrative petitions.

In Tyco, the patent owner of a drug, Tyco Healthcare Group, filed a claim for patent infringement against a generic drug manufacturer, Mutual Pharmaceutical Co., after Mutual filed an application with the Food and Drug Administration (FDA) to manufacture and sell a generic version of Tyco’s drug.  In response, Mutual filed antitrust counterclaims against Tyco.

In 2009, the district court entered a judgment of non-infringement and the following day, Tyco filed a Citizen Petition with the FDA urging the FDA to change the criteria for evaluating the bioequivalence of the proposed generic product to ensure therapeutic equivalence of the generic drug to the brand name drug.  Ultimately, the FDA approved Mutual’s application to manufacture and sell the generic drug and denied Tyco’s Citizen Petition.

Mutual moved for summary judgment on its antitrust counterclaims against Tyco, arguing Tyco was not immune from liability.  The district court held Tyco was not liable for antitrust violations as alleged by Mutual, however, on appeal, the Federal Circuit vacated the district court’s ruling in part and remanded it for further consideration as to whether Tyco’s patent infringement claim and Citizen Petition were shams.

Ordinarily, a party is exempt from antitrust liability for bringing a lawsuit against a competitor under the Noerr-Pennington doctrine.  This doctrine is not limited to just lawsuits, but can also apply to administrative petitions.  There is an exception to immunity for sham litigation.  In determining whether litigation is a “sham,” a court will look at objective and subjective elements: (1) the litigation must be objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits; and (2) the litigation must be motivated by a desire to interfere directly with the business relationships of a competitor.

In its decision, the Federal Circuit concluded that Tyco may not be immune from antitrust liability because there are issues of factual dispute as to whether Tyco’s patent infringement claim was objectively baseless and whether the Citizen Petition was objectively baseless and intended to interfere with the FDA approving Mutual’s application to manufacture and sell the drug.

So what does this mean for patent enforcement?  There is concern that the Federal Circuit has inserted antitrust liability into patent litigation, which could result in antitrust penalties for routine patent enforcement.  Further, the case could have a possible chilling effect on patentees’ communications with administrative agencies, such as the filing of a Citizen Petition with the FDA.  However, because the Noerr-Pennington doctrine continues to live, patentees are still protected unless the party alleging antitrust violations can present facts to show the litigation activity was a sham.

Lawfully Taking Your Competitor’s Technology: Optimize the Design Around

When a party is sued for patent infringement, an alternative for avoiding infringement is to develop design around technology not covered by the subject patent.  Even if there is no lawsuit, often a company has competitors that make products or offer services that include attributes and features you would like to include in products and services.

As a general rule it is completely proper to take advantage of any aspect of a competitor’s device and include it in your device unless it is protected under the U.S. patent laws.  (Other countries also have patent laws that must be considered if manufacture or sales are made in those countries.)

In some cases there may be other intellectual property rights, such as trade secrets, copyright and trademark laws, that must be considered, but these circumstances are rare and easier to avoid than the patented features.

Non-Patented Features

Often the desired feature is NOT protected by patent, meaning you can add that feature to your device as long as you do not create a “look alike” device.  Non-patented features are public and available for anyone to use.  You may want to consult with patent counsel to help determine that this particular feature is not the subject of a pending patent application, which would cause an important interruption to this plan (see discussion below), but if the feature is a couple years old most likely there will be no pending or issued patent complications.

The next step in taking your competitor’s technology is to consider your device, which now includes the additional feature, and enhance it in some new, useful and non-obvious way.  It is best for this new feature to have some market appeal but now you have the basis for seeking a patent on your enhanced device with the additional feature.

Under this plan you can provide your customers a patented enhanced device.

Patented Features

If the competitor device is patented in whole or as it relates to a particularly desired feature, you must determine the date of the patent application directed to the protected feature knowing that patents last for 20 years from the earliest application in the patent family.

You should determine if the patent can be invalidated.  Securing an invalidity search and the advice of patent counsel will assist in this evaluation.  What you are looking for is a piece of prior art the examiner did not consider during his examination that is directed to the novel feature(s) in the application that were cited by the examiner as the basis for allowance of the application.  Invalidity searches are readily available in most technology-based countries.

Once new prior art is located, you must determine the most efficient method to challenge the patent: declaratory relief action for invalidity (assuming a reasonable apprehension), or a request for re-examination (the patent may be fixed in this process).  These invalidity activities can be time-consuming and expensive.

The alternative is to identify the oldest patent that covers the desired feature.  Analyze the structure of this technology and conceive an enhancement feature that employs the desired feature and offers an enhancement that avoids all patent coverage and has market desirability.  File an application for your enhancement of the old technology.

To find a new enhancement, dissect the device into its components and analyze each component to see how current technologies can be used to enhance the device.  Typical areas of attention include materials; computer control; display features; ease of use; ease of manufacture; report functions; inclusion of multiple dependent attributes; specific limitations to a desired attribute; and ascetic nonfunctional features.

Once you have sought patent protection on your enhanced version, identify a migration plan for further enhancements and seek sequential patent protection on these continuing developments.

When the competitor’s patent ultimately lapses you will have a family of patents on enhancements, thereby limiting the competitor from making his device with your new market-desirable enhancements.

In addition, you may be able to immediately make, use and sell your enhanced device outside the United States unless the competitor has patent protection in the other country.

This method, in a relatively short period of time, permits you to properly design around and take your competitor’s technology.

Does Your Business Need a Patent Audit?

A patent audit evaluates and reports on the status of your business’ technology protection program.  A patent audit outlines considerations relevant to your ability to secure, protect and enforce your patent rights and, if desired, provides an appraisal of the value of these rights.

To know if you need a patent audit, consider:

  • Does your business have a portfolio of patents and do you have the original patents?
  • Does your business have a migration plan for expanding its technology and do you manage the protection of the new technology?
  • Does your business use its patented technology out of the country and is this technology patented where it is used?
  • Does your business use patented technology of others and do you have copies of these authorizations?
  • Does your business permit others to use your patented technology and do you have copies of these authorizations?
  • Does your business rely upon employees or independent contractors to create improved technologies and do you have the agreements that cover these relationships?

Your answers to these questions will indicate if it is time to contact an IP audit specialist to ask about a patent audit.

Federal Circuit Weighs In on Step One of Two-Step Inter Partes Review Procedure

In St. Jude Medical, Cardiology Div. v. Volcano Corp., 749 F.3d 1373, 110 U.S.P.Q.2D (BNA) 1777 (Fed. Cir. Apr. 24, 2014), the Federal Circuit, almost predictably, declined to consider a denied petition to institute an inter partes review (IPR) filed by St. Jude Medical.  In rendering its decision, the Federal Circuit followed the language of 35 U.S.C. § 314(d), which states that “[t]he determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable.”

While Section 314(d) might have been the only reasoning needed to decide the case, the Federal Circuit included additional discussion regarding the two-step nature of IPRs: step one comprising the U.S. Patent and Trademark Office Director’s decision whether to institute the IPR; and step two comprising a decision under § 318(a) by the Patent and Trial Appeal Board regarding patentability after conducting the IPR proceeding (i.e., a final written decision).  See, e.g., Belkin Int’l, Inc. v. Kappos, 696 F.3d 1379, 104 U.S.P.Q.2D (BNA) 1348 (Fed. Cir. 2012). (It may be noteworthy that Belkin involved an inter partes re-examination, yet the Federal Circuit used this case as the basis for the two-step nature of IPR.)

Under 35 U.S.C. § 319, the Board’s decision under § 318(a) (i.e., after the Director’s decision and the IPR is in motion) is appealable.  It appears that the Federal Circuit included this discussion to highlight its view that the Director’s decision whether to institute an IPR is not considered to be a “final written decision” of the Board under § 318(a).  Moreover, to clear up any confusion, the court observed that 28 U.S.C. § 1295(a)(4)(A) (jurisdiction of the Federal Circuit after appeal from, inter alia, IPR) did not provide jurisdiction to review the Director’s decision.  Rather, § 1295(a)(4)(A), similar to 35 U.S.C. § 319, refers to final Board decisions under 35 U.S.C. § 318(a), according to the court.

The court was careful to point out that its decision followed the Director’s decision regarding a formality issue of a late IPR petition, but would likely apply to all decisions of the Director on whether to institute an IPR.

Interestingly, on the same day, the Federal Circuit also denied petitions for mandamus related to the Director’s decisions regarding IPR requests by two different parties – Dominion Dealer Solutions, and Procter & Gamble Co.  Dominion sought review of the Director’s decision not to institute several of its IPR requests.  See In re Dominion Dealer Solutions, LLC, 749 F.3d 1379, 110 U.S.P.Q.2D (BNA) 1780 (Fed. Cir. Apr. 24, 2014).  Conversely, Procter & Gamble, as patent owner, sought mandamus for review of the Director’s decision to institute an IPR request.  See In re Procter & Gamble Co., 749 F.3d 1376, 110 U.S.P.Q.2D (BNA) 1782 (Fed. Cir. Apr. 24, 2014).  In its denial of mandamus of these cases, the Federal Circuit cited similar reasoning as was set forth in the St. Jude Medical decision.  It is noteworthy that Dominion Dealer Solutions had concurrently sought review of the Director’s decision not to institute an IPR in the Eastern District of Virginia in addition to its mandamus petitions.  See Dominion Dealer Solutions, LLC v. Lee, 2014 U.S. Dist. LEXIS 54350 (E.D. Va. April 18, 2014).  This District Court action failed as well.

In light of the St. Jude Medical decision, it is important to ensure that IPR petitions are timely filed, complete and accurate, and meet § 314(a) subject matter threshold limitations (i.e., “a reasonable likelihood” of prevailing on at least one of the challenged claims).  A variety of guidance is available on threshold issues in the form of representative Board decisions to institute IPR proceedings, though detailed discussion of this guidance is beyond the scope of this article.  See, e.g., Microsoft Corp. v. Proxyconn, Inc., IPR2012-00026 Decision to Institute, Paper 17, Dec. 21, 2012; Garmin Int’l, Inc. v. Cuozzo Speed Techs LLC, IPR2012-00001 Decision to Institute, Paper 15, Jan. 9, 2013; Microstrategy, Inc. v. Zillow, Inc., IPR2013-00034 Decision to Institute, Paper 22, Apr. 22, 2013.

St. Jude Medical carries special significance for parties currently accused of infringing a patent in a District Court that are deciding whether to file an IPR request.  In particular, 35 U.S.C. § 315(b) prohibits IPR requests beyond one year after an infringement complaint, including counterclaims alleging infringement.  See St. Jude Medical, Cardiology Division, Inc. v. Volcano Corp., IPR2013-00258 (PTAB 2013); Accord Healthcare v. Eli Lilly and Co., IPR2013-00356 (PTAB 2013).  Passing beyond that one-year threshold is a basis for the Director denying the institution of an IPR; which decision is unappealable.

Accordingly, if you are approaching the § 315(b) deadline for filing an IPR petition, you should carefully craft your petition so that it meets the § 314(a) threshold, and it isn’t determined to be defective due to informalities.  In certain cases a defective petition can be fixed to address formalities, while the filing date of the original petition is accorded.  See, e.g., Macauto U.S.A. v. Baumeister & Ostler GmbH & Co., IPR2012-00004, Notice of Defective Petition, Paper 6, Sept. 21, 2012.  In other situations, where the defect may affect the substance of the petition, a new petition filing date may be accorded when the defect is corrected.  See Ariosa Diagnostics v. Isis Innovation Ltd., IPR2012-00022, Notice of Incomplete Petition, Paper 5, Sept. 27, 2012 (requiring correction of Exhibits).