TRADE DRESS IN THE NEWS AGAIN – THREE STRIPES TRUMPS TWO STRIPES

By Lawrence Hoffman

          Protecting distinctive features of the appearance of your product should be an important aspect of your IP program. A recent decision of the EU General Court sheds some interesting light on the border between acceptable and unacceptable similarity.

The German shoe company Adidas considers the three parallel stripes on the sides of its sports footwear, which it has used for about 60 years, as an important part of its marketing persona and vigorously seeks to protect this distinctive feature against knockoffs and similar designs. For example, Adidas recently sued Puma, one of its competitors, in the U.S. District Court in Portland, Oregon for marketing a shoe with four parallel stripes.

The Belgian company Shoe Branding Europe is also an Adidas competitor. It recently filed applications to obtain European trademark registrations for footwear bearing two parallel stripes. Not surprisingly, that didn’t sit well with Adidas, which filed oppositions to the two Shoe Branding applications.

The oppositions were based on Article 8(5) of European Union Intellectual Property Office (EUIPO) Regulation No. 207/2009, which forbids registration of marks that are identical or similar to an earlier trademark that has a reputation in the EU, and where unauthorized use of the mark sought to be registered would take unfair advantage of, or be detrimental to, the distinctive character or the reputation of the earlier trademark. The Opposition Division ruled in favor of Adidas and the EUIPO Board of Appeals sustained the Opposition Division decision. Shoe Branding appealed to the EU General Court, which affirmed the EUIPO Board in a decision issued on March 1, 2018.

The dispute between Adidas and Shoe Branding has a long history. An opposition by Adidas was originally filed in 2009 but was rejected by the Opposition Division (OD), which treated the Adidas mark as a “position mark” i.e., that its location was a major factor in its identity. It therefore rejected the opposition on the basis that the Shoe Branding mark was not similarly positioned. The Board of Appeals (BoA) affirmed the OD’s decision and Adidas appealed to the General Court.

In 2015 the General Court rendered a decision reversing that of the BoA, essentially criticizing the Board for giving insufficient weight to other indications of similarity. In its decision, the court held that the Adidas and Shoe Branding marks were legally similar, and that there was both likelihood of confusion and dilution of the distinctiveness of the Adidas mark. This decision was affirmed by the EU Court of Justice (CJEU) in 2016 and was essentially the basis for the decision on remand to the EUIPO sustaining Adidas’ opposition. This time, Shoe Branding appealed

Shoe Branding based its appeal on three grounds: (1) Adidas did not establish that its mark was well known in the EU, (2) that the EUIPO failed to consider if the use of the marks would take unfair advantage of or be detrimental to the distinctive character or the reputation of the Adidas mark, and (3) that Shoe Branding had “due cause”, i.e., the right to use its mark. All three of these theories were rejected.

As to the first ground, the Court ruled that Adidas had presented sufficient evidence that its mark, at least, has a significant reputation in Germany and in other EU member states. The Court referred to prior rulings, holding that it was sufficient that the reputation be in a substantial part of the EU territory, even if that reputation was only in a single member state.

As to the second ground, Shoe Branding presented four arguments. First, it argued that sportswear and sports footwear were specialized goods and, accordingly, consumers would be more discerning when making a purchase. Secondly, it argued that the BoA should have taken into account the differences between the marks, including the length and color of the stripes. As to both of these arguments, the Court held that the issues had already been decided in Adidas’ favor in the 2016 CJEU decision. In passing, however, the court noted that even if the issues had not already been decided, it considered the arguments to be unfounded.

Its third argument was that the BoA failed to take into account the extremely weak inherent distinctive character of the Adidas mark. As to this, the Court referred to findings by the earlier courts that the Adidas mark had acquired a distinctive character through use.

Finally, Shoe Branding argued that use of its mark would not take unfair advantage of, or be detrimental to, the distinctive character or reputation of the Adidas mark. As to this, the Court ruled that the high, long-held reputation of the Adidas mark, combined with the essential identity of the goods, strongly favored Adidas. The Court pointedly noted a 2007 marketing campaign by Shoe Branding, which used the slogan “two stripes are enough” as a concrete example of unfair advantage being taken by Shoe Branding.

Shoe Branding’s third ground for appeal, was rejected, again largely on the basis of the 2007 marketing campaign which the Court said demonstrated that use of the two-stripe mark had not always been in good faith.

The General Court and CJEU decisions send a favorable message to trade dress mark owners and a warning to competitors that knockoffs and attempts to trade on the goodwill associated with someone else’s mark are not looked upon favorably in the EU.

So, Adidas won another battle, but the war is not necessarily over.  Shoe Branding can still appeal the General Court decision to the CJEU. And, in view of the earlier CJEU decision, it is unlikely that a further appeal will be successful, or that the oppositions, if they are ultimately reconsidered, will go in Shoe Branding’s favor.

INTER PARTES REVIEW IS ALIVE AND WELL – SORT OF

By Lawrence Hoffman

          In a long time anticipated decision, dated 24 April 2018, the U.S. Supreme Court upheld the constitutionality of the inter partes review (IPR) process, a key provision of the 2011 America Invents Act. The IPR provided a mechanism for determining the validity of an issued patent relative to the prior art in the U.S. Patent Office as an alternative to a law suit. The proceedings were held before the so-called “Patent Trial and Appeal Board” made of technically knowledgeable people and subject to an appeal to the U.S. Court of Appeals for the Federal Circuit (CAFC) , also comprised of individuals knowledgeable on matters of patent law. It was a great idea in principle. It provided a much cheaper and often faster way to get rid of some patents that never should have been granted. One of the objectives was to even the playing field for startups and small companies beset by the dreaded “patent trolls”who bought up unused patents and baselessly asserted them against multiple small parties who couldn’t afford the cost of litigation as a way to extort small settlements. Regrettably, most observers consider that the procedural rules set up by the Patent Office ended up helping the techno-giants also under attack by the patent trolls more than the little guys trying to protect their legitimate patents.

The actual decision turned on whether a patent is public or a private right. The Court decided that a patent is a public right as to which Congress had the power to permit its validity to be determined by an administrative agency like the Patent Office. In contrast, the Constitution assigns determination of private rights to the courts and assures the right of trial by jury in such matters.  The CAFC and the Patent Office appear to be working to fix some of the problems with the IPR process, and it would have been unfortunate if that potentially useful process were not given a chance to succeed.

WAYMO v. UBER – HIGH DRAMA IN THE NORTHERN DISTRICT OF CALIFORNIA

By Lawrence Hoffman

Currently, the field of autonomous vehicles is populated by high-tech companies like Intel, several startups and by virtually all of the worldwide automobile manufacturers. While most of the companies are investing in research and development, there is credible evidence that at least one player in the field, Uber Technologies, decided to get into the business the old fashioned way, i.e., by stealing the technology from what is now the Waymo division of the Alphabet/Google empire. The technology at the center of this drama is LiDAR, or light detection and ranging, which is credited to Google, for it was the first to start development of this tech and later implemented it in the autonomous vehicle field in 2009.

Fast forward a few years and Waymo and Uber are in the heat of an intense legal battle.

Two recent disclosures were made in the Waymo v. Uber litigation that are likely to influence the future of the case, in which Waymo asserts claims of patent infringement, theft of trade secrets and the violation of several California state statutes. Reportedly, Waymo has indicated that it will demand damages at trial in the amount of $2.6 billion.

The Stroz Report

Waymo had been seeking disclosure of the Stroz Report, a document written by cyber security firm Stroz, Friedberg as it conducted due diligence in connection with Uber’s plan to acquire Otto, a startup founded by Anthony Levandowski, former head of Google’s autonomous vehicle development team. Levandowski allegedly stole 14,000 documents from Google prior to starting his own company, which he ultimately sold to Uber. Both Uber and Levandowski have done everything to prevent disclosure of this report, but ultimately, Uber was ordered to provide Waymo with a full copy of the Report and its exhibits.

The report revealed that Uber knew that Levandowski had taken proprietary information from Waymo and that he was told not to use it in his future work with Uber. In addition, it was discovered that Levandowski, while employed at Google, tried to convince other Waymo employees to join his start-up company, and he even met with Uber executives about forming a new company as early as July 2015. It appears that Levandowski began working with Uber’s self-driving arm just weeks after the Otto Companies were officially formed. The due diligence report also noted a finding of 50,000 work emails from Levandowski’s time at Google on his personal computer, including pictures on Levandowski’s phones showing the construction process of Waymo’s car, components/connections and parts, as well as drawings and diagrams, such as figures depicting radar technology. Communications between Levandowski, his co-founder Lior Ron and others that specifically discussed deleting texts and other information were also discovered. On Ron’s devices, the firm found that he searched “how to secretly delete files” on the day before he left Google.

The due diligence report also looked into any liabilities Uber was taking on, specifically referencing “pre-signing bad acts”. Levandowski and his co-founder Lior Ron would not agree to sell their company to Uber unless they were protected against any potential future lawsuits, including those that occurred as a result of any “pre-signing bad acts”.

While the Stroz Report is powerful circumstantial evidence, the judge made it clear that he did not regard this is a “smoking gun” that would conclusively prove that Uber had access to and used the information in its development program. Of course, it does not have to be; Waymo will win, if considering all the evidence, a reasonable jury can find in Waymo’s favor by a preponderance of the evidence.

A copy of the full report can be found here.

Waymo v. Uber Lawsuit Referred To Criminal Investigators

Early on, Judge Alsup, the judge in Waymo v. Uber, referred the case to the U.S. Attorney for the Northern District of California for a criminal investigation. The investigation is ongoing but it has already resulted in disclosure of some further damning evidence against Uber.

Late in November, the U.S. Attorney’s office sent Judge Alsup a letter from a lawyer representing Richard Jacobs, a former official in Uber’s security department. In April, 2017, Jacobs sent an e-mail to Uber in which he resigned, describing what he called “criminal and unethical activities in security,” referring to a secretive internal Uber unit whose job was to spy on competitors for the purpose of stealing trade secrets. Jacobs said the group used secret servers isolated from the rest of Uber’s computer systems, as well as software designed to permanently remove traces of e-mails from the group’s members so that the work of the group would not come to light in the Waymo litigation. The letter sent by the U.S. Attorney was a follow up in which Jacobs’ allegations were spelled out in detail. The letter specifically mentioned Waymo as one of Uber’s targets and it was seen by seven members of Uber’s board of directors, by the company CEO and at least by Uber’s general counsel and one of it’s assistant general counsels. Nevertheless, it was never disclosed to Waymo’s attorneys.

And even though Uber attempted to characterize Jacobs as an underperforming and disgruntled employee, it paid him $4.5 million to settle his dispute with the company, $1 million of which of which was allocated to rehiring Jacobs for a further year as a consultant. Additionally, Uber paid his lawyer $3 million, apparently only for his work related to the follow up letter. A total of $7.5 million to make an extortionist go away, without explaining Jacobs’ involvement in the underlying issues to Waymo?

Judge Alsup was incensed; an independent master was appointed to determine if the e-mail, the follow-up letter, and the details of the settlement should have been disclosed in response to outstanding Waymo discovery demands and concluded that at least the follow-up letter should have been shared. Needless to say, Uber is contesting this. As of the date of this report, Judge Aslup has not addressed the Special Master’s report, but it is likely that Waymo’s lawyers will get the letter, the e-mail and the settlement details as well.

Not surprisingly, the trial, which had been originally rescheduled for December 4, was changed again to February 5, 2018 to give Waymo time to digest and deal with the new information.

In addition, there is an unresolved issue concerning whether Waymo has properly preserved its state claim for unjust enrichment arising out of Uber’s acquisition of the Otto Companies. Judge Alsup has not yet ruled in this.

Judge Alsup is outspoken and does not care to tolerate evasive lawyering. He has been critical of the lawyers on both sides, and of Levandowski and his lawyers, but his anger has mostly been directed at Uber and its lawyers. The Judge has already said that the jury will be told of Uber’s evasions and stonewalling discovery.

The trial is finally under way and if the pre-trial drama is any indicator, it seems that it will be a soap opera of is own.

Will a loss here put Uber out of the autonomous vehicle race, or even worse, out of business? If Waymo wins at the trial, Uber will almost certainly be enjoined from using anything secret that Levandowski stole, but it isn’t likely to be stopped from buying cars using the technology of others. Even if Waymo wins, Uber will surely appeal and it may be years before the dust finally settles.

ENHANCED DAMAGES – WHO PAYS WHAT AND WHEN

By Lawrence Hoffman

General Background:

Jury trials in Civil cases exist almost nowhere outside the U.S. but they represent an essential part of U.S. litigation practice under the Seventh Amendment to the Constitution. A jury trial can be demanded by either party and most cases involving damages for personal injuries or allegedly predatory business practices are still tired to a jury. The conventional wisdom is that juries are more generous in awarding damages than judges who purportedly “have heard it all before”, so plaintiffs usually demand trial by jury even if the defendants don’t.

To put all of this in perspective, as long as the damages proven don’t arise from particularly outrageous conduct, damage awards must reflect fair compensation.

But for those of you are intellectual property owners and don’t spend a lot of time in U.S. courtrooms, your reaction to the above general discussion is probably something like “how does any of this affect me?” So that’s what we will talk about in the rest of this articleie, how it applies to patent litigation.

Statutes and Judicial Discretion in Awarding Damages:

Under § 284 of the U.S. Patent Act:

Upon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court.

When the damages are not found by a jury, the court shall assess them. In either event the court may increase the damages up to three times the amount found or assessed.

By way of contrast, outside the U.S., damage awards are determined by the trial judges. In some places, however, judges have the power to increase the amount of damage awards beyond the amount needed to provide reasonable compensation in cases of particularly nasty conduct. The emphasized last sentence in § 284 reproduced above specifically gives U.S. trial judges that power as a matter of discretion. However, that judicial discretion is not without limits as we will see further on.

The Nuts and Bolts of the Presentation of Damage Evidence:

At a trial, the parties present evidence, usually through expert testimony, to support an award based on the requirements of § 284. That normally includes evidence by the patent owner to show actual damages, and evidence to justify application of the emphasized last sentence. Defendants, typically present evidence to demonstrate non-infringement (as well as invalidity of the patent). In many instances, defendants also present evidence that they acted responsibly after learning of the patent in suit to avoid infringement or to show that they had a reasonable belief that they did not infringe.

In jury trials, the judge instructs the jury on how to apply § 284 including as to its option to increase damages beyond the proven actual damages as a penalty for egregious conduct. Courts generally describe such conduct as “willful infringement”. However, the trial judge still has the final say on damages awarded by a jury. The parties typically file post-trial motions seeking to increase or decrease the damages awarded by a jury and the judge can adjust awards that he or she thinks are too high or too low. If the parties don’t accept the proposed adjustment, the judge can order a new trial on damages.

If you go back and look at the wording of § 284, you will surely agree that it doesn’t give trial courts much guidance as to how their discretion is to be exercised.

Absent statutory guidance or recent Supreme Court precedent, that left it up to the Court of Appeals for the Federal Circuit (CAFC) to make the rules. In its 2007 decision in In re Seagate Technology, LLC., the CAFC established a two-part test for determining if enhanced damages were warranted. The “Seagate test” stated that a patent owner is required to show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions that its actions constituted infringement of a valid patent. Second, the patentee had to demonstrate, also by clear and convincing evidence, that the risk of infringement “was either known or so obvious that it should have been known to the accused infringer. In subsequent decisions, the CAFC clarified that a case would not fall under the first part of the test if the accused infringer “raise[s] a ‘substantial question’ as to the validity or noninfringement of the patent.” Also, that such a defense applies even if the defendant was unaware of it when he acted. Despite those limitations, the Seagate set a pretty high barrier, wouldn’t you agree?

Not surprisingly, much had been written about the pros and cons of the Seagate test, but it all became a historical footnote in 2016 when the Supreme Court decided Halo Electronics, Inc. v. Pulse Electronics, Inc. In its decision, the Court abrogated the first part of the Seagate test altogether, and made increased damages much easier to obtain. However, it did not provide any explicit guidance for district courts in their application of the liberalized test.

As a matter of historical interest, the first U.S. patent statute of 1793 provided automatic trebling of actual damages, but the law was changed in 1836 to give the court discretion to “render judgment for any sum above the amount found by [the] verdict . . . not exceeding three times the amount thereof, according to the circumstances of the case.” This was deemed to prevent unfairness to infringers who acted innocently or in good faith.

Subsequent Supreme Court decisions generally followed the philosophy reflected in this “fairness” approach. § 284 as it is now written became part of the 1952 codification of U.S. patent law.

When the Court had to decide if the Seagate test was consistent with § 284 in Halo, it unanimously said “no”.

In its opinion, the Court noted that increasing damages was clearly a matter of discretion for the trial court, but that such discretion is not unlimited. The Court observed that its decisions over the years established that increased damages are intended as a “punitive” or “vindictive” sanction for egregious infringement behavior; cases which it characterized as willful, wanton, malicious, bad-faith, deliberate, consciously wrongful, flagrant, or—indeed—characteristic of a pirate. It also noted that over the years, appellate courts had imposed limits such that increased damages were generally reserved for “egregious cases of culpable behavior”.

Acknowledging that the Seagate test “reflects, in many respects, a sound recognition that enhanced damages are generally appropriate under §284 only in egregious cases”, it nevertheless held that the test was “unduly rigid, and it impermissibly encumbered the statutory grant of discretion to district courts.”

The Court’s biggest problem with Seagate was the requirement for objective recklessness in every case. That, it said, excludes punishment many of the most culpable offenders, such as the “wanton and malicious pirate” who intentionally infringes another’s patent—with no doubts about its validity or any notion of a defense—for no purpose other than to steal the patentee’s business. The Court saw no reason that why an independent showing of objective recklessness was needed in such a case, as required under Seagate.

The Court was similarly critical of the Seagate requirement for clear and convincing evidence, finding nothing in § 284 that required such a high standard of proof, rather than the customary requirement for a preponderance of the evidence.

In the end, the Court held that under § 284, district courts’ discretion, is to be guided by principles that limit the award of enhanced damages to egregious cases of misconduct beyond typical infringement. It therefore vacated the CAFC decision and remanded the case “for proceedings consistent with this opinion”. Essentially, the Court threw out the first part of the Seagate test, but left the second part intact.

So where were we after Halo? In effect, the CAFC was sent back to the drawing boards. Courts could no longer require proof of objective recklessness (i.e., in which the infringer’s state of mind was irrelevant) but had to focus on subjective evidence in which the infringer’s state of mind was relevant. Nor could courts consider reasonable post-litigation defenses, regardless of the culpability at the time of the infringement.

Also, the CAFC now had to an devise an effective way to consider damage awards by the district courts that required only a preponderance of the evidence to support the court’s discretion and the scope of appellate review was to be limited to abuse of the trial judge’s discretion.

Halo certainly stirred things up, and the Blogoshpere has been alive with prognostications and advice. The district courts have been busy too, with about 100 cases reportedly having been decided, but there has not been much CAFC guidance at this point. While a clear set of rules has yet to emerge, some patterns are becoming evident. Oversimplifying a bit, it appears that the district courts are looking at pre-Seagate law for guidance.

One approach (by the U.S. District Court for the Northern District of California) is reflected in the Apple v. Samsung smartphone case involving an Apple patent on its slide-to-unlock iPhone feature. Here, the evidence showed that Samsung copied the feature in several of its products well before the issuance of the patent. An earlier ruling based on Seagate had found Samsung’s conduct to be willful, but the CAFC remanded the case to the district court to reconsider its earlier decision in view of the Supreme Court decision in Halo with specific regard to one of Samsung’s products. In an opinion dated 23 June 2017 (here), the court looked to a set of nine factors identified in the CAFC’s 1992 decision in Read Corp. v. Portec, Inc. These factors were (1) whether the infringer deliberately copied the ideas or design of another; (2) whether the infringer, when he knew of the other’s patent protection, investigated the scope of the patent and formed a good-faith belief that it was invalid or that it was not infringed; (3) the infringer’s behavior as a party to the litigation; (4) defendant’s size and financial condition; (5) closeness of the case; (6) duration of defendant’s misconduct; (7) remedial action by the defendant; (8) defendant’s motivation for harm, and (9) whether defendant attempted to conceal its misconduct.

The court observed that post-Halo, courts looked at the Read guidelines as useful guide posts, and not as fixed rule. In its opinion it proceeded to do exactly that.

In its evaluation of these factors, the court noted that they did not compel a finding of willfulness, and even if they did indicate willfulness, it was still within the discretion of the court whether to increase the damage award, and if so, by how much.

I won’t go into a detailed discussion of the court’s analysis of all the Read factors, but in the end, the court found that on balance, they together demonstrated willfulness. One of the things that seemed important to the court was that there were alternatives Samsung could easily have adopted after learning of the patent. However, these were regarded as inferior and were rejected by Samsung. Another factor pointing toward willfulness was failure of Samsung to demonstrate that it sought advice of counsel after learning of the patent or took any other action to investigate the validity of the patent. Nor did it present an invalidity defense at trial as to the particular patent and the accused product under consideration. This, the court said, weighed “slightly “in favor of willfulness.

However, Samsung did ultimately change its design, and the court regarded the circumstances as an indication of reasonable remedial action as addressed by the seventh Read factor.

Another issue addressed by the court was whether the infringer’s conduct after suit was filed could be considered in determining willfulness. Seagate arguably held otherwise, and particularly precluded a finding of willfulness if the patent owner did not seek a preliminary injunction. While some district courts followed this rule and some did not, after Halo, this was only another factor to be considered. And in any event, the court found that under Halo, post filing conduct could be a basis for a finding of willfulness.

Finally, the court found that Samsung’s decisions were essentially based on competitive considerations, and inferred from this the “intent to harm” Apple addressed by the eighth Read factor.

Balancing all of the factors according to the ninth factor, the court found that all-in-all, enhanced damages were warranted. However, Samsung’s remedial actions, the duration of the misconduct, the closeness of the case, and Samsung’s litigation behavior, although insufficient to preclude the award of enhanced damages, weighed in favor of a moderate award. Accordingly, the Court, in its discretion, increased the damages award by only 30% of the compensatory damages award, stating that this “is a sufficiently punitive sanction for Samsung’s conduct in this case”.

There are still other issues before the trial court and it is too early to tell if either party will pursue the increased damage award back to the CAFC. We will just have to wait and see.

The CAFC has not had much substantive to say about Halo at this point. As of this writing, the only case I found that contained anything meaningful is Mentor Graphics Corporation v. EVA-USA. The case is mostly about other issues, but the court did have to deal with an order of the trial judge preventing Mentor from introducing evidence as to willfulness. This was based on the fact that the evidence pertained to EVA’s conduct between the time it filed a declaratory judgment action and the time Mrnotr counterclaimed for infringement, and also on the ground that Mentor did not seek a preliminary injunction, which some court had required, purportedly on the basis of Seagate case.

In reversing the trial court, the CAFC held that the evidence pertained to conduct that took place before EVA was charged with infringement and was therefore admissible. On the issue of Mentor’s failure to seek a preliminary injunction, the court noted that there is “no rigid rule” that a patentee must seek a preliminary injunction in order to seek enhanced damages. The court cited Halo, pointing the observation of the Supreme Court that “[W]e eschew any rigid formula for awarding enhanced damages under § 284 . . .”.

So what will the CAFC do if Apple v. Samsung is appealed or in some other case in which the Read factors guided the trial court’s methodology? I know it’s risky to make predictions in unsettled areas of the law, but I suspect that the CAFC will not criticize the methodology of using the Read factors as guidelines.

Strategy after Halo:

All of us who write these kinds of articles caution our readers not to treat what we say as legal advice. That’s not to avoid poaching on other lawyers’ clients. What you should do, whether you own a patent you think is being infringed, or whether you are about to introduce a product in a competitive market is to recognize that you may end up in court, and that the outcome will depend on the facts as much as on the law.

I, for one, think the patent owner has the easier task. You just need to be aware of what the competition is doing and consider if it makes economic sense to license the competitor. (You may have to do so anyway if your patent is a standard essential patent). Your lawyer will hopefully know what conduct is likely to  support a claim of willfulness, and it will be his or her job to gather the facts, perhaps with input from you, for presentation at trial.

If you are introducing a new product, your job is going to be harder. For one thing, you should expect that your competitors or others will have patents with which you may have to deal. There is no requirement that you obtain an opinion of counsel on freedom to operate, but in my view, you are courting trouble if you don’t, especially if you consciously copy a feature of a competitor’s product and even more so if you are much larger than the competitor. Keeping track of competitors’ newly issued patents is also a good idea, if your budget permits. Getting an opinion of counsel won’t alone avoid willful infringement, but the district courts have consistently found that doing so provided persuasive evidence that the infringement was not willful.

A caution, however: you will be sharing confidential information with the attorney providing the opinion, and that will result in waiver of the attorney-client priviledge as to that information. To make sure that the waiver does not extend beyond the subject of the opinion, it would be a good idea to obtain the opinion from a firm separate from the trial lawyers.

If there is a reasonable likelihood a feature of your product infringes someone’s patent, try to design around it, preferably, as soon as you discover the problem. Do it before your product goes on the market, if at all possible. Who knows, perhaps the result will be an improvement! Get clearance from your attorney for the change. (Also emphasize a resulting improvement in your marketing materials.)

Keep good records to show the timeline of your product development progress, including notations as to when you learned about possible conflicting patents and how you dealt with the information. Lab notebooks for your development team are a must.

If you do have to go to trial, your attorney will present evidence seeking to invalidate the patent, and will argue for a claim construction that limits the claims in a way that your product does not infringe. That, however, is his or her job. For you, having a good record to show that you had reason to believe your conduct was reasonable, and that you did not treat the patent lightly, will, at the end of the day, be your best friend. You might still be found to infringe, but it will go a long way to protecting you from a finding of willfulness, and imposition of enhanced damages.

IP HAPPENINGS – OCTOBER 2017

By Lawrence Hoffman

The CAFC has been its usual busy self over the past month churning out its usual normal array of non-precedential decisions and summary affirmances (i.e., orders without opinions under Rule 36 of the Federal Rules of Appellate Procedure). Nevertheless, amid the dross, there are three decisions worth bringing to your attention.

Where You Can Sue for Patent Infringement

          For those readers not familiar with the meaning of the term “venue” in a legal context, it refers to the particular court in which a law suit can be brought. It is different from “jurisdiction” which relates to whether a particular class of courts has legal power to consider disputes related to a particular subject.

In the U.S., Congress has mandated several kinds of subject matter over which the federal (rather than state) courts have exclusive jurisdiction. However, just because federal courts have jurisdiction over certain subjects doesn’t mean you can bring a suit for cases related to that subject in any one of the federal courts. There are also statutes that govern in which federal court you can bring your cases. These are the venue statutes.

Federal courts have exclusive jurisdiction over patent infringement cases. However, that does not bring you can bring a suit for patent infringement in just any federal court you like. There is also a statute that governs in which federal court you can bring your case. The patent venue statute is § 1400(b) of Title 28 of the U.S. Code.

There is a general venue statute (§1391 of Title 28) that applies to federal courts broadly, i.e., where there is no specific venue statute like the one that applies to patents. § 1391 contains a very broad definition of where a federal court case can be brought. For our purposes, the important provision is that “except as otherwise provided by law and for all venue purposes, a corporation shall be deemed to reside, if a defendant, in any judicial district in which such defendant is subject to the court’s personal jurisdiction with respect to the civil action in question.”

• 1400(b) contains a much narrower definition, according to which suit can be brought only “in the district of which the defendant was resident, or in which the defendant both maintained a regular and established place of business” and committed an act of infringement.

For some years, the CAFC has held that the “for all venue purposes” clause of § 1391 took precedence over the “unless otherwise provided” clause. This has resulted in so-called “forum shopping” in which the go-to venue for patent infringement cases has become the U.S. District Court for the Eastern Disrict of Texas, where, for some reason, juries are particularly favorable to patent owners. In 2016, something like 44% of all patent litigation was brought in the Eastern District of Texas. In recent years, one judge, Rodney Gilstrap, alone, is handling about 25 percent of all patent cases pending in the U.S. Marshall, TX, where Judge Gilstrap sits, is patent troll heaven.

But not any more. To the surprise of few (I suspect), but to the disappointment of many, in May, 2017, the U.S. Supreme Court decided TC Heartland v. Kraft Foods Group (you can read the actual decision here). In it decision the Court corrected the CAFC’s error and clarified that § 1400(b) , with its narrower definition, exclusively governes venue in patent cases, and not the broad definition of § 1391. In essence, the Court held that the “except as otherwise provided” clause negated the “for all venue purposes” clause as applied to patent cases.

The narrowing of venue choices is obviously good news for accused infringers since a patent owner will lose both the benefit of Texas generosity and the possible home-town advantage of being able to sue in its own home district.

Predictably, the Heartland decision unleashed a flood of motions for change of venue along with a dramatic drop in new filings in the Eastern District of Texas (reportedly down to about 16 percent since the Heartland decision. But the result on the motions has been all over the map. A very cursory review suggests that more motions are being denied than granted. The reasons for granting or denying such motions have been varied, and many of the denials seem to be based on questionable legal reasoning. However, an analysis of these reasons is beyond the scope of this article and the law is so unsettled that generalities and predictions are probably useless.

The CAFC have anything to say on the subject until its September 17, 1017 decision in In re Cray. Here, the court had to address the reasoning of Judge Gilstrap on the question of whether Cray, admittedly not a resident of the Eastern district, nevertheless had a regularly established place of business there because one of its sales executives lived there, and worked from his home. His communication with customers was mainly by telephone and online. He did not store literature or other materials in his home, did not use it as a showroom and did not bring clients there. His territory did not include the Eastern District. Cray paid his expenses for travel etc., but did not defray any part of the cost of his home. Apparently, Cray did not care where he lived.

Despite all of this, Judge Gilstrap, who seems to like patent cases, denied Cray’s motion for change of venue based on his interpretation of a single 1985 CAFC decision (the Cordiss case). The issue has not been before the court since Cordiss was decided. Cray petitioned the CAFC for an order that Judge Gilstrap transfer the case, and the court granted Cray’s petition, based on what it described as district court’s misinterpretation of Cordiss, and consequently, as an abuse of discretion.

The Court rejected Judge Gilstrap’s reliance on Cordiss on the ground that the decision did not interpret § 1400(b), but was simply decided based on the specific facts of that case. The court then proceeded to consider what it means to have a regularly established place of business somewhere.

The court began by recognizing that e-mail, telecommuting, and the internet had drastically changed how companies did business, and that lower court decisions on post-Heartland motions all recognized the lack of clarity and consistency on this now important issue. It also recognized that Heartland required that the wording of § 1400(b) needed to be confronted directly, and in its ruling in Cray, it proceeded to do so.

In its analysis, the court looked at the history of the patent venue statute (which has not really changed much in substance since its original enactment in 1897). The court found three required conditions: (1) there must be a physical place in the district; (2) it must be a regular and established place of business; and (3) that it must be the place of the defendant.

It then considered the meaning of each of the words “place”, “regular”, and “established”, noting that the latter two are adjectives modifying “place”. It further noted that the phrase “of business,” indicated the nature and purpose of the “place,” and the preceding words, “the defendant,” indicated that it must be a  place that the defendant itself carry out its business activities.

To make a long story short, the court found that the home of the sales executive met none of the three requirements. Working from home did not make the home a place of business of Cray, and Cray did nothing to suggest that the home had anything to do with Cray. Nor did it require the sales executive to live where he did.

There are two additional issues of interest here. Cray wanted the case transferred to the Western District of Wisconsin, while the plaintiff (Raytheon) suggested instead the Western District of Texas. Either is legally acceptable since Cray admittedly has an office there (in Houston) which met the § 1400(b) requirements. Since Judge Gilstrap did not decide where the case should go if it was transferred, the court remanded it to him to decide that issue. As of 22 October, Judge Gilstrap has not taken any action.

The other issue relates mainly to foreign companies that have no corporate U.S. presence. Such companies have no regularly established place of business in any specific jurisdiction for which venue can be established. The Heartland Court expressly declined to address this issue, or to comment on how its 1972 decision in Brunette Machine Works Ltd. v Kockum Industries, Inc., might be affected by its decision in Heartland.

Brunette confirmed that § 1391(d) as it existed then allowed an alien to be sued in any district. Thus, in theory, a foreign corporation can still be sued in the Eastern District of Texas. The court in Cray had no reason to address this, so Brunette is presumably still the law.

Does that mean that a foreign company should set up a subsidiary in the some jurisdiction other than one that is especially patent friendly? Perhaps, but such a subsidiary will need to be carefully structured so the business of the parent company in the U.S. is actually done by the subsidiary.

The 1972 version of § 1391(d) no longer exists. It is now part of § 1931(c) which provides that an entity “with the capacity to . . . be sued under its common name shall be deemed to reside, if a defendant, in any judicial district in which such defendant is subject to the court’s personal jurisdiction with respect to the civil action in question”. Moreover § 1391(c)(3) contains the old § 1391(d) provision that “a defendant not resident in the United States may be sued in any judicial district”. If § 1400(b) is the exclusive venue statute for patent matters, does that effectively nullify § 1391(c)(3)? If so, where can a foreign defendant (with no regularly established place of business in the U.S. be sued? The issue is almost certainly going to reach the Supreme Court at some point. As an aside, if the Court were to find that there is no such place, which this observer considers unlikely, the patent owner can always sue a distributor or (heaven forbid), a customer/user located in a patent friendly jurisdiction.

On balance, it seems prudent, if you have a significant U.S. market, to consider establishing a carefully structured U.S. subsidiary or sister company in a jurisdiction that has a neutral history in patent cases, and to avoid having a place of business in someplace like the Eastern District of Texas.

Section 101 Forecast – Still Cloudy, But Possibly Clearing:

            In almost every post on patent eligibility under 35 U.S.C. 101, I have complained bitterly about the CAFC’s use of a “by analogy” approach in applying the Alice test. The court will say something like “the facts here are like those of our decision in case A rather than case B, so we will decide as we did in case A”. That works well in common law jurisdictions when the court looks at precedential law and applies it to the facts, but it’s a cop-out when the facts provide the precedent, especially when the law is in a state of flux.

I have also complained that the Alice test itself is hopelessly flawed and virtually impossible to apply in a consistent and jurisprudentially valid manner.

• 101 cases are admittedly hard to decide partly because the Alice test is hard to apply. If a claim is “directed to” an abstract idea (whatever that means), how can it also be directed to something else inventive? Conversely, if it is directed also to something inventive, how can it just be directed to an abstract idea.

I’ve also argued that much of the confusion could be cleared up if the test included a explicit requirement for a technological solution to a problem or to an improvement to some aspect of technology rather than just the use of conventional technology to address a known problem or even to implement some new objective. The EPC does it, and so does China, among others. It’s hard to see why the U.S. can’t also, especially since what we call technology today is what the drafters of the Constitution called the useful arts, as I have also argued elsewhere.

With some cautious optimism, I therefore report on two recent CAFC decisions that start with a statement of the law in a coherent way and then consider how the facts fit the law, rather than how the facts fit earlier sets of facts. You may or my not agree with the results, but I think you will agree that the approach taken by the court is much better than pulling numbered balls out of a lottery jar.

Secured Mail Solutions LLC v. Universal Wilde, Inc., involved seven patents directed to methods whereby a sender affixes an identifier on the outer surface of a mail object (e.g. envelope or package) before the mail object is sent which identifier is then used by the recipient for various purposes. Reproduced below is a representative claim of one the patents:

A method of verifying mail identification data, comprising:

affixing mail identification data to at least one mail object,

said mail identification data comprising a single set of encoded data that includes at least a unique identifier, sender data, recipient data and shipping method data, wherein said unique identifier consists of a numeric value assigned by a sender of said at least one mail object;

storing at least a verifying portion of said mail identification data;

receiving by a computer at least an authenticating portion of said mail identification data from at least one reception device via a network, wherein said authenticating portion of said mail identification data comprises at least said sender data and said shipping method data; and

providing by said computer mail verification data via said network when said authenticating portion of said mail identification data corresponds with said verifying portion of said mail identification data.

The defendant moved to dismiss on the ground that the claims of all seven patents were directed to ineligible subject matter under 35 U.S.C. 101. The district court agreed, and granted the motion, holding that “the asserted claims, viewed individually or in combination, do not meaningfully limit the abstract idea of communicating information about a mailpiece by use of marking.”

The plaintiff appealed but the CAFC affirmed the decision of the district court. In doing so, it provided a helpfully clear explanation of its thought process in applying the two steps of the Alice test. In the court’s words:

Under Alice step one we consider the claims in their entirety to ascertain. . .whether the claims focus on a specific means or method[,. . .] or are instead directed to a result or effect that itself is the abstract idea and merely invokes generic processes and machinery. . .

In step two, we consider the elements of the claims to determine whether they transform the nature of the claim into a patent-eligible application of the abstract idea. . .  This is the search for an inventive concept, which is something sufficient to ensure that the claim amounts to significantly more than the abstract idea itself. . . Merely reciting the use of a generic computer or adding the words “apply it with a computer” cannot convert a patent-ineligible abstract idea into a patent-eligible invention.

(Internal citations and quotes omitted.)

In its application of step one, the court cautioned against describing the claims at too high level of abstraction and un-tethered from the language of the claims since that would all but ensure that the exceptions to § 101 swallow the rule. While it observed that the district court’s description of the claims was indeed at too high a level of abstraction, it nevertheless agreed that the claims did not satisfy step one of the Alice test. Citing its earlier decision in Enfish, LLC v. Microsoft Corp., the court considered if the claims the claims “focused on an improvement to computer functionality itself, not on economic or other tasks for which a computer is used in its ordinary capacity”. In doing so, it found that the claims in question here were not directed to an improvement in computer functionality, e.g., a new barcode format, or an improved method of generating or scanning barcodes. With respect to the representative claim reproduced above, the court noted the absence of specific details of equipment for generating and processing the bar code or specifics as to how encoding of various data onto a mail object is to be performed.

In short, the court found that the claims focused on an idea itself, and not on how the idea should be implemented, and were therefore directed to an abstract idea. That, to me, seems to be how the Alice Court is likely to have meant the phrase “directed to” to be interpreted.

Turning then to step two, the court agreed that there was no additional inventive concept in any of the claims. In doing so, it explicitly highlighted a problem with the Alice test, namely the inherent lack of a clear distinction between the analysis required at steps one and two. The court held that there was no inventive concept because the patents were “non-specific and lack technical detail. Rather than citing a specific way to solve a specific problem . . . the asserted claims cite well known and conventional ways to allow generic communication between a sender and recipient using generic computer technology”. That is essentially why it found that the claims were directed to an abstract idea under step one of the test, almost making one of the steps superfluous.

So are the skies really clearing? The Alice test is still fundamentally flawed and always will be as long as the two steps are evaluated based on the same factual considerations. The only improvement seems to be an emphasis by the CAFC on the law followed by an application to the facts. Until the focus shifts to a single test that looks only at whether new technology is being used to solve a problem, or if technology itself is being improved, I do not believe there be a bottom to the Alice rabbit hole.

There are mixed signs that this may happen even without congressional intervention. In Smart Systems Innovations, LLC v. Chicago Transit Authority, a decision handed down two days after the decision in Smart Mail, a finding of ineligibility was affirmed over a strong and thoughtful dissent by Judge Linn that clearly and eloquently expresses the things wrong with the Alice test. If you have the time and inclination, I strongly urge that you read it.

On the negative side, the Supreme Court has recently rejected several petitions requesting review of CAFC decisions on eligibility, indicating that it sees little purpose in revisiting the issue.

So unless Congress acts, or the CAFC and the Supreme Court get religion, is there anything you, the inventor (or your employer) can do to improve the chance that your computer related invention will be patent eligible? I think the answer lies, unfortunately, in the nature of the invention. Basically, I think you need to write your specification and claims so an Examiner or a court never even gets to part two of the Alice test.

If the invention uses conventional technology even to solve a new problem, the road will be quite bumpy and may end at cliff. So your best chance of success will be improve existing technology to solve the problem. If the invention relates to an improvement in how computers function, even to solve an old problem, that improvement should be even in your base claims, of course, in the broadest terms consistent with the prior art, but in there, nevertheless. Examiners being who they are, you need to do everything possible to avoid provoking a § 101 rejection so that it does not poison your claims that are clearly eligible along with broader ones that may not be.

If you are interested in a detailed study of eligibility in the post-Alice world in  a formal law review format, you might want to read a recent publication entitled Patent Eligible Subject Matter: Report On Views And Recommendations From The Public, published by the U.S. Patent and Trademark Office in July 2017. You can read it here.

Ask a Computer if Your Invention is Patent Eligible – Not Quite Yet, I Think:

A forthcoming paper to be published in the University of Illinois Journal of Law, Technology, and Policy next spring entitled Mechanizing Alice: Automating the Subject Matter Eligibility Test of Alice v. CLS Bank by Beg Dugan has been attracting some attention in the IP blogosphere. A pre-publication version is available here.

The article describes a project to determine if machine learning can be used as a reliable prediction mechanism for patent eligibility under the Alice test. Unquestionably something like that could be enormously useful: attorneys could use it to evaluate inventions and claims of varying scope to identify eligibility problems and to use such information to guide further “inventive” work by their clients; litigators could use if to help plan strategy; and maybe, even Examiners could find it useful. Needless to say, accurate predictions could avoid useless expenditures in hopeless and marginal cases.

The article is well written in my opinion and fully documents the methodology employed. Nevertheless, I have some reservations. For one thing, it is based on patent examination, i.e., all the base data comes from Office Actions. Second, CAFC decisions used for validation are based on the same data.

Further, the machine training process seems to be based on occurrence in claims and Office Actions of specific words. Unless I missed something in my reading, there is no emphasis on phrases, i.e., context. Yes, I know that would be difficult, But Google’s search algorithm does it so it’s not impossible. I am concerned about this because the Alice test, and the way it has been applied by the courts is intimately correlated with context. In short, for any and all the above reasons, I don’t think computerized prediction of eligibility is impossible, but I don’t think it is ready for prime time at this point.

This is particularly true because the state of the law is still unsettled, and several legislative proposals are extant to undo the Alice test altogether. I have even seen a suggestion that introduction of legislation is imminent.

Perhaps my biggest concern (as you might suspect from my criticism stated above) is the lack of clear correlation with the constitutional principle of promotion of the useful arts and its relation to what we now call technology. That is where context becomes critical.

That having been said, the result of the massive effort described in the Dugan article might be fun to play with. You can do so here.

We are proudly ranked Tier 1 in patent filing and prosecution and recognized as a “leading prosecution firm” in the 2017 IP STARS Handbook, with specific reference to the prosecution team led by Gal Ehrlich that includes “specialists with diverse technical backgrounds”. Ehrlich & Fenster operates under the Ehrlich Group, alongside law firm Ehrlich, Neubauer & Melzer, where Yehuda Neubauer serves as the head of IP litigation.
Recognized as “notable practitioners” are “rising star” Roy Melzer, Hadassa Waterman, and Michal Hirsch Birnbaum. [MIP IP STARS, Global edition 2017]

PLANT PATENTS IN EUROPE – SOME PRACTICAL APPROACHES TO A RESISTANT EPO
By Lawrence Hoffman

In a recent article posted on our website in July 2017 (here), we reviewed a recent change in EPO examination practice regarding plant patent applications that essentially eliminates patent protection for plants and plant parts produced by essentially biological processes in European patents. The article also noted parallel laws in some EU countries. Here, we present a followup in which we discuss the state of the law in selected European countries that still permit patents for such plants and plant parts, and offers a strategic plan for achieving optimum protection.
Where We Are Today:
Briefly summarizing, in 2015, the Enlarged Board of Appeals of the EPO ruled that plants and plant parts are patent eligible even if they are produced by essentially biological processes which are not themselves patent eligible. The opponents took up arms, and in November 2016, the European Commission (the EU administrative body) issued a Notice in which it interpreted the EU Biotech Directive to bar such patents. The EPO is not governed by EU law but has incorporated the Biotech Directive into its Rules of Practice.
Based on the Commission’s interpretation, the EPO President suspended consideration of applications and oppositions involving claims directed to such plants and plant products. Further, Austria, Germany, the Netherlands and France have amended their national patent laws to prohibit patents covering plants and animals derived from “essentially biological” breeding, effectively nullifying the 2015 Enlarged Board decision for European patents validated in those countries. It has been suggested that the Commission interpretation was supported also by Belgium, the Czech Republic, Denmark, Greece, Norway, Poland, Portugal, Romania, Spain and Switzerland. It should not be surprising if similar prohibitions are added to the laws of these countries as well.
The European Patent Compact (EPC) as interpreted by the Enlarged Board and not EU law governs practice in the EPO. Despite this, in June 2017, the EPO Administrative Council adopted a new Rule 28(2), effective 1 July 2017, which states that plants or animals exclusively obtained by means of an essentially biological process are not patent eligible. Also, the 2016 suspension of proceedings has been terminated.

As a result of these actions, the EPO has placed itself in direct conflict with the Enlarged Board’s interpretation of the law (i.e., Art. 53(b) of the EPC) which governs its practice. The opponents of plant patents appear to have won a battle in a longstanding war, but the war is far from over. Given the 2015 Enlarged Board decision, which was not ambiguous in any way, it would be somewhat surprising if the Board reverses its position when question is presented to it again, as it almost certainly will be. Thus the long term validity of current EPO practice is problematic, at best.

Not the least of the uncertainties relates to the meaning of the word “exclusively” in Rule 28(2). There is no guidance either in the Biotech Directive, in the EPC, in the EPO Rules or in any Board decisions that provide a definitive answer.
Two plausible meanings are (a) plants produced by processes that combine biological and non-biological features are not excluded, or (b) plants that can be produced by biological processes and alternatively by non-biological processes are not excluded. There are plausible arguments either way, but the question does not yet appear to have been addressed by the EPO.
Another uncertainty relates to products and processes that are derivative of excluded products. For example, would products derived from processing excluded products also be excluded? Similarly, would processes which use excluded products as starting materials be excluded? Again, there has been no interpretation from the EPO, but to this observer, it would be surprising if such products and processes were regarded as ineligible.
Be all that as it may, inventors and practitioners need to deal with current EPO practice. Therefore unless something changes, it will be necessary to present claims in a European application that don’t violate Rule 28(2) or to bypass the EPO entirely. Below, we will offer some suggestions as to how these approaches might be implemented.
Bypassing the EPO Or Complying with Rule 28(2):

The way things stand now, despite the cost effectiveness and convenience of the European patent system, you are not going to get a European patent on a plant or plant part if the method of producing it is not itself patent eligible. Therefore, there appear to be only three options: (a) direct filing in selected countries, relying on the Paris Convention for priority, (b) filing a PCT application (again relying on the Paris Convention for priority), followed by National Phase filings in selected countries, or (c) filing an EPO application, either directly or via the PCT containing claims that comply with Rule 28(2).
Regarding options (a) and (b), if your interest is in only at most three countries, the first option will be less expensive, but you will lose the extended filing window (30 or 31 months from the priority date) and other benefits afforded by the PCT.
There is, however, a problem with the PCT option. National phase filings based on a PCT application are not permitted under national laws in Belgium, Cyprus, France, Greece, Ireland, Italy, Lithuania, Latvia, Monaco, Malta, and the Netherlands, and Slovenia. Direct Paris Convention filings are therefore the only option if the European patent system is to be bypassed in these countries. Moreover, a direct filing in France and the Netherlands will essentially have to comply with the terms of Rule 28(2).

Irrespective of the choice between options (a) and (b), are there eligibility issues even under the national laws in countries other than Austria, Germany, the Netherlands and France? Let’s look at the laws of some countries you are likely to consider.
The UK:
The Intellectual Property Office (IPO) Guidelines for Examination of Biotechnological Inventions, §§ 100-106 address the patent eligibility of plant-related inventions. § 100 confirms that “[E]ssentially biological processes for the production of plants and animals, which are not micro-biological or other technical processes are excluded” from patent eligibility. However, these sections refer to the Broccoli /Tomato I and II Enlarged Board decisions, and § 106 points out that:
Whilst the aforementioned EPO decisions are not binding on the Intellectual Property Office, the Office will use the guidance provided in these decisions when interpreting claims which relate to essentially biological processes.

There has been no indication that the IPO will adopt EPO Rule 28(2) or if the law will change in this respect post Brexit, including in relation to the Unified Patent System. For the present, it is reasonable to assume that plants and plant parts will not be excluded from patent eligibility because they are produced exclusively by essentially biological processes (whatever that is ultimately construed to mean).
Plant varieties are not patentable subject matter. but claims directed to features of multiple varieties are not excluded. Also, plant varieties are subject to a separate statute covering breeders’ rights that generally parallels the protection available under EU law.
Italy:
Italy has adopted the UPOV, but in contrast to most of Europe, plant varieties are covered under patent law. Nevertheless, under Art. 45(4) (b) of the law, patents may not be granted for:
. . . plant varieties or animal species and essentially biological processes for the production of animals or plants, including new plant varieties with respect to which the invention consists exclusively of the genetic modification of other plant varieties, even if that modification is the result of a genetic engineering process.
A “microbiological process is “any process which uses microbiological material, that entails an intervention on microbiological material or that produces a microbiological material”. An essentially biological process is one which “consists fully of natural phenomena such as crossbreeding or selection”. There is no indication that Italy has taken steps to incorporate EPO Rule 28(2) into its law at the present time.

Spain:
Although Spain has not adopted a prohibition corresponding to Rule 28(2) as the present time, Spanish law does prohibit patents for essentially biological processes intended to obtain plants. It also favored adoption of new EPO Rule 28(2) as noted above. For the present, there is no prohibition against patents for plants produced by essentially biological processes.
Turkey:
Patents are not available in Turkey for pl ant varieties or for essentially biological processes intended to obtain plant varieties, but the law does not appear to prohibit patents for plants produced by essentially biological processes. Breeders’ rights are separately protected.

Hedging Your Bets:
While only the EPO and a few countries explicitly prohibit patenting of plants produced by essentially biological processes, this is not a settled area of law. For the EPO, the matter will almost certainly be reconsidered by the Enlarged Board of Appeals sooner or later, and other countries may enact prohibitions consistent with Rule 28(2). Other uncertainties include the effect of Brexit on UK law and on the unitary patent system necessary to accommodate post-Brexit participation by the UK.
The optimal strategy for obtaining maximum protection would therefore seem to be a multilateral approach. With that in mind, the following suggestions are offered:
• If there are only three or four target countries, file direct Paris Convention applications.
• If there are more than four target countries, file under the PCT and follow up with national phase applications where permitted. For any target countries which do not allow direct national phase filing, utilize both the Paris Convention and the PCT.
• Only if many target countries do not permit direct PCT filings, consider EPO filing as an alternative to the PCT where the nature of the invention permits compliance with Rule 28(2) in combination with the Paris Convention based on cost comparison.
• Unless expressly forbidden by law in a target country, file claims directed to the plant and plant parts, irrespective of the method by which it is created. Where appropriate, use product by process claims.
• Even in countries that have not enacted prohibitions corresponding to Rule 28(2), claims should be presented that are Rule 28(2) compliant where the nature of the invention permits doing so to guard against future changes in national laws.
• If an EP application is filed, comply with Rule 28(2) if possible according to the nature of the invention or don’t file an EP application. If you are prepared to spend the time and money for an appeal on an important invention, file prohibited claims along with compliant claims.
• If you file a PCT application, include both compliant and non-compliant claims to preserve flexibility.
• Don’t forget to secure breeders’ rights protection for plant varieties where applicable.

What Kinds of Claims Might Be Compliant With Rule 28(2)?
As a general matter, an attempt should be made to identify the broadest reasonable aspects of an invention, and to describe these in the application in reasonable detail. At the same time, the likely universe of infringers should be identified, and claims presented which can be asserted against members of that universe against whom suit might be practical.
In the case of plant inventions, possible product aspects of an invention might include unique genetic features, processed products derived from the plant or plant parts such as oils, cakes, meal (e.g. flour), etc. that take advantage of useful properties of the plants and plant parts themselves. Possible method aspects might include methods of processing the plant or plant parts to produce the derivative products and/or the unique genetic features, etc. Consideration should be given to presenting claims directed to all such useful aspects of the invention.
Needless to say, claims to products that are not produced exclusively by essentially biological processes (whatever that is ultimately construed to mean), and claims to such hybrid processes should also be presented.

Conclusion:
EPO Rule 28(2) and corresponding parallel national laws are clearly a setback in the quest for adequate protection of IP rights for plant related inventions, but in no sense are they fatal blows. Good protection can still be achieved in most cases and in most European countries based on deep understanding of possible aspects of the invention, and reliance on the advice of experienced counsel.

Israel is recognized across the globe as an innovative high-tech center, drawing increased attention to the local intellectual property law framework.
There are many advantages to the Israeli system that compliment and attract a growing number of foreign and multinational investors. Adv. Roy Melzer from our office discusses some of them in an article for Bloomberg BNA, where he explains some characteristics of the Israeli patent system that benefit foreign filers.
Roy Melzer is head of the Software and Information Systems Department at Ehrlich, Neubauer & Melzer law firm, operating under the Ehrlich Group and alongside patent firm Ehrich & Fenster.
For the full article, click here

IP HAPPENINGS – SEPTEMBER 2017

By Lawrence Hoffman

THE CAFC NEVER SLEEPS

While much of the IP world has been enjoying the end of the summer, or catching up on what accumulated while they enjoyed the beginning of the summer, the CAFC has been quite busy. Following are some notes on cases I found to be interesting.

Obviousness 101:

Most practitioners will agree that the methodology and substance of an obviousness determination under U.S. patent law is defined by two U.S. Supreme Court decisions: Graham v. John Deere Co. in 1966 and KSR Int’l Co. v. Teleflex Inc. in 2007. There have been some cases in the interim, but Graham defined the methodology of the inquiry and KSR identified, at least generally, the substantive considerations that might make a combination of prior art teachings obvious or unobvious to a mythical person having ordinary skill in the art.

According to Graham, there must be determined (1) the scope and content of the prior art, (2) the differences between the prior art and the claims at issue, and (3) the level of ordinary skill in the pertinent art. Graham further pointed out that certain objective (secondary) indicia of unobviousness also needed to be considered, for example, commercial success tied to novel features in the claimed patent or application, long-felt but unmet need, initial skepticism of those in the field, copying by competitors, and others.

Later appellate decisions have clarified that the first three determinations do not need to be expressed explicitly, but that it must be apparent that they all were taken into account.

Graham remained the legal standard for both methodology and substance until 2007, but it was often benignly neglected, especially as to the fourth Graham factor. Instead, examiners and courts followed the so-called “teaching, suggestion or motivation” (TSM) test articulated by the CAFC as the sole basis for a finding of obviousness and thus focused mainly on the content of the prior art with the level of skill in the art informed essentially by the TSM test.

KSR reaffirmed Graham and while it did not overrule the TSM test, it relegated it to one of several possible indicia of obviousness. The KSR Court identified predictability of results and expectations of success, combination of familiar elements according to known methods with no unexpected result, among others as indications of obviousness. An analysis of the law =ost-KSR is beyond the scope of this note, but as a practical matter, what was a reasonably objective process under the TSM test has now become, in practice, a largely subjective exercise.

The standard form paragraph U.S. examiners use to introduce obviousness rejections explicitly quotes the Graham factors, but in practice, both the PTO and the CAFC still place great emphasis on finding a motivation for modifying or combining  items of prior art. Often special emphasis is placed on the KSR-articulated factor of predictability of success. Graham, however, still purports to guide the inquiry.

This may be seen quite clearly in the recent decision in Vicor Corp. v. Synqor, Inc., a technically complex case with a messy and complex procedural history arising out of several inter partes reexaminations under pre-AIA law. There were inconsistent decisions by the Patent Trial and Appeal Board on virtually identical claims, and other nastiness that we won’t go into. However, in respect to one group of claims, (“rejections III and IV”), the examiner found the claims to be patentable solely on the basis of objective evidence under the fourth Graham factor, and clearly gave no consideration to the other three factors. Nevertheless, the PTAB affirmed examiner’s methodology and decision.

In one of the related reexaminations, the board and the Examiner followed the Graham methodology, and it is not apparent why they failed to do so in this instance.

The CAFC did not treat Graham so cavalierly. While it did affirm the Board’s allowance of certain claims, with respect to rejections III and IV, the court ruled:

The Board’s decision on these proposed rejections was erroneous and must be vacated for two reasons. First, the Board improperly analyzed Vicor’s obviousness arguments under only one of the four Graham factors when it looked exclusively at the objective evidence, without considering the remaining factors and the relative strength of the factors.

The second reason is not important for our purposes here. What is important is that the court made it completely clear that Graham is still (again) alive and well. Hopefully, examiners, the PTAB, and the district courts will get the message.

How is an Obviousness Determination is Supposed to Go in the Post-KSR World?

The recent decision in In Re: Stepan Company gives some practical guidance, if not any profound insight into the law. The case arose on an appeal from a final rejection sustained by the Patent Trial and Appeal Board. The invention related to an improved herbicide composition that adhered better to the leaves of the intended victim allowing better absorption.

The base claim, which I won’t repeat verbatim because it will likely be understood only by an organic chemist and will distract everyone else, recited the combination of water, a glyphosate salt in solution in the water, and a surfactant system, with the combination having a so-called “cloud point” of at least 70° C.

Pallas (the principal reference) disclosed herbicides having similar components but specified a cloud point of “at least 50ºC and ideally 60ºC”. The examiner rejected most of the claims as obvious over Pallas, and two additional ones as obvious over Pallas in view of a secondary reference. In support of her final rejection, the examiner stated that, for the claimed ranges of the surfactants:

it is routine optimization to select and adjust the surfactants to this range since Pallas teaches the surfactant component comprises any combination of surfactants,

and that, while:

Pallas does not teach a cloud point above 70ºC . . . achieving this cloud point would  be a matter of optimizing the formulation because Pallas teaches the ideal cloud point should be above 60ºC.

The Board adopted the examiner’s reasoning. It further determined that  Stepan failed to rebut the examiner’s prima facie case of obviousness and affirmed the examiner’s rejections.

The CAFC held  that “. . . the Board failed to adequately articulate its reasoning, erroneously rejected relevant evidence of nonobviousness, and improperly shifted to Stepan the burden of proving patentability and accordingly vacated the Board’s decision and remanded.

The court began by noting that “[A]n obviousness determination requires finding both that a skilled artisan would have been motivated to combine the teachings of the prior art . . . and that the skilled artisan would have had a reasonable expectation of success in doing so” (Internal citations and quotes omitted).

On the first point, the court criticized the Board’s decision for failing to explain why it would have been “routine optimization” to select and adjust the claimed surfactants and achieve a cloud point above at least 70ºC, saying:

The agency tribunal must make findings of relevant facts, and present its reasoning in sufficient detail that the court may conduct meaningful review of the agency action. Stating that a person of ordinary skill in the art would have arrived at the claimed invention through routine optimization falls short of this standard. Missing from the Board’s analysis is an explanation as to why it would have been routine optimization to arrive at the claimed invention.

In its brief, the PTO presented arguments to support the Board’s finding; However, the court, while observing that “this evidence could be relevant to whether there would have been a motivation to combine the claimed surfactants with a reasonable expectation of achieving a cloud point above at least 70ºC” refused to consider it because it was not part of the Board’s findings. Instead, it directed the Board to consider the proffered arguments on remand.

The court also took issue with the Board’s failure to  articulate why a person of ordinary skill in the art would have had a reasonable expectation of success to formulate the claimed surfactant system with a cloud point above at least 70ºC. To have a reasonable expectation of success, the court said, “. . . one must be motivated to do more than merely to vary all parameters or try each of numerous possible choices until one possibly arrived at a successful result”. The court rejected Pallas’ teachings that “any combination” of surfactants may be used and that a cloud point above 60ºC is desired” as an insufficient explanation as to “. . . why a skilled artisan would have selected the claimed combination of surfactants and reasonably expected a cloud point above at least 70ºC.”

Further, the  court criticized the Board’s erroneous rejection of what it termed evidence relevant to whether a skilled artisan would have had a reasonable expectation of success to achieve a cloud point above at least 70ºC with the claimed surfactant systems. The court declined to consider “in the first instance what weight the evidence ought to be afforded in the Board’s obviousness analysis”, but instructed the Board to do on remand.

Finally, the court held that the Board erred when it shifted the burden of proving patentability to Stepan. The PTO bears the burden of establishing a prima facie case of obviousness. “Only if this burden is met does the burden of coming forward with rebuttal argument or evidence shift to the applicant.” The Board’s reliance on case law involving a range within the prior art did not apply here since the Board’s opinion did not establish a prima facie case obviousness because it failed to adequately articulate its reasoning. In addition, the claims were not directed to a range within or overlapping with the range taught by Pallas.

In the dissent, Judge Lourie essentially argued that the majority improperly treated the cloud point recitation as a component of the composition (as which he is correct) when it should have been treated as property, i.e., as a functional limitation. And while he acknowledged that Palas disclosure non-specific in relation to the claims at issue, he noted that the claims themselves were comparably broad. We will see in the next note how the concepts of inherency and obviousness can sometimes overlap in a complex way.

Relying on instinct, and certainly not any significant knowledge of chemistry, it seems to me that Board is likely to find a way to create a sustainable obviousness record based on the court’s observations. In any event, it will be interesting to follow this matter on remand.

More on Functional Claim Language – Obvious or Inherent?

Sometimes, an obviousness determination is a straightforward search for a feature missing from a principal reference or a question of modifying a feature of the principal reference to conform to the claim under examination. The Examiner or other challenger finds the missing feature in another reference and comes up with a purported justification (motivation) for adding the feature to the principal reference. Sometimes it’s a purported justification to modify the ill-fitting feature. Ultimately, the Patent Trial and Appeal Board (PTAB) or a court has to decide if the mythical person of ordinary skill in the art would agree with the reasoning of the challenger.

It can get tricky, though, when the claim contains functional language and the claimed function is not described in the art cited by the challenger. In such cases, it often must be determined if the function is “inherent” even though not described. The recent CAFC decision in Southwire Co. v. Cerro Wire LLC is an interesting demonstration of how tricky it can get.

The question of inherency comes up most often when the issue is anticipation. Here, the well-established rule is that the claimed function must necessarily, i.e., always be present. But the question comes up sometimes when the context is obviousness. In such cases, the CAFC has cautioned that “the use of inherency . . . must be carefully circumscribed because ‘[t]hat which may be inherent is not necessarily known’ and that which is unknown cannot be obvious. Needless to say, the function must still necessarily be present.

The Southwire case arose in the context of an inter partes reexamination, an admistrative proceeding that predated the inter partes review created by the Ameroca invents Act. The Southwire, patetn claims were directed to a method of manufacturing a cable that exhibited reduced friction and required reduce pulling force when pulled through a cable passageway in a wall. The method involved combining a preselected lubricant with the material forming the cable jacket, the lubricant being “. . . of the type which migrates through said jacket to be available at said outermost exterior surface of said finished cable during the cable’s installation . . .” The claim also recited the result was at least a 30% reduction in pulling force when measured according to a test also recited in the claim. The claim did not specify the lubricant, except in functional terms.

Cerro, in attacking the Southwire patent, relied on a patent to Summers in combination with two other references. As described by the court, Summers taught a “fiber optic cable that is suitable for installation in a cable passageway” and teaches that “to reduce resistance to a cable pulling force,” the plastic material used to form the cable “can include a friction reducing additive” that “migrat[es] to the surface of the cable jacket”. Summers’ lubricant was different from that disclosed in the Southwire patent, but that was disclosed in a Dow Corning data sheet (Dow), one of the secondary references. Summers also did not expressly teach that the friction reducing additive can reduce the pulling force by “at least the recited 30%.

The Examiner handling the matter in the first instance held that the 30% reduction was inherent since the reference cable (as taught by the combination of Summers and Dow) was made by the claimed process and must therefore perform in the same way. On appeal, the PTAB affirmed the Examiner’s decision based on inherency. The Board first noted that “[w]here the claimed and prior art products are . . . produced by identical or substantially identical processes, a prima facie case of either anticipation or obviousness has been established.”

The Board was doing fine but it then muddied the waters by reasoning that the amount of lubricant would have to be enough to achieve the claimed 30% reduction, and that “because Summers teaches reducing the coefficient of friction using a lubricant, it inherently teaches the 30% reduction limitation because it renders it “obvious to have selected [lubricant] amounts” that achieve the claimed reduction.

That did not sit well with the CAFC, which stated that that “. . . the Board erred in relying on inherency without finding that Summers necessarily would achieve a 30% reduction in pulling force, but rather finding that it merely renders that limitation obvious.

Nevertheless, the court affirmed the Board’s decision on the basis that its error was harmless in that its “. . . underlying factual findings were sufficient to support an obviousness determination”. The Board decision recited in detail the evidence that the claimed method simply applies the same process for the same purpose as disclosed in Summers and that its findings were supported by substantial record evidence.

Citing prior authority that where “all process limitations . . . are expressly disclosed by [the prior art reference], except for the functionally expressed [limitation at issue],” the PTO can require an applicant “to prove that the subject matter shown to be in the prior art does not possess the characteristic relied on”, the court held that Southwire had failed to meet the requirement.

If that sounds like a different way of saying that that the applicant or patentee must demonstrate the lack of inherency when the prior art teaches everything except the functional limitation, I would have to agree.

Be that as it may, the lesson to be learned from Southwire is that the best answer to an assertion of inherency is to run tests on exactly what the prior art shows to demonstrate that the claimed function is not achieved.

What Does It Mean To “Make Something”? 

Lifetime has a patent that covers a novel seal in combination with a recreational vehicle that has a moving wall. Lifetime’s competitor Trim-Lok hired away two of Lifetime’s employees and shortly thereafter, offered for sale seals as described in the patent. In its complaint for patent infringment in Lifetime Industries, Inc. v. Trim-Lok, Inc., Lifetime alleged that Trim-Lok employees installed its seals on an RV manufactured by a third party for demonstration purposes and in an effort to sell its seals. This, Lifetime asserted, constituted direct infringement of its patent.

Trim-Lok moved to dismiss for failure to state a claim for direct infringement because the patent claims are directed to the combination of the seal and an RV and it only supplied the seal. The district court agreed, and dismissed the case. On appeal, the CAFC reversed.

Under § 271(a) of the U.S. patent law, whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States . . . infringes the patent. When deciding a motion to dismiss for failure to assert a cause of action, the applicable law requires the court to “assume all well-pleaded allegations are true and [to] draw all reasonable inferences in the light most favorable to the plaintiff.”

The allegations in the complaint were sufficient to state a cause of action, said the CAFC. The alleged installation of the seals by Trim-Lok’s employees, if proven at trial, would constitute “making” the patented invention without authority. It’s hard for me to understand how the district court went wrong on this one.

Who Pays the Legal Fees of the Patent and Trademark Office Litigators?

If your U.S. patent application is finally rejected, and the rejection is affirmed by the Patent Trial and Appeal Board, you have two options for a further appeal. You can appeal directly to the CAFC, or under § 145 of the Patent Act, you can file a “Civil Action to Obtain a Patent” against the PTO in the U.S. District Court for the Eastern District of Virginia.

An advantage of a § 145 action is that new evidence can be presented that was not before the Patent and Trademark Office, while a CAFC appeal is strictly on the record below. Another possible advantage is that you can appeal the Eastern District decision to the CAFC which will then review ruling below just as in any other appeal.

There is a down side, however. § 145 further provides that the applicant must pay “[a]ll of the expenses of the proceeding”. This provision has been in the law since 1839. The CAFC has interpreted this to mean irrespective of the outcome, but until recently, there does not appear to have been a decision  directly on point as to whether attorneys’ fees were included.

It all began with a final rejection of a Nantkwest application sustained by the PTAB. The applicant filed a § 145 action but lost on the merits. The PTO filed a request to include its attorneys’ fees, i.e., the salaries of the Government attorneys who defended the case, as part of the “expenses” for which Nantkwest was responsible. The district court denied the request, citing the so-called “American Rule” under which litigants pay their own attorneys’ fees, win or lose, unless a statute or contract provides otherwise. The district court, in essence, held that the term ”expenses” was not explicit enough to cover attorneys’ fees. The PTO appealed to the CAFC.

In its 23 June 2017 decision in Nantkwest v. Matal, a panel of the CAFC reversed the district court with judge Stoll dissenting. The majority relied on Supreme Court authority, the definition of “expenses” in Black’s Law Dictionary, and commentary in Wright and Miller on Federal Practice and Procedure to support its view that the commonly understood meaning of “all expenses” included attorneys’ fees. The court’s decision is, of course, of interest, but also of interest is what seems to be an angry and belittling response to the dissent.

Be that as it may, the court now seems to have had second thoughts about its decision. On 31 August 2017, the court, sua sponte (on its own initiative) ordered  to rehear the matter before the full court. The parties were directed to file new briefs directed specifically to whether the three-judge panel correctly determined that the

“. . . [a]ll the expenses of the proceedings” provision [of § 145] authorizes an award of the [PTO’s] attorneys’ fees”.

What is the significance of a Claim Preamble?

Those familiar with practice in the European Patent Office know that examiners generally insist that claims be written in “two-part” format with a preamble that states the prior art environment and a “charactizing clause” that describe the invention itself.

This is not required in the U.S., and practitioners generally avoid writing claims in the two-part format (which are known in U.S. practice as “Jepson claims”) because of its potential limiting effect. As a result, a question sometimes arises as to whether a claim preamble should be given any significance in determining patentability.

In practice, examiners usually go out of their way to treat claim preambles as no more than introductory statements of intended use and give them no “patentable weight” when they inconveniently weaken a rejection.

There are two clear situations, however, in which a claim preamble must be taken into account in determining patentability, as the CAFC recently made clear in Georgetown Rail Equipment Company v. Holland, an appeal arising out of an infringement action in the U.S. District Court for the Eastern District of Texas.

The patent in suit involved technology for checking the integrity of railway tie plates which connect the rails to the wooden cross ties. The single claim involved in the litigation included as its preamble “A system for inspecting a railroad track bed . . . to be mounted on a vehicle for movement along the railroad track, the system comprising”. The body of the claim recited a light generator, an one optical receiver,  and a processor for analyzing images from the optical receiver, along with the details of an algorithm that defined the operation of the processor.

Holland sold a system which Georgetown asserted infringed its patent. As a practical matter, the real difference for purposes of this note is that Holland’s processor is not on board the inspection vehicle. Instead, the optical data is collected and sent to a remote facility for processing after which a report is sent to Holland.

The trial judge construed the preamble of the claim as non-limitng and therefore that the body of the claim, which was silent as to the location of the processor, did not have to be on the inspection vehicle. Based on that construction, the jury found that Holland infringed the patent, and awarded lost profits to Georgetown in the amount of about $1.5 million. The court also awarded Georgetown an additional $1,000,000 in enhanced damages based on a finding of willful infringement and further awarded Georgetown legal based on a finding that the case was exceptional.

On appeal, Holland challenged the claim construction, the jury verdict, and the awards of enhanced damages and legal fees, but all of Holland’s challenges were rejected. For purposes of this note, we will focus only on the claim construction issue.

The District based its claim construction on its determination that the term to mounted on a vehicle did not recite an “essential structure” of the invention because the specification stated that “[a]lternatively, the computer analysis can be performed by another computer system having image processing software known in the art,” such that the system need not be performed in a vehicle. For the same reason, the phrase could not recite “additional structure or steps . . . underscored as important by the specification.”

The judge further concluded that the term was not an “antecedent basis” for the claim terms because “[t]he claim body, neither in whole [n]or in part, mentions the phrase ‘mounted on a vehicle.’” Finally, it found that Georgetown did not clearly rely on the limitation during prosecution because the cited statements from the prosecution history did not “distinguish the claimed invention from the prior art by reference to the system being mounted on a vehicle.”

In affirming the claim construction, the CAFC began with the generalization that the preamble does not normally limit the claims, but that it may be limiting in certain circumstances. These include situations in which the preamble recites essential structure, in which the claim body depends on preamble language as an antecedent basis, in which the preamble is essential to understand limitations or terms in the claim body, or there was “clear reliance on the preamble during prosecution to distinguish the claimed invention from the prior art.

Conversely, if the claim body defines a structurally complete invention and the preamble only states a purpose or intended use for the invention, it is not treated as a limitation.

The court then held that In the context of the entire patent, it is apparent that the term “mounted on a vehicle for movement along the railroad track” is meant to describe the principal intended use of the invention but not to import a structural limitation or to exclude from the reach of the claims an assembly that does not include a vehicle mount. The statement that a separate device could be used for image processing was clearly a critical factor and with the fact that the body of the claim defined a complete structure without reference to the location of the processor.

The message and lesson to be learned is clear: in an introductory part of the Detailed Description, all viable variations should be mentioned either in terms of being “optional”, or as ”alternatives”, or as ”according to some embodiments”, even if they are not further described. It looks like that one sentence made all the difference in the outcome of this case.

And Don’t Forget Eligibillity:

Visual Memory Inc. (“VMI”) has a patent on a three-tiered memory system including a mass storage component, a main memory component and a cache memory (a known computer configuration) in which the cache memory is comprised of three cache elements, the operating characteristics are programmable to optimize performance with different kinds of microprocessors. The result, according to the patent is that the cache memory is much smaller and therefore less costly than conventional cache memories, as well as equal or greater efficiency over conventional practice.

The patent also discloses a new configuration for the storage of data in the main memory which is also said to provide an additional improvement in efficiency over conventional practice.

VMI sued Invidia Corporation for infringement of the patent. Invidia filed a motion to dismiss on the ground that the claims failed the first step of the Alice test in that they were directed to the abstract idea of data classification and storage, and that there was nothing else inventive to satisfy the second part of the test. The district court granted Invidia’s motion and VMI appealed.

In Visual Memory Inc. v. Invidia Corporation, the CAFC reversed and remanded, demonstrating again how difficult for the PTO and the district courts to apply the Alice test to computer systems.

In contrast to the many cases decided by analogy to previously decided cases, a practice I have often criticized, the court presented a reasoned explanation as to why the claims were not directed to an abstract idea, but rather to an improvement in computer functionality. The claims accordingly satisfied the first step of the Alice test.

The court observed, almost incidentally, that it decision was limited to the question of eligibility, and that it was taking no position as to the normal conditions for patentability (novelty, unobviousness, clarity of the claims and sufficiency of the disclosure) which now be addressed by the trial judge and/or a jury trial.

Yes, I know that hindsight is 20-20, but it’s still hard for me to see how the district court went wrong here.

About the author: Larry Hoffman has a B.S. in Electrical Engineering and Comp. Sci. from Massachusetts. Institute of Technology and a J.D. from the George Washington University School of Law. He has been a lawyer since 1965 specializing in IP law and product liability defense. He is registered to practice before the U.S. PTO, the U.S. Court of Appeals for the Federal Circuit and the state and federal courts in New York, Maryland, and the District of Columbia. His work has included preparation and prosecution of patents in countries throughout the world, and counseling on IP and product safety matters. He has been involved in the trial of close to 100 lawsuits of various kinds. You can reach him at Lawrence@ipatent.co.il.