IP Law Bulletin

In its first precedential decision of 2010, the Board of Patent Appeals and Interferences (BPAI) decided in Ex Parte Frye that an Examiner’s rejection is given no deference upon appellate review. Furthermore, the BPAI will not unilaterally review any arguments on a particular issue not specifically presented to the Board by the Appellant. Appellants should thus carefully consider all issues and present thorough arguments in Appeal Briefs to ensure complete BPAI review. Also of note in this case is that USPTO Director Kappos and USPTO Deputy Director Barnes joined the BPAI panel which heard this case. Although high ranking USPTO officials are members of the BPAI, along with administrative patent judges, under 35 U.S.C. § 6(a), the vast majority of BPAI panels consist only of administrative patent judges. Kappos’s and Barnes’s decision to sit on the Frye panel indicates the significance of this case to the USPTO.

For a copy of the Frye opinion, click here.

Although allegations of a patentee’s failure to disclose the best mode of a claimed invention rarely succeed in rendering asserted claims of a patent invalid, the Federal Circuit recently affirmed in Ajinomoto Co., Inc. v. International Trade Commission a determination of invalidity by the U.S. International Trade Commission (ITC) that should alert patent practitioners and inventors of the importance of disclosing the preferred mode of practicing an invention. In accordance with U.S. patent rules and as highlighted by this case, in drafting a patent application, practitioners should inquire, and inventors should disclose, if there is a preferred embodiment of a claimed invention or any other preferences that materially affect the properties of the invention.

In this case, Ajinomoto Co., Inc. (Ajinomoto) filed a complaint with the ITC alleging that Global Bio-Chem Technology Group (GBT) violated 19 U.S.C. § 1337 by importing into the United States animal feed products containing an amino acid produced by a method which infringes various claims of U.S. Patent No. 5,827,698 (“the ‘698 patent”) and U.S. Patent No. 6,040,160 (“the ‘160 patent”). Each of the asserted claims at issue recited methods that included cultivating an E. coli type bacteria having a specific genetic mutation to provide increased lysine production.

Before the Administrative Law Judge (ALJ) at the ITC, GBT admitted infringement of the claimed methods, but argued that the asserted claims were invalid because Ajinomoto’s specification failed to disclose the best mode of the invention as required by 35 U.S.C. § 112, first paragraph. GBT further argued that the patents at issue were unenforceable due to Ajinomoto’s inequitable conduct in not only failing to disclose the best mode, but also in affirmatively concealing the preferred bacterial strains and carbon sources and submitting fictitious data in support of the best mode. The ALJ agreed with GBT and found no violation of § 1337 because the asserted claims were invalid and the ‘698 and ‘160 patents were unenforceable. Ajinomoto unsuccessfully petitioned the Commission for review of the ALJ’s determination and subsequently appealed to the Federal Circuit.

35 U.S.C. § 112, first paragraph, requires that a patent specification “set forth the best mode contemplated by the inventor of carrying out his invention.” In order to satisfy the best mode requirement, an inventor must disclose the preferred embodiment of the invention defined by the claims as well as preferences that materially affect the properties of the invention. In a best mode inquiry, a court first defines the invention by construing the claims and then determines whether the inventor contemplated a best mode of practicing the claimed invention at the time of filing the application. If the inventor had a subjective preference for one mode over others, the court must then determine whether the specification’s disclosure was sufficient to allow one of ordinary skill in the art to practice the best mode of the invention.

Ajinomoto admitted before the Federal Circuit that the inventors had a preferred strain, which contained additional non-claimed genetic mutations, for producing lysine in culture, as well as a preferred carbon source within the culture medium. Nonetheless, Ajinomoto argued that the ITC erred in analyzing whether the best mode of the invention was disclosed by focusing on the “overall production of lysine,” rather than on the “innovative aspects” of the specific genetic mutations that were claimed. The Federal Circuit affirmed the ITC’s reasoning that the scope of the invention as defined by the claims covers more than the specifically-recited mutations. Indeed, because the claimed invention recites “cultivating” a bacterial host strain containing those mutations, the failure to disclose the preferred strains and carbon sources used in the cultivation process renders the asserted claims invalid for failure to disclose the best mode of practicing the claimed invention.

Although it is not necessary to label a preferred embodiment as the “best mode” within a patent specification, Ajinomoto v. ITC provides a strong reminder of the importance of providing an enabling disclosure for a preferred embodiment, as contemplated by the inventors at the time of filing of an application. Practitioners should also note that in analyzing whether the specification discloses the best mode, courts will consider all of the limitations of the claimed invention, rather than just the “novel” features that distinguish the claim over the prior art.

The Federal Circuit declined to review the ITC’s determination that the ‘698 patent and the ‘160 patent were unenforceable due to Ajinomoto’s inequitable conduct. Ajinomoto’s only contention on appeal was a single sentence that the decision on inequitable conduct should be reversed because it was based on erroneous conclusions regarding Ajinomoto’s failure to disclose the best mode. The Federal Circuit concluded that “[s]uch a conclusory assertion unaccompanied by developed argumentation does not preserve the issue for appeal.”

This advisory was prepared by Nutter's Intellectual Property practice. For more information, please contact your Nutter attorney at 617-439-2000.

On March 22, 2010, the Federal Circuit handed down an en banc decision holding that the “written description” requirement for patent applications is distinct from the enablement requirement. The decision all but assures that the U.S. Patent and Trademark Office (USPTO) will continue its policy of heightened scrutiny for biotechnology patent applications.

The decision dealt with the first paragraph of section 112 of the patent statute, which provides:

The specification shall contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same, and shall set forth the best mode contemplated by the inventor of carrying out his invention. [35 U.S.C. 112] (Emphasis added)

In the Ariad Pharmaceuticals, Inc. v. Eli Lilly and Co.¹ case, the Court of Appeals for the Federal Circuit upheld an earlier panel decision, reversing a trial verdict in favor of Ariad and its licensors, MIT and Harvard University against Eli Lilly, the manufacturer of Evista and Xigris, drugs for treatment of osteoporosis and sepsis, respectively. The Federal Circuit’s en banc decision found the asserted patent claims were invalid due to a lack of written description.

The Federal Circuit chose to hear this case before its eleven judges to settle whether the “written description” requirement is a requirement under section 112 separate from the enablement requirement, and, if so, to clarify the scope and purpose of the written description requirement.

In a nearly unanimous (9-2) decision, the court agreed with Eli Lilly that section 112 provides a written description requirement distinct from the requirement of providing an enabling description. One of the reasons for this requirement was to ensure that the scope of the patentee’s right to exclude “does not overreach the scope of the inventor’s contribution to the art.” In essence, inventors must demonstrate that they were in “possession” of the invention they seek to claim.

In the Ariad case, the patent at issue involved a discovery by some of America’s most prominent biotech researchers, including Nobel Laureates David Baltimore and Phil Sharp, of a transcription factor, NF-kB, which affects cytokine production. The inventors also realized that reducing NF-kB activity could treat or mediate certain immune disorders associated with overproduction of cytokines. The inventors broadly claimed methods of modulating the NF-kB pathway. For example, claim 95 of U.S. Patent 6,410,516, (rewritten in independent form) reads as follows:

A method for reducing, in eukaryotic cells, the level of expression of genes which are activated by extracellular influences which induce NF-kB mediated intracellular signaling, the method comprising reducing NF-kB activity in the cells such that expression of said gene is reduced, carried out on human cells. (Emphasis added)

It is noteworthy that claim 95 does not specify particular compounds, either by chemical formula or any other characterizing feature, to reduce NF-kB activity. This type of invention is sometimes referred to as a “pathway” patent, in that the inventors have discovered a step in a physiological pathway and attempt to claim all agents that can modify the pathway.

The court found that the patent’s original 1989 disclosure of the invention disclosed three general categories of agents that could interfere with NF-kB activity but no therapeutic compositions. The court dismissed a prophetic example in the patent as an insufficient written description, characterizing it as “not so much an ‘example’ as it is a mere mention of a desired outcome.”

Critics of the Ariad decision argue that finding a separate written description test in section 112 requires a strained grammatical reading of the statute and that such a reading has no support in the legislative history of the patent act. Moreover, they note that section 112 clearly requires that patent applicants must provide an “enabling disclosure” of their inventions and that this is a clearer test – and one that makes the written description requirement redundant.

The Ariad decision, itself, does not provide much useful guidance on how the separate “written description” test should be applied. The majority opinion states that the applicant must “possess” the claim invention but fails to explain how this test should be applied in practice to “genus” claims. The opinion suggests that a written description of a genus requires either (1) a representative number of species falling within the genus, or (2) description of “structural features common to members of the genus so that one skilled in the art can ‘visualize or recognize’ members of the genus.” However, the opinion is not particularly enlightening on the status of species that fall within a claimed genus but are not specifically disclosed by the patentee. Moreover, the “visualize or recognize” test appears to bring the factual inquiry back to an enablement test.

The Federal Circuit’s opinion noted that “the level of detail required to satisfy the written description requirement varies depending on the nature and scope of the claims and on the complexity and predictability of the relevant technology.” Thus, for predictable arts (e.g., mechanical inventions) the written description requirement may have little impact but inventions in the fields of biotechnology and pharmacology are likely to be more strictly scrutinized for their level of detail in the written description.

The big winner in the Ariad case appears to be the USPTO because the opinion gives tacit approval to the government’s current strict approach to examination of biotechnology inventions. Since 2001, the USPTO has had guidelines in place for examiners that assume that the written description test is indeed a separate test and that it should be applied to all inventions in unpredictable arts. The most recent iterations of the USPTO position can be found in “Written Description Training Materials, Rev. 1, March 25, 2008² and in the Manual of Patent Examining Procedure §2163 “Guidelines for Written Description Rejections.”³

The USPTO guidance gives numerous examples of what will and will not satisfy the written description requirement. In one instance, the training materials propose the following hypothetical claim:

An isolated nucleic acid that encodes a protein that binds to the NDG receptor and stimulates tyrosine kinase activity.

The example also posits that the applicant has only disclosed a single protein agonist to the NDG receptor. According to the training materials, this claim must be rejected for lacking adequate written description because the application does not identify what domain of the protein binds to the receptor and reads upon numerous unidentified receptor agonists having such a binding domain, as well as nucleic acids encoding agonists with non-canonical binding domains. The training materials conclude:

Given the high degree of variability that may be found in receptor agonists, and that the number of species required to form a representative number varies proportionally with the degree of variability within the claimed genus, those of ordinary skill in the art would not consider the applicant to have been in possession of the entire breadth of the claimed genus of nucleic acids based on the single species disclosed.

Critics of the USPTO training materials have suggested that the guidance encourages examiners to question every aspect of the disclosure – including many aspects where one skilled in the art would recognize that a single example is indeed sufficient to possess many obvious alternatives. Practically speaking, they complain that biotechnology inventions are scrutinized for their concrete examples – and examiners seek to limit the claims to only cover the specific disclosed embodiments.

In the wake of the Ariad decision, it appears that applicants should expect this heightened scrutiny and challenges from examiners at every turn. Whenever possible, multiple examples, multiple species and detailed characterization of the features of the invention should be presented. In the case of the isolated nucleic acid claim discussed above, it appears clear that the applicant would have fared better if the protein domain that bound to the NDG receptor was better characterized or numerous protein agonists were described.

The written description requirement may also require disclosures of numerous ranges bracketing the specific examples to provide fallback positions. For example, if the DNA sequence encoding a protein agonist is all that is known, claiming that sequence and other sequences that have 70% identity, or 80% or 90% or 95% or 96%, etc., may be helpful.

The problem presented in the Ariad case, however, will be difficult for applicants to overcome in that the discovery of a new pathway may indeed be insufficient to claim methods of treatment by modulating the pathway. Unless a representative number of working examples of compounds that can actually perform the method are presented, the “written description” requirement may preclude patentability.

¹560 F.3d 1366 (Fed. Cir. 2009)
²http://www.uspto.gov/web/menu/written.pdf
³http://www.uspto.gov/web/offices/pac/mpep/documents/2100_2163.htm

This advisory was prepared by Nutter's Intellectual Property practice. For more information, please contact your Nutter attorney at 617-439-2000.

The last issue of Nutter’s IP Bulletin reported that a three judge panel of the Federal Circuit upheld a finding of inequitable conduct in Therasense, Inc. v. Becton, Dickinson and Co. The Federal Circuit finding, in which Judge Linn dissented with respect to the finding of inequitable conduct, was based on an applicant’s characterization of its own prior art reference in proceedings with the European Patent Office (EPO) that were deemed to directly contradict statements made to the United States Patent and Trademark Office (USPTO) by the applicant regarding the same reference. The statements made to the EPO regarding the reference were found to be material to patentability, and thus the failure to disclose such statements was ruled to be an appropriate basis for finding inequitable conduct.

On April 26, 2010, the Federal Circuit issued an order vacating the holding of the earlier three judge panel. The Federal Circuit decided to hear the appeal of the decision of the United States District Court for the Northern District of California en banc. In issuing its order vacating the previous appeal, the Federal Circuit presented six issues for the parties to consider when presenting the new briefing; each of the issues relates to inequitable conduct. The doctrine of inequitable conduct allows a patent to be rendered unenforceable if it is found that a person associated with the filing and prosecution of a patent fails to disclose information to the USPTO that is material to the determination of patentability and was withheld with intent to deceive the USPTO.

The six issues specified by the Federal Circuit order are:

1. Should the materiality-intent-balancing framework for inequitable conduct be modified or replaced?

2.  If so, how?  In particular, should the standard be tied directly to fraud or unclean hands?  See Precision Instrument Mfg. Co. v. Auto Maint. Mach. Co., 324 U.S. 806 (1945); Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238 (1944), overruled on the grounds by Standard Oil Co. v. United States, 429 U.S. 17 (1976); Keystone Driller Co. v. Gen. Excavator Co., 290 U.S. 240 (1933). If so, what is the appropriate standard for fraud or unclean hands?

3.  What is the proper standard for materiality? What role should the USPTO’s rules play in defining materiality? Should a finding of materiality require that but for the alleged misconduct, one or more claims would not have issued?

4. Under what circumstances is it proper to infer intent from materiality? See Kingsdown Med. Consultants, Ltd. v. Holllister Inc., 863 F.2d 867 (Fed. Cir. 1988) (en banc).

5. Should the balancing inquiry (balancing materiality and intent) be abandoned?

6. Whether the standards for materiality and intent in other federal agency contexts or at common law shed light on the appropriate standards to be applied in the patent context.

The Federal Circuit’s decision to rehear the appeal en banc has been well received, as many in the patent community believe that current rules related to inequitable conduct need to be changed. Members of the patent community hope that the Federal Circuit will clarify the doctrine of inequitable conduct, and in doing so, help ease the growing burden on applicants that the current rules create with respect to the duty of disclosure.

It is anticipated that the en banc appeal will be heard by the Federal Circuit in October or November of this year. We will keep our readers well-informed of the developments surrounding this case.

This advisory was prepared by Nutter's Intellectual Property practice. For more information, please contact your Nutter attorney at 617-439-2000.

In Association for Molecular Pathology et al. v. United States Patent And Trademark Office et al.¹, Association for Molecular Pathology and other plaintiffs, including some physicians and cancer patients, asked a federal district court in New York, in a motion for summary judgment, to invalidate several so-called “gene patents” owned by the University of Utah and Myriad Genetics. The patents are directed to two isolated gene sequences, BRCA1 and BRCA2, that researchers had discovered to be correlated with a heightened susceptibility to breast cancer. In addition to composition claims directed to the isolated genes, the patents also include method claims for analyzing BRCA1 and BRCA2 genes (or RNA) extracted from an individual to identify the presence of mutations, if any, in those genes as well as for determining the individual’s predisposition to breast cancer based on the mutations.

Judge Robert Sweet granted the motion of summary judgment and concluded that the composition claims as well as the method claims were not eligible for patenting and hence were invalid. The judge relied, at least in part, on a Supreme Court decision from 1931, American Fruit Growers, Inc. v. Brodgex Co.², to invalidate the composition claims. In that case, the Supreme Court had held that oranges whose skin had been treated with mold-resistant borax had not been sufficiently transformed into a new and different article to be eligible for patenting. Similarly, Judge Sweet held that isolated DNA did not possess “markedly different characteristics” from its naturally occurring counterpart to be eligible for patenting.

Judge Sweet relied on the recent case of In re Bilski³, which is presently before the U.S. Supreme Court, to invalidate the method claims. In In re Bilski, the U.S. Court of Appeals for the Federal Circuit held that a method claim is patent eligible if (1) it is sufficiently tied to a particualr machine or apparatus or (2) it transfoms an article into a different state or thing. Though this “machine-or-transformation” test was enunciated in the context of a so-called “business method” patent that was directed to a method of hedging risks in commodity trading, it has been applied post-Bilski by a number of courts to medical diagnostic methods.

In this case, the defendants relied on a recent post-Bilski case, Prometheus Laboratories, Inc. v. Mayo Collaborateive Services⁴, to argue that the steps of “analyzing” and “comparing” recited in the method claims were transformative. In Prometheus, the Federal Circuit had held that the step of “determining the levels of metabolites” in a method claim directed to adjusting the dosage level of certain therapeutic drugs, in order to enhance efficacy and minimize side effects, was transformative as it involved extraction and measurement of metabolite concentrations, e.g., via high pressure liquid chromatography. Judge Sweet, however, did not agree and held that the steps of “analyzing” and “comparing” were merely mental steps. The judge went even further and indicated that even if the challenged claims “were read to include the transformations associated with isolating and sequencing human DNA,” these transformations would not render the claims patent eligible as they would be merely what Bilski characterizes as “data gathering step[s]” that are not “central to the purpose of the claimed process.”

The Federal Circuit is likely to grant certiorari on this case. Look for continued updates on this important case, as well as the Supreme Court’s upcoming decision in Bilski, in future issues of Nutter’s IP Bulletin.

¹669 F.Supp.2d 365 (S.D.N.Y. 2009).
² 283 U.S. 1 (1931).
³545 F.3d 943 (Fed. Cir. 2008).
⁴581 F.3d 1336 (Fed. Cir. 2008).

This advisory was prepared by Nutter's Intellectual Property practice. For more information, please contact your Nutter attorney at 617-439-2000.

In Therasense, Inc. v. Becton, Dickinson and Co.¹, the Federal Circuit held that an applicant’s characterization of its own prior art reference in proceedings with the EPO that directly contradicts statements made to the USPTO by the applicant regarding the same reference is material to patentability and can serve as the basis of a finding of inequitable conduct. This case was distinguished from previous cases that held that attorney argument concerning the content of prior art is generally insufficient for a finding of materiality because the representations made to the USPTO were factual assertions provided in declaration and affidavit form.

Plaintiffs Therasense, Inc. and Abbott, Inc. (collectively, “the Patent Owner”) sued defendant Becton, Dickinson and Co. for infringement of U.S. Patent No. 5,820,551, entitled “Strip electrode with screen printing” (the ‘551 patent). The U.S. District Court for the Northern District of California determined that several of the asserted claims were invalid as obvious over the Patent Owner’s own U.S. Patent No. 4,545,382 (the ‘382 patent). The district court also found that the entire ‘551 patent was unenforceable due to inequitable conduct.

The ‘382 patent was cited by the Examiner during prosecution of the application that led to the patent at issue, the ‘551 patent. The claimed glucose monitoring system was directed to a membrane-less sensor, and the Patent Owner argued that the ‘382 patent teaches that electrodes for use with whole blood require a protective membrane. Although the specification of the ‘382 patent provides that “[o]ptionally, but preferably when being used on live blood, a protective membrane surrounds both the enzyme and the mediator layers, permeable to water and glucose molecules,” the Patent Owner submitted a declaration and affidavit that asserted that one of skill in the art would have understood from the ‘382 patent disclosure that a protective membrane was necessary with a whole blood sample. The Patent Owner further asserted that one skilled in the art would read the “optionally, but preferably” language as mere patent phraseology, rather than as a technical teaching. The ‘551 patent issued shortly thereafter.

Several years prior to the submission of the affidavit and declaration during prosecution of the ‘551 patent, the Patent Owner prosecuted the corresponding European application of the prior art reference, the ‘382 patent. Before the European Patent Office (EPO), the Patent Owner argued that the ‘382 patent distinguished over a German reference having a semi-permeable membrane because the protective membrane of the ‘382 patent is a safety measure rather than a permeability control. The Patent Owner further argued that the “optionally, but preferably” statement is “unequivocally clear” that the protective membrane is optional when used with whole blood.

Although the Federal Circuit has previously held that attorney argument concerning the content of prior art is generally insufficient for a finding of materiality,² the representations to the USPTO during prosecution of the ‘551 patent were not considered attorney argument. Rather, the Federal Circuit determined that the representations were factual assertions provided in declaration and affidavit form, and were thus distinguished from mere attorney argument. By describing the “optionally, but preferably” language of the ‘382 patent as “unequivocally clear,” the Patent Owner’s representations to the EPO directly contradicted the Patent Owner’s sworn statement to the USPTO that one of ordinary skill would have understood the phrase as mere “patent phraseology.” Further, the Patent Owner’s arguments before the EPO that a membrane was not necessary for testing whole blood in vitro contradicted the Patent Owner’s arguments to the USPTO that a membrane was thought to be necessary for the testing of a whole blood sample.

A finding of inequitable conduct requires a showing of an affirmative material misrepresentation or failure to disclose material information coupled with an intent to deceive. Information known by an applicant that refutes, or is inconsistent with, a position taken by the applicant in arguing the patentability before the USPTO is considered material information and should be provided to the USPTO.³ In Therasense, the Federal Circuit concluded that “[a]n applicant’s earlier statements about prior art, especially one’s own prior art, are material to the PTO when those statements directly contradict the applicant’s position regarding that prior art in the PTO.” The Federal Circuit found the lower court’s ruling on intent to deceive the USPTO amply supported, and affirmed the unenforceability of the ‘551 patent due to the Patent Owner’s inequitable conduct.

Although the Federal Circuit makes clear that a finding of inequitable conduct requires a high burden of proof, the Patent Owner in Therasense is “one of those rare case in which a finding of inequitable conduct is appropriate.” To avoid such a finding in light of Therasense, practitioners should continue to monitor submissions made to both domestic and foreign patent offices. Practitioners should consider alerting the USPTO of contradictory statements made in a foreign jurisdiction, especially when those statements directly contradict assertions made to the USPTO in the form of an affidavit or declaration. While attorney argument is generally insufficient for a finding of materiality, erring on the side of disclosure may save a patent from being rendered unenforceable.

¹593 F.3d 1289, 93 U.S.P.Q.2d 1489, Civ. Act. No. 2008-1511, -1512, -1513, -1514, -1595 (Fed. Cir. 2010) 
²See Innogenetics, N.V. v. Abbott Labs, 512 F.3d 1363, 1379, 85 U.S.P.Q.2d 1641, 1652 (Fed. Cir. 2008) (holding that possible contradictory statements made by applicant were mere attorney argument related to interpretation of claims and prior art teachings that do not constitute material omissions or misrepresentations.)
³See 37 C.F.R. § 1.56.

This advisory was prepared by Nutter's Intellectual Property practice. For more information, please contact your Nutter attorney at 617-439-2000.

In a recent Federal Circuit decision, the court held that a defendant that acted with deliberate disregard to an overt risk that a device it copied might be associated with a patent was liable for induced infringement. While induced infringement requires both an occurrence of actual infringement and a finding that the alleged infringer knew or should have known that actions would induce actual infringements, this case makes it clear that pleading ignorance to avoid actual knowledge is not sufficient when there is an overt risk that an element of the offense existed. In SEB v. Montgomery Ward ¹, the company accused of inducing infringement argued that because it had no knowledge of the patent in question, it could not be liable for induced infringement. However, because the accused infringer both admitted to copying a product that was covered by the patent, and failed to mention that it copied the product to the attorney conducting the clearance opinion, the court found that the accused infringer acted with “deliberate indifference,” and thus did have the requisite knowledge for finding induced infringement.

SEB S.A. (SEB) is the owner of U.S. Patent No. 4,995,312 (the ‘312 patent), which is directed to a deep fryer. SEB, along with its co-plaintiff T-Fal Corporation, which distributes SEB’s products in the United States (collectively, SEB), sued Montgomery Ward & Co., Inc. (Montgomery), as well as Global-Tech Appliances, Inc. and Pentalpha Enterprises, Ltd. (collectively, Pentalpha) alleging both direct infringement under 35 U.S.C. § 271(a) and induced infringement under 35 U.S.C. § 271(b). This article focuses on the induced infringement claim. In the present case, because Pentalpha supplied the alleged infringing products to Montgomery, it was Pentalpha that was liable for any induced infringement.

According to 35 U.S.C. § 271(b), “Whoever actively induces infringement of a patent shall be liable as an infringer.” Courts construe this statute to require two elements: (1) an occurrence of actual infringement; and (2) that the alleged infringer knew or should have known that actions would induce actual infringements.

The first element of induced infringement was virtually conceded by Pentalpha. Pentalpha admitted to purchasing an SEB deep fryer in Hong Kong and copying it. The district court found that Pentalpha copied everything but the cosmetics of the SEB deep fryer. The district court also found that a deep fryer constructed as a design-around by Pentalpha infringed under the doctrine of equivalents. Pentalpha failed to advance any arguments related to infringement on appeal, thereby conceding this first element of induced infringement.

Pentalpha’s defense instead focused on the second element. Pentalpha argued that because it had no knowledge of the existence of the ‘312 patent, that the second element for induced infringement could not be met. To support this position, Pentalpha relied on a Federal Circuit decision from 2006, DSU Med. Corp. v. JMS Co., which stated “[t]he requirement that the alleged infringer knew or should have known his actions would induce actual infringement necessarily includes the requirement that he or she knew of the patent.”²  (Emphasis added.) While the district court agreed that there was no evidence that Pentalpha was aware of the ‘312 patent prior to being sued, the district court still found the second element met. In affirming the district court, the Federal Circuit agreed.

In distinguishing DSU, the Federal Circuit noted that DSU did not set out the metes and bounds of the knowledge-of-the-patent requirement. The court held that actual or constructive knowledge is appropriate for the second element of induced infringement. Further, in evaluating the “knew or should have known” standard, the court determined that acting with “deliberate indifference” was an extension of the “knowledge” requirement. Both “knowledge” and “deliberate indifference” are evaluated subjectively (unlike “should have known,” which is objectively), and the court held that if a defendant knew of and disregarded the overt risk that an element of the offense existed, this constituted knowledge.³

The court determined that Pentalpha acted with “deliberate indifference” based on two actions in particular. First, the action of copying all but the cosmetics of the deep fryer was an action indicating deliberate disregard of a known risk. While Pentalpha argued that the fryer it copied was not marked with a patent number, both because the fryer was purchased in Hong Kong (where there would be no U.S. marking requirement) and because Pentalpha failed to show that it concluded there was no risk because they did not see a patent number on the fryer, the court was not persuaded. Second, Pentalpha also deliberately disregarded a known risk by failing to disclose the copying of the SEB deep fryer to the attorney that conducted a clearance opinion for SEB. While obtaining a clearance opinion can generally be helpful in negating intent, a clearance opinion in which the party obtaining the opinion withholds a key fact like it copied the invention is not helpful in negating intent. In fact, the court stated that this failure on its face was highly suggestive of deliberate indifference. The court found this withholding even more troublesome because the president of Pentalpha was well-versed in the U.S. patent system. These factors all supported the court’s finding that Pentalpha acted with complete disregard to an overt risk, and thus had knowledge of the ‘312 patent by way of “deliberate indifference.”

In view of this decision, companies should act prudently when monitoring its competitors’ products. Companies should certainly avoid copying competitors’ products. Further, to the extent companies take actions to design-around particular products or particular patents, it is generally a good idea to have an independent clearance opinion performed prior to using, making, or offering for sale the resulting product. Companies should openly disclose to the attorney providing the clearance opinion any products or patents that the resulting product was designed-around.

¹___ F.3d ___, 93 U.S.P.Q.2d 1617, Civ. Act. No. 2009-1099, -1108, -1119, 2010 WL 398118 (Fed. Cir. February 5, 2010).
²471 F.3d 1293, 1304, 81 U.S.P.Q.2d 1238, 1246 (Fed. Cir. 2006) (en banc only on issue of required intent for induced infringement).
³The court noted, however, that a defendant can defeat an allegation of “deliberate indifference” by showing it was genuinely “unaware even of an obvious risk.”

This advisory was prepared by Nutter's Intellectual Property practice. For more information, please contact your Nutter attorney at 617-439-2000.

In July of 1994, Dr. Lister registered with the United States Copyright Office a manuscript describing a method of playing golf in which players use a golf tee on any shot that is not in a designated hazard area or on a green. Later learning that his copyright registration would not protect any potential invention, he filed a patent application directed to his method in August of 1996.

Following several rounds of rejections and amendments, including two appeals to the Board of Patent Appeals and Interferences, the Federal Circuit decided whether Dr. Lister’s registration of his manuscript with the U.S. Copyright Office qualified as prior art under 35 U.S.C. § 102(b) against his own patent application. The Board previously overturned a rejection under 35 U.S.C. § 102(a) that relied on Lister’s manuscript because it was held that an inventor’s own manuscript cannot be prior art under 35 U.S.C. § 102(a). ¹

The parties did not dispute the existence or the date of Dr. Lister’s copyright registration for his manuscript. The parties also did not dispute that the manuscript disclosed the claimed invention. The parties did dispute whether the manuscript was publicly accessible.

Generally, a publication is considered publicly accessible if it is available to persons interested and having ordinary skill. A publication does not need to have actually been accessed to be considered publicly accessible. Further, convenience is not a factor in determining public accessibility. While cases involving disclosures stored in libraries have held that a reference must be cataloged, indexed, and shelved in a meaningful way to provide public accessibility, cataloging and indexing is not a requirement of public accessibility.

Dr. Lister’s manuscript was available to the public both through the U.S. Copyright Office, and through private databases provided by Westlaw and Dialog. In the present case, it was determined that the access provided by the U.S. Copyright Office was not sufficient to be considered publicly accessible because it did not allow for searching in a meaningful way. At the time, searching of U.S. copyright registrations could only be performed by searching the last name of an author or the first word of a title. The Westlaw and Dialog databases, on the other hand, were considered publicly accessible because they allowed for keyword searches of the title (but not the full text) that would have allowed an interested person having ordinary skill to locate Dr. Lister’s manuscript.

Although the Westlaw and Dialog databases were considered publicly accessible, the rejection could not be maintained because the examiner was unable to establish when Dr. Lister’s manuscript was made available for search by either Westlaw or Dialog. Further, the evidence did not contain any information related to the general procedures practiced by Westlaw and Dialog for cataloging copyright registrations. In view of prior “thesis” cases that relied on general procedures to prove a likely publication date, it is likely that such information would have been sufficient to prove a likely date by which Dr. Lister’s manuscript was made available for search by either Westlaw or Dialog.

Comparing the situation to one in which an examiner finds a reference on the Internet but is unable to prove when the reference first appeared on the Internet, the Federal Circuit determined that Dr. Lister’s reference could not be relied upon to reject Dr. Lister’s patent application under 35 U.S.C. § 102(b) without first establishing that it was publicly accessible on either Westlaw or Dialog more than a year prior to the filing date of Dr. Lister’s patent application. The Board’s decision was thus vacated and remand ordered.

Despite the favorable decision for Dr. Lister in this particular aspect of his prosecution, we do not believe this case should change the behavior of those filing patent applications. Potential patentees should remain cautious with any publications they make that could include disclosures of potential inventions. As our readers know, the public disclosure of an invention begins the one year window in which patent applicants have to file a patent application in the United States and terminates the opportunity patent applicants have to file a patent application in most every other country. Pinning one’s hopes to some other organization’s publication policies is generally not prudent. Thus, applicants benefit from filing an application before, or at the very least within one year of, any public disclosure that could possibly be construed as disclosing aspects of a potential invention.

 ¹ An inventor cannot disclose his or her own invention before he or she invents it.  Thus, 35 U.S.C. § 102(a) requires disclosure by another  that would provide evidence that a patent applicant is not the first to invent.

This advisory was prepared by Nutter's Intellectual Property practice. For more information, please contact your Nutter attorney at 617-439-2000.

In BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373, 1378-79 (Fed. Cir. 2007), the Federal Circuit held that direct infringement of a method claim requires a single party to perform every step of the claimed method. Where the actions of multiple parties combine to perform the steps of a claim, finding direct infringement can be more difficult. Specifically, as clarified by the court in BMC Resources, direct infringement exists in such cases only if one party exercised “control or direction” over the entire process such that every step is attributable to the controlling party.¹  Notably, the BMC Resources court acknowledged that this is an imperfect standard, as parties can conceivably enter into arms-length agreements, in which no direction or control exists, to avoid infringement. As explained below, steps can be taken at the claim drafting stage to help avoid this undesirable possibility.

In BMC Resources, the plaintiff BMC alleged that the defendant Paymentech infringed two of its patents directed to methods for processing debit transactions. BMC conceded that Paymentech did not by itself perform each and every step of the claimed method, but argued that they should nonetheless be liable for infringement since they had allegedly combined with other parties to do so. The court found for Paymentech, affirming the district court’s grant of summary judgment of non-infringement. The court explained that, even if Paymentech did combine with various financial institutions and debit networks to perform the claimed method, they had not exercised “control or direction” over these third parties and thus could not be held liable for direct infringement.

In the BMC Resources opinion, Judge Rader pointed out the fatal flaw in the claims-in-suit – they were drafted to effectively require at least four different entities to carry out the claimed method. For example, one claim recited in part:

A method of paying bills…the method comprising the steps of:

…

[prompting a caller for various information]

…

accessing a remote payment network associated with the entered payment number, the accessed remote payment network determining, during the session, whether sufficient available credit or funds exist in an account associated with the entered payment number to complete the payment transaction,

and upon a determination that sufficient available credit or funds exist in the associated account, charging the entered payment amount against the account associated with the entered payment number…²  

While not apparent from the claim’s plain language, infringement of this claim effectively requires action by as many as four autonomous parties. This is because of the way debit transactions are processed in the real-world. For example, the claimed steps of determining whether sufficient funds exist and charging an account would generally require both a debit network and an underlying card-issuing financial institution.  Neither of these entities would typically perform the various prompting steps recited in the claim, and thus, practically speaking, a payee’s agent is also required. Finally, depending on how the claim is construed, a caller may also be needed. Thus, the claimed method would almost never be performed in the real world without action by four parties: (1) a caller, (2) a payee’s agent (i.e., the party that does the prompting), (3) a remote payment network (i.e., the debit network that checks for sufficient funds and initiates an account charge), and (4) a financial institution (i.e., the bank that informs the debit network whether sufficient funds exist and settles the charge). It is highly unlikely that all four of these parties would ever be under common direction or control such that a single entity could be held liable for infringing the claim.

As Judge Rader suggests, had the claim instead been drafted to focus on a single entity, infringement by a single party would be more easily captured. For example, instead of reciting “the accessed remote payment network determining,” the applicant in BMC Resources could have drafted the claim to recite steps such as “sending account information to a remote network” and “receiving a response from a remote network indicating sufficiency of funds.” Such a claim would presumably have been infringed by the defendant and thus have been significantly more valuable to BMC.

A similar claim drafting miscue was highlighted in Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318 (Fed. Cir. 2008). There, the patentee Muniauction, Inc. sued the defendant Thomson Corporation for infringement of its patent directed to methods for conducting bond auctions over the internet. Just like in BMC Resources, the plaintiff in Muniauction conceded that the defendant did not, by itself, perform each of the method steps.  Reinforcing its BMC Resources holding, the Federal Circuit reversed the lower court’s finding of infringement and instead held that the defendant lacked the requisite exercise of direction or control over the third parties with whom it combined to perform each step of the claim. In other words, while Thomson performed most of the “auction” steps recited in the claim, it did not infringe because the recited “inputting” steps were performed by individual bidders over whom Thomson had no control.

Like in BMC Resources, the patentee in Muniauction had drafted claims that would require at least two parties to infringe in most instances. For example, one claim-in-suit³ recited “inputting data associated with at least one bid” (a step typically performed by a bidder sitting at their computer) and various other steps such as computing an interest cost value, submitting the bid over an electronic network, and displaying the bid on an issuer’s computer (all steps typically performed by an online auction system). Muniauction may have prevailed had they simply drafted the claim with only the online auction system’s perspective in mind, i.e., by reciting receiving bid data instead of inputting bid data.

To summarize, for the claims at issue in both BMC Resources and Muniauction, it would be extremely rare for any one entity to perform the entire claim. Accordingly, the claims in those cases are effectively only enforceable in the limited situation where multiple parties acting under common direction or control combine to perform the claim. Unfortunately for the patentees, any such parties could simply enter into arms-length agreements to avoid infringement liability. Had BMC and Muniauction drafted their claims to focus on a single entity, this undesirable result could likely have been avoided. 

 ¹ BMC Resources, 498 F.3d at 1380-81; see also Muniauction, 532 F.3d at 1329.
 ² Claim 7 of U.S. Patent No. 5,870,456, combined here with the independent claim from which it depends and truncated for clarity.  (Emphasis added).
 ³ Claim 1 of U.S. Patent No. 6,161,099.

This advisory was prepared by Nutter's Intellectual Property practice. For more information, please contact your Nutter attorney at 617-439-2000.

The U.S. Supreme Court has yet to issue any intellectual property (“IP”) related opinions since Justice Sotomayor joined the Court, but she will undoubtedly participate in a number of IP cases in the future. One case almost certainly familiar to patent practitioners, In re Bilski 545 F.3d 943 (Fed. Cir. 2008), was recently heard by the Court and will be decided later this Supreme Court term.

Justice Sotomayor has gathered experience in intellectual property issues throughout much of her legal career. After five years as an assistant district attorney in the New York County District Attorney’s Office, Justice Sotomayor joined Pavia & Harcourt in Manhattan. While there in private practice from 1984-1992, she handled a variety of cases in a variety of fields, including international law. Her focus, however, was on IP litigation, primarily related to trademarks and copyrights.

After her tenure in private practice, Justice Sotomayor served as a judge in the U.S. District Court for the Southern District of New York from 1992-1998. As is typical for a judge at the Federal District Court level, Justice Sotomayor heard a wide variety of cases, including a full range of IP issues involving patents, trademarks, and copyrights. She was involved as a District Court Judge with two patent cases that were heard on appeal by the U.S. Court of Appeals for the Federal Circuit. The Federal Circuit affirmed her decision in REFAC Intern., Ltd. v. Lotus Dev. Corp., 887 F.Supp. 539 (S.D.N.Y. 1995), aff’d, 81 F.3d 1576 (Fed. Cir. 1996) holding a patent unenforcable due to inequitable conduct related to affadavits submitted during prosecution to address 35 U.S.C. § 112 issues. Inequitable conduct in patent prosecution has become more of a hot button topic in the legislature and the judiciary in recent years, so it would not be unreasonable to suspect that Justice Sotomayor may revisit the issue as a judge on the nation’s highest court.

In another case at the District Court, Justice Sotomayor made a Markman claim construction ruling that was overturned by the Federal Circuit in Intellectual Property Dev., Inc. v. UA-Columbia Cablevision of Westchester, Inc., 336 F.3d 1308, 1317 (Fed. Cir. 2003) (initial claim construction ruling by J. Sotomayor, 1998 WL 142346 (S.D.N.Y. 1998), subsequent rulings after J. Sotomayor’s departure from the court, 2002 WL 10479 (S.D.N.Y. 2002)).

One of Justice Sotomayor’s most well known cases at the District Court involved a copyright issue. In Tasini v. New York Times Co., 981 F. Supp 841 (S.D.N.Y. 1997), the District Court ruled that the New York Times was permitted to include material in a LexisNexis database that was published by the newspaper but written by freelance journalists. This decision was reversed, however, by the Second Circuit in Tasini v. New York Times Co., Inc., 206 F.3d 161 (2000). The U.S. Supreme Court upheld the Second Circuit’s ruling in New York Times Co., Inc. v. Tasini, 121 S.Ct. 2381 (2001), deciding that the New York Times could not license the work of freelance journalists without the journalists receiving compensation. This case is the only District Court case of Justice Sotomayor’s that was ultimately heard by the U.S. Supreme Court. Copyright cases are not frequently heard at the U.S. Supreme Court, but should one arise during Justice Sotomayor’s tenure on the Court, this case could likely be revisited even if not directly on point with a case’s particular copyright issue.

In another copyright case decided by Justice Sotomayor as a District Court judge, she ruled and the Second Circuit affirmed that a trivia book regarding the television show Seinfeld was protectable expression under the Copyright Act. Castle Rock Entm’t Inc. v. Carol Publ’g Co., 955 F. Supp. 260 (S.D.N.Y. 1997); 150 F.3d 132 (2nd Cir. 1998). A nation rejoices, yada, yada, yada.

Justice Sotomayor also heard IP cases while seated at the Second Circuit from 1998 to immediately before her Supreme Court appointment. With patent cases typically being appealed to the Federal Circuit rather than one of the other appellate courts, Justice Sotomayor heard relatively few patent cases. Of note she was involved with Innomed Labs, LLC v. Alza Corp., 368 F.3d 148 (2nd Cir.2004) and In re Visa Check/MasterMoney Antitrust Litigation, 280 F.3d 124 (2nd Cir. 2001), both concerning patent issues in an antitrust context.

While it is uncertain how many IP-related cases Justice Sotomayor will hear while seated on the Supreme Court and how she will decide such cases, it should be beneficial to the IP community to have a Justice versed in IP cases as a lower court judge and, unique to the Court, as a practitioner.

This advisory was prepared by Nutter's Intellectual Property practice. For more information, please contact your Nutter attorney at 617-439-2000.