IP Law Bulletin

The start of a new year is always a time to reflect on the year that has passed before looking forward. To that end, below is a recap of some of the intellectual property news highlights from the year (in no particular order):

    Supreme Court Addresses Patent Eligibility of Business Methods in Bilski Case

In June, the Supreme Court handed down its long-awaited decision on “business method” patents in the case of Bilski v. Kappos. In a rare instance of unanimity, the justices agreed that Bilski’s method of hedging risks in commodity trading was not eligible for patent protection. The Court reached this determination by taking a simple approach—relying on long-standing precedent that one cannot patent an abstract idea. The Court affirmed the judgment of the Federal Circuit but rejected that court’s rationale. The Court refused to endorse the so-called “machine-or-transformation” test as the standard to determine patent eligible subject matter, though the Court did indicate that the test can provide a “useful and important clue” for such determinations. While a number of questions about the patentability of business methods remain, applicants desiring business method claims should draft claims that do not portray the inventive methods as abstract ideas. Applicants may further consider drafting claims that do pass the “machine-or-transformation” test as a possible safe harbor. For more information on this issue, see the discussion of the Federal Circuit’s Prometheus decision in this issue. More information on the Bilski decision can be found in Nutter’s July edition of the IP Bulletin.

The Court did divide on the issue of whether business method patents are categorically excluded from patent-eligibility. Justice Kennedy, writing for the majority, suggested that “…the Patent Act leaves open the possibility that there are at least some processes that can be fairly described as business methods that are within patentable subject matter…." In a separate opinion, Justice Stevens concluded that Congress never intended to make any methods of doing business patentable. According to him, “[t]he breadth of business methods, their omnipresence in our society, and their potential vagueness also invite a particularly pernicious use of patents that we have long criticized.”

The Bilski decision leaves many questions unanswered. Following its time-honored traditions, the Court chose to avoid far-reaching pronouncements and let the law of patent-eligible subject matter evolve in due course. Those who seek business method patents in the future, however, will need to carefully consider their claims because Justice Stevens and the other three Justices who joined in his concurring opinion clearly share the view that business method patents are not authorized by U.S. Patent laws. Hence, in the short term, applicants seeking business method patents may want to draft their claims in a way that avoids their rejection as merely “abstract” ideas. Moreover, since both Kennedy and Stevens’ opinions agreed that the “machine-or transformation” test is, while not an exclusive test, nevertheless “a useful and important clue” for determining patent eligibility, applicants who draft claims to meet this test may well continue to have a safe harbor. This decision also suggests to applicants in the biotech and gene patenting world that diagnostic method patents will likely be patent eligible, and might serve as a useful alternative to isolated gene patents, which, in light of the Myriad decision discussed below, may be of questionable patent eligibility.

    Federal Circuit Confirms the Written Description Requirement for Patent Application

The May issue of Nutter’s IP Bulletin discussed the Federal Circuit’s en banc decision in Ariad Pharmaceuticals, Inc. v. Eli Lilly and Co., holding that there was a “written description” requirement that is distinct from other requirements of the patent laws. The decision all but assures that the USPTO will continue its policy of heightened scrutiny for biotechnology patent applications.

Critics of the Ariad decision argue that finding a separate written description test in 35 U.S.C.  § 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 claimed 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 the examination of biotechnology inventions. Since 2001 the USPTO has had guidelines in place for examiners that assume the written description test is indeed a separate test and that it should be applied to all inventions in unpredictable arts. Critics of the USPTO training materials have suggested that the guidelines encourage 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, these critics complain that biotechnology inventions are scrutinized for their concrete examples and examiners seek to limit the claims to cover only 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. Practitioners should also be aware that in Ariad the written description was used as a litigation tool to invalidate a patent. Therefore multiple examples, multiple species, and detailed characterization of the features of the invention should ideally be presented in an application whenever possible. Common features or structures between the species should also ideally be identified. The written description requirement may require further disclosure 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, it may be helpful to claim other sequences that have 70% identity, 80%, 90%, etc.

The problem presented in the Ariad case, however, will be difficult for applicants to overcome because 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.

    Myriad’s Gene Patents

In March, the Southern District of New York decided Association for Molecular Pathology v. U.S. Patent and Trademark Office involving patent claims related to so-called “gene patents.” The plaintiffs asked the federal district court to invalidate several gene patents owned by the University of Utah and Myriad Genetics that are directed to two isolated gene sequences, BRCA1 and BRCA2, that researchers had discovered were correlated with a heightened susceptibility to breast cancer. In an important decision largely affecting research institutions and pharmaceutical companies (and seemingly ignoring Federal Circuit precedent), the court determined that various ones of the patents’ claims were invalid for encompassing non-statutory subject matter. For further discussion of this case, see the May issue of Nutter’s IP bulletin. As expected, the case has been appealed to the U.S. Court of Appeals for the Federal Circuit (Case No. 2010-1406).

On October 29, 2010, the U.S. Department of Justice (DOJ) filed an amicus brief in support of the S.D.N.Y. decision that isolated human genomic DNA is not patentable, a position counter to that of the USPTO. The DOJ drew a line between human-engineered DNA, which it believes are patent-eligible, and isolated, but otherwise unmodified DNA, which it believes are not patent eligible. Critics argue in support of the Myriad patents, stating that isolated genes are not merely products of nature and differ from naturally occurring genes.

While the case remains pending, prosecution strategies for DNA-related patents should be carefully considered. Recitation of “isolated” genes or DNA could raise potential issues. Emphasis should perhaps be placed on the non-naturally occurring aspects and associated human-effort, such as difficulties in, and inventive aspects of, isolating, purifying, and characterizing the gene. The use of genes in diagnostic assays might also be an effective strategy, given the Supreme Court’s Bilski decision (discussed above).

    Federal Circuit Expected to Clarify Inequitable Conduct Standards in Therasense Appeal

The March 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 holding 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 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. As reported in the May issue of Nutter’s IP Bulletin, 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 opinion, the Federal Circuit presented six issues for the parties to consider for briefing; each of which 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 failed to disclose information to the USPTO that is material to the determination of patentability and withheld that information 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.; Hazel-Atlas Glass Co. v. Hartford-Empire Co. (overruled on other grounds by Standard Oil Co. v. United States); Keystone Driller Co. v. Gen. Excavator Co. 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.
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. Many 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. Several amicus briefs have been filed and oral arguments were heard from Plaintiff Abbott (i.e., Therasense), Defendant Becton, Dickinson, Defendant Nova, and the USPTO on November 9, 2010. The decision is expected to provide clarification on both the materiality and intent standard of inequitable conduct.

    Wyeth and the USPTO’s Miscalculation of Patent Term Adjustment

In January, the Federal Circuit decided Wyeth v. Kappos, affirming that the USPTO had been miscalculating, and typically under-calculating, Patent Term Adjustment (PTA). The case was first discussed in the January issue of Nutter’s IP Bulletin. The miscalculations occurred especially in cases where applications were pending for more than 3 years. A patent is valid for 20 years from its filing date; PTA extends the effective term of a patent due to delays in its issuance. Under 35 U.S.C. § 154(b), a patent can receive a term adjustment for, among other things, (a) delays caused by the USPTO in meeting certain examination deadlines and (b) each day that issuance of the patent is delayed longer than 3 years due to delays by the USPTO. These delays are subject to an “overlap limitation,” which says the “the period of any adjustment granted…shall not exceed the actual number of the days the issuance of the patent was delayed.” The dispute in this case centered on the interpretation of how to calculate the actual number of days the issuance of the patent was delayed in an overlap situation. The Federal Circuit sided against the USPTO’s method of calculation, and as a result the decision may give many patent holders an increase in patent term. Patent owners should consider reviewing any PTA calculations provided by the USPTO and compare the USPTO’s calculation to the post-Wyeth calculation method.

In response to this decision, the USPTO announced an interim procedure for requesting PTA recalculation and initiated an overhaul of the computer system used to calculate PTA. For more information on this program, see the March issue of Nutter’s IP Bulletin. As of March 2, 2010, PTA calculations should be calculated properly by the USPTO computer systems. Nevertheless, patent owners should continue to monitor their patents to confirm the accuracy of PTA calculations. Further, patent owners should particularly review patents that were issued between September 2, 2009 and March 1, 2010, which is the time period during which PTA calculations were likely not calculated correctly. For patents issued during this time period, applicants have 180 days to petition to correct the PTA. Unfortunately, there is no straightforward way to request PTA recalculation for patents in which more than 180 days have elapsed since the issue date. Applicants should also understand the measures they can take to correct any miscalculated PTA for patents that issue on or after March 2, 2010. Some patent owners are challenging the USPTO for older patents as well. For example, Novartis filed suit in the District of Columbia earlier this year challenging PTA on several patents with grant dates going as far back as 2003.

The spotlight now shining on PTA provides an opportune time to consider simple ways practitioners can limit any loss of PTA. As discussed in the March issue of Nutter’s IP Bulletin, many practitioners are unaware that the filing of an information disclosure statement (IDS) can result in up to a four month loss of PTA. PTA loss can occur when an IDS results in the mailing of a supplemental office action or notice of allowance. PTA loss can also occur in certain situations when an IDS is filed after a response to an office action, after a decision by the Board of Patent Appeals and Interferences (BPAI) or a federal court, or after a notice of allowance. However, any PTA loss that results from filing an IDS can be avoided if the IDS is filed in conjunction with filing a statement under 37 C.F.R. § 1.704(d), which affirms that any cited reference was first cited in any communication from a foreign patent office in a counterpart application and that such communication was not received by any individual designated in 37 C.F.R. § 1.56(c) more than thirty days prior to the filing of the IDS.

    Other IP Highlights During 2010:

• The USPTO initiated and extended the “Green Technology Pilot Program,” which allows for an applicant to petition for his or her application to be examined more quickly if the application pertains to the development of a renewable energy source or energy conservation, or the reduction of greenhouse gas emissions, discussed in both the January and November issues of Nutter’s IP Bulletin.
• The Board of Patent Appeals and Interferences clarified the standard of review for an examiner’s rejection in ex parte Frye, discussed in the May issue of Nutter’s IP Bulletin.
• The USPTO issued 2010 KSR Guidelines Update for the evaluation of obviousness, discussed in the November issue of Nutter’s IP Bulletin.

    Big IP News on the 2011 Horizon:

• The Supreme Court has agreed to hear Microsoft’s appeal in Microsoft Corp. v. i4i Ltd. Partnership, where it will decide whether clear and convincing evidence—or some lesser standard—should apply to evidence presented to a jury about a prior art reference that was not considered by a patent examiner during prosecution. Oral arguments will be heard early this year. For more information, see the discussion in this issue.
• The Supreme Court granted a writ of certiorari in Global-Tech Appliances Inc. v. SEB SA, a case where the Federal Circuit held that a potential infringer can have the necessary intent to commit induced infringement by acting with “deliberate indifference of a known risk.” This case was discussed in the March issue of Nutter’s IP Bulletin. 
• The Supreme Court also granted cert in a case related to patent ownership stemming from the Bayh-Dole Act. In Board of Trustees of the Leland Stanford Jr. Univ. v. Roche Molecular Sys. Inc., the Court will determine the ownership rights of universities in inventions derived from federally sponsored research. This case was also discussed in the March issue of Nutter’s IP Bulletin.

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

This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.