IP Law Bulletin

In the January and March issues of the IP Bulletin, we reported about the initiative implemented by the USPTO to reduce the backlog of patent applications by permitting small entity applicants to expressly abandon one application and file a petition seeking special status for a second application. We are pleased to announce that this program been extended through the end of the year, or until the receipt of 10,000 qualifying petitions, whichever comes first. More significantly, this program is no longer limited to small entity applicants. Now all applicants are eligible to “dump” one patent application to “bump” a second application up in the queue. Each entity seeking to take advantage of this program is limited to 15 applications. An entity is based on ownership, and thus applications assigned to an entity, or subject to an obligation to assign to an entity, are included as being owned by that entity.

In order for an application to qualify to be “bumped,” both applications must be unexamined, must have been filed earlier than October 1, 2009, and must either be owned by the same party or have at least one common inventor. Further, the abandoned application cannot be revived, but a refund of an applicant’s search fee and excess claims fee can be recovered. All patent application owners are encouraged to evaluate their current patent portfolio to determine if they have applications they are willing to abandon in order to pursue another application in a quicker time frame.

Additional details and requirements are available from the USPTO website via this link.

The Federal Circuit's decision last year in Abbott Labs. v. Sandoz, Inc.¹, clarified conflicting precedent regarding product-by-process claims. The court held that infringement of a product-by-process claim requires showing that an equivalent process was used in making the alleged infringer’s product. In light of this decision, it would be prudent for patent applicants to carefully evaluate their inventions to determine if their inventions implicate the specialized circumstances in which the product-by-process claim format is useful. If their inventions warrant this format, applicants should consider the impact such claims may have during the different stages of patent procurement and patent enforcement.

A typical product or apparatus claim recites a product in terms of its structural composition and/or function, while a typical process or method claim recites a process in terms of the steps necessary to perform it. As implied by its name, a product-by-process claim is a hybrid of typical product and process claims that recites a product in terms of the process in which it is produced. Product-by-process claims are only proper when the inventive product cannot be recited in terms of its structure but can only be recited in terms of the process used to create it. Such circumstances are generally rare. They usually arise in very complex chemical or biotech arts where a structure may be invented but include a composition that is unidentifiable, at least given the confines of current technology.

The USPTO evaluates product-by-process claims for patentability differently than typical product claims and process claims. In contrast, courts evaluate product-by-process claims for validity and infringement similar to typical product claims and process claims, and thus in a different manner than the USPTO. These differences between evaluation of product-by-process in prosecution and after issuance give rise to a number of issues that patent applicants should be cognizant of during prosecution.

As discussed in the Manual of Patent Examining Procedure §§ 2113 and 2173.05(p), and as confirmed by the Federal Circuit in Abbott, product-by-process claims are examined only with regard to the product they recite. In other words, for a product-by-process claim to be rejected for substantive reasons, the prior art need only disclose the claimed product, regardless of the process used to create the prior art product, except to the extent that any portion of the recited process includes structural product limitations, which are considered for patentability. For example, a product-by-process claim reciting “Product X, produced by Step 1, Step 2, and Step 3,” would be examined by the USPTO only on the basis of the existence of Product X in the prior art and of any structural product limitations recited in any of Steps 1, 2, and 3. The USPTO’s determination of a product-by-process claim’s patentability helps ensure that patents do not issue covering known products, thereby depriving the public of the right to make and use recognized goods.

As decided in Abbott, courts must consider both the product itself and the recited process steps when assessing validity and infringement of product-by-process claims. Thus, a potentially-infringing product will only infringe a product-by-process claim if the potentially-infringing product is the same as the claimed product and is produced in the same manner as required by the claim. Such an evaluation clearly differs from the USPTO’s patentability evaluation of product-by-process claims.

The differing standards for pre-issuance and post-issuance evaluation of product-by-process claims create greater unpredictability in enforcement of product-by-process claims. Judge Newman’s dissent in Abbott discusses this dichotomy, emphasizing its unacceptability yet apparent endorsement by the majority. At least while this apparent tension exists between examination at the USPTO and adjudication in the courts, it may be prudent for patent applicants to carefully evaluate their inventions to ensure that they present claims in product-by-process form only when required.

As mentioned above, product-by-process claims are very limited in their applicability to an invention. Patent applicants should keep this narrow applicability in mind and carefully consider whether their product inventions can only be defined in terms of their production, in which case product-by-process claims may be desirable, or if their product inventions can be more traditionally claimed in terms of structure.

If product-by-process claims are pursued, patent applicants should also take care in presenting process steps in the claim even if the process steps are not commented on during prosecution because the process steps will become important during any post-issuance evaluation of the claim. Furthermore, any comments regarding the process steps that are made by the applicant during prosecution may give rise to estoppel, just as can occur with any other claim type.

Patent applicants should also consider performing a pre-issuance patentability search on at least the process steps recited in product-by-process claims because these recitations will not be independently searched and examined by the USPTO. Such a search may help limit any surprises during any post-issuance litigation in which process steps not particularly evaluated for patentability during patent prosecution will now be subject to interpretation and increased consideration.

¹566 F.3d 1282, 90 U.S.P.Q.2d 1769 (Fed. Cir. 2009).

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

In In Re Suitco Surface Inc., the Federal Circuit reaffirmed its support of the Broadest Reasonable Interpretation Standard (“BRI”) standard. It is well settled law that the USPTO applies a different claim interpretation standard during the examination and reexamination process than the courts apply when construing the claims of an issued patent. Examiners at the USPTO give the words in claims their “broadest reasonable meaning” “consistent with the specification,”  “as they would be understood by a person of ordinary skill in the art.” The Federal Circuit applies a different standard of review to USPTO claim constructions. The Federal Circuit reviews interpretations by the USPTO under a reasonableness standard while it reviews district court interpretations of claims in issued patents de novo (without deference).

The main justification for the BRI standard is to ensure adequate public notice of the scope of the patent. During prosecution, the USPTO can stretch the meaning of the application’s claims to their broadest reasonable bounds and the applicant can then engage the examiner with argument or amendment. Through this process ambiguities can be addressed and clarifications made to ensure the scope of the patent is commensurate with the inventor’s contribution. Application of the BRI standard also helps prevent the USPTO from incorrectly granting a patent based on a narrow interpretation that is later invalidated by a court through a broader interpretation that encompasses invalidating prior art.

The BRI standard, however, has been met with some criticism. Critics note that application of a different standard in examination than in the courts results in two different “inventions,” which is contrary to the patent statute¹. They also note that the BRI standard can cause the USPTO to incorrectly reject applications due to overly-broad interpretations. And they note that the BRI standard adds another level of uncertainty to the already uncertain and unpredictable process of claim construction.  

In In Re Suitco Surface Inc., the USPTO rejected certain claims of U.S. Patent No. 4,944,514 (the “’514 patent”), as anticipated during a reexamination proceeding. The ’514 patent claims a “floor finishing material” for use on athletic courts, bowling lanes, and other “floor surfaces made of wood, linoleum, terrazzo, [or] concrete.” The invention is essentially a protective layer for a floor made from a flexible thin plastic sheet that is attached to the top surface of the floor with an adhesive layer. Lines, logos, and other decorations can be etched to the underside of the sheet before it is installed.  

Although the ’514 patent was an issued patent, its claims were reviewed without deference under the BRI standard by an examiner, and later by the Board, because it was the subject of an ex parte reexamination. The Board affirmed the examiner’s rejection of claim 4 in view of either Amos (U.S. Patent No. 3,785,102) or Barrett (U.S. Patent No. 4,543,765) and claim 8 in view of Amos. Claim 4 of the ’514 patent, written in Jepson claim format, is as follows:

On a floor having a flat top surface and an improved material for finishing the top surface of the floor, the improvement comprising:   

at least one elongated sheet including a uniform flexible film of clear plastic material having a thickness between about one mil and about twenty-five mils and 

a continuous layer of  adhesive material disposed between the top surface of the floor and the flexible film, the adhesive layer releasably adhering the flexible film onto the top surface of the floor. (emphasis added).

In its rejection, the Board construed the term “material for finishing the top surface of the floor” to mean “requiring a material that is structurally suitable for placement on the top surface of a floor.” The Board therefore construed the claim such that the material could be used as an intermediate layer placed below other layers rather than just as a top finishing layer. In response to the Board’s construction, the Federal Circuit held that “[a] material cannot be finishing any surface unless it is the final layer on that surface.” The Court concluded that the Board’s interpretation did not “reasonably reflect the plain language and disclosure of the ’514 patent” noting that under the Board’s construction, “a prior art reference with carpet on top of wood, on top of tile, on top of concrete, on top of a thin adhesive plastic sheet” would anticipate claim 4.   

Chief Judge Rader, writing an opinion joined by Judges Prost and Moore noted that although the USPTO is to give claims their broadest reasonable construction, “[t]he broadest-construction rubric coupled with the term ‘comprising’ does not give the USPTO an unfettered license to interpret claims to embrace anything remotely related to the claimed invention. Rather, claims should always be read in light of the specification and teachings in the underlying patent.” Here, the Board’s construction was contrary to the express language of the claim and the specification which disclosed a clear plastic material that is to be the final treatment or coating of a surface and not some intermediate layer. The court concluded that the Board’s construction was unreasonable in light of the claim and specification and remanded the case back to the USPTO for a new validity analysis using the appropriate standard.  

A second important issue the Federal Circuit declined to address was what deference, if any, the USPTO should give to a district court’s or the Federal Circuit’s construction of a claim in a subsequent reexamination. The ’514 patent had already been the subject of extensive litigation when the Court heard this appeal. The United States District Court for the Northern District of Illinois had construed claim terms after a Markman hearing and granted summary judgment to the defendant two different times. Each time, the Federal Circuit also construed claim terms and vacated and remanded. After the second remand, the defendant filed a request for reexamination which led to this appeal.  Notably, the first time the Federal Circuit reviewed the ’514 patent it held that “[i]n the context of claim 4, ‘finishing’ clearly refers to providing a clear, uniform layer on the top surface of a floor.” On this appeal, Suitco argued that the Board should have been bound by the Federal Circuit’s earlier construction of “material for finishing” and in the alternative, “that the Board’s adopted construction [was] unreasonable.” The Federal Circuit held that it did not need to address the first argument “because even under the broadest-construction rubric, the USPTO’s construction [was] unreasonable.”

The Suitco case is an example of what some patent practitioners see as a common problem?examiners’ unreasonable application of the BRI standard. The Suitco decision should prove useful for patent applicants when they face what they feel are unreasonable claim constructions by the USPTO under the BRI standard.        

¹See Dawn-Marie Bey & Christopher A. Cotropia, The Unreasonableness of the Patent Office’s “Broadest Reasonable Interpretation” Standard, 37 AIPLA Q.J. 285, 294 (2009).

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

Over the past ten years, the small Texas city of Marshall (population under 24,000) has been the capital of patent litigation. The combination of a fast docket, rigid local patent rules that expedite discovery and slow claim construction, plaintiff-favorable juries, and a disdain for transferring cases to other districts has made the Eastern District and Marshall, Texas a favorite forum in which to bring patent infringement actions. Recent challenges to some of these perceptions, however, raise doubts as to whether the Eastern District is still the patent-friendly district it once was and whether the Eastern District’s popularity may now be waning.

Emergence of the Eastern District as a Patent Hotbed

Soon after Judge T. John Ward was sworn into the federal bench in 1999, patent filings in the Eastern District exploded. In 2002, 32 patent cases were filed in the Eastern District, but by 2006 that number had grown to 234 new patent cases. Over 300 new suits were filed in 2008.

One of Judge Ward’s first acts was to issue local patent rules that laid out strict guidelines and provided for early discovery deadlines. These early deadlines quickly pushed cases forward and forced defendants to spend time, effort, and money at a much earlier stage than in some other districts. Further, the guidelines made certain deadlines, such as the claim construction hearing and the trial date, largely immovable.  Plaintiffs entered the Eastern District knowing that defendants would be unable to continuously delay trial. As a result, the Eastern District became known as a rocket docket with fast moving cases. The quick turn around to trial and the early onset of potentially expensive discovery costs were also viewed by patent plaintiffs as promoting settlement of cases early rather than late; a result that many plaintiffs, especially patent “trolls,” prefer to a full-blown and expensive trial.

Despite promoting early settlement, facing a trial is a real possibility as the Eastern District sends the second highest percentage of cases to trial among common patent forums. Further, the jury pool likely to sit on these trials is largely pro-plaintiff. A recent study determined that over 90% of potential jurors in the district favor protecting inventions through patents, 76% say they “strongly favor” patent protection, and 25% believe that the USPTO “rarely or never” makes mistakes in awarding patents. This pro-plaintiff lean was demonstrated in Centocor, Inc. v. Abbott Laboratories (07-cv-00139, E.D. Texas)(Ward), where a jury awarded $1.67 billion in damages after a trial that lasted just one week.

Many defendants who find themselves in the Eastern District would prefer to have their case transferred to another forum. Historically, however, the judges of the Eastern District have been very reluctant to do so, only granting approximately 33% of transfer motions, while other districts see transfer motions granted at rates closer to 50%. Due to this low success rate, many attorneys have declined to file motions to transfer at all, even when a connection to the Eastern District appears lacking.

The Turning of the Tide

The surrounding environment that made the Eastern District of Texas a favorite place to bring patent suits may now have changed. While the Eastern District may have once been a rocket docket, the tremendous amount of patent cases brought in the district have bogged down the court. It now takes approximately 16 months for a case to be disposed of, ranking the Eastern District 28th among common patent districts, and it takes approximately 25 months for a case to go to trial, ranking the Eastern District seventh among its contemporaries. In contrast, it takes the Western District of Wisconsin approximately six months to dispose of a matter and eight months to bring the case to trial.

The percentage of plaintiff-favorable verdicts has also declined in recent years. Though plaintiff’s emerge victorious in a comparatively high 40.3% of cases that go to trial (relative to the country-wide average of 32.5%), that number has fallen from as high as 75% in the past. The Eastern District now ranks sixth among common patent forums, behind even its neighboring forum, the Northern District of Texas, and that district’s top-ranked 55.1% plaintiff win percentage.

Finally, the Federal Circuit has recently acted to reign in the worst abuses of discretion regarding denial of motions to transfer. In 2008, the Federal Circuit reviewed the mandamus petition of In re TS Tech¹. The court overruled the Eastern District and ordered the district to transfer the case, in part because there were no witnesses, parties, or evidence located in the forum. A short time later, the Federal Circuit ordered the Eastern District to grant transfer in In re Genetech², holding, among other things, that the Eastern District improperly relied on its “central location” between participants on the West and East coasts. In late 2009, the Federal Circuit next decided In re Hoffman-La Roche Inc.³ and In re Nintendo Co.⁴ In Hoffman, the court again rejected the Eastern District’s refusal to transfer while also noting that the shipment of 75,000 pages of documents to the Plaintiff’s attorney in Texas in anticipation of litigation was an attempt to manufacture a Texas connection and manipulate venue, and that such manipulation is viewed unfavorably. In Nintendo, the Federal Circuit again held that the “centralized location” of the Eastern District was an improper consideration.

As a result of these developments, the Eastern District appears to have lost some of its luster for patent plaintiffs. In the Fall of 2008, the rate of new patent cases filed in the Eastern District fell from 15.5 suits per month to 7.5 suits per month. The Eastern District, which had been the first in the number of patent case filings in 2008, fell to fifth in 2009. Additionally, by early 2009, the number of motions to transfer venue filed by defendants had increased by 270%.

Shift in Tactics for Patent Plaintiffs

The Eastern District is still one of the most popular patent districts, and patent plaintiffs who choose the Eastern District have changed their tactics to attempt to keep the cases from being transferred. In response to increased scrutiny over the Texas connections to these patent lawsuits, plaintiffs have used such tactics as incorporating or opening an office in the Eastern District, pre-selecting experts and other witnesses that are local, or including de minimis local defendants in the patent suit such as local “mom and pop” companies.  

Despite the language of Hoffman denigrating forum manipulation, these tactics have not elicited much response from the courts. The Eastern District recently rejected a defendant’s argument that a case should be transferred because the plaintiff moved its location from Michigan to Texas in order to manipulate venue. The court declined to “scrutinize the litigants business decisions” in order to determine whether this move served a business purpose or was a mere tactic to manipulate venue. Similarly, the Federal Circuit, in a nonprecedential order, denied a writ for mandamus despite stating that the plaintiff’s status as a “Texas entity,” formed two months prior to suit and headquartered in the office of its litigation counsel, was “not entitled to significant weight.” The court reasoned that the defendant had failed to show that the proposed forum was more convenient.  

In one instance, however, the court severed local Texas defendants from the case and transferred the rest of the matter to the Northern District of California when it became apparent that the Texas defendants were added in an attempt to keep the matter in the district.  The circumstances of this case, however, show that it may be a potential outlier. The case was pending when TS Tech was decided, and the plaintiff seemingly acknowledged that it had amended the complaint to add local parties specifically to avoid the implication of TS Tech. A plaintiff who includes local Texas companies from the beginning of the suit will likely find it easier to avoid this same fate, so long as claims against those local companies appear nonfrivolous.
    
Future of Patent Litigation in the Eastern District

Over the past decade, the Eastern District has been one of the most popular forums among patent plaintiffs for bringing suit. Though it can no longer be considered a rocket docket by virtue of its own success in attracting numerous law suits, and a plaintiff’s chance of success at trial has slightly diminished over time, the Eastern District remains the fifth most popular destination for plaintiffs.

The real danger to the Eastern District’s continued dominance is the Federal Circuit’s recent crack down on abuse of discretion in denying motions to transfer when cases have little connection to the district. While this increased scrutiny will, no doubt, preclude the filing of many cases that have no pretense of any connection to Texas, inventive plaintiff’s attorneys have already adjusted to this new landscape by devising ways to manufacture such a connection. So far, these new methods have avoided judicial scrutiny, and it seems likely that patent plaintiffs will continue to choose to forum shop in the Eastern District of Texas.

¹In re TS Tech USA Corp (Fed. Cir. 2008).
²In re Genetech, Inc. (Fed. Cir. 2009).
³In re Hoffman-La Roche Inc., 541 F.3d 1115 (Fed. Cir. 2008).
⁴In re Nintendo (Fed. Cir. 2010).

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

The Supreme Court handed down its long-awaited decision on “business method” patents in the case of Bilski v. Kappos (No. 08-964, June 28, 2010) last month and, 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 took the simplest approach, relying on long-standing precedent that one cannot patent an abstract idea to conclude that Bilski’s method of hedging commodity trades was not a patent-eligible process but, rather, just an ineligible abstract idea.

Although it affirmed the judgment of the Court of Appeals for the Federal Circuit, the Supreme Court rejected that court’s rationale. Writing for the majority, Justice Kennedy said that the so-called machine-or-transformation standard adopted by the Federal Circuit as a litmus test of patent eligibility violated principles of statutory interpretation and posed a risk of obscuring the underlying objectives of the patent system. Under that test, a method is deemed eligible for patenting only if it is tied to a specific machine implementation or it transforms an article from one state to another. "The machine-or-transformation test may well provide a sufficient basis for evaluating processes," said Kennedy, but "should not be the sole criterion for determining the patentability of inventions in the Information Age." Justice Kennedy did not specify any other criterion per se, but he suggested that it ought to be in line with the Supreme Court precedent against patenting abstract ideas and that it be less extreme than the machine-or-transformation standard.

Kennedy refused to categorically exclude business methods from patent-eligibility, suggesting 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…." It was on this point that the Court lacked unanimity. In a separate opinion, Justice Stevens traced the history of patent law from early English common law and American jurisprudence to the last comprehensive revision of the U.S. Patent laws in 1952. 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.” Justices Ginsberg, Sotomayor, and Breyer were in agreement with Stevens.

Writing separately and joined by Justice Scalia, Justice Breyer counseled the lower courts not to infer from yesterday's opinion any support for the Federal Circuit's earlier test of patent eligibility from State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998). In that case, the Federal Circuit had ruled that any method which produced a “useful, concrete and tangible result” was patentable. That was the prevailing standard until it was repudiated by the same court in Bilski, in 2008. Breyer saw little value in re-adopting that standard, ridiculing the prior test as having led to granting of patents that ranged from the “somewhat ridiculous to the truly absurd."

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 be wary since 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. Indeed, future decisions from the Federal Circuit may limit the boundaries of patent-eligibility for business methods, as Justice Kennedy’s majority opinion advised that “[i]f the Court of Appeals were to succeed in defining a narrower category…of patent applications that claim to instruct how business should be conducted, and then rule that the category is unpatentable because, for instance, it represents an attempt to patent abstract ideas, this conclusion might well be in accord with controlling precedent.” The majority opinion also left open the possibility that the Federal Circuit could define “other limiting criteria that…are not inconsistent with [the Patent Act’s] text.”

Hence, in the short term, applicants seeking business method patents will need to draft their claims in a way that avoids their rejection as merely “abstract” ideas. Moreover, since both Kennedy’s and Steven’s 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 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 advertising.

The United States Patent and Trademark Office (“USPTO”) recently proposed a “Three-Track” patent application processing system to provide a choice of examination timelines and to reduce application pendency times generally. The proposed three tracks are: (I) Prioritized Examination; (II) Traditional Examination; and (III) Delayed Examination. The prioritized examination would allow applicants to pay a fee to expedite the examination of the application, with a goal of issuing a first Office action on the merits within four months and a final disposition within one year of prioritized status being granted. The traditional examination would continue to follow current timelines and procedures. The delayed examination would allow for an applicant-controlled delay of up to 30 months prior to docketing the application for examination, at which point it would be treated like a traditional examination. The delayed examination would be for non-continuing applications that were first filed in the United States. Applications based on a prior foreign-filed application would receive no action until the USPTO receives a copy of any international search report, a copy of the first office action from the foreign office, and a copy of an appropriate reply to the foreign office action. Written comments related to this proposal must be submitted to the USPTO by August 20, 2010, and a public meeting regarding the same will be held at the USPTO on July 20, 2010 (registration closes on July 16, 2010 at 5 PM).

For additional information about the proposed “Three-Track system, click here.

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.