In re Hyon: Substantial Evidence Standard Helps Preserve Finding of Obviousness

By Chris Reaves

A recent appeal of a lengthy prosecution ended last week, when the Federal Circuit in In re Hyon, 102 USPQ2d 1889 (Fed. Cir. 2012) upheld the Board of Patent Appeals and Interferences (BPAI) findings that a person of ordinary skill would have reason to combine two references to create the invention at issue.  The Board’s decision, though possibly “flawed,” could not be found unreasonable under the applicable standard of review, emphasizing the challenge that patent prosecutors face in overcoming a factual finding.

Background

The applicants, Suong-Hyu Hyon and Masanori Oka, were granted U.S. Patent No. 6,168,626 on a specific type of “Ultra High Molecular Weight Polyethylene” (abbreviated throughout the patent and the opinion as “UHMWPE”), and on the method for creating these material.  The inventors intended the material to be used for artificial joints although the claims were not limited to this embodiment.  The patent had only eleven claims, with limitations such as thickness of the UHMWPE and orientation of the crystal planes within.

Deciding these limitations were unnecessary, the applicants filed a reissue application (No. 10/643,674) within the two-year window, cancelling the original claims and adding several dozen new claims.  These new claims generally consisted of a method of four steps:

(a) crosslinking an ultra high molecular weight polyethylene block having a molecular weight not less than 5 million by irradiating the block with a high energy radiation at a level of at least 1 MR;

(b) heating said crosslinked block up to a compression deformable temperature below the melting point of the UHMWPE;

(c) subjecting said heated block to pressure; and then

(d) cooling said block.

(All claims to the UHMWPE material itself were eventually cancelled voluntarily.)

The examiner rejected all the reissue claims as obvious over two prior art patents, “Zachariades” and “Kitamaru” (Patent Nos. 5,030,402 and 3,886,056, respectively).  As the applicants acknowledged, Zachariades contained all the steps of the applicants’ claims, but in a different order – irradiation occurred after cooling.  (The exact radiation levels and molecular weights also varied, but not to a degree that the examiner thought relevant, and the applicants did not address this difference before either the Board or the Federal Circuit.)  Kitamaru, meanwhile, used a somewhat different method to prepare UHMWPE for use in films and sheets, but it began the process with an irradiation step.  The examiner found that it would be obvious to take the teaching of Kitamaru, to begin with the irradiation crosslinking, and apply it to Zachariades.

The applicants appealed to the Board of Patent Appeals and Interferences, arguing that there was no motivation to combine the references.  The Board, however, affirmed the rejection, and the applicants appealed again to the Federal Circuit.

Ruling: Board Had Substantial Evidence to Support Finding

The majority opinion, written by Judge Bryson and joined by District Judge Jeremy Fogel (N.D. Cal., sitting by designation), opened by recalling that “existence of a reason for a person of ordinary skill to combine references” is a factual finding, reviewed under the “substantial evidence” standard.

Examining the applicants’ arguments, the majority first rejected the suggestion that the prior art came from “fundamentally different material technologies.”  Both patents spoke to the preparation of UHMWPE products, and although each focused on different embodiments, “[n]either reference limits the structure of the UHMWPE product that can be made”.

The majority also found arguments that Zachariades taught against irradiating before molding, or that the examiner and Board had cherry-picked one aspect of Kitamaru to combine with Zachariades, unconvincing.  Although its claims were limited to irradiating after molding, nowhere had Zachariades stated that the opposite was unfeasible or inadvisable.  More importantly, Kitamaru had emphasized that irradiation before molding was the key to creating desired improvements in UHMWPE, namely “a higher melting or softening point, improved transparency, and excellent dimensional stability.”  Therefore, the suggestion to select that element from the reference was in the reference itself.

Judge Newman, in dissent, found it telling that Kitamaru predated Zachariades (indeed, the former issued over a decade before the latter was filed).  It was therefore “noteworthy that Zachariades, seeking mechanical strength and dimensional stability, did not follow the known Kitamaru processing sequence, but instead crosslinked the polyethylene after deformation”.  Newman found this sufficient to show that a person of ordinary skill would not find the results of the combination predictable; had it been obvious to combine, Zachariades would have already done it in his own patent.  The Board, she concluded, had engaged in impermissible hindsight analysis, “reasoning backward from” the patent at issue to see what Zachariades himself had not.

Analysis: Don’t Directly Challenge a “Reason to Combine” Finding

The majority emphasizes the standard of review in its decision.  “Substantial evidence,” a standard used in review of factual findings by both juries and quasi-judicial agency decisions, requires deference to the Board’s decision unless it was without “such relevant evidence as a reasonable mind might accept as adequate to support [the] conclusion” (Universal Camera Corp. v. NLRB, 340 U.S. 474).  In other words, unless no reasonable fact-finder could come to the same conclusion given the same evidence, the appellate court will affirm.

Given this emphasis, the standard was likely what tipped the court.  The applicants may have presented a sufficiently convincing case under a preponderance standard, but could not show that the Board’s decision was “unreasonable.”  (Notably, the dissent did not mention the standard of review once, merely calling the Board’s reasoning “flawed”.)

The substantial evidence standard reminds prosecutors that the Board hearing is the stage to win questions of obviousness.  A Circuit panel with a clear focus on this standard is highly unlikely to overturn such a finding, so prosecutors should treat the Board as their only chance.  Should that fail, however, a prosecutor can also focus more energy on the meaning of claims, both prior art and present, which are reviewed de novo.  Finally, although expensive, a § 145 civil action can reset the entire record and remove all deference (see the recent Kappos v. Hyatt, 132 S.Ct. 1690), should the applicant be in true need of a do-over.

The opinion is available at: http://www.cafc.uscourts.gov/images/stories/opinions-orders/11-1239.pdf

Oral arguments may be heard at: http://oralarguments.cafc.uscourts.gov/default.aspx?fl=2011-1239.mp3 (NOTE: the Federal Circuit’s oral argument database has been inconsistently accessible as of this article’s posting)

Federal Circuit Reaffirmed Lead Compound Analysis for Evaluating Obviousness of a New Chemical Compound

James Jang

In Otsuka Pharmaceutical Co. v. Sandoz, Inc., 678 F.3d 1280 (Fed. Cir. 2012), the Federal Circuit affirmed the decision of the district court that the patent was not obvious based on prior art evidence, nor the asserted claims were invalid for nonstatutory double patenting.

The Defendants are drug manufacturers who submitted ADNA filings to the Food and Drug Administration (FDA) for an approval to manufacture, use, or sale of generic aripiprazole products. Otsuka Pharmaceutical Corporation brought action against the drug manufacturers for infringement of patent on the compound claimed in Patent No. 5,006,528, aripiprazole, an atypical antipsychotic compound approved by the FDA for the treatment of schizophrenia. The Defendants counterclaimed that the patent was invalid for obviousness and nonstatutory double patenting. The Federal Circuit analyzed three ‘lead compounds’ asserted by the Defendants, unsubstituted butoxy compound, 2,3-dichloro propoxy compound, and OPC-4392 compound. A ‘lead compound’ means “a compound in the prior art that would be most promising to modify in order to improve upon its … activity and obtain a compound with better activity.” Takeda Chem. Indus., Ltd. v. Alphapharm Pty., Ltd., 492 F.d 1350, 1357 (Fed. Cir. 2007). The patents which disclosed the lead compounds, unsubstituted butoxy and 2,3-dichloro propoxy, also disclosed numerous examples of agents useful for the central nervous system, including an antischizophrenia agent.

In its ruling, the Federal Circuit reaffirmed the lead compound analysis, employed in Takeda Chemical Industries and Eisai Co. v. Dr. Reddy’s Labs, 533 F.3d 1354 (Fed. Cir. 2008) for evaluating obviousness of a new chemical compound, which were the first two lead compound cases decided post-KSR. The Federal Circuit explained that the lead compound analysis consists of a two-part inquiry:

First, the court determines whether a chemist of ordinary skill would have selected the asserted prior art compounds as lead compounds, or starting points, for further development efforts . . . . The second inquiry in the analysis is whether the prior art would have supplied one of ordinary skill in the art with a reason or motivation to modify a lead compound to make the claimed compound with a reasonable expectation of success.

The Federal Circuit also noted that for the lead compound selection, mere structural similarity between a prior art compound and the claimed compound is not enough, but it should be guided by the compound’s “pertinent properties.”

Applying this approach, the Federal Circuit rejected the Defendant’s argument that the lead compound analysis applied by the district court was a “rigid” obviousness analysis precluded by KSR because the court assumed that only the most obvious choice could serve as a lead. The Federal Circuit found that after evaluating all of the potential choices available to one of ordinary skill the district court correctly determined that the compounds asserted by the Defendants, unsubstituted butoxy, 2,3-dichloro propoxy, and OPC-4392, would not have been selected as lead compounds. Furthermore, focusing on the pertinent property of the new compound, rather than the structural similarity, Federal Circuit found that two other compounds — clozapine and risperidone — were viable lead compounds because these were the only capable antipsychotic compounds at the time of the invention. The Federal Circuit concluded that the Defendants failed to prove that the patent would have been obvious under 35 U.S.C. § 103.

The ruling in Otsuka Pharmaceutical Co. might be seen as the Federal Circuit’s return to the “rigid” motivation rules precluded by KSR.1 However, It appears that the Federal Circuit attempted to avoid this concern by addressing that to keep with the “flexible” nature of the obviousness inquiry, “the reason or motivation for modifying a lead compound may come from any number of sources and need not necessarily be explicit in the prior art.” This is consistent with the rulings in the previous chemical compound cases after KSR, such as Eisai Co. v. Dr. Reddy’s Labs, where Judge Rader found that the decision in KSR for flexibility would not preclude the Federal Circuit from assessing motivation in the case. Thus, the post-KSR chemical compound cases may imply that the flexible motivation test is still viable.2

“Laundry List” of potential effects is not sufficient to prove the obviousness

The Federal Circuit also rejected the Defendants’ argument that the three lead compounds asserted by the Defendants were known to have antipsychotic activity so that the claimed compound, aripiprazole, would have been obvious to one of ordinary skill. The Federal Circuit found that the patents’ “laundry list” of the potential central nervous system controlling effects, would not have informed one of ordinary skill in the art that the three compounds would have antipsychotic activity.

Nonstatutory Double Patenting

The double patenting doctrine is a judicially created doctrine “precluding one person from obtaining more than one valid patent for either (a) the ‘same invention,’ or (b) an ‘obvious’ modification of the same invention.” In re Longi, 759 F.2d 887, 892. The latter is referred to as the obviousness-type double patenting. The Federal Circuit differentiated obviousness-type double patenting from obviousness under § 103 by addressing that when examining the obviousness-type double patenting in chemical compound cases, the earlier-filed application need not qualify as prior art and “the issue is not whether a skilled artisan would have selected the earlier compound as a lead compound.” However, the Federal circuit rejected the Defendants’ argument that the double patenting never requires identifying the motivation to modify the earlier claimed compound. The Federal Circuit noted that the identification of the reason for modification is an essential part of the question whether the two claimed compounds are “patentably distinct” in the obviousness-type double patenting analysis.

In concluding that the asserted claims were not invalid for obviousness-type double patenting, the Federal Circuit also noted that predictability is an important element to consider in the obviousness analysis. The Federal Circuit held that given the high degree of unpredictability in antipsychotic drug discovery at the time of the invention, “the prior art would not have provided a skilled artisan with a reason to make the necessary structural changes.”


1. Mark D. Janisal, Tuning the Obviousness Inquiry After KSR, 7 Wash. J. L. Tech. & Arts 335 at 344-45 (2012), available at http://digital.law.washington.edu/dspace-law/bitstream/handle/1773.1/1125/7WJLTA335.pdf?sequence=4.

2. Id. at 342-44.

Board of Patent Appeals and Interferences Rules on Indefiniteness of the Term “Substantially Filled,” Prima Facie Obviousness in an Engine Cooling Method

By Charles Pierce

In Ex Parte Evans et al. (Appeal 2011-004119; Application serial no. 11/823,993), the Board of Patent Appeals and Interferences reversed examiner rejections under 35 U.S.C. § 112 for indefiniteness, and 35 U.S.C. § 103(a) for obviousness.

Claim 1 of the patent states:

A method for cooling an internal combustion engine using a reduced toxicity, ethylene glycol and water based heat transfer fluid, said method comprising the steps of:

(a) formulating a heat transfer fluid comprising (1) a glycol component consisting of ethylene glycol and propylene glycol, wherein the weight of the propylene glycol is between 5% less to less than 30% of the total weight of the glycol component and wherein the glycol component is less toxic than 10,000 mg/kg on an acute LD50(rat) oral toxicity basis, and (2) water, wherein the water comprises between 40% and 70% by weight of the total weight of the heat transfer fluid; and

(b) substantially filling the cooling system of the internal combustion engine with the heat transfer fluid such that the heat transfer fluid absorbs heat that is produced by the internal combustion engine and releases the absorbed heat to the atmosphere. (emphasis added).

The examiner rejected this claim reasoning that because the term “substantially” is not defined, the specification does not sufficiently describe the invention such that a person of ordinary skill in the art would be reasonably apprised of its scope.  The board disagreed.  They noted that “substantially” was used to describe how much a cooling system should be filled, and any person skilled in the art would know what can be considered substantially filled.  The term “substantially” was used to avoid a strict measurement,  because slight variations in the amount of fluid may still be considered to have filled a cooling system.  The board decided that the claim was sufficiently definite.

The board also disagreed with the examiner’s obviousness rejections.  The examiner’s rejection was that the claims were prima facie obvious.  The board noted that no reference disclosed the weight range of the propylene glycol in the glycerol component, or the weight range of the glycerol in the polyhydric alcohol component.  Because the references also disclosed only the components of the invention, the board ruled that they were not enough for a person of ordinary skill in the art to create the claimed cooling method.

Fort Properties, Inc. v. American Master Lease LLC

By Zi Wang

In Fort Properties, Inc. v. American Master Lease LLC, 2012 WL 603969 (Fed. Cir. 2012), the Federal Circuit affirmed the district court’s holding that a method patent for creating real estate investment instrument adapted for performing tax-deferred exchanges is invalid because it is directed at an unpatentable abstract idea, even though the claim language of the patent at issue recited a computer in certain operations.

American Master Lease LLC (“AML”) holds the ‘788 patent at issue.  The ‘788 patent discloses an investment tool designed to enable property owners to buy and sell properties without incurring tax liability pursuant to a tax law provision that exempts certain investment property exchanges when an owner of investment property exchanges one property for another of like kind and certain conditions are met.

Specifically, the claims require the aggregation of a number of properties into a “real estate portfolio.”  The property interests in this portfolio are then divided into shares, called “deedshares”, and are sold to investors much in the same way that a company sells stock.  Each deedshare can be encumbered by its own mortgage debt, which provides flexibility to real estate investors attempting to structure their debts in a way that complies with the exemption provision of tax law.

All claims in the ‘788 patent are method claims.  Claim 1 discloses:

  1. A method of creating a real estate investment instrument adapted for performing tax-deferred exchanges comprising:

aggregating real property to form a real estate portfolio;

encumbering the property in the real estate portfolio with a master agreements; and

creating a plurality of deedshares by dividing title in the real estate portfolio into a plurality of tenant-in-common deeds of at least one predetermined denomination, each of the plurality of deedshares subject to a provision in the master agreement for reaggregating the plurality of tenant-in-common deeds after a specified interval.

Two of the other independent claims, claims 22 and 32, are nearly identical to claim 1—though claim 32 contains an additional limitation requiring a computer to “generate a plurality of deedshares.”  The only other independent claim, claim 11, discloses a method of transferring ownership of deedshares in a manner consistent with the tax law provision discussed above.

Fort Properties, Inc. brought action against AML and moved for summary judgment of invalidity in the district court.  The district court invalidated all claims in the ‘788 patent for failing to claim patent-eligible subject matter under 35 U.S.C. § 101.  In reaching its decision, the district court relied on In re Bilski, 545 F.3d 943 (Fed. Cir. 2008) and applied the machine-or-transformation test.  The court held that the patent failed both prongs of the test and accordingly invalidated the whole patent.  AML appealed the decision to the Federal Circuit.

In its opinion, The Federal Circuit cited to four seminal Supreme Court cases that deal with the question of when an invention qualifies as a patent-eligible process as opposed to an abstract idea, namely, Bilski v. Kappos, 130 S.Ct. 3218 (2010); Diamond v. Diehr, 450 U.S. 175 (1985); Parker v. Flook, 437 U.S. 584 (1978); and Gottschalk v. Benson, 409 U.S. 63 (1972).  The Federal Circuit analogized the invention in the ‘788 patent to the invention in Bilski, which is an investment tool not requiring the use of a computer.

AML argued that claims 1-31 constitute a patentable process and not an abstract idea because they require a series of steps to take place in the real world that involve real property, deeds, and contracts.  More specifically, AML contended that the deeds remove the invention from the realm of the abstract because they are physical legal documents signifying real property ownership.  Fort Properties, on the other hand, argued that the claimed method of aggregating property, making it subject to an agreement, and then issuing ownership interests to multiple parties consists entirely of mental processes and abstract intellectual concepts.  Fort Properties pointed out that the Bilski invention’s intertwinement with deeds, contracts, and real property does not transform the abstract method into a patentable process.

The Federal Circuit sided with Fort Properties and drew extensive similarities between the invention at issue and the Bilski invention.  The Federal Circuit further stated that its reasoning is in accord with its own precedent in In re Comiskey, 554 F.3d 967 (Fed. Cir. 2009), and in In re Schrader, 22 F.3d 290 (Fed. Cir. 1994).

The court then turned to the question of how claim limitations involving computers apply in the § 101 analysis.  The court relied on three of its own 2011 and 2012 cases: Cybersource v. Retail Decisions, Inc., 654 F.3d 1366 (Fed. Cir. 2011); Ultramercial, LLC v. Hulu, LLC, 657 F.3d 1323 (Fed. Cir. 2011); and Dealertrack, Inc. v. Huber, 2012 WL 164439 (Fed. Cir. 2012).  The court opined that the basic character of a process claim drawn to an abstract idea is not changed by claiming only its performance by computers, or by claiming the process embodied in program instructions on a computer readable medium.  Instead, to impart patent-eligibility to an otherwise unpatentable process under the theory that the process is linked to a machine, the use of the machine must impose meaningful limits on the claim’s scope.  As a positive example, the court pointed to the claimed invention in Ultramercial, which “required intricate and complex computer programming” and “specific application to the Internet and a cybermarket environment.”  The addition of the computer to the claims was not merely insignificant post-solution activity; rather, the invention
itself involved “advances in computer technology,” and it was thus sufficient to qualify the claims for patent eligibility under § 101.

The court then held that the computer limitation in the patent at issue is akin to that in Dealertrack, and does not play a significant part in permitting the claimed method to be performed.  The computer limitation here is a broad and general limitation that does not impose meaningful limits on the claim’s scope.  AML simply added a computer limitation to claims covering an abstract concept—that is, the computer limitation is simply insignificant post-solution activity.  Therefore the computer limitation cannot impart patent-eligiblity here.

In this case the Federal Circuit once again took on the task of drawing the line between patentable process claims and patent-ineligible abstract ideas after Supreme Court’s Bilski v. Kappos decision.  Together with patents in Cybersource and Dealertrack, the patent in the present case was struck down for covering unpatentable abstract ideas, recitation to computers notwithstanding.  In the most likely scenario, method patent claims that are otherwise unpatentable under § 101 will not be upheld by the court if the recitation to a computer is simply post-solution activity.  To put it in another way, if a computer merely facilitates practice of an invention, rather than enables it, the recitation to a computer in patent claims is superfluous for § 101 purposes.  On the other hand, if an invention has a complicated-enough interface with computerization that it can be described as an advance in computer technology, then Ultramercial should control and it is possible for the patent to be upheld.

Cell Phone Network Patent Survives § 112 Attacks in Federal Circuit

By Chris Reaves

HTC Corporation v. IPCom GmbH & Co., KG, No. 2011-1004, Fed. Cir. Jan. 30, 2012

In a recent infringement suit, a patent for a cell phone network mobile station narrowly survived several attempts at invalidation through indefiniteness.  The Federal Circuit applied numerous rules of claim interpretation, especially for means-plus-function claims, and reminded the defense of the importance of addressing all issues at the trial level.  The case serves as a good lesson in “what not to do” for both prosecutors and litigants.

Background

IPCom GmbH & Co., KG owns US Patent No. 6,879,830 (‘830) and other patents, which go to cell phone networks and their methods.  ‘830 in particular discusses an efficient cellular phone network “handover” – the process by which one cell tower takes over a call from another as the phone moves from place to place.

IPCom and the HTC Corporation countersued each other for, respectively, infringement of three of IPCom’s patents, including ‘830, and declaration of non-infringement.  During the trial’s Markman hearing, HTC moved for summary judgment of invalidity of ‘830 claims 1 and 18.  The district court found that the means-plus-function portion of these claims had the required corresponding structure.  However, it also found that the claims included both method steps and an apparatus, making them indefinite under the rule of IPXL Holdings v. Amazon.com.  It therefore invalidated both claims.

On stipulation of the parties, the decision was promptly declared final and certified for appeal under Fed. R. Civ. P. 54(b).  Judges Bryson, Linn, and O’Malley of the Federal Circuit heard the appeal.

IPXL Indefiniteness Does Not Apply to “Preamble-Within-A-Preamble”

Claim 1 of ‘830 recites, in total:

A mobile station for use with a network including a first base station and a second base station that achieves a handover from the first base station to the second base station by:

storing link data for a link in a first base station,

holding in reserve for the link resources of the first base station, and

when the link is to be handed over to the second base station:

initially maintaining a storage of the link data in the first base station,

initially causing the resources of the first base station to remain held in reserve, and

at a later timepoint determined by a fixed period of time predefined at a beginning of the handover, deleting the link data from the first base station and freeing up the resources of the first base station, the mobile station comprising:

an arrangement for reactivating the link with the first base station if the handover is unsuccessful.

Claim 18 and, by stipulation, claim 16 differ only in ways “immaterial to this appeal.”

The district court had construed the claims to state that the mobile station “achieves a handover” which is then described as a series of steps.  Because the claim described the mobile station both in terms of this method and separately in terms of “an arrangement,” the court therefore invalidated it as indefinite.

The Federal Circuit, however, determined that the “that achieves a handover” clause described “network”, not “mobile station.”  First, “[m]odifiers should be placed next to the words they modify”, and the clause was closer to “network.”  Second, the repetition of “mobile station” in the seventh paragraph “would read in a disjointed manner” if the preceding functions also referred to the mobile station.  And third, the specification confirmed that the base stations of the network, not the mobile station, perform the functions in the handover.

HTC and the district court both tried to overcome this language by pointing to the prosecution history, but the Federal Circuit recalled Phillips v. AWH for the principle that prosecution “often lacks the clarity of the specification and thus is less useful for claim construction purposes.”  Although the applicants had referred to the “claimed process” of claim 1 during prosecution, the Federal Circuit found this insufficient to overcome the “plain language of the claims and the specification” that showed the mobile station was an apparatus.  A single reference to “steps” was similarly unpersuasive.

As the claims did not claim both the apparatus and the process, the Federal Circuit ruled that they did not violate the rule of IPXL.  They were instead merely in a “preamble-within-a-preamble” form, which was “unconventional” but valid under Microprocessor Enhancement Corp. v. Texas Instruments.

General Structure for Means-Plus-Function Claims May Be Implied, Not Explicit

The court then examined HTC’s alternate argument that the claims were indefinite under § 112 ¶ 6.  The parties had agreed that the “arrangement for reactivating” in all three claims was a means-plus-function limitation, which requires disclosure of a corresponding structure in the specification.  But the district court found, and the Federal Circuit agreed, that no literal disclosure was necessary, because a person skilled in the art “would understand that the mobile device would have to contain a processor and transceiver.”  Expert testimony, including the deposition of HTC’s own expert, supported this assessment.

The Federal Circuit also noted that a detailed hardware configuration was not necessary; “reference to such general-purpose processors will suffice” to make the claim definite if the description also discloses an algorithm that “describe[s] a means for achieving [the reactivating] outcome, not merely the outcome itself.”  At the trial level, HTC had argued exclusively that the hardware disclosure was insufficient with or without algorithms, and did not contend in the alternate that the disclosed algorithms were inadequate, even when IPCom argued in briefs that they were.  Therefore, the Federal Circuit did not let HTC raise the argument on appeal, finding no reason not to apply the general appellate policy against considering issues not raised at trial.

With no other cause to invalidate, the panel reversed, declaring all claims valid.

Post-Case Analysis

The Federal Circuit creates little new law here, but reminds us of some existing principles for both prosecutors and litigators.  Prosecutors are reminded of the importance of clarity in drafting.  Although IPCom’s claims survived their second interpretation, clearer attachment of nouns to modifiers would have avoided the initial invalidation.  Simple use of commas or semi-colons to break up the clauses, and then leading each clause with its own element, can be an invaluable rule of thumb.  For instance, opening with “A mobile station for use with a network, the network including…” would have made it undeniable what the following paragraphs referred to.

Similarly, although the courts will treat a structure as implicitly disclosed when it is “understood” by those skilled in the art, it is better to be explicit.  What is “understood” can vary from expert to expert, and had HTC’s own expert not admitted to the validity of IPCom’s position, the patent might well have failed on this point.  Also, this rule has less benefit when the structure is not a processor or similar; that is, one that must be thoroughly defined on its own terms instead of in the context of algorithms.

Means-plus-function claims are especially vulnerable to a few mistakes that IPCom nearly stumbled over.  Prosecutors should always remember to check their claims for IPXL-style indefiniteness, as the drafter is already thinking in terms of the corresponding process and may forget to make the distinction.  Double-checking for the appropriate structure for each function – including the algorithm, if software is involved – is also vital.

Finally, in all cases, proofreading is key.  A second pair of eyes to check for these and other mistakes during drafting can save your client from both a higher risk of invalidity and unnecessary legal fees the first time he tries to enforce.

Litigators, meanwhile, are reminded of the importance of attacking the opponent from every reasonable angle; in this case, to challenge the structure disclosure on both hardware and software.  It is sometimes splitting hairs to say what specific sub-(sub-sub-)issues a party has failed to address, and HTC might have argued that, by bringing up structure disclosure at all, they preserved all aspects of it for appeal.  But at minimum, once IPCom reminded HTC of the algorithm issue in its own briefs, HTC needed to respond.  Leaving that argument unchallenged cost them dearly.

The opinion is available at: http://www.cafc.uscourts.gov/images/stories/opinions-orders/11-1004.pdf

Oral arguments may be heard at: http://oralarguments.cafc.uscourts.gov/default.aspx?fl=2011-1004.mp3

Federal Circuit Says § 101 Requires “Concrete Steps” In Software Methods

By Chris Reaves

Dealertrack, Inc. v. Huber, No. 2009-1566, Fed. Cir. Jan. 20 2012

The Federal Circuit on January 20 once again addressed the question of 35 U.S.C. § 101 eligibility for a software method.   The court found the patent at issue closer to CyberSource than Ultramercial, drawing a distinction between “a practical application with concrete steps” and a mere declaration that the method is “computer-aided.”  It also looked to the interpretation of claims, expanding the rule of Phillips v. AWH to cover exemplary lists.

Background

Plaintiff Dealertrack, Inc. owns three patents related to the same concept: the use of a computer system as a loan intermediary, converting one generalized application for a car loan into several bank-specific applications and processing said applications with their respective banks.  The original patent, U.S. Patent No. 5,878,403 (‘403), was filed in 1995.  Later, 7,181,427 (‘427), patenting the computer system, was filed as a continuation-in-part, and 6,587,841 (‘841), patenting the method, was filed as a divisional application.  All three patents issued, with the latter two claiming priority to ‘403.

Dealertrack sued the defendants, Finance Express, LLC (with its president David Huber) and RouteOne, in the Central District of California, claiming their respective loan management systems infringed on all three patents.  The defendants filed motions for summary judgment on four grounds: that ‘841 was not infringed given its proper interpretation, that certain means-plus-function claims in ‘841 were invalid as indefinite under § 112, that all applicable claims of ‘427 were abstract and ineligible for patent protection under § 101, and that ‘427 did not properly claim priority to ‘403.

The district court found for Dealertrack on indefiniteness and priority but for the defendants on non-infringement and ineligibility, and dismissed the case.  Dealertrack appealed the dismissal to the Federal Circuit and the defendants cross-appealed on the indefiniteness and priority findings.  Judges Linn and Dyk, with Senior Judge Plager, heard the appeal.

Claim Interpretation: Multiple Examples Are Not Always Exhaustive

The preamble of ‘841’s independent claim 7 reads:

“A computer based method of operating a credit application and routing system, the system including a central processor coupled to a communications medium for communicating with remote application entry and display devices, remote credit bureau terminal devices, and remote funding source terminal devices . . .”  (Emphasis added.)

“A communications medium” is also one of the elements of independent claims 12 and 14.  Exemplary mediums are listed in the description as follows:

“Although illustrated as a wide area network, it should be appreciated that the communications medium could take a variety of other forms, for example, a local area network, a satellite communications network, a commercial value added network (VAN) ordinary telephone lines, or private leased lines…  The communications medium used need only provide fast reliable data communication between its users…”

During prosecution of the parent ‘403 patent, the examiner allowed “the Internet” to be added explicitly to a corresponding exemplary list, and ‘841 incorporated ‘403 by reference.  However, in its interpretation of ‘841, the district court interpreted “communications medium” to exclude the Internet, finding its omission in ‘841, in an otherwise thorough list, to be a waiver of its inclusion regardless of ‘403.  Therefore, because both the defendants’ systems used only the Internet for communication, neither had infringed.

The Federal Circuit disagreed, finding that the district court had ascribed too much importance to the list’s contents.  “The disclosure of multiple examples,” it ruled, “does not necessarily mean that such list is exhaustive or that non-enumerated examples should be excluded.”  Rather, it found the case similar to Phillips v. AWH Corp., where a single embodiment listed in a description had not necessarily limited the meaning of the corresponding claims.  Multiple examples did not change the Phillips rule, especially as the context of the ‘841 list – leading with “for example” and closing with “The communication medium used need only provide…” – indicated that it was not meant to be exhaustive.

The district court also found waiver of the term in that the “the Internet” had also been named in ‘841 but the examiner had removed the reference post-allowance.  However, the examiner had given no reason for this removal, and there was no prosecution history suggesting that Dealertrack had deliberately surrendered the term.   The Federal Circuit therefore attached no importance to this removal.  And although the defendants argued that, in 1995, the Internet would not have been seen as “reliable” or “secure” as the description required, the court found they had not presented sufficient evidence on this point.

The court also rejected arguments by the defendants to narrow the meaning of other terms in the patent, noting that explicit embodiments of the claims fell outside the supposed interpretation. It did, however, use the rule of WMS Gaming to apply disclosed software algorithms, not a computer itself, as the structure for claim 12 and 14’s “central processing means” element.  Because claim 14 also stated that the central processing means “further provides for tracking pending credit applications,” without disclosing a tracking algorithm, the court invalidated claim 14 and its dependent claims as indefinite under § 112 ¶ 6.

§ 101: Computer-Aided Methods Require “Practical Application With Concrete Steps”

Claim 1 of ‘427 reads, in total:

1. A computer aided method of managing a credit application, the method comprising the steps of:

[A] receiving credit application data from a remote application entry and display device;

[B] selectively forwarding the credit application data to remote funding source terminal devices;

[C] forwarding funding decision data from at least one of the remote funding source terminal devices to the remote application entry and display device;

[D] wherein the selectively forwarding the credit application data step further comprises:

[D1] sending at least a portion of a credit application to more than one of said remote funding sources substantially at the same time;

[D2] sending at least a portion of a credit application to more than one of said remote funding sources sequentially until a finding [sic, funding] source returns a positive funding decision;

[D3] sending at least a portion of a credit application to a first one of said remote funding sources, and then, after a predetermined time, sending to at least one other remote funding source, until one of the finding [sic, funding] sources returns a positive funding decision or until all funding sources have been exhausted; or,

[D4] sending the credit application from a first remote funding source to a second remote finding [sic, funding] source if the first funding source declines to approve the credit application.

When the district court examined ‘427 for § 101 ineligibility, the Supreme Court had yet to rule in Bilski, and the “machine or transformation” test was still definitive.  Dealertrack had conceded lack of transformation and the district court had found that a “general purpose computer” was not a “particular machine” under the existing test.

The Federal Circuit examined the case under the new standard but came to the same conclusion.  While recognizing that, as in Research Corp., abstractness must “exhibit itself so manifestly as to override the broad statutory categories of eligible subject matter,” the court found that ‘427 crossed this line.  Namely, it claimed “the basic concept of processing information through a clearing-house…”   The court found the “computer aided” limitation in the preamble equally abstract and insufficient to save the patent “without specifying any level of involvement or detail,” and distinguished ‘427 from the patent in Ultramercial, which also described “a practical application with concrete steps requiring an extensive computer interface…”  (Perhaps foolishly, Dealertrack conceded in oral arguments that ‘427 would not be § 101 eligible had “computer aided” been omitted.)

Dealertrack argued that disclosed algorithms in the description made the patent less abstract, but the court noted that the claims themselves were not limited to any algorithm, under an interpretation to which Dealertrack itself had already conceded.  The court also found irrelevant that the method was limited to car loan applications, comparing it to that of Bilski, where a method of hedging was no less abstract for being limited to the energy market.  The court therefore invalidated the applicable ‘427 claims as ineligibly abstract.

On this point alone, Senior Judge Plager dissented.  Without commenting on the thrust of the panel’s argument, he proposed that courts should “not foray into the jurisprudential morass of § 101 unless absolutely necessary” instead looking first to whether they can invalidate under other sections of the Patent Act before the court.  But the majority, while calling Plager’s goal “laudable,” noted that the Supreme Court had called § 101 a “threshold test” in Bilski.  They further noted that no other argument for ‘427’s invalidity was presented in the initial motions for summary judgment; although Dealertrack had argued that ‘427 was clearly valid under § 103, the defendants had been happy to leave that question to the jury.

Because it invalidated ‘427 under § 101, the panel did not address whether the same patent failed to claim priority to ‘403.

Post-Case Analysis: Tell Us Why You Need A Computer

The gray area between eligible and ineligible methods narrows again, albeit slower than anyone would like.  As previously noted on this blog, Ultramercial suggested three applicable factors in the analysis.  This case emphasized two: the software must be specialized and well-described in the claims, and the claim must explain why the software is necessary to the claimed method.  Had the claims in this case restricted their scope to the algorithms in the description, they might have survived the panel’s analysis.  Unfortunately, as the defendants noted in oral arguments, Dealertrack had been arguing the opposite.  Existing patent owners might be wise to concede to a narrower interpretation of their own software patents, and future drafters should include a more elaborate disclosure of the software, algorithms, and computer configurations involved.  Most importantly, the computer should be explicitly necessary, not merely helpful, to the claimed method.

Many commenters (including both Chief Judge Randall Rader and Professor Dennis Crouch of the University of Missouri) have argued, like Plager, that § 101’s jurisprudence is unpredictable and overused, and that public policy should encourage its disuse.  A few have gone farther and proposed that § 101 should be reinterpreted by the courts or rewritten by Congress to allow truly “anything under the sun,” leaving the rest of the Act in place to catch the existing, obvious, or abstract.  To both groups, the majority’s response to Plager will be a serious disappointment, and a step back from the direction suggested in Classen and Ultramercial (albeit in apparent dicta).  If § 101 is indeed a threshold in the sense of “it must be considered,” and if its borders remain vague, defendants will have little reason not to include an ineligibility argument against method claims and hope for the best.  We can hope that the Supreme Court itself will clarify the standard in Mayo Collaborative Services v. Prometheus Labs, but with its past pattern of insisting on a case-by-case analysis, it is more likely to leave the Federal Circuit buried in § 101 cases.

Less vogue a topic but still important is the ruling on ‘841’s interpretation.  Exemplary but non-exhaustive lists of embodiments are common practice, and the court’s opinion protects the resulting patents from unintended limitations.  However, Dealertrack was in part protected by the Internet’s mention in the issuing parent patent; other patents are unlikely to have this extra safety net.  Therefore, a good patent drafter should still make it absolutely clear in context that such lists are indeed non-exhaustive, with phrases such as “for example”, “include but is not limited to”, “many other embodiments and modifications should be apparent”, and “need only [do X] to meet the needs of the invention”.

For software patent prosecutors, this case is also a good reminder of the WMG Gaming rule: means-plus-function claims cannot be satisfied with disclosure of “a computer” or similar.  Only a computer with specific algorithms or software for the job will do.  Any good draft should therefore either avoid means-plus-function language or be as exhaustive as possible in the description.

The opinion is available at: http://www.cafc.uscourts.gov/images/stories/opinions-orders/09-1566.pdf

Oral arguments may be heard at: http://oralarguments.cafc.uscourts.gov/default.aspx?fl=2009-1566.mp3

For Rader’s comments on § 101, see Classen Immunotherapies Inc. v. Biogen IDEC, 100 USPQ2d 1492, 1505-07 (Fed. Cir. 2011).  For Crouch’s, see Operating Efficiently Post-Bilski by Ordering Patent Doctrine Decision-Making, 25 Berkeley Tech. L.J. 1673 (2010).

Federal Circuit Finds District Courts Can Correct Obvious Errors Without Certificate of Correction

In CBT Flint Partners, LLC v. Return Path, Inc., 99 USPQ2d 1610 (Fed. Cir. 2011), CBT Flint Partners, LLC (“CBT”) appealed the District Court for the Northern District of Georgia’s grant of summary judgment of invalidity of claim 13 of U.S. Patent 6,587,550 (“the ‘550 patent”).  CBT owns the ‘550 patent, as well as another patent, the ‘114 patent, which both relate to methods and systems for charging a fee for sending spam email to recipients.  In the preferred embodiment of the ‘550 patent, the invention is implemented as part of an Internet Service Provider (“ISP”).  When a sender attempts to send spam emails over the ISP network, the patented system determines whether this sender is an “authorized sending party,” i.e., a party who has agreed to pay a fee to the ISP.  If the sender is an authorized sending party, the ISP will forward its spam emails to the intended recipients.  If the sender is not an authorized sending party, the patented system will send a message to the sender, giving the sender the option to pay the fee and become an authorized sending party.  If the sender does not pay this fee, its spam emails will not be forwarded over the network.

In August 2007, CBT sued Return Path, Inc. and Cisco Ironport Systems, LLC (“the Defendants”), alleging infringement of both the ‘550 and ‘114 patents by the Defendants’ “Bonded Sender” system.  This system analyzes incoming emails to determine whether they came from an authorized computer and, if so, forwards them to their intended recipients.  CBT asserted infringement of claim 13 of the ‘550 patent, as well as infringement of ten claims of the ‘114 patent. Continue reading

Federal Circuit finds Patent Obvious in view of Common Sense despite Objective Evidence

In Wyers v. Master Lock Co., 95 USPQ2d 1525 (Fed. Cir. 2010), plaintiff Philip W. Wyers (Wyers) sued defendant Master Lock Company (Master) for infringement of its patents for hitch pin locks.  Hitch pin locks are typically used to secure draw bars or tow-ball mount to a hitch receiver attached to a motor vehicle.  Wyers’ patents describe a barbell-shaped lock with a stop portion on one end, a locking head on the other end, and a shank portion which passes through the aligned apertures of the hitch receiver and the tow-ball mount.

The use of barbell-shaped locks and locks on trailer hitch receivers was well known in prior art.  Specifically, the prior art had examples of locks with a lock head, a shackle having a stop member, a shank, and a latch.  Moreover, the prior art also had examples of barbell-shaped locks being used as a trailer hitch receiver lock.

Wyers’ patents claim improvements to the prior art locks; mainly a removable sleeve to increase the shank’s diameter.  The removable sleeve allows adjusting the diameter of the shank which can be used with trailer hitch receivers of different apertures sizes.  The patent claims also include an external seal designed to protect the locking mechanism from contaminants.

At the trial level, the two main questions the court asked were “whether the use of the removable sleeve to adjust the operative thickness of a shank would have been obvious;” and “whether Master Lock presented clear and convincing evidence that the use of the external flat flange seal would have been obvious.” JMOL Order, 2009 WL 1309774 at 3 and 5.  The district court found held that plaintiff’s patents were not obvious and awarded $5.35 million in damages, $1.1 million in interest, and a 24% royalty for any infringing products Master sold based on Wyers’ patent.

On appeal, the parties agreed that the case turned on whether the claims were obvious based on prior art.  The court said that the issues in dispute were, “(1) whether the prior art references are in the same field of endeavor as the patented invention; (2) whether there was sufficient motivation to combine the references; (3) the existence and significance of pertinent secondary considerations.”

In reviewing the first question, the Federal Circuit noted that the test of whether the art is from the same field of endeavor is “(1) whether the art is from the same field of endeavor, regardless of the problem addressed, and (2) if the reference is not within the field of the inventor’s endeavor, whether the reference still is reasonably pertinent to the particular problem with which the inventor is involved.” Comaper Corp. v. Antec, Inc., 596 F.3d 1343, 1351 (Fed. Cir. 2010) (quoting In re Clay, 966 F.2d 656, 658-59 (Fed. Cir. 1992)).”  The Federal Circuit noted that the jury at the trial court applied the wrong standard.  The correct standard is whether a person of ordinary skill in the field of locksmithing would find this improvement to be obvious, not the standard of a layman on a jury.  The appellate court, also said the prior art was relevant because the prior art was within the “same field of endeavor.”  The prior art was directed towards trailer-towing applications, as were most of Wyers’ patents.

On the second question as to whether there was motivation to combine the adjustable sleeve with the prior art barbell locks and whether there was motivation to combine the prior art locks with an external sealing mechanism, the Federal Circuit noted that the test is no longer strictly one of express motivations to combine.  KSR International Co. v. Teleflex, Inc., 550 U.S. 398 (2007).  “Common sense” is one standard when looking for a reason to combine references.  Moreover, the Federal Circuit noted that, while the facts supporting obviousness are to be determined by a jury, the ultimate question of whether the facts support “common sense” or reasons to make combinations are susceptible to resolution at summary judgment and motions JMOL.

In applying this standard, the Federal Circuit said that sleeves were used in prior art in a towing arrangement similar to a hitch receiver/tow bar arrangement, and could be combined with a barbell-shaped hitch pin lock in order to address different aperture sizes in standard hitch receivers.  In addition, the Federal Circuit noted prior art in the Down patent that “sleeves of different external diameter may be provided for the attachment of trailer towing eyes of different internal diameter.  When the sleeve is used, the pin accommodates larger diameter towing eyes; without the sleeve, the pin fits smaller ones.”    Thus, a person of ordinary skill in the art of locksmithing would have been likely put these two designs together.

The Federal Circuit concluded that “it was a mater of common sense to combine the Down patent with the prior art barbell locks in order to arrive at the invention claimed in the [Wyers’ patents], and that one of ordinary skill in the art would have had a reasonable expectation of success in doing so.”

Furthermore, the Federal Circuit noted that “it is a matter of common sense that a flat external seal used in the prior art padlocks could be combined with a barbell-shaped hitch pin lock.”  This is because prior to Wyers’ filing, the concept of using external or internal seals to protect a lock’s head from contaminants, was widely known.

Lastly, in evaluating the effect of secondary considerations, the Federal Circuit noted that for objective evidence of secondary considerations to be accorded substantial weight, its proponent must establish a nexus between the evidence and the merits of the claimed invention. In re Huang, 100 F.3d 135 (Fed. Cir. 1996); In re GPAC Inc., 57 F.3d 1573 (Fed. Cir. 1995).  Here, plaintiff could not prove that Master’s $20 million in sales of the accused product were the result of any of the supposed features of Wyers’ patents.  Further, there was no evidence of copying of Wyers’ design.  Thus, any secondary considerations here can not overcome a strong prima facie case of obviousness, as was the case here.

Significance for Patent Applicants and Owners

Rejections under 35 U.S.C. §103 using common sense as a basis are particularly perplexing for patent practitioners as what constitutes common sense appears to be a subjective test.  As is evident from the Federal Circuit’s analysis, the use of common sense is based upon an analysis of prior art within the record.  While such a robust record is expected in inter partes proceedings, however, it is unclear as to how Patent Examiners performing examination in an ex parte process would be able to develop a sufficient record to substantiate a prima facie burden.  Moreover, the United States Patent and Trademark Office has not provided examples of how such a conclusion would be made in its proposed Examination Guidelines Update: Developments in the Obviousness Inquiry After KSR v.Teleflex, Fed. Reg. Vol. 75, No. 169, pp. 53643 (September 1, 2010).  Thus, patent applicants should be mindful that, when faced with a rejection based upon common sense, the Examiner must still provide evidence supporting this conclusion and require this evidence as grounds of traversing the rejection.

 

Federal Circuit Clarified Abstractness in the Context of Software

Court Finds Software Patentable Unless Unmistakably Abstract

In Research Corp. Technologies, Inc. v. Microsoft Corp., Civ. Case. No. 10-1037 (Fed. Cir. December 8, 2010), Research Corporation Technologies, Inc. (“RCT”) owns six related patents: U.S. Patent Nos. 5,111,310 (“’310 patent”); 5,341,228 (“’228 patent”); 5,477,305 (“’305 patent”); 5,543,941 (“’941 patent”); 5,708,518 (“’518 patent”); and 5,726,772 (“’772 patent”).  The six related patents relate to digital image half toning which allows a computer to create more colors than otherwise possible with the limited number of pixel colors available in a typical printer.  In order to measure the quality of the half toning, the inventors created a method of detecting a power spectrum which measures the frequency of the dots used to create the half tone and compares this power spectrum to an ideal spectrum stored in a mask.  By comparing the stored mask and detected power spectrum, the method determines half tone quality. Continue reading

Federal Circuit En Banc Decision Confirms Written Description is Separate from Enablement

In Ariad Pharmaceuticals, Inc., et a. v. Eli Lilly and Co., 598 F3d 1336, 94 USPQ2d 1161 (Fed. Cir. 2010) (en banc), the Federal Circuit reversed the district court’s denial of a JMOL and held that the asserted claims of U.S. Patent No. 6,410,516 are invalid as failing to meet the statutory written description requirement.   As background, the plaintiffs (herein, collectively referred to as “Ariad”) are the owners of U.S. Patent 6,410,516 (“the ’516 patent”). The patented technology relates to a method of reducing the activity of NF-κB, a transcription factor, in eukaryotic cells. Briefly, NF-κB is a substance that normally exists in cells as an inactive complex with a protein inhibitor, IκB. When a cell encounters extracellular stimuli, such as lipopolysaccharides from a bacterial invader, NF-κB is released from its inhibitor and travels to the cell nucleus, where it binds to NF-κB recognition sites to crank up the production of cytokines that stimulate the immune system to fight the invaders. However, the production of too many cytokines is also harmful to an organism.  The inventors of the ’516 patent were the first to identify NF-κB and discovered its mechanism of activating gene expression. The inventors also came up with the idea that it would be useful under certain circumstances to reduce NF-κB activity in cells. Continue reading