CAFC: Overseas Contract Requiring Delivery and Performance in the U.S. Constitutes a "Sale" under Section 271(a)

Transocean Offshore Deepwater Drilling, Inc. v. Maersk Contractors USA Inc., No. 2009-1556 (August 18, 2010)

Transocean sued Maersk on patents relating to an improved apparatus for conducting offshore drilling.  The lower court granted summary judgment of noninfringement in favor of Maersk.  One of the issues involved the finding that Maersk contracted with another U.S. corporation (Statoil) to use an accused rig in the "operating area" of the U.S. Gulf of Mexico, and that Statoil had the right to use the rig outside the operating area with certain limitations.  The contract, which was signed in Norway, mentioned Transocean's patents and reserved the right for Maersk to make "alterations" to the rig "in view of court or administrative determinations throughout the world."

At the same time, Transocean successfully sued another competitor (GSF) for infringement of the same patent claims.  When GSF redesigned their rigs to get around Transocean's patents, the district court in that case held that the new design did not infringe.  Before delivering the rig to the U.S., Transocean modified its rig according to the noninfringing design.

Maersk maintained that the district court correctly held that because the negotiations and execution of the contract took place outside of the U.S., this could not be an offer to sell under § 271(a).

The CAFC disagreed:

[W]e hold that a contract between two U.S. companies for the sale of the patented invention with delivery and performance in the U.S. constitutes a sale under § 271(a) as a matter of law. Maersk USA’s first argument, that the location of negotiation and contracting should control is contrary to our precedent in Lightcubes. There, we held that a sale does not only occur at a “single point where some legally opera-tive act took place.” Lightcubes, 523 F.3d at 1369-70. We may also consider other factors such as the place of performance . . . Maersk USA’s argument that Statoil could use the rig outside the U.S. ignores the plain language of the contract, which includes an “Operating Area” of the U.S. Gulf of Mexico.  It also ignores the fact that Maersk did in fact deliver the rig to U.S. waters.

On the issue of the re-design:

[Maersk's] remaining arguments regarding the right to alter the final design and the fact that the rig was not complete at the time of contracting do not change the result. Maersk USA and Statoil signed a contract and the schematics that accompanied that contract could support a finding that the sale was of an infringing article under § 271(a). The fact that Maersk USA, after the execution of the contract, altered the rig in response to the GSF injunction is irrelevant to this infringement analysis. The potentially infringing article is the rig sold in the contract, not the altered rig that Maersk USA delivered to the U.S.

Finally, we reject Maersk USA’s claim that the entire apparatus must have been constructed and ready for use in order to have been sold. Our precedent establishes that a contract can constitute a sale to trigger infringe-ment liability. See NTP, Inc. v. Research in Motion, Ltd., 418 F.3d 1282, 1319 (Fed. Cir. 2005). A “sale” is not limited to the transfer of tangible property; a sale may also be the agreement by which such a transfer takes place. Id. In this case, there was a contract to sell a rig that included schematics. On summary judgment, we must draw all justifiable inferences in favor of the non-movant, Transocean. Transocean argues that these schematics show sale of the patented invention. This is a genuine issue of material fact sufficient to withstand summary judgment.

Obviousness

The district court also found all claims obvious as a matter of law in light of two prior art references (Horn in view of Lund).  On appeal, the CAFC agreed that Horn and Lund established a prima facie case of obviousness.  However,

Although we hold that Horn in view of Lund present a prima facie case of obviousness, this is not the end of the analysis. At the district court, Transocean presented significant objective evidence of nonobviousness. First, Transocean presented evidence of industry skepticism. A Transocean competitor, in an article discussing simultaneous drilling operations, stated that dual drill strings would be a “radical departure” from conventional systems and that there was a high potential for underwater collision.  Others in the field described dual activity as “not being realistic” for the same reasons.  Second, Transocean presented evidence of industry praise for its dual activity rig.  An industry publication called the invention one of the top 50 innovations in offshore drilling history. Transocean also cites other examples of praise from clients and competitors, including Maersk USA. Third, Transocean presented evidence that its implementation of the dual activity invention has been a commercial success. It showed that its dual activity rigs command a higher licensing premium than standard rigs. Finally, Transocean presented evidence that the success of its invention caused others to copy it, including Maersk USA.

[W]e hold that the district court erred by failing to consider Transocean’s objective evidence of nonobviousness.  Our case law is clear that this type of evidence “must be considered in evaluating the obviousness of a claimed invention.” . . . While it is true that we have held in individual cases that objective evidence of nonobviousness did not overcome the strong prima facie case – this is a case-by-case determination. . . . To be clear, a district court must always consider any objective evidence of nonobviousness presented in a case.

REVERSED-IN-PART, VACATED-IN-PART, AFFIRMED-IN-PART, and REMANDED

Read/download the opinion here (link)

Supreme Court Asked to Yank Obviousness From the Purview of Juries

Medela AG v. Kinetic Concepts, Inc. (petition for a writ of certiorari)

Question presented: Whether a person accused of patent infringement has a right to independent judicial, as distinct from lay jury, determination of whether an asserted patent claim satisfies the “non-obvious subject matter” condition for patentability.

Medela defended against allegations of patent infringement by arguing that the asserted patent was invalid for obviousness. The district court provided the jury with lengthy instructions, along with jury interrogatories that asked the jurors to answer "yes" or "no" on whether Medela proved by clear and convincing evidence that the invention was obvious. The jury answered "no" to 37 questions related to obviousness. The jury was not asked to provide, and did not provide, any explanations of the "no" answers.

On appeal to the Federal Circuit, the court stated that “[t]he scope and content of the prior art are factual questions to be determined by the jury,” but because the jury made no findings on those mat­ters, the Federal Circuit applied its highly deferen­tial standard of review: “This court reviews these factual determinations, ‘whether explicit or implicit within the verdict, for substantial evidence.’” Stating that the court " must assume that the jury found that the prior art does not dis­close ‘treating a wound with negative pressure’ with­in the meaning of the patents," the CAFC upheld the jury verdict (see CAFC opinion here).

It its petition, Medela argues that "Federal Circuit precedent broadly and improperly abrogates any right to independent judicial, as dis­tinct from lay jury, determination of whether an as­serted patent claim satisfies the nonobviousness ­requirement of 35 U.S.C. § 103(a)."

More specifically, Medela argues that Federal Circuit Precedent

[C]onflicts with two en banc decisions of other circuits, both of which were unanimous in rejecting the very sort of jury procedure that was used in this case and in many other cases.

[C]onflicts with, or is in deep tension with, this Court’s precedents on obviousness, which have repeatedly described obviousness as “a legal determi­nation,” KSR Int’l Co. v. Teleflex Inc, 550 U.S. 398, 427 (2007), stated that obviousness analysis was to be conducted by “a court, or patent examiner”, and instructed that “this analysis should be made explicit” so as “[t]o facilitate review.”

[I]s difficult or impossible to reconcile with settled principles of federal administrative law, under which the power to “pass on the validity of an administra­tive order” is reserved exclusively to courts, not ju­ries, even in actions where a right to trial by jury ex­ists and the invalidity of the administrative action is a legal defense to the action. See Cox v. United States, 332 U .S. 442, 453 (1947).

Read/download a copy of the petition here (link)

See also, "High Court Cert Petition Argues Judges Should Decide Patent Validity" (link)

BPAI Tightens Use of Declarations in Overcoming Obviousness Rejections

Ex Parte Jellá, Appeal No. 2008- 1619 (BPAI, November 3, 2008), Precedential Opinion

The Appellant's claimed invention relates to raised panel door sections for overhead garage doors. Claim 1, reproduced below, is representative of the subject matter on appeal.

1. A door section for an overhead garage door comprising :

a sheet metal layer having a finished height of substantially twenty-eight inches; and

support members coupled to first and second lateral edges of said sheet metal layer.

The prior art taught everything except "a finished height of substantially twenty-eight inches." The BPAI agreed with the Examiner's determination that the claimed finished height of the door section "is a matter of design choice" and that the claimed finished height of twenty-eight inches
would be "a predictable result":

The claimed finished door section height is no more than the result of the substitution of one element (three twenty-eight inch door panel sections) for another known in the field (four twenty-one inch door panel sections) to yield a predictable result (a door section with a finished height of substantially twenty-eight inches).

To rebut the prima facie finding of obviousness, the applicant submitted eight different declarations addressing various reasons for non-obviousness of the claimed configuration. Some of the declarations addressed the "highly visible features" of garage door panels and mentioned a commercial need in the market to have a garage door that "looks different from the traditional raised panel steel garage doors."

The BPAI dismissed these declarations, stating that

Evidence of commercial success for a claimed invention of a utility patent application cannot be shown, however, by industry reaction to the aesthetic appearance of the claimed invention. Such evidence is too subjective to serve as reliable objective evidence of secondary considerations of non-obviousness. Further, the ornamental appearance of a product is the purview of the design patent law. Were we to allow secondary considerations of non-obviousness to be based on the industry's reaction to the ornamental appearance of the claimed invention, we would be blurring the distinction between design and utility patent protection. Objective evidence of secondary considerations of non-obviousness should be tied to the functional aspects of the claimed invention for a utility patent application . . . we hold that unexpected results for the claimed invention of a utility patent application cannot be based on enhanced aesthetic appearance, which is a subjective factor and one more properly reserved for the confines of design patent protection.

With regard to commercial success, the Appellant submitted figures related to number of units sold, 25% increase in sales annually and attested that "eighteen of the top twenty builders" in Southern California were using these panels in new home subdivisions. Again, the Board found these declarations unpersuasive:

The Appellant's evidence of gross sales as an indication of commercial success is weak, at best. The Appellant's proof of unit sales does not indicate whether the numbers sold were a substantial quantity in the relevant market In re Huang, 100 F.3d 135, 140 (Fed. Cir. 1996) (without evidence that the sales are a substantial quantity in the relevant market, "bare sales numbers" are a "weak showing" of commercial success, if any); In re Baxter Travenol Labs., 952 F.2d 388, 392 (Fed. Cir. 1991) ("[I]nformation solely on numbers of units sold is insufficient to establish commercial success."); Kansas Jack, Inc. v. Kuhn, 719 F.2d 1144, 1150-51 (Fed. Cir. 1983) ("The evidence of commercial success consisted solely of the number of units sold. There was no evidence of market share, of growth in market share, of replacing earlier units sold by others or of dollar amounts, and no evidence of a nexus between sales and the merits of the invention. Under such circumstances, consideration of the totality of the evidence, including that relating to commercial success, does not require a holding that the invention would have been nonobvious at the time it was made to one skilled in the art.")

Also, while certain Affidavits addressed "a long-felt and growing need" for the 28 inch panels, the BPAI held that the Appellant failed to make the requisite showing that the need was "persistent":

Establishing long-felt need requires objective evidence that an art-recognized problem existed in the art for a long period of time without solution. In particular, the evidence must show that the need was a persistent one that was recognized by those of ordinary skill in the art. In re Gershon, 372 F.2d 535, 539 (CCPA 1967). The declarations submitted by the Appellant do not show that the need for a different looking door was a persistent one or that others tried to meet the need and failed. While the need for a new look to garage doors may have been a market pressure that existed at the time of the invention, the declarants fail to state how long the need existed in the industry and whether any attempts to meet the need were made by others in the industry.

As such, the BPAI affirmed the obviousness rejections.

Read/download a copy of the opinion here (link)

BPAI Precedential Opinion: Examiners Must Provide "Reasoned, Fact-Based" Evidence For Prior Art Rejections

Ex Parte Whalen II, Appeal 2007-4423, July 23, 2008

Whalen's application claimed a composition for embolizing an aneurism, which the Examiner rejected for anticipation, and obviousness.

The primary issue in the rejections centered around a claim element reciting embolic compositions having a viscosity of at least 150cSt (centiStokes) at 40 degrees C. While the prior art disclosed embolyc compositions, they did not disclose the exact viscosity specified in the claim.

The examiner's rejection stated that the prior art "inherently" contained the same viscosity because they "comprise similar components used in overlapping ranges of concentrations as those claimed." Alternately, the Examiner concluded that the claimed compositions would have been obvious because "it would have been prima facie obvious to optimize the viscosity range of [the known] compositions by routine experimentation."

The BAPI reversed the examiner on both inherency and obviousness.

The Examiner has not provided an adequate basis – based on evidence or scientific reasoning – to support the finding that the “compositions disclosed by Evans inherently possess the same viscosity . . . as the instantly claimed invention” . . . The Examiner reasons that “Evans’ compositions comprise similar component[s] used in overlapping ranges of concentrations,” but even if some of the compositions encompassed by Evans’ broad disclosure might have a viscosity of 150 cSt at 40° C, that possibility is not adequate to support a finding of inherent anticipation.

“Inherency . . . may not be established by probabilities or possibilities. The mere fact that a certain thing may result from a given set of circumstances is not sufficient.” In re Oelrich, 666 F.2d 578, 581 (CCPA 1981). See also Ex parte Skinner, 2 USPQ2d 1788, 1789 (BPAI 1986) (“[T]he examiner must provide some evidence or scientific reasoning to establish the reasonableness of the examiner’s belief that the functional limitation is an inherent characteristic of the prior art” before the burden is shifted to the applicant to disprove the inherency.).

On obviousness, the Board stated:

While “the discovery of an optimum value of a variable in a known process is normally obvious,” In re Antonie, 559 F.2d 618, 620 (CCPA 1977), this is not always the case. One exception to the rule is where the parameter optimized was not recognized in the prior art as one that would affect the results. Id.

Here, the Examiner has not pointed to any teaching in the cited references, or provided any explanation based on scientific reasoning, that would support the conclusion that those skilled in the art would have considered it obvious to “optimize” the prior art compositions by increasing their viscosity to the level recited in the claims. No reason to have done so is apparent to us based on the record. On the contrary, the references all suggest that low viscosity was a desired property in embolic compositions.

* * *

The U.S. Supreme Court recently held that rigid and mandatory application of the “teaching-suggestion-motivation,” or TSM, test is incompatible with its precedents. KSR Int’l Co. v. Teleflex Inc., 127 S.Ct. 1727, 1741 (2007). The Court did not, however, discard the TSM test completely; it noted that its precedents show that an invention “composed of several elements is not proved obvious merely by demonstrating that each of its elements was, independently, known in the prior art.” Id.

The Court held that the TSM test must be applied flexibly, and take into account a number of factors “in order to determine whether there was an apparent reason to combine the known elements in the fashion claimed.” Id. at 1740-41. Despite this flexibility, however, the Court stated that “it can be important to identify a reason that would have prompted a person of ordinary skill in the relevant field to combine the [prior art] elements in the way the claimed new invention does.” Id. “To facilitate review, this analysis should be made explicit.” Id.

[W]hen the prior art teaches away from the claimed solution as presented here . . . obviousness cannot be proven merely by showing that a known composition could have been modified by routine experimentation or solely on the expectation of success; it must be shown that those of ordinary skill in the art would have had some apparent reason to modify the known composition in a way that would result in the claimed composition.

REVERSED

"Blockbuster" Academic Studies on KSR, Obviousness

Professor Joseph Scott Miller of the Lewis & Clark Law School ( and author of the Fire of Genius Blog) has put together a special issue of the law journal that focuses upon the many aspects of the KSR Supreme Court obviousness ruling. Thus publications include:

• Gregory N. Mandel, Another Missed Opportunity: The Supreme Court’s Failure to Define Nonobviousness or Combat Hindsight Bias in KSR v. Teleflex, 12 Lewis & Clark L. Rev. 323 (2008)

- Arguing that the KSR Court never defined what obviousness requires. Also, despite recognizing the problem of hindsight bias in nonobviousness analysis, the Court appeared to misconstrue the problem. As a result, "nonobviousness decisions will continue to be systematically biased with respect to the legal inquiry required by section 103."

• John F. Duffy, A Timing Approach to Patentability, 12 Lewis & Clark L. Rev. 343 (2008).

- Arguing that a “timing approach” to patentability that considers the free and open competition to innovate present before patenting will reliably generate all obvious innovations quickly once the market and technological conditions make the innovation both valuable and obvious.

• Rebecca S. Eisenberg, Pharma’s Nonobvious Problem, 12 Lewis & Clark L. Rev. 375 (2008).

- Recent CAFC cases having obviousness challenges to pharmaceutical patents suggest that the pharmaceutical industry does indeed have a nonobviousness problem, but that problem is not KSR. Rather, the problem is that many of the patents that the industry relies upon are invalid for obviousness under time-honored patent doctrine.

• Rochelle Cooper Dreyfuss, Nonobviousness: A Comment on Three Learned Papers, 12 Lewis & Clark L. Rev. 431 (2008).

- This paper addresses three areas where improvements could be made in the law on nonobviousness. First, the quantum of inventiveness required for patentability should reflect the capabilities of the ordinary artisan. Second, the asymmetry in the error rate of nonobviousness determinations should be taken into account in setting the standard of nonobviousness. Third, the concept of nonobviousness—or, better, inventive step—should be operationalized by considering the opportunities, risks, and nonpatent incentives the inventor faced at the time of the innovation.

Other papers include:

• Vincenzo Denicolò, Economic Theories of the Nonobviousness Requirement for Patentability: A Survey, 12 Lewis & Clark L. Rev. 443 (2008).

• R. Keith Sawyer, Creativity, Innovation, and Obviousness, 12 Lewis & Clark L. Rev. 461 (2008).

• Colleen M. Seifert, Now Why Didn’t I Think of That? The Cognitive Processes that Create the Obvious, 12 Lewis & Clark L. Rev. 489 (2008).

• Steven M. Smith, Invisible Assumptions and the Unintentional Use of Knowledge and Experiences in Creative Cognition, 12 Lewis & Clark L. Rev. 509 (2008).

• Janet Davidson and Nicole Greenberg, Psychologists’ Views on Nonobviousness: Are They Obvious?, 12 Lewis & Clark L. Rev. 527 (2008).

• Michael J. Meurer and Katherine J. Strandburg, Patent Carrots and Sticks: A Model of Nonobviousness, 12 Lewis & Clark L. Rev. 547 (2008).

• Joseph Scott Miller, Level of Skill and Long-Felt Need: Notes on a Forgotten Future, 12 Lewis & Clark L. Rev. 579 (2008).

View the entire listing here (link)

Special thanks to Hal Wegner for forwarding this information.

CAFC: Web-Based Implementation Deemed Obvious; Joint Infringement Nixed

Muniauction, Inc. v. Thomson Corp., July 14, 2008 (2007-1485)

After a jury trial, the district court ruled that Thomson wilfully infringed Muniauction's patent related to conducting original issuer auctions of financial instruments. The district court awarded enhanced damages, and entered a permanent injunction against Thomson. Shortly after trial, the Supreme Court issued KSR International Co. v. Teleflex, Inc., however the district court did not modify their finding that Muniauction's patent was not obvious.

While the appeal was pending, the CAFC issued two opinions relevant to this case: (1) In re Seagate (changing the standard of willful infringement from one akin to negligence to that of objective recklessness) and (2) BMC Resources (where steps of a method claim are performed by multiple parties, the entire method must be performed at the control or direction of the alleged direct infringer). Thomson argued that these cases rendered the patent invalid and/or established that Thomson did not infringe as a matter of law.

Obviousness

On the issue of obviousness, the CAFC found that Muniauction's patent was disclosed in the prior art, except that the prior art did not discuss the use of a web browser for performing the claimed features.

The CAFC noted that the patent specification identified the invention as using a "conventional Internet browser" and "conventional web browsing software." Accordingly, the CAFC acknowledged that this terminology "denotes a reference to web browsers in existence at the time of the alleged invention."

The CAFC also cited various patent and prior art publications that generally disclosed the use of Internet browsers for electronic auctions, and thus, indicated the obviousness of the claimed combination. Furthermore, citing Leapfrog Enterprises, the CAFC found that "adapting existing electronic processes to incorporate modern internet and web browser technology was similarly commonplace at the time the [] patent application was filed."

On secondary considerations, the CAFC noted that "[a] nexus between the merits of the claimed invention and evidence of secondary considerations is required in order for the evidence to be given substantial weight in an obviousness decision." Finding that Muniauction's evidence of secondary considerations lacked the requisite nexus to the claims, the CAFC ruled the patent was obvious as a matter of law.

Noninfringement

The only theory of infringement put forward by Muniauction was that of so-called joint infringement, which was addressed in BMC Resources v. Paymentech:

[W]here the actions of multiple parties combine to perform every step of a claimed method, the claim is directly infringed only if one party exercises "control or direction" over the entire process such that every step is attributable to the controlling party, i.e., the "mastermind." . . . At the other end of this multi-party spectrum, mere "arms-length cooperation" will not give rise to direct infringement by any party.

Muniauction's patent recited the feature of "inputting data associated with at least one bid for at least one fixed income financial instrument into said bidder’s computer via said input device." Since Thomson did not "input" data, nor "control" or "direct" users to perform the acts, the CAFC found there to be no infringement as well:

Under BMC Resources, the control or direction standard is satisfied in situations where the law would traditionally hold the accused direct infringer vicariously liable for the acts committed by another party that are required to complete performance of a claimed method . . . In this case, Thomson neither performed every step of the claimed methods nor had another party perform steps on its behalf, and Muniauction has identified no legal theory under which Thomson might be vicariously liable for the actions of the bidders. Therefore, Thomson does not infringe the asserted claims as a matter of law.

REVERSED-IN-PART AND VACATED-IN-PART

From the footnotes:

Footnote 3:

Because the ’099 patent is itself silent regarding how to actually implement the methods claimed therein with a web browser, Muniauction’s argument therefore might suggest that the claims present an enablement issue, rather than support a
conclusion of nonobviousness. See, e.g., Sitrick v. Dreamworks, LLC, 516 F.3d 993, 999 (Fed. Cir. 2008) ("The ‘enablement requirement is satisfied when one skilled in the art, after reading the specification, could practice the claimed invention without undue experimentation.’")

Footnote 4:

We further note that our conclusion as to the nexus between this award and the claims is consistent with the long-established rule that "[c]laims which are broad enough to read on obvious subject matter are unpatentable even though they also read on nonobvious subject matter." In re Lintner, 458 F.2d 1013, 1007 (CCPA 1972) (citing In re Mraz, 455 F.2d 1069, 1073 (CCPA 1972)).

KSR Invades Preliminary Injunctions at the CAFC

Erico Int'l Corp. v. Vutec Corp. (2007-1168) February 19, 2008

After surviving reexamination, Erico alleged that their J-Hook patent was being infringed by the defendants. While one of the defendants assured Erico that they would stop selling the allegedly infringing product, they "sold the very products it promised to retain and continued to manufacture and sell knock off J-Hooks."

The district court granted Erico's motion for a preliminary injunction. In defending against the motion, it was argued, among other things, that the patent was invalid due to obviousness. The documents relied upon for obviousness were (1) a reference that was considered by the PTO during reexamination, combined with (2) a new reference (the "EAI/TIA spacing standards" document). The district court did not find the obviousness arguments persuasive, noting that "the [PTO] had sufficient information before it during its prior examinations to assess the very obviousness claim [defendant] now raises, and because secondary considerations of nonobviousness cut in [Erico's] favor."

Vacating the preliminary injunction, the CAFC concluded that the prior art posed a "serious challenge" to the validity of the patent. Citing KSR and Dystar, the court found that "it is reasonable to infer that one of ordinary skill would have considered the [reexamination reference] coupled with the EIA standards and common knowledge within the art as shown by Mr. Laughlin's testimony to explain that Claim 17 is vulnerable based on invalidity."

The court also noted that, for the purposes of preliminary injunctions,

a defendant need not prove actual invalidity. On the contrary, a defendant must put forth a substantial question of invalidity to show that the claims at issue are vulnerable. Thus, a showing of a substantial question of invalidity requires less proof than the clear and convincing standard to show actual invalidity.

Judge Newman, dissenting:

[The Supreme Court] explained that "[t]he purpose of a preliminary injunction is merely to preserve the relative positions of the parties until a trial on the merits can be held" . . . The question here on appellate review is whether the district court abused its discretion in deciding to maintain the status quo during this litigation.

The district court decided that the status quo should be preserved during this litigation. In overturning that decision, the panel majority mistakes the law, misplaces the burdens, misconstrues the assumptions, and ignores the district court's discretionary authority and its balance of the equitable aspects. The panel majority does not explain how the district court abused its discretion, nor is recognition given to the standard of review whereby, as this court has stated: "A decision granting a preliminary injunction will be overturned on appeal only if it is established that the district court made a clear error of judgment in weighing relevant factors, or relied on incorrect law or on clearly erroneous factual findings."

Patent Shorts

USPTO Gets Funding Increase - the PTO has received a budget increase of about 9 percent for the government's 2008 fiscal year. The Office received the president's full funding request of $1.9 billion in a budget bill passed by the U.S. Congress in mid-December and signed by president Bush the day after Christmas. If you thought PTO fee diversion is dead, think again - currently there is nothing preventing Congress from diverting fees as 2008 progresses (link).

Summary Judgment Motions Filed in Tafas/Glaxo v. Dudas - in addition to 31 amicus briefs filed in support of Tafas/Galxo, and 16 amicii filed supporting the PTO, all parties have submitted their briefs for summary judgment. View Glaxo's brief (link), Tafas brief (link), and the PTO brief (link). Read more at the PLI blog (link).

A "Long-Felt, Unmet Need" Gem - Johnson v. Forty-Second Street, Manhattanville & St. Nicholas Ave. R. Co., 33 F. 499, 501 (C.C.S.D.N.Y. 1888):

It would be as irrational to charge an author who has produced a sentence of surpassing power and beauty with plagiarism, because the words which he employes have long been found in the lexicon, as to over-throw a patent for a new and useful combination upon the ground that its separate elements are old. By an ingenious assembling of known appliances this inventor solved the problem the solution of which had been sought for in vain through a long series of years. Although the goal was frequently in sight, it had never been reached; always some necessary requisite to success was lacking. The practical disentanglement of the difficulty was left to Newman. He made that a success which before had been tentative and rudimentary.

Courtesy of the Fire of Genius blog (link)

Viewing Patent Searches Visually - Check out PatentScrounger.com (link)

CAFC Punts on Court vs. USPTO Validity Determinations

(1) In Re Translogic Technology Inc. (2006-1192), October 12, 2007

(2) Translogic Technology, Inc. v. Hitachi, LTD, et al. (2005-1387) (nonprecedential), October 12, 2007

This case illustrated the ongoing tension between district court proceedings and parallel USPTO reexaminations, where each proceeding ended with a different result. In Translogic, the district court, after waiting 3 years on 5 reexamination requests, decided to reopen the case and found the patent-in-suit not invalid and infringed, and levied a $86.5M judgment and a permanent injunction (which was later stayed). In the meantime, the PTO found the patent obvious and invalid - for more background info, see earlier 271 Blog post here.

Despite the PTO's findings, the district court stuck to its guns and maintained its ruling, noting that "[t]he Federal Circuit is the proper forum to resolve conflicts between this court's claim construction and the Board's claim construction." One of the primary questions presented on appeal was "[s]hould the judgment of the district court be vacated and the case remanded for summary dismissal because the claims of the '666 patent are unpatentable on reexamination and the patent is void ab initio?"

To answer this question, the CAFC turned to BPAI proceedings, and found that the patent was invalid for obviousness. One of the sticking points was the interpretation of "coupled to" and "coupled to receive" - Translogic argued that the BPAI should have followed the district court's interpretation of "coupled to receive" to mean "connected to receive . . . directly or through one or more intervening inverters." The BPAI interpreted "coupled to receive" to mean "capable of receiving" signals.

Interestingly, the CAFC didn't base its decision on a "broadest reasonable interpretation," but instead engaged in a Phillips analysis of the claims, and found that the BPAI was correct:

The term "coupled to" in the phrase "second stage input terminal 'coupled to' the first stage output terminal" defines a connection between the TGMs. In other words, "coupled to" in the context of this claim phrase defines the connection between two of the TGMs essential for a series multiplexer.

On the other hand, the term "coupled to receive" in the phrase "input terminals 'coupled to receive' first and second input variables" does not specify a particular connection. In other words, the claimed circuit does not require any specific input or connection. Instead, like any logic circuit, this part of the circuit only accepts inputs from an external source. As such, "coupled to" and "coupled to receive" are clearly different in the claimed '666 patent multiplexer circuit . . . Even if the input terminals are not connected, the circuit claimed in the '666 patent defines a series multiplexer. Therefore, this court agrees with the Board's construction that "coupled to receive" means "capable of receiving."

On the issue of obviousness, Translogic argued that the prior art (Gorai) was not applicable, because it pertained to an algorithm to design logic circuits based on functional parameters, while the patent-in-suit improves a known circuit (i.e., multiplexer). The CAFC rejected this argument:

In its prior art argument, Translogic is making the same error corrected by the Supreme Court in KSR. Translogic mistakenly argues that variants of a circuit connecting 2:1 multiplexers in series are not relevant prior art with respect to the '666 patent because these variants do not address the same problem, namely an improved multiplexer circuit. However, this argument overlooks the fundamental proposition that the series circuits in Gorai are prior art within the public domain and the common knowledge of a person of ordinary skill in the art. Thus, the Gorai reference is a relevant prior art reference with respect to the '666 patent and clearly discloses a series 2:1 multiplexer circuit.

[C]laims 47 and 48 of the '666 patent define a series multiplexer circuit. Gorai Fig. 3 discloses the same serial multiplexer circuit. As any person of ordinary skill in the art would understand, the inputs to a circuit do not change the circuit itself. Therefore, this court finds that Gorai discloses a series multiplexer circuit as claimed in the '666 patent. Thus, the Board was correct in concluding that the Gorai reference discloses a series multiplexer circuit.

Regarding the question "[s]hould the judgment of the district court be vacated and the case remanded for summary dismissal because the claims of the '666 patent are unpatentable on reexamination and the patent is void ab initio?", the CAFC issued a short statement, answering this question in the affirmative:

In light of this court's decision in In re Translogic Tech., Inc., this court vacates the district court's decision and remands this case to the district court for dismissal.

CAFC: Evidence of Unexpected Results Must be Considered by PTO

In Re John B. Sullivan (2006-1507) August 29, 2007 (link)

The applicants appealed a decision by the BPAI, finding their application obvious. The subject matter of the appeal relates to an antivenom composition used to treat venomous bites from a rattlesnake.

The PTO reasoned that two prior art references rendered the claims obvious, and added that limitations recited towards snakebite victims were for an "intended use", and that functional language related to the composition "would have been expected by a person of ordinary skill in the art at the time the invention was made to neutralize the lethality of the venom of a rattlesnake."

Interestingly, the applicant submitted three declarations which argued non-obviousness, but the PTO "gave them no weight because they only relate to the use of the claimed composition."

While finding that a prima facie case of obviousness was made, the court found error in the PTO's refusal to consider the declarations:

The Board failed to consider each of these declarations. The Board stated in a footnote that the declarations of record relate only to the use of the claimed composition as an antivenom, and thus the Board expressly declined to give any meaningful consideration to them. Sullivan, No. 2006-0220, slip op. at 13 n.7. As stated above, when an applicant puts forth relevant rebuttal evidence, as it did here, the Board must consider such evidence. The claimed composition cannot be held to have been obvious if competent evidence rebuts the prima facie case of obviousness. By failing to consider the submitted evidence, the Board thus committed error. That is not to suggest that the Board’s finding of obviousness must be overturned in light of the evidence; rather, the Board must give the declarations meaningful consideration before arriving at its conclusion.

Moreover, the Board was mistaken to assert that the declarations only relate to the use of the claimed composition. The declarations do more than that; they purport to show an unexpected result from use of the claimed composition, how the prior art taught away from the composition, and how a long-felt need existed for a new antivenom composition. While a statement of intended use may not render a known composition patentable, the claimed composition was not known, and whether it would have been obvious depends upon consideration of the rebuttal evidence. Had the Board considered or reviewed the declarations in any meaningful way, it might have arrived at a different conclusion than it did.

With regard to "intended use," the CAFC provided this important language:

The issue here is not whether a claim recites a new use, but whether the subject matter of the claim possesses an unexpected use. That unexpected property is relevant, and thus the declarations describing it should have been considered by the Board.

VACATED AND REMANDED

Erroneous "Skill in the Art" Triggers Obviousness

Daiichi Sankyo Co., Ltd. v. Apotex, Inc. (06-1564) July 11, 2007 (non-precedential)

Daiichi held a patent drawn to a method for treating bacterial ear infections by topically administering the antibiotic ofloxacin into the ear. During litigation, a dispute arose over the skill in the art when considering obviousness. Apotex argued that the skill in the art would be:

"a person engaged in developing new pharmaceuticals, formulations and treatment
methods, or a specialist in ear treatments such as an otologist, otolaryngologist, or otorhinolaryngologist who also has training in pharmaceutical formulations."

Instead, the district court concluded that a person of ordinary skill in the art

"would have a medical degree, experience treating patients with ear infections, and knowledge of the pharmacology and use of antibiotics. This person would be . . . a pediatrician or general practitioner—those doctors who are often the ‘first line of defense’ in treating ear infections and who, by virtue of their medical training, possess basic pharmacological knowledge."

When considering the prior art, the district court concluded that the teachings fell outside the skill in the art of an otologist with only basic pharmacological knowledge, and held the patent nonobvious. The CAFC disagreed.

The inventors of the ’741 patent were specialists in drug and ear treatments—not general practitioners or pediatricians. At the time of the invention, Inventor Sato was a university professor specializing in otorhinolaryngology; Inventor Handa was a clinical development department manager at Daiichi, where he was involved with new drug development and clinical trials; and Inventor Kitahara was a research scientist at Daiichi engaged in the research and development of antibiotics. Additionally, others working in the same field as the inventors of the ’741 patent were of the same skill level.

[M]ost of the written description details the inventors’ testing ofloxacin on guinea pigs and their findings that ototoxicity did not result from the use of their compound. Such animal testing is traditionally outside the realm of a general practitioner or pediatrician. Finally, while a general practitioner or pediatrician could (and would) prescribe the invention of the ’741 patent to treat ear infections, he would not have the training or knowledge to develop the claimed compound absent some specialty training such as that possessed by the ’741 patent’s inventors.

[T]he district court’s error in determining the level of ordinary skill in the art of the ’741 patent tainted its obviousness analysis. In view of the correct level of skill in the art and the evidence of record, we conclude that as a matter of law the ’741 patent is invalid as obvious.

REVERSED

Interestingly, KSR was not invoked in the opinion. This is now the 7th opinion (eight, if you count the Pfizer v. Apotex denial of en banc) on obviousness from the CAFC after KSR. So far, the CAFC has not explained in any of the opinions how KSR may have changed the outcome of a case, even though most of the lower court decisions came before KSR. Including Daiichi, the outcomes at the CAFC favor obviousness by a 6-1 margin:

Syngenta Seeds, Inc. v. Monsanto Co. - affirmed obviousness

Leapfrog Enterprises, Inc. v. Fisher-Price, Inc. - affirmed obviousness

Omegaflex, Inc. v. Parker-Hannifin - reversed SJ of non-obviousness

Takeda Chemical Indus. v. Alphapharm Pty., Ltd. - affirming non-obviousness

Frazier v. Layne Christensen Co. - affirming JMOL on obviousness

Pharmastem Therapeutics, Inc. v. Viacell, Inc. - reversing jury verdict and JMOL of non-obviousness

CAFC Flexes It's Muscle on Obviousness, Infringement

PharmaStem Therapeutics, Inc. v. Viacell, Inc. (05-1490) July 9, 2007

PharmaStem sued Viacell and 5 other defendants over broad patents related to stem cell medical treatment for persons having compromised blood and immune systems. After a 3 week jury trial, the jury returned a verdict in favor of PharmaStem, finding that the patents were not obvious and infringed. After the defendants filed JMOL motions to overturn the verdicts, the district court reversed the finding of infringement, but maintained that the patents were not invalid. Prior to, and during, the litigation, PharmaStem's patents survived 3 reexamination requests.

In a controversial split opinion, the CAFC upheld the JMOL on infringement and sua sponte held that the patents were invalid for obviousness.

Infringement:

One of the sticking points in the litigation was language in the claims that required that the recited composition contained stem cells "in an amount sufficient to effect hematopoietic reconstitution of a human adult."

Each of the defendants are in the business of servicing families with newborn infants in which blood from the infant's umbilical cord is collected and cryopreserved for possible later use. The problem was that PharmaStem could not show enough evidence that the defendants' cord blood contained a "sufficient" supply of stem cells to effect successful reconstitution of an adult. An expert provided testimony based on the defendants' marketing materials, but did not consider any data regarding the composition of the cord blood units. Accordingly, the expert's testimony was excluded.

In a more interesting move, the CAFC also determined that the method claims could not be infringed because all the steps were not performed by the same party - the defendants were responsible for collecting and cryopreserving cord blood samples, while transplant physicians unrelated to the defendants thawed the cord blood and used it for transplanting. Also, since the defendants never "owned" the blood, there was no contributory infringement:

While cord blood is certainly a product, the transaction between the defendants and their clients is plainly not the sale of "a material or apparatus for use in practicing a patented process," as is required by section 271(c) with respect to method patents. The evidence at trial showed that the cord blood remained the property of the families throughout the period in which the defendants stored it. The defendants were never owners of the blood, but instead were merely bailees; they were not free to dispose of the blood as they chose, but were contractually obligated to preserve it pending the families’ need for it at some point in the future. On those occasions when the cord blood was needed, the defendants provided the blood to transplanters in satisfaction of their contractual obligation to ship the families’ cord blood samples to a transplanter upon direction. Neither that transaction nor any earlier transaction between the families and the defendants constituted a "sale" of the cord blood.

Obviousness:

The CAFC came out of the gate framing the obviousness issue as one revolving around the "reasonable expectation of success":

The idea of using cryopreserved cord blood to effect hematopoietic reconstitution was not new at the time the inventors filed the applications that matured into the ’681 and ’553 patents . . . Accordingly, this is not a case in which there is any serious question whether there was a suggestion or motivation to devise the patented composition or process.

The more difficult question is whether the prior art would have given rise to a reasonable expectation of success in creating the process claimed in the ’553 patent and the composition claimed in the ’681 patent. In addressing that question, the parties focus on whether the inventors had a reasonable expectation that cord blood could be successfully used in transplants for hematopoietic reconstitution.

PharmaStem brought forward testimony asserting that those working in the transplant field did not believe blood would be suitable as a transplant tissue. However, the CAFC dismissed this evidence in light of statements made in the patentees own specification:

The problem with Dr. Bernstein’s testimony about the prior art references is that it cannot be reconciled with statements made by the inventors in the joint specification and with the prior art references themselves . . . [In the patentee's specification], the inventors acknowledged that it was previously known that the properties of cord blood are quite different from those of adult blood and that hematopoietic stem cells had been found in cord blood in much greater concentrations than in adult blood.

[C]ontrary to Dr. Bernstein’s contention that the prior art did not disclose the presence of stem cells in cord blood, the inventors cited several prior art references and stated flatly that "hematopoietic stem cells have been demonstrated in human umbilical cord blood." Moreover, the inventors noted that the prior art references showed that the concentration of stem cells in cord blood was "at a much higher level than in the adult." Nor can those statements in the specification be dismissed as
reflecting a careless use of the term "hematopoietic stem cell."

* * *

Accordingly, PharmaStem’s argument that stem cells had not been proved to exist in cord blood prior to the experiments described in the patents is contrary to the representation in the specification that the prior art disclosed stem cells in cord blood. Admissions in the specification regarding the prior art are binding on the patentee for purposes of a later inquiry into obviousness . . . Nor is there any unfairness in holding the inventors to the consequences of their admissions, as their characterization of the prior art as showing the presence of stem cells in cord blood is hardly unreasonable.

And then, the CAFC dropped the big one:

While the inventors may have proved conclusively what was strongly suspected before—that umbilical cord blood is capable of hematopoietic reconstitution—and while their work may have significantly advanced the state of the science of hematopoietic transplantations by eliminating any doubt as to the presence of stem cells in cord blood, the mouse experiments and the conclusions drawn from them were not inventive in nature. Instead, the inventors merely used routine research methods to prove what was already believed to be the case. Scientific confirmation of what was already believed to be true may be a valuable contribution, but it does not give rise to a patentable invention . . . Good science and useful contributions do not necessarily result in patentability.

PharmaStem also put forward secondary considerations in support of non-obviousness, but the CAFC was not receptive, stating that "there was no indication that the praise for the inventors’ work was based on any inventive contribution they made, as opposed to their proof, through laboratory work, that fetal blood contains large numbers of stem cells. As noted, the former is a basis for patentability; the latter is not. "

With regard to the reexamination, the CAFC viewed the analysis in the reexamination certificate as "flawed," based on similar reasons used to reverse the jury verdict.

Judge Newman's dissent: in a 31 page opinion (!!) Judge Newman took the majority to task over most every issue, stating that, while there was room to disagree over the jury's verdict, the majority opinion went too far in reversing infringement and non-obviousness. Also, Judge Newman came close to accusing the majority of exceeding its appellate authority by re-trying the case on appeal. Some notable quotes follow:

The discoveries of these inventors were met with universal acclaim and widespread utilization, including the founding of many commercial enterprises, all of which are reported to have licensed the patents except for these defendants. Unimpressed by these considerations, my colleagues on this panel now reconstruct these inventions by selection and inference, with perfect hindsight of the discoveries.

* * *

The panel majority scours the prior art for clues that could fit the eventual achievement, and then rules that the achievement was obvious, no matter that it eluded the others whose work is now compiled by this court so as to invalidate these patents.

* * *

My colleagues ignore not only the scientific experts who testified at the trial, but also the PTO examiners who conducted the three reexaminations . . . My colleagues do not explain where the PTO went wrong; instead, they rearrange the past, criticize the acclaim heaped on these inventors, and propose that if the people in this field knew what this court knows, they would not have been so impressed.

* * *

The question is whether the jury's verdict is sustainable on the evidence presented, not whether we could have or would have gone the other way on the evidence presented.

* * *

It is often far easier to recognize the problem than to find and demonstrate the solution. The patent law recognizes that advances of great power may be based as much on persistent and skilled investigation as on the flash of creative genius, for both serve to transcend that which was previously achieved . . . Scientific methodology usually starts with a hypothesis based on what is already known; the record shows that several scientists mentioned the idea of rebuilding destroyed blood cells. However, none achieved this long-sought goal, and the record shows the extreme skepticism concerning even the possibility of this achievement.

* * *

The district court ruled that PharmaStem had not proved infringement because PharmaStem did not separately analyze the stem cell content of each sample of cord blood . . . Every defendant testified that the blood it collected and stored was analyzed for cell content at the time of collection. The jury was not instructed that such evidence was inadequate and inadmissible -- as the district court ruled post-trial. On the evidence presented, this is not a sound basis for rejecting the jury's verdict. The tardy rejection of the testimony of PharmaStem's expert witness, Dr. Hendrix, is an inappropriate application of Daubert and its succeeding cases, on which the panel majority relies, for there was no criticism of the expert's scientific credentials or her analysis of the prior art and the state of the science.

* * *

The principles of patent infringement are not negated when the steps of a method claim are performed by more than one entity. There was no instruction as to legal impossibility of liability as to the '553 patent, and no objection was raised to the verdict questions. We are not told whether the legal theory of sale or rent was aired at the trial, but it is apparent that the jury was fully apprised of the nature of the accused activities, as reflected in the jury questions . . . It is irrelevant whether any steps of a method claim can be viewed as a "service;" infringement requires only that the steps be performed.

Is KSR Actually Helping Applicants at the BPAI?

Earlier in the month, the 271 Blog reported on post-KSR appeals at the BPAI related to obviousness (link), and reported that "only" 36% of obviousness cases were reversed on appeal. This inevitably lead to the question: "what was the reversal rate before KSR?"

This resulted in further digging, and a bit of controversy. The BPAI traditionally publishes statistics in the Official Gazette (OG), and similarly posts statistics on the BPAI link of the Office's web page.

Back in 2005, a widely-distributed analysis was made on reversal rates, based off of the OG, and reported that the reversal rate was around 60%:

Disposition-------% of Dispositions--------[% decided cases]
Affirmed------------------- 36. 6%------------------[40 % decided]
Affirmed-in-Part---------12.6 %-------------------[14 % decided]
Reversed-------------------40.9 %------------------[45 % decided]
Reversals-------------------53.5 %------------------[59 % decided]

Partial Remands, Dismissals--------9.9 %

TOTAL, 100.0%

Now, the 59% "reversal" number was a combination of decisions that outright reversed a rejection (40.9%), and partial reversals (i.e., "affirmed-in-part" - 12.6%). It is important to note here, that the reversals included ALL rejections, and not just obviousness rejections.

Turning to the published numbers on the BPAI site (link), the numbers tell a slightly different story:

FY 2005 (link) -- reversed = 39.6%; partial reversals = 12.5%; total reversals = 52.1%

FY 2006 (link) -- reversed = 34.8%; partial reversals = 12.1%; total reversals = 46.9%

FY 2007, through April (link) -- reversed = 29.6%; partial reversals = 13.9%; total reversals = 43.5%

Judging from the "reversed" numbers alone, the 36% rate of reversal on obviousness rejections for May 2007 suggests an increased rate of reversal at the BPAI. Again, the early numbers (2005-2007) combined all reversals, which may or may not have been based on obviousness. Thus, it can be extrapolated that the reversal rate of 36% on "obviousness-only" rejections suggests an increase in the overall reversal rate. It follows that the likelihood of reversal on 103 grounds increased as well.

The BPAI is expected to publish its May numbers shortly, and they will be posted when they come out.

Post-KSR Activity at the BPAI

The Board of Patent Appeals and Interferences issued two decisions on May 10 addressing obviousness and KSR. In one decision, the examiner was reversed, while the second decision affirmed the 103 rejection. Both decisions came from art unit 2100

U.S. Application 09/757,913 (PAIR link) - obviousness reversed

We begin our analysis by noting that in the rejection of claims 1 and 12, the Examiner asserts that Chen teaches the limitations argued by Appellants (i.e., "stopping the context information updating . . ." and "taking a snapshot of the compression and decompression context information . . ." )(see Answer 4; see also claim 1). However, when we look to the Examiner's rejection for specific citations for these argued limitations, there are none (Answer 4, ¶1). In responding to Appellants' arguments, the Examiner asserts that Chen inherently teaches "stopping the context information updating" as claimed (see Answer 16). Likewise, the Examiner asserts that Chen inherently teaches "taking a snapshot of the compression and decompression context information," as claimed. (See Answer 18,T 2: 8-10, i.e., "It is inherent that a snapshot can only be taken when all the data has been received as claimed. Otherwise, the snapshot would be useless").

After carefully considering both the Chen and Maggenti references, we find no specific teaching or suggestion within either reference that fairly meets the language of the claim that requires "stopping the context information updating. . .," and "taking a snapshot of the compression and decompression context information . . ." (claim 1). We find that to affirm the Examiner on this record would require speculation on our part. Furthermore, the Court of Appeals for the Federal Circuit has determined that inherency may not be established by probabilities or possibilities. "The mere fact that a certain thing may result from a given set of circumstances is not sufficient." In re Robertson, 169 F.3d 743,745,49 USPQ2d 1949, 1950-51 (Fed. Cir. 1999) (internal citations omitted). Because we find the combination of Chen and Maggenti fails to teach or suggest all the limitations recited in the claim, we agree with Appellants that the Examiner has failed to meet the burden of presenting a prima facie case of obviousness. Accordingly, we will reverse the Examiner's rejection of independent claim 1 as being unpatentable over Chen in view of Maggenti.

U.S. Application 09/999,074 (PAIR link) - obviousness affirmed

Contrary to Appellants' argument, Guheen in fact discloses technological means to perform user management (e.g., developing user profiles via a database and customizing interfaces based on specific user profiles) as we discussed previosly. Moreover, Berg's flow management engine tracks each user's identification (e.g., the user's login name) for each particular step in a flow in a database." Based on these collective teachings, as well as the inferences and creative steps that the skilled artisan - an electrical engineer with several years of related industry experience - would reasonably employ, we see no reason why the skilled artisan would not have combined the user management features of Guheen with Berg's workflow management capability. Such a combination would provide, among other things, customized interfaces tailored to particular users in a workflow environment. For at least these reasons, the skilled artisan would have reasonably combined the respective teachings of the references.

Joe Miller at the Fire of Genius is compiling a post-KSR collection of CAFC and district court cases, as well as BPAI decisions on obviousness. It's a fantastic resource that should be visited by everyone in the weeks/months (years?) to come.

Should Presumptions Be Used for Obviousness?

Professor Timothy Holbrook wrote a brief article prior to the KSR decision which discusses the use of a presumption-based approach for obviousness:

This situation is ripe for the use of presumptions. If all of the limitations of the claim are present in the prior art, then the court would look for either a motivation to combine the prior art or a teaching away from the claimed invention.

The presence of a suggestion to combine should create a presumption of obviousness, rebuttable by strong secondary considerations, such as the failure of others, unexpected results, or long-felt but unsolved need, or by contrary evidence from the prior art.

Similarly, the presence of a teaching away should create a presumption of non-obviousness, rebuttable by other secondary considerations suggesting the advancement was merely trivial or by other parts of the prior art demonstrating that one of skill in the art would not view this combination as being discouraged by the prior art.

Importantly, in the absence of either a suggestion to combine or a teaching away, no presumption arises and the court should apply the Graham methodology alone, absent any presumptions. Indeed, the absence of either a motivation or a teaching away says very little about the state of the art one way or the other; it is merely an absence of evidence and not evidence of a lack of technical knowhow.

After KSR, this idea seems to make sense, in light of the SCOTUS opinion. An interesting proposition that is worth a read.

T. Holbrook: "Obviousness in Patent Law and the Motivation to Combine: A Presumption-Based Approach" (SSRN link; Wash. U. link)

KSR v. Teleflex - Has "Inventive Step" Made its Appearance in U.S. Patent Law?

As predicted, the SCOTUS has whittled back the Federal Circuit's teaching, suggestion or motivation (TSM) test. While noting the TSM test is "helpful," the unanimous opinion concluded that the "purpose" or "motivation" behind a patent claim was not controlling - "[w]hat matters is the objective reach of the claim."

Relying on Sakraida and Anderson's-Black Rock (which brought us the "synergism" test), the Court provided a modified "inventive step" test for determining obviousness:

[I]f a technique has been used to improve one device, and a person of ordinary skill in the art would recognize that it would improve similar devices in the same way, using the technique is obvious unless its actual application is beyond his or her skill. Sakraida and Anderson’s-Black Rock are illustrative - a court must ask whether the improvement is more than the predictable use of prior art elements according to their established functions.

(Compare this to Article 56 of the EPC: "An invention shall be considered as involving an inventive step if, having regard to the state of the art, it is not obvious to a person skilled in the art.")

The SCOTUS ruled that the CAFC was being too "rigid" in applying the TSM test, and noted numerous errors in the application of the test:

Specific "problem to be solved" is not the controlling factor

"The first error of the Court of Appeals in this case was to foreclose this reasoning by holding that courts and patent examiners should look only to the problem the patentee was trying to solve . . . The Court of Appeals failed to recognize that the problem motivating the patentee may be only one of many addressed by the patent’s subject matter. The question is not whether the combination was obvious to the patentee but whether the combination was obvious to a person with ordinary skill in the art. Under the correct analysis, any need or problem known in the field of endeavor at the time of invention and addressed by the patent can provide a reason for combining the elements in the manner claimed."

Obviousness may exists for different problems:

"The second error of the Court of Appeals lay in its assumption that a person of ordinary skill attempting to solve a problem will be led only to those elements of prior art designed to solve the same problem . . . Common sense teaches, however, that familiar items may have obvious uses beyond their primary purposes, and in many cases a person of ordinary skill will be able to fit the teachings of multiple patents together like pieces of a puzzle . . . The idea that a designer hoping to make an adjustable electronic pedal would ignore Asano because Asano was designed to solve the constant ratio problem makes little sense. A person of ordinary skill is also a person of ordinary creativity, not an automaton."

"Obvious to try" may still be OK:

"The same constricted analysis led the Court of Appeals to conclude, in error, that a patent claim cannot be proved obvious merely by showing that the combination of elements was "obvious to try" . . . When there is a design need or market pressure to solve a problem and there are a finite number of identified, predictable solutions, a person of ordinary skill has good reason to pursue the known options within his or her technical grasp. If this leads to the anticipated success, it is likely the product not of innovation but of ordinary skill and common sense."

"Common sense" trumps the possibility of hindsight:

"The Court of Appeals, finally, drew the wrong conclusion from the risk of courts and patent examiners falling prey to hindsight bias. A factfinder should be aware, of course, of the distortion caused by hindsight bias and must be cautious of arguments reliant upon ex post reasoning . . . Rigid preventative rules that deny factfinders recourse to common sense, however, are neither necessary under our case law nor consistent with it . . . The extent to which [CAFC hindsight provisions are] more consistent with our earlier precedents and our decision here is a matter for the Court of Appeals to consider in its future cases."

By paring back the TSM test, the Court did not provide much in terms of a bright-line test, but instead gave a number of obviousness considerations that revolve around (1) predictability and (2) recognition of a benefit by one skilled in the art:

• "[A] combination of familiar elements according to known methods is likely to be obvious when it does no more than yield predictable results."

• "If a person of ordinary skill in the art can implement a predictable variation, and would see the benefit of doing so, §103 likely bars its patentability."

• "One of the ways in which a patent’s subject matter can be proved obvious is by noting that there existed at the time of invention a known problem for which there was an obvious solution encompassed by the patent’s claims."

Unfortunately, the decision gave even less guidance for applying the rules at the USPTO (the words "USPTO" or "patent office" are not even mentioned in the opinion, and "examiners" are mentioned only twice in passing). Nevertheless future arguments on obviousness will likely be focused on the "predictability" of alleged combinations, along with the lack of a recognized benefit (see 1.132 declarations).

TSM is not dead as such - The SCOTUS finding of obviousness reviewed the standard Graham factors, and analyzed the scope and content of the prior art, as well as the problems to be solved. The Court rejected the CAFC's rule that the prior art had to "address the precise problem that the patentee was trying to solve" (emphasis added), and allowed the knowledge of the art to come into play. Since the prior art taught every element except for the location of the sensor, Teleflex's best chance appeared to be the lack of motivation to combine. Unfortunately for Teleflex, it wasn't a very strong argument, given the prior art that was cited to the district court.

NOTE: The Court also threw out a rather ominous note regarding the presumption of validity, which some have interpreted as a possible basis for a future challenge:

We need not reach the question whether the failure to disclose Asano during the prosecution of Engelgau voids the presumption of validity given to issued patents, for claim 4 is obvious despite the presumption. We nevertheless think it appropriate to note that the rationale underlying the presumption - that the PTO, in its expertise, has approved the claim - seems much diminished here.

Waiting for KSR v. Teleflex? You May Need to Wait a Little Longer . . .

Recently, KSR has become analogous to a band-aid that is about to ripped off the skin of an anxious patent bar. Considering the acerbic tone of the SCOTUS bench during oral arguments, many fear that the decision will amount to a painful wrench on a hairy appendage. Regardless of outcome, people have become restless waiting for the opinion (of course, it didn't help that Justice Scalia quipped in December: "I know how that one comes out, but I'm not going to tell you.").

Is the SCOTUS "late" in issuing the opinion? Not really.

Joe Miller at the Fire of Genius Blog has an excellent breakdown of the SCOTUS's decision making pace for the last term, and explains the following:

Assume the Roberts Court is similar to the Rehnquist Court: Opinions will issue in roughly the order in which they were argued, and majority opinions will be distributed roughly evenly among the justices for each argument session. What does the pattern of argument and opinion dates tell us thus far?

First argument session, beginning 10/2/2006

9 cases argued, with 9 opinions issued to date

(The last case to issue was Global Crossing Telecommunications v. Metrophones Telecommunications, No. 05-705. Justice Breyer wrote the majority opinion.)

Second argument session, beginning 10/30/2006

12 cases argued, with 9 [10] opinions issued to date

(One case remaining is James v. United States, No. 05-9264. The other two are the partial birth abortion cases, Gonzales v. Carhart, No. 05-380, and Gonzales v. Planned Parenthood, No. 05-1382. Justice Kennedy has not authored an opinion from this session yet.) [the Gonzales opinion issued today]

Third argument session, beginning 11/27/2006 [includes the KSR case]

10 cases argued, with 5 opinions issued to date

The authors of the five majority opinions issued to date are Justice Breyer (Gonzales v. Duenas-Alvarez, No. 05-1629, issued 1/17/2007), Justice Thomas (Weyerhauser Co. v. Ross-Simmons Hardwood Lumber Co., No. 05-381, issued 2/20/2007), Justice Scalia (Rockwell Int’l v. United States, No. 05-1272, issued 3/27/2007), Justice Stevens (Massachusetts v. EPA, No. 05-1120, issued 4/2/2007), and Justice Ginsburg (Watters v. Wachovia Bank, No. 05-1342, issued 4/17/2007).

Thus, half of the cases argued before the Court during the same session as KSR have not received opinions. A recent Washington Post article explains that the court is off to a "slower-than-usual pace" in issuing opinions. "The justices have issued 23 decisions so far, a bit behind last year's pace. Of course, at this point, they've also heard fewer cases than last year."

According to Joe, Justice Souter is most likely to author the majority opinion in KSR, followed by Justice Alito:

I assume that Justice Kennedy will have written the Seattle and Jefferson County affirmative action cases, and that the Chief Justice will have written the Ledbetter Title VII case. That leaves KSR and Twombly for Justices Souter and Alito.

Read Joe's post here.

See the SCOTUS Blog: The Pace of the Court's Decisionmaking

NOTE: Of course, the Supreme Court hasn't been predictable as of late. Earlier in the term, legal analysts and reporters noted that the justices were taking far fewer cases than in recent years. Shortly thereafter, the court accepted a slew of new cases in January.

Accordingly, the SCOTUS pace is likely to pick up in the coming months. Besides writing opinions in cases they've heard, the justices are scheduled to hear 16 cases in April, which is the same number as in February and March combined.

KSR v. Teleflex Recap: Judge Rader Lists Potential Outcomes

At a recent IP seminar, Judge Rader gave a speech covering the history and application of nonobviousness and the TSM test, and continued to challenge the perception that TSM is responsible for "gutting" obviousness (he prefaced his speech by stating that "much of what you may hear may be gobbledygook”). In the speech, Rader gave his thoughts on potential outcomes for the KSR v. Teleflex decision:

Scenario #1: Revive “synergism” test, where a combination of elements must result in an effect that is greater than the sum of the separate parts (Anderson’s-Black Rock, Inc., v. Pavement Salvage Co., 396 U.S. 57, 61 (1969) (holding patent invalid because ‘‘[n]o such synergistic result is argued here’’); Sakraida v. Ag Pro, Inc., 425 U.S. 273, 282 (1976) (holding patent invalid because it was a mere combination of old elements and had no ‘‘synergistic effect’’).

Scenario #2: Create new test, such as the “extraordinary” contribution to the arts contained in the Solicitor General brief ("This Court should restore the proper content of the nonobviousness analysis by refocusing the inquiry on the key question that the Graham framework addresses: whether the claimed invention manifests the extraordinary level of innovation, beyond the capabilities of a person having ordinary skill in the art, that warrants the award of a patent.")

Scenario #3: Reject TSM, but leave proper substitute to Federal Circuit

Scenario #4: Make TSM a “non-exclusive test,” allowing courts to use “synergism” or other tests skeptical of “combination patents”

Scenario #5: Make TSM test a “question of law” (now “factual” requiring specific citations to prior art or doctrines in knowledge of PHOSITA)