| | | | | |
Douglas Panzer
May 7, 2015

Software Patents with Means-Plus-Function Claims Must Disclose Algorithm

Software patents are a challenging field these days.  The big news of late has been the effect of the Supreme Court’s June 2014 ruling in Alice v. CLS Bank, which has caused many patents — especially in the business method and software realms — to fall into the category of unpatentable abstract ideas.  A decision this week by the Court of Appeals for the Federal Circuit — the court tasked with all federal patent appeals — further illustrates the stringent requirements for software patents and the danger of claiming software inventions in the means-plus-function form permitted under the Patent Act.

In a decision yesterday, May 6th, 2015, the CAFC affirmed a lower court decision invalidating a patent asserted by plaintiff EON Corp. IP Holdings, LLC against AT&T Mobility, Sprint, HTC, Qualcomm and Wirefly.

The Patent Act permits patent claims to be written in so-called “means-plus-function” language. 

Section 112, paragraph 6 states that:

An element in a claim for a combination may be expressed as a means or step for performing a specified function without the recital of structure, material, or acts in support thereof, and such claim shall be construed to cover the corresponding structure, material, or acts described in the specification and equivalents thereof.

35 U.S.C. § 112 ¶ 6.

That is, the claim may say “a means for <doing some function>” without specifying in the claim what the means is.  In order to properly achieve patentability, however, the patent’s specification must detail a structure corresponding to the claimed function.  Essentially, the specification has to disclose a means.  If it fails to do so, the patent does not fully teach one of skill in the art how to implement the invention and is indefinite (therefore invalid).

In this case, the CAFC reminded us that while some inventions are amenable to the disclosure of a physical structure, “[i]t is well-established that the corresponding structure for a function performed by a software algorithm is the algorithm itself.”  In this case it was also “uncontested that the only structure disclosed in the ’757 patent is a microprocessor,” not the algorithm.

EON, despite admitting the lack of structure, attempted to save its case and its patent.  The court summarized: “EON relies on an exception to the algorithm rule created in In re Katz Interactive Call Processing Patent Litigation, 639 F.3d 1303 (Fed. Cir. 2011). Katz held that a standard microprocessor can serve as sufficient structure for ‘functions [that] can be achieved by any general purpose computer without special programming.’ Katz, 639 F.3d at 1316. In Katz, claim terms involving basic ‘processing,’ ‘receiving,’ and ‘storing’ functions were not necessarily indefinite because a general purpose computer need not ‘be specially programmed to perform the recited function.’ Id. However, other claim terms involving conditionally coupling calls were indefinite because those functions required special programming.”

The court called the Katz exception a “narrow” one and wrote, “it is only in the rare circumstances where any general-purpose computer without any special programming can perform the function that an algorithm need not be disclosed.”  This case was not that rare circumstance.

The message to patent attorneys and those seeking software patents is clear.  If claiming software in means-plus-function form, the actual algorithm must be disclosed in the specification.  Patent attorneys should not rely on the general microprocessor exception as even the simplest control structures, such as an if-statement, may cause the algorithm to fall outside of the very narrow general purpose computer exception.

April 9, 2015

DietGoal Patent is Abstract Under Alice, Bravo!

Posted By Douglas Panzer @ 10:33 am
Filed under: Alice,Eligibility,Patent Litigation

THIS CAUSE having been heard and considered, it is
PER CURIAM (DYK, MAYER, and REYNA, Circuit Judges).
AFFIRMED. See Fed. Cir. R. 36.

That’s all she wrote.  Literally.  So read the entire order of The Court of Appeals for the Federal Circuit yesterday affirming the Southern District of New York’s summary judgment determination that a patent owned by seeming patent troll DietGoal represents an abstract idea, unpatentable under Section 101.  This can’t bode well for DietGoal’s dozen or so other suits against website owners and app producers.  The patent in suit is the latest to fall to the Supreme Court’s Alice standard.

The Abstract of the ’516 patent, while not determinative of the scope of the patent, certainly couldn’t have helped the plaintiff’s cause.  It reads:

The method can include the following steps. First, the Meal Database and the Food Database can be prepared. Second, the user can use the Picture Menus to choose meals for a particular time period to correspond to a customized eating plan. Third, the user can decide whether or not to change one or more of the meals he has chosen for the particular time period. If the user decides to change his chosen meals, the user can edit or create new meals using the Meal Builder. If the user decides not to change his choices, or after the user changes his choices, the user can save the meals for the particular time period.

So…yeah.  Make a list of meals (with pictures), pick one or more of those meals that you like and either change them or save them.  That’s some innovative stuff right there.  Judge Engelmayer of the Southern District of New York didn’t think so either, opining on summary judgment that “[t]he claims of the ’516 patent recite nothing more than the abstract concept of selecting meals for the day, according to one’s particular dietary goals and food preferences.”  This suit, filed in 2012, likely would never have made it to court post-Alice.

January 29, 2015

Trade Secrets: It’s All About the Bacon…’Bout the Bacon

Posted By Douglas Panzer @ 3:49 pm
Filed under: Litigation,Patents,Risk Management,Trade Secrets

The court set the stage on the technology:

Unitherm developed what it called the “Unitherm Process” for preparing pre-cooked sliced bacon. This process involved the use of a spiral ovens [sic] and super-heated steam. According to Unitherm, before it developed this process, there was no acceptable process for pre-cooking sliced bacon because all attempts had resulted in bacon that did not resemble a pan-fried product.

The relationship between the parties appears to have been a bit of a soap opera from the start. Unitherm, which claimed that its process was a trade secret, met with Hormel in June 2007, to discuss a potential business deal between the two companies regarding the process. No signed NDA was provided in court as evidence, but Hormel did not dispute the claim that one was signed around July 20, 2007. Of course, Unitherm also claimed that Hormel disclosed some Unitherm confidential information to a Unitherm competitor (FMC Technologies) at some point between the June meeting and the July 20 NDA. Hormel claimed to have remedied that situation and the parties entered into a joint development agreement in September 2012, despite the early hiccup.

Despite Unitherm’s position that its process was a confidential trade secret, the company filed a patent application on the process in January 2008, which published in due course in July of 2009. In April 2010, Hormel terminated the joint development agreement with Unitherm and less than 5 months later filed its own patent application on the process. After the Hormel patent application published, Unitherm sued Hormel alleging, among other counts, that Hormel misappropriated Unitherm’s trade secrets (under Minnesota law).

On Hormel’s motion to dismiss, the court dealt Unitherm the harsh reality of Trade Secret 101:

“[I]t is axiomatic that a thing patented cannot also remain a secret.”

In order for information to constitute a trade secret, it must be kept secret. As a quid pro quo for patent protection, one must publish a specification detailing the process to be patented. Unitherm published the information it claimed constituted its trade secret. The court, therefore, held that any activity regarding the supposed trade secret information after the July 2009 date of publication could not constitute misappropriation of a trade secret since no trade secret remained. In the court’s words: “The publication of the patent means that Unitherm no longer had a trade secret in the Process, and its misappropriation claim fails.”

While the full details of this particular story contain significant additional complexities, the lesson is pretty simple – trade secrets must be kept strictly confidential or they will be lost, period.

Plaintiff: Unitherm Food Systems, Inc.
Defendants: Hormel Foods Corporation; Hormel Foods Corporate Services, LLC
Decision Date: January 27, 2015
Case Number: Civ. No. 14-4034 (D.Minn.)

Unitherm-v-Hormel-Trade-Secret-14-4034 (Opinion on Motion to Dismiss)

April 30, 2014

Supreme Court Sets Stage for Potential Financial Doom of Patent Trolls

Patent litigation has been a hot and growing judicial and legislative topic for several years now.  On April 29, 2014, the Supreme Court delivered two opinions that may prove to define an inflection point leading to a downward trend in that recent growth.

The fervent attention to patent litigation has been due in large part to the growing number of patent infringement suits brought each year by those patent owners known as non-practicing entities (NPE’s) or more derisively as “patent trolls” (depending on your perspective).  These are entities or individuals who own patents and sue to enforce them, but do not actually produce a product or service based on the patent.  Supporters of such litigation point out that while small corporate or individual inventors may not have the resources to commercialize their patents, protecting those patents through litigation is the only way to properly compensate and incentivize inventive “little guys” who would otherwise be trampled by infringing, larger companies.  Critics respond that NPE litigation actually stifles innovation and economic growth by unfairly rewarding patent owners who have taken no financial risk — especially when the patents are of questionable substance.

Tuesday’s Supreme Court decision in Octane Fitness v. Icon Health, No. 12-1184 represents a major lowering of the standard for patent defendants to show the court that the plaintiff should pay the defendant’s attorney’s fees when the defendant wins.  The Patent Act allows for a grant of attorney’s fees in “exceptional cases.”  Prior to this decision, a prevailing defendant had to show that the suit was “objectively baseless” and brought in “subjectively bad faith” to prove exceptional case status.  These factors also had to be proved by “clear and convincing” evidence.  The court’s holding in Octane says that standard is too rigid and that a determination of exceptional case status should be within the court’s reasonable discretion.   Justice Sotomayor wrote:

An “exceptional” case, then, is simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated. District courts may determine whether a case is “exceptional” in the case-by-case exercise of their discretion, considering the totality of the circumstances.

So the test for exceptional case status should now be that the case “stands out from others” based on the totality of the circumstances.  This is a major opening for a potential increase in fee awards.

On the same day, the Court also delivered its opinion in Highmark v. Allcare Health Management System, No. 12-1163.  This opinion states that when a lower court does award attorney’s fees, an appeals court should only overturn that award if it finds that the lower court decision represented an abuse of judicial discretion.  This standard is the standard most deferential to the trial court and means that (as interpreted by the Federal Circuit) appellate courts will only overturn fee awards when they find:

(1) the tribunal’s decision is clearly unreasonable, arbitrary, or fanciful; (2) the decision was based on an erroneous conclusion of law; (3) the tribunal’s findings are clearly erroneous; or (4) the record contains no evidence upon which the tribunal rationally could have based its decision.

(See Abrutyn v. Giovanniello, 15 F.3d 1048,1050-51, 29 U.S.P.Q.2d 1615, 1617 (Fed. Cir. 1994); W. Elec. Co. v. Piezo Tech., Inc., 860 F.2d 428, 430-31, 8 U.S.P.Q.2d 1853, 1855 (Fed. Cir. 1988); Heat & Control, Inc. v. Hester Indus., Inc., 785 F.2d 1017, 1022, 228 U.S.P.Q. 926, 930 (Fed. Cir.1986).)

In combination with the Octane decision, the Highmark case sets the stage for more findings of exceptional case status and a lower likelihood that such findings will be overturned on appeal.  Now we wait to see if this significantly affects the rate of NPE patent litigation.  Will the coffers of the NPE’s be cleaned out by the first loss?  Will investors in the litigation shy away from the increased risk?  Will defendants be emboldened to see cases through trial?  Stay tuned!

January 24, 2014

Threaten to Sue Your Licensee and You Better Be Able to Prove Infringement

Posted By Douglas Panzer @ 11:19 am
Filed under: Declaratory Judgment,Litigation,Patent Litigation,Patents

The Supreme Court of the United States ruled on Tuesday, January 22 that a patent owner defending against declaratory judgment of non-infringement continues to bear the burden of proving infringement, even when the declaratory judgment plaintiff is a licensee.

In Medtronic, Inc. v. Mirowski Family Ventures, LLC (12-1128) the Supreme Court unanimously reversed the ruling of the Federal Circuit (that NEVER happens in patent cases, right?) that Mirowski, as the patent owner, held the burden of showing that licensee Medtronic infringed certain licensed patents, despite the case arising out of Medtronic’s declaratory judgment action. The court reasoned that:

  1.   A patentee normally bears the burden of proving infringement of the patent;
  2.   The stated operation of the Declaratory Judgment Act is to leave the rights of the parties unchanged, but simply to dictate procedure;
  3.   “Burden of proof” is a substantive part of a claim, the kind which is to remain unchanged under #2.

The court also voiced concern that shifting the burden to a declaratory judgment defendant may create confusion in two regards.   First, shifting the burden to a declaratory judgment defendant would force the defendant to “prove a negative” and “work in the dark” to attempt to negate every possible theory of infringement.   Second, post-litigation confusion may remain if the declaratory judgment plaintiff loses his case simply for failure of proof, where the same actions by another party (or the same licensee in the future) may not constitute infringement in light of a more sufficient showing of evidence.

Opinion of the court: [here]

December 6, 2013

Overwhelming Support for House Anti-Patent Troll Bill

The US House of Representatives yesterday passed a proposed patent litigation reform bill aimed at making it much more difficult for non-practicing entities or “patent trolls” to bring patent infringement suits.  The bill passed with major bipartisan support in a 325 to 91 vote.  This bill, introduced by Representative Bob Goodlatte, sets new standards for suits by NPE’s, including such highlights:

  • Significant increases in the pleading specificity requirements for patent suits
  • Disclosure of the ultimate beneficiary of any damage award or settlement
  • New double-patenting rules
  • Judicially limited early discovery
  • Early determination of patent validity

The passage of this bill, referred to as The Innovation Act, is sure to be followed quickly by introduction in the Senate of a sister bill sponsored by Representative Patrick Leahy, one of the sponsors of the American Invents Act, which introduced the most sweeping patent legislation reforms in decades last year.

The Innovation Act is sure to continue the dialogue/debate regarding patent infringement suits brought by those not commercializing the patented subject matter.  On one extreme the argument will be raised that shell companies sweeping up dozens or even thousands of patents solely for the purpose of litigating them for profit is stifling of innovation, in contravention to the Constitution and the Patent Act.  On the other extreme we’ll find the argument that in this age of costly, complex and time-intensive litigation, such enforcement represents the only real means for individual or small company inventors to protect their inventions and in turn spur further innovation.  In true Goldilocks fashion, the answer likely lies somewhere in between.  Whether the Innovation Act becomes law and whether it finds the happy medium is one step closer to determination.

New York Times report: http://www.nytimes.com/2013/12/06/business/house-bill-raises-bar-for-suits-over-patents.html?emc=edit_tnt_20131206&tntemail0=y&_r=0

August 15, 2013

CAFC Case Update – Monolithic Power Systems v. O2 Micro: Bad Faith Not Required for Exceptional Case Finding Under 35 USC 285

Posted By Douglas Panzer @ 4:51 pm
Filed under: Attorney's Fees,Litigation,Patent Litigation,Patents

The Court of Appeals for the Federal Circuit, this week, published its decision in Monolithic Power Systems, Inc. v. O2 Micro Int’l, Ltd., ___ F.3d. ___ (Fed. Cir., August 13, 2013), clearly stating that an “exceptional case” finding under 35 USC §285 does not require a finding of “bad faith” or that the claim was “objectively baseless.”  The court viewed the totality of the circumstances surrounding patent owner and counter-claimant O2′s conduct in the litigation as well as O2′s litigation strategy in the present case and related litigation matters with defendant Monolithic and its customers.

The court upheld the district court’s sizeable fee award (over $8M), stating in relevant part:

We have observed that, as a general matter, many forms of misconduct can support a district court’s exceptional case finding, including inequitable conduct before the U.S. Patent and Trademark Office (“PTO”); litigation misconduct; vexatious, unjustified, and otherwise bad faith litigation; a frivolous suit; or willful infringement. Brasseler, U.S.A. I, L.P. v. Stryker Sales Corp., 267 F.3d 1370, 1380 (Fed. Cir. 2001) (citing Hoffmann-La Roche Inc. v. Invamed Inc., 213 F.3d 1359, 1365 (Fed. Cir. 2000)).

In its opinion, the district court cited Brooks Furniture for the exceptional case standard: “A case may be deemed exceptional when there has been some material inappropriate conduct related to the matter in litigation, such as…misconduct during litigation, vexatious or unjustified litigation,conduct that violates FED. R. CIV. P. 11, or like infractions”…[T]he district court also cited Taltech Ltd. v. Esquel Enterprises Ltd., 604 F.3d 1324, 1329 (Fed. Cir. 2010), to clarify that “[l]itigation misconduct and unprofessional behavior are relevant to the award of attorney fees, and may suffice to make a case exceptional.”

O2 Micro is incorrect in suggesting that findings of “bad faith” and “objectively baseless” litigation are always required in addition to a “litigation misconduct” finding for an exceptional case.   The district court applied the correct standard.

O2 Micro fails to appreciate the “well-established [rule] that litigation misconduct and unprofessional behavior may suffice, by themselves, to make a case exceptional under § 285.” MarcTec, LLC v. Johnson & Johnson, 664 F.3d 907, 919 (Fed. Cir. 2012) (internal quotation marks omitted). Instead, O2 Micro’s arguments challenging the exceptional case determination hinge on its mistaken conviction that there must be an additional “bad faith” component…

[T]he district court’s findings of an overall vexatious litigation strategy and numerous instances of litigation misconduct are sufficient to support an exceptional case determination. The record provides ample grounds for the district court to find that O2 Micro had undertaken a vexatious litigation strategy. Having presided over a decade of litigation between O2 Micro and MPS, the district court witnessed several instances in which O2 Micro sued MPS customers in order to prompt MPS to file declaratory judgment actions with the court. In each previous case, O2 Micro withdrew its claims and granted Covenants not to sue after substantial litigation had taken place…wasting the parties’ and the court’s resources.

O2 Micro repeatedly misrepresented…[and] failed to conduct an investigation into the veracity of its representations…obfuscated [facts]…[and] filed three “baseless motions.”…[I]t “ill behooves an appellate court to overrule a trial judge concerning litigation misconduct when the litigation occurred in front of the trial judge, not the appellate court.” Nilssen v. Osram Sylvania, Inc., 528 F.3d 1352, 1359 (Fed. Cir. 2008).

Monolithic, ___ F.3d ___, at 11-14 (emphasis added).

August 12, 2013

The Trouble With Executive Overrides of ITC Exclusion Orders (Samsung v. Apple)

Posted By Douglas Panzer @ 1:52 pm
Filed under: ITC 337 Actions,Litigation,Patents,Technology Law

Ambassador Michael Froman – the U.S. trade representative – and the Obama administration created much buzz last week by overturning a June decision from the U.S. International Trade Commission (ITC) that would have prevented Apple from importing the iPhone 4 and certain iPads into the United States. The executive decision brings to a swirling head numerous troubling issues in the cross-governmental-branch battle instigated by Samsung and Apple in their ongoing strategic legal battle for mobile device market supremacy in the U.S.

Have Apple, Samsung, the ITC and the executive branch finally pried the lid off Pandora’s Box or have they tactfully attempted to close it?

What is the ITC and why is Samsung v. Apple There?

The ITC is a “quasi-judicial” agency of the federal government tasked by Congress with numerous responsibilities and granted various powers to enforce and advise upon international trade issues affecting U.S. markets. Among its responsibilities, the ITC is tasked under its “Section 337″ (19 USC §1337) for protecting U.S. markets from harm brought about by imports of goods that, among other fouls, infringe U.S. intellectual property rights, including patents.

In recent years, numerous patent holders have chosen to bring cases of alleged patent infringement to the ITC seeking issuance of an “exclusion order” relating to the accused imports.  If granted, an exclusion order instructs U.S. Customs to seize the identified goods at the U.S. border and preclude them from entering the country.  In effect this achieves the same outcome as a complete victory in more typical patent litigation. However, such an outcome through patent litigation typically involves several years of litigation, millions of dollars in legal fees, extended, costly discovery and – since the 2006 case of eBay v. Mercexchange – hard-to-come-by injunctive relief granted by the court.

Litigants view the ITC as a faster, less expensive means of achieving this powerful position, with the added bonus that exclusion orders are enforced by the federal government as opposed to enforcement of a judicially issued injunction, which if granted in the first place and then violated, requires the party to return to court to seek enforcement.

Clearly Samsung felt an ITC action was the better strategic choice in its attempt to assert its U.S. patents to block Apple’s sales in the U.S. But Samsung had to know, even in victory, that an executive override was a possible result. Did Samsung calculate and assume the risk?

Executive Override Power of ITC Orders

Under 19 USC   §1337, ITC exclusion orders are subject to review and “disapproval” by the executive branch.  After issuance of the order, the President or his delegate (currently the U.S. Trade Representative) has sixty days to override the order, generally based on public policy concerns of harm to a domestic industry. However, such disapproval is exceedingly rare.  In the history of the ITC, the executive branch had disapproved of only five exclusion orders prior to this weekend’s disapproval and had not done so since 1987.

  • Presidential Determination of April 22, 1978, 43 Fed. Reg. 177898 (April 22, 1978) (disapproval of Inv. No. 337-TA-20);
  • Presidential Disapproval of Determination of the U.S. International Trade Commission in Investigation No. 337-TA-82, 46 Fed. Reg. 32361-01 (June 22, 1981);
  • Determination of the U.S. International Trade Commission in Investigation No. 337-TA-99, Certain Molded-In Sandwich Panel Inserts and Methods for Their Installation, 47 Fed. Reg. 29919-02 (July 9, 1982);
  • Determination of the President Regarding Certain Alkaline Batteries, 50 Fed. Reg. 1655-01 (Jan. 11, 1985) (disapproval of Inv. No. 337-TA-165);
  • Presidential Disapproval of a Section 337 Determination, 52 Fed. Reg. 46011-02 (Dec. 3, 1987) (disapproval of Inv. No. 337-TA-242).

Did Samsung simply see the benefits of quick resolution, government enforcement and exceedingly rare Presidential override as a risk worth taking? It certainly seems that way.  But one further fact, identified or not, has to sting Samsung greatly – executive disapproval of a Section 337 exclusion order is  not appealable. After a complete victory at the ITC, Samsung has lost its case.

Why Did the Obama Administration Step In?

Did the Obama administration simply bow to corporate lobby pressures from Cupertino or is something more calculated at the heart of this rare exercise of executive oversight? As a basis for his disapproval, Ambassador Froman cited exertion of “undue influence” from patent rights. At first blush this is counter to the exercise of patent rights and free markets. After all, a patent is not just a legal, government-approved limited monopoly for the patented invention; it’s one that originates in the text of the Constitution itself. The purpose of patents is to exert the influence that comes as a reward for inventiveness in order to benefit the inventor and encourage further invention. Critics will urge us to quickly accept that this is a protectionist action of an executive branch under the undue influence of big business financial power. But a larger scheme may be in motion here.

In recent months the Obama administration has been very vocal about patent reform. From patent trolls to forum shopping, the administration has expressed several standpoints on the patent litigation landscape that are largely, agreeably beneficial regardless of political bent, financial position, etc. The latter of these – forum shopping – may be at play.

Statistics overwhelmingly show, regardless of corporate domicile or factual nexus, the filing of patent actions in federal district courts in the District of Delaware based on its speed and patent expertise, and the Eastern District of Texas based on its staggering willingness to rule for patent plaintiffs. Patent plaintiffs have also shown a major trend toward patent enforcement through the ITC for the reasons discussed above. But along with increased speed and reduced expense, this act of forum shopping into the ITC also stems from avoidance of the heightened burden required for acquisition of injuctive relief in judicial patent actions after the Supreme Court’s 2006 holding in  eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006).

As quoted in Ambassador Froman’s disapproval letter, the legislative history of Section 337 guides the President to consider the effect of an exclusion order on “competitive conditions in the U.S. economy.” The Obama administration has simply seized upon the Samsung v. Apple case, not so much for its particular merits, but more as a good vehicle for tamping down heightened litigation risk for companies contributing to the U.S. economy. By disapproving the Apple exclusion order, the Obama administration waters down incentive for litigants to forum shop into the ITC where they may seek the equivalent of injunctive relief without meeting the 4-point burden for injunctions extended to patent cases under  eBay. As a corollary, the rejection of the exclusion order reduces the costs of managing litigation risk for potential defendants as they will be less likely to face conflicting bodies of rules depending upon the forum in which they are accused.

Evidence of this goal is apparent in the disapproval letter itself, in which Ambassador Froman summarizes:

My decision to disapprove this determination does not mean that the patent owner in this case is not entitled to a remedy. On the contrary, the patent owner may continue to pursue its rights through the courts.

The message, though obscured by the commotion of feverish discussion around it, could not be more clear. The Obama administration has fired the first shot – and a loud one – in its battle for patent litigation reform and it is aimed squarely at quelling litigation forum shopping.

June 14, 2013

SCOTUS Says Human Genes Not Patent Eligible

Posted By Douglas Panzer @ 5:40 pm
Filed under: Eligibility,Invalidity,Litigation,Patents

At first glance, it’s a simple question: Are human genes patentable? So, why is The Supreme Court’s decision on the question this week in Association for Molecular Pathology v. Myriad Genetics the subject of extensive federal litigation, addressed by greater than 45 amicus curiae (third party “friends of the Court”) briefs and reported in health, science and legal media across the country? The answer is anything but simple, spanning issues of statutory interpretation, public health concerns and billions of dollars in corporate interests.

Scientists for Myriad Genetics were the first, in 1994, to isolate and sequence two human genes dubbed BRCA1 and BRCA2. These genes, first identified in 1990 by scientists at UC Berkley, contain mutations and identifying markers of certain types of cancer. After isolating the genes Myriad applied for and was granted several patents covering the isolated genes themselves as well as products and methods for identifying those genes in patients. (U.S. Patents: 5,747,282; 5,837,492; 5,693,473; 5,709,999; 5,710,001; 5,753,441; 6,033,857.)

US patent law states that “[w]hoever invents or discovers any new and useful process, machine, manufacture, or composition of matter…may obtain a patent therefor.” (35 USC 101) A patent grants to the holder a limited 20-year monopoly on the patented subject matter, a grant which the Constitution confers in order to “promote the progress of science and the useful arts.” It is well-settled, however, through decades of patent litigation that one may not receive a patent covering a product of nature. This is aimed at striking a balance between providing researchers and investors with incentive to commit time and money to advancing science through new research and simultaneously preventing profiteers from simply identifying a natural process or substance and suing others for their use of it.

Based on its patents, Myriad held the exclusive right in the US to isolate the BRCA1 and BRCA2 genes.

In this case, the Supreme Court looked to whether Myriad’s isolation of BRCA1 and BRCA2 transformed those genes from a product of nature to a new scientific discovery. Myriad argued that it did. In the first battle in the case, the US District Court for the Southern District of New York rejected Myriad’s argument, writing:

DNA’s existence in an ‘isolated’ form alters neither this fundamental quality of DNA as it exists in the body nor the information it encodes. Therefore, the patents at issue directed to ‘isolated DNA’ containing sequences found in nature are unsustainable as a matter of law and are deemed unpatentable under 35 U.S.C. 101.

This decision held the Myriad patents in suit invalid. On appeal, the Court of Appeals for the Federal Circuit partially reversed the District Court’s decision, stating that, by isolating the genes, Myriad caused them to be “markedly different” from their natural state and therefore patentable. This analysis relied upon precedent of the Supreme Court indicating that “transformation” of a natural product may make it patent eligible

The Supreme Court’s unanimous June 13 decision reversed the CAFC finding and held that isolation of genes, like BRCA1 and BRCA2, does not transform the genes in a way that makes them patentable. Justice Clarence Thomas, on behalf of the Court, wrote, “[a] naturally occurring DNA segment is a product of nature and not patent eligible merely because it has been isolated” and that isolated DNA does not have a “markedly different chemical structure” from DNA occurring in its natural state. The Court also stated that Myriad’s process claims were to processes “well understood, widely used, and fairly uniform insofar as any scientist engaged in the search for a gene would likely have utilized” at the time of the patent application.

The Court expressly pointed out that this case does not preclude patenting “new applications of knowledge” about DNA sequences or novel and non-obvious processes, and does not address at all the patentability of “DNA in which the order of the naturally occurring nucleotides has been altered.”

While this opinion will invalidate numerous existing patents claiming isolated genes/DNA sequences, the field remains open for scientists and corporations to seek and monetize new methodologies and new, man-made genetic material (known as cDNA) for application in relevant medical areas. Myriad and similar gene patent holders will suffer in the short term, but the industry will otherwise likely be unaffected and the search for patentable products, processes and methods relating to genetic material will continue.

May 15, 2013

Not the End of Business Method Patents…But Could it Finally Be the End of Bad Business Method Patents?

Posted By Douglas Panzer @ 11:44 pm
Filed under: Business Method Patents,Eligibility,Invalidity,Patents

The debate continues to rage over the patent-eligibility of so-called business method patents. With each judicial installment from the Federal Circuit or the Supreme Court, legal pundits proclaim either that the latest opinion ensures business methods remain eligible for patent protection or that the opinion jeopardizes the validity of thousands of issued patents, casting peril upon the economic certainty of the industries related to those patents (frequently software and finance). With its May 10, 2013 opinion in CLS Bank Int’l. v. Alice Corp., the CAFC has taken a significant step toward proclaiming the continued patentability of business methods, while simultaneously reigning in the devious draftsmanship of patent attorneys/agents that floods the U.S. Patent Office and the patent system with paper-thin claims of method invention, thinly cloaked and uncomfortably shoehorned into nominal hardware and computer system language.

The CLS Bank opinion trails behind it all the above-referenced pundit commotion. One legal news outfit has even headlined it a “Nightmare Ruling” (subscription req’d.) that “Baffles [Attorneys].” But for those truly interested in innovation and those interested in coaxing the patent system into requiring that patents be not only formalistically acceptable, but innovatively worthwhile and not counter to the Constitutional goal of promoting science, CLS Bank is the closest the CAFC has come to returning the threshold question of patent eligibility to a true and common sense analysis of the claimed invention’s substance and closing the loophole that has allowed countless stifling, worthless patents to issue based on twists of cloaking claim language.

Patent attorneys, IP litigators, tech entrepreneurs and others have become accustomed to patents like the ones at issue in CLS Bank. These contain a set of method claims as well as system claims and computer readable medium (CRM) claims that purport to address physical articles of manufacture in an attempt to hurdle over the judicially fashioned abstract idea rejection that causes so many method-only claims to fall outside of the bounds of 35 USC 101. The court in CLS Bank however, has finally and directly addressed this clear ruse.

The court calls out the elephant in the room that patent practitioners have looked past for years and observed that the system and CRM claims of the Alice patents, though nominally claiming objects of manufacture, really re-claim the subject matter of the method claims, but formalistically mention physical articles that perform those methods, hoping to gain eligibility under Section 101. The system claims, the court says, by requiring a “computer” and a “data storage unit,” among other nominal physical objects, “provide for computer implementation at an incrementally reduced, though still striking level of generality.” Similarly, the CRM claims simply state “a computer readable medium” and instructions on that medium causing the method to be executed.

The CAFC has clearly stated in CLS Bank that business method and software patents remain patent eligible. However, the claimed method must be truly inventive, embodying “significantly more” than an abstract process. Further, the nominal addition of physical components does not gain eligibility for methods that do not otherwise meet this standard. The CAFC appears to have placed a great challenge before patent practitioners and inventors to improve the quality of business method inventions in exchange for the award of a patent monopoly. The next steps that we should watch with great interest will be: 1) whether the USPTO issues guidance to examiners based upon the CLS Bank holding; and 2) whether the Supreme Court chooses to review CLS Bank in order to cap its 40+ year old line of Section 101 cases. Hopefully both will occur, establishing without question the continued viability of business method patents as well as raising the bar to require true scientific progress in exchange for patentability.

* indicates required