Source: https://www.patentspostgrant.com/category/business-method-patent-challenge/
Timestamp: 2017-09-23 16:23:18
Document Index: 115742889

Matched Legal Cases: ['§ 18', '§ 42', '§ 314', '§ 701', '§ 706', '§ 315', '§ 42']

Business Method Patent Challenge | Patents Post-Grant
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In the sovereign immunity context, immunity applies if an administrative proceeding is similar to civil litigation. Fed. Mar. Comm’n v. S.C. State Ports Auth., 535 U.S. 743 (2002). But, some judges of the CAFC have already signaled a willingness to unravel this “IPR is a trial” premise, and it is my expectation that Oil States will follow suit. Continue Reading Sovereign Immunity at the PTAB a Temporary Phenomena?
AIA Trials Unconstitutional? Don’t Bet on It
By Scott McKeown on June 13, 2017
The Supreme Court has had at least three occasions over the past 7 months to review the constitutionality of AIA trial proceedings — it declined all three invitations. Thus, the writing appeared to be on the wall when the same question was posed recently in Oil States Energy Services v. Greene’s Energy Group. But, then the Federal Circuit wavered somewhat as to its conviction in its own precedent on point. When asked to reconsider the debate as to whether a patent is purely a private right or public right (as previously decided in MCM Portfolio LLC v. Hewlett-Packard Co. et al.) the CAFC’s en banc denial of that request a few weeks ago (here) was a split decision. (As a reminder, as a public right, a patent may be adjudicated by an Article I court).
While the High Court’s cert. decision will be embraced as a clear interest in reversal (as it almost always is), this would be ignoring practical realities of what has occurred here. First, the Court takes patent cases from time-to-time to simply provide guidance on oft debated issues, i4i and Cuozzo being the most recent examples. With the recent decision of the CAFC in Cascades Projection v. Epson and Sony, (noted above) essentially providing a split among circuits so to speak, and perhaps at least some academic interest on the Court to explain the public right aspects of patents, you can see why the Court may now have incrementally more interest in this debate.
As I explained previously, the issue of whether an intangible intellectual property right is exclusively a public right was recently debated in B&B Hardware, Inc. v. HargisIndus., Inc.,135 S. Ct. 1293, 1316-17 (2015) (Thomas, J., dissenting), which described the idea of IP as a “quasi-private right”:
[T]rademark registration under the Lanham Act has the characteristics of a quasi-private right” and that, because registration is a “statutory government entitlement, no one disputes that the [Trademark Trial and Appeal Board] may constitutionally adjudicate a registration claim.” Id. at 1317. But the “right to adopt and exclusively use a trademark appears to be a private property right . . .
An opportunity to clarify this quasi-private right for patents, correct the CAFC, and overrule/distinguish the statement in McCormick Harvesting Mach. Co. v. Aultman-Miller Co., 169 U.S. 606 (1898), which everyone of these certs. is based on, appears to have finally convinced the Court that feedback was now in order.
Second, if reversal were the goal, the court could have done so in any of the previous three opportunities, it’s not like these previous opportunities were presented decades ago — we are talking October and November of 2016. All of the previous cases were indistinguishable in terms of being acceptable “vehicles” for the court’s consideration of this broad constitutional principle.
My expectation is that the Court will reinforce the B&B delineation between infringement (private right) and validity (public right) and find the PTAB’s validity-focused reviews constitutional.
By Scott McKeown on June 12, 2017
By Scott McKeown on June 7, 2017
Yesterday, the Federal Circuit denied en banc review in Secure Axcess LLC v. PNC Bank National Assoc., et al. The rehearing request sought a full court review of America Invents Act (AIA) Sec. 18’s definition of a “business method patent.” This same issue was denied en banc review in April of this year in Google v. Unwired Planet. As in that decision, the dissents from denial raised the appeal bar debate now awaiting decision in WiFi One.
In Secure Axcess (here) the majority asserted that the claim based analysis of Unwired Planet was sound statutory construction and provided a manageable resolution to the issue. The dissent focused on the “used in practice” component of Sec. 18(d)(1) to argue that the context of the infringement assertion, such as banking defendants was more in the spirit of the legislation. The majority explained the unmanageability of this “used in fact test:
[T]he dissent’s effort to confine the scope of the CBM program to the intended “business method patents” boundary is also intrinsically indeterminate to an unacceptable
degree. What record of lawsuits should count? What happens when more suits are brought? What mention of banking or other particular applications in the specification should count—short of having a claim narrowing effect?
Of perhaps greater interest was some of the dissenting commentary on appeal bar issues. Judges Dyk, joined by judges Wallach and Hughes explained:
In my view, Versata wrongly held that the appeal bar does not apply to the question of whether the Board correctly determined that a patent is CBM-eligible because it involves a “financial product or service.” Such reviews are inconsistent with the statute as interpreted in Cuozzo Speed Technologies, LLC v. Lee, 136 S. Ct. 2131 (2016), which held that the appeal bar in Section 314(d), identical to the appeal bar here, precludes review.
Because the “Director may institute a [CBM] proceeding only for a patent that is a covered business method patent,” AIA § 18(a)(1)(E) (emphasis added), determining what is a CBM is not only “closely tied” to the institution decision, but is expressly part of the institution decision itself. Indeed, it would be difficult to see how the CBM review program, as a five-part statute—where the requirement for institution is discussed in Section (a) and the definition for what is a CBM is discussed in Section (d)—can be read as separating the institution decision from the definition of what is a covered business method patent. The two are not just “closely tied,” but are inextricably intertwined.
My post-Cuozzo read was the same as to this point. The Cuozzo language appears to suggest a different outcome for Versata.
The Federal Circuit continues to struggle with the Cuozzo “shenanigans” guidance as to when the 314(d) appeal bar may be excused.
The problem with the “shenanigans” guidepost is that it is more a characterization of a degree of conduct as opposed to specific acts or classification that the Federal Circuit can apply in practice. The lone example given in Cuozzo is the PTAB moving forward on a 112 ground in an IPR; we can all agree that would be an arbitrary and unreasonable departure from the governing statutes/rules. But, in terms of classification guidance, where does that example fall, really? Jurisdictional?…acting outside statutory limits? It cannot be the latter as a violation of 312(a)(3) was barred from appeal in Cuozzo.
WiFi One will take another shot at this issue in the months ahead. Given the mixed perspectives in Secure Axcess, and likely WiFi One, I suspect the Supreme Court will see another round of PTAB shenanigans headed its way.
By Scott McKeown on May 23, 2017
“All or Nothing” PTAB Institution Practice Coming Soon?
Today, the Supreme Court granted certiorari in SAS Institute Inc., v. ComplemenSoft LLC. As previously explained, SAS argues that partial PTAB trial institutions are inconsistent with the controlling statutes of the America Invents Act (AIA). That is, if the PTAB finds that at least one claim is demonstrated as likely unpatentable, the PTAB should institute trial for all petitioned claims.
The dispute stems from an IPR filing of SAS in which it challenged all sixteen claims of ComplementSoft’s 7,110,936 patent. Trial was instituted for claims 1 and 3-10, but claims 2 and 11-16 were denied institution. On appeal to the Federal Circuit, SAS argued that it was inefficient to institute on only a subset of claims, and that the controlling rule authorizing partial institution (37 C.F.R. § 42.108(a) was in direct conflict with statutes 35 U.S.C. §§ 314(a)/318(a). The Federal Circuit disagreed.
Basically, SAS is seeking an end-run around the 314(d) appeal bar. In other words, had the PTAB simply moved forward with trial on all claims, SAS would have been able to appeal any unfavorable decision on claims 2 and 11-16 (presumably would have been found not unpatentable at the close of trial) as part of its appeal from the Final Written Decision (FWD). As it currently stands, 314(d) prevents the appeal of claims 2 and 11-16 since they were denied institution.
Setting aside for another day the academic debate on the merits, should the high court accept SAS’s argument, Patentees will be significantly prejudiced.
First, partial institutions are of significant value to patentees. Frequently, stays of concurrent litigation are avoided since “simplification of issues for trial,” a factor in such determinations, is effectively mooted when it is clear the trial will need to go forward as to at least non-instituted claims. As between the two options, Patentees, even if later winning on some claims at FWD, will not want their litigation efforts needlessly stalled for an 18 month PTAB proceeding (trial + preliminary proceeding). Likewise, it would seem unlikely that courts would be interested in lifting a stay during the pendency of an appeal covering all challenged (and presumably litigated) claims. This would significantly undermine settlement opportunities and unnecessarily expand legal spend, and needlessly expand prosecution history for claims that would have otherwise avoided trial under the current trial framework.
Second, patentees have only recently secured the right to submit new testimonial evidence to avoid institution. Should the all or nothing institution model become reality, there would be even less of an appetite to submit this testimony. As it stands now, there is value in such submissions since avoiding trial on even a subset of claims is, as noted above, of significant value. If Patentees now have to defeat every claim to avoid trial, they are better off keeping their evidence and arguments for trial. In my experience the submission of early evidence fosters settlement.
Third, if the PTAB need only find a single claim of a challenged set susceptible to unpatentability the quality of institution decisions will significantly degrade. For example, as institution would likely analyze the broadest claim, meaningful discussions of narrower claim terms wouldn’t even need to be included in the decision. Likewise, it is human nature that institution will become far more attractive from the agency perspective (or so it will be argued). This is because it is far easier to author an opinion to institute on a single claim as opposed to authoring a denial that would need to address every claim. As it stands, institution decisions offer a great deal of guidance to the parties, and also help facilitate settlements. The loss of quality institution decision would be a loss for both sides.
To the extent there is any benefit to an “all or nothing” system it would be the simplification of estoppel determinations. With no partial institutions or redundancy issues to deal with, district courts may have an easier time grappling with the scope of statutory estoppel. But, having advocated for this benefit previously, I am now convinced it is not worth the significant drawbacks noted above.
There will certainly be a significant amount of amicus briefing on this issue in the months ahead. Stay tuned.
By Scott McKeown on May 18, 2017
We all remember the “Great BRI Debate” that was Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131, 2143–44 (2016). PTAB critics argued that the Board’s “broadest” claim construction rubric was unfairly stretching claims to embrace prior art — resulting in inevitable invalidity determinations. And that since the PTAB was now in the business of litigation, they must follow litigation claim construction practices deemed more favorable to patent holders (especially since the PTAB amendment process, the justification for BRI, was argued as illusory).
In reality, the difference between BRI and the district court Philips practices is the label used to reference each. Both constructions apply the ordinary and customary meaning of a claim term at the time of the invention from the perspective of one of skill in the art. The difference in outcomes is a simple reflection of expert agency’s technical insight, not a meaningful difference in claim construction frameworks. For this reason, and many others, Cuozzo failed.
Attempts to derail PTAB trial proceedings still persist some 5 years into its life. These attempts now include recycling failed constitutional arguments against Article I adjudication practices.
Over the years the constitutionality of USPTO post-grant procedures have been repeatedly challenged. Typically, it is argued that the 7th Amendment’s guarantee to a jury trial is inconsistent with Article I adjudication. Most recently, the Supreme Court denied certiorari in two cases challenging the constitutionality of PTAB trial proceedings. MCM Portfolio LLC v. Hewlett-Packard Co. et al., and Cooper et al. v Lee et al. These cases largely presented the same constitutional challenge as that lodged against the USPTO’s patent reexamination system in the 1980s, in Patlex Corp. v. Mossinghoff, 758 F.2d 594 (Fed. Cir. 1985). That is, as a private property right, a patent may not be adjudicated by an Article I Court without violating the 7th amendment. As explained by the Federal Circuit in MCM, patent validity is found to fall within the “public rights exception,” permitting adjudication before non-Article III tribunals.
The debate as to whether a patent is purely a private right or public right has continued. Last week en banc review of the MCM was denied (here) in Cascades Projection v. Epson and Sony, but a pending petition for certiorari in Oil States Energy Services v. Greene’s Energy Group also remains (gov’t brief here).
While it seems clear that neither the Federal Circuit nor the Supreme Court are the least bit uncomfortable with Article I adjudication of patent rights — as practiced for decades at both the ITC and USPTO— the academic distraction of whether a patent is truly a private right, or something in between private and public rights, remains.
Today’s debate centers around a 19th century Supreme Court decision, McCormick Harvesting Mach. Co. v. Aultman-Miller Co., 169 U.S. 606 (1898). In Harvesting, the Court considered whether a patent resissue filing could result in the cancellation of originally issued claims if the reissue application were abandoned. Stated another way, would the original claims stand as valid even though the patent examiner found them unpatentable during the now abandoned reissue proceeding?
In upholding the validity of those claims, the high court explained:
Divorced from context, this quote is cited for the proposition that patent validity is the sole province of the courts, and can never be properly delegated to an Article I court.
Not so fast.First, Harvesting was a discussion of patent reissue at a time in history where no PTO post-grant challenges existed. So, of course, the only authority at that time was the courts. (i.e., no enabling statute existed for the examiner in Harvesting to have cancelled claims of an issued patent). Harvesting was a decision on statutory authority, nothing more. Patent reissue, to this day, operates the exact same way with respect to claim surrender. While a patent examiner is free to reject originally issued claims in reissue proceedings, a reissue applicant is free to abandon the proceeding without surrendering those original claims. Since Harvesting, of course, Congress has created numerous post-grant patent challenge mechanisms, starting in the 1980s with patent reexamination.Patlex decided that patent reexamination was a proper challenge to validity delegated to an expert administrative agency by Congress. In an attempt to distinguish Patlex, as was tried in Cuozzo, it is argued that AIA trial proceedings are litigation-like, and that examiner based proceedings are somehow different — nonsense. While patent reexamination begins with an examiner, it ends at the Board. The Federal Circuit affirms the Board; this is a distinction without a difference. There is no meaningful way to distinguish Patlex as to USPTO procedures.
Ultimately, one is left going back to the original question, is a patent a private or public right? The correct answer is that a patent has components of both private and public rights.
The proper definition of how a government issued (intangible) property right should be classified with respect to public vs. private right is best enunciated in B&B Hardware, Inc. v. Hargis Indus., Inc.,135 S. Ct. 1293, 1316-17 (2015) (Thomas, J., dissenting), which described the idea of a “quasi-private right”:
In my view, the B&B delineation between infringement (private right) and validity (public right) is the most sensible. To the extent the Supreme Court or CAFC ever take up this debate again, it will be to clarify this principle, not to unravel a half century or more of Article I adjudication practices.
By Scott McKeown on April 17, 2017
CAFC Emphasizes that Art of Denied Petition Grounds Can Come Back to Haunt Patentees
It is not uncommon for an AIA Trial Proceeding, such as Inter Partes Review (IPR), to be instituted on a subset of unpatentability grounds presented in the petition. For example, IPR is currently granted on a claim-by-claim basis. That is, petition grounds can be accepted or denied based upon the Patent Trial & Appeal Board’s (PTAB) conclusions as to whether a reasonable likelihood of prevailing is shown for a given patent claim.
The Federal Circuit recently considered the relevance of denied ground prior art in Novartis v. Torrent Pharmaceuticals (here). In this appeal from multiple IPRs, the Court considered the PTAB’s decision to cancel all claims of U.S. Patent 8,324,283, which claimed oral administration of a pharmaceutical compound for treating multiple sclerosis.
Novartis argued the Board violated the Administrative Procedure Act (APA) when it relied on Sakai in the Final Written Decision without affording Novartis proper notice and a chance to be heard. In essence, Novartis took the position that Sakai was effectively “ruled out” of the trial when the grounds including it were denied.
The Federal Circuit rejected this argument, explaining:
[T]he Board found that Sakai merely reinforced its finding that the person of ordinary skill in the art would have expected [compatible ingredients] because Sakai discloses a stable combination of these two ingredients suitable for long-term preservation. The Board’s discussion of Sakai in the Final Written Decision was not inconsistent with its review of Sakai in the Institution Decision
Thereafter, the Court pointed out that Sakai was the subject of much of the briefing at trial and there was no “surprise.” It also faulted Novartis for a boilerplate Motion to Exclude in which it might have made its argument more artfully to the PTAB (footnote 2).
Still, even had Novartis’s Motion to Exclude been more focused, however, it is unlikely that such would have made a difference. Independent of whether Sakai was explicitly relied upon in the accepted trial grounds as documentary evidence of motivation/predictability, assuming trial would have gone forward on the accepted grounds without it, its introduction to the trial record would have been a fair rebuttal exhibit under the Court’s Belden decision.
By Scott McKeown on April 6, 2017
Excess of Jurisdiction vs. Agency Discretion
Earlier this week, the CAFC denied en banc rehearing in Google v. Unwired Planet. While the denial was largely expected, Judge Hughes’ concurrence foreshadows the debate to come in WiFi One.
That debate, at least for Judge Hughes, is separating matters of agency discretion from questions of constitutionality and/or ultimate statutory authority.
As a reminder, WiFi One presents the following issue:
In his concurrence Judge Hughes takes the position that the appeal bar of 314(d)/324(e) should control in all but an unconstitutional act or an unambiguous disregard of a statutory mandate. And, that the Federal Circuit in Versata Development Group Inc. v. SAP America Inc. established a precedent of disagreeing with agency discretion under the auspices of a check on ultimate statutory authority.
Judge Hughes explained (here):
An exception [to the appeal bar] does not apply in instances where the court disagrees with the agency’s discretionary exercise of its explicit statutory authority. As I pointed out in Versata, if an agency can be said to be acting without statutory authority whenever this court disagrees with the board’s decision on any of the statutes related to institution, then the bar on judicial review is essentially eviscerated and is morphed into a bar on interlocutory review of the institution decision and nothing more.
Indeed, where Congress intended to convey final agency authority over a given decision, the statute must express that discretion; arguably this is the role of of 314(d)/324(e). See 5 U.S.C. § 701(a)(1) of the Administrative Procedure Act (APA)
Nevertheless, 5 U.S.C. § 706(2)(C) of the APA also provides that a reviewing court shall consider whether an agency acted in excess of statutory jurisdiction. So, the court must balance its policing role relative to statutory jurisdiction without over reaching to disturb otherwise lawful decisions left to agency discretion. In Versata, the threshold question presented (paraphrased) was: When does a patent qualify for CBM review, and is “financial product or service” language of Section 18(d)(1) of the America Invents Act (AIA) limiting in this regard? This analysis would seem to be fair game as a question of the metes and bounds of ultimate agency jurisdiction, despite the appeal bar.
On the other hand, once a patent is deemed to qualify under the CBM statutory standard, Congress gave the agency an exception. This exception, “technological Invention,” gave the agency complete discretion to exclude otherwise qualifying CBM patents. AIA Sec. 18(d)(2). To the extent that the application of this exception is disputed to the CAFC, that aspect of CBM eligibility would seem to be barred as a matter left entirely to agency discretion. In my view the distinction in reviewability of these two sections speaks to the concern of Judge Hughes. Therefore CBM reviewability in Versata may be more appropriately considered review of Sec. 18(d)(1) jurisdiction issues, but probably not 18(d)(2) discretionary issues. (As I pointed out previously, the technological invention analysis creates a risk for petitioners seeking to preserve 101 challenges for the district court).
So where does this leave WiFi One?
35 U.S.C. § 315(b) does not present the same fundamental, definitional exercise as Versata’s Section 18(d)(1) jurisdictional dispute. Yet, at least the PTAB rules appear to label 315(b) as a jurisdictional issue (37 C.F.R. § 42.3(b)) Previously the Achates decision found that 315(b) issues were sufficiently distinguishable from the fundamental jurisdiction questions of Versata— that is, 315(b) is party specific. This case-by-case analysis seemed less a fundamental jurisdictional issue, and more a matter best left to the discretion of the PTAB fact-finders.
Matters common to 315(b) disputes, such as privity and real-party-in-interest, are certainly not within the PTAB’s specialized expertise. Congress probably didn’t intend for the 315(b) bar to preclude such matters (or even dream such would be a commonly debated issue). Nevertheless, it may be difficult for the Federal Circuit to reconcile Versata with a reversal of Achates without struggling with the discretion vs. jurisdictional dichotomy emphasized by Judge Hughes. The more likely outcome would seem to be a WiFi One holding that restricts the 314(d)/324(e) appeal bar to underlying patentability disputes as implied in portions of the High Court’s Cuozzo decision.