In Bilski v. Kappos (2010), the Supreme Court affirmed the Federal Circuit’s decision upholding rejection of the applicant Bilski’s claims to a commodities trading risk-hedging method. The claims were to abstract ideas and thus unpatentable under the hoary Benson-Flook-Diehr trilogy. The Court declined to adopt “categorical rules that might have wide-ranging and unforeseen impacts.”

The Court did not fully endorse the view of any of the five opinions by the Federal Circuit judges in the en banc Bilski.  However, the Court was consolatory: “Students of patent law would be well advised to study these scholarly opinions.”

1. Inconclusive Contribution. Bilski is a remarkably inconclusive contribution to the law on patent eligible subject matter. One reason for the inconclusiveness may have been that the concurring opinion by Justice Stevens, discussed below, reads as if  it were drafted to be a majority opinion. That opinion and the opinion for the Court by Justice Kennedy, discussed below, reach the same conclusion on the merits of the specific application, to wit, that the Federal Circuit’s affirmance of the PTO’s rejection should be affirmed. The Stevens opinion may have become a concurring one only after it failed to garner the necessary fifth vote. The relatively shorter Kennedy opinion reads as if  it were drafted as a compromise statement later in the Court’s deliberative process. Justice Scalia, who declined to concur in two parts of the Justice Kennedy opinion and concurred in one part of the Justice Breyer opinion, may have been the potential swing vote. Justice Scalia’s action suggests that he was sympathetic with some of the views in the Stevens and Breyer opinions that advocated restricting the scope of patent eligible subject matter but that he could not accept the categorical ban on business method patents espoused by Justice Stevens.

2. The “Majority” Opinion; Holdings. In Bilski, Justice Kennedy wrote the lead opinion. Chief Justice Roberts and Justices Thomas and Alito joined “in full.” Justice Scalia, without explanation, joined the Kennedy opinion “except for Parts II-B-2 and II-C-2.” Thus, Justice Kennedy’s opinion is the majority opinion of the Court except as to what is said in those two subparts.

In the portions of the Kennedy opinion concurred in by the Court majority, the Court held that:

(a) the “three specific exceptions to §101’s broad patent-eligibility principles” derived from case law, to wit: ” `laws of nature, physical phenomena, and abstract ideas’,” remain the law even though those exceptions were “not required by the statutory text” (Section 101).

(b) the MORT (machine-or-transformation) test is a “useful and important clue, an investigative tool, for determining whether some claimed claimed inventions are processes under §101,” but, contrary to the Federal Circuit majority, the MORT test “is not the sole test for deciding whether an invention is a patent-eligible `process’.”

(c) Section 101’s category of “process,” which Section 100(b) defines as including a “method,” does not “categorically exclude[] business methods,” because (a) the ordinary meaning of “method” does not exclude business methods, (b) it was not clear “how far a prohibition of business method patents would reach,” (c) it was not clear whether such a prohibition “would exclude technologies for conducting a business more efficiently,” and (d) the Section 273 infringement defense clarified that “a business method is simply one kind of `method’ that is, at least in some circumstances, eligible for patenting under §101.”

(d) Bilski’s “patent application … falls outside of §101,” not because of either of the two rejected “broad and atextual approaches,” that is, the MORT test and the business method categorical exclusion, but because its claims cover an abstract idea–to wit, either the “basic of concept of hedging” (claim 1), that concept reduced to a mathematical formula (claim 4), or that concept limited to a particular field or to “token post solution components,” abstract ideas being one of the Section 101 exceptions established in the Benson, Flook and Diehr decisions.

Concluding, the Court cautioned that it was neither endorsing past Federal Circuit precedent nor precluding the Federal Circuit from developing “other limiting criteria,” including “less extreme means of restricting business method patents.”

3. Stevens, Concurring. Justice Stevens, who, inter alia, had authored Parker v. Flook (1978), and dissented in Diamond v. Diehr (1981), wrote a lengthy concurring opinion, joined by Justices Ginsburg, Breyer and Sotomayor. In the opinion, issued the day of his retirement from the Supreme Court, Justice Stevens agreed that the MORT test was “reliable in most cases” but “not the exclusive test.” However, he argued that the Court should “restore patent law to its historical and constitutional moorings” by declaring that “methods of doing business are not, in themselves, covered by the statute.”

4. Breyer, Concurring. Justice Breyer also wrote a concurring opinion. In part I, Justice Breyer agreed with Justice Stevens that “business methods” are not patentable. In part II, in which Justice Scalia joined, Justice Breyer argued that four points were consistent with both the Court’s opinion (that is, Justice Kennedy’s opinion) and Justice Steven’s concurring opinion: (1) Section 101 is “broad” but “not without limit,” excluding phenomena of nature (though newly discovered), mental processes, and abstract intellectual concepts; (2) the MORT test has repeatedly helped the Court determine what is a patentable “process” in cases extending “back over a century,” (3), MORT has never been the “sole test,” and (4) the suggestion in State Street Bank (1998) that “anything which produces a `useful, concrete, and tangible result” “may be patented” is unsupported by Supreme Court authority, and the Court’s decision in this case should not be taken as disapproving of the Federal Circuit’s rejection of the “useful, concrete and tangible result” test.

The last specific point, repudiation of the State Street “useful, concrete and tangible” test, reflected the views of at least five Justices and hence can be regarded as the holding of the Court.

5. Structure of the Majority Opinion. The Court’s opinion by Justice Kennedy first summarized the determinative question in the case and the three arguments why the patent application at issue was “outside the scope of patent law.”

In Part I, it reviewed the subject matter of the application and claims, the rejections by the Patent and Trademark Office, and the Federal Circuit’s holding with its concurring and dissent opinions.

In Part II, the Court discussed the applicable legal principles.

In Part III, the Court resolved the case “in the light of” three precedents, Benson, Flook, and Diehr.

Finally, the Court concluded:

Today, the Court once again declines to impose limitations on the Patent Act that are inconsistent with the Act’s text.  The patent application here can be rejected under our precedents on the unpatentability of abstract ideas.  The Court, therefore, need not define further what constitutes a patentable “process,” beyond pointing to the definition of that term provided in §100(b) and looking to the guideposts in Benson, Flook, and Diehr. And nothing in today’s opinion should be read as endorsing interpretations of §101 that the Court of Appeals for the Federal Circuit has used in the past. See, e.g., State Street [Bank & Trust Co. v. Signature Financial Group, Inc., 149 F. 3d 1368, 1373 (1998)], and AT&T Corp. [v. Excel Communications, Inc., 172 F. 3d 1352, 1357 (1999)]. It may be that the Court of Appeals thought it needed to make the machine-or-transformation test exclusive precisely because its case law had not adequately identified less extreme means of restricting business method patents, including (but not limited to) application of our opinions in Benson, Flook, and Diehr. In disapproving an exclusive machine-or-transformation test, we by no means foreclose the Federal Circuit’s development of other limiting criteria that further the purposes of the Patent Act and are not inconsistent with its text.”

6. Comment on “Abstract Ideas.”  The Court’s characterization of the claims as “abstract ideas” is palpably unsatisfying. The claims were to a series of specified steps a human can take (e.g, “identifying market participants” and “initiating a series of transactions.” The claimed subject matter may have been very obvious in view of the state of the art or possibly unduly vague, but to characterize it  as an ”abstract idea” stretches the meaning of “abstract” and “idea” beyond recognition.

Bilski Watch; Supreme Court on Business Method Patents

2002 Speech Text

internationalseaway12172009fc

MAJOR ISSUES: Design patents; ordinary observer standard for anticipation and obviousness; minor variations not avoiding anticipation; design as a whole; features visible any time during product’s life

This case contains some odd, unsupported language about the nonobviousness standard for design patents.  For a discussion of obviousness for design patents, see Chisum Patent Law Digest 1552; Chisum on Patents 23.03[6].

In 1966, the Federal Circuit’s predecessor, the Court of Customs and Patent Appeals (CCPA),  adopted “the ordinary intelligent man” standard for assessing obviousness of designs.  In re Laverne, 356 F.2d 1003, 148 USPQ 674 (CCPA 1966).  Subsequently, in 1981, the CCPA overruled Laverne and adopted as the standard, “designer of ordinary capability who designs articles of the type presented in the application.”  In re Nalbandian, 661 F.2d 1214, 211 USPQ 782 (CCPA 1981).

In International Seaway, the Federal Circuit addressed directly only the anticipation (lack of novelty) standard for design patents and held that the same “ordinary observer test” applied to infringement should apply to anticipation.  But on obviousness, the court suggested that the designer standard applied to obviousness only for a limited purpose (deciding whether prior art designs can be modified or combined) and that, otherwise, the ordinary observer standard applies.  The court did not cite or discuss Nalbandian or any other authority.

1. Clogs. Three design patents concerned footware, known as clogs.   uspatnod529263 uspatnod545032 uspatnod545033 A district court granted summary judgment that the patents were invalid as anticipated by a  prior patent (’789) on a similar clog. uspatnod517789
The Federal Circuit held that the district court applied the correct, sole test, that of the ordinary observer, for anticipation, but it erred in failing to consider the patented design as a whole, including the insole portions of the clogs, which were hidden when the clogs were worn but not at other times.  On remand, the district court should assess the alleged obviousness of the designs as well as anticipation, in both instances considering the patented designs as a whole from the perspective of the ordinary observer.

2. Ordinary Observer: Sole Test for Anticipation (Lack of Novelty); No “Point of Novelty” Test for Either Infringement or Anticipation; Egyptian Goddess (En Banc 2008). The district court correctly held that the ordinary observer test is the sole test for invalidity by anticipation (Section 102) of a design patent by a single prior art reference, just as it is the sole test for infringement.   Prior cases had applied an additional  “point of novelty” test for both infringement and anticipation.  Egyptian Goddess, Inc. v. Swisa, Inc., 543 F.3d 665 (Fed. Cir. 2008) (en banc), changed the test for infringement.  Under a long-standing general patent law principle (that which infringes if later, anticipates if earlier), the tests for infringement and anticipation are the same.  See Chisum Patent Law Digest § 1211.10.
In describing pre-Egyptian Goddess case law, the court noted that “[t]he ordinary observer and point of novelty tests were applied in much the same manner for obviousness as for anticipation ….”    An exception was that “in the case of obviousness the features of the prior art could be combined to create a single anticipatory reference or an earlier single reference could be modified based on the knowledge of a skilled artisan.  See, e.g., Durling v. Spectrum Furniture Co., 101 F.3d 100, 103 (Fed. Cir. 1996).”
The patent owner argued that preserving the “point of novelty” test for anticipation was necessary to prevent blurring the distinction between anticipation and obviousness.  The Federal Circuit disagreed.  It noted:

”For design patents, the role of one skilled in the art in the obviousness context lies only in determining whether to combine earlier references to arrive at a single piece of art for comparison with the potential design or to modify a single prior art reference.”

In a footnote, the court observed:

”That combination or modification would not necessarily yield a single piece of prior art identical to a patented design since there may be no motivation to change the prior art to achieve such identity.”

The court continued:

”Once that piece of prior art has been constructed, obviousness, like anticipation, requires application of the ordinary observer test, not the view of one skilled in the art.”

The court cited no authority for these statements about using the ordinary observer test for obviousness.

3. Failure to Compare Designs as a Whole; Features Hidden in Use. In finding anticipation, the district court refused to consider the differences between the insoles of the patented clog design and the insole of the prior art clog.  The Federal Circuit held that this was error.
a. District Court: Consider Only Portions of Product Visible in Normal Use; Insoles Hidden While Worn by User; Contessa (2002). Relying on Contessa Food Prods., Inc. v. Conagra, Inc., 282 F.3d 1370 (Fed. Cir. 2002), the district court reasoned that only portions of a product visible during normal use could be considered, whether in determining infringement or anticipation.  Insoles are hidden while a user wears a clog.
b. “Normal Use”: Consider Visibility of Product from Creation to Destruction; Point of Sale Not Excluded; Insole Visible at Point of Sale and When Not Worn. Under Contessa, “normal use” is from a product’s manufacture until its destruction or loss.  Contrary to the district court’s view, visibility at a “point of sale” is not excluded.  A clog’s insole is visible both at the point of sale and when a user is not wearing it, for example, when a user removes the clogs at a beach.
The accused infringers conceded that the district court erred in failing to consider the insoles but argued that the error was harmless.  First, the accused infringers argued that insoles had an insignificant effect on the designs as a whole because, inter alia, it is a “universal truth” that consumers buy shoes primarily for external appearance.  However, the accused infringers bore the burden of proof on invalidity by anticipation, and they introduced no evidence supporting their assertion.  Second, the accused infringers argued that the insoles of the patented designs varied only slightly from the prior art design.  However, a comparison of the two showed that they were “distinctly different.”  A court could not say that, as a matter of law, an ordinary observer would view them as substantially similar.

4. Four Differences in External Features: Minor Variations Not Sufficient to Preclude Anticipation; No Change in Overall Visual Impression of the Shoe. The patent owner pointed to four differences in the external features of the patented clog design and the prior art design.  It argued that there were material fact issues as to these differences that should preclude summary judgment of invalidity on remand.  The Federal Circuit held that these differences were “minor variations” that were not sufficient “to preclude a finding of anticipation because they do not change the overall visual impression of the shoe.”
The ordinary observer test mandates “consideration of the design as a whole.”  However, that mandate does not preclude a summary judgment determination that “individual features of the design are insignificant from the point of view of the ordinary observer and should not be considered as part of the overall comparison.”

5. Obviousness on Remand. The accused infringers asserted invalidity for obviousness as well as anticipation.  The district court did not determine obviousness because it had found invalidity for anticipation.  On remand, the district court should consider obviousness.   The court repeated:”Obviousness, like anticipation, requires courts to consider the perspective of the ordinary observer.”  Again, it cited no authority.  But, from this proposition, it concluded that failure to “compare the insoles of the patented designs to the prior art designs” would preclude a finding of obviousness, as well as of anticipation.

intellectualscience12152009fc

MAJOR ISSUES: Summary judgment of noninfringement
Expert declaration by patent owner–conclusory statements not sufficient to survive summary judgment motion
Expert conclusory statements on infringement–failure to link to particular structures in accused device
Means-plus-function limitations

In an infringement suit, a patent owner must respond to an accused infringer’s motion for summary judgment of non-infringement with great care.  In this case, the Federal Circuit broadcasts a warning: a declaration by an expert phrased in generalities will not suffice.

A patent concerned an apparatus that improves reading optical discs (CD-ROMS) in a computer.  uspatno5748575 In an infringement suit, the asserted claim included a means-plus-function limitation (data transmitting means).  The limitation required four elements, including an ITDM, a type of multiplexer.  The Federal Circuit held that a district court properly granted summary judgment that an accused infringer’s device did not infringe.  The patent owner presented an expert’s declaration, but the declaration was conclusory and did not identify with sufficient particularity the presence in the accused device of the required elements.

The declaration by the patent owner’s expert (1) did not “sufficiently identify the structural elements of the claimed `data transmitting means,’ (2) set forth only “an unsupported conclusion of infringement,” and (3) was “not sufficient to raise a genuine issue of material fact.

Unexplained Array of Electronic Symbols. The expert stated that “[s]erial input buses receive information from each optical drive to an ITDM for multiplexing subcode data which is then transmitted to the host bus interface.”  This statement did not “pinpoint where those elements are found in the accused devices.”   The expert cited pages numbers in the accused infringer’s “Service Manual,” but this supplied “no specific showing of an infringing structure.”  The schematics were “an unexplained array of electronic symbols.”

”To present a prospect of infringement, [the patent owner] must present a triable issue of fact that a person of skill in the art would recognize that these symbols depict an infringing device.  See TechSearch, L.L.C. v. Intel Corp., 286 F.3d 1360, 1374-75 (Fed. Cir. 2002) (affirming summary judgment of non-infringement because the record did not support assertion that one of skill in the art would equate the accused element, a multiplexer, with the claimed element, a decoder).”

Off-The-Shelf Components? The patent owner asserted, vaguely, that “the structural elements are `off-the-shelf’ components,” but it did not corroborate that statement or show that “one of skill in the art would recognize the `off-the-shelf’ component as matching the infringing means.”  Furthermore,  “[e]ven if the elements are common components, the record must specifically identify the infringing features of those components and the reason that one of skill in the art would recognize them as infringing.”

The patent owner argued that its expert “did at least identify the structure that serves as the ITDM ….” The identification was not with sufficient particularity.  The expert did refer to an element (IC-109) in the schematic for the accused device as producing “multiplexed” information.   However, the reference to the IC-109 multiplexer did “not suffice to show infringement.”  The expert’s “opaque” identification required an inference that “the identified playback signal selection device is an ITDM simply because both devices perform multiplexing.” The identification was “not enough to permit any reasonable juror to make that leap.”  The record showed that not all multiplexers are ITDMs.  An ITDM was more complex, requiring simultaneous transmission of a plurality of information sets, and the expert did not establish that the multiplexer in the accused device met that definition.

Means-Plus-Function Clause. “Stated another way,” there was no “showing that the identified structure accomplishes the same function in the same way as the claimed structure.  See Welker Bearing Co., 550 F.3d at 1099.”

The expert provided only an insufficient, conclusory statement, to wit, that that “the structures in the accused devices `perform the same function as the claimed ‘data transmitting means’ (i.e., transmitting to the host computer), in the same way (i.e., through a time division multiplexed structure) to achieve the same result (i.e., transmitted information sets).”

The expert “needed to supply at a minimum some description about the specific features of the accused playback signal selection device’s multiplexing of the audio information stream.”  The expert supplied none of “the details necessary to identify an infringing device.”

TWO OTHER POINTS.  “Two other points” support the conclusion that the expert’s declaration was not sufficient.

First, the patent owner’s counsel admitted that the expert’s language on identifying elements was “perhaps not as grammatical as one would wish.”  “Asking litigants to provide more than a difficult-to-decipher expert declaration does not impose too high a burden at summary judgment, especially where, as here, the structural elements are allegedly common.”

Second, the attorney’s argument did “not offer any more clarity.”

”[A]ttorney argument might be able to clarify an otherwise ambiguous expert declaration in some circumstances, see Applied Medical Resources Corp. v. United States Surgical Corp., 448 F.3d 1324, 1335 n.5 (Fed. Cir. 2006) (`[T]he expert declaration and Applied’s argument provide[] particularized testimony and linking argument.’  (emphasis added)) ….”

Here, the attorney’s arguments rendered the expert’s declaration “even less clear.”

The patent owner argued that, to survive a motion for summary judgment of no infringement, it “was not required to link” an expert’s conclusory statements on infringement “to particular structures in the accused devices.”  It relied on Applied Medical Resources Corp. v. United States Surgical Corp., 448 F.3d 1324 (Fed. Cir. 2006).  The argument lacked merit

On summary judgment and the burden of proving infringement, see Chisum Patent Law Digest § 5321.20, § 5720.  On “means-plus-function” clauses, see Chisum Patent Law Digest § 5250; Chisum on Patents 18.03[5].

tyco12072009fc

MAJOR ISSUES: Standing to sue–dismissal without prejudice
Agreement transferring patents
Exception for patents and applications “related to” pending litigation

The moral of this case: draft an agreement that transfers assets including patents carefully.  An ambiguity may provide a basis for an accused infringer in a later suit to challenge the plaintiff’s ownership of the patent.  For a discussion of standing to sue for infringement, see Chisum Patent Law Digest § 9300.

In an April 1, 1999, “Contribution Agreement,” the plaintiff obtained a transfer of all the assets of another company, USSC.  The transfer agreement included patents but excluded patents and patent applications “relating to” then-pending litigation involving USSC.

The Federal Circuit held that, properly interpreted under the applicable state contract law (Delaware), the agreement’s exclusion of patents and applications “related to” litigation was not limited to patents actually asserted in the existing litigations or to applications in the same family as an asserted patent.  Rather, the “related to” provision included “any patents or patent applications in the same family or so related in subject matter that they were or could have been reasonably asserted in or affected by a litigation pending at the time the Contribution Agreement was executed.”

A plaintiff bears the burden of proving standing.  Here, the plaintiff’s burden was to prove that the patents currently asserted in this suit “could not have been asserted in or affected by any litigation pending as of April 1, 1999.  Plaintiff did not meet this burden.”

The record was silent on what litigation was pending on that date.  The Contribution Agreement stated in Section 4.21 that there was no pending litigation except as set forth in Schedule 4.21.  However, that Schedule either never existed or was missing!  Without knowledge of the pending litigations, “it is not possible to ascertain whether the patents-in-suit are `related to’ any relevant USSC litigation.”

On April 1, 1999, the transferor USSC had also entered into a “settlement agreement” with Ethicon, the accused infringer in the current suit.  The Settlement Agreement resolved five pending litigations and several interferences.  In the Settlement Agreement, USSC agreed to dismissal of the litigations and granted immunity to certain then-existing Ethicon products.  However, the accused products in the current litigation are not immune because they were sold after April 1, 1999.  The Settlement Agreement was not “dispositive of whether the patents-in-suit were `related to’ pending litigation.”  It covered “more subject matter than what was involved in the pending USSC litigation,” referring to “unasserted claims of patent infringement.”

The district court did not abuse its discretion in making the dismissal without prejudice.  The plaintiff might be able to establish that it did own the patents, or it might be able to obtain ownership of the patents.  There was no undue prejudice to the accused infringer.  The lack of standing was not raised until after the trial had begun.  If the plaintiff should “cure the ownership deficiency, most if not all the evidence, testimony, and rulings developed during trial should be applicable to a subsequent proceeding between the parties.”

sourcesearch12072009fc

MAJOR ISSUES: Obviousness–no summary judgment of invalidity–fact issues on teachings of prior art references
E-commerce system: more than computerized version of pre-internet systems
Infringement–fact issues on accused system
Definiteness–”standardized” not unduly subjective

A suit involved a patent on a computerized procurement service.  uspatno5758328 A district court granted summary judgment that the patent was infringed and invalid for obviousness.  The Federal Circuit reversed, finding factual issues on both infringement and obviousness.  Both courts rejected an indefiniteness challenge.

The case well illustrates a basic patent law principle: claim scope is the same for both validity and infringement.  See Chisum Patent Law Digest § 5262.30.

The case is also notable as a post-KSR (2007) decision in which an internet-related patent survives a summary judgment motion of invalidity for obviousness.

1. The Patented Invention.  The application for the patent was filed in 1996, “at the dawn of the internet era.”  The patented system matched potential buyers with potential sellers over a network.   A buyer submits a request for quotation (RFQ) for a standard good or service.  The system sends the RFQ to selected sellers based on filter criteria.  The claimed invention purportedly solved the problems of “too much” information and “too little” information with prior art search systems by “using buyer, vendor, and network criteria to return both a manageable and a sufficient number of search results.”

2. Claim and Its Construction.  The asserted claim (14) required, inter alia, a “request for a quotation from a potential buyer” of “goods or services.”  The district court construed the claim limitation, “request for a quotation,” as meaning “a request for the price and other terms of a particular transaction in sufficient detail to constitute an offer capable of acceptance.”
The district court construed the claim limitation, “goods or services,” as meaning standardized articles.
On appeal, the patent owner and accused infringer did not dispute the constructions of the asserted claim but did dispute their application to the prior art (on invalidity) and to the accused infringer’s system (on infringement).

3. No Indefiniteness, “Standardize” Good or Service, Subjective Term.  Was the “standardized” construction unduly subjective?  The district court said “no” and granted summary judgment dismissing an indefiniteness challenge.  The Federal Circuit affirmed.  For indefiniteness as a ground for invalidating a patent claim, see Chisum Patent Law Digest § 2424; Chisum on Patents § 8.03.

4. Prior Art; Two Categories.  The district court relied on two categories of prior art.
a. Early E-Commerce; Internet Access and Distribution.  The first category was “early e-commerce” system for accessing and distributing goods and services over the internet.   Three prior art systems did not provide filtering or contractually-binding quotes.  A 1992 article in a magazine of the Association of Computing Machines discussed generally the need for a mediator to filter information between users and information sources.  A “third party” in the communication line could pass only information that it “deem[ed] relevant to individual users.”
b. “Bricks and Mortar” Prior Art; Pre-Internet Referral Systems.  The second category of prior art was “pre-internet referral services,” denominated “bricks and mortar” prior art.  The district court put “significant weight” on the “bricks and mortar” prior art, and the accused infringer contended that the pre-internet referral services “inherently embodied all the elements of [the asserted claim] except that a person, rather than a computer, did the `filtering.’ ”
c. Delayed Reliance on “Bricks and Mortar” Prior Art; No Judicial Estoppel.  The patent owner argued that the accused infringer was barred by “judicial estoppel” from relying on the “bricks and mortar” prior art because it failed to cite the art in its opening expert reports and discussed such art only in its supplemental report.  The Federal Circuit saw no abuse of discretion in the district court’s refusal to find judicial estoppel.  The accused infringer’s proferred grounds for delay, including a new Supreme Court decision on obviousness, KSR International Co. v. Teleflex Inc., 550 U.S. 398 (2007), were “questionable.”  However, the patent owner had ample opportunity for full discovery on “bricks and mortar” prior art.

5. Fact Issues on Prior Art Prevent Conclusion That Invention Was a Common Sense Application of Prior Art to Apparent Problems. There were “points about” the prior art references that remained “in factual dispute” and that prevented “a conclusion that one of ordinary skill in 1996 would find the advances of the … patent easy, obvious, routine, or within the grasp of a common sense application of prior art to the apparent problems.”
a. For example, the record reflected that, in the one reference, the “quotes” sent to customers were non-binding, availability responses, not contractual offers.  Similarly, the other e-commerce systems did not return quotes.
b. The “bricks and mortar” systems also did not provide quotes.   Unlike the patented system, which involved standard (fungible) goods and services, the bricks and mortar” systems “involved non-fungible, non-commodity services, such as the services of an attorney on a legal matter, that could not be quantified or quoted immediately over the phone.”
c. More Than Computerized Version of Prior Art “Bricks and Mortar” Systems; Leapfrog Enterprises (2007). The court rejected the argument that the patent was merely “a computerized version of the bricks and mortar prior art.”  Compare Leapfrog Enters., Inc. v. Fisher-Price, Inc., 485 F.3d 1157, 1162 (Fed. Cir. 2007).  First, none of the prior art disclosed the claim requirement of a “quote” forwarded directly to the “potential buyer.”  Second, the prior art did not disclose filtering.  The e-commerce prior art did not disclose meaningful filtering. With the “bricks and mortar” prior art, that is, referral systems, it was not clear that a person skilled in the art would equate judgment by a human with filtering on a network.
d. The court concluded that, from the summary judgment record, it was not clear that the prior art, on the date of the invention (1996), which was at the “dawn of the internet era,” either taught the problem the patent addressed or the solution (filtering by simultaneous use of specifications submitted by buyer, vendor and network).

6. Fact Issues on Infringement. On infringement, the district court correctly found that claim 14’s “goods and services” limitation was met by the accused infringer’s system.  However, for reasons similar to the invalidity issue, it was error to grant summary judgment that the accused system met the “request for a quotation” limitation, as that limitation had been construed.
a. Accused System. The accused infringer’s system was a website that referred “borrowers to potential lenders for a variety of home, auto, and personal loans.”  With the system, (1) lenders provided the system with information on types of loans and borrowers that they would likely approve, (2) a prospective borrower selected a type of loan and submitted a “qualification form” (QF), (3) the system matched the borrower with five potential lenders, (4) the system sent information on the lenders reviewing the QF to the borrower, and (5) the system sent details of a lender’s loan offer to the borrower.  The system played “no further role in the process once the loan offers are sent to the borrower.”
b. Standardized Goods and Services.  The accused infringer argued that its system did not meet the “goods and services” limitation.  Its arguments lacked merit.
First, the accused infringer argued that the loans that it offered were not a good or service.  However, the accused infringer provided a “financial service.”  The patent specification “contemplate[d] similar types of services,” referring, for example, to providing quotations from insurance companies.
Second, the district court construed”goods or services” as meaning standardized goods and services.  The accused infringer argued that its loans were not standardized but rather customized to a particular borrowers means and needs.  However, the patent indicated that the reason for requiring standardization was to avoid confusion as to what is being offered. With loans, there was no risk of such confusion.  Even when the terms varied, the loans were “within the realm of a standard financial operation.”
c. “Request for a Quotation.” Fact issues on how the accused website operated precluded summary judgment that the website met the asserted claim’s “request for quote” limitation.
Evidence indicated that the accused website did not provide a quote to the buyer and that the buyer “must take significant steps before closing a loan.”  The form for the buyer indicated that it was “a request for a loan qualification,” not “an application for credit.”
On the other hand, the record would support a finding that the accused infringer did return an “offer capable of acceptance.”   The accused infringer instructed lenders to provide all conditions that must be satisfied before a lender was obligated to provide a loan.

hewlettpackard12042009fc

MAJOR ISSUES: Declaratory judgment jurisdiction patent holding company implied assertion of a patent.

Soon after acquiring a patent, a patent holding company, Acceleron, sent two letters to a plaintiff, Hewlett-Packard (HP).  The letters identified the patent and the plaintiff’s product line and requested that any information on the patent that the patent owner provided “not be used for any litigation purposes.”  In the second letter, the patent owner declined the plaintiff’s request for a 120 day “stand-still” agreement (that is, an agreement not to sue).  The letters did not mention litigation or infringement, identify specific claims in the patent, or refer to licensing or litigation involving other parties.

In a thorough opinion, a district court held that the letters did not create a justiciable controversy sufficient to support the plaintiff’s declaratory judgment suit.  Hewlett-Packard Co. v. Acceleron, LLC, 601 F. Supp. 2d 581 (D. Del. 2009).

The Federal Circuit reversed.  Under case law before the Supreme Court’s decision, MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007), there would have been no jurisdiction.  However, MedImmune requires a shift in jurisprudence.  See SanDisk Corp. v. STMicroelectronics, Inc., 480 F.3d 1372 (Fed. Cir. 2007).  Under the totality of the circumstances, the patent owner’s letters were “an implied assertion” of patents against the plaintiff’s products.  Those circumstances included (1) the patent owner’s status as a non-competing patent “holding company,” which benefits from patents only by asserting them, (2) the patent owner’s acts of contacting plaintiff soon after acquiring the patent, and (3) the patent owner’s refusal to agree to a standstill, which “is distinguishable from a covenant not to sue, such as that cited by the district court in Prasco, LLC, v. Medicis Pharmaceutical Corp., 537 F.3d 1329, 1341 (Fed. Cir. 2008).”
On declaratory judgment jurisdiction, see Chisum Patent Law Digest § 8126.40; Chisum on Patents § 21.02[1][d].

ultramaxcement12032009fc

MAJOR ISSUES: Typographical errors in claims–correction when no reasonable debate about correction–persons skilled in the art
Definiteness–claim construction–dictionary definitions
Laches defense (undue, prejudicial delay in suing for infringement)–fact question on when patent owner first knew of infringement

The suit involved three patents, which concerned rapid-hardening, high-strength cement, and an alleged trade secret misappropriation. uspatno4957556 uspatno6113684 uspatno6406534 A district court granted summary judgment of noninfringment and invalidity and sustained a laches defense.  The Federal Circuit reversed.

1. Claim Definiteness and Construction; Typographical Errors.  On three issues, the Federal Circuit showed more tolerance than the district court for interpreting and evaluating the asserted patent claims according to what the patent draftsperson clearly intended as opposed to what the bare claim language said.
a. CALCIUM SULFATE ANHYDRIDE MEANS ANHYDROUS CALCIUM SULFATE.  First, a claim recited a “soluble CaSO4 anhydride,”also known as “soluble calcium sulfate anhydride.”  The district court construed the claim by applying a single dictionary definition, which defined “anhydride” as “a compound formed from an acid by removal of water.”  This construction dictated non-infringement because an accused infringer’s cement contained no acid from which water had been removed.  From the context in which “anhydride” was used in the claim, it was clear that the patent owner intended to claim anhydrous calcium sulfate, that is, calcium sulfate (not an acid) from which water had been removed.  The district court erred by construing “anhydride” in isolation rather than in context and by applying one among multiple dictionary definitions of “anhydride” without consider the specification teaching.  The district court’s opinion issued before the Federal Circuit had clarified the role of dictionary definitions in Phillips v. AWH Corp., 415 F.3d 1303, 1314 (Fed. Cir. 2005) (en banc).  The patent used “anhydride” as a modifier, not a stand-alone concept.  The specification supported construing “soluble calcium sulfate anhydride” to mean “soluble anhydrous calcium sulfate” or, simply, “anhydrite”, which is defined as anhydrous calcium sulfate.  The specification never used “anhydride” alone but, rather, only as modifying “calcium sulfate.”   The specification did not disclose forming any compound from an acid by removing water.  “[I]nterpreting the claim term to mean `soluble anhydrous calcium sulfate’ is not rewriting the claim or correcting a typographical error.”
On definiteness, see Chisum Patent Law Digest § 2420; Chisum on Patents § 8.03;  On dictionary definitions in claim construction, see Chisum Patent Law Digest § 5228.40; Chisum on Patents § 18.03[2][b][i].
b.  FORMULA WITH A MISSING COMMA; TYPOGRAPHICAL ERROR.  Second, the district court held that a second formula was indefinite because it lacked a comma.  The claim recited: “C9S3S3Ca(f cl)2.”  The symbols “f” and “cl” were for fluorine and chlorine.  With a comma, the formula would require the presence of either fluorine or chlorine.  Without the comma, it might mean that both must be present.  The district court recognized that a person of ordinary skill in the art would recognize that the omission of a comma between “f” and “cl” was a typographical error but held that the law required that the error be clear “on the face of the patent.”  HELD: the district court erred “in declining to view the notation in light of the knowledge of one of ordinary skill.”  See Novo Indus., L.P. v. Micro Molds Corp., 350 F.3d 1348, 1357 (Fed. Cir. 2003).  If a “correction is not subject to reasonable debate to one of ordinary skill in the art, namely, through claim language and the specification, and the prosecution history does not suggest a different interpretation, then a court can correct an obvious typographical error.”   The district court “determined that the claimed formula C9S3S3Ca(f cl)2 `corresponds to no known mineral,’ and that one of ordinary skill in the art would know that the formula should contain a comma.”
On correcting errors in claims, see Chisum on Patents § 8.03[3][g].
c. COMPLEX FORMULA COVERING 5000 COMPOUNDS; BREADTH IS NOT INDEFINITENESS.  Finally, the district court held that a required compound was defined by a formula that, with all possible substitutions, encompassed more than 5000 possible compounds and, therefore, rendered the claim indefinite.  HELD: the district court erred.  “[T]he formula for crystal X is obviously complex,” but “it is not necessarily indefinite.” The patent owner argued that that the claim should be construed as limited to a single compound.  Because the district court’s broader construction was not indefinite, the Federal Circuit saw no need to decide “whether the term should in fact be construed more narrowly.”

2.  Laches. A “laches” defense to a patent infringement suit arises when a patent owner unreasonably delays filing suit and there is prejudice to the accused infringer.  The key decision on laches is A.C. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020 (Fed. Cir. 1992) (en banc).  On laches, see Chisum Patent Law Digest § 5624; Chisum on Patents § 19.05[2]. A court will presume unreasonable delay and prejudice if the delay period is more than six years.  The delay period begins when the patent owner first knows or should have known of the alleged infringement.

In this case, the district court granted summary judgment based on a 12 year delay from when the patent issued (1990) to the filing of suit (2002).  This was error.  The patent owner filed suit based on other patents and added a complaint for infringement of the 1990 patent only after obtaining litigation discovery from the accused infringer.  The patent owner had demonstrated the invention to the accused infringer in 1989.  However, the patent claims required as a limitation the presence of anhydrite in the cement product.  One could not determine whether a cement maker had used soluble anhydrite merely by testing a finished cement product.  The patent could not have sued for infringement of the patent without a reasonable belief in infringement, including the presence of a claim limitation (soluble anhydrite).  See Antonious v. Spalding & Evenflo Cos., 275 F.3d 1066 (Fed. Cir. 2002).  “In the case of a claim limitation whose presence is undetectable in a finished product, it is reasonable that [the patent owner] might not have known or been able to find out whether [the accused infringer] infringed.”

perfectwebtech12022009fc

MAJOR ISSUES: Obviousness–common sense not reflected in specific reference or expert opinion
Obvious to try
Long-felt need

Common sense and the Supreme Court’s decision on the non-obviousness requirement for patentability, KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398, 406 (2007), proved fatal to a patent’s claims.  For a discussion of KSR, see Chisum on Patents § 5.02[9]; Chisum, Patent Law Digest § 1542.10.

The patent concerned a method for managing bulk electronic mail (”e-mail”) distribution to groups of targeted consumers.  uspatno6631400 The representative claim 1 recited four steps ((A)-(D)), to wit, matching, transmitting, calculating, and repeating (A) and (D) until the “calculated quantity” of “successfully received e-mails” “exceeds [a] prescribed minimum quantity.”  The patent owner conceded that the first three steps were disclosed in a prior art reference.  The accused infringer conceded that the fourth “repeating” step did not appear in the prior art.   The issue for validity of the patent became: would it have been obvious to a person of ordinary skill to add the fourth step, that is, to repeat the first three steps to achieve success?   A district court granted summary judgment of invalidity for obviousness, reasoning that ” `the final step is merely the logical result of common sense application of the maxim “try, try again.” ‘ ”

The Federal Circuit affirmed.  In reaching an obviousness conclusion, a district court may rely on common sense not reflected in a specific prior art reference or expert opinion.  The court cautioned that, on summary judgment, “a district court must articulate its reasoning with sufficient clarity for review.”  However, here, the district court met that standard.   The record contained the “predicate evidence on which the district court based its `common sense’ reasoning.”  The evidence was the two facts:  (1) “step (D) merely involves repeating earlier steps,” and (2) “a marketer could repeat those steps, if desired.”  “The district court … adequately explained its invocation of common sense.”  It explained that claim merely requires “repetition of a known procedure until success is achieved.”  The district court noted: ” `If 100 e-mail deliveries were ordered, and the first transmission delivered only 95, common sense dictates that one should try again.  One could do little else.’ “   The court noted that expert opinion might have been necessary if “the relevant technology” were complex, but no expert opinion “was required to appreciate the potential value” of repeating the claim’s first three steps.  The parties agreed that “ordinary skill in the relevant art required only a high school education and limited marketing and computer experience.”  Though unnecessary, the testimony by the parties’ experts supported the common sense conclusion of obviousness.

The record showed that the fourth, repeating step “would have been obvious to try,” and thus obvious under the Supreme Court’s analysis in KSR.   KSR referred to a “finite number of identified, predictable solutions” leading to “anticipated success” as a product of “ordinary skill and common sense,” not “innovation.”  The experts identified only three potential solutions, one being “identifying a new group of addresses and sending messages to them, which is step (D) in the … patent.”  Simple logic suggested that sending new messages was “more likely to produce successful deliveries than re-sending messages to addresses that have already failed.”  The patent owner “presented no evidence that the patented method offered any unexpected results or was not reasonably expected to succeed; indeed, the predictable and actual result of performing step (D) is that more e-mail messages reach more recipients.”  There was no evidence of a need to vary all parameters or to explore a new technology, which might “counsel against an invention being obvious to try.”  See In re Kubin, 561 F.3d 1351 (Fed. Cir. 2009); In re O’Farrell, 853 F.2d 894 (Fed. Cir. 1988).

For a discussion of “obvious to try,” see Chisum on Patents § 5.04[1][f]; Chisum, Patent Law Digest § 1543.10.

Finally, the patent owner argued that there was a fact issue on whether the patented invention met a “long-felt and unmet need” by solving an “oversending” problem in the bulk e-mail industry and that this precluded summary judgment of invalidity for obviousness.  The argument lacked merit.  “Evidence that an invention satisfied a long-felt and unmet need that existed on the patent’s filing date is a secondary consideration of nonobviousness.”  However, the patent owner provided no evidence on when the need arose or how the patented invention met the need.   See Texas Instruments v. Int’l Trade Comm’n, 988 F.2d 1165 (Fed. Cir. 1993).  Secondary considerations do “not always overcome a strong prima facie showing of obviousness.’  Asyst Techs., Inc. v. Emtrak, Inc., 544 F.3d 1310, 1316 (Fed. Cir. 2008) (affirming judgment as a matter of law of obviousness).”

For a discussion of “long felt need,” see Chisum on Patents § 5.05[1]; Chisum, Patent Law Digest § 1534.