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I'm back! More posts to come soon! 2011 was a very busy year for me, but 2012 it looking great. So, It's time to get back to the blog. I'll be posting shortly.

Supreme Court Grants Certiorari in Patent Case

Today the U.S. Supreme Court granted a writ of certiorari in a patent case, a rare occurrence. The Court announced that it will hear an appeal from the Court of Appeals for the Federal Circuit in Global-Tech Appliances, Inc. v. SEB S.A. The Global-Tech case concerns the level of intent that a patentee must prove to establish infringement by inducement, a very important legal issue. The Court's decision will have significant ramifications across many industries, including the computer and software industries in particular.

"False Marking" Revisited by the Federal Circuit

On June 10, 2010, the United States Court of Appeals for the Federal Circuit issued a widely anticipated decision in Pequignot v. Solo Cup Co., No. 2009-1547 (Fed. Cir. June 10, 2010). The Solo court held that marking a product with the number of an expired U.S. patent can create liability for false patent marking. The court also held that knowingly marking a product with an expired patent number creates a presumption of intent to deceive the public. Along with the Federal Circuit’s recent decision in Forest Group, Inc. v. Bon Tool Co., the Solo decision highlights the need for care in marking products with a patent number.

The false marking statute, 35 U.S.C. § 292, provides a penalty for marking an unpatented product with a patent number. The statute allows any person to sue for the penalty, with half of any recovery going to the government. In the recent Forest Group case, the Federal Circuit clarified that this statute provides a potential penalty of up to $500 for each item marked with a false patent number.

The Forest Group decision led to a spate of false marking lawsuits, the most closely watched of which has been the Solo case. In Solo, the product at issue was a disposable cup lid for beverages—a mass-produced item. The defendant, Solo, had sold the lids for years, and had marked the lids with a patent number. After the relevant patents expired Solo continued to mark the lids as patented, eventually selling billions of the lids so marked.

The plaintiff, Pequignot, sued for false marking under Section 292 and, under the Forest Group case, claimed damages of $500 for every lid that Solo had marked after expiration of the patent. As the Federal Circuit noted, based on the billions of lids that Solo had sold, the total damages provided under the statute theoretically could have run into the trillions of dollars.

The Federal Circuit reviewed several issues on appeal. First, the court considered whether Solo’s marking of the lids with an expired patent number in fact could constitute false marking. The Federal Circuit answered this question in the affirmative, reasoning that products that are no longer patented are "unpatented" and within the purview of Section 292: "Solo's products that were once covered by now-expired patents are therefore 'unpatented' within the meaning of the statute."

Second, the court held that where the manufacturer marks a product with a patent that the manufacturer knows has expired, there arises a presumption of an intent to deceive. Specifically, the court held that "the combination of a false statement and knowledge that the statement was false creates a rebuttable presumption of intent to deceive the public." Because Solo had known that the patents were expired, the court held that Solo was presumed to have acted with intent to deceive.

Solo had obtained an opinion of counsel, however, that stated the acceptability of continuing to mark the patent number. Solo also had instituted a policy of replacing its lid molds having expired patent numbers with lid molds without patent numbers as the molds needed replacement. Based on these factors, the court found that Solo had rebutted the presumption of intent to deceive.

Third, Solo had included the following marking on packages for both patented and non-patented products: "This product may be covered by one or more U.S. or foreign pending or issued patents. For details, contact www.solocup.com." The court found that this notice helped to rebut the presumption of intent to deceive. Some of Solo's products indeed were covered by patents, and some were not. "Thus," reasoned the court, "it is highly questionable whether such a statement could be made 'for the purpose of deceiving the public,' when the public would not reasonably be deceived into believing the products were definitely covered by a patent." With respect to the link to Solo's website, the court noted: "Solo did not state on its packaging that any product was definitely covered by a patent, and it provided the consumer with an easy way to verify whether a specific product was covered; the consumer could 'contact www.solocup.com' for details."

Solo emphasizes the need for caution when marking products with a patent number. If the patent in question has expired, under Solo this may constitute actionable "false marking." Companies that engage in patent marking are encouraged to contact a Fitch Even attorney for further guidance in this area.

American Needle v. NFL—The Supreme Court Applies Antitrust Law to IP Licensing by Associations

The Supreme Court’s May 24, 2010 American Needle, Inc. v. National Football League et al., 560 U.S. ____ (2010), ruling has implications for associations that license intellectual property rights. The Court held that associations aggregating intellectual property are subject to antitrust scrutiny because they are not entitled per se to be treated as a single entity. American Needle emphasizes the need for careful consideration when forming joint licensing arrangements.

The Litigation Between American Needle And NFL

The NFL teams formed National Football League Properties (“NFLP”) in1963 to license their intellectual property, including trademarked team logos. Up until 2000, American Needle was one of several non-exclusive licensees manufacturing baseball style caps with NFL team logos. In December, 2000 the NFL teams authorized NFLP to grant exclusive licenses. NFLP subsequently granted an exclusive license to Reebok International, Ltd. and declined to renew American Needle’s non-exclusive license.

American Needle sued NFLP, alleging violations of § 1 of the Sherman antitrust act, which makes illegal "every contract, combination in the form of a trust or otherwise, or, conspiracy, in restraint of trade." 15 U.S.C. § 1. The first inquiry in analyzing liability under § 1 is to determine whether there has been a "contract, combination . . . or, conspiracy." Slip op. at 1. The second inquiry, upon finding that the defendant formed a "contract, combination . . . or, conspiracy" is to determine whether the defendants improperly restrained trade.

A central issue in American Needle was whether the NFLP constituted a single entity incapable of "contract, combination, or conspiring." The NFL took the position that NFLP was a single entity, independent from its member teams. American Needle contended that the NFLP embodied concerted action of the individual NFL teams, through which each team acted in restraint of trade.

Both the district court and the court of appeals held that the NFLP constituted a single entity incapable of conspiring and thus not liable under § 1 of the Sherman act. Slip op. at 3. The Supreme Court reversed and remanded, holding that the decision to collectively license separately owned trademarks to a single vendor "depriv[es] the market place of independent centers of decision making" and therefore can be actionable under § 1 if found to improperly restrain trade. Slip op. at 12.

The Test For Improper Concerted Action

To prove liability under § 1, a plaintiff must first show that the defendants engaged in improper concerted activity rather than acting independently. In its holding on this point, the Court emphasized a focus on "competitive reality" when reviewing whether separate entities engage in improper concerted action. The Court held that the test for improper concerted action is "whether there is a 'contract, combination . . . , or conspiracy' amongst 'separate economic actors pursuing separate economic interests,' such that the agreement 'deprives the marketplace of independent centers of decision making,' and therefore of 'diversity of entrepreneurial interests.'" Slip op. at 10 (internal citations omitted).

Applied to the facts in American Needle, the Court noted that NFL teams compete in the market for intellectual property and that each team is a "substantial, independently owned, and independently managed business." Slip op. at 12. The Court discounted the notion that NFL teams have a common interest for purposes of trademark licensing, noting that their "interests in licensing team trademarks are not necessarily aligned." Slip op. at 13. The Court thus reversed and remanded for further consideration of whether the NFLP improperly restrained trade. Slip op. at 20.

American Needle Increases Uncertainty For IP Licensing Consortiums

The Court's decision makes it less certain whether licensing consortiums engage in illegal restraint of trade. The functional considerations emphasized by the Court provide an uncertain test of whether there has been a concerted action and will require careful handling. Parties to IP licensing consortiums may need to consider their liability in light of the Court’s decision.

For any questions relating to this decision or to the specifics of your circumstances, please contact David A. Gosse or the Fitch Even attorney with whom you regularly consult.

Federal District Judge Invalidates Gene Patents

Association for Molecular Pathology, et al. v. United States Patent and Trademark Office, et al., decided March 29, 2010, is a controversial decision that calls into question the patentability of isolated genes. The U.S. District Court for the Southern District of New York ruled that “isolated” or “purified” genes are not patentable subject matter because they are not “markedly different” from a product of nature. An appeal is expected to the U.S. Court of Appeals for the Federal Circuit.

According to patent law, products of nature cannot be patented because they are not “made by man.” The United States Patent and Trademark Office (USPTO) takes the position that an isolated and purified DNA molecule that has the same sequence as a naturally occurring gene is eligible for a patent because that DNA molecule does not occur in that purified or isolated form in nature. Natural substances constitute patentable subject matter, according to the USPTO, provided that they are “isolated and purified,” because they do not occur in that “isolated” or “purified” form in nature.

The USPTO’s policy was called into question in Association for Molecular Pathology, et al. This lawsuit involved two human genes, known as BRCA1 and BRCA2 genes. Mutations in these genes are responsible for about 40% of inherited *** cancers and about 80% of inherited *** and ovarian cancers. The availability of “isolated” or “purified” BRCA1 and BRCA2 genes now makes the diagnosis of inherited *** cancer a reality. Previously, the only available method to diagnose human *** cancer involved *** examination, e.g., mammogram, followed by biopsy in which cells are examined under a microscope. The diagnosis of inherited *** cancer now involves screening the BRCA1 and BRCA2 genes in a cancer test for the mutations responsible for inherited *** cancer.

The lawsuit was filed by the American Civil Liberties Union (ACLU) and other plaintiffs who challenged the validity of several claims in the patents at issue. The principal defendant, Myriad, is a company that developed and commercialized the cancer test. The dispute arose when a *** cancer patient took the Myriad cancer test to see if her genes had the mutations that are responsible for inherited *** cancer. The test came out positive, indicating that her genes have the mutations responsible for inherited *** cancer. The patient wanted a “second opinion.” No second opinion was available, however, because Myriad patented the isolated BRCA1 and BRCA2 genes and associated cancer test. The patient sought the assistance of the ACLU in bringing suit against Myriad and against the USPTO.

The court’s ruling invalidated composition of matter claims directed to isolated BRCA1 and BRCA2 nucleic acid sequences. The court reasoned that the USPTO’s policy was incorrect, and that purification of these genes did not transform a product of nature into patentable subject matter. The court also invalidated claims directed to methods for analyzing a BRCA1 and BRCA2 sequence to assess mutations reflecting cancer risk. Applying the test of In re Bilski, which limits patentability to processes that are tied to a machine or apparatus or that transform a particular article into a different state or thing, the court held that the method claims do not satisfy the Bilski test because they covered only abstract mental processes.

This case is controversial, raises important policy issues, and could have a significant impact on the biotechnology industry.

Patents serve to stimulate innovation by rewarding research and development (R&D) in exchange for a limited right to exclude others from copying the patented invention during the term of the patent. Patentees argue that, without patent protection, companies could not recover the costs of R&D because the invention could be copied by all. The countervailing view is that the risk of infringement claims for gene patents may discourage use of those genes in research and clinical settings. The appeal of the Association for Molecular Pathology et al. decision is sure to be watched closely.

If you have questions about the subject of this IP Law Alert, please contact Nancy W. Vensko or the Fitch Even attorney with whom you regularly consult.

Ariad v. Eli Lilly—The Federal Circuit Confirms the Written Description Requirement

In Ariad Pharms, Inc., et. al. v. Eli Lilly and Co., the Federal Circuit has reaffirmed, en banc, the "written description" requirement of patent law.

The Ariad decision, rendered March 22, has many important ramifications, most evidently in the chemical and pharmaceutical arts, but more broadly in all technical fields. For patent prosecutors, the Ariad decision confirms the importance of careful planning and thorough communication with patent counsel when drafting a patent application. More generally, Ariad provides guidance for analysis of applications and patents for compliance with the written description requirement of law.

The Litigation Between Ariad And Lilly

In 2002, Ariad Pharmaceuticals sued Eli Lilly for patent infringement, and Lilly defended on various grounds, among them patent invalidity. On initial appeal, the Federal Circuit held that the asserted claims were invalid for lack of written description. Ariad Pharms., Inc. v. Eli Lilly & Co., 560 F.3d 1366, 1371 (Fed. Cir. 2009).

Ariad then petitioned the Federal Circuit for rehearing en banc, arguing that the law contains no written description requirement separate from the enablement requirement. In its en banc decision, the Federal Circuit rejected Ariad's argument, and confirmed that the law does indeed provide a "written description" requirement that is distinct from the other disclosure requirements provided by law, in particular the requirement that a patent enable one of skill in the art to practice the claimed invention. In other words, it is insufficient for a patent to teach only how to practice the invention; rather, the patent also must describe the invention.

The claims of the Ariad patent encompassed various methods for regulating "expression" of certain genes.¹ Ariad disclosed in its patent specification that several categories of compounds were suitable for use in regulating the gene expression, but Ariad did not describe the compounds in each category. Rather, Ariad only specified the desirability of regulating gene expression, and suggested that certain types of compounds might be operative.

The Federal Circuit held this description to be insufficient: "Such claims merely recite a description of the problem to be solved while claiming all solutions to it." It is impermissible, the court held, to "cover any compound later actually invented and determined to fall within the claim's functional boundaries—leaving it to the pharmaceutical industry to complete an unfinished invention." The Federal Circuit further explained that claims written in functional terms must find support via specific structures, formulas, chemicals or physical properties that achieve the claimed function:

The problem is especially acute with genus claims that use functional language to define the boundaries of a claimed genus. In such a case, the functional claim may simply claim a desired result, and may do so without describing species that achieve that result.

In summary, "an adequate written description . . . requires more than a generic statement of an invention’s boundaries."

Ariad argued that the specification enabled one of skill in the art to prepare suitable compounds, and that this disclosure was sufficient. The Federal Circuit rejected this argument:

If Congress had intended enablement to be the sole description requirement of § 112, first paragraph, the statute would have been written differently.

The court considered a disclosure of a chemical process involving a one-carbon molecule. These teachings might enable someone to practice the invention with three- or four-carbon molecules, but, explained the court, "such compounds have not been described and are not entitled to a patent." "Consider the case where the specification discusses only compound A and contains no broadening language of any kind. This might very well enable one skilled in the art to make and use compounds B and C; yet the class consisting of A, B and C has not been described."

Ruschig: The Flip Side of the Written Description Doctrine

The immediate holding of Ariad is that claims that cover a broad genus, or category, must find equally broad supporting disclosure in the specification. It often will be insufficient to disclose a single compound and subsequently to attempt to claim a class of compounds.

But Ariad also held that the converse is true. It may be insufficient to disclose a broad genus or category of compounds and later attempt to present a claim to a specific one of those compounds. The Ariad court cited In re Ruschig, 379 F.2d 990 (CCPA 1967), with approval. In Ruschig, the specification disclosed a general chemical formula, but did not disclose a specific compound (chlorpropamide). "[T]he specification provided no guides or 'blaze marks' to single out chlorpropamide from all the other compounds, and thus did not support the later-added claim."

The Patent Office refused to allow Ruschig to present a claim to chlorpropamide, and Ruschig appealed to the C.C.P.A. (a predecessor court to the Federal Circuit). The Ruschig court affirmed, holding the chlorpropamide claim to be unpatentable:

Not having been specifically named or mentioned in any manner, one is left to select from the myriads of possibilities encompassed by the broad disclosure, with no guide indicating or directing that this particular selection should be made rather than any of the many others which could also be made.

379 F.2d at 995.

The Ruschig doctrine is applicable in other contexts. For instance, a patent disclosure of "an effective amount of chemical X" may be insufficient to support a claim that specifies "10-20% of chemical X." A disclosure of "a microprocessor" may be insufficient to support a claim to a particular processor architecture. A disclosure of "a supporting beam" may not support a claim to "a wooden support beam."

Satisfaction of the Written Description Requirement is a Factual Inquiry

The Ariad court reaffirmed many earlier cases that held that satisfaction of the written description requirement is a fact question. "We have recognized that determining whether a patent complies with the written description requirement will necessarily vary depending on the context." The level of skill in the art is one factor in this determination. Other factors include the nature and scope of the claims, the complexity and predictability of the relevant technology, the level of existing knowledge in the particular field, the extent and content of the prior art, the maturity of the science or technology, and the predictability of the aspect at issue.

According to the Ariad court, the written description law "must be applied to each invention at the time it enters the patent process, for each patented advance has a novel relationship with the state of the art from which it emerges."

Ariad Provides Guidance to Patent Prosecutors and to Courts and Litigators

Patent applicants should take steps to ensure that their patent applications satisfy the written description requirement. The more examples of the invention and its component parts that are disclosed in the specification, and the more specific those examples are, the more likely that the specification will meet the written description requirement. The patent applicant should include both broad and specific language in describing the invention, and should describe the invention in a manner specific to and appropriate for the application in question, keeping in mind the various factors enumerated by Ariad.

An applicant intending to claim the invention broadly (e.g., a class of compounds A, B, C), should disclose the invention broadly (should not disclose only A). Conversely, an applicant may provide a disclosure of a broad category of materials, but would be wise to supplement the broad disclosure with specific examples.

More broadly, Ariad also provides guidance as to how an applicant (or court litigant) should analyze patents for compliance with the written description requirement. Ariad provides several factors that a court will consider in addressing whether a patent claim finds adequate written description.

Planning and communication with skilled patent counsel will be key to any Ariad analysis. Fitch, Even attorneys are available to answer any questions relating to the Ariad case.

This IP Law Alert was authored by Alison Aubry Richards, who is a member of Fitch Even’s IP litigation Practice Group.

The Supreme Court's Bilski Decision

The United States Supreme Court issued its widely-anticipated decision in Bilski v. Kappos, 561 U.S. ___ (2010). The Bilski decision addressed whether so-called “business” methods can be eligible for patent protection. Bilski is of particular significance in the financial, software, and computer sciences fields, where many business method patents originate. The Court upheld the rejection of the Bilski application by the Patent Office and the Federal Circuit, but did so on grounds that differ significantly from those relied upon by the Patent Office or the Federal Circuit.
Bilski’s patent application sought protection for procedures for allowing energy suppliers and consumers to minimize risks resulting from demand and price fluctuations in energy markets. At issue was whether such techniques are eligible subject matter for patent protection as a “process” under Section 101 of the Patent Act, which restricts the categories of inventions eligible for protection to processes, machines, manufacturers and compositions of matter.
Below, the Federal Circuit had held in its en banc Bilski decision that the test for patent eligibility of a process or method was whether the process was "tied to a particular machine or apparatus" or whether it "transforms a particular article into a different state or thing." This was called the "machine-or-transformation test." On appeal from that decision, the Supreme Court addressed three arguments advanced for why the claimed invention does not fall within the scope of Section 101 patentable subject matter: (1) it does not satisfy the machine-or-transformation test; (2) it is directed to a business method; and (3) it is merely an abstract idea.
The Supreme Court found "reasons to doubt whether the [machine-or-transformation] test should be the sole criterion for determining the patentability of inventions in the Information Age." The Court held that the Federal Circuit's view was too limiting and that the "machine-or-transformation test" is not the exclusive test for patent eligibility. The Court noted that, while the machine-or-transformation test can be a useful tool in evaluating patent eligibility, the Patent Act is more expansive in scope, and offers the possibility of patent protection for a broader range of processes than those delimited by the "machine-or-transformation test." Noting that one provision of the Act explicitly contemplates the existence of business method patents, the Court also refused to categorically exclude business methods from the scope of patentable subject matter contemplated by Section 101. The Court, however, went on to conclude that the claims of the Bilski patent application are outside the scope of Section 101 because they are directed to an abstract idea in violation of established precedent holding that abstract ideas are unpatentable.