J. Peter Fasse

Is Property Really Property?

MATTO MATTO Technology TransferTechnology Transfer SeminarSeminarJune 21, 2006

RECENT SUPREME COURT CASESI. I. e eBBaayy v. MercExchange

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The Issue

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A Disconnect by the District Court

District Judge Friedman:

“Plaintiff [MercExchange] exists solely to license its patents or sue to enforce its patents, and not to develop or commercialize them.”

Since when did commercialization exclude licensing?

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The Question Presented

Whether the Federal Circuit erred in setting forth a general rule in patent cases that a district court must, absent exceptional circumstances, issue a permanent injunction after a finding of infringement.

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The Petition for Certiorari

Supreme Court of the United StateseBAY INC., ET AL. v. MERCEXCHANGE, L.L.C.

The petition for a writ of certiorari is granted. In addition to the Question presented by the petition, the parties are directed to brief and argue the following Question: ‘Whether this Court should reconsider its precedents, including Continental Paper Bag Co. v. Eastern Paper Bag Co., 210 U.S. 405 (1908), on when it is appropriate to grant an injunction against a patent infringer.’

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The Constitution

“The Congress shall have power . . . To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.”

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The Decision

EBAY INC. ET AL. v. MERCEXCHANGE, L.L.C.

Argued March 29, 2006

Decided May 15, 2006

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“Unanimous Opinion” – The Result

The appellate court’s decision against eBay is vacated.

There is no “general rule” that a permanent injunction follows a finding of infringement of a valid patent.

Justice Thomas delivered the opinion for a unanimous court

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“Unanimous Opinion” – The Test

“A plaintiff seeking a permanent injunction must satisfy a four-factor test before a court may grant such relief.” (1) irreparable injury? (2) $ sufficient? (3) balance of hardships favor patent owner? (4) public interest?

“These familiar principles apply with equal force to disputes arising under the Patent Act.”

“The decision to grant or deny permanent injunctive relief is an act of equitable discretion.”

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“Unanimous Opinion” – IP Marketers

“[S]ome patent holders, such as university researchers or self-made inventors, might reasonably prefer to license their patents, rather than undertake efforts to secure the financing necessary to bring their works to market themselves.”

“Such patent holders may be able to satisfy the traditional four-factor test, and we see no basis for categorically denying them the opportunity to do so.”

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Chief Justice Roberts concurred(joined by Justices Scalia and Ginsburg)

“From at least the early 19th century, courts have granted injunctive relief upon a finding of infringement in the vast majority of patent cases.”

“[T]here is a difference between exercising equitable discretion pursuant to the established four-factor test and writing on an entirely clean slate. Discretion is not whim, and limiting discretion according to legal standards helps promote the basic principle of justice that like cases should be decided alike.”

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Take Aways

Probably no different result in majority of cases -injunction will still issue.

For business method patents and patents covering only a part of an apparatus - what will the Federal Circuit do if district courts deny injunctions here?

J. Peter Fasse

Everything Under the Sun?

RECENT SUPREME COURT CASES

II. LAB. CORP. V. METABOLITE

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The Set-UpThe Supreme Court on March 1, 2005, issued the following order in Laboratory Corp. of America v. Metabolite Laboratories, U.S., No. 04-607, 2/28/05:

Question: Respondent’s patent claims a method for detecting a form of vitamin B deficiency, which focuses upon a correlation in the human body between elevated levels of certain amino acids and deficient levels of vitamin B. The method consists of the following: First, measure the level of the relevant amino acids using any device, whether the device is, or is not, patented; second, notice whether the amino acid level is elevated and, if so, conclude that a vitamin B deficiency exists. Is the patent invalid because one cannot patent “laws of nature, natural phenomena, and abstract ideas”? Diamond v. Diehr, 450 U.S. 175, 185 (1981).Acting Solicitor General responds in September of 2005, by urging Court to deny certiorari because claim is more than a recital of a natural relationship but also claims a diagnostic method.

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The Loaded QuestionThe Supreme Court of the United States grants certiorari on Question No. 3 in the petitioner Lab. Corp.’s brief, which reads as follows:

Whether a method patent setting forth an indefinite, undescribed and non-enabling step directing a party simply to “correlate” test results can validly claim a monopoly over a basic scientific relationship used in medical treatment such that any doctor necessarily infringes the patent by thinking about the relationship after looking at a test result.

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Background: The Patent

The patent in suit, U.S. Patent No. 4,940,658 (“the ‘658 patent”) is directed to methods for detecting deficiencies of cobalamin (vitamin B12) and folate (folic acid). The inventors discovered a relationship between elevated levels of total homocysteine and a deficiency in either cobalamin or folate. See Metabolite Labs., Inc. v. Lab. Corp. of Am. Holdings, 370 F.3d 1354, 1358 (Fed. Cir. 2004). They then claimed a diagnostic method that applied this discovery by first assaying for total homocysteine and then correlating the result with the vitamin deficiency.

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Background: Claim 13

Claim 13 of the ‘658 patent reads as follows:

A method for detecting a deficiency of cobalamin or folate in warm-blooded animals comprising the steps of:

assaying a body fluid for an elevated level of total homocysteine;

and correlating an elevated level of total

homocysteine in said body fluid with a deficiency of cobalamin or folate.

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Background: The Infringement

Lab. Corp. began running a series of assays, on which Metabolite did not own patents, for the purpose of measuring homocysteine to be used by physicians to diagnose B-12 and B-9 deficiencies.

Lab. Corp. did not tender a royalty to Metabolite and was sued for inducing infringement of claim 13 of the ‘658 patent.

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Background: The Trial

The jury found claim 13 to be valid and willfully infringed. At trial, petitioner Lab. Corp. argued that the claim was invalid because it was anticipated by prior art under Section 102; was obvious in light of the prior art under Section 103; did not “distinctly claim” the invention under Section 112,¶2; and did not satisfy the written description requirement of section 112,¶1. 370 F.3d at 1359, 1366-67.

The patent holders argued at trial that doctors were direct infringers because they had the assaying done for them and then they performed the ‘correlating step,” and that LabCorp induced doctors to infringe by performing a test for total homocysteine and publishing information to the effect that an elevated level of total homocysteine correlates with cobalamin or folate deficiency. Id. At 1365. The record suggests that any competent doctor will necessarily perform the second “correlating step” when he receives the results of any total homocysteine assay because it would be malpractice for a doctor to receive a total homocysteine assay without determining cobalamin/folate deficiency. Id. At 1364

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What is a Court to do?

It may have been too late for the issue to be raised in the petition for certiorari. If so, the Supreme Court may: Dismiss the petition as improvidently granted, or Remand the case to the Federal Circuit for its views on

whether the issue was properly raised, or Remand the case to the Federal Circuit for its views on the

merits of the issue and possibly for development of the issue at the trial court level

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Statutory Background

U.S. Constitution, Article 1, Section 8: grants Congress the power to pass laws that “promote the

Progress of Science and the useful Arts”

35 U.S.C. § 101: “whoever invents or discovers any new and useful process,

machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefore, subject to the conditions and requirements of this title.”

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Prior Supreme Court CasesFunk Brothers Seed Company v. Kalo., 333 U.S. 127 (1948) - “If there is to be invention from [the discovery of a phenomena of nature], it must come from the application of the law of nature to a new and useful end.” Justice Douglas stated the proper rule of law, but did not apply that rule to the facts in the case and thus reached the wrong conclusion.Diamond v. Chakrabarty 447 U.S. 303 (1980) - After over 30 years of silence, the Supreme Court revisits the issue in Funk Brothers. Statutory subject matter is intended to include “anything under the sun that is made by man.”Diamond v. Diehr, 450 US 175 (1981) “When a claim containing a mathematical formula implements or applies that formula in a structure or process which, when considered as a whole, is performing a function which the patent laws were designed to protect … then the claim satisfies the requirements of § 101.” In effect Diehr overrules Funk, sub silentio.

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The Wished For Proper Merits Result In Lab. Corp.

Apply the rule announced in Funk Brothers and Diehr,Explicitly overrule the holding in Funk Brothers, andAffirm the validity of claim 13

But what will eight justices do? (Chief Justice Roberts recused himself)?

Slides based on work by Frank Porcelli, John Dragseth, Kyle Wagner Compton, and Michael Kallus in F&R’s Appellate Practice Group

Faustino A. Lichauco

PROPOSED RULE CHANGES

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I: Continuation Practice Change

PRESENT CONTINUATION PRACTICE

* unlimited progeny, no questions asked* “progeny” = CN/RCE/DV/CIP

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Advantages For TTO

Can accept allowed claims and pursue broader ones later

Claims can evolve to more accurately articulate invention

Iron in the fire; adjust to competition, tailor to licensee’s demands

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One Leaf In A Patent Tree

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The Entire Tree

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PTO Family Planning (71 Fed. Reg. 48)

One child as of right per founding parent.

“child” = CN, DV, RCE, or CIP

For more children: petition (with $400 fee)

Reason for extra children could not have been presented earlier

“Reason” = argument/amendment/evidence

File petition within four months of continuation filing date

Result: ZPG

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Proposed Prosecution Cycle For CN, RCE, CIP

Founder

CN-1

PatentFinal Rejection

SHOWING CN-2

Founder

CN

Patent-1

Patent-2

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Special Rules For Divisionals

Only if there has been a restriction requirement in the founding parent

Divisional may have one free child claiming priority from founding parent

Additional child of divisional requires petition

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Proposed Front-Loaded Cycle For Divisional Applications

Founder

Con

Div1

Div2

Div3

Patent

P

Con

P

P

Con

P

P

Con

P

P

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Special Rules For CIPs

Must identify which claims are supported by original filing date

Must identify which claims are supported by new matter

Unidentified claims are entitled to later date by default

Additional free child, but with priority only one generation back

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Statutory Basis For Rule Changes

35 USC 2(b) “The Office...may establish regulations, not inconsistent with law, which (A) shall govern the conduct of proceedings in the Office; (B) shall be made in accordance with section 553 of title 5 [Administrative Procedures Act]”

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Legal Issues Raised By Proposed Rule Changes

Inconsistent with 35 USC 120

“An application…disclosed in the manner provided by (sec. 112 para. 1) in an application previously filed in the United States…shall have the same effect, as to such invention, as though filed on the date of the prior application…or on an application similarly entitled to the benefit of the filing date of the first application” [emphasis added]

PTO says its petition for another child makes rule consistent with 35 USC 120.

Text of Title 35 refers to Director's power in certain places, but not in others.

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Status Of Rule Making

Rule proposed in January 2006

Comment period closed in May 2006

Now awaiting final rule

Final rule takes effect ≥ 30-days after publication

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What Can We Expect?

More appeals to Board

More use of pre-appeal conference procedure

Avoid omnibus specifications

Delay publication in journals

No more filing continuation without already including new claims.

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Sibling Applications

Common inventor, and

Common owner, and

Filed within two months of each other

“Owner” includes CREATE “owner”

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Twin Applications

Are sibling applications that:

Have substantial overlapping disclosure

Have same filing date

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Special Rules For Siblings And Twins

Siblings must be cross-cited

Twins spawn an automatic obviousness-type double-patenting rejection

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Rebutting The Double Patenting Presumption

Argue that claims are patentably distinct, OR

Explain why you filed twins and submit a terminal disclaimer

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II: Present Examination Procedure

Unlimited claims, but with excess claim fees

Examiner examines all claims

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Proposed Examination Procedure (71 Fed. Reg. 61)

Unlimited claims, with fees

Examiner examines only ten claims

The ten include all independent claims

Balance chosen by Applicant

Applications having more than ten claims are examined on a self-service basis.

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Self-Service ExaminationFirst, prepare your own office action

* identify classes and subclasses searched

* IDS with closest references

* Map each independent claim to each reference

Then, respond to your own office action

* Discuss why each independent claim is patentable over each cited reference.

* Map each claim to your own specification

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Adaptations: Pre-Filing

File only when prepared to prosecute

Carry out and fully document more extensive prior art searching

Control schedule using PCT and provisional applications

Disclosure no broader than claims

Although not possible for universities and hospitals, try to avoid scientific publication until patent is published

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Adaptations: Early In Prosecution

Preliminary amendment in view of newly published applications

Interview early, and often.

File any Rule 131 declaration promptly

Actively prosecute PCT for early resolution of issues.

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Adaptation: Later In Prosecution

Appeal often, save free continuation for new and final claim set.

Petition often to remove finality.

File continuing applications with “the showing” before deploying your free continuation.

Having an unused free continuation is a marketable asset.

Review petitions in Federal Court