IP UPDATE
Exploring the Latest in Intellectual Property Law
IP UPDATE
Exploring the Latest in Intellectual Property Law
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Don’t Let Prophetic Examples Work Against You

by | Jul 8, 2021 |

On July 1, 2021, the US Patent & Trademark Office (PTO) issued a notice reminding patent applicants that when their applications contain both prophetic and working examples, they must make a clear distinction between the two.

Prophetic examples illustrate reasonably expected results or anticipated results. They stem from experiments that have not been actually performed and are instead hypothetical simulations. In contrast, working examples result from experiments that were actually performed. In order to aid in distinguishing between the two example types within a patent application, prophetic examples should be written only in the future or present tense—not in the past tense. Prophetic examples cannot be used to meet the written description and enablement requirements for a patent application.

The PTO’s recent notice underscores the importance of the applicant’s duty to clearly distinguish between prophetic and working examples: “[k]nowingly asserting in a patent application that a certain result ‘was run’ or an experiment ‘was conducted’ when, in fact, the experiment was not conducted or the result was not obtained is fraud.”



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Diehr Alice, Yu are Superimposing Novelty onto Patent Eligibility. Love, Newman.

by | Jun 24, 2021 |

The US Court of Appeals for the Federal Circuit affirmed the district court’s grant of a Rule 12(b)(6) motion to dismiss on the basis that, under the two-step Alice analysis, the patent claims—directed to a digital camera—were directed to ineligible subject matter under 35 U.S.C. § 101. Yu, et al. v. Apple Inc., et al., Case Nos. 20-1760; -1803 (Fed. Cir. June 11, 2021) (Prost, J.) (Newman, J., dissenting)

The patent claim under consideration recited an “improved digital camera” that has two lenses, two image sensors, an analog-to-digital converter, a memory and a digital image processor for “producing a resultant digital image from said first digital image enhanced with said second digital image.” Yu conceded that “the idea and practice of using multiple pictures to enhance each other has been known by photographers for over a century” and that the components recited in the claim “are themselves generic and conventional.”

Applying the Supreme Court’s two-step Alice v. CLS Bank test for determining patent eligible subject matter, the Federal Circuit determined at step one that the claim was “directed to the abstract idea of taking two pictures . . . and using one picture to enhance the other in some way.” At step two, the Court held that the claim failed to otherwise define a patent eligible invention because the digital camera “is recited at a high level of generality and merely invokes well-understood, routine, conventional components to apply the abstract idea of [using one picture to enhance the other in some way].” The Court rejected Yu’s attempts to use portions of the patent’s specification to support eligibility, explaining that the eligibility analysis is limited to the literal recitations of the asserted claims.

Then, along came Judge Pauline Newman. With a chainsaw.

In dissent, Judge Newman argued that the majority was improperly enlarging the § 101 analysis to include other “substantive requirements of patentability.” Judge Newman emphasized (twice) that the claim literally recited an electromechanical camera, not an abstract idea. In her view, the camera recited in the claim met the requirements of § 101 as a new and useful machine, without regard to whether the claimed camera also met the novelty requirements of §§ 102 and 103. Referring to the Supreme Court’s 1981 holding in Diamond v. Diehr, Judge Newman wrote that “[i]n contravention of [Diehr‘s] explicit distinction between Section 101 and Section 102, the majority now holds that the [claimed] camera is an abstract idea because the camera’s components were well-known and conventional and perform only their basic functions.” Judge Newman further proclaimed that “the principle that the majority today invokes was long ago discarded.”

Judge Newman also admonished the majority for the destabilizing effects that similar holdings have already had on US patent policy. She noted that “[i]n the current state of Section 101 jurisprudence, inconsistency and unpredictability of adjudication have destabilized technologic development in important fields of commerce,” and that “[t]he fresh uncertainties engendered by the majority’s revision of Section 101 are contrary to the statute and [...]

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Second Circuit Rejects FTC Challenge of 1-800 Contacts, Highlighting Procompetitive Trademark Policy

by and | Jun 24, 2021 | ,

The US Court of Appeals for the Second Circuit vacated a final order of the Federal Trade Commission (FTC), which had found that agreements to refrain from bidding on keyword search terms for internet advertisements violated Section 5 of the FTC Act. The Court made clear that although trademark agreements are not necessarily immune from antitrust scrutiny, they are entitled to significant deference. 1-800 Contacts, Inc. v. Federal Trade Commission, Case No. 18-3848 (2d Cir. June 11, 2021) (Per Curium). The Second Circuit held that the FTC applied an incorrect analytical framework and incorrectly concluded that the agreements were an unfair method of competition under the FTC Act.

1-800 Contacts and its competitors advertise online through search advertising. They bid on search engine keywords, which help display their websites in response to consumer searches. They also bid on negative keywords, which prevent their ads from being displayed when consumers search for specified terms.

Between 2004 and 2013, 1-800 Contacts entered into a series of settlement agreements to resolve trademark disputes with competitors, as well as one commercial agreement with a competitor, all of which included terms prohibiting the parties from using each other’s trademarks, URLs and similar terms as search advertising keywords. The agreements also required the parties to use negative keywords so that a search including one party’s trademarks would not trigger a display of the other party’s ads. 1-800 Contacts enforced these agreements when it believed them to be breached.

The FTC challenged the agreements, alleging that they “unreasonably restrain truthful, non-misleading advertising as well as price competition in search advertising auctions,” violating Section 5 of the FTC Act, 15 U.S.C. § 45. An administrative law judge (ALJ) subsequently found the agreements to violate Section 5. 1-800 Contacts appealed to the full Commission, which affirmed the ALJ’s decision. 1-800 Contacts appealed.

The Second Circuit vacated the FTC’s decision but noted that the FTC was correct to reject 1-800 Contacts’ argument that trademark settlement agreements are necessarily immune from antitrust scrutiny. Citing the Supreme Court decision in Actavis, the Second Circuit held, “the mere fact that an agreement implicates intellectual property rights does not immunize an agreement from antitrust attack.”

The Second Circuit disagreed with the FTC’s specific antitrust analysis, however. The Court held that the FTC erred by applying an “inherently suspect” analysis—also known as a “quick-look” analysis—rather than the rule of reason. The Court focused on the fact that “the restraints at issue here could plausibly be thought to have a net procompetitive effect because they are derived from trademark settlement agreements,” and the fact that the FTC acknowledged as much by finding that the company’s justifications were “cognizable and, at least, facially plausible.” The Second Circuit also noted that courts have limited experience with these types of agreements. The Court concluded that “[w]hen, as here, not only are there cognizable procompetitive justifications but also the type of restraint has not been widely condemned in our judicial experience . . . . [w]e are bound . . [...]

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What Does it Take to Plead Trade Secret Misappropriation Under the DTSA?

by | Jun 24, 2021 |

Addressing the pleading standard under the Defend Trade Secrets Act (DTSA) and New Jersey Trade Secrets Act (NJTSA), the US Court of Appeals for the Third Circuit vacated the district court’s dismissal of a third amended complaint for trade secrets misappropriation and remanded for further proceedings. Oakwood Labs. LLC v. Thanoo, Case No. 19-3707 (3d Cir. May 8, 2021) (Jordan, J.)

Thanoo was a key player in Oakwood Laboratories’ Microsphere Project, a 20-year, $130 million project to develop injectable sustained-release drug products using a complex and rare microsphere technology. In 2013, Aurobindo approached Oakwood about a possible collaboration, specifically to involve Aurobindo’s manufacture of an active pharmaceutical ingredient for Oakwood. Subject to a nondisclosure agreement, Oakwood shared with Aurobindo confidential information, including a 27-page memorandum describing the Microsphere Project. Ultimately, Aurobindo declined to proceed, citing financial considerations. Aurobindo subsequently hired Thanoo. Although Thanoo told Oakwood that he was going to Aurobindo to work on standard injectable drugs and not microspheres, he immediately set up a research and development program concerning microspheres for Aurobindo. Aurobindo, which had no previous experience in microspheres, announced that it would have products ready for clinical testing in just one to four years, despite a relatively small investment of only $6 million. Oakwood sued Thanoo and Aurobindo for trade secret misappropriation under the DTSA and NJTSA, and for breach of contract and tortious interference.

On Thanoo’s motion, the district court dismissed Oakwood’s complaint, finding that it failed to provide specific allegations of what trade secrets were allegedly misappropriated and how Aurobindo allegedly used the trade secrets. Oakwood filed first, second and third amended complaints, each alleging with greater specificity the trade secrets associated with the Microsphere Project and expanding on the allegation that Aurobindo could not have proceeded so quickly from no experience to announcing near-complete development of microsphere products without using Oakwood’s trade secrets. Nonetheless, the district court dismissed each complaint as being insufficiently specific as to which particular trade secrets were allegedly misappropriated and the particular way in which Aurobindo allegedly used the trade secrets. The district court also held that, absent any product launch from Aurobindo, any harm from the alleged misappropriation was too speculative to support a claim. After dismissal of the third amended complaint, Oakwood appealed.

The Third Circuit reversed, concluding that Oakwood’s complaint sufficiently pled a claim for trade secret misappropriation under either the DTSA or the NJTSA. The Court explained that Oakwood had sufficiently identified its trade secrets by its allegation that information laying out its design, research and development (including identification of variables that affect the development), test methods and results, manufacturing processes, quality assurance, marketing strategies and regulatory compliance related to its development of a microsphere system were trade secrets. Oakwood had also identified a specific memorandum disclosed to Aurobindo under a confidentiality agreement as containing trade secrets, and attached other documents specifying in detail secrets related to the Microsphere Project.

The Court further found that Oakwood had sufficiently alleged misappropriation. Although there are several ways to [...]

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Federal Circuit Lacks Appellate Jurisdiction over Standalone Walker Process Claims

by and | Jun 24, 2021 | ,

The US Court of Appeals for the Federal Circuit ordered the transfer of a case asserting standalone Walker Process antitrust claims involving an unenforceable patent to the regional circuit, in this case the US Court of Appeals for the Fifth Circuit. Chandler v. Phoenix Services LLC, Case No. 20-1848 (Fed Cir. June 10, 2021) (Hughes, J.) The case originated in the US District Court for the Northern District of Texas, over which the Fifth Circuit has appellate jurisdiction. The decision to transfer was based on a subject matter jurisdiction analysis for Walker Process claims. The Federal Circuit reiterated that its precedent does not mandate exclusive Federal Circuit jurisdiction over all Walker Process cases.

In 2006, Phoenix Services and Mark Fisher (collectively, Phoenix) acquired a company called Heat On-The-Fly and its patent to protect a purported proprietary fracking process. Heat-On-The-Fly, and later Phoenix, sought to enforce the patent against numerous parties. During the patent application process, however, Heat On-The-Fly had failed to disclose numerous public uses of the fracking process prior to the application filing. In 2018, in an unrelated case, Energy Heating, LLC v. Heat On-The-Fly, the Federal Circuit, held that “failure to disclose prior uses of the fracking process rendered the . . . patent unenforceable due to inequitable conduct.” The plaintiffs in the case at hand, Ronald Chandler, Chandler MFG., Newco Enterprises and Supertherm Heating Services (collectively, Chandler), alleged that Phoenix’s continued enforcement of the patent violated Walker Process pursuant to § 2 of the Sherman Act.

Walker Process monopolization claims originate from a 1965 Supreme Court decision that recognized an antitrust cause of action under the Sherman and Clayton Acts when a party fraudulently obtains a patent for the purpose of attempted monopolization. Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp. To succeed on a Walker Process claim, a plaintiff must satisfy two elements:

  • The plaintiff must show that the defendant obtained the patent through knowing and willful fraud on the US Patent & Trademark Office and enforced that patent with knowledge of its fraudulent procurement.
  • The plaintiff must be able to satisfy all other elements for a Sherman Act monopolization claim.

Pursuant to 28 U.S.C. § 1295(a)(1), the Federal Circuit retains jurisdiction over any civil case arising under any act of Congress relating to patents. In this instance, the Federal Circuit stated that Walker Process antitrust claims may relate to patents “in the colloquial use of the term,” but under 1988 Supreme Court precedent, Christianson v. Colt Indus., the Federal Circuit’s jurisdiction only extends to cases where the cause of action is created under federal patent law, or where the plaintiff’s right to relief “necessarily depends on resolution of a substantial question of federal patent law.”

Here, the Federal Circuit relied on its own 2018 precedent where it analyzed subject matter jurisdiction for Walker Process claims. Xitronix Corp v. KLA-Tencor Corp. (Xitronix I). Xitronix I involved alleged fraud by the defendants to obtain a patent. The Court acknowledged [...]

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10th Circuit Falls into Line on Exceptionality Doctrine in Lanham Act Cases

by | Jun 17, 2021 |

Addressing whether the term “exceptional case” in the Patent Act differs in meaning from the same term used in the Lanham Act, the US Court of Appeals for the 10th Circuit upheld an award of attorneys’ fees granted under a motion filed under 15 U.S.C. 1117(a) and clarified that the exceptional case standard in the Lanham Act parallels the standard in the Patent Act. Derma Pen, LLC v. 4EverYoung Limited, et al., Case No. 19-4114 (10th Cir. June 8, 2021) (Lucero, J.)

In 2013, Derma Pen sued several companies for infringement of the “DERMAPEN” mark. Four years later, Derma Pen was granted a permanent injunction prohibiting the companies and “their officers, agents, servants, employees, attorneys, licensees, and anyone in active concert or participation with, aiding, assisting, or enabling Defendants” from using the mark. A few months later, Derma Pen filed for an order of contempt against one of the defendants, Stene Marshall, alleging that Marshall, with the help of other actors (related parties), had been violating the earlier-issued injunction. During the subsequent proceedings, despite being the plaintiff, Derma Pen routinely failed to meet its discovery obligations, causing the related parties to file as many as six discovery motions and resulting in the imposition of sanctions on Derma Pen.

Following an evidentiary hearing, the district court found Marshall in contempt of the injunction, but concluded that the related parties took no part in Marshall’s violation. Subsequently, the related parties moved for attorneys’ fees incurred in the contempt proceeding under the Lanham Act, 15 U.S.C. 1117(a). The district court granted the motion and awarded more than $190,000 in fees based on application of the “exceptional case” standard set forth in the Supreme Court of the United States’ 2014 decision in Octane Fitness v. Icon Health & Fitness. Specifically, the district court decided that the case was “exceptional” because:

  • Derma Pen produced “no evidence of damages.”
  • “[T]he evidence showed [Derma Pen] had no right to enforce the injunction.”
  • “[T]he evidence showed that [the] trademark was abandoned.”
  • “[M]onetary sanctions were imposed on” Derma Pen for misconduct and delay during discovery.
  • Derma Pen was “entitled to no relief against the [related parties].”

Derma Pen appealed.

The 10th Circuit affirmed the district court’s holding and fees award for the related parties, noting Derma Pen’s misconduct and delay during discovery. In so doing, the Court adopted the Octane Fitness standard as applicable to cases brought under the Lanham Act.

Practice Note: The 10th Circuit noted that it was acting consistently with other circuits that have considered application of the Octane standard to fee disputes under the Lanham Act, citing LHO Chicago River, L.L.C. v. Perillo (7th Cir. 2019) (collecting cases); Xereas v. Heiss (DC Cir. 2021); and Safeway Transit LLC v. Disc. Party Bus, Inc. (8th Cir. 2020).



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Ninth Circuit Withdraws Opinion That Signaled Shift in Arbitration Landscape for Non-Signatories

by and | Jun 17, 2021 |

The US Court of Appeals for the Ninth Circuit issued an order withdrawing its opinion in Setty v. Shrinivas Sugandhalaya, where the Court affirmed the denial of a non-signatory’s bid to arbitrate its claims for trademark infringement against one of the signatories to a contract under Indian law. Setty v. Shrinivas Sugandhalaya LLP, Case No. No. 18-35573 (9th Cir. June 8, 2021). The Court did not provide any reasoning for the withdrawal but indicated that a new disposition will be filed in due course.



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Paris Court of Appeals Rejects Pharmaceutical Supplementary Protection Certificate Applications

by and | Jun 17, 2021 | ,

One of the conditions for obtaining an SPC is that “the product is protected by a basic patent in force”. The Court of Justice of the European Union (CJEU) clarified to what extent a product must be identified by the claims to meet this condition in Teva, Eli Lilly, and Royalty Pharma.

In Eli Lilly, the CJEU notes that an active ingredient which is not identified in the claims of a basic patent by means of a structural or functional definition cannot be considered to be “protected by a basic patent.”

The active ingredient does not, however, have to be identified in the claims by a structural formula. A functional definition of the active ingredient may suffice if it is possible to reach the conclusion on the basis of the claims (interpreted in light of the description of the invention) that they relate “implicitly but necessarily and specifically, to the active ingredient in question.

Click here to read the full article in our latest International News.



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What You Say Can and Will be Used Against You – Prosecution History and Prior Infringement Arguments

by | Jun 10, 2021 |

Noting patent owner’s prior litigation statements, the US Court of Appeals for the Federal Circuit upheld a district court ruling that a clear and unmistakable disclaimer in the prosecution history affected claim construction of an asserted patent. SpeedTrack, Inc. v. Amazon.com, Inc., Case No. 20-1573 (Fed. Cir. June 3, 2021) (Prost, J.)

In 2009, SpeedTrack filed suit against various online retailers alleging infringement of its patent directed to a method for accessing files in a filing system leveraging “category descriptions” to aid in organizing the files. The patent describes associating category descriptions with files using a “file information directory.” A “search filter” then searches the files using their associated category descriptions. A limitation that “the category descriptions hav[e] no predefined hierarchical relationship with such list or each other” was added during prosecution to overcome a prior art reference that leveraged hierarchical field-and-value relationships.

The district court initially adopted a proposed claim construction that lacked any reference to a field-and-value relationship, noting that the construction “account[ed] for the disclaimers made during prosecution.” Following a motion by SpeedTrack, the court concluded there was still a fundamental dispute about the scope of the claim term. After further analyzing SpeedTrack’s prosecution history, the court concluded that the history “demonstrate[d] clear and unambiguous disavowal of category descriptions based on hierarchical field-and-value systems” and issued a second claim construction order explicitly disclaiming “predefined hierarchical field-and-value relationships” from the scope of “category descriptions.” SpeedTrack subsequently stipulated to noninfringement under the second claim construction and appealed.

On appeal, the Federal Circuit stressed that prosecution-history disclaimer can arise from both claim amendments and arguments. Here, the prosecution history showed that the applicants “repeatedly highlighted predefined hierarchical field-and-value relationships” as a difference between the prior art and the patent claims in no uncertain terms. That SpeedTrack distinguished the prior art on other grounds did not moot its disclaimer statements.

The Federal Circuit also noted that SpeedTrack argued in litigation against another defendant that the purpose of the amendment was to distinguish the category descriptions from attributes that “have a ‘hierarchical’ relationship between fields and their values.” While the Court agreed with SpeedTrack that such litigation statements were not a disclaimer on their own (since they were not the inventors’ prosecution statements), these litigation statements further supported not accepting SpeedTrack’s arguments. The Court reminded SpeedTrack that it has cautioned (in Aylus and Southwall) that “the doctrine of prosecution disclaimer ensures that claims are not ‘construed one way in order to obtain their allowance and in a different way against accused infringers.’”

After assessing SpeedTrack’s prior statements, the Federal Circuit considered whether the disclaimer was clear and unmistakable. The Court concluded it was. In rejecting SpeedTrack’s argument that prior decisions not expressly finding disclaimer supported that prosecution statements were not clear and unambiguous, the Court noted the construction had not been fully considered in those judgments. Similarly, the Court rejected the notion that the district court’s issuance of a second claim construction order showed there was no clear and [...]

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Submarine Sunk: Patent Prosecution Laches Pops GATT Bubble

by | Jun 10, 2021 |

Addressing for the first time whether the US Patent & Trademark Office (PTO) can assert prosecution laches as a defense in a civil action brought under 35 U.S.C. §145, the US Court of Appeals for the Federal Circuit held that the PTO could assert prosecution laches as a defense against four patent applications in a case where the plaintiff delayed presenting the claims for these applications over a period of at least 10 years. Hyatt v. Hirshfeld, Case Nos. 2018-2390; -2391; -2392; 2019-1038; -1039; -1049; -1070 (Fed. Cir. June 1, 2021) (Reyna, J.)

Gilbert Hyatt is well known for having built a prolific patent application portfolio based on nearly 400 initial filings made just before the United States changed from an issuance-based patent exclusivity system to a filing-based patent exclusivity system under the Uruguay Round of the General Agreement on Tariffs and Trade (GATT). By 2003, those 400 initial filings had exploded into 45,000 independent claims. Hyatt’s applications were so labor intensive that the PTO developed a separate examining unit specifically dedicated to their review. Many of these applications have been rejected.

After the PTO finally rejected four of Hyatt’s computer software patent applications, in 2005 Hyatt filed a § 145 action in the district court. Throughout the litigation, the PTO argued that Hyatt had routinely delayed prosecuting his patent applications and never complied with his verbal agreement with the PTO to streamline each application to apply for only one invention. Ultimately, after a five-day bench trial, the district court found that the PTO failed to prove it had taken sufficient action to advance prosecution of Hyatt’s applications. The PTO appealed.

Resolving the threshold issue on appeal of whether prosecution laches is even available to the PTO in a § 145 action, the Federal Circuit explained that the right to assert laches as an affirmative defense flows naturally from the PTO’s rights to reject applications based on laches and defend such rejections on appeal in the Federal Circuit on the same grounds. Any other conclusion, the Court recognized, would create incongruence and undermine the PTO’s authority. Such a defense is available even if raised for the first time in the district court, as “§145 actions open the door to new evidence.”

The Court found significant errors in the district court’s application of prosecution laches law. First, the Federal Circuit held that the district court too narrowly focused on the PTO’s specific conduct without considering the totality of the circumstances, including delays caused by Hyatt’s sweeping amendments and prosecution of other patent applications, as well as the relative costs and burdens of examining Hyatt’s gargantuan application portfolio. The Court was particularly critical regarding the district court’s assignment of blame to the PTO in its attempts to manage the unwieldy task before it.

After reviewing the evidence presented by the PTO, the Federal Circuit found that the PTO had amassed significant evidence of Hyatt’s delay of prosecution of his applications—i.e., “patterns of prosecution conduct [that] created a perfect storm that overwhelmed the [...]

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