Sep 01

PTAB Reversed Based on Non-Analogous Art Theory

34108250_sAlthough In re Natural Alternatives LLC (Fed. Cir. August 31, 2016) is not an IPR appeal, it should be of interest to those who care about IPRs and PGRs because it reflects a successful appeal from the Patent Trial & Appeal Board (PTAB) involving the fairly rare issue of non-analogous art.

Natural Alternatives (NA) owns US 6,080,330 (‘330), which claims compositions for deicing roads using less salt and fewer toxic chemicals than have traditionally been used for that purpose. NA licenses ‘330 to various manufacturers of road-deicing supplies. One of NA’s licensees decided to challenge the patent by filing a request for ex parte re-examination, which the PTO granted. Eventually the Examiner rejected all claims as obvious and the PTAB affirmed. NA appealed to the Federal Circuit (CAFC).

There were two “representative” limitations litigated before the PTAB and then the CAFC, and the key limitation in both claims was “desugared sugar beet molasses.” NA discovered that if you mix this particular molasses with any of a number of previously known deicing agents (mostly road salts), you enhance the salt’s deicing effectiveness, such that you get more deicing “bang” for the salt “buck.” This means that you can use less salt per winter, which is good because salt can corrode vehicles, pollute groundwater, etc. Before NA’s discovery, desugared sugar beet molasses was a waste product that was simply thrown away.

The crux of the PTO’s argument for prima facie obviousness was that PL 164018 (Zdzisław) disclosed an antifreeze containing sugar beet molasses (the parties disputed whether this molasses was desugared, but that point is not critical) and a prior art deicing agent (a class of alcohols). The principle difference between Zdzisław’s antifreeze and NA’s claimed composition are that NA’s claimed composition: (1) requires a particular ratio of molasses to deicing agent; and (2) at least some of NA’s claims require salt, not alcohol, as the deicing agent. The Examiner cited US 5,639,319 (Daly), which also used molasses and alcohol but in different ratios than used in Zdzisław. Daly uses the molasses/alcohol mix as a tire ballast (i.e., bulk weight loaded into a truck tire to make it more dense to improve driving on slick surfaces). Then the Examiner cited a study published in Public Works magazine to show that alcohol and road salt achieve essentially the same deicing effect. The PTAB considered that the range of molasses to alcohol ratios in Zdzisław and Daly—combined with the alleged interchangeability between alcohol and salt from Public Works—showed that it was nothing more than routine optimization to adjust the ratio of molasses and road salt to arrive at NA’s claimed deicing composition.

NA argued that it was not proper to combine antifreeze art (Zdzisław) and tire ballast art (Daly) because they are not analogous art fields. The PTAB took the position that both anti-freeze and tire ballast are things that you use in a car in the winter, and this made them part of the same general art field. The CAFC disagreed, citing In re Clay, 966 F.2d 656 (Fed. Cir. 1992). In Clay the PTO had argued that oil storage tanks and oil extraction rigs were all part of the same art field of “petroleum industry,” but the CAFC disagreed, holding that “petroleum industry” was too generic and abstract a way of framing the art fields in question. The panel in the present case similarly considered the things-you-do-to-a-car-in-winter view of analogous art to be too abstract. Because the PTO—which has the initial burden of establishing prima facie obviousness—had not offered a cogent explanation of why Zdzisław and Daly are analogous art, the CAFC held that prima facie obviousness was not established in the first instance, and therefore there was properly no rejection for NA to rebut. Therefore, the PTAB’s judgment was reversed.

Aug 30

Federal Circuit Demonstrates Willingness to Rein in PTAB’s Onerous Idle Free Rules Regarding Claim Amendments

cafc1Patentees have been generally frustrated with the Board’s unwillingness to grant motions to amend. The Board’s Idle Free case, and its progeny, have added a number of requirements to a motion to amend that are above and beyond the simple requirements set forth in the IPR implementing statute. While the Federal Circuit has, generally, stated that the Board can, via decisions like Idle Free, define the characteristics of IPR proceedings, some of those requirements are beginning to fall by the wayside. Another requirement was knocked down by the Court today in Veritas Techs. v. Veeam Software (August 30, 2016). No longer must a patentee show that added claim elements in a motion to amend are, individually, inventive over the known prior art.  The Federal Circuit’s rebuke of the Board on this point  gives patentees more hope for future amendments.

The Veritas IPR involved a patent covering systems and methods for restoring computer data.  As a first line of defense, the patentee argued for a narrow claim construction in an effort to avoid the prior art.  That argument was rejected by both the Board and the Federal Circuit, with citation to the broadest reasonable construction claim construction standard.  As a second line defense, the patentee presented a conditional motion to amend which explicitly added the patentee’s claim construction argument to the claims.  The Board also rejected that motion, a ruling the Federal Circuit characterized as “based on its insistence that the patent owner discuss whether each newly added feature was separately known in the prior art.”  Specifically, the Board had faulted the patentee for discussing only “the newly added features in combination with other known features.”  The Federal Circuit held that position to be arbitrary and capricious and thus in violation of the Administrative Procedure Act.

Specifically, the Court found several instances in the record where the patentee (or its expert) explained that prior art systems did not contain the newly added features.  The Court could “not see how the Board could reasonably demand more from Veritas,” particularly in light of the “long line of Supreme Court and Federal Circuit cases (including KSR) which note “that novel and nonobvious inventions often are only a combination of known individual features.”  In light of that precedent, the Court “fail[s] to see how describing a combination is meaningfully different from describing what is new about the proposed claims, even in comparison to the unamended claims.”

As a final note, the Court explained the recent grant of en banc rehearing in In re Aqua Products (concerning the allocation of burdens in IPR amendment practice) did not affect the issue in this case.  The Court thus remanded instead of waiting for the decision in Aqua Products.

Aug 24

Moneyball for IPRs

12Welcome to the 14th Volume of our quarterly IPR-PGR Report.

Aug 16

“Substantial Evidence” Hurdle is Substantially Difficult to Overcome

56499061 - be deferential typography vector illustration

One of the less appreciated hurdles to a successful appeal of a Final Written Decision in an IPR proceeding is the “substantial evidence” standard of review the Federal Circuit applies to the Graham factors that underlie a determination of obviousness.  Although the ultimate determination of obviousness is a legal issue subject to de novo review, the underlying Graham factors are questions of fact, which receive the more deferential, substantial evidence standard of review.  In practice, the ultimate legal conclusion rises and falls with the Graham factors—particularly, whether the prior art teaches the claimed limitations (i.e., “the differences between the prior art and the claim at issue”).

The Federal Circuit’s August 9, 2016 opinion in In re: Warsaw Orthopedics illustrates the deferential nature of the substantial evidence standard.  According to the Federal Circuit, “substantial evidence” is “something less than the weight of the evidence more than a mere scintilla.”  In Warsaw, the claim limitation of interest was: “[i]nserting…a non-bone interbody intraspinal implant…, the length of said implant being sized to occupy substantially the full transverse width of the vertebral bodies of the two adjacent vertebrae, the length of said implant being greater than the depth of the disc space,…[and] the length of said implant being greater than the maximum height of said implant.”

The factual question was whether the prior art disclosed these limitations.  The prior art disclosed implants that were recessed within the vertebrae and which were substantially shorter than the full width of the vertebrae.  The PTAB nevertheless found it would have been obvious to one of ordinary skill that the prior art implant would be sized to conform to the disk space.  The Federal Circuit determined this was supported by substantial evidence, despite the fact that no expert testimony was referenced in the Federal Circuit opinion.  In doing so, the Federal Circuit indicates that an obviousness determination does not actually require each claimed limitation be met by the prior art, stating “To the extent that Warsaw argues the PTAB erred because it did not decide whether [the prior art] discloses dimensions that exactly meet the limitation ‘substantially the full transverse width’ in claims 1 and 17 of the ‘’97 patent, Warsaw misunderstands the governing law, see, e.g., Beckson Marine, Inc. v. NFM, Inc., 292 F.3d 718, 727 (Fed. Cir. 2002) (“[O]bviousness does not require the prior art to reach expressly each limitation exactly.”).

The Federal Circuit did, however, throw a bone to the patentee with respect to the PTAB’s cancellation of claim 17.  There, the Court agreed that the PTAB’s following explanation on one limitation did not sufficiently show its reasoning in reaching its decision:  “Jacobsen appears to disclose anchor wires (i.e., ‘elongated portions’) that are positions over adjacent vertebrae.’) (citing Figure 5).”  The reversal as to claim 17 may be a fleeting victory for the patentee, though, because the Federal Circuit remanded for further findings on the issue.

Aug 11

PTAB Reversed–Common Sense Improperly Used to Supply Missing Limitation in Obviousness Inquiry

10311096 - rejected stamp isolated on white backgroundIn a rare rebuke of the PTAB’s discretion, the Federal Circuit has outright reversed a finding of obviousness based on the Board’s misapplication of the law on the permissible use of “common sense” in an obviousness analysis.  The case, Arendi S.A.R.L. v. Apple Inc., Google Inc., and Motorola Mobility LLC (Aug. 10, 2016) involved a patent for providing coordination between a first computer program displaying a document and a second computer program for searching an external information source.  The invention allows a user to access and conduct a search using the second program while remaining in the first program; for example, a user using a data entry program can search a separate database for data in a certain field.  The limitation at issue was:  “performing a search using at least part of the first information as a search term in order to find the second information, of a specific type or types, associated with the search term in an information source external to the document, wherein the specific type or types of second information is dependent at least in part on the type or types of the first information.

The prior art involved a program that recognizes a phone number as a class of text.  The question on appeal was whether the Board erred in finding it would have been “common sense” to a person of ordinary skill in the art to search for the telephone number that is detected when the prior art’s “Add to address book” option is selected.

The Court found there was insufficient evidence to support such a resort to “common sense” here.  In doing so, the Court offered the reminder that when “common sense” is used to supply a missing limitation (as opposed to the more common use of providing a motivation to combine references), “it must…be supported by evidence and a reasoned explanation.”  Id. at 12. According to the Court, this was particularly so where, as here, the subject limitation was an important structural limitation that is not evidently and indisputably within the common knowledge of those skilled in the art.  In doing so, the Court distinguished precedent where “common sense” is used to supply a “peripheral” limitation in a claim.

In Arendi, the Court ultimately determined the challenger’s arguments were not specific enough to explain why the person of ordinary skill in the art would have found the subject limitation obvious.  As a result, the Court reversed the cancellation of the claims.

Aug 05

Federal Circuit Provides Ammunition to Patentees In Magnum Decision

cafc1Patent Owners gained a bit of a reprieve in the Federal Circuit’s recent decision in In Re Magnum Oil Tool Int’l, Ltd.decided on July 25, 2016. In several key respects, Patent Owners regained some footing in the otherwise daunting IPR process.

As an initial matter, in one of its first post-Cuozzo (Supreme Court edition) decisions, the Federal Circuit determined that, for issues that are central to the Board’s Final Written Decision, the Court is not prohibited by § 314(d) from reviewing those decisions just because they were also addressed in the Decision to Institute. The merits of a final written decision is reviewable, even though the issue was initially decided by the Board at the decision to institute stage. Id. at 12. In the context of the Magnum decision, this meant that the Court had jurisdiction to review all of Patent Owner’s arguments regarding the basis for the Board’s ultimate judgment of unpatentability, including rationale to combine references, even though the Board addressed those arguments in the decision to institute.

The key substantive issue in the case was whether the Board’s decision adequately established a prima facie basis of obviousness. Specifically, Patent Owner argued that no adequate motivation to combine the subject references was articulated. The issue stemmed from the fact that, in the petition, Petitioner put forth a detailed obviousness argument on one set of references (“Ground 1”), but took a more abbreviated approach with a second set of references (“Ground 2”), that “incorporated by reference” the motivation to combine from Ground 1.

In response, the PTO argued that when the Board institutes a ground, it necessarily finds that Petitioner has demonstrated a reasonable likelihood of success and that this finding operates to shift the burden of producing evidence of nonobviousness to Patent Owner. But, the Court rejected the PTO’s contention and clarified that the burden of persuasion is always on the Petitioner to prove unpatentability by preponderance and that burden never shifts to the patentee. The court reasoned that, due to the significant difference between the standards of proof at institution (likelihood of success) and at trial (preponderance), it is inappropriate to shift the burden to the patentee after institution to prove that the claims are patentable.

As to the ultimate conclusion of obviousness, the court concluded that, in light of Petitioner’s failure to explain why a skilled artisan would combine the Ground 2 references, the Board had no basis for its conclusion that Petitioner had met its burden of proving obviousness by preponderance under KSR.  The court emphasized that to satisfy its burden of proving obviousness, Petitioner cannot employ mere conclusory statements because such statements cannot satisfy Petitioner’s burden. Nonetheless, the PTO argued that the Board did not err in making an obviousness argument on behalf of Petitioner based on the Ground 2 references because this argument “could have been included in a properly drafted petition.” The court flatly rejected the PTO’s contention that the Board is free to adopt arguments on behalf of Petitioners that could have been but were not raised by the Petitioner during an IPR, noting again that Petitioner bears the burden of proof. The court acknowledged that the PTO has broad authority to establish procedures in IPR’s but clarified that the authority is not so broad to allow the PTO to raise, address, and decide patentability theories never presented by the Petitioner and not supported by record evidence. Instead, the court emphasized that the Board must base its decisions on arguments advanced by a party and to which the opposing party was given a chance to respond. Accordingly, the court held that the Board’s obviousness conclusion was not based on sufficient evidence since the Board relied on Petitioner’s conclusory statements and improperly argued on behalf of Petitioner why the Ground 2 references could be combined.

Lastly, the Court addressed the PTO’s argument that Patent Owner should have challenged the Board’s actions in the rehearing request. The court quickly disposed the PTO’s argument, stating that the plain language of 35 USC § 141(c) does not require a party dissatisfied with the Board’s final written decision to first raise the issue in a rehearing request before appealing the issue to the court.

In sum, Magnum is a ray of hope for Patent Owners that have become accustomed to most aspects of IPR practice being construed against them. The Court’s docket contains many upcoming cases that will allow us to learn whether this is an aberration, or a trend.

Jun 22

Federal Circuit Weighs in on Propriety of New Evidence Adduced During IPR Trial

cafc1In Genzyme Therapeutics v. Biomarin Pharma., the Federal Circuit considered what sort of notice and opportunity to be heard in an IPR will satisfy the Administrative Procedure Act (“APA,” 5 U.S.C. § 554(b) & (c)). Genzyme owns US 7,351,410 and US 7,655,226, which both concern methods of treating Pompe’s disease. When Biomarin petitioned for IPR of these two patents, Genzyme submitted a patent-owner statement arguing that the in vitro data in Biomarin’s petition were not sufficient to establish a reasonable expectation of success for the claimed methods, and therefore could not show that the challenged claims were more likely than not to be obvious.

The Board instituted IPR on both patents, despite Genzyme’s arguments about the insufficiency of in vitro data. In its petitioner response, Biomarin responded to Genzyme’s arguments about in vitro data by citing additional references that included in vivo data. Instead of arguing that these additional references do not establish a reasonable expectation of success, Genzyme pressed a procedural point, arguing that it was improper for the Board to consider references that were not included in the grounds of institution for each IPR trial. When the Board disagreed with Genzyme’s argument and relied on two of the in vivo references in its final written decision of unpatentability, Genzyme appealed this point to the Federal Circuit.

Judge Bryson wrote for a unanimous panel that also included Judges Moore and Reyna. The court disagreed with Genzyme’s argument in the strongest possible terms. The Federal Circuit noted that IPRs are trials, and that it is expected that additional evidence will come to light during the course of a trial. The Federal Circuit strongly disagreed with the idea that the Board is constrained to consider only those references that are cited in the institution decision. Indeed, the court noted that it had previously reversed the PTAB for refusing to consider a reference on the same grounds that Genzyme was urging here. Ariosa Diagnostics v. Verinata Health, 805 F.3d 1359, 1365 (Fed. Cir. 2015).

Rather, drawing on D.C. Circuit precedents, the court held that the APA is satisfied so long as the patentee has reasonable notice of the argument being advanced for unpatentability, and an adequate chance to respond. Here Genzyme was on notice of Biomarin’s reliance on the in vivo data from at least the point of Biomarin’s response brief. Also, during oral argument the PTAB questioned Genzyme extensively about several of the in vivo references. Genzyme could have moved under 37 C.F.R. § 42.64(c) to exclude the challenged references, but it did not. Therefore, the Federal Circuit held that Genzyme had been afforded adequate notice and opportunity to respond under the APA.

The Federal Circuit affirmed the PTAB’s holding of unpatentability for the challenged claims.

Jun 14

First PGR Final Written Decisions – Look a Lot Like IPR/CBM Decisions

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Despite the overwhelming popularity of IPR proceedings since their inception, about three and a half years ago, Post Grant Review has, to date, been little used. There are probably valid reasons for this low popularity, including the limited (current) subset of patents subject to PGR, the broader estoppel associated with PGR (as compared to IPR), and the fact that 35 USC § 101 challenges are now relatively quick and inexpensive at the district court level, in view of the Alice decision. Regardless, many have been anticipating the first Final Written Decisions from PGR proceedings to see this next chapter in the game-changing world of post-grant proceedings.

Perhaps unsurprisingly, however, the first PGR Final Written Decisions are largely reminiscent of IPR/CBM decisions. See, e.g., Am. Simmental Assoc. v. Leachman Cattle of CO., LLC, PGR2015-00003 (June 13, 2016). For example, like the majority of decisions from IPR, the Patent Owner lost its claims. Further, Patent Owner’s Motion to Amend was denied for failing to meet the burdens of the Board jurisprudence, including Idle Free. The details of the decisions were also similar to PGR’s well-known predecessors. To that end, the claim construction analysis played a central role, with the Board undertaking a detailed and thorough analysis.

Indeed, the only major difference between the first PGR decisions and those we have come to know via IPR proceedings is the subject matter of the dispute, which is unique to PGR. For example, Petitioner challenged the claims-at-issue under an obviousness analysis using a prior art reference that was neither a patent nor a printed publication. Such an unpatentability ground is, of course, inappropriate for IPR petitions. Ultimately, this ground was denied because insufficient corroborating evidence of testimony regarding the prior art was put forth by the Petitioner.

Patent Owner did not have the same success, however, with the second main challenge ground – a challenge that the claims failed to recite statutory subject matter. In this analysis, and pursuant to the first step of the Alice test, the Board found that the claims were directed to an abstract idea; specifically, “a fundamental economic practice…long prevalent in our system of commerce.” Opinion at 29. Pursuant to the second step of the Alice analysis, the Board determined that the claims failed to recite “significantly more.” Instead, they merely claimed generic computer hardware used in a conventional manner. As such, all of the challenge claims were deemed unpatentable.

So, PGR is off and running, and the news is just as positive for Petitioners as the results of the majority of IPR proceedings.

 

May 19

PTAB Reversed for Failing to Explain “Why” a Person of Skill Would Modify the Prior Art

Judge's BenchIt is no secret that patent owners have, on average, struggled at the PTAB over the last three and a half years.  Some practitioners say that a reason for this result is that the Board many times takes an aggressive approach in the assessment of “obviousness” under Section 103.  Yesterday, the Federal Circuit issued its decision in Black & Decker, Inc. v. Positec USA, Inc., which may signal a change in that tide.

Positec challenged Black & Decker’s US Patent No. 5,544,417, which is directed to a manner of mounting a motor in the housing of a string trimmer.  In particular, the ‘417 patent discloses the use of a “motor mounting plate” supported by the string trimmer’s housing such that the motor does not contact the interior surface of the housing.  The motor is fixedly secured to the motor mounting plate.

The Board upheld the validity of claims 7 and 10 directed to a vegetation string trimmer, but found that claims 16 and 17, directed to a method of assembling an outdoor power tool, were unpatentable under 35 USC Sec. 103 in view of Mack alone.

The Federal Circuit reversed the Board’s finding of obviousness, finding that it “is not sufficient” under Section 103 to merely find that a person skilled in the art “could have” or “would have known” to do something.  The Board must “explain why one of skill in the art would have adapted or replaced Mack’s motor mounting yoke to ensure that the motor did not move relative to the motor mounting structure.  The Board did not do so.”  (emphasis added).  “Our precedent requires that the Board explain a rationale why a person of ordinary skill would have modified Mack’s motor.”  Citing, Ball Aerosol & Specialty Container, Inc. v. Limited Brands, Inc. 555 F.3d 984, 993 (Fed. Cir. 2009).  The Federal Circuit further noted that Positec offered mere attorney argument, not evidence, to explain why a person of ordinary skill would have “fixedly secure[d]” the motor.

Perhaps this case will result in more rigorous analyses of the rationale for proposed combinations and/or modifications to prior art in the context of Section 103 assessments.  In any event, this case is a positive for patent owners.

*By way of disclaimer, Harness Dickey represented Black & Decker in the IPR and the Federal Circuit appeal

May 18

Judge Uses Institution of IPR to “Bolster” Decision to Overturn Jury’s Finding of Willfulness

40639429_sA Colorado district court has provided an example of how the decisions of the PTAB in an IPR proceeding can impact district court litigation. In XY, LLC v. Trans Ova Genetics, LLC, Case No. 1:13-cv-00876 (D. Colo.), Judge Martinez used the PTAB’s decision to institute IPR proceedings to “bolster” his decision to overturn the jury’s finding of willful infringement.

Plaintiff XY had asserted ten patents against Defendant Trans Ova Genetics.  The patents were directed to systems and methods for selecting the sex of cattle and other livestock. Trans Ova challenged XY’s infringement assertion on the basis that the asserted claims were anticipated and/or obvious. The jury ultimately found that all of the asserted claims were valid and infringed. The jury also found that the infringement was willful.

Trans Ova filed a post-trial motion to overturn the jury’s finding of willfulness on the basis that Trans Ova’s evidence of invalidity as to all ten of the patents-in-suit presented a substantial question of invalidity. Noting that a district court reviews a jury’s finding of “objective recklessness” de novo, Judge Martinez agreed that Trans Ova’s evidence of invalidity presented a substantial question of invalidity and overturned the jury’s finding of willfulness.

The Court primarily relied upon the evidence of invalidity that Trans Ova had presented at trial to support its decision.  However, the Court also noted that its opinion was “further supported” by the fact that the PTAB had instituted IPR proceedings with respect to two (out of ten) of the asserted patents and had found the claims of one of those patents unpatentable:

This finding is further supported by the proceedings brought with respect to the ‘920 and ‘425 patents before the Patent Trial and Appeal Board, which resulted in a finding of invalidity as to the ‘920 patent, and a hearing as to the possible invalidity of the ‘425 patent.  While this evidence was not before the jury, it bolsters the Court’s present finding that Trans Ova’s invalidity defenses met the minimal standard of objective reasonableness, at least as to some of XY’s patents.

It is apparent that the Court was influenced to some degree – and at least felt more comfortable with his decision – by the fact that the PTAB had instituted IPRs on two of the patents, at least enough such that the Court mentioned it in its Opinion. It is logical that other courts, whether they explicitly say so or not, to be influenced by decisions of the PTAB to institute IPRs when it comes to assessing the objective recklessness of a defendant’s actions in connection with a willfulness evaluation.

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