Troy & Schwartz Attorneys-At-Law

In Trinity Info Media, LLC, et al. v. Covalent, Inc., the Federal Circuit Court of Appeals (CAFC) held that the patent claims were directed to an abstract idea of “matching users who gave corresponding answers to polling questions.” As such, they do not involve an inventive concept under § 101 and are patent ineligible.  The holding itself is not surprising based on previous case law in this post-Alice world.  The precedential decision is noteworthy because it addresses claim construction in the context of a 12(b)(6) motion to dismiss a patent infringement lawsuit on § 101 grounds.  This blog reviews the CAFC’s decision and ends with a discussion of the following two topics:

1. Could the invalidated claims have been written differently to avoid invalidation?
2. How does the proposed Patent Eligibility Restoration Act of 2023 address the § 101 boondoggle created by the courts?

BACKGROUND

Trinity sued Covalent for patent infringement asserting two patents –  nos. 9,087,321 and 10, 946,685.   Both patents are directed to a poll-based networking system that connects users based on similarities as determined through poll answering while providing real-time results to the users.   The later patent contains additional disclosures discussing progressive polling for ecommerce systems.

Covalent filed a motion to dismiss Trinity’s amended complaint, arguing that the claims asserted against it are invalid under 35 U.S.C. § 101.  The District Court for the Central District of California agreed with Covalent, finding that the claims do not improve computer functionality but instead use “generic computer components as tools to perform the functions faster than a human would.”

Trinity appealed the decision to the Federal Circuit, arguing that the dismissal was improper because the district court did not conduct claim construction and discovery before analyzing the claims under § 101 according to the Alice framework  articulated by the U.S. Supreme Court in Alice Corp. v. CLS Bank, Intl.  Citing its previous decisions, the CAFC disagreed, explaining that “[a] patentee must do more than invoke a generic need for claim construction or discovery to avoid grant of a motion to dismiss under § 101.  Instead, the patent holder must “propose a specific claim construction or identify specific facts that need development and explain why those circumstances must be resolved before the scope of the claims can be understood for § 101 purposes.”   Slip opinion at 7. Because Trinity did not identify a proposed claim construction or specific facts to be discovered that would change its analysis, the CAFC proceeded with analyzing Trinity’s asserted claims under the Alice framework.

Step 1 of the Alice Framework – The Claims are Abstract

In finding that the asserted claims are abstract, the CAFC stated: “A telltale sign of abstraction is when the claimed functions are mental processes that can be performed in the human mind or using a pencil and paper.   For example, in SAP Am., Inc. v. InvestPIC, LLC, the CAFC previously held that “[s]electing certain information, analyzing it using mathematical techniques, and reporting or displaying the results of the analysis . . . is all abstract.”   Slip opinion at 9.  Accordingly, Trinity’s independent claims are focused on “collecting information, analyzing it, and displaying certain results” which places them in the “familiar class of claims directed to patent ineligible material.”  Citing Elec. Power Group, LLC v. Alstom S.A., et al.  Slip opinion at 10.  Not surprisingly, the CAFC opined that “[a] human mind could review people’s answers to questions and identify matches based on those answers” and found that the independent claims of both patents are directed to an abstract idea.  As for the dependent claims, they merely add trivial variations of the abstract idea.

Trinity argued that “humans could not mentally engage in the same claimed process because “they could not perform ‘nanosecond comparisons and aggregate ‘result values with huge numbers of pools and members, nor could they select criteria using ‘servers, storage, identifiers, and/or thresholds.’” The CAFC noted that these arguments are not tethered to the asserted claims which do not require “nanosecond comparisons” or aggregating “huge numbers of pools and members.”   Slip opinion at 13.

In rejecting Trinity’s arguments, the CAFC cited its previous decisions where claims were found to be directed to a “forbidden” abstract idea when the claims required generic computer components or required operations that a human could not perform as quickly as a computer.   Moreover, Trinity’s claims relied on generic computing terms such as “data processing systems, processors, and memory.”   And even though Trinity emphasized the invention was intended for use with a hand-held device/mobile phone, such a device was viewed by the CAFC as being no different from a generic computer.  Slip opinion at 10.

Step 2 of the Alice Framework –  The Claim Elements Do Not Transform the Claim into a Patent-Eligible Claim

After finding that Trinity’s asserted claims are abstract, the Court proceeded with the second step of its Alice analysis. Here the CAFC concluded that the asserted claims do not ‘transform’ the claimed abstract idea into a patent-eligible claim.  In particular, the Court took issue with Trinity’s conclusory statements that the prior art did not include, “alone or in combination certain features, including (1) real-time matching based on progressive polling, (2) using match servers and a match aggregator, (3) using a mobile device, (4) displaying matches reviewable by swiping, and (5) using a mobile application. Under its precedent, the CAFC’s policy is to disregard conclusory statements under a Rule 12(b)(6) motion.  Slip opinion at 10.

The CAFC was left with viewing the claim limitations individually and in an ordered combination.  The Court concluded that the asserted claims do not add an inventive concept that would be “sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the ineligible concept itself.”  Trinity’s inventiveness arguments were found to merely reflect improved speed inherent with applying the abstract idea using a computer, or in this case a hand-held device.  Nor is there anything inventive in the ordered combination of elements because the asserted claims are organized in an expected was – receiving user information, asking the user questions, receiving answers, and identifying and displaying a match based on those answers.  Slip opinion at 18.  Nor did the CAFC find that the use of “multiple processors, match servers, unique identifications and/or match aggregator” transformed the abstract idea into an inventive concept in the application of an abstract idea.   The CAFC emphasized that has “ruled many times” that “invocations of computers and networks that are not even arguably inventive are insufficient to pass the test of an inventive concept.” Id.

DISCUSSION

Could the Claims Have Been Written in Such a Way So as to Overcome the § 101 Rejection?

It is not surprising that Trinity’s patents were invalidated in our post-Alice patent invalidation environment.  This environment favors infringers who refuse to pay a licensing fee to patent owners and instead pursue patent invalidation through the courts or through administrative proceedings involving the Patent Trial and Appeal Board (PTAB).

Are all computer-based inventions at risk?  Is the current environment fair for patents that have passed the USPTO’s own strict requirements which are now based on judicial exceptions and case law?  For example, patent no. ‘321 was granted in 2015 or a short time after SCOTUS’s infamous holding in Alice Corp v. CLS Bank, Intl.  Patent no. ‘685 was granted in 2021 after the USPTO had developed its first § 101 guidance for its examiners in 2019.   But the CAFC found that both of Trinity’s patents were invalid under its case law involving its and the U.S. Supreme Court’s judicially-created exceptions.

The patents’ independent claims used the words “comparing” and “generating,” two words that are trigger points for the courts to find a § 101 problem.  Merely making conclusory statements that the method “is done on a computer/process” and therefore is done in the “human mind” will not overcome a § 101 rejection.   Under current case law, this is so even if the method could never be practically performed by the human mind.  That is, the courts have not cared if length of time required by a human to achieve the same results would totally defeat the invention’s utility.

Drafting claims for a computer-based invention is no easy task.  Here, the invention did not improve the functioning of a computer to overcome the § 101 rejection.   The § 101 issue in Trinity may have been avoided if the independent claims had been drafted to emphasize how the computer system’s method incorporated the unique ID or claimed just how the likelihood of a match is determined.  Both approaches would have required reciting the steps of an algorithm.

Unfortunately, even with these changes, it is likely that the CAFC would have reached the same conclusion.  The CAFC and other courts have routinely found ineligibility by finding that: 1) the claims are not directed to a technological improvement (slip opinion at 14); and/or 2) the invention merely uses generic computers components as tools to perform functions faster than a human would.  Slip opinion at 5.   Trinity’s inventions are not directed to a technological improvement of the generic computer’s functioning.   Also, given enough time, humans could perform the matching steps no matter how impractical the time commitment.

And this takes us to Congress’s attempt to correct what the judicially-created exceptions to patent eligibility under § 101 have done to thwart innovation, encourage infringement, and hurt the ability of U.S. companies to compete globally.

The Patent Eligibility Restoration Act of 2023 – How It May Fix the § 101 Invalidation Landscape

Thankfully, there is some relief on the horizon through the bipartisan efforts of Senators Thom Tillis and Chris Coons.  On June 22, 2023, these Senators introduced their Patent Eligibility Restoration Act of 2023. This legislation is intended to bring clarity to U.S. patent law by eliminating many of the judicial exceptions to patent eligibility and providing clear guidance on determining patent eligibility especially in areas such as medical diagnostics, biotechnology, personalized medicine, AI, 5G, and blockchain.  The proposed legislation states that the following inventions shall not be eligible for patent prosecution:

• A mathematical formula that is not part of an invention comprising a useful process, machine, manufacture, or composition of matter;
• A mental process performed solely in the mind of a human being;
• An unmodified gene, as that gene exists in the human body;
• An unmodified natural material, as that material exists in nature; and
• A process that is substantially economic, financial, business, social, cultural, or artistic.

However, the legislation includes an important exception:

The processes described in 5 above shall not be excluded from eligibility for a patent if the process cannot be practically performed without the use of a machine (including a computer) or manufacturer. 

The legislation is intended to stop the courts from invalidating patents under § 101 while ignoring the elements of the claimed invention and/or treating them as conventional.  If enacted, the eligibility focus by the USPTO and the courts will be far more focused on the patentability factors involving sections 102 (novelty), 103 (non-obviousness), and 112 (definiteness) of the Patent Act which in the commentator’s opinion is where the focus should be.

Perhaps had this legislation already been in place, Trinity’s patents would not have been invalidated because the invention clearly cannot be practically performed without a computer.   On the other hand, one factor that will likely be litigated with the new legislation is what exactly constitutes “practically performed.”  Regardless, this legislation is a huge step forward, something that has been needed for a long time as the courts have effectively taken over Congress’s patent law regulatory role through judicially-created law.

Have a question on obtaining a U.S. or foreign patent or enforcing your rights as a patent owner? Contact us at 305-279-4740.  And be sure to check out our other patent law blogs at www.troyandschwartzlaw.com.

THANK YOU FOR YOUR INTEREST IN THIS BLOG.  AS USUAL THE CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT LEGAL ADVICE.

© 2023 by Troy & Schwartz, LLC

This blog discusses a patent law case which SCOTUS has decided hear on the enablement requirement as it applies to genus claims.  The anticipated decision will have ramifications in particular in the life sciences industry which includes the biotech and pharmaceutical industries.

Background

Even if the invention described in a patent application meets the subject matter eligibility (35 U.S.C § 101), novelty (35 U.S.C. § 102), and non-obviousness requirements (35 U.S.C. § 103) for patentability, the applicant must still describe the invention with enough particularity such that those skilled in the art will be able to make, use, and understand the “parameters” of the invention disclosed and claimed.  Under 35 U.S.C. § 112, this requirement involves 2 major factors: 1) the enablement requirement; and 2) the written description requirement.   The statute states:

The specification shall contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same, and shall set forth the best mode contemplated by the inventor or joint inventor of carrying out the invention.

Granted patent claims can later be invalidated on the basis of non-enablement or an inadequate written prescription in an inter partes proceeding before the Patent Trial & Appeal Board or during patent infringement litigation.  In long-time patent infringement litigation involving the biopharmaceutical firms Amgen and Sanofi, the enablement requirement issue has become intertwined with civil procedure issues:  is the determination of whether the patent description meets the enable requirements a question of law (to be decided by the presiding judge(s)) or fact (to be determined by a jury)?  In 2021, the U.S. Court of Appeals for the Federal Circuit (CAFC) affirmed the District of Delaware’s invalidation of Amgen’s patent claims asserted against Sanofi as a matter of law in a post-verdict motion.  These very same invalidated claims had previously survived Sanofi’s “lack of enablement” allegations in two separate jury verdicts which the District Court ignored by ruling in favor of Sanofi. Amgen, Inc. v. Sanofi, 987 F.3d 1080 (Fed. Circ. 2021).

In Nov. 2021, Amgen filed a petition for writ of certiorari requesting the Supreme Court to grant the writ for the purpose of addressing two patent enablement questions raised by the CAFC’s opinion.  The first question pertained to whether enablement determinations are a question of law or fact.   The second question pertained to what level of experimentation is required to make Amgen’s invention enabled under 35 U.S.C. § 112(a) for its genus claims.  The Court invited the U.S. Solicitor General to file a brief; the resultant brief counseled against granting the writ.

Amgen filed a reply, arguing that the government’s own brief created a “disagreement with everyone” that further supports SCOTUS’s review. In support of the writ, Amgen emphasized that the Supreme Court’s “a question of fact” standard for enablement extends back to the pre-Civil war era in the 1847 case of Wood v. Underhill.  Amgen also argued that the Solicitor General’s brief failed to respond to arguments that the Seventh Amendment prohibits reexaminations of jury verdicts except under common law standards, which should have precluded the CAFC from reviewing the jury’s enablement finding de novo.   Finally, Amgen argued that the government never explained why a claim should be invalidated based on the cumulative effort to make all embodiments where, as with Amgen’s invention, such efforts would not require undue experimentation for those skilled in the art.  Indeed, the CAFC, in finding non-enablement, had opined that the the enablement standard for a genus claim may be raised if “substantial time and effort would be required to reach the full scope of the claimed embodiments.”

On Nov. 4, 2022, SCOTUS granted Amgen’s writ on Question 2 only: Whether enablement is governed by the statutory requirement [35 U.S.C. § 112(a)] that the specification teach those skilled in the art to “make and use” the claimed invention or whether it must instead enable those skilled in the art “to reach the full scope of claimed embodiments” without undue experimentation – i.e., to cumulative identify and make [the invention] or nearly all [of its] embodiments.”

The Public Policy Behind the Enablement Requirement 

Patent protection lasts for about 20 years from the application’s filing date.  Through the government’s grant of this limited monopoly, the patentee has the right to exclusively use and exploit the invention.  After a patent expires, anyone can use, or sell, or import the invention covered by the patent. As such, the enablement requirement is intended to ensure that the public can actually derive benefit after the granted monopoly period is finished by making and using the invention.  Accordingly, the patent disclosure must provide sufficient information for allowing such persons to make the invention after the patent has expired.

Another aspect of the enablement requirement is to prevent the introduction of new matter during prosecution of the patent application.   MPEP 2164.05(a). Accordingly, the patent application is not to be “adjusted” to include new matter during prosecution.  This requirement is intended to help ensure that the patent application is thorough and complete at the time of filing.

What Does It Mean for an Invention to Enabled?

An enabled invention is one which is sufficiently instructive such that who is skilled in the art could make and use the invention without undue experimentation.  This requirement is not as straight forward as it may seem because all inventions are not equal with respect to their complexity or subject matter.   Storer v. Clark, 860 F.3d, 1340, 1350 (Fed. Circ. 2017).   New and more complex inventions may require more description and “directions” to meet the enablement requirement.   Also, for all claims to be approved under the enable requirement, the disclosure must sufficiently enable all of the claims.  In re Borkowski, 422 F.2d 904, 909 (CCPA 1970).

On the other hand, the enablement requirements does not require that the patent disclosure explain how to make a perfected, commercially viable embodiment of the invention.  See Christianson v. Colt Indus. Operating Corp., 822 F.2d 1544, 1562 (Fed. Cir. 1987).  Also, any invention may be associated with know-how and trade secrets (e.g., a raw material with desirable purity specifications to improve invented-product yields) which need not be revealed providing the trade secrets are not critical to the patentability of the invention.

The relevant factors courts have used in determining if the enablement requirement is met may “include (1) the quantity of experimentation necessary; (2) the amount of direction or guidance presented; (3) the presence or absence of working examples; (4) the nature of the invention; (5) the state of the prior art; (6) the relative skill of those in the art; (6) the unpredictability of the art; and (8) the breadth of the claims.”   In re Wands, 858 F.2d 731, 738 (Fed. Cir. 1988) (reversing the USPTO’s refusal to approve the patent applicant’s claims on non-enablement grounds and stating “[c]onsidering all of the factors, we conclude that it would not require undue experimentation to obtain antibodies needed to practice the claimed invention.”).  The commentator notes that this decision was at a time when biotechnology patents were in favor thanks to SCOTUS’s 1980 decision in Diamond v. Chakrabarty, 447 U.S. 303 (1980).  That decision is credited with paving the way for the rapid growth of the then-new biotechnology industry.  And now 40 years later SCOTUS is widely viewed as stifling innovation in today’s related technologies.

The subject patents the CAFC invalidated in Amgen v. Sanofi are directed to a genus of antibodies defined not by their structure (e.g., their amino acid sequence) but by their function, i.e., the ability of the monoclonal antibodies to bind a certain part of the PCSK9 antigen.  PCSK9 is a target for treating levels of LDL (the particularly “dangerous” form of cholesterol).   Accordingly, monoclonal antibodies directed against PCSK9 may still work with various sequence changes.   Patentees in the life sciences have had a difficult time defending claims directed to discovery of a novel biological therapeutic which often involve a functional genus claim.  Narrowly drawn claims to only the patent’s disclosed variations of the invention do not always “appreciate” the full scope of the invention, giving potential infringers wiggle room.

Amgen’s petition for writ emphasized that the CAFC wrongly applied a “special test” for its genus claims after gutting the juries’ findings.  “This approach will have devastating ramifications for biotech and pharmaceutical innovations because “significant breakthroughs [in these industries] often involve the mechanism for producing a desired effect and making a working embodiment . . . [where] the mechanism . . .may have the same effect when implemented in any number of structurally similar compounds.”  Amgen Pet. at 3, 29-30.  Hence a functional genus claim is one where structurally similar biochemical structures may be able to achieve at least some of level of the claimed function or mechanism.  The CAFC’s opinion indicated that the enablement standard for a genus claim could be raised if “substantial time and effort would be required to reach the full scope of the claimed embodiments.”

In its reply to the Solicitor General’s brief, Amgen argued that the Solicitor General had also wrongly extended the scope of Section 112’s enablement requirement to require a skilled artisan to “reach the full scope of claimed embodiments” without “substantial time and effort.”  Amgen’s position is that  “[o]nce inventors teach skilled artisans how to make and use the individual embodiments across the scope of the claim, there is no reason why they should lose their patent because it would take a lot of work to make them all [consecutively].”  Amgen countered that this standard does not comport with the statutory language of Section 112 which has no language connecting enablement with the amount of time and effort required to practice all embodiments of the claimed invention.  Nor did the government explain “why a claim should be invalidated based on the cumulative effort to make all claimed embodiments where as here, it would not require undue experimentation to make and use any individual embodiment.”  Substantial time and effort is not necessarily undue experimentation.

Conclusions

Put another way, the question SCOTUS will be addressing in 2023 is the following:  under the enablement requirement, must an invention like Amgen’s disclose every single potential embodiment of the claimed functional invention and how to make it to meet the enablement requirement and thereby minimize time required for making the embodiments by future users who are skilled in the art?  The commentator adds that the question is related to the actual disclosure’s quality.  Is there sufficient disclosure to meet the enablement requirement for the disclosed embodiments which will allow future users having the requisite skill in the art to proceed in making the disclosed and additional embodiments of a genus claim even if considerable time is involved? Under the enablement requirement, future users should not have to reinvent the wheel to make the patented invention and its various embodiments.  But time and effort are not necessarily undue experimentation.  Even the seminal Wands case’s “enablement” factors do not refer to time and effort but the quantity of experimentation.   Experimentation is itself subjective – and could range from optimization experiments (e.g., to maximize the yield of a claimed process’s product) to experimentation directed to filling in a critical missing or vague step not disclosed in the original application.

In sum, the issue in Amgen v. Sanofi is whether a precise roadmap for making all embodiments of a genus claim must be disclosed to meet the enablement requirement.  Does “time and effort” refer to the “time and effort” for making a limited number of the patent’s discussed embodiments or the “time and effort” for cumulatively making all possible embodiments which of course will result require more time and effort.   Amgen Pet. at 2 (quoting Amgen, 987, F.3d at 1088).  The commentator notes that the methodology for making and growing monoclonal antibodies was first developed last century and is routinely used by biotech companies who rely on the quicker technologies which have been developed over the years to support the biotech and pharmaceutical industries.

In Jan. 2021, SCOTUS denied a cert petition filed by Idenix Pharmaceuticals for nearly identical issues of enablement of functionally defined genus claims after it lost its appeal.  Idenix Pharmaceuticals, LLC v. Gilead Sciences, Inc., 941 F.3d 1149 (Fed. Cir. 2019).  The Amgen case will be closely watched by the patent bar and the life sciences industries now that SCOTUS is finally involved. After many decisions which have invalidated patent claims and negatively impacted patent portfolios in the life sciences industry, there is optimism that patent owners will see a shift in the pendulum in favor of genus claims which are common in this industry given the nature of the beast.  Of interest is the fact that three amicus briefs have been filed in favor in Amgen, including one by highly respected Professor Mark Lemley of Stanford Law School on behalf of a group of intellectual property professors.  This commentator is rooting for Amgen.

Stay tuned for a blog on SCOTUS’s opinion.

THANK YOU FOR YOUR INTEREST IN THIS BLOG.  THE CONTENT IS FOR  INFORMATIONAL PURPOSES ONLY AND IS NOT LEGAL ADVICE.

© 2022 by Troy & Schwartz, LLC

Take Home Points

1. File at least a provisional patent application before taking steps to commercialize and sell an invention.
2. Understand the ramifications of the on-sale bar to patentability.
3. If engaging in experimentation with others prior to filing a patent application, ensure that contracts are very clear concerning the experimentation purpose.
4. Be very careful about making an offer for sale of the invention prior to filing a patent application. An offer for sale can take many forms including a contract, proposal and/or invoice.

Section 102(b) of the Patent Act involves the on-sale bar to patentability.  The America Invents Act (“AIA”) amended § 102(b).  Any patent issuing from an application filed before May 16, 2013 which is later subjected to an on-sale bar analysis in a patent infringement analysis will be analyzed under pre-AIA § 102(b). This section states that a patent claim is invalid under 35 U.S.C. § 102(b) if “the invention was  . . .  on sale in this country more than one year prior to the date of the application for patent in the United States.”

This commentator recently published a blog on the CAFC’s February 2022 opinion in Junker v. Medical Corp., Inc where the Court held that the patentee had not timely filed a patent application under § 102(b) of the Patent Act.  Also see that blog for a comparison of the pre-AIA § 102(b) and the post AIA statute.  In Junker, the patent owner’s damages for patent infringement awarded by the district court were negated.  Now we have another decision in just over two months where the patent owner has had patent claim rights adversely affected because of failure to timely file a patent application.

On April 29, 2022^, in Sunoco Partners Marketing v. U.S. Venture, Inc., the CAFC again addressed the on-sale bar to patentability.  The patent at issue involved an application filed on February 9, 2001.  Accordingly, based on 35 U.S.C. § 102(b), the critical date (the latest date on which the patentee could have made an offer for sale without violating the on-sale bar) was Feb. 9, 2000.  Here, the patentee’s offer for sale was Feb. 7, 2000.  Put another way, once the offer for sale was made, the patent applicant had exactly one year to file the patent application or until Feb. 7, 2001.

In Sunoco, the defendant asserted an on-sale bar defense to invalidate claims in two of Sunoco’s patents. To prevail, the defendant needed to demonstrate by clear and convincing evidence that the patented invention was both: (1) “the subject of a commercial offer for sale”; and (2) “ready for patenting.”  Pfaff v. Wells Elecs., Inc., 525 U.S. 55, 57 (1998).

A factor which may allow the patent owner to negate an on-sale bar invalidation is whether the offer for sale occurred primarily for purposes of experimentation.  The “experimentation” exception to the on-sale bar was first articulated by the U.S. Supreme Court in City of Elizabeth v. Am. Nicholson Pavement Co., 97 U.S. 126, 137 (1877):  [E]xperimental use allows inventors to delay patenting to engage in “bona fide effort[s] to bring his invention to perfection or to ascertain whether it will answer the purpose intended.”  At the same time, “[a]ny attempt to use [the invention] for a profit and not by way of experiment” before the critical date will “deprive the inventor of his right to a patent.”  Ultimately, as the City of Elizabeth court explained, the on-sale bar is related to the monopoly afforded to a patentee – to have the government-granted right to seek legal recourse for the unauthorized use of the patented invention for a statutory period of time.   The on-sale bar prevents a subsequent patentee from “acquiring an undue advantage over the public by “preserv[ing] their monopoly . . .  for a longer period than is allowed.”

Sunoco, the current owner of the patents at issue, argued the on-sale bar was not violated because the inventor’s company, MCE Blending (“MCE”) offer to sell the invention to Equilon Enterprise, LLC (“Equilon”) was primarily for experimentation purposes.  The district court agreed and held found that the defendant’s on-sale bar defense was negated by the experimental use doctrine.

The CAFC disagreed on the basis of the terms of a contract between the inventor’s company and MCE.  The opinion is instructive because it demonstrates how a contract’s terms can play a critical role in upholding or defeating patent rights.  Whether such a transaction was for primarily for experimental or commercial purposes is a “question of law to be analyzed based on the totality of the surrounding circumstances.”   The Sunoco court assessed the transaction “under contract law as generally understood, focusing on those activities that would be understood to be commercial offers for sale in the commercial community.”

The invention was for an automated butane-blending system to maximize a desirable property of combining butane and similar gasoline components.

Based on the following contractual words and terms, the transaction was deemed to be a commercial offer for sale for the following reasons:

1. The contract expressly described the transaction as a sale without any mention of any experimental purpose.
2. The contract stated that MCE already developed the relevant technology and equipment, that Equilon wanted to purchase it, and that MCE was willing to sell it, install it, and supply butane for it in return for Equilon’s agreement to purchase several hundred barrels of butane from it over a period of five years.
3. The contract stated that MCE is willing to install the blending Equipment and to supply the butane required for such blending to Equilon.
4. The contract stated that the ownership and title to the Equipment shall be conveyed to Equilon by MCE upon completion of the installation and training. MCE was to execute a bill of sale to effectuate the conveyance of ownership of the Equipment to Equilon.
5. The contract referred to Equipment Testing and not Experimental Evaluation.

The district court concluded that there had been no offer of sale of the invention because the contract “did not require Equilon to pay MCE anything in exchange for the system which incorporated the invention.  In contrast, the CAFC opined that Equilon purchased MCE’s equipment by committing to buy MCE’s butane.  In other words, it incurred a real if indirect cost.   Had the contract not intertwined the equipment’s required installation with Equilon’s obligation to buy butane, the CAFC indicated that it would not have characterized the transaction as a sale.

The CAFC further emphasized that the concept of experimental use can be difficult to establish.  For example, the contract had a section entitled “Equipment Testing” with two sets of testing:  pre-installation testing and post-installation testing.  Sunoco argued that MCE wanted “to experiment at the actual tank farm and determine whether their inventive idea was capable of performing its intended purpose in its intended environment.” MCE therefore would need access to Equilon’s facility to test under action conditions.  However, testimony revealed that the testing, which focused on determining whether that system could communicate with one of the equipment’s components was not done at Equilon, after all but by a third party.  Additionally, the testing could have been done at any time prior to entering into the offer for sale with Equilon.   This was not a situation involving, e.g., street pavement, which cannot be experimented upon satisfactorily except on a highway.  Sunoco court quoting City of Elizabeth, 97 U.S.C. 134.

The commentator adds that large, expensive equipment is often set up and qualify assurance tests conducted by the seller’s employees.  However, these are not “experimental purpose” activities because the buyer is expecting the equipment to work.  A good example is medical diagnostics equipment.

The inventor’s subjective intent concerning experimentation is of minimal importance.  The courts have generally looked to objective evidence to show that a precritical date sale was primarily for experimentation.   The opinion includes a useful list of objective indicia relied on by the courts in footnote 5.  In this case: 1) the terms of the sale agreement itself constituted objective evidence; and 2) the nature of the experimentation was such that it could have been done prior to the sales offer.

In conclusion, the CAFC held that the Equilon agreement was an offer for sale to commercially exploit the invention rather than primarily for experimentation purposes. Equipment which incorporated the invention was ready for use at the time the contract was entered into and ready for patenting based on objective evidence.   The district court’s experimental-use determination was reversed and its infringement determination with respect to the pertinent claims was vacated.   The decision involved some other issues which are separate from the 102(b) discussion of this blog for those interested.

If you have any questions about when you should file a patent application to preserve your rights, contact Susan at 305-279-4740.

WE THANK YOU READING THIS BLOG AND HOPE YOU FOUND IT INFORMATIVE.  HOWEVER, THE CONTENT IS PROVIDED FOR INFORMATION ONLY AND DOES NOT CONSTITUTE LEGAL ADVICE.  IF YOU ARE CONTEMPLATING ANY ACTION THAT MAY HAVE LEGAL CONSEQUENCES, CONSULT WITH AN ATTORNEY.

©2022

Troy & Schwartz, LLC

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This blog discusses an often-missed fact about the potential impact of pre-patent-application-filing activity on the validity of any resulting patent.  In a nutshell, there is a “statute of limitations” for filing patent applications under certain circumstances.  Patents have been invalidated on the basis of late-application filing.  

On Feb. 10, 2022 in the case of Junker v. Medical Components, Inc., the U.S. Court of Appeals for the Federal Circuit (CAFC) effectively eliminated a bench trial award of $1.2 million to the plaintiff in a patent infringement lawsuit by invalidating the plaintiff’s design patent (Pat. No. D450,839).  The invalidation was not based on theories involving obviousness or novelty.  Instead, the validation was based on a written price quotation for a product incorporating the later patented design.

The CAFC’s opinion does not refer to the lower court’s finding of facts concerning the plaintiff’s lawsuit against the company & the individuals who are merely referred to as the plaintiff’s business partners but who were also defendants in the lawsuit.  The lower court found that these business partners were not credible in their assertions that one of them was actually the inventor of the design in patent no. ’839.  To add insult to injury, it was one of these business partners which corresponded with Boston Scientific, unbeknownst to the plaintiff.  It may be that the lower court’s judge, after hearing and reviewing the evidence, avoided invalidating the design patent because of the unsavory actions of the plaintiff’s business partners on several fronts.

The CAFC’s decision is a cautionary tale to inventors to timely file their patent applications once the invention is ready for patenting to avoid: 1) either not being awarded a patent; or 2) having a granted patent later invalidated.  Under the law pertaining to patent applications filed before  May 16, 2013, a patent claim is invalid under 35 U.S.C. § 102(b) if “the invention was  . . .  on sale in this country, more than one year prior to the date of the application for patent in the United States.”   In Junker, the plaintiff filed his application for a design patent on Feb. 7, 2000. The Boston Scientific quotation was dated Jan. 8, 1999. Under the statute, the plaintiff had until Jan. 8, 2000 to file his patent application if the quotation constituted an offer for sale.

Congress amended § 102 when it acted the America Invents Act (“AIA”).   The amended AIA is applicable to patent applications filed since March 16, 2013.    The Junker patent was thus analyzed under the pre-AIA statute.  In determining if the on-sale bar applies, a court will rely on the underlying factual findings.   The lower court found that the communication sent to Boston Scientific Boston was not a quotation and not an actual offer for sale.

The CAFC focused only on the pre-AIA statute.  Because it concluded the 102b bar applied, the CAFC did not address any of the other appealed issues.  The Junker appellate court’s analysis focused on determining if the January 8, 1999 letter was an offer for sale of the claimed design or merely a quote, as the letter stated three times, signaling the parties were engaged in preliminary negotiations.  In conducting its analysis, the court applied traditional contract law principles involving an offer and acceptance.   Based on the CAFC’s precedent, only an offer which rises to the level of a commercial offer for sale, one which the other party could make into a binding contract by simple acceptance, constitutes an offer for sale under § 102(b).

One of the plaintiff’s business partners had responded through his company Xentek in response to Boston Scientific’s request for a quotation.   As such, the letter with its quotation was not an unsolicited price quotation or invitation to negotiate but a specific offer to Boston Scientific but not by the plaintiff who apparently knew nothing about the offer.  Additionally, the letter did not just include a quote but contained a number of terms typical of a commercial contract because if provided specific shipping conditions and that the shipment will be “FOB (free on board) Athens, Texas.” FOB is a standard contract term where goods shipping is involved to allocate the risks and responsibilities of the buyer and seller with respect to delivery, payment, and loss/damage of the goods.   The letter also included payment terms along with multiple different purchase options for Xentek’s goods where the listed prices were based the number of units ordered.  The court concluded that the detail of the relevant commercial sale terms in the letter establishes that the letter was not merely an invitation to negotiate.  The letter included multiple offers for sale, any one of which Boston Scientific could have simply accepted to bind the parties in a contract.  Additionally, later communications between the two companies used the exact same commercial terms suggesting that Xenex’s original terms were definite and not “suggestions.”

The Junker plaintiff argued that the letter was not an offer for sale but merely a price quotation inviting further negotiation, as the district court had found.   The court did state “[t] word quote is commonly understood as inviting an offer rather than as making one, even when directed to a particular customer.”  However, it opined that the terms of the letter must be considered in their entirety to determine whether an offer was intended, or if it was merely an invitation for an offer or further negotiations.  Here, the quotation went beyond merely providing a quote and included delivery, various ordering options, and payment terms.   Relying on a contracts law treatise which provides that if the quotation contains detailed terms, it may well be deemed an offer, the CAFC invalidated the patent due to the on-sale bar.

Would the same decision have been reached under the A1A had Junker’s design patent been filed after May 16, 2013? The AIA’s amendments to Section 102 for patent applications filed after March 16, 2013 have muddied the waters.  First, the AIA has relocated the statutory bar provisions to a new 35 U.S.C. § 102(a)(1).  Second, it has carried forward the concept of a “grace period” in a new 35 U.S.C. § 102(b).

102(a)(1)  NOVELTY; PRIOR ART

A person shall be entitled to a patent unless: (1) the claimed invention was patented, described, in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention….

102(b) EXCEPTIONS

(1) DISCLOSURES MADE ONE YEAR OR LESS BEFORE THE EFFECTIVE FILING DATE OF THE CLAIMED INVENTION.

(A) the disclosure was made 1 year or less before the effective filing date of a claimed invention shall not be prior art to the claimed invention under subsection (a)(1) if: (A) the disclosure was made by the inventor or joint inventor or by another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor; or

(B) the subject matter disclosed had, before such disclosure, been publicly disclosed by the inventor or a joint inventor or another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor.

The AIA’s oddly worded 102(a)(1) provision was ostensibly intended to exclude from the statutory bar any prior commercial activity by the inventor that does not place the details of the invention into the public domain.  That’s why the phrase “or otherwise available to the public” was added at least according to the AIA’s legislative history:  to exclude confidential sales or offers to sell an invention from triggering the on-sale bar. Under the pre-A1A statute, case law held that private offers for sale (as in Junker) or private uses or secret processes practiced in the US that result in a product or service that is then made public may be deemed patent-defeating prior art.  To add further confusion, Congress did not expressly define the word “disclosures” in the new Section 102(b) or the relationship of these “disclosures” to Section 102(a)(1)’s patent-barring events.   Congress should have left well enough alone and just modified the original 102(b) statute to explicitly state that confidential sales or offers for sell shall not trigger the on-sale bar.

In fact for now, the Supreme Court and the Federal Circuit have both concluded that Congress had not made that intent sufficiently clear to afford it a legally recognized policy.  In Heisinn Healthcare, S.A. v. Teva Pharmaceuticals USA, Inc., 686 U.S. (2019),  Supreme Court affirmed the CAFC’s conclusion that under Section 102(a)(1), a publicly disclosed commercial sale of an invention by an inventor, even if it does not place the details of the invention into the public domain (i.e., remains confidential), if made more than one year before the effective filing date of a patent.  As such, the disclosure can qualify as invalidating prior art under AIA Section 102(a)(1). Thus, the Heisinn decision arguably resurrects the pre-AIA separation of the statutory bars into two categories: public disclosures (patented, publication, in public use) and commercialization (on sale).

Confusing, isn’t it?  Based on Helsinn, those who are considering filing a patent application in this AIA world should for now assume that any confidential sales activity prior to applying for a patent might not be accorded a safe harbor.   Thus it makes goods sense to file at least a provisional patent application before commencing any such transactions or clearly within a year of commencing any sales activity whether confidential or not.  Prompt disclosure of the invention in at least a provisional patent disclosure is further encouraged considering that patents are now granted to the first inventor to file, another outcome of the AIA.  Moreover, all inventors should proceed cautiously when revealing their invention to anyone by having proper confidentiality agreements in place with language curtailing the providing of any information to any third party without the inventor’s written permission.

As a reminder: 1) the pre-AIA statute remains applicable to all patents granted on applications filed before March 16, 2013; and 2) a patent infringement lawsuit can occur during the lifetime of the granted patent (about 20 years after the filing date or 14 years from the grant date for design patents granted pre-AIA and 15 years post-AIA) and some years thereafter as a result of the patent statute’s 6-year statute of limitations for bringing a lawsuit. The impact of the pre-AIA statute will be around for a while.  As for the AIA statute, perhaps the courts will have a chance to add some clarity around the Helsinn decision in the not-too-distant future.

Take Home Points for Those Contemplating a Patent Application in the AIA World

• Timely file patent applications to avoid any problems related to attempting to commercialize the invention before actual filing which could be violative of the AIA’s 102(a) and 102(b) provisions for patents resulting from applications filed since March 16, 2013 as the Helsinn decision demonstrates.
• Ensure that all communications with potential commercialization partners are maintained in confidence and exchanged under the terms of an executed NDA.
• Don’t broadcast “deals” of a business venture publicly before an application is filed.

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On April 5th, a federal judge in the U.S. District Court of Virginia heard summary judgment arguments on this very issue in Thaler v. Iancu.  Thaler brought this action to challenge the current legal definition of inventorship of patent applications after the United States Patent & Trademark Office had rejected two of his patent applications for failing to identify a person as inventor in non-compliance with the Patent Statute’s statutory requirements.  Instead, he had named an artificial intelligence (AI)-based system, DABUS, as the inventor and disavowed any notion of being named a sole or at least a joint inventor.  Thaler may well have brought as a test case given AI’s increasing role in R&D in industries ranging from the life sciences to chemistry to engineering.

The judge is expected to rule in favor of the USPTO on the basis of the patent statute’s definition of inventor which states:  “The term “inventor” means the individual or, if a joint invention, the individuals collectively who invented or discovered the subject matter of the invention.”  Any change in the definition of inventor to include AI will require intervention by Congress.

The issue is not, however, as simple as expanding the definition to include the AI.  For example, an Inventor must contribute to the conception of the invention.  As the Manual for the Procedure for Examining Patents (MPEP) states, “[t]he threshold question in determining inventorship is who conceived the invention.  Unless a person contributes to the conception of the invention, he is not an inventor.”  MPEP § 2019.

In understanding the legal definition of inventorship, it is important to understand that the inventor is not required to reduce the invention to practice.  “Difficulties arise in separating members of a team effort, where each member of the team has contributed something, into those members that actually contributed to the conception of the invention, such as the physical structure or operative steps, from those members that merely acted under the direction and supervision of the conceivers.”  MPEP § 2019 citing a 1991 case from the Board of Patent Appeals and Interferences.

Can AI spontaneously conceive of an invention without any human input or is it actually being directed to reduce a human-inputted concept to practice?  Under this scenario, AI cannot be an inventor even if the definition for inventor is expanded to include AI.

Additionally, assignment of patent rights is a common practice.  Generally, any scientist or engineer employed by a company is required to execute and assignment of any patent rights resulting from his or her endeavors to the company-employer.  The company generally files the patent application as the assignee wherein the inventors must always be named.  Another common patent assignment scenario is one where the inventor, as the patent owner, assigns another person, often a business entity, to commercialize the patent.   Patent licensing is another common business transaction surrounding issued patents.   These routine contractual business transactions will clearly become complicated if AI is allowed to be named as an inventor.  Why? Because the party to an agreement must have the requisite intent to enter into the agreement.   Can AI have that requisite invent to assign its patent rights or enter into a licensing agreement?

Other considerations include:  1) An AI machine’s ability to have standing to sue or be able to testify as the inventor in a patent infringement lawsuit; 2) Ownership rights in any resulting patentable invention if the AI machine was designed by an independent person and purchased by the inventor.  Here, any purchase contracts should unequivocally state that any resulting patentable technology resulting from the usage of the AI machine belongs to the purchaser of that machine.  But what if the AI machine is named as the inventor?  The point is that any such contracts involving AI must be carefully tailored to anticipate possible scenarios.

This commentator is not in favor of having AI named as an inventor perhaps because of a bias in favor of the human brain as the ultimate source of creativity and ingenuity.  Instead, Congress should first address the upheaval in intellectual property law caused by simply bad court decisions in U.S. patent law concerning patent eligibility under § 101 and just this month, the questionable application of the fair use doctrine in a copyright law case.  Click here for a link to the blog on the copyright case.  There is also no question that human ingenuity is what created AI in the first place and that AI is here to stay.

As an alternative to complicating the patent law business transactions that are so essential to acquiring investment funding and commercially exploiting patented inventions, a separate statute for thoughtfully addressing the unique aspects of AI-involved inventions is suggested.  This suggestion of a separate patent classification has precedent through plant patents and design patents – types of patents that are separate and distinct from utility patent applications, the very type of patent application at issue in the Thayer case.

THANK YOU FOR YOUR INTEREST IN THIS BLOG.  AS USUAL THE CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT LEGAL ADVICE.

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