Have Mayo and Alice gone too far?

For those of you following this blog, you will be familiar with our assessment of the recent decisions from the Supreme court in Mayo Collaborative Services v. Prometheus Laboratories and Alice Corp. v. CLS Bank International. These cases concerned what types of inventions qualify for patent protection under 35 U.S.C. 101, the statute governing patent eligibility. The cases were decided by the Supreme Court in 2012 and 2014, respectively, and both resulted in the invalidation of the patents involved. The first of these cases, Mayo, involved a method of administering a drug, gathering data on how the patient was responding to that drug, and deciding whether or not to alter dosage based on that information. This was determined to be a manipulation of natural laws using data and methods known to persons skilled in the art. Alice dealt with software for financial transactions, which the Court ruled to be an “abstract idea.”

Alice-and-Mayo-abstract

Mayo and Alice ...interpretation, but too far?

So why is it that these cases have become points of contention in the field of patent law? Simply put, these Supreme Court decisions offer precedent which is at best unhelpful for attorneys and courts, and at worst seriously concerning for patent owners.

To illustrate this result, we’re going to briefly examine a recent decision by the Federal Circuit, Ariosa v. Sequenom. In June of 2015, the Federal Circuit issued a ruling invalidating the method claims of U.S. Patent No. 6,258,540, held by Sequenom Inc. The patent concerned a means for using cell-free fetal DNA, which they discovered could be found in the blood of a pregnant mother, to determine the fetus’ susceptibility to a panel of genetic defects. The tests could also establish paternity or gender of the fetus, among other characteristics. While other diagnostic tests are able to make these determinations, until the method of the ‘540 patent was discovered the DNA for such tests would have to be harvested from the placenta or fetus. The method of the ‘540 patent allowed these tests to be run in a manner that was less invasive and dangerous for the fetus and the mother by using a sample of the mother’s blood. When the patent was struck down under the precedents set by Mayo and Alice, Sequenom petitioned the Federal Circuit for en banc review (a process by which the entire court is urged to reconsider the decision of one of its 3-judge panels). On December 2, 2015, the en banc court denied the petition, letting stand the panel’s decision and maintaining that it was bound by the Supreme Court decisions in Alice and Mayo.

Alice is firm on the impermissibility of patenting an abstract idea.

Ariosa represents one of the first major cases in which Alice and Mayo were applied to their fullest extent, with predictably troubling results. For instance, Alice is firm on the impermissibility of patenting an abstract idea (as is the language of 35 U.S.C. 101). However, the opinion issued by the Federal Circuit failed to define what constitutes an abstract idea, or offer a test for determining if an idea was too abstract to be patentable. Mayo concluded that discovering something new in nature did not show an inventive step; however, the court there stated that they “need not determine here whether, from a policy perspective, increased protection for discoveries of diagnostic laws of nature is desirable”. Neither of these decisions made clear how their precedents should be applied in upcoming cases, yet both made clear that violations of these unknown standards would result in the invalidation of a patent.

Despite denying en banc review in the Sequenom case, the en banc review panel of judges expressed concerns about the rigid application of Alice and Mayo in these types of cases. Notably, Judge Dyk called the test of patentability outlined in Mayo “too restrictive" and stated that continued use of this standard may “discourage development and disclosure of new diagnostic and therapeutic methods in the life sciences.” He also noted that the discovery of natural laws is the basis of diagnostic methods, and further went on to say that an inventive concept is present in a novel discovery of “a specific application of [a] new law of nature discovered by the patent applicant and reduced to practice.”

While the denial of further review for Sequenom stands, opinions such as these issued by the Federal Circuit only serve to further highlight the need for clarification on what the Alice and Mayo decisions mean for those of us in the business of acquiring and enforcing patents. This certainly isn’t the end of what will be a difficult battle for patent owners in the fields of software and medical diagnostics. We’ll keep you posted on new developments on this topic as they emerge.

Inter Partes Review: Bane for Patent Owners, Boon for Investment Firms

The Inter Partes Review can be a bane for patent owners and a boon for investment firms.

Can an investment fund file a challenge to a patent and bet on the outcome? This appears to the case ever since the America Invents Act gave birth to Inter Partes Review proceedings before the U.S. Patent and Trademark Office.

An Inter Partes Review is a route to invalidate a patent before the USPTO’s Patent Trial and Appeal Board, as opposed to bringing the case before a district court. In an IPR, a patent can be challenged on the grounds of anticipation by or obviousness in view of prior art. Only prior art in the form of patents or printed publication can be asserted in an IPR, but IPRs nonetheless have some notable advantages over district court proceedings. First, IPRs are relatively inexpensive to file as compared to district court cases. IPRs also adhere to different standards than district courts to invalidate a patent. While a district court is bound to interpret the words of a claim according to their ordinary and customary meaning, the PTAB examines claims under the broadest reasonable interpretation standard. This means that claims a district court may find patentable over the prior art could be found patentable in an IPR. Another notable advantage is that anyone can file an IPR to invalidate a patent, which brings us to investment mogul Kyle Bass. (continued below...)
Inter-Partes-Review-previous
Bass is the president of Hayman Capital, a Texas based hedge fund. He is noted for two particularly interesting investment strategies, the first being his prediction of and profit from the recent mortgage crisis. The second, his latest strategy, involves filing IPR petitions against pharmaceutical companies and then shorting their stock or investing in their competitors. The obvious question here is “Does it work?” The answer is sometimes, but Bass and company don’t appear to be waging bad bets, considering that over 75% of patents in IPR proceedings have had at least one claim struck. In the wake of Bass’s first IPR filing against Acorda Therapeutics involving the drug Ampyra, Acorda’s stock price dropped approximately 10%, although his more recent filings against other companies have been met with a mix of changes in stock prices.

Upon hearing about this investment strategy, people’s first reaction is “That’s legal?” The answer is yes. What Bass is doing is legal. These are not frivolous lawsuits. The PTAB will only initiate an IPR if the prior art being asserted could reasonably be interpreted as anticipating the claims of the patent or rendering them invalid as being obvious variations of the asserted prior art. This is a classic example of the letter versus the spirit of the law giving rise to (presumably) unintended consequences. IPRs were designed to be a low-cost alternative to litigation in the courts, aimed at allowing parties to settle disputes over claims without spending millions. Bass’s strategy is certainly well outside of the intentions of IPR proceedings, but the PTAB has initiated IPRs in 7 of the 13 petitions filed by Bass and his associates, and there are at least 20 cases pending before the PTAB. The PTAB has also stated that “profit is at the heart of nearly every patent and nearly every inter partes review” when they ruled in September that Bass’s practice did not constitute an abuse of the IPR process.

An Inter Partes Review is a route to invalidate a patent before the USPTO’s Patent Trial and Appeal Board, as opposed to bringing the case before a district court....anyone can file an IPR to invalidate a patent.

In response to allegations that he is abusing the system, Bass and others in his investment fund and legal team have pointed out that a small number of pharmaceutical companies rely heavily on a few weak patents, and use them to artificially inflate drug prices. If this is truly the case, then the outcome of the Bass-initiated IPRs will result in a number of unhappy patent owners but some very happy investors.

There is hope for Bass’s besieged patent owners in the form of the Protecting American Talent and Entrepreneurship Act, or PATENT Act for short. While the Act currently proposes only minimal changes to IPR proceedings, there is a considerable amount of lobbying to change both the standards of review and who can file an IPR, primarily to thwart strategies like Bass’s. Similarly, the Innovation Act (discussed in one of our previous blog posts) would amend post-grant proceedings such that the PTAB would have to interpret claims under the same doctrine of ordinary and customary meaning that district courts use. But since the PTAB has determined there is nothing wrong with investment firms filing IPR petitions, it will be up to Congress to decide whether this unintended consequence of the America Invents Act should be squelched.

 

 

Patent Reform Legislation: More Potential Impact on Patent Owners

Patent Reform Legislation: More Potential Impact on Patent Owners

Current Patent Reform Legislation

Whether one’s role in the IP community is as an inventor, agent, attorney, examiner, or business owner, a number of significant reforms to the U.S. patent system in the last decade have been a source of angst to owners and developers of intellectual property. The parade of landmark Supreme Court decisions and Congress’s passing of the America Invents Act has quickly made obsolete the relatively static patent laws we knew in the twentieth century. In the last decade alone, we’ve seen the Supreme Court repeatedly reverse district court and Federal Circuit decisions regarding patentable subject matter under 35 U.S.C. 101 (most notably in Bilski, Prometheus, Alice and Myriad). Technology developers now question whether or not they have actually produced something that’s patentable.

The Supreme Court’s opinion in Alice provides a roadmap for invalidating many, many software and internet patents, and patent owners and applicants are seeing that the Federal Court and the USPTO’s Patent Trial and Appeal Board are overturning patents and denying applications at historic high rates. Just as unsettling is the prospect of further legislation and higher court rulings that could add to the present turmoil in the U.S. patent system. And the bias in the current U.S. patent system against inventors and patent owners could get worse. It’s therefore worth examining two recent legislative proposals and their potential impacts on the U.S. patent system.

Innovation Act

The first legislative proposal is the Innovation Act, a bill which passed the House in late 2013, but failed to progress through the Senate. This bill is once again up for consideration (with certain reforms), and is directed towards cutting down the number of patent lawsuits by non–practicing entities (NPEs). The bill generally requires plaintiffs to be specific as to the exact means by which their patent is being infringed (claim by claim), as well as mandatory fee–shifting, where a losing plaintiff/patent owner would be responsible for paying the attorney fees of the winning defendant). Another noteworthy change in the bill would affect the Post Grant Review (PGR) process. Currently, post-grant patent challengers are barred from raising in later court proceedings “any ground that the petitioner raised or reasonably could have raised” throughout the review process. The new bill would remove the portion regarding grounds the petitioner “reasonably could have raised”, meaning that a challenger could theoretically file for Post Grant Review on ground A, eventually lose on this ground, and then seek a further PGR of the same patent on ground B.

The Innovation Act has been criticized for its potential to raise the cost of patent litigation and prolong lawsuits, while discouraging small patent owners from asserting their exclusive rights. In the view of many, the reforms included in the Act would continue to push the U.S. patent system away from protecting inventors, and would discourage technology developers from engaging in the costly process of acquiring patents that have a higher potential than ever of being overturned. So even though the Act’s main focus is to prevent abuse of the patent system by NPEs (“patent trolls”), the effects will undoubtedly spill over to weaken the hand of technology developers generally.

STRONG Patents Act

The second legislative proposal worth noting is the Support Technology and Research for Our Nation’s Growth, or STRONG Patents Act of 2015. Introduced this year in the Senate, STRONG proposes a number of revisions to the patent system, most notably requiring the PTAB during PGR to review patent claims the way a district court would. Currently, the PTAB evaluates claims under a “broadest reasonable interpretation” standard, while district courts employ a standard of “ordinary and customary meaning.” STRONG would also place the burden of proof in a PGR on the entity challenging the patent, and would also require that claims under review be assumed valid. Other important provisions of STRONG would empower the FTC to pursue patent owners who sent frivolous demand letters, change the way damages are calculated in patent cases, and direct how the USPTO can use the fees it collects. STRONG is seen as being particularly helpful for inventors and entities seeking to enforce their patents. Many have argued that this type of law is necessary in the wake of cases like Alice, where patents that were once considered valid and enforceable are now too easily overturned. Unfortunately, the legislation would do nothing to clarify the definitions of “abstract ideas” as they relate to software in the Alice ruling.

Are your company’s IP dollars producing the strong patents you need?

Good Patents are like bees—they should protect what's sweet and sting when they need to.
—Bob Fieseler, Founder of Corridor Law Group

Corridor-law-Group_Patents-are-like-bees

Technology companies, investors, inventors and start-ups, ask yourselves—are your company’s IP dollars producing the strong patents you need?

Of the 3,000 patents the U.S. issues every week, only 2-3% are said to cover technology that’s ever sold. Companies need to know that their IP dollars are producing strong patents that protect the key features of their products. Corridor Law Group‘s success rate beats the average by an order of magnitude. In other words, the patents Corridor Law Group secures will cover what makes your product unique and worth buying so money isn’t wasted on patents with negligible value. Corridor Law Group’s veteran attorneys make it their business to understand what’s important to your business, and then craft patents that will keep others out of your market and withstand challenges from those who don’t respect innovation.

Let Corridor Law Group be your company’s IP champions. We offer a no obligation 20-minute consultation. Call us today.

Smaller Clients at Larger Law Firms a “Burden?”

Smaller Clients at Larger Law Firms a “Burden?”

At Corridor Law Group we value every one of our clients. Our attorneys have guided many small startups into successful corporations and, we recognize and appreciate the unique opportunities smaller companies enjoy, along with the challenges they face.

Smaller Clients Devalued at Larger Firms

Fewer and fewer of the larger law firms appreciate or are even willing to take work from smaller clients. A large law firm recently decided to cut loose from its smaller clients. The firm described representing smaller clients as a “burden” and attorneys at the firm were told to “eliminate” those clients from the firm in “30 days.” You can read more in this article from Above the Law.

Big Solution for Smaller Clients

If you’ve already received, or expect to receive, a breakup letter from your law firm or if you're simply feeling under-appreciated by your current IP firm, give Corridor Law Group a call. Our lawyers have big-firm pedigrees, but delivering high-value services to smaller clients is what we’re all about.