Winter 2017-2018
Reclaiming Our Lost Inventors and Authors Effective January 1, 2018, a new CLE requirement applies to New York attorneys: Diversity, Inclusion, and Elimination of Bias (“D&I”). D&I programs may include, among other things, diversity, inclusion and elimination of bias based on, for example, race, ethnicity, national origin, gender, sexual orientation, gender identity, religion, age or disability. Little did I consider, when D&I CLE was first announced, the nexus between the goal of enhancing diversity in the practice of law and the goal of enhancing diversity in the people who become inventors and authors in our intellectual property regime. Two recent articles brought that interplay clearly in focus for me. Here I summarize the main points in each article, which I hope you will find time to read. The first article is Who Becomes an Inventor in America? The Importance of Exposure to Innovation by Raj Chetty, Alex Bell, Xavier Jaravel, Neviana Petkova, and John Van Reenen (December 2017). Stanford Professor Raj Chetty and his colleagues at the Equality of Opportunity Project analyzed the lives of more than one million inventors in the United States to understand the factors that determine who becomes an inventor in America. A key phrase in the paper,“lost Einsteins,” refers to people who had the potential to create highly impactful innovations if they had access to the same opportunities as others. Chetty and his colleagues document large disparities in innovation rates by socioeconomic class, race, and gender. Children with parents in the top 1% of the income distribution are ten times more likely to become inventors than children with below median income parents. There are analogous gaps by race and gender: white children are three times more likely to become inventors than black children and only 18% of inventors are female. Id. at pp. 13-19. In particular, Chetty et al. show that exposure to innovation substantially increases the chances that children become inventors: Children whose fathers are inventors are more likely to become inventors themselves. Id. at 19-22. Chetty et al conclude that “[a] lack of exposure to innovation can help explain why high-ability children in low-income families, minorities, and women are significantly less likely to become inventors. Importantly, such lack of exposure screens out not just marginal inventors but the ‘Einsteins’ who produce innovations that have the greatest impacts on society. Policies that increase exposure therefore have the capacity to greatly increase quality-weighted aggregate innovation. In contrast, changes in financial incentives (e.g., via tax cuts) are less likely to spur additional star inventors to enter the field because the private financial returns to high-impact innovations are already quite large.” Id. at 42. The second paper is An Empirical Study of the Race, Ethnicity, Gender and Age of Copyright Registrants, by Robert Brauneis and Dotan Oliar (86 George Washington Law Review 101 (January 2018)). They studied U.S. Copyright Office registration data for the period 1978 to 2014. Their “findings show that authors of different races and ethnicities, genders, and ages tend to create different types of works, and at different rates. They also show that these patterns of creativity have changed over time.” Id. at 154. Among other things, this study notes that women, half of the population, currently comprise only 36% of registered authors, compared to a general female work force participation rate of 46.9%. While two‐thirds of the authors in this study are male, the data show a statistically significant trend over time of increased female representation among authors of registered works. Id. at 129. Most interesting is the authors’ observation that none of the current theories of copyright law predicted or can explain the disparities in gender, race, ethnicity, and age that this study has found. Id. at 142-47. What are the implications of the findings of the studies in Chetty et al. and Brauneis & Oliar? How can intellectual property lawyers have an impact on changing the demographics of innovation and authorship? No doubt, further study and better information will enable both analysis and action to achieve a more open and diverse environment for innovation and authorship. As lawyers who practice intellectual property law in the New York metropolitan region, let’s consider how NYIPLA can develop D&I CLE programming that will help guide the way toward increasing diversity in innovation and authorship.
In This Issue:
NYIPLA President's Corner
anneMARIE hassett
The District of Delaware Interprets the Patent Venue Statute After TC Heartland Searching for a Sound: A Proposal for Creating Consistent De Minimis Sampling Standards in the Music Industry October/November 2017 IP Media Links Tips From the Bench: Practical Advice for Oral Argument Patent Litigation Alert: Federal Circuit Court Clarifies "Regular and Established Business" for Venue Purposes in In re Cray Inc Historian’s Corner: As Time Goes By - Oil States Stakes Can the PTO Seek Payment of its Legal-Staff Salaries as of Right in District Court Actions Notable Trademark Decisions The Federal Circuit Holds that the Ban on Scandalous/Immoral Trademarks is Unconstitutional Patent Trial Statistics: A Cross Comparison of District Court Trends in Light of TC Heartland Supreme Court 2017-2018 IP Case Review The End of the Disparagement Clause Utility in Canada and in the United States-Before and After the Demise of Canada's Promise of the Patent Doctrine NYIPLA Event Programming Moving Up and Moving On Welcome New Members
96th Annual Dinner in Honor of the Federal Judiciary
Hot Topics in IP Law The Princeton Club
Friday, March 23, 2018 New York Hilton Midtown Keynote Speaker Bob Woodward Outstanding Public Service Award Honorable Sue L. Robinson (Ret.) District of Delaware
July 17
"Day of Dinner" Luncheon CLE: Developments in the Courts and Congress and the Implications for Patent Policy and Innovation New York Hilton Midtown Hotel
may 15
November 15
march 23
Annual Meeting Union League Club
Calendar
Trade Secret/Cybersecurity: Protecting Your Corporate Client's Information APA Hotel Woodbridge
April 18
One-Day Patent CLE Seminar The Princeton Club
The District of Delaware Interprets the Patent Venue Statute After TC Heartland By: Alexander Callo
On September 11, 2017, the District of Delaware released two related opinions authored by Chief Judge Leonard Stark—Bristol-Myers Squibb Co. v. Mylan Pharmaceuticals., Inc., No. 17-379-LPS, 2017 U.S. Dist. LEXIS 146372 (D. Del. Sept. 11, 2017) and Boston Scientific Corp. v. Cook Group, Inc., No. 15-980-LPS-CJB, 2017 U.S. Dist. LEXIS 146126 (D. Del. Sept. 11, 2017)—that touch on the Supreme Court’s recent patent venue decision in TC Heartland.[1] In TC Heartland, the Supreme Court construed the first prong of the two-pronged patent venue statute, 28 U.S.C. § 1400(b), notably holding that a corporate defendant in a patent infringement suit “resides” only its in state of incorporation.[2] Previously, courts interpreted this first prong of § 1400(b) to allow a plaintiff to bring a patent infringement lawsuit against a corporation in any district in which the corporation was subject to personal jurisdiction.[3] TC Heartland interpreted the patent venue statute more stringently, making it more difficult for a plaintiff to justify venue according to the first prong of § 1400(b). Given the decision in TC Heartland, plaintiffs will increasingly rely on the second prong of § 1400(b) to justify venue in a particular jurisdiction.[4] When a defendant does not “reside” in a certain jurisdiction according to TC Heartland, a plaintiff may alternatively argue that venue is proper in that jurisdiction according to the second prong of § 1400(b), which makes venue proper in a district:“[1] where the defendant has committed acts of infringement and [2] has a regular and established place of business.”[5] Since the plaintiffs in Bristol-Myers Squibb and Boston Scientific conceded that the respective defendants do not reside in Delaware under TC Heartland, the plaintiffs instead argued that venue was proper in Delaware under the second prong of 28 U.S.C. § 1400(b). I. Judge Stark’s analysis concerning whether “the defendant has committed acts of infringement” in the District of Delaware under § 1400(b). The second prong of § 1400(b) requires that “the defendant has committed acts of infringement” in the relevant district.[6] In Bristol-Myers, the plaintiff brand drug company brought forth a patent infringement case under the Hatch-Waxman Act. Unlike traditional patent infringement suits, a defendant in Hatch-Waxman cases does not infringe a patent by manufacturing, selling, or offering to sell an infringing product in the relevant district. Instead, Hatch-Waxman cases provide a “highly artificial act of infringement” where the defendant generic drug company infringes a drug patent when the defendant submits its Abbreviated New Drug Application (“ANDA”) to the FDA.[7] This method of asserting infringement created “an almost impenetrable problem” for the court’s venue analysis because “the temporal focus of the Hatch-Waxman infringement analysis is the future,” (i.e. where the drug will be infringing in the future) while § 1400(b) is drafted in the present perfect tense (i.e. where the defendant has committed acts of infringement).[8] With this in mind, the defendant in Bristol-Myers argued that venue is improper under § 1400(b) because it has not yet launched its generic drug in the Delaware market, and thus, has not yet committed an act of infringement. Judge Stark disagreed, noting that litigation in a Hatch-Waxman case “is not about whether the documents submitted to the FDA are somehow unlawful,” but rather “whether a valid patent ‘[will or] will not be infringed by the manufacture, use, or sale of the new drug for which the application is submitted.’”[9] Indeed, Judge Stark found that “[t]he submission of an ANDA is a stand-in that serves to move forward in time the infringement and invalidity challenges that otherwise would come later in time, such as after approval or marketing of the ANDA drug.”[10] The court therefore concluded that “in the context of Hatch-Waxman litigation, the ‘acts of infringement’ an ANDA filer ‘has committed’ includes all of the acts that would constitute ordinary patent infringement if, upon FDA approval, the generic product is launched into the market.”[11] Conceding that it would direct sales of its ANDA-product into Delaware upon FDA approval, the defendant was found liable for infringement in Delaware pursuant to § 1400(b). II. Judge Stark’s analysis concerning whether a defendant has “a regular and established place of business” in the District of Delaware under § 1400(b). The second prong of § 1400(b) not only requires that a defendant must have committed an act of infringement, but also requires that the defendant have “a regular and established place of business” in the relevant district. This language in § 1400(b) contains three elements:“a (i) place of business that is (ii) regular and (iii) established.”[12] Judge Stark, in both Bristol-Myers and Boston Scientific, relied heavily on In re Cordis, 769 F.2d 733 (Fed. Cir. 1985), to interpret this statute and apply it to the cases at hand. In both cases, Judge Stark reiterated the rule in Cordis that, for the purposes of the “regular and established place of business” requirement, a corporate defendant need not have a “fixed physical presence in the sense of a formal office or store” in the District of Delaware.[13] However, Judge Stark warned that “Cordis should not be understood as eliminating the statutory requirement that a defendant must have some regular and established ‘place of business’ in the venue.”[14] Following precedent from the District of Delaware, Judge Stark found that a “corporate defendant is required to have some sort of meaningful physical manifestation in the district,” such as employees, products, or other such meaningful contacts with the venue.[15] Simply demonstrating “minimum contacts” for the purposes of personal jurisdiction, though, does not necessarily meet the standard outlined in § 1400(b).[16] According to the court, whether a corporate defendant satisfies this aspect of § 1400(b) “is factually driven and dependent on the circumstances of the case.”[17] In Boston Scientific, Judge Stark held that the defendants met their burden to show that venue was improper in Delaware.[18] Only one corporate defendant in this case had contacts with Delaware, but “none of [the contacts], even when considered in the aggregate, amount[] to a regular and established place of business.”[19] Other than these minor contacts, the defendants had no physical facilities or corporate offices in Delaware and no employees based in Delaware. “At most, [one of the defendants] is ‘doing business’ in Delaware, but . . . this is not equivalent to having a regular and established place of business” in the jurisdiction.[20] Thus, the court concluded that venue was improper in Delaware because the record “clearly establish[es] that neither [of the defendants] has a regular and established place of business in Delaware.”[21] III. Conclusion After TC Heartland, parties to a patent infringement suit will have to increasingly rely on the second prong of § 1400(b) in order to justify/contest venue within a particular jurisdiction. Therefore, courts are only just beginning to apply the second half of § 1400(b) to disputes regarding venue in patent cases.[22] Together, Bristol-Myers and Boston Scientific provide some initial guidance as to how federal courts will begin to interpret this prong of § 1400(b). *Alexander L. Callo is an Associate at Haug Partners LLP. His practice focuses on Hatch-Waxman patent litigation, and he also has experience advising clients about other intellectual property and FDA regulatory matters. [1] TC Heartland LLC v. Kraft Foods Grp. Brands LLC, 137 S. Ct. 1514 (2017) [2] TC Heartland, 137 S. Ct. at 1517. [3] VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574, 1584 (Fed. Cir. 1990) (“[T]he first test for venue under § 1400(b) with respect to a defendant that is a corporation . . . is whether the defendant was subject to personal jurisdiction in the district of suit at the time the action was commenced”), overruled by TC Heartland, 137 S. Ct. at 1517. [4] See Bristol-Myers, 2017 U.S. Dist. LEXIS 146372, at *33 (“Because for so long it was so easy to establish proper venue under the residency prong of § 1400(b) . . . courts have not, until very recently, had much occasion to address” the second prong of § 1400(b)). [5] 28 U.S.C. § 1400(b). [6] Judge Stark in Boston Scientific did not address this element of § 1400(b). The Court found it unnecessary to consider this element because the defendants had met their burden to show that venue was improper under the “regular and established place of business” element of § 1400(b). Boston Sci., 2017 U.S. Dist. LEXIS 146126, at *26 n.13. [7] Bristol-Myers, 2017 U.S. Dist. LEXIS 146372, at *17 (citation omitted). [8] Id. at *15. [9] Id. at *18 (emphasis in original). [10] Id. at *19. [11] Id. (relying on the Federal Circuit’s guidance in Acorda Therapeutics, Inc. v. Mylan Pharms., Inc., 817 F.3d 755, 762 (Fed Cir. 2016), which held that, for determining personal jurisdiction in a Hatch-Waxman case, courts must consider all future acts the ANDA filer non-speculatively intends to commit upon receiving final FDA approval for its ANDA product). [12] Bristol-Myers, 2017 U.S. Dist. LEXIS 146372, at *33; Boston Sci., 2017 U.S. Dist. LEXIS 146126, at *27. [13] Bristol-Myers, 2017 U.S. Dist. LEXIS 146372, at *35 (emphases and citation omitted); Boston Sci., 2017 U.S. Dist. LEXIS 146126, at *29 (emphases and citation omitted). [14] Bristol-Myers, 2017 U.S. Dist. LEXIS 146372, at *38 (emphases in original); Boston Sci., 2017 U.S. Dist. LEXIS 146126, at *32 (emphases in original). [15] Bristol-Myers, 2017 U.S. Dist. LEXIS 146372, at *39 (emphases in original); Boston Sci., 2017 U.S. Dist. LEXIS 146126, at *33 (emphases in original). [16] Bristol-Myers, 2017 U.S. Dist. LEXIS 146372, at *40 (citations omitted); Boston Sci., 2017 U.S. Dist. LEXIS 146126, at *34 (citations omitted). [17] Bristol-Myers, 2017 U.S. Dist. LEXIS 146372, at *39 (citation omitted); Boston Sci., 2017 U.S. Dist. LEXIS 146126, at *33 (citation omitted). [18] Boston Sci., 2017 U.S. Dist. LEXIS 146126, at *38.In Bristol-Myers, Judge Stark found that the Court was unable to determine whether the defendant has a regular and established place of business in Delaware under Cordis, and therefore provided the plaintiff an opportunity to take venue-related discovery. Bristol-Myers, 2017 U.S. Dist. LEXIS 146372, at *44-45. [19] Boston Sci., 2017 U.S. Dist. LEXIS 146126, at *38-39 (these contacts consisted of “(1) sales of medical devices throughout the United States, including in the District of Delaware; (2) sales representatives who ‘occasionally call on physicians and hospitals (or their respective buyers) in Delaware’ but do not live in Delaware; and (3) one sales representative who lived in Delaware between January 2015 and September 2016, but had no responsibility for sales in Delaware and is no longer employed by Cook Medical”) (citations omitted). [20] Id. at *39 (citations omitted). [21] Id. at *41. [22] See id. at *26-27 (“Because of the development of the case law surrounding the residency test of § 1400(b) under VE Holding, . . . few courts—until very recently—have had occasion to rely on the second prong of § 1400(b) . . . .Now that TC Heartland has abrogated VE Holding, the issue of how to determine what is and is not a regular and established place of business is arising before courts with increased frequency.”) (citations omitted)
Conner First Place Winner Mary Catherine Amerine and NYIPLA President Anne Hassett
The New York Intellectual Property Law Association created a writing competition for law students and appropriately named it “The William C. Conner Intellectual Property Law Writing Competition”, after the Honorable William C. Conner, who was a former president of the NYIPLA. In recognition of his significant contributions to the field of Intellectual Property, in 1992 the Association established this competition in his name. The Honorable William Conner Writing Competition was established to recognize exceptionally written papers that are submitted by law students and is presented each year at the Annual Meeting and Awards Dinner. The winners receive cash awards and plaques at the NYIPLA Annual Meeting and Dinner to be held in New York City at the Princeton Club. The 2017 Hon. William C. Conner Writing Competition winner was Mary Catherine Amerine from William & Mary Law School, for her paper entitled Searching for a Sound: A Proposal for De Minimis Sampling Standards in the Music Industry Read Full Essay
2017 Hon. William C. Conner Writing Competition First PLACE Winner
Conner Writing Competition Co-Chair Richard Brown and Conner First Place Winner Mary Catherine Amerine
October/November 2017 IP Media Links By: Jayson L. Cohen
According to a news piece by Dalmeet Singh Chawla appearing on the Science website in October, the popular academic networking site ResearchGate has been sued in Germany by the American Chemical Society (ACS) and publisher Elsevier, which “alleg[e] copyright infringement on a mass scale.” ResearchGate has millions of users, who can “upload and share a wide range of material, including published papers, book chapters, and meeting presentations.” Chawla reports that ACS and Elsevier, among other copyright owners, became concerned about millions of copyrighted works that were being shared outside of their sites’ subscription paywalls. In September, when the publishers collectively approached ResearchGate about a solution involving an automated service to verify copyrights, ResearchGate rejected it and countered with a proposal that the publishers send formal take-down notices instead. ACS and Elsevier filed suit, claiming take-down notices were not a viable long-term solution. Another publisher Springer Nature is seeking to negotiate a solution with ResearchGate. The outcome of these events could have a lasting impact on how researchers work collaboratively and share information.(LINK) Richard Van Noorden published a similar article on Nature’s website.(LINK) In November 2017, Andrew Widener reported in Chemical & Engineering News that ACS won its infringement case against alleged pirate Sci-Hub, which was found by a U.S. federal court to be illegally distributing ACS’s copyrighted content and imitating ACS’s trademarks. In addition to injunctive relief, ACS was awarded damages of $4.8 million. According to the article, ACS will continue in its efforts to stop copyright infringement. (LINK) Eriq Gardner reported on the Ninth Circuit appeal in the “Blurred Lines” case between Marvin Gaye’s estate and Pharrell Williams and Robin Thicke, in a Hollywood Reporter article entitled, “Appeals Court Skeptical About Overturning Marvin Gaye Family’s ‘Blurred Lines’ Victory.” The article quotes from the arguments made by both sides. Williams and Thicke seek reversal, claiming the jury verdict and the Judge’s failure to grant summary judgment improperly rely on evidence that is beyond the copyrightable elements of the sheet music at issue. They argue that the properly considered evidence cannot sustain the jury’s finding of substantial similarity that is necessary to prove copyright infringement. The Gaye estate, in contrast, seeks affirmance, and further seeks to allow the jury to hear the recorded music – Gaye’s song “Got to Give It Up” – should the case be remanded. (LINK) This case is being closely watched by various stakeholders in the music industry and other interested parties, which are taking sides. (LINK) Finally, in a Halloween-themed suit Kmart must think it has received the “trick” half of the “trick-or-treat” proposition. Kmart is fighting for its right to sell banana-shaped costumes against copyright infringement and unfair competition alleged by Rasta Imposta, based on a 2010 design. According to an article by Shumita Basu for WNYC, Professor Chris Sprigman at NYU is skeptical of the claims, given the prevalence of banana-shaped costumes over time. (LINK)
Tips from the Bench: Practical Advice for Oral Argument By: Dyan Finguerra-Ducharme
For the past two years, I’ve had the pleasure to mentor and coach the firm’s team for the Annual Mock Appellate Second Circuit Argument coordinated by the NYIPLA. The four participating teams are composed of a mixture of summer and junior associates who present an appellate argument before Second Circuit judges and/or district court judges sitting by designation. Following the argument, the judges spend a generous amount of time providing valuable and insightful feedback to the advocates. As a practitioner, I find this part of the program to be the most interesting—a rare opportunity to capture pearls of wisdom on oral advocacy straight from the bench. I thought it would be beneficial to share my notes from the past two years with the NYIPLA membership: • All judges reacted adversely to use of the phrase "with all due respect." They unanimously and unequivocally find it highly offensive. To them you are saying “I'm not allowed to curse at you so I'll tell you in nicer words that I have no respect for you.” No judge will listen to you after you utter the words—it has a negative connotation across the bench so kill it from your go to oral advocacy vocabulary. • Don't say "Our position is"—it implies that you don't mean it, but you are getting paid to say it. Argue like you strongly believe in your argument. • Don’t lean on the podium. It gives the impression of awkwardness. • Don't let your voice drop at the end of sentences. It signals a lack of belief in the argument. • Don't be afraid to take a few moments to think about the answer to a tough question; you don't want to be thinking while you are talking. A pregnant silence is OK. • Don't be confrontational to a judge. Don't say he or she is wrong. • Don't act like the question is interfering with the plan for your argument. A judge's question is hugely important because it's telling you what the judge doesn't understand or where you have problems with your argument or position. You need to use the question as an opportunity to integrate the answer into your argument. Don't give a five word answer followed by complete silence. • The red light is sacred. When it goes on, you need to stop or ask permission to keep going. • Paraphrase long passages from a case—do not read long quotes. • There was a dispute among the judges as to whether it was appropriate to gesticulate. To err on the side of caution, you are likely better off keeping your hands on the podium. • If it is an IP case, educate the judge on the intellectual property at issue. • Oral argument is not a conversation. Constantly interrupting sentences or guessing where the other person is going is not appropriate. Wait for the judge to finish before you speak. • When referencing a case, remind the court of the jurisdiction of the case. • Don't start argument with a quote. Works with a jury but not a judge. • Don't do too much reading; it makes it seem like you do not believe in your argument. • Make eye contact. • If you are done, say you are done and sit down even if there's more time. • Make sure you answer the question before you move on. And listen—don't answer your own version of the question. • Don't use phrases like "Well, I suppose" or "I will get to that point later." Just answer the question when asked. • You need to be prepared for the left field question. • If the argument is split among multiple lawyers, know your colleague's arguments so you can answer them if asked rather than trying to punt it. • Responsiveness is most important attribute of a good oral advocate. If the question calls for a yes or no answer, then answer yes or no and "then you can do your dance." • If you can't answer the hard questions, then you are less likely to win. If you give good answers to the hard questions, you are more likely to win. • Don't complement the court: "That's a very good question." From the perspective of the judge, the judge will think “Yes, I know that's why I asked it,” and “how is this question any different from all of my others?" All of the judges’ questions are good. • Don't say "I believe." Just say the sky is blue. Don't say "I submit." These phrases suggest that you are just making the argument as an advocate. Phrases clutter things up. • End strong. End with an affirmative statement. • Don't say "the evidence is so strong"—when you make such a grand statement you are inviting judges to jump on you. Don't overstate. • Be responsive to the questions that you've been asked. Anticipate the weakest points of your case and acknowledge them. • Avoid the run-on sentences and place holders while you are getting to your point. For example, the cat is gone rather than when I checked the litter box the cat was not there and he also wasn't playing in the living room . . . . Value every second you have to argue. • Go forward on the basis that this is your golden opportunity to address the court's questions. • You want a hot bench. • Written submissions should be very precise and concise. Don't cite cases that aren't directly on point or not really helpful. A 30 page brief that contains 10 pages that aren't helpful is frustrating. • It drives judges crazy when lawyers respond to a specific question by talking about a case. The question may be a factual question and the lawyer starts talking about a case instead of the facts. • Help the court understand why it's important. Argue the big picture.
Patent Litigation Alert: Federal Circuit Clarifies ""Regular And Established Business"" For Venue Purposes in In re Cray Inc. By: Anthony f. Lo Cicero and Richard mandaro
On September 21, 2017, the United States Court of Appeals for the Federal Circuit (“Federal Circuit”) issued its decision in In re Cray Inc.[i] The Federal Circuit granted a writ of mandamus and vacated an order of the United States District Court for the Eastern District of Texas (“District Court”) denying a motion to transfer.[ii] In doing so, the court rejected the four-factor test established by Judge Gilstrap to determine what constitutes a “regular and established place of business” within the meaning of 28 U.S.C.§1400(b).[iii] In vacating the District Court's decision, the Federal Circuit set forth a new three-part test to assist courts in defining a “regular and established place of business” within the meaning of Section 1400(b). The Federal Circuit identified the following three requirements as relevant to the inquiry: (1) there must be a physical place in the district; (2) it must be a regular and established place of business; and (3) it must be the place of the defendant.[iv] The Federal Circuit stated that if any of these statutory requirements is not satisfied, venue is improper. In the District Court proceeding, Cray moved to transfer the action, arguing that it did not “reside” in the Eastern District of Texas in light of the Supreme Court's recent decision in TC Heartland LLC v. Kraft Foods Group Brands LLC.[v] Cray also argued that venue was improper in the Eastern District of Texas because Cray had neither committed acts of infringement, nor maintained “a regular and established place of business” within that district.[vi] The District Court rejected that argument and found that venue was proper based upon, among other facts, a Cray employee’s activities within the District. Following the District Court’s decision, Cray petitioned the Federal Circuit for a writ of mandamus. In vacating the District Court’s order, the Federal Circuit found that the District Court misunderstood the scope and effect of its prior decisions, leading it to improperly deny the motion to transfer. As the Federal Circuit stated, “[a]lthough the law was unclear and the error understandable, the district court abused its discretion by applying an incorrect legal standard, which we now clarify in this opinion.”[vii] In its analysis of whether Cray had a “regular and established place of business” in the Eastern District of Texas within the meaning of §1400(b), the Federal Circuit focused on the language of the statute. The Federal Circuit held that §1400(b) requires that “a defendant has” a “place of business” that is “regular” and “established.”[viii] It found that the four-factor test applied by the lower court was not sufficiently tethered to the statutory language, and thus failed to inform each of the necessary requirements of the statute.[ix] Rather, the Federal Circuit stated, “the analysis must be closely tied to the language of the statute.”[x] With regard to the first requirement that there “must be a physical place in the district,” the court found that the statute cannot be read to refer merely to a virtual space or to electronic communications from one person to another.[xi] Rather, there must be “a physical, geographical location in the district from which the business of the defendant is carried out.”[xii] In its analysis of the second factor that the place “must be a regular and established place of business,” the court focused on the word “regular.”[xiii] It stated that “[a] business may be ‘regular,’ for example, if it operates in a ‘steady[,] uniform[,] orderly [, and] methodical’ manner.”[xiv] The court held that neither sporadic business activity, nor a transient business location, can create venue.[xv] In its analysis of the third factor that the place of business “must be the place of the defendant,” the court explained that an employee's residence in a district is not necessarily enough to establish venue.[xvi] “[T]he mere fact that a defendant has advertised that it has a place of business or has even set up an office is not sufficient; the defendant must actually engage in business from that location.”[xvii] This was the crucial factor upon which the court relied in vacating the District Court's decision.[xviii] The Federal Circuit found that an employee's home was not a regular and established place of business—Cray did not own, lease or rent any portion of the employee's home in the Eastern District of Texas.[xix] Further, there was no evidence which indicated “that Cray played a part in selecting the place's location, stored inventory or conducted demonstrations” in the employee's home.[xx] Additionally, the employee's job was not conditioned upon his maintenance of a location in the Eastern District of Texas.[xxi] The facts here “merely show[ed] that there exists within the district a physical location where an employee of the defendant carries on certain work for his employer.”[xxii] The Federal Circuit explained that no one factor was controlling.[xxiii] However, taken together, the facts there did not support a finding that Cray had an established a place of business in the Eastern District of Texas, and thus, venue was improper under §1400(b).[xxiv] The case was remanded back to the District Court to determine the proper transferee district. The impact of this decision will help companies and courts more easily determine whether a “regular and established place of business” exists for the purpose of venue under §1400(b). Over the few months since the Cray decision issued in September 2017, courts have been using the three-part test as a road map to determine what constitutes a “regular” and “established” place of business. A number of rulings suggest that the mere presence of remote workers will not likely establish venue unless a company requires employees to live in a certain location and pays for its employee’s residence. For example, in the Western District of Wisconsin, a judge dismissed a suit finding that while a defendant has employees in the district, it didn’t own or lease any of its employees’ homes; require them to live there; warehouse products in their homes; post signage; or otherwise engage in business there.[xxv] Similarly, in the Eastern District of Texas, Judge Gilstrap rejected an argument that a company’s remote employees located in East Texas established venue, despite maintaining company files on their home computers and using those computers to connect to the allegedly infringing platform.[xxvi] In the Middle District of North Carolina, a judge transferred a case after finding that a residence in the district where a employee lived and carried on certain work for his employer was not enough to establish venue.[xxvii] Most recently in January 2018, a Northern District of Ohio court transferred a case after analyzing the background of four employees in the District and determined that their contacts were insufficient to support a finding of physical place in the district, or a permanent place of business, or that the company’s equipment on a customer’s property did not constitute “the place of the defendant.”[xxviii] Also, an agent for the service of process is not enough to establish venue. In the District of Delaware, Judge Stark rejected Plaintiffs" assertion that a defendant "has a physical presence in Delaware through its appointment of an agent for the service of process in Delaware." [xxix] However, in ordering further discovery into the issue of venue, Judge Stark suggested that the place of business prong of the new venue test could possibly be established through a company’s subsidiaries in the district.[xxx] Finally, a company’s computer servers do not establish a place of business for purposes of establishing venue. In East Texas, Judge Clark held that Google global cache servers hosted by third party ISPs in a server room located in the District are not “places” under the meaning of the statute.[xxxi] Judge Clark found that “[t]he servers are not places of Google” [rather] . . . “the servers are part of the third party ISP's network environment” and plaintiff “misconstrues the reality of Google's structure and ignores the distance between the GGC servers and Google as an entity.”[xxxii] Similarly, an Eastern District of Virginia court found that a rented computer server located in the District did not give the a company a place of business there, and constituted only a virtual space.[xxxiii] With the Cray decision issuing only a few months ago, we have only begun to see its ramifications, and there are sure to be more interesting venue issues arising in the years ahead. * Anthony F. Lo Cicero is a Partner and Richard Mandaro is Senior Counsel at Amster, Rothstein & Ebenstein LLP.Their practice specializes in intellectual property issues. They can be reached at alocicero@arelaw.com and rmandaro@arelaw.com. [i] In re Cray Inc., 871 F.3d 1355 (Fed. Cir. 2017). [ii] Id. at 1356-57. [iii] Id. [iv] Id. at 1360. [v] TC Heartland LLC v. Kraft Food Grp. Brands LLC, 137 S. Ct. 1514 (2017). [vi] Cray, 871 F.3d at 1358. [vii] Id. at 1360. [viii] Id. at 1362. [ix] Id. [x] Id. [xi] Id. [xii] Id. [xiii] Id. [xiv] Id. (citation omitted). [xv] Id. at 1362-63. [xvi] Id. at 1363. [xvii] Id.at 1364. [xviii] Id. [xix] Id. at 1365. [xx] Id. [xxi] Id. [xxii] Id. at 1366. [xxiii] Id. [xxiv] Id. [xxv] Niazi v. St. Jude Med. S.C., Inc., 2017 U.S. Dist. LEXIS 183849 (W.D. Wis. Nov. 7, 2017). [xxvi] Uniloc USA, Inc. v. Nutaniz, Inc., No. 2:17-cv-00174 (E.D. Tex. Dec. 6, 2017). [xxvii] Precision Fabrics Grp., Inc. v. Tietex Int'l, Ltd., 2017 U.S. Dist. LEXIS 184153 (M.D.N.C. Nov. 7, 2017). [xxviii] Automated Packaging Sys. v. Free-Flow Packaging Int’l, Inc., 2018 U.S. Dist. LEXIS 5910 (N.D. Ohio Jan. 12, 2018). [xxix] Mallinckrodt IP v. B. Braun Med. Inc., 2017 U.S. Dist. LEXIS 205593 (D. Del. Dec. 14, 2017). [xxx] Id. at *7. [xxxi] Personal Audio, LLC v. Google, Inc., 2017 U.S. Dist. LEXIS 198937 (E.D. Tex. Dec. 1, 2017). [xxxii] Id. at *29-*30. [xxxiii] BMC Software, Inc. v. Cherwell Software, LLC, No. 1:17-cv-01074 (E.D. Va. Dec. 21, 2017).
In the era before the ill-fated, inaptly-titled America Invents Act of 2011 (AIA), if you were informed that a drug company was assigning key patents to an Indian tribe, and paying them millions of dollars, in exchange for a license back and sovereign immunity for the patents in Inter Partes Review (IPR) proceedings, you might think that the drug company was, well, on drugs. Post-AIA, desperate times apparently call for desperate measures. Prior to the AIA, America's patent system was widely considered to be the best in the world. Now, however, the U.S. Chamber of Commerce has ranked the U.S. patent system tenth globally, tied with Hungary and behind major European and Asian countries. You may ask, “what went wrong with the system?” For one thing, IPRs became a vehicle for cancellation of patent claims with respect to the vast majority of claims subjected to that review. Perhaps not surprisingly, SCOTUS has granted certiorari in the Oil States case. The issue at hand is the constitutionality of patent invalidation in IPR proceedings featuring non-Article III judges and in the absence of due process constraints. Proponents of constitutionality tend to agree with a Federal Circuit panel's untenable position in MCM Portfolio LLC v. Hewlett-Packard, 812 F.3d 1284,1293 (Fed. Cir. 2015), that patent rights are “public rights,” as opposed to private rights. Daniel Webster, for one, would beg to differ with the Federal Circuit's position in MCM Portfolio. He noted that, although the power of securing the patent right for inventors is recited in the Constitution, the patent right exists before the Constitution and above the Constitution. Put differently, the inventor has an inchoate property right, flowing from the natural law, in an invention. The inchoate right vests upon grant of the patent. Chief Justice John Marshall, acting in a circuit court judge capacity, put it thusly in Evans v. Jordan, 8 F. Cas. 872, 873 (C.C. Va. 1813) (No. 4,564), back in 1813: “The constitution and law, taken together, give to the inventor, from the moment of invention, an inchoate property therein, which is completed by suing out a patent. This inchoate right is exclusive. It can be invaded or impaired by no person. No person can, without the consent of the inventor, acquire a property in the invention.” Clearly, both Daniel Webster and Chief Justice Marshall would agree that granted patents are private rights, not public ones. Certain avid supporters of the AIA would also agree. For example, the Intellectual Property Owners (IPO) organization, created as the political lobbying arm of the Association of Corporate Patent Counsel (ACPC), submitted an Amicus Brief in Oil States in support of the rights associated with patents being properly characterized as private rights. In its Brief, the IPO took no position on the constitutional question posed by SCOTUS, perhaps due to its strong support of AIA. If SCOTUS adopts IPO's position, the Justices may have little wiggle room on the constitutional issue. They might narrowly rule that IPR is unconstitutional with respect to pre-AIA patents (like those in contention in Oil States), or they might cut to the chase and rule that IPR is unconstitutional, period. Either ruling might be a good start to bringing the American patent system back from its eve of destruction. We shall know soon enough!
By : Dale carlson
AS TIME GOES BY - Oil States Stakes
HISTOrIAN'S CORNER
Two recent, potentially precedent-setting split-panel federal court of appeals decisions in intellectual-property cases, one by the Fourth Circuit in Shammas v. Focarino[1] and the other by the Federal Circuit in Nantkwest, Inc. v. Matal,[2] present a singular issue of broad and exceptional importance, not only to brand owners and inventors, but also to those in all other types of cases involving the nature and scope of court-awarded litigation expenses. Together with Realvirt, LLC v. Matal, yet to be decided by the Federal Circuit,[3] these decisions raise serious questions and concerns over a government agency’s, i.e., the interpretation by the U.S. Patent and Trademark Office (“PTO” or “Agency”), of the scope of statutorily mandated “expense-shifting” to include its attorney fees in federal district court proceedings for de novo review of adverse administrative rulings on applications for trademark registrations and patents. To date, the PTO has prevailed in insisting that the American rule against “attorney-fee-shifting” does not apply to these statutes. This article illuminates the fallacy and consequences of construing “expenses” to include attorney fees which, unless corrected, will inflate the price of lawful recourse to de novo review of PTO rulings beyond the reach of many, and in so doing attenuate the fundamental right of equal access to justice in seeking redress of grievances. INTRODUCTION For generations, members of the intellectual property (“IP”) bar have regularly counseled and represented U.S. and foreign businesses, non-profit organizations, and individuals in applying to the PTO for trademark registrations under the Trademark Act of 1946 (“Lanham Act”), 15 U.S.C. § 1051et seq., and patents under the 1952 Patent Act, 35 U.S.C. § 1 et seq. (reenacted in amended form in 2011 as the Leahy-Smith America Invents Act (“AIA”)). These activities aimed at securing IP rights typically involve ex parte examination of applications which, if rejected in whole or in part, can lead to administrative appeals,[4] resulting in agency rulings that are subject to review by Article III courts. Fundamental to this process is the right of applicants to challenge adverse PTO decisions by means of judicial review as a constraint imposed by Congress on the power of the administrative state. Judicial review of PTO refusals to grant trademark and patent applications is available in the form of two mutually exclusive options. They are authorized generally by the U.S. Administrative Procedure Act (“APA”)[5] and enabled specifically by organic statutes in the Lanham Act for trademark cases, 15 U.S.C. § 1071, and in the AIA for patent cases, 35 U.S.C. §§ 141-145. One option is direct appellate review by the U.S. Court of Appeals for the Federal Circuit, which accords significant deference to PTO factfindings when based on substantial evidence in the administrative record.[6] 15 U.S.C. § 1071(a); 35 U.S.C. § 141(a) and §§ 142-144. The court’s opinions and judgments are entered pursuant to Fed. R. App. P. 36, and its mandates are issued pursuant to Fed. R. App. P. 41. Under Fed. Cir. R. 36 (a) and (c)-(e), the court may, in the interest of judicial economy, enter summary orders of affirmance, without opinion. Such orders have increased in frequency in recent years. The other option is de novo (non-deferential) review in district court that takes into account further evidence relevant to the merits of the rejected application.[7] In order to develop a fulsome body of pertinent information upon which to consider and decide the merits of the application comprehensively and with optimal accuracy, the review takes place by adjudication in a civil action against the PTO in U.S. district court.[8] These civil actions allow the parties to adduce further evidence relevant to registrability or to patentability that, for whatever reason,[9] was not presented to the PTO prior to appealing examiners’ rejections to administrative tribunals within the Agency, namely, the Trademark Trial and Appeal Board (“TTAB”) or the Patent Trial and Appeal Board (“PTAB”).[10] In the absence of such further evidence, the court will likely entertain a motion by the PTO for judgment on the pleadings under Fed. R. Civ. P. 12(c) or for summary judgment under Fed. R. Civ. P. 56. For this reason, civil actions under 15 U.S.C. § 1071(b) (“§ 1071(b)”) or 35 U.S.C. § 145 (“§ 145”) are usually undertaken when the plaintiff-applicant intends to supplement the administrative record with additional facts. That, coupled with the relatively high cost of a trial, explains the disparity between the number of civil actions in district court and the larger number of direct appeals to the Federal Circuit than the appeals to the Federal Circuit via the district courts. Against the backdrop of this second judicial review option under §1071(b) and § 145, this article examines a new controversy regarding the scope and applicability of the existing language in both statutes that currently requires plaintiff-applicants to pay “all the expenses” associated with civil actions in every instance. DISCUSSION When the PTO rules against a trademark applicant or a patent applicant are based on less than all the available evidence, there are compelling policy reasons and a deliberate legislative purpose for preserving an applicant’s option to seek de novo judicial review by civil action in district court on an open record, as an alternative to the option of direct appeal to the Federal Circuit based on a closed, administrative record. A. The Nature of Civil Actions Against the PTO and Their Core Statutory Feature at Issue in the Present Controversy Civil actions that are the subject of this article[11] have been characterized as hybrid proceedings: in one sense, they are appeals from the PTO’s adverse decisions as part of the application process; in another sense, they are litigations against the PTO under federal practice and evidence rules[12] culminating in bench trials in which an Article III judge considers anew (de novo) the administrative record in light of further, relevant evidence submitted by either side.[13] The court, acting as a “fresh pair of eyes,” undertakes a “hard-look” (non-deferential) review of the entire case without issue preclusion (collateral estoppel).[14] A procedural distinction between civil actions under § 1071(b) and those under § 145 is that the latter are expressly venued exclusively in the Eastern District of Virginia.[15] A party that is dissatisfied with the district court judgment in a civil action, whether it be the plaintiff-applicant or the defendant-PTO, can appeal in trademark cases to the U.S. court of appeals for the regional circuit in which the district court is situated, 28 U.S.C. §§ 1291 and 1294(1), or in patent cases to the U.S. Court of Appeals for the Federal Circuit, 28 U.S.C. § 1295 (a)(4)(A). For that reason, civil actions under § 1071(b) and § 145 are regarded as intermediate proceedings, as compared to direct appeals to the Federal Circuit under § 1071(a) and § 141(a)/§§ 142-144. The controversy discussed in this article concerns the mandatory, automatic (non-discretionary) expense-shifting provisions in 15 U.S.C. § 1071(b)(3) (emphasis added): [U]nless the court finds the expenses to be unreasonable, all the expenses of the proceeding shall be paid by the party bringing the case, whether the final decision is in favor of such party or not . . . .[T]he record in the [PTO] shall be admitted on motion of any party, upon such terms and conditions as to costs [and] expenses . . . as the court imposes . . . . and in 35 U.S.C. § 145 (emphasis added): All the expenses of the proceedings shall be paid by the applicant. Thus, win or lose, plaintiff-applicants always bear the “heavy economic burden of paying ‘[a]ll the expenses’” in such cases.[16] Since neither statute on its face nor any relevant antecedent[17] explicitly permits or prohibits attorney-fee awards, i.e., “fee shifting,” as a component of “all the expenses,” the question boils down to whether any valid judicial interpretation of the scope of the term “all the expenses of the proceeding(s)” automatically must always include or implicate the shifting of the PTO’s legal expenses. B. The English Rule vs. the American Rule on Attorney-Fee Awards in the Context of Litigation with a Government Agency “Attorney fees” or “legal fees” are lawyers’ charges invoiced to their clients as compensation for the work they performed for the clients, for example, at an hourly (lodestar) rate, a flat-rate (fixed-fee), or on a contingent-fee basis.In a broader sense, such fees are charges for attorneys’ professional services[18] as distinguished from service fees charged by non-attorneys (i.e., witnesses and consultants) and by other entities (i.e., courts and agencies). From the client’s perspective, fee remittances are disbursements in payment of “costs” or “expenses”[19] differentiated by adjectives (“legal,” “court,” or “personnel”). Shifting of costs and expenses results in a reimbursement to the party that incurred them. The PTO argues that “all expenses” in § 1071(b)(3) and § 145 are to be understood to include attorney fees, legal fees, legal costs, legal expenses – whichever one may choose to call them – according to a straightforward, ordinary, contemporary, common, dictionary definition of “expenses.”[20] 1. The English Rule and Its Components The “English rule,” followed in most countries outside the United States, routinely shifts the burden of paying litigation expenses plus associated legal fees away from the prevailing party. The rule has been recognized in English courts since at least as early as the Middle Ages and regularly since the 1600s to discourage frivolous or clearly meritless lawsuits.[21] It is applied, according to its proponents, not as an element of damages arising from the cause of action, but rather as a separate and independent remedy in the form of compensation to the victor for having had to assert, or defend against, a claim in a litigation that need not or should not have been brought. Pursuant to the rule, a court orders reimbursement of fees that were paid or owed by the prevailing party to its attorneys (solicitors and barristers), the courts, and fact and expert witnesses.[22] The awarding of “legal fees” in countries that follow the English rule, notably in Great Britain, is understood to encompass the salaries of the prevailing party’s in‑house legal personnel.[23] 2. The American Rule and Its Exceptions In the United States, a vital tenet of the common law and legislative policy in existence since the founding of the Republic[24] as a bedrock principle[25] that has become rooted in federal and state jurisprudence – known as the “American rule” – presumes that each side in a litigation, win or lose, pays for its own lawyer.[26] According to its proponents, the rule serves the public interest in facilitating the development of substantive law. It does this by insulating litigants from the financial risk inherent in the English rule that might otherwise deter those from pursuing bona fide causes of action seeking redress of legitimate grievances, or from defending against rather than capitulating to malicious or frivolous claims. Stated another way, the American rule embodies a basic principle in this country that one who files or defends a suit in good faith should not be penalized by shifting attorney fees against him or her for not prevailing at the trial of a bona fide claim or defense.[27] There are three types of exceptions that enable a U.S. court to deviate from strict application of the American rule: (i) statutory, (ii) contractual, and (iii) judicial. These can result in “shifting” the burden of paying attorney fees away from the party that incurred them similar to the way that the English rule does. The proliferation of these exceptions – statutory, contractual, and in court decisions, in tandem with the increasing size and activity of the Government and the increasing number of statutes waiving its sovereign immunity from suit – has made the American rule a presumption rather than an immutable, rigid doctrine. In the present context, the statutory and judicial exceptions are the most significant. Statutory exceptions are usually intended to implement or to further the public policy of encouraging meritorious litigation by private parties who seek redress of their grievances – or to defend against claims –in particular settings. For example, the exceptions tend to level the financial playing field between plaintiffs of limited means on the one hand and well-funded corporate and government entities on the other. A notable example in the area of litigation against the federal government and its agencies in the present context is the Equal Access to Justice Act (“EAJA”), discussed in more detail later in this article.[28] Under the EAJA, the United States can be liable for the attorney fees and expenses incurred by certain types of plaintiffs in certain court cases that the Government loses and in which it fails to persuade the court that its position in the litigation “was substantially justified” or that “special circumstances make an award [against the Government] unjust.”[29] Judicial exceptions arise from the common law recognition of a court’s inherent equitable power to award (shift) attorney fees whenever overriding considerations indicate that the interest of justice so requires. In particular, a federal court may in its discretion[30]– sometimes authorized or aided by statute – punish a litigant (usually the losing side) that has “acted in bad faith, vexatiously, wantonly, or for oppressive reasons,” by ordering that party and/or its counsel personally to pay the other side’s (usually the prevailing party’s) attorney fees.[31] Legislation authorizing judicial shifting of attorney fees as sanctions in IP infringement cases and other civil actions that are exceptional involve plant variety protection certificates under 7 U.S.C. § 2565,[32] patents under 35 U.S.C. § 285,[33] trademarks under 15 U.S.C. § 1117,[34] and copyrights under 17 U.S.C. § 505.[35] These exceptions to the American rule authorize courts in outstanding litigations to award attorney fees in the case-by-case exercise of sound discretion, subject to “abuse of discretion” appellate review. They require courts to consider evidence of the objective unreasonableness of the sanctionee’s position under a totality-of-the-circumstances analysis. C. The PTO’s Aversion to Being Sued in District Court is at the Root of the Problem in Shammas, in Nantkwest, and in Realvirt For decades, a bureaucratic bias has existed against the district court’s statutory review power over PTO decision-making, in civil actions against the Agency as intruding upon and undermining the Agency’s self-perceived fact-finding and judgmental expertise. The PTO’s defense of these civil actions is supervised by and conducted through the U.S. Attorney General’s Office[36] by attorneys for the U.S. Justice Department[37] and possibly aided by other, selected outside “special attorneys.”[38] Contradicting the PTO’s position that it requires attorney fee awards as an aid to funding its operations is the fact that the DOJ’s services are usually provided at no cost to the PTO in litigations pursuant to the Federal Rules of Civil Procedure and the Federal Rules of Evidence, which the Agency can neither administer nor control, and over which it has no rulemaking or interpretive authority. To the PTO, such civil actions are a distraction from its role as appellee under § 1071(a) and § 141(a) / §§ 142-144 (option 1, above), wherein it can be represented entirely by its own salaried in-house attorneys and paralegal personnel in the Solicitor’s Office of the Agency. Symptomatic of its antipathy toward district court oversight, the PTO has tried over the years in various ways to impede, curtail, and indeed abolish the right of aggrieved applicants to petition the judiciary for redress of their grievances against the PTO through adversarial adjudication. This topic is discussed in greater detail in the American Bar Association Intellectual Property Law Section Report to the ABA House of Delegates and Recommended ABA Resolution 108A, approved February 8, 2016. Apropos of that, there has been keen interest of late in a trio of recent cases in which the PTO launched an unprecedented, expansive reading of the expense-shifting provisions in § 1071(b)(3) and § 145 that would make all de novo reviews of adverse PTO decisions through civil actions against the Agency significantly more costly to applicants and in some instances prohibitively so. Thus, in three separate lawsuits against the Agency decided recently by federal courts in the Fourth Circuit – one involving a rejected trademark registration application in Shammas v. Focarino,784 F.3d 219 (4th Cir. 2015), and the other two involving rejected patent applications in Nantkwest, Inc. v. Lee,162 F. Supp. 3d 540 (E.D. Va. 2016), and in Realvirt, LLC v. Lee, 195 F. Supp. 3d 847 (E.D. Va. 2016) – the PTO for the first time in its 170-year history of operating under these statutory provisions and their antecedents[39] has taken the position that the scope of the non-specific, unelaborated term “all the expenses” in § 1071(b)(3) and § 145 is to be construed in every instance – regardless of who wins and notwithstanding the bona fides of the plaintiff-applicant and competence of counsel in bringing and maintaining the action – to include the PTO’s attorney fees couched in terms of the pro-rated salaries of the Agency’s in-house counsel and paralegals allocated to the case under the rubric of “personnel” costs.[40] The Agency’s prior long history of not doing so goes against its argument in support of its abrupt about-face toward a position diametrically opposite from, and in conflict with, the American rule without the requisite statutory authority. In consequence of the PTO’s interpretation of the expense-shifting provisions in § 1071(b)(3) and § 145, when the defendant-PTO prevails on the merits (as it did in Shammas, in Nantkwest, and in Realvirt), then the provision defaults to the English rule, in which case the losing plaintiff-applicant would have to reimburse the PTO’s legal expenditures; but where the plaintiff-applicant wins, then it still must pay the loser’s lawyers – an interpretation that defies the logic of both the American and English rules and leads to a result absurd on its face. In flouting the American rule, the PTO in these three cases failed to identify (i) any unequivocal, specific, and explicit exceptional language of heightened clarity whether in the statutes themselves or in any underlying legislation, history, or commentary or (ii) any sanctionable conduct by the plaintiffs in bringing or maintaining these actions. Both § 1071(b)(3) and § 145 and their environments are devoid of such an interpretation, and in none of the three cases did the PTO allege or suggest that Mr. Shammas, Nantkwest, Inc. or Realvirt, LLC had acted in a manner that would warrant sanctions against any of them under 35 U.S.C. § 285. Given this backdrop, the PTO’s argument contradicts canons of statutory construction, abandons and undermines the original meaning and structure of § 1071(b)(3) and § 145, and foments discord and confusion in the law. So far, the PTO’s strategy has succeeded in both the Fourth and Federal Circuits. On the one hand, the Agency won in Shammas, where the District Court (Judge T.S. Ellis, III) granted the PTO’s post-judgment motion for reimbursement of the prorated salaries of the Agency’s in-house attorneys and paralegal who worked on the case. The Fourth Circuit affirmed the District Court’s grant of the motion in a split-panel decision (Judge Paul V. Niemeyer writing for the majority), and the U.S. Supreme Court denied Mr. Shammas’ petition for certiorari. To date, the Agency also won in Realvirt where Judge Ellis likewise granted the PTO’s post-judgment motion for legal expenses notwithstanding the court’s concurrent finding that the plaintiff lacked the requisite standing as an “applicant” under 35 U.S.C. § 145 to bring the action due to a defective assignment of the application. On the other hand, the Agency was initially unsuccessful in Nantkwest where a different judge (Judge Gerald Bruce Lee) in the same district court viewed the Fourth Circuit’s majority holding in Shammas to be erroneous and the dissent in that case to be correct, and denied the PTO’s post-judgment motion for reimbursement of similar PTO “personnel costs” as being contrary to the doctrinal American rule. The Agency, relying on the result it got in Shammas, appealed to the Federal Circuit wherein a sharply divided three-judge panel reversed the district court’s denial of the PTO’s motion for attorney fees. Thus, the PTO so far has successfully side-stepped the protection afforded to plaintiffs by the American rule with the intention of administering a fiscal coup de grace aimed at effectively abolishing the historic statutory right – or the legitimate exercise thereof –to de novo judicial review of adverse PTO rulings under 15 U.S.C. § 1070 and 35 U.S.C. § 134(a).[41] Shammas, Nantkwest, and Realvirt epitomize the singularity of the issue. And if the forthcoming Federal Circuit decision in Realvirt creates an inter-circuit split between that court and the Fourth Circuit in Shammas, then Realvirt may be the right case at the right time for the U.S. Supreme Court to exercise its discretion in recognizing and acknowledging the requisite compelling reason[42] to grant certiorari and decide whether “all the expenses of the proceeding” under 35 U.S.C. § 145 (and, by implication, 15 U.S.C. § 1071(b)) should, as a matter of statutory construction, exclude the PTO’s salaries for legal services as being equivalent to attorney fees excludable under the American rule. The dissent in Shammas (Judge Robert B. King) recognized that mere reference to a dictionary definition of “expense” does not equate to the requisite judicial interpretation of a statute in which the word appears when other factors are at play. The dissent makes the point that “a primary justification for the [American] Rule is that a party ‘should not be [financially] penalized [as it would be under the English rule] for merely . . . prosecuting [and losing] a [bona fide] lawsuit.’”[43] As a corollary, the holding in Shammas on expense-shifting in trademark registration cases, if not corrected with respect to patent cases, will achieve the PTO’s desired in terrorem effect that will deter many, if not most, aggrieved applicants from electing to incur the unpredictable, uncontrollable, and often extraordinary and insurmountable financial burden of paying the PTO’s lawyers. Plaintiff-applicants who write the checks would have no say as to who those lawyers are, where they come from, what they do, how much they charge or get paid by the PTO for their services, or whether those charges are reasonable – all-in-all a princely price to pay for what has been the statutory right, heretofore unfettered beyond the burden of expense-shifting, to challenge by robust civil action in district court the PTO’s flawed decisions denying trademark registrations or patents. The Fourth Circuit’s holding in Shammas upon which the PTO relied in Nantkwest, if not rejected at the Federal Circuit or beyond, would dramatically increase the financial risks faced by aggrieved applicants in litigating against the PTO to the point where, in many instances they would be compelled to forgo legitimate recourse for submitting further supporting evidence. In sum, the threat of judicial legislation compliments of the PTO would effectively eliminate § 1071(b) and § 145 as practicable recourses from erroneously adverse PTO decisions for IP stakeholders of limited means despite the potential worth of their trademarks or inventions. D. The PTO’s and Fourth Circuit Majority’s Interpretation of the Expense-Shifting Provisions in 15 U.S.C. § 1071(b)(3) and 35 U.S.C. § 145 is at Odds with the Equal Access to Justice Act Prior to Shammas, Nantkwest, and Realvirt, the PTO did not seek (nor was it awarded) reimbursement of its attorney fees (or to put it in terms of PTO parlance, compensation paid to its in-house attorneys and paralegals) by asserting the “all expenses” provisions in § 1071(b)(3) or § 145. Courts have allowed the PTO to recover its expenses in the form of printing costs,[44] its government counsel’s travel expenses in connection with depositions,[45] and court reporter and expert witness fees,[46] but no court had ever construed “expenses” in § 1071(b)(3) or § 145, or in their predecessor statutes, to include attorney fees. The exclusion of a lawyer’s compensation – whether it be the fee of an outside attorney or an in-house counsel’s salary – from “all the expenses” that are shifted in § 1071(b)(3) and § 145 follows as a matter of black-letter law under the American rule.[47] But the PTO has tried to sidestep the rule in two ways. First, it created a red herring to divert attention away from the rule, by couching its in-house counsel and paralegal salaries in terms of “personnel” expenses. In doing so, the PTO argues that reimbursing it for the pro-rated salaries of its “personnel” in every instance as part of “all the expenses of the proceedings” neither conflicts with nor operates as a statutory exception to the established, long-settled presumption of the American rule against fee-shifting in favor of parties that prevail in litigation because § 1071(b)(3) and § 145 always operate against the plaintiff-applicant in favor of the PTO even when the plaintiff-applicant is the prevailing party. Second, the PTO argues that these expense-shifting measures are provisions that help fund the Agency’s operations by alleviating the PTO’s financial burden resulting from an applicant’s election of the more expensive district court litigation option. But this argument conflates legal fees with “expenses” and then equates them to administrative fees imposed by the PTO or by Congress on applicants in exchange for access to the Agency’s services during prosecution within the confines of the Agency. This rationale for unilateral compensatory shifting of attorney fees finds no support in the legislative history. Under the PTO’s expansive interpretation of expense-shifting, plaintiff-applicants (and IP stakeholders generally) stand to lose financially more relative to what the PTO stands to gain. In rejecting the Shammas majority’s reasoning that the American rule does not apply to § 1071(b)(3) civil actions, the dissenting judge in Shammas (King) pointed out the “intuitive notions of fairness” that the American rule embodies as its primary justification for the principle that one “should not be penalized for merely . . . prosecuting a lawsuit.”[48] By requiring the plaintiff to pay the PTO’s attorney fees in all instances, the PTO would extract a price from applicants who seek to exercise their right to introduce new evidence in civil actions in order to vindicate their entitlement to trademark registrations or the grant of patents and the benefits these IP rights bestow. The Equal Access to Justice Act (“EAJA”)[49] is a comprehensive, partial statutory exception to the American rule nobly intended to provide successful private litigants with a means of recovering their expenses and attorney fees in civil actions brought by or against federal agencies whose positions in the litigation are not substantially justified. Conversely, the EAJA protects unsuccessful private plaintiffs that have limited financial means (like Mr. Shammas, for example) from being saddled with the burden of having to pay the government’s attorney fees in civil actions where the enabling statutes (like § 1071(b)(3) and § 145) do not mandate the shifting of attorneys’ fees. The EAJA reflects Congress’ concern that small businesses were being subjected to arbitrary regulation by federal administrators and “are the target of agency action precisely because they do not have the financial resources to fully litigate the issue.”[50] Thus, the Government, with its vastly greater resources could force people into acquiescing to adverse Government action, or electing less effective forms of recourse rather than vindicating their rights, simply by threatening them with costly litigation. Enlarging the expense-shifting language of § 1071(b)(3) and § 145 to include attorney fees, as advocated by the PTO, directly conflicts with and is inimical in spirit to the provisions of the EAJA in 28 U.S.C. §§ 2412(a)(1), (b), (c) and (d)(1)(A) governing the award to a prevailing private party (defined in (d)(2)(B)) of the expenses, costs, and fees in “any civil action brought . . . against any agency or any official of the United States . . .” including (under (d)(2)(A)) “proceedings for judicial review of agency action . . . .” The term “fees and other expenses” is expressly defined in 28 U.S.C. § 2412 (d)(2)(A) to include “reasonable attorney fees . . . which are to be included in the award except as otherwise specifically provided by statute” (as stated in 28 U.S.C. 2412(d)(1)(A)) or “unless expressly prohibited by statute” (as stated in 28 U.S.C. § 2412(b)). In the present controversy, the language of § 1071(b)(3) and § 145, when juxtaposed against the EAJA, does not specifically or expressly provide for or prohibit attorney fee awards, but the American rule operates to exclude them. The EAJA waives the federal government’s sovereign immunity against permitting private plaintiffs to recover their attorney fees from federal agencies, but never vice versa as the PTO contends. Thus, the provisions in the EAJA are thwarted by the PTO’s rationale for obtaining attorney fees by characterizing § 1071(b)(3) and § 145 as “funding provisions” for the benefit of the Agency. In contrast, the EAJA was enacted in response to legislative concerns that the economic disparity between the government and private plaintiffs would discourage parties of limited means (i.e., the “little guy”) from challenging unreasonable government action or the careless or wrongful execution of government authority. Simply put, the PTO’s position and the EAJA are mutually incompatible, and the PTO’s targeting for extinction the right of de novo review under § 1071(b)(3) and § 145 is what the EAJA seeks to prevent. E. The Fate of Shammas in the U.S. Supreme Court; the Federal Circuit Proceedings in Nantkwest; and the Status of Realvirt Shammas: On October 29, 2015, convinced that the Government had wrongly prevailed in the Fourth Circuit, Milo Shammas petitioned the U.S. Supreme Court for a writ of certiorari. On November 24, November 30, and December 1, 2015 amici curiae briefs, all in support of the petition, were filed by the International Trademark Association (“INTA”), the Intellectual Property Law Association of Chicago, and the New York Intellectual Property Law Association (“NYIPLA”), respectively. Following the Court’s March 4th conference on the petition, certiorari was denied on March 7, 2016. One might speculate that the justices appreciated that courts in other circuits would not be bound by the Fourth Circuit holding in Shammas, and that the February 5, 2015 district court decision in Nantkwest would soon reach the Federal Circuit, and, if affirmed there (which in fact did not happen –see below), the resulting circuit split on the same issue (albeit in different statutes) would make Nantkwest a more suitable vehicle for the Supreme Court’s review. Meanwhile, on March 31, 2017, the Fourth Circuit, in an unpublished per curiam order, affirmed the district court’s May 9, 2016 denial of Shammas’s April 14, 2015 Fed. R. Civ. P. 60(b) motion for relief from the court’s award of the PTO’s legal expenses to the PTO in view of Nantkwest after “review[ing] the record and find[ing] no reversible error.” Nantkwest: On September 30, 2015, the plaintiff-applicant in Nantkwest appealed to the Federal Circuit (Case No. 2015-2095) from the district court’s summary judgment decision in favor of the PTO on the issue of obviousness of the invention. On April 1, 2016, the PTO appealed to the Federal Circuit (Case No. 2016-1794) from the district court’s rejection of the PTO’s request for attorney fees qua “personnel expenses” incurred by the Agency in defending the civil action in the district court proceeding. Oral arguments were heard in both appeals on February 9, 2017. On May 3, 2017, the Federal Circuit issued a non-precedential decision affirming the district court’s grant of summary judgment of obviousness. On June 23, 2017, a sharply-divided three-judge panel of the Federal Circuit reversed the district court.[51] On August 31, 2017, the Federal Circuit unexpectedly issued a sua sponte order (i) vacating its June 23, 2017 panel ruling, (ii) reinstating the PTO’s appeal of the district court’s denial of the Agency’s motion for attorney fees, and (iii) setting the case for rehearing en banc. The order call for new briefs addressing the issue of whether the panel correctly determined that the provision of 35 U.S.C. § 145 “[a]ll expenses of the proceedings” authorizes an award of the PTO’s attorney fees. Following the re-briefing this fall and oral argument, the court’s decision will probably be forthcoming in early 2018. Realvirt: On November 14, 2016, the plaintiff-applicant in Realvirt appealed to the Federal Circuit (Case No. 2017-1159, consolidated with its appeal of the PTO’s rejection of the patent application in Case No. 2016-2669) from the district court’s (Judge Ellis) October 27, 2016 order granting the PTO’s motion for attorney fees. Realvirt, LLC’s principal brief was filed January 5, 2017, the PTO’s principal brief was filed March 16, 2017, and Realvirt’s reply brief was filed March 30, 2017. It appears that Realvirt could result in a circuit split between the Fourth and Federal Circuits as between that case and Shammas, echoing the intra-circuit split within the Eastern District of Virginia as between Nantkwest on the one hand and Realvirt on the other. Hence, the issue is now teed up for definitive Federal Circuit decision-making in Realvirt and, if need be, the U.S. Supreme Court’s review and resolution – or possible congressional intervention – to correct the PTO’s implausible, fundamentally flawed, expansive – and expensive – redefinition of the already onerous expense-shifting provisions in § 1071(b)(3) and § 145 before serious damage is done to the U.S. patent and trademark systems. Such correction is needed in order to provide clear, uniform guidance and finality, on this important legal issue of vital concern to the proper administration of Congress’ Article I, sec. 8 powers to “regulate Commerce” (clause 3 vis-à-vis trademarks) and to “promote the Progress of Science and useful Arts” (clause 8 vis-à-vis patents for inventions). Such guidance will hopefully restore long-settled expectations of and confidence in the patent and trademark laws on expense shifting and avoid uncertainties and misunderstandings as to the limits as well as the risks and other potential consequences – both direct and collateral – of applicants’ statutory burden of having to pay “all the expenses” in suits against the PTO. CONCLUSION The IP community’s concern over Shammas, Nantkwest, and Realvirtis with the continued viability of the right of aggrieved trademark and patent applicants to prove fully the merits of their trademarks and inventions through the submission of evidence beyond the administrative record in civil actions under statutes that are fair, sensible, free of ambiguity, and consistent with meaningful due process, and that are not at odds with the economic, policy, and legal purposes of this long-standing aspect of IP law. What is ultimately at stake in the present state of affairs? For those who depend on the lawful benefits of valid U.S. IP rights the answer is clear: to challenge the present attempt by the PTO to use fiscal means to dismantle district-court oversight jurisdiction of ex parte PTO administrative cases by placing them out of reach for many IP stakeholders. The consequences will be dire if draconian, senseless attorney-fee shifting is automatically imposed on trademark and patent applicants who find it necessary to resort to de novo judicial review in order to introduce further evidence to challenge the PTO’s mistakes. Just as there is a societal cost when the PTO registers ineligible trademarks or issues patents that should not have been granted, so too will there be a societal cost in erecting a potentially insurmountable financial impediment against de novo, substantive review of erroneous PTO refusals to register legitimate trademarks or grant patents on inventions that are worthy of protection. *Charles Miller is a partner at Eaton & Van Winkle LLP. Details of his professional credentials and contact information can be found at www.evw.com. He has appeared in the Realvirt, LLC v. Matal appeal as counsel for Amicus Curiae Association of Amicus Counsel in support of Realvirt, LLC. This article is presented for information purposes, and to elicit professional discourse. The contents hereof are neither intended nor should they be deemed, under any circumstances, by implication, inference, or otherwise, to constitute specific legal advice on any particular matter, and do not necessarily reflect the views of either the author’s law firm or the NYIPLA. However, the author or his colleagues will be pleased to answer or respond to any questions or comments about this article and related subjects. [1] Shammas v. Focarino, 784 F.3d 219 (4th Cir. 2015). [2] Nantkwest, Inc. v. Matal, 860 F.3d 1352 (Fed. Cir. 2017). [3] Realvirt LLC v. Matal, No. 2017-1159 (Fed. Cir. filed Sep. 20, 2016). [4] Administrative appeals within the PTO in trademark cases are enabled by 15 U.S.C. § 1070 and in patent cases by 35 U.S.C. § 134. [5] Passed by Congress in 1946 and enacted into positive law in 1948, the APA, 5 U.S.C. §§ 701-706, waives the sovereign immunity of the Executive Branch from judicial review of its agencies’ behavior. Federal agencies are defined in 5 U.S.C. § 551. With respect to the PTO, see 35 U.S.C. § 1(a). [6] In Dickinson v. Zurko, 527 U.S. 150, 152 (1999), the Supreme Court held that, in deciding appeals of administrative affirmances of PTO examiners’ rejections of patent applications, the Federal Circuit must apply the APA court/agency “substantial evidence,” “arbitrary and capricious,” or “not in accordance with law” standard of review of the Agency’s factfinding instead of the more stringent, less deferential court/court “clear error” review standard. [7] See 15 U.S.C. § 1071(b); 35 U.S.C. § 145. [8] Although neither 15 U.S.C. § 1071(b) nor 35 U.S.C § 145 prescribes the forum for civil actions against the PTO, jurisdiction lies with the U.S. district court under 28 U.S.C. § 1338(a). Venue in trademark cases lies in the Eastern District of Virginia or in the district where the plaintiff-registration applicant resides.28 U.S.C. § 1391(e)(1)(A) and (C). Venue in patent cases lies exclusively in the Eastern District of Virginia. 35 U.S.C. § 145. [9] Kappos v. Hyatt, 566 U.S. 431, 433-34 (2012) (“First, . . . . there are no evidentiary restrictions [in civil actions] beyond those already imposed by the [FREs] and the [FRCPs]. Second, . . . .the district court must make a de novo finding when new evidence is presented on a disputed question of fact”). [10] See supra note 4. [11] Civil actions are not available against the PTO for review of decisions in administrative inter partes cases, wherein the PTO is the adjudicator, not a party. For trademark cases in which there are adverse parties, see 15 U.S.C. § 1071(b)(2) and (4). In patent cases involving interferences (pre-AIA) or derivation proceedings, civil actions between parties are available under and are governed by 35 U.S.C. § 146. Such cases are not affected by the present controversy over statutory expense-shifting. [12] Fed. R. Civ. P. 1 and 2; Fed R. Evid. 101 and 1101. [13] CAE Inc. v. Clean Air Eng’g Inc., 267 F.3d 660, 673-74 (7th Cir. 2001) (In reviewing a PTO decision adverse to the applicant for a trademark registration, the district court, under 15 U.S.C. § 1071(b)(1), “sits in a dual capacity. It is an appellate reviewer of facts found by the TTAB and is also a fact-finder based on new evidence introduced to the court.”) (citation omitted). [14] The doctrine of collateral estoppel does not apply to de novo review of ex parte, non-adversarial PTO determinations. See Johnston v. Rea, No. 1:12-cv-440, 2013 WL 1499052, at *2 (E.D. Va. Apr. 9, 2013); BTG Int’l Ltd. v. Kappos, 1:12-cv-00682, 2012 WL 6082910, at *4 (E.D. Va. Dec. 6, 2012). [15] For venue in civil actions under 15 U.S.C. § 1071(b), see supra note 8, second sentence. [16] Hyatt v. Kappos, 625 F.3d 1320, 1337 (Fed. Cir. 2010) (en banc) (citing 35 U.S.C. § 145), aff’d, 566 U.S. 431 (2012). [17] The legislative histories of 35 U.S.C. § 145 and 15 U.S.C. § 1071(b) are intertwined, dating back to 1836.The predecessor of both statutes was Rev. Stat. § 4915 (1870) (“all the expenses of the proceeding”), which was preceded by the Patent Act of 1839, Ch. 88, § 10, 5 Stat. 353, 354 (1839) (“the whole of the expenses of the proceedings”), which in turn replaced the Patent Act of 1836, Ch. 357, 5 Stat. 117, 121 (1836) (“expenses of the Patent Office” including “the salaries of the officers and clerks herein provided for”). Nowhere else in those statutes, in any of their legislative histories, or in any court decision applying them, is there any mention of attorney fees or in-house legal personnel salaries as being part of the PTO’s taxable expenses. [18] Black’s Law Dictionary 154, 732 (10th ed. 2014). [19] Id. at 698. [20] Brief for Appellant at 14, Nantkwest, Inc. v. Matal, 860 F.3d 1352 (Fed. Cir. 2017) (No. 16-1794) (citing Black’s Law Dictionary698 (10th ed. 2014)). [21] See, e.g., Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U.S. 714, 717 (1967) (noting the history of fees recovery in English courts). [22] Id. [23] In the U.K., the salaries of in-house counsel and legal staff personal prorated to the time spent on legal work in particular civil litigations are considered “attorney fees.” This principal can be traced back to the case of Henderson v. Merthyr Tydfil Urban Council [1900] 1 QBD 434. [24] Arcambel v. Wiseman, 3 U.S. (3 Dall.) 306 (1796) (in rejecting the prevailing plaintiff’s attempt to include its counsel’s fee as an element of damages, the Court held that “we do not think that this charge ought to be allowed. The general practice of the United States is in opposition to it; and even if the practice were not strictly correct in principle, it is entitled to the respect of the court, till it is changed, or modified, by statute”). [25] Baker Botts L.L.P. v. ASARCO LLC, 135 S. Ct. 2158, 2164 (2015) (quoting Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242, 252-53 (2010)); Alyeska Pipeline Serv. Co. v. Wilderness Soc’y, 421 U.S. 240, 271 (1975) (“it is not for [the courts] to invade the legislature’s province by redistributing litigation costs”). [26] The American rule has long been adhered to by courts in all U.S. jurisdictions except Alaska. See Alaska Rent-A-Car, Inc. v. Avis Budget Grp., Inc., 738 F.3d 960, 972 (9th Cir. 2013); Warren Drilling Co. v. Equitable Prod. Co., 621 F. App’x 800, 806 (6th Cir. 2015). [27] Summit Valley Indus. v. Local 112, United Brotherhood of Carpenters & Joiners of Am., 456 U.S. 717, 724 (1972). [28] See infra note 49. [29] See also Pierce v. Underwood, 487 U.S. 552 (1988). [30] Judicial decisions are themselves traditionally divided into three categories of issues to be resolved, namely, questions of law (reviewable de novo), questions of fact (reviewable for clear error), and questions to be decided as matters within a judge’s discretion (reviewable for “abuse of discretion”). Pierce, 487 U.S. at 553. [31] Hall v. Cole, 412 U.S. 1, 5 (1973) (citations omitted); Chambers v. NASCO, Inc., 501 U.S. 32, 45-46 (1991) (citations omitted). 28 U.S.C. § 1927 provides that “[a]ny attorney . . . who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.” 28 U.S.C. § 1927 (emphasis added). [32] No reported court decisions. [33] Highmark Inc. v. Allcare Health Mgt. Sys. Inc., 134 S. Ct. 1744 (2014); Octane Fitness LLC, v. ICON Health and Fitness, Inc., 134 S. Ct. 1749, 1756 (2014). For the application of the “exceptional case” standard under 35 U.S.C. § 285 in a litigated dispute over inventorship, see University of Utah v. Max-Planck-Gesellschaft zur Forderung der Wissenschaften e.V., 851 F.3d 1317 (Fed. Cir. 2017). [34] Baker v. DeShong, 821 F.3d 620 (5th Cir. 2016). [35] Kirtsaeng v. John Wiley & Sons, 136 S. Ct. 1979 (2016). [36] 28 U.S.C. § 519. The DOJ’s supervisory role in defending the PTO in civil actions continues into the appellate review stage under 28 U.S.C. § 1291, § 1294(1), and § 1295(a)(4)(6). [37] 28 U.S.C. §§ 515-518. [38] 28 U.S.C. § 543(a), first clause, and (b). [39] See supra note 17. [40] One should note that the title of the PTO’s Motion for Attorney Fees and Expenses in Shammas distinguishes “attorney fees” from “expenses.” Was the separate use of the terms “attorney fees” and “expenses” a scrivener’s redundancy; or it was a Freudian slip that betrayed the PTO’s counsel’s own subliminal belief in the dichotomy? Also, the salary of the PTO’s paralegal employee – a non-attorney – was included with the salaries of the PTO’s in-house attorneys although it is questionable whether a paralegal’s work product can be properly regarded and invoiced as an “attorney fee.” Moreover, the PTO by its own administrative rules recognizes that compensatory expenses do not implicitly include attorney fees. See 37 C.F.R. § 42.12(b)(6) by which the PTO, drawing upon its dubious legislative rulemaking authority in 35 U.S.C. §§ 316(a)(6) and 326(a)(6), assumes that it can impose sanctions for contumacious conduct in contested AIA post-patent-grant review proceedings by “providing for [an award of] compensatory expenses, including [the shifting of] attorney fees.” If, as the PTO contends, the term “expenses” must be construed to include “attorney fees,” then why recite the latter specifically as such? [41] See supra note 4. [42] Sup. Ct. R. 10 (“Review on a writ of certiorari is not a matter of right, but of judicial discretion. A petition for a writ of certiorari will be granted only for compelling reasons. The following, although neither controlling nor fully measuring the Court’s discretion, indicate the character of the reasons the Court considers: (a) a United States court of appeals has entered a decision in conflict with the decision of another United States court of appeals on the same important matter . . . .”). [43] Shammas, 784 F.3d at 230 (4th Cir. 2015) (citations and emphasis omitted). [44] Cook v. Watson, 208 F.2d 529, 531 (D.C. Cir. 1953). [45] Robertson v. Cooper, 46 F.2d 766, 769 (4th Cir. 1931). [46] Sandvik Aktiebolag v. Samuels, No. Civ. A. 89-3127-LFO, 1991 WL 25774, at *2 (D.D.C. Feb. 7, 1991). [47] See, e.g., Alyeska Pipeline Serv. Co. v. Wilderness Soc’y, 421 U.S. 240, 267-68 (1975) (holding that under the American rule, in the absence of statutory authorization, a prevailing litigant cannot recover attorney fees based on its status as a “private attorney general”). For a prescient, comprehensive modern discussion of the American and English rules, see Hon. Victor Marrero (SDNY), The Cost of Rules, The Rules of Costs, 37 Cardozo L. Rev. 1599, 1684-92 (2016); and Mary Frances Derfner and Arthur D. Wolf, Court Awarded Attorney Fees (Matthew Bender & Co. Lexis Nexis Group 2015). Many of the drawbacks and suggestions for correcting them that are made by these writers on a philosophical level are beyond the scope of this article. However, the reader may wish to consult them in order to gain useful insights into the depth and complexity of the overall subject. [48] Shammas, 784 F.3d at 230 (citations and emphasis omitted). [49] Pub. L. No. 96-481, tit. II, 94 Stat. 2321 at 2325-30 (1980). The EAJA was reenacted into positive law at Pub. L. No. 99-80, 99 Stat. 183 (1985), and codified with respect to judicial proceedings in 28 U.S.C. § 2412. [50] H.R. Rep. No. 1418, 96th Cong., 2d Sess. 10 (1980), reprinted in 1980 U.S.C.C.A.N 4984, 4788; S. Rep. 253, 96th Cong., 1st Sess. 7 (1979). [51] See supra note 2.
Can the PTO Seek Payment of its Legal-Staff Salaries as of Right in District Court Actions By: Charles E. miller
Notable Trademark Decisions By: Scott Greenberg and Michael kraich
Federal Circuit Affords First Amendment Protection To Immoral/Scandalous Trademarks In a precedential decision, the U.S. Court of Appeals for the Federal Circuit held that the provision of Section 2(a) of the Lanham Act (15 U.S.C. § 1052(a)) authorizing refusal of registration of trademarks that comprise immoral or scandalous matter—a ground of refusal which the USPTO had invoked for over 100 years—is an unconstitutional restriction of the right of free speech under the First Amendment. In re Brunetti, 877 F.3d 1330 (Fed. Cir. 2017). This decision follows on the heels of Matal v. Tam, 137 S. Ct. 1744 (2017), in which the Supreme Court affirmed the Federal Circuit’s en banc decision that another provision of Section 2(a)—namely, the ground permitting refusal of registration if a mark may be disparaging to persons living or dead, institutions, or beliefs—violated the First Amendment right of free speech. In Brunetti, the applicant filed two applications to register the trademark “FUCT” in connection with clothing products. 877 F.3d at 1335. The examining attorney refused registration under Section 2(a) on immoral/scandalous grounds, and the Trademark Trial and Appeal Board (“Board”) affirmed this refusal. Id. at 1336. On appeal to the Federal Circuit, the Court found that substantial evidence supported the Board’s finding that the mark at issue was immoral or scandalous, including evidence that, taking into account contemporary attitudes, a substantial portion of the general public would consider the mark “vulgar.” Id. at 1338-40. However, the Court went on to hold that refusing to register trademarks because they are vulgar is an improper governmental restriction of free speech. Id. at 1341. The Court noted that a statute is presumptively invalid under the First Amendment if it restricts, or has a chilling effect upon, speech based on content, specifically, when “‘a law applies to particular speech because of the topic discussed or the idea or message expressed.’” 877 F.3d at 1341-42 (quoting Reed v. Town of Gilbert, 135 S.Ct. 2218, 2227 (2015)). The government can overcome this presumption of invalidity by demonstrating that the statute: (a) constitutes a type of government activity which does not implicate the First Amendment, e.g., a government subsidy program or a limited public forum provision (877 F.3d at 1343-44), (b) survives “strict scrutiny” review, i.e., “‘that the restriction furthers a compelling interest and is narrowly tailored to achieve that interest,’” (id. at 1342, 1348-49 (quoting Reed, 135 S.Ct. at 2231)) or (c) only regulates commercial speech and survives the “intermediate scrutiny” review standard, i.e., that the statute “‘directly advances a substantial government interest and that the measure is drawn to achieve that interest’” (id. at 1350-54 (citing Sorrell v. IMS Health, Inc., 564 U.S. 552, 574 (2017))). In Brunetti, the government conceded that the immoral/scandalous refusal is a content-based restriction on speech that would not survive strict scrutiny review. 877 F.3d at 1343. However, the government contended that the federal trademark registration system (a) constitutes either a government subsidy or a limited public forum, or, (b) alternatively, only regulates commercial speech and the immoral/scandalous refusal survives intermediate scrutiny. Id. The Court rejected all of the Government’s arguments. 877 F.3d at 1342-54. The Court held that the trademark registration system did not constitute a government spending program of the type that might give rise to the “subsidy” exception, because the trademark applicant is not receiving federal funds when the USPTO grants a trademark registration. Id. at 1344. The registration system is not a limited public forum, i.e., a situation in which “the government has opened its property for a limited purpose,” (id. at 1346-47 (citation and quotation omitted)) because trademarks exist in the marketplace, and “the speech that flows from trademark registration is not tethered to . . . any . . . government property.” Id. at 1347. The register of trademarks is merely a database and not a forum for the exchange of ideas. Id. at 1348. Finally, the Court held that the immoral/scandalous ground for refusal failed intermediate scrutiny even if deemed to regulate commercial speech because (1) it targets the expressive content of marks and not their commercial function, and (2) in any event, the desire to protect “the public from off-putting marks is an inadequate government interest for First Amendment purposes.” 877 F.3d at 1350-54. The Federal Circuit also held, responding to a dissenting opinion, that it would be impermissible for the Court to construe the immoral/scandalous refusal as only applying to “obscene” marks, in order to avoid the issue of constitutionality, because such a limitation was not a reasonable or foreseeable interpretation of the wording of the statute. Id. at 1355-56. In re Brunetti, 877 F.3d 1330, 125 USPQ2d 1072 (Fed. Cir. 2017) [precedential].
The Federal Circuit Holds that the Ban on Scandalous or Immoral Trademarks is Unconstitutional By: Ben natter and jessica sblendorio
On Friday, December 15, 2017, in an anticipated decision, the Federal Circuit ruled that the scandalous clause of the Lanham Act was unconstitutional on First Amendment grounds. See In re Brunetti, No. 2015-1109 (Fed. Cir. Dec. 15, 2017). This decision comes several months after the Supreme Court’s decision in Matal v. Tam, 137 S. Ct. 1744 (2017), which affirmed the Federal Circuit’s decision that the disparagement clause of the Lanham Act, contained in the same section as the scandalous clause, was unconstitutional. Prior to this decision and in the Supreme Court’s holding in Matal, section 2(a) of the Lanham Act allowed the United States Patent and Trademark Office (“USPTO”) to refuse to register a trademark that “[c]onsists of or comprises immoral, deceptive, or scandalous matter; or matter which may disparage or falsely suggest a connection with persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt or disrepute . . . ." 15 U.S.C. § 1052(a). Traditionally, the USPTO would evaluate whether a mark should be refused if “‘a substantial composite of the general public’ would find the mark scandalous, defined as ‘shocking to the sense of truth, decency, or propriety; disgraceful; offensive; disreputable; . . . giving offense to the conscience or moral feelings; . . . or calling out for condemnation.” In re Brunetti, slip op. at 3 (internal citations omitted). The USPTO also could determine if a mark was “scandalousness by establishing that a mark is ‘vulgar.’” Id. This determination was made in the context of contemporary attitudes, which means that the determination of what is scandalous or immoral would change over time. As background, Mr. Brunetti owns the clothing brand “fuct,” and in 2011, two individuals filed an intent-to-use application for the mark FUCT for various clothing items. Id. at 4. The individuals assigned the application to Mr. Brunetti, who amended it to allege use of the mark. The USPTO refused the application for trademark registration for the word “Fuct” for use on clothing apparel on the grounds that it comprised immoral or scandalous material. As part of its reasoning, the examining attorney noted that FUCT is the past tense of the verb “fuck,” which is considered a vulgar word and therefore scandalous. Id. Mr. Brunetti requested reconsideration and appealed the decision to the Trademark Trial and Appeal Board (“TTAB” or “the Board”) to no avail. Following the decision of the Board, Mr. Brunetti appealed the decision to the Federal Circuit. Mr. Brunetti’s main argument before the court was that the substantial evidence relied upon by the Board to find the mark FUCT vulgar under section 2(a) of the Lanham did not support this finding. Further, even if the mark was vulgar, Mr. Brunetti asserted that section 2(a) did not expressly prohibit registration of vulgar marks and that where there is doubt as to the meaning of the mark, as was with the mark FUCT, then the mark should be approved for registration. Id. at 5. As an alternative, Mr. Brunetti challenged the constitutionality of section 2(a)’s prohibition on scandalous or immoral marks. The Federal Circuit did find that the mark FUCT was vulgar and therefore scandalous. See id. at 6-9. In its analysis, the court noted that substantial evidence did support the Board’s finding that “‘fuct’ is a ‘phonetic twin’ of ‘fucked,’ the past tense of the word ‘fuck,’” and was sufficient to the relevancy of whether Mr. Brunetti’s mark FUCT was vulgar. Id. at 6. Further, the evidence in the marketplace regarding the use of Mr. Brunetti’s mark bolstered the Board’s finding—the mark was used on products that contained sexual imagery and was perceived by consumers as having a sexual connotation. Id. at 6-7. The court concluded that Mr. Brunetti’s arguments had no merit and that the Board did not err in concluding that the mark was not registrable under section 2(a). Although Judge Moore noted that the “trademark at issue is vulgar,” the Federal Circuit found that the First Amendment protects private speech, even in cases where it is offensive to the general public, and the scandalous clause amounted to a content-based discrimination on speech. Citing to the Supreme Court’s decision in Matal, the Federal Circuit noted that the Supreme Court left the question open of whether the test articulated in Central Hudson “provides the appropriate test for deciding free speech challenges to provisions of the Lanham Act”; however, the Federal Circuit applied this test here and concluded that the scandalous provision discriminates based on content in violation of the First Amendment. Id. at 12-13; 566 (1980). In cases where speech based on content is restricted, strict scrutiny review must be applied, which requires the government to demonstrate that the restriction furthers a compelling interest and is narrowly tailored to achieve that interest. Id. at 13. Although, the government conceded that the bar for registering scandalous or immoral marks under section 2(a) is a content-based restriction, the government argued that trademarks are commercial speech, and thus intermediate scrutiny should be applied and therefore was an appropriate restriction under this type of scrutiny. Id. at 14 . In rejecting this argument, the court noted that trademark registration is not a government subsidy program, and the cases discussing government subsidies did not justify the government’s content-based restriction on immoral or scandalous marks. See id. at 14-20. Additionally, the Federal Circuit found that trademark restriction is not limited to a public forum. The constitutionality of speech restrictions on government property are analyzed under the Supreme Court’s “forum analysis", under which the government can regulate property “in its charge” and place limits on speech. Id. at 20. Here, the government argued that the federal program for trademark restriction was a limited public forum and thus could subject section 2(a) to content-based restrictions on speech. Id. at 21.The Federal Circuit concluded that the registration and use of trademarks was not in line within the public or limited public forum cases, and “bears no resemblance to these limited public forums.” Id. at 24. Just because the registered trademarks appear on the government’s registrar, this is not enough to “transform” the trademark registration into a limited public forum. Id. at 25. Furthermore, the Federal Circuit concluded that because the scandalous clause targeted the expressive content of speech, strict scrutiny should apply. In its analysis, the court noted that although trademarks do convey a commercial message, they may also contain expressive content and stated that “[t]here can be no question that the immoral or scandalous prohibition targets the expressive components of speech.” Id. at 27. The court relied on a point made by Justice Kennedy in the Matal decision that unlike the provisions of the Lanham Act that discuss the source-identifying information of a mark, the disparagement clause, and in turn the scandalous clause, base rejection off an expressive message and not the commercial components of a trademark. Id. at 27-28. For these reasons, the Federal Circuit concluded that the scandalous clause of section 2(a) would be unconstitutional if strict scrutiny applied. Id. at 28. Moreover, the Federal Circuit held that the scandalous clause of the Lanham Act did not even pass intermediate scrutiny. Relying on the four-part test for commercial speech articulated in Central Hudson Gas & Electric Corp. v. Public Service Commission, 447 U.S. 557, the Federal Circuit asked “whether (1) the speech concerns lawful activity and is not misleading; (2) the asserted government interest is substantial; (3) the regulation directly advances that government interest; and (4) whether the regulation is ‘not more extensive than necessary to serve that interest.’” Id. (citing Central Hudson, 447 U.S. at 566). Although the court found that the scandalous clause clearly met the first prong, the court concluded that the second prong requiring a substantial government interest was not met: “The only government interest related to the immoral or scandalous provision that we can discern from the government’s briefing is its interest in ‘protecting public order and morality.’” Id. at 29 (internal citation omitted). In its analysis, the court noted that the government does not have a substantial interest in promoting certain trademarks over others and relied upon the Supreme Court’s reasoning in Matal v. Tam that trademarks are not government speech and cannot be regulated as such. See id. at 30-31. Furthermore, the court stated that the precedent of the Supreme Court, “makes clear” that the government’s interest in protecting the public from marks it views as “off-putting” is not a substantial government interest that can be used to suppress speech and relied upon the Supreme Court’s decision in Matal to support its analysis. Id. at 31-32. Additionally, the Federal Circuit noted that the government also does not have a substantial interest in protecting the public from scandalousness and profanities and rejected the government’s reliance on FCC v. Pacifica Foundation, 438 U.S. 726 (1978), which upheld the constitutionality of an order declaring a radio broadcast as indecent and potentially sanctionable. Id. at 33-34. The court noted that government’s interest in protecting the public from scandalous or immoral marks was not the same as the government’s interest in protecting children and other unsuspecting listeners from an onslaught of swear words, which was the case in Pacifica. Id. at 34. With respect to the third prong of Central Hudson, the court noted the government also would not meet this prong. The scandalous clause would not prevent prospective trademark applicants from using their marks, even if the mark is not federally registered, and in the age of the Internet, the court stated that the government “has completely failed” to protect the general population from scandalous material. Id. at 35. Lastly, the Federal Circuit held that no matter what the government's interest was, it could not meet the fourth prong of the Central Hudson test. Id. The court stated that the “inconsistent application” of the scandalous clause “create[d] an ‘uncertainty [that] undermines the likelihood that the [provision] has been carefully tailored,’” and noted that nearly identical marks have been approved or rejected by different examining attorneys, including marks that reference the vulgar term “fuck.” Id. at 35-36 (internal citation omitted). For these reasons, the Federal Circuit concluded that the scandalous clause does not pass muster under the Central Hudson test and failed to pass intermediate scrutiny review. Lastly, the majority noted that statutes are construed as narrowly as possible to preserve their constitutionality. However, the court found it was not reasonable to construe the scandalous or immoral clause to be confined to obscene material, which was limited to material of a sexual nature. Id. at 38-41. In a separate concurrence, Judge Dyk disagreed with the majority’s conclusion that there could be no reasonable narrow construction of the statute to preserve the constitutionality of it and urged adopting a narrowing construction. Judge Dyk suggested that one possible reading could be to limit the clause to cover obscene marks, which are not entitled to First Amendment protection. See id. at 2 (Dyk, J. concurring). However, Judge Dyk did note that because Mr. Brunetti’s mark was not obscene, the decision of the Board must be reversed and concurred with the judgment. Id. at 8 (Dyk, J. concurring). This decision is distinct from Matal in that the Supreme Court ruled that the disparagement clause constituted viewpoint discrimination, whereas the Federal Circuit concluded that the scandalous clause was a content-based restriction. Due to the recent nature of the decision in In re Brunetti, no petition for a writ of certiorari has been filed to date challenging the Federal Circuit’s decision. Because the restrictions of the disparagement clause and scandalous clause no longer exist, and as of yet, there are no apparent restrictions on who can take advantage of these decisions, this may result in more trademark applications for offensive terms. The question now will center on whether there will be any restrictions on such controversial trademarks at all.
Renowned for its favorable patent jury trial outcomes, the Eastern District of Texas has been home to the greatest number of patent case filings for nine out of the past ten years.[1] But the Eastern District’s popularity has tumbled since the Supreme Court’s decision in TC Heartland v. Kraft Foods Group Brands LLC, which limited venue options for patent plaintiffs. In TC Heartland, the Court restricted the venues in which a U.S. company may be sued for patent infringement, holding that for purposes of determining proper patent venue a domestic corporation “resides” only in its state of incorporation.[2] Whereas previously a patent defendant could be sued effectively anywhere it made sales, now, a patent defendant may only be sued in its place of incorporation or “where the defendant has committed acts of infringement and has a regular and established place of business.”[3] The shift away from the Eastern District was immediate and is proving sustained. Between May 23, 2017 and December 31, 2017, as compared to the same period last year, the overall number of patent case filings decreased by 15%, while the Eastern District of Texas’ patent filings dropped by 70%. Simultaneously, the District of Delaware’s patent case filings increased by 68%, and the Northern District of California’s filings nearly doubled, moving the Northern District of California into the top five district courts by patent case filings, ranking fourth. As patent case filings shift across district courts, the number of patent trials held in each district will follow suit. Plaintiffs reevaluating their venue options should consider district court resolution trends, such as the stage of litigation when cases are likely to be resolved and whether a court is more or less likely to find a patent valid, infringed or enforceable. Differences between the Eastern District of Texas and the District of Delaware may be the most informative as the District of Delaware begins to edge out the Eastern District of Texas as the top patent district. Similarly, plaintiffs deciding between the Central District of California and the Northern District of California may consider historical trends across the courts particularly relevant.[4] The following provides pre-TC Heartland statistical information on the top six district courts for patent disputes over the previous ten years: the Eastern District of Texas; the District of Delaware; the Central District of California; the Northern District of California; the Northern District of Illinois; and the District of New Jersey. I. Patent Case Resolutions Across Litigation Phase At a national level, for the period between 2012 and 2016, the percent of all patent cases resolved at trial was only 1.6%.[5] Cases brought in the Eastern District of Texas, the Central District of California and the Northern District of Illinois were less likely to be resolved at trial, each coming in under the national rate with 1.0%, 0.7%, and 0.7% of patent cases resolved at trial, respectively. Both the District of Delaware and the Northern District of California had comparatively larger percentages of trial resolutions, with 2.2% and 2.5% of all patent cases resolved at trial, respectively. Unsurprisingly, the Eastern District of Texas has the largest percentage of cases resolved through settlement, with 86% of all resolutions through settlement. Compared with the Eastern District of Texas’ small rate of trail resolutions, the District of Delaware’s comparatively larger rate reflects the fact that while the Eastern District of Texas has seen more patent case filings, the District of Delaware has seen more patent trials in the past 10 years. Between 2007 and 2016, the District of Delaware had 233 patent trials, while the Eastern District of Texas had 189 trials. As between the District of Delaware and the Eastern District of Texas, Delaware not only resolved more cases at trial, it also resolved more cases through pretrial resolutions. This may be correlated to the disproportionate percent of cases resolved through settlement in the Eastern District of Texas (86% in the Eastern District of Texas versus 76% in the District of Delaware). Between the Central District of California and the Northern District of California, the Central District had less patent disputes resolved at trial and through settlement, with a greater share of its patent disputes resolved through pretrial resolution or on procedural grounds. II. Infringement, Validity and Enforceability Findings The district courts have also exhibited varying trends in infringement, validity and enforceability findings.[6] At the national level, about half of all infringement related findings found for infringement (51%), and two thirds of all invalidity related determinations were for patent validity (66%). Despite its reputation as a patentee friendly district, the Eastern District of Texas found for infringement in less than half of all cases, with 44% of all infringement related determinations for infringement. Compare these statistics with the District of Delaware, which had a greater likelihood of infringement findings (50% compared to the Eastern District of Texas’ 44%), as well as the Central District of California and the District of New Jersey, which each found for infringement in more than half of all infringement related findings (54% and 71%, respectively). Like the Eastern District of Texas, the Northern District of California and the Northern District of Illinois tended to find more frequently for non-infringement than infringement, with only 35% and 38% of all infringement related findings for infringement, respectively. The Northern District of California and the Northern District of Illinois also had greater shares of invalidity findings than at the national level, with only 48% and 63% of all such determinations for validity, respectively. III. Patent Invalidity Findings Within invalidity findings, district courts have exhibited varying proclivities to certain invalidity grounds.[7] The Eastern District of Texas has exhibited a comparative disfavoring of § 101, instead relying more frequently on the § 112 bases for its patent invalidity findings. Twelve percent of the Eastern District of Texas’ invalidity findings were based on § 101, compared to the district courts across the nation where 16% of all invalidity findings relied on § 101 grounds. In exchange for a decreased reliance on § 101, a greater share of the Eastern District of Texas invalidity findings were based on § 112 grounds, with 35% of all its invalidity findings based on the § 112 bases while at the national level only 26% of all invalidity findings were based on the § 112 bases. As between the Central District of California and the Northern District of California, a greater share of the Northern District’s invalidity findings relied on § 101 grounds (24% of Northern District’s invalidity findings versus 17% of the Central District’s invalidity findings). The Central District instead based a greater portion of its invalidity findings on § 103 (27% of the Central District’s invalidity findings versus 21% of the Northern District’s invalidity findings). IV. Conclusion While drawing qualitative distinctions from summary statistics is a precarious task, the above statistics suggest that as between the Central District of California and the Northern District of California, the Central District may be a more patentee friendly venue. In the Central District, while having less patent cases overall, a greater portion of its determinations are for patent validity and infringement as compared to its northern counterpart. The same may be said of the District of Delaware as compared to the Eastern District of Texas, with the District of Delaware more frequently finding patents infringed as compared to the Eastern District. In reevaluating the venue landscape post-TC Heartland, reliance on old venue reflexes should give way to evidence based assessments for plaintiffs and defendants alike, while either determining where to bring suit or in filing venue transfer motions. *With great thanks to Anne Hassett, Executive Director, Engelberg Center on Innovation Law & Policy, for her insight, guidance and lively discussions. [1] The statistics and facts referenced in this article were compiled using the third party database Lex Machina. [2] 137 S.Ct. 1514, 1514 (2017). [3] 28 U.S.C. § 1400(b). [4] But see Order, Realtime Data LLC v. Nexenta Systems, Inc., No. 2-17-07690 (C.D. Cal. Jan. 23, 2018) (granting a motion to transfer on the basis that a corporate defendant resides “only in the state of its incorporation and, within that state, only in the judicial district in which it maintains its principal place of business”); Petition for Writ of Mandamus, Diem LLC v. BigCommerce, Inc., No. 18-120 (Fed. Cir. Dec. 22, 2017)and Petition for Writ of Mandamus, Express Mobile, Inc. v. BigCommerce, Inc., No. 18-122 (Fed. Cir. Dec. 28, 2017) (arguing that domestic corporations “reside” only in the district of incorporation, not every district in the state of incorporation). [5] These statistics reflect cases filed between January 1, 2000 and December 31, 2016, with termination dates between January 1, 2012 and December 31, 2016. Lex Machina uses the resolution category as a summary of the final stage at which the case terminates. If there are multiple defendants, the resolution shows how the case was resolved for the last defendant. To reduce the effect of this categorization, the period was limited to 2012 and 2016 after the implementation of 35 U.S.C. § 299, which modified the joinder rules in patent litigation. The pretrial resolution category includes disputes resolved by default judgments, consent judgments and judgment on the pleadings. Settlements include resolutions by voluntary dismissals and stipulated settlements. Procedural resolutions cover resolutions where the merits of the case were not examined and include contest dismissals, dismissals, consolidations, severances, inter- and intra-district transfers and stays. A small fraction of cases were resolved as a judgment as a matter of law, and were not included in this graph. [6] These statistics reflect cases filed between January 1, 2000 and December 31, 2016, with termination dates between January 1, 2007 and December 31, 2016. [7] These statistics reflect cases filed between January 1, 2000 and December 31, 2016, with termination dates between January 1, 2007 and December 31, 2016.A single determination of patent invalidity may be based on one or more grounds. The above graph counts each ground for patent invalidity separately. The category of § 112 includes Definiteness, Written Description, Enablement and Best-Mode (pre-AIA). The category “Other” includes invalidity on the basis of Obvious-Type Double Patenting, § 102(f) (pre-AIA), § 102(g) (pre-AIA), as well as §§ 132, 251, 255, 305 Defective Corrections grounds, and determinations with no invalidity reason given.
Patent Trial Statistics: A Cross Comparison of District Court Trends in Light of TC Heartland By: Maggie mortimer and daniel Roberts
Question Presented: Whether inter partes review (“IPR”), an adversarial process used by the Patent and Trademark Office (“PTO”) to analyze the validity of existing patents, violates the Constitution by extinguishing private property rights through a non-Article III forum without a jury.
Supreme Court 2017-2018 IP Case Preview By: Charles R. Macedo, David P. Goldberg, Marion P. Metelski
INTRODUCTION The Supreme Court has continued to demonstrate considerable interest in intellectual property issues, as it has over the past several years, by granting writs of certiorari in two patent cases so far for review this term (as of publication). While less in number than previous years (at least so far) the two cases promise to have far reaching effects on not only patent law but the role of an Administrative State in the United States. The Court has also invited the views of the Solicitor General in two other cases, and there are several other notable pending petitions awaiting a decision by the Court. The Amicus Brief Committee will continue to monitor and propose amicus curiae submissions, where appropriate, to be made to the Court(s). If you would like to join the Amicus Brief Committee, please contact Co-Chairs, David P. Goldberg (dgoldberg@arelaw.com) and Aron Fischer (afischer@pbwt.com). A. CASES IN WHICH THE PETITIONS WERE GRANTED: 1. Oil States Energy Services, LLC v. Greene's Energy Group, LLC, No. 16-712 (cert. granted June 12, 2017, to be argued Nov. 27, 2017). Issue: Patent Law/Constitutional Law – Constitutionality of PTAB Proceedings Greene’s Energy Group, LLC (“Greene”) sought inter partes review of claims 1 and 22 of U.S. Patent No. 6,179,053 (“the ’053 Patent”), which is entitled “Lockdown Mechanism for Well Tools Requiring Fixed-Point Packoff” and is owned by Oil States Energy Services, LLC (“Oil States”). Claims 1 and 22 relate, respectively, to an apparatus and a method that are designed to protect wellheads from the corrosive and abrasive fluids that are pumped into oil and gas wells during fracking procedures. The Patent Trial and Appeal Board (“PTAB”) instituted a trial and, at the conclusion of the trial, issued a Final Written Decision in which it held that claims 1 and 22 of the ’053 Patent are unpatentable. Oil States appealed the PTAB’s decision to the U.S. Court of Appeals for the Federal Circuit (“the Federal Circuit”). In addition to arguing against the PTAB’s construction of claims 1 and 22 of the ’053 Patent and against the PTAB’s denial of its motion to amend those claims, Oil States also argued that the inter partes review procedure violates Article III and the Seventh Amendment of the Constitution. A Federal Circuit panel affirmed the PTAB’s Decision without opinion, and the Federal Circuit denied Oil States’s petition for panel rehearing and rehearing en banc. With regard to the constitutional issue, the Federal Circuit had issued its decision in MCM Portfolio LLC v. Hewlett-Packard Co., 812 F.3d 1284 (Fed. Cir. 2015) before briefing in Oil States had closed. In MCM Portfolio, a Federal Circuit panel held that inter partes review is constitutional. The panel wrote that its holding is supported by Supreme Court precedent, as well as by the Federal Circuit’s own precedent.MCM Portfolio, 812 F.3d at 1291. The panel also held that inter partes review does not violate the Seventh Amendment “[b]ecause patent rights are public rights.” Id. at 1293. The Supreme Court limited its grant of Oil States’s petition for a writ of certiorari to the question of whether inter partes review violates the Constitution. In its brief on the merits, Oil States argues that patent owners have a right to an Article III forum for patent invalidation proceedings, since patent infringement actions, including the patent invalidity defenses raised therein, were traditionally tried at common law courts in England. Brief for Petitioner at 16, Oil States Energy Services, LLC v. Greene's Energy Group, LLC, No. 16-712 (filed Nov. 23, 2016). According to Oil States, Article III thus prohibits the PTAB’s exercise of “judicial power” in the context of inter partes review. Id. In support of this position, and contrary to the Federal Circuit’s holding in MCM Portfolio, Oil States argues that a patent is a private property right. Id. at 18. Furthermore, Oil States argues that patent infringement actions, including invalidity defenses, are required by the Seventh Amendment to be tried to a jury since they would have traditionally been heard in English law courts. Id. at 19. In their respective briefs on the merits, Greene and the Federal Government argue, inter alia, that patent rights are public rights because they are created by statute, and did not exist at common law. Greene and the Federal Government also argue that the inter partes review procedure was created by Congress as an avenue for the PTO to apply its specialized expertise to correct its own erroneous issuance of patent rights, and does not involve any adjudication of damages or award of liability. The Federal Government’s brief also argues that the trial-type procedures used in inter partes review, in and of themselves, are not determinative of the Article III issue. In support of the constitutionality of inter partes review, the Federal Government also argues that inter partes reviews do not remove any type of patentability dispute from Article III courts, and that review of PTAB decisions by an Article III court is available. Finally, the Federal Government argues that the Seventh Amendment does not separately prohibit inter partes review if that procedure is permissible under Article III. Thus, according to Greene and to the Federal Government, inter partes review does not violate either Article III or the Seventh Amendment of the Constitution. 2. SAS Institute, Inc. v. Matal, No. 16-969 (cert. granted May 22, 2017, argued Nov. 27, 2017). Issue: Patent Law/Administrative Procedure Act – Compliance of PTAB Practice with AIA SAS Institute, Inc. (“SAS”) sought inter partes review of U.S. Patent No. 7,110,936 (“the ’936 Patent”) entitled “System and Method for Generating and Maintaining Software Code” and owned by ComplementSoft LLC. SAS’s Petition for Inter Partes Review (“IPR Petition”) alleged that ComplementSoft LLC’s patent should be invalidated because it includes elements that were known in the prior art before the patent’s filing date. The PTAB instituted a review on some, but not all, of the claims that SAS petitioned the PTAB to review. With one exception, the PTAB invalidated all of the claims reviewed. See SAS Inst., Inc. v. ComplementSoft, LLC, 825 F.3d 1341, 1346 (Fed. Cir. 2016). In its appeal to the Federal Circuit, SAS challenged the PTAB’s final, written decision on grounds that the decision addresses only some of the patent claims challenged in the IPR Petition. In particular, SAS argued that the PTAB’s decision violates 35 U.S.C. § 318(a), which states: If an inter partes review is instituted and not dismissed under this chapter, the Patent Trial and Appeal Board shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner and any new claim added under section 316(d). SAS argued that this statutory provision requires a final, written decision of all claims challenged in the IPR Petition. A Federal Circuit Panel, including Judges Stoll, Chen and Newman, upheld the PTAB decision. SAS Inst., 825 F.3d at 1343. Writing for the majority, Judge Stoll held that SAS’s argument was precluded by Synopsys, Inc. v. Mentor Graphics Corp.,814 F.3d 1309 (Fed. Cir. 2016). In Synopsis, the Federal Circuit found “no statutory requirement that the Board’s final decision address every claim raised in a petition for inter partes review. Section 318(a) only requires the Board to address claims as to which review was granted.” Id. at 1316-17. As Judge Stoll explained, the Synopsis court “found it significant that § 318(a) describes ‘claims challenged by the petitioner,’ whereas the institution decision statutory subsection, 35 U.S.C. § 314, describes ‘claims challenged in the petition.’ We reasoned that the differing language implies a distinction between the two subsections such that § 318(a) does not foreclose the claim-by-claim approach the Board adopted there and in this case.” SAS Inst., 825 F.3d at 1352 (emphasis added). Judge Newman filed a lengthy and detailed separate opinion strongly dissenting on this point, arguing that “the PTAB’s practice of deciding the validity of only some of the patent claims challenged in the petition does not conform to the America Invents Act.” Id. at 1353 (Newman, J., concurring-in-part and dissenting-in-part). She reasoned that [t]he statutory provisions and the legislative purpose of substituting an agency tribunal for district court proceedings on aspects of patent validity are defeated by the PTO’s position that it can leave some challenged claims untouched . . . . Final determination of the validity of a challenged patent is not achieved when the PTO selects, at its sole and unreviewable choice, which claims it will review and which it will not touch. Id. at 1353-54 (emphasis added). Doing so, Judge Newman opined, would undercut the purpose of the AIA to provide an efficient and streamlined manner for the PTO to resolve patent disputes that would otherwise take years to litigate in costly district court proceedings. Id. In short, “the AIA . . . provides no support for the PTO’s practice of accepting consideration of some of the patent claims in the petition while ignoring others, when all challenged claims are fully documented and briefed in compliance with the statute.” Id. at 1355. SAS filed a Petition for Rehearing En Banc, which was denied. SAS Inst., Inc. v. ComplementSoft, LLC, 842 F.3d 1223, 1224 (Fed. Cir. 2016). However, SAS’s subsequent Petition for a Writ of Certiorari was granted by the Supreme Court for the question set forth above. SAS Inst. Inc. v. Lee, 137 S. Ct. 2160 (2017). In its brief on the merits, SAS reiterated in some detail on the same points made in Judge Newman’s dissent, that is, that by failing to issue a final, written decision on all of the patent claims challenged in SAS’s IPR Petition, the PTAB violated both the plain language of 35 U.S.C. § 318(a) and Congress’ legislative intent in creating IPRs. Brief for Petitioner at 17-32, SAS Institute Inc. v. Matal, No. 16-969 (filed July 20, 2017). SAS also argued that relying on the Federal Circuit’s reasoning in Synopsis was flawed because the Synopsys majority opined only that a regulation governing institution was “a reasonable interpretation of the statutory provision governing the institution of inter partes review”— that is, § 314(a). 814 F.3d at 1316. But a regulation that governs institution determinations does not speak to the completeness of final written decisions— which is “the precise question at issue.” [Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842 (1984).] Id. at 33-34 (emphases omitted). In other words, there is a difference between decisions to institute under Section 314 and final decisions on IPRs under Section 318, which should not be conflated. Accordingly, regardless of whether the Director’s regulation purporting to interpret § 314(a) is even authorized, let alone reasonable, it would remain the case that any claims on which inter partes review was not “instituted” under § 314(a) would still be claims “challenged by the petitioner” under § 318(a), and thus are still subject to that latter section’s mandate (“shall issue”) that the Board’s final written decision must address all, not just some, of those challenged claims. Id. at 36. SAS concludes from this that the PTO decision that not all challenged claims need be addressed in IPRs made an impermissible “fundamental structural change to the essential Congressional system of inter partes review.” Id. at 42. In its response, the PTO contends that such arguments are impermissible, “because the AIA precludes judicial review of the [PTO’s] institution decisions.” Brief for the Federal Respondent at 17, SAS Institute Inc. v. Matal, No. 16-969 (filed Sept. 5, 2017). Nevertheless, the PTO then addresses SAS’s arguments in detail, arguing that the “AIA provisions that address the institution of inter partes review confer very broad discretion on the agency, and they contain no language that even arguably requires the all-or-nothing approach that petitioner advocates.” Id. (citation omitted). Additionally, the PTO contends that SAS’s interpretation of Section 318(a) is fundamentally misconceived in that Section 318(a) . . . addresses the Board’s final disposition of an inter partes reviewafterthe Board’s consideration of the merits is complete.In light of its place within the statutory scheme, the directive on which petitioner relies is best read to refer to the patent claims that the petitioner challenges within the instituted review proceeding—i.e., the claims that the USPTO had previously agreed to review—rather than to all claims that were challenged in the petition. Id. (emphasis added). Accordingly, the PTO concludes that it is perfectly proper for the PTAB to issue final, written decisions that address only those patent claims on which IPRs have been instituted. Id. at 45-48. ComplementSoft’s responsive brief makes many of the same points as the PTO’s response, but adds Even if SAS were correct about the purpose of the statute, though, partial institution furthers the goal of expeditious resolution of validity questions. Because validity is always a claim-by-claim analysis, it only makes sense that an IPR be used only for those specific claims where the petitioner might be expected to prevail. A petitioner unhappy with a partial institution decision can always elect to proceed in district court instead of the IPR. Brief for Respondent ComplementSoft, LLC at 9, SAS Institute Inc. v. Matal, No. 16-969 (filed Sept. 5, 2017). ComplementSoft’s brief also argues that the conflict between Section 314 and 318 renders the AIA ambiguous, so that the PTO’s understanding should be given deference by the Court under the Chevron standard. Id. at 19-20. Finally, ComplementSoft’s brief points out that SAS’s arguments may amount to an end run around the Supreme Court’s Cuozzo decision: The Court noted that it has previously found such initial determinations to be unreviewable in other contexts. . . .There is no logical reason to make that determination reviewable here . . . . Id. at 26 (citing Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131, 2140 (2016)). Hedging its bets, ComplementSoft concludes by arguing that if the Court agrees with SAS the appropriate remedy is not to force the Board to litigate or enter a final written decision with regard to the claims on which SAS failed to meet its burden at the institution stage. Rather, the appropriate remedy would be to strike down the Board’s partial institution rules, vacate the IPR decision that would have been inappropriately rendered, and allow the Board the opportunity to decide again in the first instance whether it still wishes to institute this IPR. Id. 3. WesternGeco LLC v. ION Geophysical Corp., No. 16-1011 (cert. granted January 12, 2018) Issue: Patent Law/Damages – Availability of Lost Profits for Patent Infringement Under 35 U.S.C. § 271(f) WesternGeco LLC (“WesternGeco”) developed a geological surveying system, which it called “Q-Marine,” and used the system to perform geological surveys of ocean floors to identify drilling locations for oil and gas. In such surveys, a ship tows an array of “streamers,” which are miles-long cables that are filled with acoustic sensors, over the area of ocean that is being surveyed. The Q-Marine system employs a technology known as “lateral steering,” which WesternGeco developed and patented. Lateral steering enables the surveyors to control the movement of the streamers in relation to one another and to generate four-dimensional maps of the ocean floor (i.e., maps which show how the ocean floor has changed over time). WesternGeco LLC v. ION Geophysical Corp., 791 F. 3d 1340, 1343 (Fed. Cir. 2015). WesternGeco sued ION Geophysical Corp. (“ION”) for patent infringement under 35 U.S.C. §§ 271(f)(1) and (f)(2), alleging that ION’s DigiFIN geological survey device infringes four of WesternGeco’s patents relating to lateral steering technology. ION shipped components of its survey system to its customers abroad. ION’s customers, who were competitors of WesternGeco, used the DigiFIN devices in their surveying systems to perform geologic surveys. The jury found ION liable for infringement and awarded damages to WesternGeco, including $93.4 million in lost profits. On appeal, the majority opinion of the panel of the U.S. Court of Appeals for the Federal Circuit (“the Federal Circuit”) reversed the award of lost profits. The panel majority held that lost profits could not be awarded to WesternGeco for lost contracts for services that would be performed abroad. WesternGeco, 791 F. 3d at 1349. The majority relied on the presumption against the extraterritorial operation of U.S. patent law, citing to the Supreme Court’s decision in Microsoft Corp. v. AT & T Corp., 550 U.S. 437 (2007), and on the proposition that the purpose of the enactment of 35 U.S.C. § 271(f) was to treat the intentional export of components of patented systems abroad the same as the export of finished, patented systems abroad under 35 U.S.C. § 271(a). WesternGeco, 791 F. 3d at 1350. The majority then stated that, under the Federal Circuit’s decision in Power Integrations, Inc., v. Fairchild Semiconductor Int’l, Inc., 711 F.3d 1348 (Fed. Cir. 2013), “[i]t is clear that under § 271(a) the export of a finished product cannot create liability for extraterritorial use of that product.” Id. Accordingly, the majority reasoned that, “[u]nder Power Integrations, WesternGeco cannot recover lost profits resulting from its failure to win foreign service contracts, the failure of which allegedly resulted from ION’s supplying infringing products to WesternGeco’s competitors.” Id. at 1351. The panel majority also rejected WesternGeco’s argument that Power Integrations does not apply to infringement under § 271(f). Id. The majority reasoned that it is the act of exporting the components from the United States that creates the infringement liability under the express terms of § 271(f), and thus the liability attaches in the United States. According to the majority, any other construction of § 271(f) would render it broader than § 271(a). Id. Finally, the panel majority stated that the Supreme Court cases cited in the dissent were inapposite because they involved claims for lost profits arising from the sale of infringing items manufactured in the United States to foreign buyers by the U.S. manufacturer, whereas in this case WesternGeco’s claim for lost profits is from the use of the infringing items abroad. WesternGeco, 791 F. 3d at 1351–52. In its Petition for a writ of certiorari, WesternGeco argued that the Federal Circuit panel majority erred by applying the presumption against extraterritoriality to both liability under 35 U.S.C. § 271(f) and to damages under 35 U.S.C. § 284. (Pet. at 15–16). According to WesternGeco, none of the Supreme Court’s cases apply this presumption to limit damages once liability has been established. Furthermore, doing so would vitiate Congress’s clear intent in enacting § 271(f). (Id. at 17–18). WesternGeco also argued that the panel majority’s decision denying lost profits is counter to both 35 U.S.C. § 284 and the Supreme Court’s decision in General Motors Corp. v. Devex Corp., 461 U.S. 648 (1983). Here, WesternGeco relies on the Supreme Court’s explanation in General Motors that § 284 ensures “full compensation” for “any damages” incurred due to patent infringement. (Id. at 20). In this regard, WesternGeco argued that the cases cited in the Federal Circuit dissent hold that “foreign” sales can provide a basis for lost-profits damages “so long as they are tied to infringing activity in the United States.” (Id. at 22 (emphasis omitted)). Also in reliance on General Motors, WesternGeco argued that if Congress wanted to limit recovery of lost-profits damages for infringement of § 271(f), it would have done so explicitly. (Id. at 21). Finally, WesternGeco argued that the panel majority’s decision conflicts with the “predicate act” doctrine of copyright law, which provides that damages for copyright infringement based on foreign sales are available if the initial infringement occurred in the United States and the foreign sales are directly linked to the initial infringement. (Id. at 23). Noting the “historical kinship” between patent law and copyright law, and that the Supreme Court has historically construed the Patent and Copyright Acts in light of the same background principles, WesternGeco argued that nothing in the Patent Act is incompatible with the predicate act doctrine. (Id. at 22, 25). In addition to putting forth several procedural arguments for why WesternGeco’s Petition should be denied, ION responded that WesternGeco’s Petition should be denied on the merits. Specifically, ION argued that the purpose of § 271(f) was to create the same exposure to infringement liability for an exporter of components as existed for an exporter of finished goods under § 271(a). (Opp. at 5, 15–18). According to ION, the infringing act under both § 271(a) and § 271(f) is limited to exporting, and thus infringement does not occur outside the United States. Since damages under § 284 are provided to compensate “for the infringement,” it makes no sense that an exporter of a component under § 271(f) should face greater damages exposure than an exporter of a finished product that directly infringes under § 271(a). (Id. at 5–6, 16–18). ION also pointed out that it was its overseas customers, and not ION, who combined ION’s DigiFIN products with other equipment to make and use the invention to perform the surveys. (Id. at 18). ION also argued that WesternGeco is effectively asking the Supreme Court to overrule Microsoft v. AT&T and its progeny, and their presumption against extraterritoriality, with regard to § 271(f). (Id. at 21). According to ION, overruling this presumption opens the door for claims of damages worldwide if some connection can be shown between those worldwide damages and acts occurring in the United States. (Id.). As to the predicate act doctrine, ION argued that there is no split among the circuit courts of appeal with regard to the viability of the doctrine that requires the Supreme Court’s attention. ION also argued that WesternGeco waived this argument because it did not raise it in the district court or at the Federal Circuit, and thus no record has been made on this issue. (Id. at 23–24). The Supreme Court invited the Solicitor General to express the views of the United States on WesternGeco’s Petition. The Solicitor concluded that WesternGeco’s Petition should be granted. (Amicus Br. at 23). The Solicitor expressed the view that WesternGeco’s entitlement to foreign lost-profits damages “should be informed by . . . the traditional common-law rule that the victim of a tort should be returned to the position he or she would have occupied but for the legal wrong committed by the defendant.” (Id. at 12–13). In the Solicitor’s view, such “damages adequate to compensate for the infringement” would include all lost profits that were proximately caused by ION’s domestic infringement, in accordance with traditional common-law principles of tort. (Id. at 8, 13). The Solicitor argued that this result is consistent with the Supreme Court’s two-step framework for identifying impermissible extraterritorial applications of federal statutes that was set forth in RJR Nabisco, Inc. v. European Community, 136 S. Ct. 2090 (2016). In the first step, the Court asks whether there is “a clear, affirmative indication that [the statute] applies extraterritorially.” 136 S. Ct. at 2101. If so, then an extraterritorial application of the statute is permissible. (Amicus Br. at 13). If not, then in the second step the Court “determine[s] whether the case involves a domestic application of the statute . . . by looking at the statute’s ‘focus.’”136 S. Ct. at 2101. The Solicitor noted that the Supreme Court has not applied the two-step framework of RJR Nabiscoto a general damages provision, such as 35 U.S.C. § 284. (Amicus Br. at 14). However, assuming that the framework applies to § 284, the Solicitor opined that the “focus” of § 284 is to provide compensation for “infringement” of a U.S. patent, which by definition is always a domestic act. (Id. at 14). Since § 284 is not limited to any particular type of damages, but rather is intended to provide “full compensation for ‘any damages’” suffered as a result of patent infringement, even including foreign profits in the lost-profits calculation would entail a domestic application of § 284. (Id. at 14–15). The Solicitor also argued that the Federal Circuit’s decision with regard to lost profits is inconsistent with the only Supreme Court decisions that address the availability of foreign lost profits for domestic patent infringement: Brown v. Duchesne, 60 U.S. (19 How.) 183 (1857); Manufacturing Co. v. Cowing, 105 U.S. 253 (1882); Dowagiac Mfg. Co. v. Minnesota Moline Plow Co., 235 U.S. 641 (1915). (Id. at 16–18). The Solicitor noted, however, that “none of [these] decisions squarely holds that such profits may be recovered.”(Id. at 16). The Solicitor also agreed with ION that the Federal Circuit’s decision conflicts with copyright law’s “predicate act” doctrine. (Id. at 19–20). B. OTHER INTERESTING ISSUES: We also note the following additional petitions for certiorari which have been filed and are still under consideration. If you want more information on these cases, please consider joining the Amicus Briefs Committee, which will track these cases as they develop. 1. Paice LLC v. Ford Motor Co., Nos. 17-110/-111/-112/-113 (distributed for conference of Dec. 8, 2017) 2. Affinity Labs of Texas, LLC v. Samsung Electronics Co., No. 17-116 (distributed for conference of Nov. 21, 2017) and Affinity Labs of Texas, LLC v. Matal, No. 17-117 (distributed for conference of Oct. 27, 2017) 3. Celgard, LLC v. Matal, No. 16-1526(distributed for conference of Sept. 25, 2017) * Charles R. Macedo is a former Board Member and former co-chair of the Amicus Brief Committee of the NYIPLA and a Partner at Amster, Rothstein & Ebenstein LLP, David P. Goldberg is co-chair of Amicus Brief Committee of the NYIPLA and an Associate at Amster, Rothstein & Ebenstein LLP, and Marion P. Metelski is Senior Counsel at Amster, Rothstein & Ebenstein LLP. Their practice specializes in intellectual property issues, including litigating patent, trademark and other intellectual property disputes. They may be reached at cmacedo@arelaw.com,dgoldberg@arelaw.com and mmetelski@arelaw.com.
Question Presented: Whether 35 U.S.C. § 318(a), which provides that the Patent Trial and Appeal Board in an inter partes review “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner,” requires the Board to issue a final written decision as to every claim challenged by the petitioner, or whether it allows that Board to issue a final written decision with respect to the patentability of only some of the patent claims challenged by the petitioner, as the U.S. Court of Appeals for the Federal Circuit held.
Question Presented: Whether the U.S. Court of Appeals for the Federal Circuit erred in holding that lost profits arising from prohibited combinations occurring outside of the United States are categorically unavailable in cases where patent infringement is proven under 35 U.S.C. § 271(f).
Question Presented: Whether inter partes review—an adversarial process used by the Patent and Trademark Office (PTO) to analyze the validity of existing patents—violates the Constitution by extinguishing private property rights through a non-Article III forum without a jury.
Questions Presented: 1. Whether inter partes review—an adversarial process used by the Patent and Trademark Office (“Patent Office”) to analyze the validity of existing patents—violates the Constitution by extinguishing private property rights through a non-Article III forum without a jury? 2. Whether the Federal Circuit's issuance of Rule 36 judgments without opinions for the disposition of appeals from the Patent Office violates 35 U.S.C. § 144's requirement that the Federal Circuit “shall issue” its “mandate and opinion” for such appeals? 3. Whether the Federal Circuit's pervasive practice of issuing Rule 36 judgments without opinions to affirm more than 50% of appeals from the Patent Office has exceeded the bounds of reasonableness and is inconsistent with “principles of right and justice”? 4. Whether the Patent Office's consistent practice of failing to consider the claimed invention “as a whole” and failing to consider whether the combination of elements would lead to “anticipated success” in an obviousness determination conflicts with 35 U.S.C. § 103 and this Court's precedent in KSR Int'l Co. v. Teleflex Inc., 550 U.S. 398 (2007)?
Question Presented: Whether inter partes review—an adversarial process used by the Patent and Trademark Office (“Patent Office”) to analyze the validity of existing patents—violates the Constitution by extinguishing private property rights through a non-Article III forum without a jury?
David P. Goldberg
Marion P. Metelski
Charles R. Macedo
Last year, the Supreme Court ruled in the high-profile case Matal v. Tam, 137 S. Ct. 1744 (2017), that the disparagement clause of the Lanham Act violated the First Amendment’s Free Speech Clause. As such, the Court found that the disparagement clause was unconstitutional, thus concluding that the United States Patent and Trademark Office (“USPTO”) can no longer deny registrations or cancel U.S. trademarks containing disparaging material. While this was a unanimous decision with a vote of 8-0[1], there were a number of concurring opinions proffered by the Court. This article provides factual background for the case, examines the various concurring opinions of the Court, and provides some real-world consequences and take-aways in the wake of this decision. I. How Matal v. Tam got to the Supreme Court In 2006, Simon Tam, a 36-year-old bass player formed a rock band called “The Slants” with the intent to reclaim the word “slant” for the community of people it once targeted. Since 2011, Tam had been trying to obtain a federal trademark registration over this name. Tam’s application was originally rejected by the USPTO because the applied-for mark consisted of or included matter which “may ‘disparage . . . or bring . . . into contemp[t] or disrepute’ any ‘persons, living or dead, institutions, beliefs, or national symbols.”[2]According to the USPTO, the application violated § 2(a) of the Lanham Act, also known as the “disparagement clause.” After Tam’s application for the mark was rejected by the USPTO, Tam appealed the rejection to the Trademark Trial and Appeal Board (“TTAB”), which affirmed the rejection. Thereafter, Tam appealed again, this time to the Court of Appeals for the Federal Circuit, which held, en banc, that the disparagement clause was unconstitutional.[3] The Government then filed a Petition for a writ of certiorari on April 20, 2016, which was granted by the Supreme Court on September 29, 2016. After receiving a number of amicus briefs and hearing oral arguments, the Supreme Court issued its opinion on June 19, 2017. II. The Opinion “Speech may not be banned on the ground that it expresses ideas that offend.”[4] While the Justices differed on their exact reasoning, the above sentiment served as the foundation of the opinion, which held that the disparagement clause of the Lanham Act violated the Free Speech Clause in the First Amendment. SCOTUSblog concisely summed up the various Justices’ opinions: Justice Alito announced the judgment of the Supreme Court and delivered the opinion of the Supreme Court with respect to Parts I, II and III-A, in which all the justices joined except that Justice Thomas did not join Part II; Justice Alito also delivered an opinion with respect to Parts III-B, III-C and IV, in which Chief Justice Roberts and Justices Thomas and Breyer joined. Justice Kennedy filed an opinion concurring in part and concurring in the judgment, in which Justices Ginsburg, Sotomayor and Kagan joined. Justice Thomas filed an opinion concurring in part and concurring in the judgment. Justice Gorsuch took no part in the consideration or decision of the case.[5] In Part I of the opinion, the Court began with a brief history of trademarks in the United States leading up to the creation of the Lanham Act, and then discussed the benefits of having a federal trademark system, as well as the benefit of federal trademark registrations themselves. The Court also discussed the factual and procedural background of the case. From there, the Court in Part II discussed the arguments that Tam submitted on appeal to the Federal Circuit. Tam’s first argument was that the disparagement clause does not reach marks that disparage groups, as the text of the disparagement clause refers to “persons.” Interestingly, Tam did not previously raise this issue, and therefore, the Court did not grant certiorari on this point. However, as an affirmative answer to that question would render the rest of the opinion moot, the Court decided to address it.[6] In support of his argument, Tam pointed to the definition of “person” contained within the Lanham Act, the legislative history surrounding the Lanham Act, and the history of the USPTO registering marks that are disparaging to African Americans and Native Americans. The Court rejected these arguments by stating that Tam’s interpretation of the disparagement clause is too narrow, the legislative history does not support his position, and the disparaging marks previously allowed by the USPTO were “most likely [due to] the regrettable attitudes and sensibilities of the time in question.”[7] As such, the Court proceeded to address the issue that was granted certiorari: whether the disparagement clause is unconstitutional under the Free Speech clause of the First Amendment. In Part III of the opinion, the Court considered whether or not Tam’s trademark application should be offered protection under the First Amendment. The Court first addressed the government’s arguments that: (A) trademarks are government speech, not private speech; (B) trademarks are a form of a government subsidy; and (C) the constitutionality of the disparagement clause should be tested under a now “government-program” doctrine.[8] Part III-A unpacked the government’s first argument that trademarks are government speech. The Court expressed its reluctance to accept this position when it stated,“[i]f private speech could be passed off as government speech by simply affixing a government seal of approval, [the] government could silence or muffle the expression of disfavored viewpoints. For this reason, we must exercise great caution before extending our government-speech precedents.”[9] Further, the Court noted that the government does not create the content of trademarks and performs no examination to determine if any viewpoint conveyed by the mark is consistent with government policy. Accordingly, the Court found that “[n]one of our government speech cases even remotely supports the idea that registered trademarks are government speech.” The Court goes on to cite legal precedent which confirms this position. In support of the finding that registered trademarks are not government speech, Justice Alito discussed several cases where the Court concluded that the government-sponsored program at issue constituted government speech. These cases included a case where a federal statute created a program to produce advertisements to promote the consumption of beef;[10] another which held that the erection of monuments in a public park constituted government speech;[11] and a case that held that messages on specialty license plates are considered government speech.[12] In analyzing those cases, the Court concluded that trademarks share no characteristics with the holdings in those cases. Specifically, the Court held that the trademark registration process bears no resemblance to the government programs in those instances. After addressing some of the other government’s arguments, the court succinctly concluded that “[t]rademarks are private, not government, speech.”[13] Part III-B addressed whether trademarks are a form of a government subsidy. The Court began by that all of the cases that the government relies on address cash subsidies paid by the government. In contrast, trademarks involve the exact opposite—a trademark applicant must pay the government in order to receive federal trademark protection. In reply, the government stated that federal trademark registrations confer non-monetary benefits on the registration holder, and that government funds are used to process the registration. The Court summarily rejected this counter-argument. Part III-C parsed the government’s request that the disparagement clause be sustained under a new doctrine that applies to “government-program” cases. Specifically, the Court discussed two cases where a non-monetary benefit was given, in the context of making it easier for unions to engage in collective bargaining agreements where non-union members would also have to chip in to assist the unions.[14][15] The Court distinguished these cases by recognizing that the lawmakers in those instances were attempting to confer a particular benefit, which made those cases more analogous to the subsidy cases discussed in Part III-B.[16] The Court also discussed instances in which the government creates a limited public forum, which must abstain from viewpoint discrimination. However, the Court noted that “[g]iving offense is a viewpoint” and therefore the disparagement clause cannot be sustained by analyzing it as a type of government program.[17] Part IV next considered whether trademarks constitute commercial speech. Commercial speech is subject to the Central Hudson test, which requires that the restriction of speech be narrowly tailored and must serve a substantial government interest. Here, the Court found that the Lanham Act’s disparagement clause failed this test: “‘[t]he regulatory technique may extend only as far as the interest it serves.’”[18] As noted by the Court, the Government argued that the disparagement clause was intended to serve the purpose of preventing underrepresented groups from being subjected to demeaning messages in commercial advertising.[19] Furthermore, the First Amendment protects the freedom to express views that others may find hateful. The government further argued that the disparagement clause can be seen as protecting the flow of commerce.[20] Rejecting this argument, the Court found that the disparagement clause protects any person, group, or distinction, including groups that are not underrepresented, making the clause overbroad as drafted. For these reasons, the Court held that the disparagement clause fails the Central Hudson test and is therefore not protected as commercial speech.[21] In a concurrence, Justice Kennedy expanded on why the First Amendment’s prohibition on viewpoint discrimination renders the disparagement clause unconstitutional, and why this fact renders the government’s other positions moot. Justice Kennedy noted that “[a] law found to discriminate based on viewpoint is an ‘egregious form of content discrimination,’ which is ‘presumptively unconstitutional.’”[22] Based on this precedent, Kennedy concluded that the disparagement clause was necessarily an instance of viewpoint discrimination because the clause deems acceptable only the marks that convey positive or neutral messages. The government argued that the disparagement clause is viewpoint neutral because it applies equally to all trademarks that demean or offend. Justice Kennedy rejected this argument, finding that a law that restricts a certain viewpoint cannot be viewpoint neutral. The government advanced a second argument, contending that because the disparagement clause deals with how a group would react to a given mark, it does not limit a person from expressing their viewpoint. In also rejecting this argument, Justice Kennedy wrote that “[t]he Government may not insulate a law from charges of viewpoint discrimination by tying censorship to the reaction of the speaker’s audience.”[23] As such, Kennedy concurred in the judgment of the majority. III. Future Outlook and Takeaways While the Supreme Court seems to have reached the right legal conclusion, the decision has opened the floodgates for other potentially offensive and hurtful marks to be registered. One such result is that the Washington Redskins, an NFL football team whose name and logo have been the subject of much ire, will not have its federal trademark registration canceled as result of this holding.[24] However, for those of us representing clients who operate in sectors that are generally more open to vulgarity, many new marks may now be registered. For example, many beer brands have used racy names to help appeal to their customers. While such marks were previously unprotectable, the holding of Matal v. Tam now makes federal trademark protection is now a viable option. Also, for those who fear that this ruling may lie on a slippery slope, know that there are activists in the space who have taken measures to safeguard against abuses. A number of attorneys have filed applications for trademarks on various racial slurs and symbols of hate as a means of standing in the way of others who would attempt to truly commercialize those names and symbols. While there are many flaws with that approach, we certainly commend them for trying. [1] Gorsuch was not included as he was not present for oral arguments. [2] Matal v. Tam, 137 S. Ct. 1744, 1765 (2017) (Kennedy, J., concurring). [3] In re Tam, 808 F.3d 1321, 1328 (Fed. Cir. 2015) (en banc). [4] Tam, 137 S. Ct. at 1751. [5] Matal v. Tam - SCOTUSblog,SCOTUSblog - Supreme Court Of The United States Blog, http://www.scotusblog.com/case-files/cases/lee-v-tam/ (last visited Oct. 31, 2017). [6] Justice Thomas wrote separately to say that there was no reason to address this argument in the first instance. See Tam, 137 S. Ct. at 1369 (Thomas, J., concurring in part and concurring in the judgment). [7] Tam, 137 S. Ct. at 1757. [8] Id. [9] Id. at 1758. [10] Id. at 1759. [10] Id. at 1759 (citing Johanns v. Livestock Mktg. Ass’n, 544 U.S. 550 (2005)). [11] Id. (citing Pleasant Grove City v. Summum, 555 U.S. 460 (2009)). [12] Id. at 1760 (citing Walker v. Tex. Div., Sons of Confederate Veterans, Inc., 135 S. Ct. 2239 (2015)). [13] Id. [14] Davenport v.Washington Ed. Assn., 551 U. S. 177, 181–182 (2007). [15] Ysursa v. Pocatello Ed. Assn., 555 U. S. 353 (2009). [16] Tam, at 1762 (finding that those “cases occupy a special area of First Amendment case law, and they are far removed from the registration of trademarks”). [17] Id. at 1763. [18] Id. at 1764 (citing Cent. Hudson Gas and Elec. Corp. v. Pub. Serv. Comm’n, 447 U.S. 557, 565 (1980)). [19] Id. [20] Id. (noting that commerce may be disrupted by disparaging trademarks, which is similar to the recognition that discriminatory conduct adversely affects commerce). [21] Id. at 1765. [22] Id. at 1766 (Kennedy, J., concurring) (citing Rosenberger v. Rector and Visitors of Univ. of Va., 515 U.S. 819, 829-30 (1995)). [23] Id. (Kennedy, J., concurring). [24] Unsurprisingly, Pro-Football Inc. submitted an amicus brief in Matal v. Tam. See Brief for Pro-Football, Inc. as Amicus Curiae Supporting Respondent, Matal v. Tam, 137 S. Ct. 1744 (2017) (No. 15-1293).
The End of The Disparagement Clause By: MattheW G. Miller AND John E. Acito
Utility in Canada and in the United States-Before and After the Demise of Canada's Promise of the Patent Doctrine By: nicholas bertram and ryan schneer
Introduction: On June 30, 2017, the Supreme Court of Canada had released its decision rejecting Canada’s “promise of the patent” doctrine. As a result, a Canadian patent protecting a commercially successful invention no longer risks invalidity on the grounds that it does not have the requisite utility under the Promise Doctrine. The Canadian requirement of utility has stabilized, now further in line with utility under U.S. patent law, as will be explained below. Canada’s Promise of the Patent Doctrine: Under Canadian patent law, a patent may be granted for an invention that is new and useful, where the claimed subject-matter is novel and non-obvious.[1] Canadian courts had adopted for many years a “promise of the patent” doctrine that impacts the requirement of utility. The doctrine sets the level of utility as a function of promises of specific utility made in the specification of the invention. The invention had the requisite utility only if the promises were fulfilled. The doctrine of the “promise of the patent” applied by Canadian courts is rooted under the “false promise doctrine” in English law. The “false promise doctrine” was based on a patent being a grant from the Crown as an exercise of the Royal prerogative. An objection could be made if the Crown had been deceived by the grant based, for instance, on a false representation or suggestion made in the petition addressed to the Crown. Despite this doctrine now being extinct under English law, it had taken new life under Canadian patent law as the Promise Doctrine.[2] However, despite its English roots, Canada’s Promise Doctrine is unique. Under the Canadian doctrine of the “promise of the patent,” the requirement of “utility” under patent law is to be measured with respect to promises made in the specification of the application.[3] If a patentee’s patent promises a specific utility, the invention can only have the requisite utility if that promise is fulfilled.[4] Canadian courts are directed to read both the claims and the disclosure to identify potential promises. If any one of the promises is not fulfilled, then the utility requirement is not met and the patent, in its entirety, may be invalidated.[5] Therefore, despite commercial success, a patent may be declared invalid for lack of utility, even if only one of these promises was not met. This created uncertainty under Canadian patent law, as dozens of patents were being invalidated under this doctrine despite the commercial success of the invention.[6] The Supreme Court of Canada’s Decision in AstraZeneca Canada, Inc.v. Apotex Inc.: In its analysis, the Court rejected the “promise of the patent” doctrine. The Court took a firm position in this regard, stating that the Promise Doctrine is not good law and undermines a key part of the scheme of the Canadian Patent Act.[7] The Court stressed that the Promise Doctrine has the potential for unfair consequences. An “otherwise useful invention [may] be deprived of patent protection because not every promised use was sufficiently demonstrated or soundly predicted by the filing date.”[8] Moreover, the Court stated that depriving an invention of patent protection if only one of the disclosed uses is not soundly predicted or demonstrated is a drastic consequence that is antagonistic to the bargain on which patent law is based – inventors are asked to give fulsome disclosure in exchange for a limited monopoly. “[I]nvalidat[ing] a patent solely on the basis of an unintentional overstatement of even a single use” was seen by the Court as discouraging a patentee from disclosing fully, where such disclosure is to the advantage of the public.[9] Current Requirement of Utility under Canadian Patent Law Post-AstraZeneca v. Apotex: The Court in AstraZeneca v. Apotex stated that the requirement of utility under section 2 of the Canadian Patent Act is met when the subject-matter of the claimed invention is capable of an actual relevant use and is not devoid of utility.[10] In order to determine if the patent discloses an invention with sufficient utility, a court “must first identify the subject-matter of the invention as claimed in the patent,” then ask if the subject-matter is useful, i.e. capable of a practical purpose.[11] Therefore, the use is related to the subject-matter of the claimed invention. Moreover, “[a] single use related to the nature of the subject-matter is sufficient,” and the utility must be either demonstrated or soundly-predicted as of the filing date.[12] This is to ensure that a patent is not granted for a speculative use. The utility requirement has the purpose of “prevent[ing] the patenting of fanciful, speculative or inoperable inventions.”[13] Additionally, the patentee is not required to disclose the utility of the invention in the patent for the requirement of utility to be met.[14] Now that promises are no longer the yardstick against which utility is to be measured, the requirement of utility under Canadian patent law is closer in line with utility as it exists under U.S. patent law. Overview of the Utility requirement under U.S. Law: There is a longstanding tradition in the U.S. patent system favoring patent protection for only those inventions that possess utility. The utility requirement under U.S. patent law can be traced back to the U.S. Constitution[15] with various patent statutes dating back to 1790 requiring inventions to possess utility in some sense.[16] The modern utility requirement finds its basis in section 101 of the 1952 Patent Act.[17] Generally speaking, the utility requirement in the United States is satisfied if there is at least one “real world” use for the invention.[18] If the “real world use” of an invention is well-established, there is no requirement that utility be explicitly set forth in the specification.[19] Moreover, when a “real world use” is explicitly set forth in the specification, this use will be presumed sufficient in most cases.[20] Accordingly, in most technical fields, the utility requirement is a “low threshold” to patentability because a single “real-world” use of invention is often readily apparent.[21] However, in some technical fields, notably the biotech field, this is not always the case. Practitioners should keep in mind that while the utility requirement is often not a major concern in many fields, there are certain types of inventions that do not have a single defined “real world use.” A key example of a situation where a patent was found invalid for lacking a “real world use” can be found in the Supreme Court’s decision in Brenner v. Manson.[22] The patent at issue in Manson was directed to a process for making a form of dihydrotestosterone.[23] Though the patent holder argued that similar forms of dihydrotestosterone were known to have anti-tumor properties in mice, no specific use for the claimed form of dihydrotestosterone was known at the time of invention nor was any specific use of the claimed form of dihydrotestosterone disclosed by the patent.[24] Ultimately, the Court held the patent invalid because the claimed form of dihydrotestosterone had no known use outside of its use as an “object of scientific research.”[25] According to the Court: [A] patent is not a hunting license. It is not a reward for the search, but compensation for its successful conclusion. [A] patent system must be related to the world of commerce rather than to the realm of philosophy.[26] The takeaway from the decision in Manson is that the “real world use” of the claimed invention must be a practical one.[27] The fact that an invention is “useful” for intellectual inquiry or future research is insufficient. Lower courts have since elaborated on and clarified what it means for an invention to have a “single real world use.”[28] A noteworthy example of an invention lacking a “real world” use was at issue in In re Fisher.[29] In Fisher, the patent application claimed five different nucleotide sequences derived from maize.[30] The applicant asserted that the claimed nucleotide sequences possessed utility because (1) they could be used for the identification of polymorphisms, and (2) as probes or as a source for primers.[31] The Federal Circuit rejected this reasoning on the ground that the applicant’s alleged “uses” were applicable to any nucleotide sequence, not just the five claimed nucleotide sequences.[32]Citing In re Kirk,[33] the panel stated that: We do not believe that it was the intention of the statutes to require the Patent Office, the courts, or the public to play the sort of guessing game that might be involved if an applicant could satisfy the requirements of the statutes by indicating the usefulness of a claimed compound in terms of possible use so general as to be meaningless and then, after his research or that of his competitors has definitely ascertained an actual use for the compound, adducing evidence intended to show that a particular specific use would have been obvious to men skilled in the particular art to which this use relates.[34] The takeaway from the decision in Fisher is that an invention’s single “real world use” must be specific to the claimed invention.[35] There are situations where an invention can be found as lacking utility even when an argument can be made that it possesses a single “real world use.” This can occur when the sole “real world use” is “incredible” or the invention is found “inoperative.” Findings of inoperability are extremely rare.[36] They only occur when all the alleged “real world” uses of the invention are “inconsistent with known scientific principles”[37] or the invention is “totally incapable of achieving [any] useful result.”[38] Examples of such “incredible” inventions include perpetual motion machines,[39] cold fusion processes,[40] and other forms of miscellaneous pseudoscience.[41] Historically, there were also some patents held invalid for violating public morals.[42] However, in Juicy Whip Inc. v. Orange Bang Inc.,[43] the Federal Circuit found that it is never proper to find a patent invalid for lacking morality.[44] As such, the so called “moral utility” requirement is no longer good law in the United States.[45] In sum, under U.S. law, if an invention possesses a single “real world” use, this asserted utility will likely be taken as valid[46] unless the asserted utility is purely philosophical,[47] speculative,[48] incredible,[49]or “so general as to be meaningless.”[50] Conclusion Since AstraZeneca v. Apotex, which was decided under Canadian law, the risk of disclosing multiple possible uses of the claimed invention is reduced. Prior to the reversal of Canada’s “promise of the patent” doctrine, presenting several potential utilities, where only one is shown to be valid as of the filing date, would have been a permissible approach in the United States but not in Canada. In Canada, the fact that not all of the asserted utilities were demonstrated or soundly predicted at the time of filing could have resulted in invalidity of the patent under the Promise Doctrine. This is no longer the case. In light of the reversal of the “promise of the patent” doctrine in Canada, practitioners prosecuting patents internationally can take comfort in knowing that Canadian law is more in line with U.S. law. In fact, since AstraZeneca v. Apotex, lower courts in Canada have followed the Supreme Court of Canada’s decision, stating that the Promise Doctrine is no longer the correct approach to determine whether a patent has sufficient utility.[51] There have been attempts to revive the Doctrine based on new arguments, such as by stating that an overpromise does not meet certain requirements of the specification of a patent under section 27(3) of the Canadian Patent Act.[52] These arguments, though, have been held by the Federal Court of Canada to not be justified. At present, the requirement of identifying a single “real world” use for the invention under U.S. law is similar to the current two-part analysis to establish utility under Canadian law, which is identifying the subject-matter as claimed, and determining whether that subject-matter is capable of a practical purpose (i.e.an actual result). Furthermore, although not required under Canadian law and under U.S. law, when applicants believe that a compound may have several real world uses, it is now possible to disclose all of these potential uses in the application in the hopes that one is taken to be valid later on, by a court, the Canadian Intellectual Property Office or the United States Patent and Trademark Office. Practitioners should keep in mind, however, that making willfully false statements in a patent application could still run afoul and be considered inequitable conduct in the United States or may be considered a misrepresentation in Canada[53] (similar to inequitable conduct in the United States). However, under both inequitable conduct in the United States[54] and misrepresentation under section 53 of the Canadian Patent Act, an intent to deceive is required. Finally, Canadian courts appear to be increasingly more careful as to the impact of their decisions upon trade and commerce. In the words of Justice Gauthier of the Federal Court of Appeal: [c]onsidering the importance of patents nowadays, and the importance given to intellectual property law in trade treaties, courts should obviously be careful before adopting an interpretation that would put Canada at odds with its trading partners.[55] This increased sensitivity to trade is welcome, considering the international nature of patent law. The rejection of the Promise Doctrine is an important stride in putting Canada in line with its trading partners, namely the United States. [1] Patent Act, R.S.C. 1985, c P-4, s. 2, 28.2, 28.3. [2] AstraZeneca Can. Inc. v. Apotex Inc., 2017 S.C.C. 36, [2017] 1 S.C.R. 943, paras.33-35 (Can.) (hereinafter also referred to as “AstraZeneca v. Apotex”). [3] Eli Lilly Can. Inc. v. Novopharm Ltd.,[2010] F.C.A. 197, para. 80 (Can. F.C.A.). [4] AstraZeneca Can., para. 28. [5] Id., para. 31. [6] See e.g., Apotex Inc. v. Pfizer Can. Inc., 2011 F.C.A. 236 (Can. F.C.A.); Bell Helicopter Textron Can. Limitée v. Eurocopter, société par actions simplifiée, 2013 F.C.A. 219 (Can. F.C.A.)(15 of 16 claims were held invalid under the Promise Doctrine). [7] AstraZeneca Can., para. 51. [8] Id., para. 50 (emphasis added). [9] Id., para. 51. [10] Id., para. 52. [11] Id., para. 54. [12] Id., para. 55. [13] Id., paras. 56, 57. [14] Id., para. 58. [15] See, U.S.Const. art. I, § 8, cl. 8 (giving Congress the power to “promote the progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”) (emphasis added). [16] See generally 2 Moy's Walker on Patents § 6:1 n. 2-5 (4th ed.). [17] 35 U.S.C. § 101 (1952) (“Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title”) (emphasis added). [18] See, e.g.,Raytheon v. Roper, 724 F.2d 951, 958 (Fed. Cir. 1983) (“When a properly claimed invention meets at least one stated objective, utility under § 101 is clearly shown.”), cert. denied, 469 U.S. 835 (1984). [19] See MPEP § 2107.01, “General Principles Governing Utility Rejections” (citing In re Folkers, 344 F.2d 970 (C.C.P.A. 1965)). [20] See In re Langer, 503 F.2d 1380, 1391 (C.C.P.A. 1974) (“[A] specification which contains a disclosure of utility which corresponds in scope to the subject matter sought to be patented must be taken as sufficient to satisfy the utility requirement of § 101 for the entire claimed subject matter.”). [21] See Gene Quinn, Understanding the Patent Law Utility Requirement, IPWatchdog (November 7, 2015), http://www.ipwatchdog.com/2015/11/07/ understanding-the-patent-law-utility- requirement/id=63007. [22] 383 U.S. 519 (1966). [23] Id. at 520 n. 1. [24] Id. at 531–32. [25] Id. at 535. [26] Id. at 536 (citation and quotation omitted). [27] See also Nelson v. Bowler, 626 F.2d 853, 856 (C.C.P.A. 1980). [28] See, e.g., id. (holding that a patent must disclose at least one practical use); In re Kirk, 376 F.2d 936 (C.C.P.A. 1967) (holding that the decision in Manson extends to products without known uses and is not limited to the processes used to make those products); In re Joly, 376 F.2d 906 (C.C.P.A. 1967) (holding that a compound that can only be used as an intermediate to make other compounds that may have some use in the future cannot be considered to have a “real world use”). [29] 421 F.3d 1365 (Fed. Cir. 2005). [30] Id. at 1368. [31] Id. [32] Id. at 1374. [33] 376 F.2d at 942. [34] 421 F.3d. at 1375 (emphasis in original) (citation omitted). [35] See also MPEP, supranote 19. [36] Id. (“Situations where an invention is found to be ‘inoperative’ and therefore lacking in utility are rare, and rejections maintained solely on this ground by a federal court even rarer.”). [37] Id. [38] Brooktree Corp. v. Advanced Micro Devices, Inc., 977 F.2d 1555, 1571 (Fed. Cir. 1992). [39] Newman v. Quigg, 877 F.2d 1575 (Fed. Cir. 1989). [40] In re Swartz, 232 F.3d 862 (Fed. Cir. 2000). [41] See also In re Ruskin, 354 F.2d 395 (C.C.P.A. 1966) (invention directed to a method for increasing the energy output of fossil fuels upon combustion through exposure to a magnetic field); Fregeau v. Mossinghoff, 776 F.2d 1034 (Fed. Cir. 1985) (invention directed to a method asserted to change the taste of food using a magnetic field). [42] See, e.g., Lowell v. Lewis, 15 F. Cas. 1018 (C.C.D. Mass. 1817) (Story, J.); Brewer v. Lichtenstein, 278 F. 512 (7th Cir. 1922). [43] 185 F.3d 1364 (Fed. Cir. 1999). [44] Id. at 1368 (citing Webber v. Virginia, 103 U.S. 344, 347-48 (1880))(“Congress never intended that the patent laws should displace the police powers of the States, meaning by that term those powers by which the health, good order, peace and general welfare of the community are promoted.”). [45] See generally, Benjamin D. Enerson, Protecting Society from Patently Offensive Inventions: The Risk of Reviving the Moral Utility Doctrine, 89 Cornell L. Rev. 685 (2004). [46] See generally MPEP, supranote 19; see also In re Langer,503 F.2d 1380, 1391 (C.C.P.A. 1974) (“As a matter of Patent Office practice, a specification which contains a disclosure of utility which corresponds in scope to the subject matter sought to be patented must be taken as sufficient to satisfy the utility requirement of § 101 for the entire claimed subject matter unless there is a reason for one skilled in the art to question the objective truth of the statement of utility or its scope.”). [47] Fisher, 421 F.3d at 1376. [48] Joly, 376 F.2d at 908. [49] See supranotes 36–41. [50] Fisher, 421 F.3d at 1370. [51] See, e.g., Pfizer Can. Inc. v. Teva Can. Ltd., 2017 F.C. 777, para. 312 (Can. Fed. Ct.); Bristol-Myers Squibb Can. Co. v. Apotex Inc., 2017 F.C.A. 190, para. 7 (Can. F.C.A.). [52] Canadian Patent Act, supranote 1, s. 27(3); Pfizer Can. Inc. v. Apotex Inc., 2017 F.C. 774, paras. 362, 363 and 365 (Can. Fed. Ct.). [53] Canadian Patent Act, supranote 1, s. 53(1): A patent is void if any material allegation in the petition of the applicant in respect of the patent is untrue, or if the specification and drawings contain more or less than is necessary for obtaining the end for which they purport to be made, and the omission or addition is willfully [sic] made for the purpose of misleading. (Emphasis added.) [54] Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1288-89 (Fed. Cir. 2011) (en banc). [55] Apotex Inc. v. Pfizer Inc., 2017 F.C.A. 201, para. 77 (Can. F.C.A.)
Corporate Committee Fall Mixer Tulloss Delk AND Laura Sheridan, Co-Chairs of the COrporate committee
On October 4th, over 40 students and attorneys attended a joint CLE program hosted by NYIPLA and Hofstra Law School, “IP Considerations for New Practitioners and Non-IP Attorneys.” The program consisted of two panels and a networking reception, all held at the Maurice A. Deane School of Law at Hofstra University. The first panel, “Diverse Careers in IP Law and Strategies for Achieving Success,” included in-house counsel and attorneys from several law firms of various sizes. Panelists addressed various areas of practice and types of careers available in the field of IP law and provided advice on how to pursue these options while in law school and after graduation. The second panel, “IP Considerations for New IP Practitioners and Non-IP Attorneys,” which also included in-house and outside counsel, covered a range of IP-related issues that new practitioners, whether or not practicing IP law, may encounter. The panel addressed such topics as assignment and transfer of licenses, mergers and acquisitions, bankruptcy matters, and labor and employment issues.
IP Considerations for New Practitioners and Non-IP Attorneys lindsay korotkin, steven bernstein, and scott forman, co-chairs of the young lawyers committee
On September 26th, the NYIPLA Corporate Committee held its annual in-person mixer at Public House in midtown Manhattan. An always-anticipated event, the Fall Mixer provides Committee members a welcome chance to reconnect. It also provides us a chance to invite and meet new NYIPLA corporate members who haven’t yet joined our committee. As in the past few years, the Committee again invited members of NYIPLA’s Young Lawyers Committee to join the mixer. The conversation was lively, as was the usual exchange of war stories. So lively, in fact, that movie industry insiders at a competing party—yet clearly looking to enhance their patent litigation skills—had to be turned away. In the end, the attendees enjoyed themselves, and the Committee successfully added new members. The Corporate Committee will continue to look for more opportunities for in-person events over the next year.
Preparing an Amicus Brief Submission on Behalf of the NYIPLA Aron fischer and david goldberg , co-chairs of the Amicus brief committee
On October 24th, the NYIPLA Women in IP Committee hosted a discussion led by Fordham Law Professor Susan Scafidi and committee member Rachel Dooley. Professor Scafidi is the founder and academic director of the Fashion Law Institute, the first center of its kind dedicated to the intersection of law and fashion. Ms. Dooley is an attorney at Willkie Farr & Gallagher LLP and founder of the fashion brand GEMMA REDUX. Professor Scafidi discussed the Supreme Court’s recent decision in Star Athletica v. Varsity Brands, in which she served as an expert on fashion law. Together with Ms. Dooley, she explained the potential impact of Star Athletica on protection for designers, as well as the balance between this decision and recent legislative pushes (again, involving Professor Scafidi) to extend copyright protections for certain design infringements. After the discussion, Ms. Dooley led well over 50 attendees in a workshop where each participant made a one-of-a-kind necklace. The event space was graciously provided by Willkie Farr & Gallagher.
Understanding the Protectable IP of Jewelry and Fashion Jessica copeland and abigail langsam, co-chairs of the women in ip law committee
On Tuesday, October 17, 2017, the Amicus Brief Committee (“ABC”) held an in-person CLE presentation on the amicus brief process. A presentation was made by Charles R. Macedo and David P. Goldberg from Amster, Rothstein & Ebenstein LLP, Robert J. Rando of The Rando Law Firm, Robert M. Isackson of Venable, Jeffrey Lewis of Norton Rose Fulbright, Charles E. Miller of Eaton & Van Winkle and Jonathan E. Moskin of Foley & Lardner. Foley & Lardner hosted the event, which was attended by a dozen NYIPLA members. The presentation focused on the amicus brief process as implemented by the NYIPLA and the ABC, including a general background on the process, conflict clearing, pro bono credit, and amicus procedures before the Federal Circuit and the U.S. Supreme Court. The ABC is a vibrant and important component of the NYIPLA and provides a voice at the courts on behalf of the Association. Members are encouraged to identify potential cases for ABC consideration and to participate in the drafting and submission of amicus briefs. For more information on the Amicus Brief Committee, please contact David Goldberg (dgoldberg@arelaw.com) and Aron Fischer (afischer@pbwt.com), the co-chairs of the ABC, or Irena Royzman (iroyzman@pbwt.com), its Board Liaison.
On the evening of February 28, 2018, the Patent Litigation Committee presented a panel discussion entitled, “Advanced Topics in PTAB Practice.” Hosted at Troutman Sanders LLP, this program provided an update on four topics of recent importance. Bruce Koch (AGC and Head of Litigation: Purdue Pharma LP) addressed the 11th Amendment and Tribal Sovereign Immunity in light of the PTAB’s recent ruling in Mylan v. St. Regis Mohawk Tribe. Steve Baughman (Paul Weiss Rifkind Wharton & Garrison LLP) addressed the Discretionary Denial of Institution of IPRs in light of the PTAB’s recent ruling in General Plastic Industrial Co., Ltd. v. Canon Kabushiki Kaisha. Brian Murphy (Haug Partners LLP) discussed Motions to Amend Claims in IPRs in light of the Federal Circuit’s recenten banc decision inAqua Products, Inc. v. Matal. Joe Robinson (Troutman Sanders LLP) discussed the challenges of presenting Secondary Considerations of Non-Obviousness Before the PTAB. Mitchell Epner (Hughes Hubbard & Reed LLP) moderated the panel. The event drew a large and diverse audience of practitioners and other professionals, who posed interesting follow-up questions to the panelists after their presentations. The Patent Litigation Committee wishes to thank the panelists, Troutman Sanders LLP, Lisa Lu, and Feikje van Rein for making the program a resounding success.
Speaking the Language of IP Litigation Finance: What Your Partners Don't Know Eric greenwald, young lawyers committee
On the evening of January 10, 2018, the Young Lawyers Committee presented a panel discussion entitled, “Speaking the Language of Intellectual Property Litigation Finance: What Your Partners Don’t Know.” Hosted at Baker Botts LLP, this event provided an overview of litigation financing arrangements from the perspectives of key players in the industry. Katharine Wolanyk (Burford Capital LLC) addressed the ways litigants and law firms use litigation finance, including typical criteria for financing candidates and the requisite and ongoing diligence involved. Joseph Loy (Kirkland & Ellis LLP) explained the role of litigation counsel in facilitating financing arrangements, as well as considerations presented by a third-party funder as related to attorney work-product protection. Michael Sander (Fastcase Analytics) discussed the use of litigation outcome metrics in pre-litigation diligence decisions. Eric Greenwald (Axinn, Veltrop & Harkrider LLP) moderated the panel. The presentation drew a large and diverse audience of practitioners and other professionals. The Young Lawyers Committee wishes to thank the panelists, Baker Botts LLP, Lisa Lu, and Feikje van Rein for making the program a resounding success.
Advanced Topics In PTAB Practice Panel Mitchell epner, Patent litigation Committee
mariA A. Scungio
Brian P. Murphy
Formerly of consulting firm Marc Adler LLC, has joined Buchanan Ingersoll & Rooney PC as Of Counsel in its intellectual property section.
MOVING UP & MOVING ON
Marc S. Adler
Formerly a former lead judge at the Patent Trial and Appeal Board, has joined Haug Partners LLP as a partner in its post-grant review practice group.
Formerly of Fried Frank Harris Shriver & Jacobson LLP, has joined Norton Rose Fulbright as a partner in its patent litigation practice.
Jeffrey I.D. Lewis
MichaeL h. imbacuan
Formerly of Locke Lord LLP, has joined Wolf Greenfield & Sacks, P.C. as a shareholder in its Trademark and Copyright practice.
Formerly of Budd Larner P.C., has joined Greenberg Traurig LLP as a shareholder in its patent litigation practice.
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WELCOME NEW MEMBERS
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