Patents

The BPCIA Patent Dance: A Patent Law Cliffhanger

September 5, 2015
Intellectual Property, Patents

Will Orlady, MJLST Lead Articles Editor

In 2009, Congress enacted the Biologics Price Competition and Innovation Act (“BPCIA”), found at 42 U.S.C. § 262(k) and § 262(l). The BPCIA created an abbreviated pathway to FDA approval for biologic products that the agency found to be sufficiently similar to biologic products already approved for market sale (“biosimilars”). The BPCIA also created mechanisms for resolving patent disputes related to biosimilars. Colloquially known as the “patent dance,” the BPCIA’s patent dispute resolution mechanisms allows participants to go through a series of negotiations and disclosures—all in place to limit the complexity and cost of patent litigation. Parties complying with the “patent dance’s” requirements can enjoy safe harbor from costly patent litigation. The underlying policy of the BPCIA’s “patent dance” is to narrow the scope and reduce the costs associated with patent disputes.

Congress enacted the BPCIA. Time passed, and its “patent dance” flew under the radar—until this year. In 2014, Sandoz became the first company to file a Biologic License Application pursuant to the BPCIA’s abbreviated procedure. Despite availing itself of the BPCIA’s abbreviated approval procedures, Sandoz snubbed the “patent dance.” In its litigation against competitor Amgen, Sandoz argued that the BPCIA’s “patent dance” was not compulsory. The matter made its way to Judge Richard Seeborg in the Northern District of California. In a detailed opinion, Judge Seeborg outlined both Amgen’s and Sandoz’s positions and ultimately sided with Sandoz, ruling that the “patent dance” is optional (the abbreviated statutory biosimilar FDA approval scheme notwithstanding). The parties appealed the matter to the Federal Circuit. The Court heard the matter on June 3, 2015.

On July 21, 2015, the Federal Circuit handed down its decision in Amgen v. Sandoz, answering whether the BPCIA’s “patent dance” is compulsory for those manufacturers availing themselves of the BPCIA’s abbreviated FDA approval scheme. A fractured panel (led by J. Lourie) held that the “patent dance” is optional. Conceding that the statutory provisions involved are immensely complex, the Court stated that the provisions involved must be read in the context of the entire statute. The relevant provisions in light of the entire statute lead Judge Lourie to the conclusion that Congress intended the “patent dance” to be optional.

“We therefore conclude that, even though under paragraph (l)(2)(A), when read in isolation, a subsection (k) applicant would be required to disclose its aBLA and the manufacturing information to the RPS by the statutory deadline, we ultimately conclude that when a subsection (k) applicant fails the disclosure requirement, 42 U.S.C. § 262(l)(9)(C) and 35 U.S.C. § 271(e) expressly provide the only remedies as those being based on a claim of patent infringement. Because Sandoz took a path expressly contemplated by the BPCIA, it did not violate the BPCIA by not disclosing its aBLA and the manufacturing information by the statutory deadline.”

Judge Newman dissented on this point.

Though the Federal Circuit has answered whether the “patent dance” is compulsory for the time being, the parties have petitioned the court to hear the matter en banc. This is not surprising given the divided tone of the deciding panel’s opinion. Practitioners and scholars alike are now waiting to see whether the Court uses this matter to affirm or re-decide the “patent dance” question. Even if the Federal Circuit denies the en banc petition, a petition for certiorari would not be out of the question. The instant issue may just be juicy enough to grab SCOTUS’s attention.

Revisiting the Idea of a Patent Small Claims Court

February 24, 2015
Patents

Comi Sharif, Managing Editor

In 2009, Robert P. Greenspoon explored the idea of adjusting the patent court system to improve efficiency for the adjudication of small-scale claims. His article, Is the United States Finally Ready for a Patent Small Claims Court?, appearing in Volume 10 Issue 2 of the Minnesota Journal of Law, Science & Technology, pointed out the deterrent-like effect that high transaction costs involved with traditional patent litigation have on inventors trying to protect their intellectual property. Greenspoon argues that if patent holders are merely trying to recover small sums from infringers, the lengthy and expensive patent litigation system currently in effect often outweighs the remedies available through litigation. As a result, Greenspoon suggests the creation of a “Patent Small Claims Court” to resolve these issues. Seeing that it’s been over five years since Greenspoon’s article, it makes sense to reexamine this topic and identify the some of the recent developments related to the article.

In May of 2012, the USPTO and United States Copyright Office co-sponsored a roundtable discussion to consider the possible introduction of small claims courts for patent and copyright claims. A few months later, The USPTO held another forum focused solely on patent small claims proceedings. A major emphasis of these discussions was conformity of the new court with the U.S. Constitution (an issue addressed by Greenspoon in his article). In December of 2012 the USPTO published a questionnaire to seek feedback from the public on the idea of a patent small claims court. The focus of the survey involved matters relating to subject matter jurisdiction, venue, case management, appellate review, and available remedies. See this link for the official request and list of questions from the USPTO submitted in the Federal Register. The deadline for submitting responses has since passed, but the results of the survey are still unclear.

In Greenspoon’s article, he addresses a few of the unsuccessful past attempts to create a small claims patent court. In 2013, the House of Representative passed a bill, which authorized further study into the idea of developing a pilot program for patent small claims procedures in certain judicial districts. See H.R. 3309, 113th Cong. (2013). Senate did not pass the bill, however, so no further progress occurred.

Overall, though there appears to be continued interest in creating a patent small claims system, it doesn’t seem likely that one will be created in the near future. The idea is far from dead, though, and perhaps some of Greenspoon’s proposals can still help influence a change. Stay tuned.

Open Patenting, Innovation, and the Release of the Tesla Patents

November 11, 2014
Corporate Ethics, Intellectual Property, Patents, Social Media

Blake Vettel, MJLST Staff Member

In Volume 14 Issue 2 of the Minnesota Journal of Law, Science & Technology, Mariateresa Maggiolino and Marie Lillá Montagnani proposed a framework for standardized terms and conditions for Open Patenting. This framework set forth a standard system for patent holders to license their patents in order to encourage open innovation, in a way that was easy to administer for patent holders of all sizes. Maggiolino and Montagnani argued for an open patenting scheme in which the patent owner would irrevocably spread their patented knowledge worldwide, based on non-exclusive and no-charge licensing. Futhermore, the licensing system would be centrally operated online and allow the patentee to customize certain clauses in the licensing agreement; while maintaining a few compulsory clauses such as a non-assertion pledge that would keep the license open.

On June 12, 2014 Elon Musk, CEO of Tesla Motors, shocked the business world by announcing via blog post that “Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology.” Musk described his reasoning for opening Tesla’s patents for use by others as a way to encourage innovation and growth within the electric car market, and depicted Tesla’s true competition as gasoline cars instead of electric competitors. By allowing use of their patented technology, Tesla hopes to develop the electric car market and encourage innovation. Some commentators have been skeptical about the altruistic motive behind releasing the patents, arguing that it may in fact be a move intended to entice other electric car manufacturers to produce cars that are compatible with Tesla’s patented charging stations in an effort to develop the network of stations around the country.

However, Musk did not unequivocally release these patents; instead he conditioned their subsequent use upon being in “good faith.” What constitutes a good faith use of Tesla’s technology is not clear, but Tesla could have instead opted for a standardized licensing system as proposed by Maggiolino and Montagnani. A clear standardized licensing scheme with compulsory clauses designed to encourage free movement of patented technology and spur innovation may have been more effective in promoting use of Tesla’s patents. An inventor who wants to use Tesla’s patents may be hesitant under Musk’s promise not to initiate lawsuits, where he could be much more confident of his right to use the patented technology under a licensing agreement. The extent to which Tesla’s patents will be used and their effect on the car market and open innovation is yet to be seen, as is the true value of Tesla’s open innovation.

How Far is Too Far?: Some Patents Border on the Absurd

May 16, 2014
Intellectual Property, Patents

Michael Burke, MJLST Staff

Most people are not up to date on the latest and greatest patents. Most wait for the idea to be reported in the media, or see the idea’s physical manifestation at their favorite technology store. But this past week, Stephen Colbert made a point to inform his late night audience–and the public at large–about the latest patent filed by Amazon: taking photos against a white background. On March 18th, The U.S. Patent and Trademark Office awarded Amazon with their “Studio Arrangement” patent numbered U.S. 8,676,045. Amazon’s filing essentially gives the company the intellectual rights to taking any picture in front of seamless white backgrounds.

Michael S. Mireles, Jr.’s book review, The United States Patent Reform Quagmire: A Balanced Proposal, helps to provide a framework of why weak patent ideas unfortunately receive the blessing of the United States government, and how patent reform efforts can help resolve this problem. Mireles provides a two-tiered approach to solving the problems of the patent system by attacking the current system at its weakest points: the issuance of weak patent grants from the USPTO and the liberal upholding of the validity of weak patents.

Allowing weak patents to exist undermines the genuine purpose of assigning ownership of intellectual property. The result has been a “dangerous and expensive arms’ race, which now undermines rather than fosters the crucial process of technological innovations.” Most certainly, someone needs to develop and implement a quality idea for change. Who knows, under the current system, maybe he or she could patent it?

Alice Corporation: Is Software That Implements an Abstract Idea Patentable?

April 10, 2014
Intellectual Property, Patents

Nathan Peske, MJLST Staff

On March 31, 2014 the Supreme Court heard oral arguments in the case CLS Bank International v. Alice Corporation Pty. Ltd. This case examines patents held by the Alice Corporation for software that implements an abstract scheme for managing settlement risk in the series of transaction banks make back and forth over the course of the day. The question before the court is whether the software is patent-eligible subject matter under §101 of the Patent Act.

Section 101 sets out the initial statutory requirements for patent-eligible subject matter. An invention must be a “new and useful process, machine, manufacture, or composition of matter” or an improvement to one of those categories. Supreme Court jurisprudence has repeatedly affirmed that there are three judicial exceptions to these categories. These exceptions are laws of nature, natural phenomena, and abstract ideas. Einstein’s famous theory of relativity E = mc^2 is often cited in court opinions as an example of unpatentable subject matter. If patents this broad were granted they would foreclose any other innovation using the abstract idea. This would ultimately stifle innovation rather than encouraging it.

When an implementation of an abstract idea is patentable has proved a very difficult standard to establish, particularly when software is involved. In Gottschalk v. Benson a computer program implementing a mathematical formula was ruled unpatentable because simply incorporating an abstract idea into a software program is not sufficient to render it patent-eligible subject matter. In Diamond v. Diehr a software program that calculated the cook time for curing rubber was ruled patent-eligible subject matter because it also controlled the cook time and opened the mold when the rubber was done. Subsequent cases have generally been decided on narrow factual grounds and have failed to establish a general test.

The Federal Circuit en banc rehearing of Alice Corporation continued this trend. In a thoroughly fractured decision seven of the ten Federal Circuit judges held the Alice patents invalid and wrote five concurring and dissenting opinions to justify their reasoning. Chief Judge Rader also penned a series of Reflections discussing the current state of patent law. Since the Supreme Court granted Alice’s petition for certiorari it has the opportunity to establish a clear standard that will settle some of the continuing uncertainty over software and business method patents.

This decision has sweeping implication for the future of software patents. A broad interpretation of the patentability of software would open the door for endless patent litigation and reduced the patent system to dueling patent lawyers. A narrow interpretation would have the benefit of reducing the ability of “patent trolls” to harass other companies. Patent trolls acquire patents, often cheaply from struggling companies, and sue or threaten to sue other companies for infringing them. Rather than face years of expensive patent litigation many companies will settle even spurious claims. At the same time a narrow interpretation could drastically limit the abilities of software inventors to patent their inventions. Thus discouraging the innovation the patent system was designed to encourage.

Justice Breyer summarized the situation during oral arguments when he said “There is a risk that you will take business in the United States or large segments and instead of having competition on price, service and better production methods, we’ll have competition on who has the best patent lawyer. And if you go the other way and say never, then what you do is you rule out real inventions with computers.” The justices’ questions seemed to indicate they were unsure if and how to address this question.

There is ample precedent for the Supreme Court to issue a narrow ruling on the merits. Rather than attempting to issue a sweeping decision to establish a precedent for future cases. Indeed, they seem poised to do exactly this. Observers can only watch and wait to see how the Supreme Court will decide this time.

Why Antitrust Must Play a Role in Analyzing Drug Patent Settlements

March 28, 2014
Antitrust, Patents

Michael A. Carrier, Distinguished Professor, Rutgers School of Law, MJLST Guest Blogger

Think back several years to, say, 2006 or 2008. The world of drug patent settlements, by which brand-name drug companies pay generics to delay entering the market, was a far different place. A string of appellate courts–the Second, Federal, and Eleventh Circuits–had essentially immunized these agreements by applying a toothless framework based on the “scope of the patent.” The test applied by these courts assumed that the patent was valid and infringed and that a payment for delayed entry could not violate the antitrust laws.

In the landmark case of FTC v. Actavis, 133 S. Ct. 2223 (2013), the Supreme Court rejected such a narrow view. Writing for a majority of five, Justice Stephen Breyer concluded that these settlements “tend to have significant adverse effects on competition” and could violate the antitrust laws. The Court also found that such agreements could demonstrate market power and that the parties had ways to settle other than with payment.

In contrast, writing for three Justices in dissent, Chief Justice John Roberts downplayed antitrust law in contending that “the scope of the patent–i.e., what rights are conferred by the patent–should be determined by reference to patent law.” The claimed reason is that “a patent holder acting within the scope of its patent does not engage in any unlawful anticompetitive behavior” but “simply exercis[es] the monopoly rights granted to it by the Government.”

Roberts combined his exclusive preference for patent law with the position that activity within the nominal scope of the patent is immune from the antitrust laws. A patentee “acting within the scope of its patent has an obvious defense to any antitrust suit: that its patent allows it to engage in conduct that would otherwise violate the antitrust laws.” And even though he viewed “the question posed” as “fundamentally a question of patent law,” he lamented that “the majority declares that such questions should henceforth be scrutinized by antitrust law’s unruly rule of reason.”

My short article in the Minnesota Journal of Law, Science & Technology highlights three significant flaws with Roberts’ opinion. First, Roberts ignored the patent-law policy of challenging and eliminating invalid patents. Second, he downplayed the role of antitrust law. And third, he neglected the importance of the Hatch-Waxman Act, Congress’s resolution of the patent-antitrust intersection in the pharmaceutical industry.

First is patent law. Empirical studies have consistently shown that at least 40% of patents issued by the U.S. Patent and Trademark Office (PTO) that are litigated to decision are invalid. For that reason, the Actavis Court recognized the “patent-related policy of eliminating unwarranted patent grants so the public will not ‘continually be required to pay tribute to would-be monopolists without need or justification.'” Roberts’ suggestion to decide the issue solely on the grounds of patent law does not include this important aspect of patent policy.

Second is antitrust law. As the majority in Actavis recognized, reverse-payment settlements “tend to have significant adverse effects on competition.” Of all the types of business activity subject to the antitrust laws, agreements by which competitors divide markets could be the most dangerous since market division restricts all competition between the parties on all grounds.

Reverse-payment settlements result in generics dropping patent challenges and, in exchange for millions of dollars, agreeing to delay entry into the market. Because the brand makes more by keeping the generic out of the market than the two parties would receive by competing in the market, the parties have an incentive to cede the market to the brand firm and split the monopoly profits.

Third is the regulatory regime. As the Supreme Court has made clear, it is appropriate for courts applying antitrust law to “be attuned to the particular structure and circumstances of the industry at issue.” Congress resolved the tension between the patent and antitrust laws in the pharmaceutical industry by enacting the Hatch-Waxman Act.

The Act had a central purpose of encouraging challenges to invalid or not infringed patents during the term of the patent to encourage early market entry. Reverse-payment settlements directly contravene this goal by allowing brands to pay generics for delayed market entry. In short, not only does such conduct flout the patent policy of testing invalid patents and present significant antitrust harm, but it also disregards the Hatch-Waxman Act and important public-policy goal of increasing the number of affordable generic medicines.

As courts begin to interpret drug patent settlements in the wake of Actavis, they should not follow the approach to patent and antitrust law articulated by Chief Justice Roberts. For in addition to being rejected by the Supreme Court, it (1) shortchanges patent law, which includes a policy goal of testing invalid patents to ensure they do not block competition; (2) downplays antitrust law’s role in monitoring behavior that resembles market division between potential rivals; and (3) ignores the Hatch-Waxman Act’s encouragement of challenges to patents that are invalid and not infringed.

Athletic Performance Heavyweights on Verge of Patent Battle

February 16, 2014
Patents

Comi Sharif, MJLST Staff

Last week, athletic apparel giant Adidas filed a complaint accusing Under Armour of patent infringement. The complaint identifies ten Adidas-held patents that are used in mobile applications to collect and share workout-related data. The patents currently implemented in Adidas’s “miCoach” product line are allegedly being put to similar use in Under Armour’s “Armour39” products. The technology allows users to monitor their workout progress, and record and share statistics such as calories burned, heart rate intervals and distances traveled.

Both companies are major players in the fast-growing wearable technology fitness market. Adding fuel to the rivalry is the fact that Under Armour’s director of product and innovation previously worked as a senior innovation engineer at Adidas for over a decade. In addition, Under Armour recently announced a sponsorship deal with the University of Notre Dame, which ended a run for the school as one of Adidas’s biggest partners.

Though this dispute is only just getting underway, the results will be an important indicator for future events. If Adidas can succeed in preventing Under Armour and others from using the identified patents in its products, Adidas could put itself in a strong market position moving forward, while Under Armour would be relegated back to the drawing board. As fitness and mobile interconnectivity continue to trend worldwide, the intensity of the competition to gain market share is sure to increase as well. Holding and protecting patents could be the key that separates the winners and the losers in this race to the top. Stay tuned.

Akamai Provides a New Induced Infringement Standard, but How Do We Use It?

February 3, 2014
Intellectual Property, Patents

Ryan J. Connell, MJLST Lead Articles Editor

In the spring 2013 issue of the Minnesota Journal of Law, Science & Technology Mr. Roy D. Gross examined the use of circumstantial evidence to prove inducement of infringement. Mr. Gross’s article is titled Can an Inference of Intent to Induce Infringement of a Patent Be Drawn Where Other Reasonable Inferences Exist? An Examination of the Use of Circumstantial Evidence to Prove Inducement of Infringement. Mr. Gross ultimately argues that that the doctrine of specific intent to infringe in patent cases should be harmonized with the standard used for inequitable conduct.

It is important to discern the boundaries of specific intent to infringe in light of the recent Akamai case. Akamai Techs. Inc. v. Limelight Networks Inc., 692 F.3d 1301 (Fed. Cir. 2012). In Akamai the Federal Circuit arguably made it easier for a patent owner to hold a person liable for induced infringement of a method claim when no single person performed all the steps of the method. The Akamai decision still requires the alleged inducer to have the specific intent to induce infringement. Akamai, 692 F.3d at 1308. The results of Akamai are mixed then, on one hand patent owners can now go after those who induced infringement but never induced a single party to infringe the patent. On the other hand the patent owner must still provide evidence of a specific intent to induce infringement.

Proving induced infringement is a difficult task. Direct evidence of inducement is often hard to come by and the patent owner must often resort to using circumstantial evidence to prove specific intent. Mr. Gross suggests courts to weigh the following three factors, in light of circumstantial evidence, when determining if the requisite intent is present: (1) nexus; (2) control; and (3) mitigating evidence of intent not to infringe.

Akamai has closed an undesirable loophole in patent law. For Akamai to reach its full potential however, courts and litigators need to understand how to weigh circumstantial evidence that may be more strained in cases where a patent is collectively infringed as opposed to directly infringed by one actor. Articles such as this can help the legal community understand how to use circumstantial evidence in light of the new induced infringement standard.

Akamai Provides a New Induced Infringement Standard, but How Do We Use It?

February 3, 2014
Intellectual Property, Patents

Ryan J. Connell, MJLST Lead Articles Editor

Is the Juice Worth the Squeeze? Fighting Patent Trolls With Fee-Shifting

November 1, 2013
Intellectual Property, Patents

by Eric Maloney, UMN Law Student, MJLST Lead Managing Editor

It’s a bad time to be a patent troll in the United States. Both the Supreme Court and Congress are taking aim at these widely disparaged “trolls” who buy up a portfolio of patents and proceed to file lawsuits against anyone who may be using or selling inventions covered by those patents, often with a disregard for the merits of such suits.

Critics see these patent trolls as contributing nothing but a waste of time and resources to an already-burdened court system. President Obama has echoed this sentiment, accusing these trolls of “hijack[ing] somebody else’s idea and see[ing] if they can extort some money out of them.” On the other hand, legitimate patent holders are concerned that their ability to sue infringers may be limited in this mad rush to curb the patent troll problem.

The Patent Act does already have a mechanism in place to deal with frivolous patent lawsuits–35 U.S.C. § 285. This statute allows courts to award patent suit winners with “reasonable attorney fees.” There’s a catch, though–this fee-shifting isn’t available for just any winner. It can only be awarded in “exceptional cases.”

The Federal Circuit hears all patent appeals and sets patent precedent that is followed by district courts throughout the country. So far, their interpretation of “exceptional case” has required losing parties to misbehave quite flagrantly; the patent holder’s suit must have been “objectively baseless,” and the loser must have known it was baseless. Failing that, fees can only be shifted if the loser committed misconduct in the course of the suit or in obtaining the patent. MarcTec, LLC v. Johnson & Johnson, 664 F.3d 907, 916 (Fed. Cir. 2012). This high standard makes it tough for those sued by patent trolls to recover fees spent defending against a frivolous suit.

Two branches of government are taking aim at potentially easing this standard and making fee-shifting more commonplace, or even mandatory. The Supreme Court has decided to hear two appeals for fee-shifting cases, and may be looking to change how courts evaluate what is an “exceptional case” to make it easier for courts to punish frivolous plaintiffs. Rep. Goodlatte (R-VA) introduced the Innovation Act last week, which would change § 285 to mandate that patent suit losers pay fees to the winner, with some exceptions.

This would bring patent suits more in line with how English courts treat losing parties. The American legal system typically does not add insult to injury by forcing losing parties to reimburse the winners. While all the concern about patent trolls may not be misplaced, it may be worthwhile for policymakers (be they Congressional or judicial) to step back and consider the effect this may have on legitimate patent holders, such as inventors wishing to protect their patented products. Is mandatory fee-shifting the answer? All those involved should tread carefully before making groundbreaking changes to the patent litigation system.

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