Smart Systems Innovations, LLC (“SSI”) v. Chicago Transit Authority, et al. (“CTA”)


Docket No. 2016-1233

REYNA, LINN (D), WALLACH
October 18, 2017

Brief summary: DC finding that SSI’s claims are ineligible under § 101 affirmed (e.g., not directed to “a new type of bankcard, turnstile, or database”).

Summary: SSI appealed DC finding that US 7,566,003; 7,568,617; 8,505,816; and 8,662,390 (“the Patents-in-Suit”, all belonging to the same family) relating to “open-payment fare systems in mass transit networks” (e.g., using debit/credit cards) are patent ineligible under § 101. The DC’s decision was reached on CTA’s motion on the pleadings after SSI filed suit. The FC reviews such motions under the law of the regional circuit (the Seventh Circuit) and was therefore reviewed de novo “taking the facts alleged in the complaint as true and drawing all reasonable inferences in favor of the plaintiff”. Issues “unique to patent law” (eligibility under § 101) is reviewed in light of FC precedent (Madey, FC 2002). Section 101 questions are issues of law reviewed de novo (Int. Ventures, FC 2017). The FC panel explained that under Alice (US 2014), “[a] patent claim falls outside § 101 where (1) it is ‘directed to’ a patent-ineligible concept, i.e., a law of nature, natural phenomenon, or abstract idea, and (2) [] if so, the particular elements of the claim, considered ‘both individually and ‘as an ordered combination,’’ do not add enough to ‘transform the nature of the claim’ into a patent-eligible application” (Elec. Power Grp. FC 2016). Representative claims of each of the Patents-in-Suit are presented in the opinion and reviewed under Alice step one “in their entirety to ascertain whether their character as a whole is directed to excluded subject matter” (Internet Patents, US 2015; McRO, FC 2016 (“whether the claims…focus on a specific means or method that improves the technology or are instead directed to a result or effect that itself is the abstract idea and merely invoke generic processes and machinery; Enfish, FC 2016 (e.g., claims improving “the functioning of the computer itself” not abstract)). The DC summarized the claims, “[s]tripped of the technical jargon that broadly describes non-inventive elements (e.g., the ‘interfaces’ and ‘processing systems’)”, as covering “paying for a subway or bus ride with a credit card.” The DC stated that “recent case law has reiterated that whatever bells and whistles may be added, when reduced to their core, claims directed to the performance of certain financial transactions…must be categorized as involving abstract ideas.” The FC panel determined the claims “are directed to the collection, storage, and recognition of data” and not “a new type of bankcard, turnstile, or database”, and are therefore “directed to an abstract idea” (the opinion was corrected to remove “not”). Further, the FC panel explained, “merely limiting the field of use of the abstract idea to a particular…environment” (e.g., rapid transit) “does not render the claims any less abstract” (Affinity Labs, FC 2016). Regarding Alice step two, the FC panel also agreed that the claims “offer no inventive concept” (e.g., “use of a ‘processor’ and ‘memory’”) “that transforms them into patent-eligible subject matter”. The FC panel was not persuaded by SSI’s arguments that the claims “do not preempt any field or allegedly abstract idea” (Ariosa, FC 2015 (preemption is moot where claims are to patent ineligible subject matter)) and “satisfy the machine-or[-]-transformation test” (Ultramercial, FC 2014 (“patent must disclose the use of an apparatus specific to the claimed invention”)). Thus, the DC decision was affirmed. Judge Linn’s dissent argued “[t]he majority commits the same error as the [DC] in engaging in a reductionist exercise of ignoring the limitations of the claims in question” which the majority addressed by explaining the analysis considers what the claims are “directed to” and not the general “thrust” of the same.

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Merck Sharp & Dohme B.V. v. Warner Chilcott Company, LLC et al.


Docket No. 2016-2583

DYK, LINN, HUGHES
October 19, 2017

Non-precedential

Brief summary: DC decision that Merck’s claims relating to NuvaRing® reversed and remanded (e.g., “the only way to arrive at the hypothetical ring is by using the ‘581 patent as the roadmap” which “represents an improper reliance on hindsight.”)

Summary: Merck appealed DC finding that claims 4 and 11 of US 5,989,581 relating to NuvaRing® (a contraceptive vaginal ring) are invalid for obviousness in view of “PCT ‘015” application (WO 97/02015). Both “claims 4 and 11…require at least a single-compartment that includes a progestogenic steroidal compound” (e.g., etonogestrel (ETO)) “and an estrogenic steroidal compound” (e.g., ethinyl estradiol (EE)). “Claim 4…requires direct release of ‘physiologically required amounts ‘of both compounds from one compartment” and claim 11 “requires ‘at least one compartment’ to include a ‘mixture of a progestonic steroidal compound and an estrogenic steroidal compound’ in specific ratios and concentrations.” The DC concluded “a person of ordinary skill would have been motivated to optimize PCT ‘015” to reach the ‘581 invention, and “it would have been obvious for a person of skill to derive the claimed ratios of progestin and estrogen’ from the target release rates”. The FC panel explained that obviousness is a question of law reviewed de novo and facts underlying that conclusion (including the Graham factors, US 1966) are reviewed for clear error (Honeywell, FC 2010). “[A] patent composed of several elements is not proved obvious merely by demonstrating that each of its elements was independently known in the art” (KSR, US 2007) and “it is improper to combine references ‘like separate pieces of a simple jigsaw puzzle’ without ‘explain[ing] what reason or motivation one of ordinary skill in the art at the time of the invention would have had to place the pieces together” (InTouch, FC 2014). In addition, “[t]he inventor’s own path itself never leads to a conclusion of obviousness; that is hindsight” (Otsuka, FC 2012). The FC panel explained that “PCT ‘015…relies on a two-compartment design” and “criticizes one-compartment vaginal rings”. It found flaws in the DC’s reasoning that the skilled artisan “would have optimized the second compartment to release physiologically required amounts of ETO and EE” (which was also alleged to “comprise[] 97% of the ring”) and, therefore, “there would have been “little reason to keep the first compartment in place”. This is because, e.g., “PCT ‘015 does not actually disclose a ring with a second compartment that comprises 97% of the ring”, which is “outside of the usual or preferred range disclosed in PCT ‘015”. In that “hypothetical ring”, that person would also need to “pick a concentration of ETO from the high end of the disclosed range, but conversely select a concentration of EE from the low end of the range” and “[n]othing in PCT ‘015 suggests picking these values out of the innumerable possible combinations” (also noting the above-mentioned criticism). “[T]he only way to arrive at the hypothetical ring is by using the ‘581 patent as the roadmap” which “represents an improper reliance on hindsight.” Thus, the DC decision was reversed and remanded.

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Secured Mail Solutions LLC v. Universal Wilde, Inc.


Docket No. 2016-1728

PROST, CLEVENGER, REYNA
October 16, 2017

Brief summary: DC grant of UW’s motion to dismiss because SM’s patents are patent-ineligible under § 101 affirmed ((e.g., “not directed to an improvement in computer functionality” (Alice step one) and “cite well known and conventional ways to allow generic communication between a sender and recipient using generic computer technology” (Alice step two)).

Summary: Secured Mail appealed DC grant of UW’s motion to dismiss because the claims of SM’s “Intelligent Bar Code”, “QR Code” and “Personalized URL” patents are invalid under § 101. Each patent relates to “methods whereby a sender affixes an identifier on the outer surface of a mail object (e.g., envelope or package) before the object is sent” such that computers and networks can communicate information about the mail content and sender after it is delivered. The DC concluded “the asserted claims, viewed individually or in combination, do not meaningfully limit the abstract idea of communicating information about a mailpiece by use of marking.” The FC panel explained that “procedural questions not unique to patent law” are reviewed according to the law of the regional circuit (here the Ninth, so de novo regarding the failure to state a claim) (Univ. Utah, FC 2013) and § 101 issues de novo (McRO, FC 2016).

The FC panel reviewed the “two-step framework” for analysis under § 101: 1) “determine whether the claims at issue are ‘directed to’ a judicial exception, such as an abstract idea” (“if not, the inquiry ends”) (Thales, FC 2017; Enfish, FC 2016 (issued after the DC’s opinion in this case)); and 2) “consider…whether the claims contain an ‘inventive concept’ sufficient to ‘transform the nature of the claim into a patent-eligible concept’” (Alice, US 2014 (quoting Myriad, US 2013); Content Extraction, FC 2014; Recognicorp, FC 2017 (“To save a patent at step two, an inventive concept must be evident from the claims.”); Versata, FC 2015 (“Merely reciting the use of a generic computer or adding the words ‘apply it with a computer’” will not suffice.); DDR (FC 2014 (inventive concept in claims incorporating “elements from multiple sources in order to solve a problem”)). The Enfish claims, relating “to organization of data in a table in computer memory and a system for indexing that data”, were found “patent-eligible under Alice step one because the claims focused on an improvement to computer functionality itself, not on economic or other tasks for which a computer is used in its ordinary capacity.” Enfish prohibits analysis under the first step from “describing the claims at such a high level of abstraction and untethered from the language of the claims”, as this would “all but ensure[] that the exceptions to § 101 swallow the rule.”

Here, the FC panel concluded that even though the DC considered the claims under the first step at “a reasonably high level of generality”, the DC correctly found the claims to be directed to an abstract idea (e.g., “not directed to an improvement in computer functionality”; not, e.g., a “new barcode format, an improved method for generating or scanning barcodes, or similar improvements”; “the claim…merely recites that the unique identifier is generated by the sender”). The FC panel distinguished SM’s claims from those in McRO (“eligibility where the ‘claimed process uses a combined order of specific rules that renders information into a specific format that is then used and applied to create desired results”) and Thales (eligibility where the ‘claims specify a particular configuration of inertial sensors and a particular method of using the raw data from the sensors’”). The FC panel also agreed the claims do not include an “inventive concept” since, e.g., unlike in DDR, SM’s claims “cite well known and conventional ways to allow generic communication between a sender and recipient using generic computer technology.”

The FC panel also found it was appropriate for the DC to dismiss the case via Rule 12(b)(6) and that the DC “did not place any special burden of proof on [SM], but simply concluded from the claims that they were directed to patent-ineligible subject matter.”

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Ignite USA, LLC v. CamelBak Products, LLC


Docket No. 2016-2747 (IPR2015-01034)

PROST, WALLACH, TARANTO
October 12, 2017

Non-precedential

Brief summary: Claim construction and obviousness determination in PTAB FWD regarding Ignite’s patent affirmed as supported by substantial evidence.

Summary: Ignite appealed PTAB final written decision following IPR finding certain claims of US 8,864,878 relating “to a moveable trigger/seal mechanism for a beverage container” anticipated by “Oesterling” (WO 2005/115204 A1) and another claim obvious in view of the same reference. “Each of the Asserted Claims teaches a seal arm or trigger member ‘connected’ to the lid housing or a drink aperture (‘the connected limitation’), either expressly or through its attendant independent claim.” Ignite argued the PTAB erred in construing the connected limitation and in finding claim 7 obvious. The FC panel explained that it “review[s] the PTAB’s factual findings for substantial evidence and its legal conclusion de novo” (Redline, FC 2015), substantial evidence being “something less than the weight of the evidence but more than a mere scintilla” (In re Nuvasive, FC 2016). And “[i]f two ‘inconsistent conclusion may reasonably be drawn from the evidence in record, [the PTAB]’s decision to favor one conclusion over the other is the epitome of a decision that must be sustained upon review for substantial evidence” (In re Cree, FC 2016). The FC panel also explained the broadest reasonable construction standard of claim construction (37 CFR § 42.100(b) (2016)) and that “[a] patent’s specification, together with its prosecution history (Ormco, FC 2007), constitutes intrinsic evidence to which the PTAB gives priority when it construes the claims” (In re Packard, FC 2014; Microsoft, FC 2015 (if intrinsic evidence is unclear, PTAB may rely on extrinsic evidence); In re Cuozzo, FC 2015/US 2016 (underlying factual determinations concerning extrinsic evidence is reviewed for substantial evidence, ultimate construction is reviewed de novo)). The PTAB determined the connected limitation “includes non-permanent connections” and, based on the intrinsic evidence alone (as such, it “need not consider…th[e extrinsic] evidence” (Microsoft)), the FC panel agreed (e.g., “The specification’s use of ‘when’ indicates that the trigger member is not always connected to the lid housing….”) The FC panel also found that substantial evidence (e.g., expert testimony) supports the PTO’s obviousness conclusion, even though its “analysis primarily consists of summaries and rejections of Ignite’s arguments, which is usually insufficient” (Icon Health, FC 2017) because it “also explained that if found CamelBak’s arguments and supporting evidence more persuasive” (“undoubtebly, it would be preferable for the PTAB to provide its own reasoned explanation”). Further, the FC panel explained, “explaining why a party’s arguments are not persuasive does not constitute improper burden shifting.” The FC panel therefore affirmed the PTAB’s decision.

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Owens Corning v. Fast Felt Corporation


Docket No. 2016-2613 (IPR2015-00650)

NEWMAN, DYK, TARANTO
October 11, 2017

Brief summary: Board decision that Owens did not show obviousness during IPR reversed (not remanded) under a corrected claim construction.

Summary: Fast Felt sued Owens for infringement of its US 8,137,757 relating to “methods for printing nail tabs or reinforcement strips on roofing or building cover material”, and Owens petitioned for IPR which was granted. In its Final Written Decision (Aug. 11, 2016), the PTAB concluded that Owens had failed to show obviousness of any challenged claims, and Owens appealed. The FC panel opinion explains that “[a]ll of the challenged claims contain the claim term ‘roofing or building cover material’” (e.g., claim 1: “method…comprising the steps of: depositing tab material onto the surface of said roofing or building cover material”). The PTAB found “all of the elements of independent claims are disclosed in Lassiter when combined with either Hefele or Eaton” but that Owens “failed to show that a skilled artisan would have combined” the references. Owens argued that “when evaluating obviousness in light of the prior art”, the PTAB “at least implicitly adopted an erroneous claim construction”. The FC panel agreed, writing that the PTAB “simply did not address roofing or building cover materials that would never be coated in asphalt” and “[t]he exclusion of such materials from the scope of the claims is mistaken” and “not reasonable” under the broadest reasonable construction determined “in light of the specification of the patent in which it appears” (37 CFR § 42.100(b); In re Cuozzo, FC 2015/US 2016). This is so, even though “the preferred embodiments…focus on roofing materials that are or will be coated or saturated with asphalt or asphalt mix”, because neither the claims nor the specification are “so limited” (e.g., the claims “are not even limited to ‘roofing materials’” and “all expressly include ‘building cover material’ as well as roofing material”). The FC panel explained that “it is not necessary or appropriate to remand for the Board to reassess the evidence in light of the correct claim construction” since “when the correct construction is employed”, its conclusion “is not supported by substantial evidence” (Belden, FC 2015). In addition, the FC panel noted that Fast Felt “in its responsive brief did not ask for a remand if this court adopted a claim interpretation not limited by any requirement of asphalt coating or saturation” or “respond that this was a late-arising interpretation and it had lacked an opportunity in the Board proceedings to introduce evidence relevant under this interpretation”. In cases like this, the FC panel wrote, “where only one answer is supported by substantial evidence” (i.e., obviousness under the correct claim construction) “and there is neither a request nor an apparent reason to grant a second record-making opportunity, reversal is warranted.”

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Organik Kimya AS v. Rohm and Hass Company


Docket No. 2015-1983, -2001

PROST, NEWMAN, TARANTO
October 11, 2017

Brief summary: PTAB decision following IPR sustaining the patentability of Rohm’s patents relating to polymers for use in paints and the like affirmed (e.g., Organik did not present any “evidence to contravene with the patent specification or the expert testimony.”)

Summary: Organik appealed PTAB decision following IPR sustaining the patentability of Rohm’s US 6,020,435 and 6,252,004 relating to processes for preparing emulsion polymers having improved opacity for use in paints and the like. Organik challenged the patents on the grounds of anticipation and obviousness. The FC panel explained that PTAB decisions regarding anticipation (a question of fact) are “reviewed for support by substantial evidence in the record before the PTO”, and obviousness “is a matter of law and receives plenary review on appeal, with any underlying findings of fact reviewed for support by substantial evidence in the PTO record” (Kennametal, FC 2015). For claim construction, “the PTAB relied principally on the intrinsic evidence” and therefore “receives de novo review on appeal” (Microsoft, FC 2015). Representaive ‘435 claim 1 is directed to “[a] process for preparing emulsion polymer particles comprising: (a) providing an aqueous emulsion” having specific characteristics and (b) reducing the level of monomer by at least fifty percent.” The “aqueous emulsion” requires a swelling agent and, according to Organik, the Board “improperly added a ‘swelling step’ into the claims” by including in its definition that “the swelling agent operates ‘under the conditions of the specific process for which the agent is to be used’”, and found the cited art does not disclose a “swelling agent” (same argument was raised regarding the ‘004 patent). Organik argued the PTAB (which relied in part on expert testimony) “improperly adopted the narrower of two possible constructions of a ‘grammatically ambiguous passage’” (“Suitable swelling agents include, are those which…”) and “the broader construction of any ambiguity is required by law” (In re Cuozzo, FC 2015 (US 2016) (broadest reasonable construction)). The FC panel agreed with the PTAB that “include’…is modified by the phrase immediately following it, i.e., ‘are those which’, suggesting that those suitable swelling agents include only those which exhibit the functional characteristics thereafter described” (“construction ‘cannot be divorced from the specification and the record evidence’ and ‘must be consistent with the one that those of skill in the art would reach’” (Microsoft, FC 2015; In re NTP, FC 2011; In re Cortright, FC 1999)), and noted that Organik did not present any “evidence to contravene with the patent specification or the expert testimony.” Organik argued that one of the prior art references (“Toda”) taught a “swelling agent” but Rohm’s expert “verified by experimentation” that Toda did not, and Organik “did not provide any contrary evidence” that “negate[d] and outweigh[ed]” Rohm’s evidence. The FC panel also agreed with the PTAB regarding the second prior art reference (“Touda”) for similar reasons (e.g., Organik criticized Rohm’s expert conclusions but “did not reproduce any of his experiments or any of the Touda examples”). And it agreed with the PTAB’s decision, based on the same reasoning, that these references did not invalidate the ‘004 claims.

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Aqua Products, Inc. v. Joseph Matal (USPTO)


Docket No. 2015-1177 (IPR2013-00159)

En banc Opinion
October 4, 2017

Brief summary: Earlier appeal of IPR decision remanded “to the Board to issue a final decision under § 318(a) assessing the patentability of the proposed substituted claims without placing the burden of persuasion on the patent owner.”

Summary: This en banc opinion (6-5 decision) follows its now vacated 2016 Panel Decision finding the Board did not abuse its discretion in denying Aqua Products motion to amend the claims of its US 8,273,183 related to automatic swimming pool cleaners during an IPR. During IPR, Aqua moved to substituted ‘183 claims 1, 8, and 20 with proposed claims 22, 23 and 24, respectively, asserting that “they did not enlarge the scope of the original claims or introduce new matter…and were patentable over the obviousness combinations at issue”, but was denied because “the Board concluded Aqua had failed to prove the substitute claims were patentable.” The Panel Decision “upheld the Board’s approach” and did not “revisit” the patentability burden question. The majority in this opinion found “no interpretation of the statute by the [PTO] to which this court must defer under Chevron” (US 1984 (“a court reviewing an agency’s construction of a statute it administeres” must “determine first ‘whether Congress has directly spoken to the precise question at issue’” and if it has not “the court must consider ‘whether the agency’s answer [to the precise question at issue] is based on a permissible construction of the statute”)). It wrote that “Congress explicitly placed the burden of persuasion to prove propositions of unpatentability on the petitioner for all claims, including amended claims”, “consistent with § 316(d)).” The court therefore remanded the case “to the Board to issue a final decision under § 318(a) assessing the patentability of the proposed substituted claims without placing the burden of persuasion on the patent owner.” Four additional opinions issued with that of the majority. Judges Moore, Newman and O’Malley agreed with the majority that “the agency actions at issue are not entitled to Chevron deference” but “wrote separately to explain why” the PTO’s Idle Free and MasterImage “opinions are not entitled to Chevron deference” (“We cannot by judicial fiat usurp legislative authority and hand it over to the executive.”) Judges Reyna and Dyk disagreed “with [the] premise” that “Chevron deference…is a yes-or-no question”, agreeing the Panel Decision should be vacated and remanded but should be done “with instruction for the Agency to review the underlying motion to amend by applying only a burden of production on the patent owner, as § 316(d) and 37 C.F.R. § 42.21 currently permit, and not a burden of persuasion” (Judges Taranto, Chen and Hughes jointed Part III (“Burden of Production” is on the patent owner) of this opinion.) Judges Taranto, Prost, Chen and Hughes also dissented (joined in part by Judges Dyk and Reyna), writing that the Director can “address who has the burden of persuasion” and “§316(e) does not unambiguously bar assigning that burden to the patent owner.” Judges Hughes and Chen also dissented, writing that “the complicated reasons of the majority….do a serious disservice to the issue at hand, and to a stable interpretation of the law.”

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