Supreme Court Decides Oil States – Inter Partes Review Does Not Violate Article III or the 7th Amendment

justice scaleThe Supreme Court issued its long-awaited opinion in Oil States Energy Services v. Greene’s Energy Group, Appeal No. 16-712 (April 24, 2018), holding 7/2 that inter parties review was an appropriate exercise of the power of Congress to assign adjudication of public rights to the USPTO, and is not required to assign such adjudications to Article III courts for resolution by a jury trial. To reach this conclusion, the Court held that the grant of a patent falls within the public rights doctrine, as a matter “arising between the government and others” and that IPR is “simply a reconsideration of that grant” that Congress has reserved to the PTO.

The Court minimized the procedures unique to IPR by reasoning that IPR involves the same interests as the original grant of a patent, and analogized the grant or cancellation of a patent to the qualification of other “public franchises” by Congress.

Although we often hear that a “strict constructionist” Justice believes in deciding cases based on what the Founding Fathers intended when they considered questions of law, such as by disregarding the first “militia clause” of the 2d amendment, I think that this opinion is unusual in the depth of the historical review of patent validity determiners as it relates to the present case. While the Court cites some 19th century precedent in deciding the “public rights” question, this is just a warm-up of the “Way Back Machine” that the Court is will use to look at really old decisions regarding the review of granted patents:

“The Patent Clause in our Constitution ‘was written against the backdrop’ of the English system. Based on the practice of the Privy Council [that invalidated British patents until 1779], it was well understood at the founding that a patent system could include a practice of granting patents subject to potential cancellation in the executive proceeding of the Privy Council. The parties have cited nothing in the text or history of the Patent Clause or Article III to suggest that the Framers were not aware of this common practice. Nor is there any reason to think they excluded this practice during their deliberations.” Slip. op. at 14.

I can hear the ghost of Justice Scalia toasting this imaginative investigation about the Framers’ state of mind when they wrote the patent clause of the Constitution. These are two “negatives” that Oil States could not disprove.

The dissent tried, arguing that the IPR procedures undermine judicial independence, which the Founding Fathers sought to protect: “Only courts could hear patent challenges in England at the time of the founding.” But tradition only goes so far and the Court “disagreed with the dissent’s assumption that, because courts have traditionally adjudicated patent validity in the courts, courts must forever do so…That Congress chose the courts in the past does not foreclose its choice of the PTO today.” Slip op. at 14-15.

The dissent also argued that the majority’s decision endorsed an unfair weakening of patentee’s rights: “To reward those who had proven the social utility of their work (and to induce other to follow suit), the law long afforded patent holders more protection … against the treat of governmental intrusion and dispossession.” Slip. op. at 10-11 (Gorsuch, dissenting).

Finally, the Court dismissed the 7th Amendment challenge “because inter partes review is a matter that Congress can properly assign to the PTO, a jury is not necessary in these proceedings”.

The arguments presented by the minority suggest that the majority is adopting an anti-patent position, a question that the majority attempts to skirt. In any case, we appear to be stuck with inter partes review, including the tensions and uncertainty provided by inconsistent rulings by the courts. The Framers may or may not have intended that validity disputes be settled in court, but it’s a pretty sure bet that they never envisioned anything like the Mad Hatter’s tea party that Alice (get it) tried to make sense of.

Posted in Alice, Federal Court, Patent Reform Legislation, Post-Grant Issues, Post-issuance procedures, PTAB | Tagged , , , , | Leave a comment

USPTO Memorandum Seeks to Clarify “Inventive Concept” Requirement

On April 19, 2018, the USPTO released a Memorandum from Robert Bahr, The Deputy Commissioner for Patent Examination Policy, to the Examiners,  that summarized the support required for a finding whether or not a claim directed to a judicial exception to s. 101 under Step 2A of the analysis chart of MPEP 2106 – a natural phenomenon, an abstract idea or a product of nature – contains additional elements that meet the Step 2B requirement that, taken alone or in combination, represent well-understood, routine, conventional activity.

The Memorandum was prompted by the recent decision in Berkheimer v. HP, 881 F.3d 1360 (Fed. Cir. 2018) I which the court held the Step 2B decision is a (disputed) factual issue that precludes resolution by summary judgment (or otherwise at the pleadings stage). In Berkheimer, while most of the claims directed to aspects of a “digital asset management system” were ineligible as directed to abstract ideas that did not recite “purported improvements” such as “reducing redundancy”, 4 claims did recite said improvements, and so raised an issue of material fact as to whether or not these improvements were well-understood, routine, conventional activity  previously known in the industry.

The Memorandum purports to clarify the scope of the factual inquiry that an Examiner must conduct in order to find that the claim element(s,) other than the abstract idea product or phenomenon of nature, represent well-understood, routine conventional activity. (The Office’s “markedly different” test for identifying a “natural product(s)” recited in a claim was not discussed).

Part III of the Memorandum requires that, in a Step 2B analysis, an additional element (or combination of elements is not well-understood, routine or conventional UNLESS the examiner finds ONE or more of the following (which I will attempt to summarize)):

  1. The specification describes, or applicant(s) argue that the additional steps or elements are, in fact, well-known, routine or conventional, as a commercially available product, or in a manner that indicates that detailed description is not required to describe the additional elements in detail in order to satisfy s. 112(a) (enablement and written description requirement). This explicit linkage of patent-eligible subject matter and a requirement for patentability seems to go beyond the S. Ct.’s statement that “the inquiry ‘might sometimes overlap’ with other fact-intensive inquiries under 35 USC s. 102”).

In fact, the Fed. Cir.’s Alice decision spent almost a full page discussing the fallacy of this approach:

“The eligibility requirement is not an inquiry into obviousness, novelty, enablement, or any other patent law concept. Each section plays a different role and no one section is more important than any other. Section 112 of Title 35 protects the public by ensuring that patents fully disclose, enable, and particularly claim the invention. Sections 102 and 103 ensure that the public is free to use what was previously known and the obvious variants thereof. The Section 101 eligibility inquiry determines whether a claim is limited meaningfully to permissible subject matter, as distinct from the validity requirements of the other sections….Because a new combination of old steps is patentable, as is a new process using an old manufacture or composition, subject matter eligibility must exist even if it was obvious to use the old steps with the new machine or composition. Otherwise the eligibility analysis ignores the text of sections 101 and 100(b) and read Section 103 out of the Patent Act.” Slip op. at 22-23.

The Supreme Court’s language in Mayo also does not justify drawing Section 112(a) fully into the 101 inquiry on “inventive step”:

“We recognize that, in evaluating the significance of additional steps, the s. 101 patent-eligibility inquiry and, say the s. 102 novelty inquiry might sometimes overlap. But that need not always be so. …Section 112 … does not focus on the possibility that a law of nature…that meets these conditions [enablement, WDR] will nonetheless create the kind of risk that underlies the law of nature exception, namely the risk that a patent on the law would significantly impede future innovation.” Slip. op. at 21-22.

Factor 2 of the Memorandum permits an examiner to simply cite to “one or more of the court decisions discussed in MPEP 2106(5)(d)(2) as noting the well-understood, routine, conventional nature of the additional elements.” This section of the MPEP simply lists, broadly, steps such as “detecting DNA or enzymes in a sample”, citing Cleveland Clinic. Can the PTO really intend to take these steps out of context and make them universally conventional?

Factor 4 permits a citation to a publication that “describes the state of the art and discusses what is well-known and in common use in the relevant industry.” There is a valiant attempt to give examples of publications disclosing a claim element that would not meet this requirement. Again, though, there is a statement that a sufficient publication would be one that would demonstrate that the specification of an application meets the requirements of s. 112(a).

Factor 5 simply permits a statement that the examiner can take official notice of the conventionality of the additional elements, based on his/her personal knowledge. Again, the conventionality should be comparable to the types of activity or elements that are so well-known that they do not have to be described in a patent application in order for the specification to meet the requirements of s. 112. However, any examiner who attempts this shortcut faces the requirement to prepare a 104 declaration, and this almost never happens.

Finally, and oddly, Director Iancu released a Request for Comments on Determining Whether a Claim Elements is [conventional] for the purposes of Subject Matter Eligibility on the same date as the Memorandum was released, and it pretty much repeats the factors discussed above. Just what does the Office plan to do with these comments? I assume that they could alter the revisions in the MPEP promised by the Memorandum, but nothing says so, and we can only hope that this is a chance to make the Office great again.

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Federal Circuit Circumvents Mayo/Alice Rule in Vanda v. West-Ward

After Cleveland Clinic, IP practitioners were left to speculate about the fate of claims directed to methods of medical treatment. These claims seemed next in line for extinction by the Mayo/Alice rule, which I will paraphrase: “If a patent claim is directed to a phenomenon of nature or abstract idea, it is patent-ineligible unless it contains an additional ‘inventive concept’ and does not merely recite routine and conventional pre or post-solution activity.” In other words, what is patent-eligible about the discovery of the natural phenomenon that drug x can treat pathology y if the discovery that biomarker z correlates with a feature of pathology y and thus can be used to diagnose it, cannot provide the needed inventive concept that will pass step 2B of the Mayo/Alice test. See Genetic Tech’s. v. Meriel (2016) and MPEP 2106.

On April 13th a divided panel of the Fed. Cir. (Lurie writing for Lurie and Hughes, Prost dissenting) affirmed a district court ruling that claims to an improved method of treating schizophrenia (“SC”) with iloperidone (“Ilo”)was not an attempt to claim a natural phenomenon, and so passed test 2A of the Mayo/Alice analysis, and did not need to be dissected to see if it contained the dreaded additional inventive concept of test 2B. (Vanda Pharm., Inc. v. West-Ward Pharm. Int’l Ltd, Appeal No. 2106-2707, -08 (Fed. Cir., April 18th 2018)).

I am well aware that many commentators have already weighed in on this decision, but I have avoided reading their sage analyses on the off chance that I can add some novel thoughts on the majority’s reasoning. The illustrative claim is as follows:

A method for treating a patient with Ilo, wherein the patient is suffering from SC, the method comprising the steps of:

determining whether the patient is a CYP2D6 poor metabolizer [of Ilo] by:

obtaining or having obtained a sample from the patient; and

performing or having performed a genotyping assay on the biological

sample to determine if the patient has a  CYP2D6 poor metabolizer genotype; and

if the patient has a CYP2D6 poor metabolizer genotype, then internally administering Ilo to the patient in an amount of 12 mg/day or less, and

if the patient does not have a CYP2D6 poor metabolizer genotype, then internally administering Ilo to the patient in an amount that is greater than 12 mg/day up to 24 mg/day,

wherein the risk of QTc prolongation (a heart arrhythmia) for a patient having a CYP2D6 genotype is lower following the internal administration of 12 mg/day or less than it would be if the Ilo were administered in an amount of greater than 12 mg/day, up to 24 mg/day.

The task before the majority, of course, was to distinguish this claim from the doomed claims in Mayo v. Prometheus, and they got right to it. (Start at page 26 unless you are eager to have a Hatch-Waxman tutorial or hear about how copying a label can support a charge of induced infringement.) The majority started by noting that the Mayo claims were not directed to a novel method of treating a disease but rather were directed to a diagnostic method that was based on the correlation between the 6-TG metabolite of a drug and the likelihood that a dosage of the drug with be ineffective or cause harm. The S. Ct. found that the claim simply describes this relationship which is, per se, a natural law.

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USPTO Director Outlines Challenges to the Patent System at the U.S. Chamber of Commerce Patent Policy Conference

The USPTO released a copy of the “Remarks” made by Director Andrei Iancu, that read like a major policy summary regarding challenges to the US patent system. Specific solutions were not suggested, but Iancu identified two areas that need review and may subsequently be changed, particularly since the US Chamber’s 6th Annual International IP index showed the USPTO had fallen in the rankings from 10th to 12th in the world.

What makes this talk important is the Director’s recognition that the Mayo/Alice/Myriad “Rules” are rife with uncertainty for all of the stakeholders. He emphasized that the Office cannot ignore Supreme Court precedent, but he felt that the Office can also “simplify the eligibility determination for our examiners through forward-looking guidance.” (His comments about reviewing all aspects of IPR were more general in nature.)

Of course, I hope that Iancu comes to the recognition that most of the uncertainty and lack of clarity afflicting life sciences patenting comes from the PTO’s sua sponte decision to read and apply both Mayo and Myriad more broadly than the facts and the ultimate Supreme Court decisions require. Mayo involved the old use of an old compound – the correlation between the metabolite levels and side effects or efficacy of a known class of drugs does not inexorably lead to the conclusion that the discovery of a previously unknown naturally-occurring correlation and its utility as a diagnostic agent should be deemed patent-ineligible.

Likewise, the limited holding that an isolated human gene or fragment thereof is a natural product does not inexorably lead to the conclusion that isolated polypeptides or fragments thereof also natural products, and are patent ineligible. I hope that the Director will read Judge Rich’s elegant opinion in Bergy II justifying patent-eligibility of useful organisms (such as antibiotics)  discovered in, and isolated from environments (such as dirt)  which environments prevented their practical utility. In any case, the PTO took the opposite position and has been rejecting claims to naturally-sourced chemicals unless the isolation/purification step renders them “markedly different” from the chemical in its natural state.

Perhaps all that I have written here adds up to an “open letter” to the Director, suggesting just a few changes in PTO policy that he could implement without offending the Supreme Court. The Federal Circuit is another matter, but I still cling to the hope that at least some of the Judges would welcome the chance to read Mayo more narrowly, so as not to remove entire art areas from patent protection. In fact, the Director spent most of his remarks emphasizing the importance of patent protection as a driver for the entire R&D community. The Director has outlined areas that need “legal help.” Now, I hope that he will use his “Remarks” as a starting point for meaningful action.

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