The Year in Patents: The Top 10 Patent Stories from 2015

It is that time once again when we look back on the previous year in preparation to close the final chapter in order move fresh into the year ahead. 2015 was a busy year in the patent world, although change was not as cataclysmic as it was in 2013 when the United States became a first to file country or in 2014 when the Supreme Court issued the Alice v. CLS Bank decision. It was still an interesting year nevertheless.

As I close out 2015, I’ve reviewed my patent articles and have come up with my own top 10 patent moments for 2015. They appear in chronological order as they happened throughout the year.

Although not mentioned below, because it wasn’t an “event” in the same way as the other news stories, on a personal note one of the more interesting moments that occurred during 2015 related to our coverage of Mark Cuban (see here, here and here) and Cuban repeatedly returning to IPWatchdog over a period of weeks to engage our community in substantive dialogue.  Ultimately, this exchange resulted in an on the record interview with Mark Cuban.

Happy New Year, and thanks for reading IPWatchdog.com!

1. The end of de novo review, sort of

On January 20, 2015, the United States Supreme Court issued a decision in Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc. The United States Court of Appeals for the Federal Circuit had a very long love affair with de novo review, a standard whereby the reviewing appellate court can simply do whatever they want without giving any deference to the district court judge or the jury. De novo review is supposed to be limited to questions of law, but the Federal Circuit has applied the standard when reviewing matters that are undeniably factual in nature.

After deciding that the Federal Circuit can no longer apply the de novo standard to review findings of fact, Justice Breyer endeavored to explain how this would work in practice. Justice Breyer explained the process of looking first to intrinsic evidence within the patent and then also, in some cases, looking to extrinsic evidence from outside the patent. Justice Breyer then explained that even if the factual findings are dispositive the nature of the question does not change to become a question of law reviewed de novo. Of course, the Supreme Court only said de novo review is the wrong standard when there are factual findings, which means when there is extrinsic evidence. Despite the reality that there are a great many factual findings even when only intrisic evidence is considered, the Federal Circuit continues to apply a de novo standard to review findings based purely on intrinsic evidence.

For more on this please see Supremes end Federal Circuit love affair with de novo review.

2. Cuozzo appeals by BRI the proper standard in IPR

On February 4, 2015, the United States Court of Appeals for the Federal Circuit issued its much-anticipated decision in In re Cuozzo Speed Technologies, which is the first appeal of a final decision of the Patent Trial and Appeal Board (PTAB) in an Inter Partes Review (IPR) proceeding.  On appeal to the Federal Circuit, Cuozzo primarily raised two arguments. First, Cuozzo argued that the IPR was improperly instituted because the USPTO on certain prior art to institute that was not raised by the petitioner. Second, Cuozzo argued that the PTAB applied the incorrect standard when evaluating the scope of the claim.

Writing for the panel majority, Judge Dyk, who was joined by Judge Clevenger, explained that regardless of whether the USPTO properly should have instituted an IPR, the decision of the USPTO could not be reviewed or challenged even after a completed IPR proceeding. Not surprisingly, Judge Dyk found that the broadest reasonable interpretation standard is appropriate.

For more on this please see CAFC Affirms PTAB in First Inter Partes Review Appeal.

3. Good faith belief of invalidity is no defense

On May 26, 2015, the United States Supreme Court issued a decision in Commil USA, LLC v. Cisco Systems, Inc. The case dealt with the issue of induced infringement. Specifically, the issue considered by the Supreme Court was whether a good faith belief of patent invalidity is a defense to a claim of induced infringement. In a 6-2 decision written by Justice Kennedy, the Supreme Court ruled that belief of invalidity is not a defense to a claim of induced infringement.

While it seems that the Supreme Court issued a reasonable decision in this case it is deeply troubling how little the Supreme Court actually knows about patent law. In addition to repeatedly discussing the validity of the Commil patent, rather than the validity of the patent claims, the Supreme Court also seemed to suggest that Cisco could have relied on a procedural challenge to the Commil patent that simply wasn’t available as an option at any relevant time during the proceedings. Thus, even when the Supreme Court issues a decision within the bounds of reasonableness they can’t help but evidence their lack of knowledge with respect to basic patent law concepts.

For more on this please see SCOTUS rules good faith belief of patent invalidity is no defense to induced infringement.

4. Spiderman goes to the Supreme Court

On June 22, 2015, in Kimble v. Marvel, the United States Supreme Court rejuvenated a 50-year-old rule that limits collecting patent royalties after a patent expires. The Court, in an opinion authored by Justice Kagan, upheld its per se Brulotte rule that bars a patent licensor’s collection of royalties for the use of a claimed invention beyond the expiration date of the underlying patent. The Court directly addressed criticisms of this rule, which originated in its Brulotte v. Thys Co. (1964) decision, and foreclosed any speculation about the continued viability of Brulotte’s bright-line rule in current practice. Thus, once again we learned that the Supreme Court is not completely intolerant of bright line rules. As per usual, the Supreme Court is completely comfortable with bright-line rules of its own creation, while seemingly being practically allergic to bright-line rules created by inferior courts — regardless of whether the bright-line rule makes good sense or good policy.

The Supreme Court has been extremely cavalier toward patent law generally and their own well-established patent precedent specifically in recent years. Therefore, it was particularly difficult to read the Supreme Court explain that overruling previous decisions requires special justification. In my opinion, any patent decision from the Supreme Court that cites stare decisis, as Kimble v. Marvel did, lacks all intellectual credibility given how arbitrarily and capriciously they have ignored their patent own precedent and the patent statutes over the past decade.

For more on this please see Supreme Court applies stare decisis in patent case and Kimble v. Marvel – Supreme Court quiets criticism of per se rule against post-patent royalties.

5. Examiner A submits fraudulent time sheets and gets paid by USPTO

On Wednesday, August 19, 2015, the Office of Inspector General at the Commerce Department issued a scathing summary of an investigation into an unnamed patent examiner who was falsifying time records. Called only “Examiner A” in the report, the examiner in question also received extraordinarily low performance evaluations, receiving a reprimand for poor quality on nine (9) separate occasions. Rather than cooperate with the IG’s investigation Examiner A resigned and declined the opportunity to review and comment on the investigation findings. While the overwhelming majority of patent examiners take the job very seriously, those that do not take the job of examining patents so seriously do real damage to the patent system they are supposed to be serving.

This story probably won’t make the top 10 list for many others, but for me it is one of the most important stories of the year, if not they most important story. The situation with Examiner A focuses a spotlight on the inability of the Patent Office to get rid of patent examiners who are routinely cited for inferior quality, and similarly focuses a spotlight on the Office’s inability to control rogue patent examiners. On a broader level it speaks to the presence of an overwhelming government bureaucracy that makes it virtually impossible to get rid of bad actors; as hard as it is to believe Examiner A was not fired, he resigned so his personnel file wouldn’t contain mention of this episode. That all of this happens at the very time the Patent Office is embarking on another patent quality initiative is truly ironic, and sad. I have nothing against increasing patent quality, but patent quality must be a two-way street. Patent quality simply cannot mean rejecting more applications quicker and giving applicants and representatives the run-around.

For more on this please see USPTO pays patent examiner for 730 hours fraudulently not worked and Patent quality is much ado about nothing without better patent examiner controls.

6. The Kyle Bass saga

Kyle Bass is the hedge fund billionaire the Coalition for Affordable Drugs, which has filed a series of inter partes review challenges against a number of drug patents that he and his organization think should never issued. In the first two decisions relating to his challenge against Acorda Therapeutics patents the PTAB refused to institute the IPRs. In what can be described only as a horribly disingenuous decision the PTAB also refused to institute an IPR in Bass’ challenge against Biogen. Making matters worse, decisions of the PTAB are not appealable. It was not looking good for Bass, and some started to wonder whether the Patent Office was simply going to refuse Bass’ petitions at every turn.

The first bit of good news for Bass came with respect to his IPR petition against Celgene Corporation. Celgene Corporation filed a motion for sanctions against the Coalition for Affordable Drugs on July 28, 2015. The motion for sanctions alleged that filing of the inter partes review (IPR) by the Coalition for Affordable Drugs constituted an abuse of process. On August 11, 2015, the Coalition for Affordable Drugs filed an opposition to the patent owner’s motion for sanctions.

On September 25, 2015, the PTAB, in a decision authored by Administrative Patent Judge Michael Tierney, explained that the purpose of the America Invents Act (AIA) was to “encourage the filing of meritorious patentability challenges, by any person who is not the patent owner, in an effort to improve patent quality.” Given that Bass and the Coalition for Affordable Drugs did not own the patent in question the law allows these types of challenges.

Bass’ luck continued to an October 7, 2015, decision of the PTAB to institute an IPR proceeding against U.S. Patent No. 6,773,720, owned by Cosmo Technologies LTD. Bass, by and through the Coalition for Affordable Drugs, challenged claims 1–4 of the ’720 patent as unpatentable under 35 U.S.C. § 103(a).

For more on this please see our Kyle Bass archive.

7. SCOTUS takes up enhanced damages

On October 19, 2015, the United States Supreme Court accepted certiorari in two patent cases, which will require the court to determine whether district court judges should have discretion to award victorious patentees with enhanced damages under 35 U.S.C. § 284. Halo Electronics, Inc. v. Pulse Electronics, Inc. (14-1513) and Stryker Corporation v. Zimmer, Inc. (14-1520) have been consolidated by the Court for consideration, with one hour allotted for oral argument. The single issue accepted by the Supreme Court is whether district courts enjoy discretion to treble damages under § 284 of Title 35, or whether the rigid two-part test adopted by the Federal Circuit is statutorily appropriate. If the Supreme Court follows their own reasoning in Highmark Inc. v. Allcare Health Management Systems, Inc., 134 S. Ct. 1744 (2014) and Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014), district courts will be given broad discretion to enhance damages.

Regardless of the outcome of these cases, this will also be one of the biggest moments of 2016. It is on my list for 2015 because of the impact it will have on already stalled patent reform. With damages uncertainty present it will make it even less likely we will see sweeping patent reform moving forward.

For more on this please see SCOTUS takes case on awarding enhanced damages for patent infringement.

8. Ariosa v. Sequenom

On December 3, 2015, in a per curiam decision with only Judge Newman dissenting, the United States Court of Appeals for the Federal Circuit denied the Sequenom petition for rehearing en banc. See Ariosa Diagnostics, Inv. v. Sequenom, Inc. Sequenom, the patent holder, had already hired Thomas Goldstein, the founder of SCOTUS blog and renowned Supreme Court advocate, as a part of their appellate team. The case will now undoubtedly move to the Supreme Court.

The patent in question, U.S. Patent No. 6,258,540, claimed certain methods of using cell-free fetal DNA (“cffDNA”). The district court ruled that the claims of the ’540 patent in question were directed to the natural phenomenon of paternally inherited cffDNA. The Federal Circuit agreed that the claims were patent ineligible under the Supreme Court’s Mayo and Myriad line of cases. It was undisputed, however, that the claims covered a significant medical advancement, which allowed for safer testing for both fetus and mother.

For more on this please see CAFC denies Sequenom en banc petition, Next stop SCOTUS.

9. Power outage takes out USPTO electronic systems

The USPTO electronic systems have been antiquated for years, difficult to use in any real world sense of what is acceptable in a 21st century e-commerce digital age. Then on December 22, 2015, at approximately 7:00 pm, the USPTO experienced a catastrophic failure of electronic information systems due to what is being called a major power outage at the Office’s headquarters in Alexandria, Virginia. Initially it seemed that the USPTO was slow to provide information. In fact, according to some practitioners, the blog page dedicated to notify the industry about electronic filing issues was for a time displaying a 404 error message. When information was provided the Office posted only rather nebulous statements on the agency website.

Potentially making matters worse, the USPTO declared that it would consider each day from Tuesday, December 22, 2015, through Thursday, December 24, 2015, to be a “Federal holiday within the District of Columbia.” Unfortunately, it seems that Director Lee may have relied on some unspecified power under 35 U.S.C. 21(b), rather than rely on a specific power granted under § 21(a) to declare an emergency. The power granted the Director under § 21(a) has been used in the past by the Office to extend deadlines when there has been a natural disaster that has made filing by mail impossible. Think earthquakes or hurricanes where Post Offices in certain areas were destroyed, but by its express terms could have and should have been used here.

For more information please see USPTO experiences catastrophic failure of electronic patent and trademark systems and The USPTO Director can legally extend filing deadlines for emergencies.

10. Patent reform stalls in Congress

I’m not really sure where to put this chronologically. I elected to place it last given that patent reform remains pending in Congress, but stalled.

If you can remember all the way back to the aftermath of the 2014 mid-term elections, when Republicans increased their majority in the House of Representatives and regained control of the United States Senate, Republican leaders in both the House and Senate pledged that patent reform legislation would be one of the first pieces of legislation to pass in the new Republican controlled Congress. Not so fast! Not for a lack of effort, but patent reform stalled, although both the Innovation Act in the House and the PATENT Act in the Senate did manage to get voted out of Committee. Skepticism in the broader membership, heavy lobbying against additional reform, and push by conservative Republicans took its toll and killed any momentum for patent reform. That together with a strong alternative vision for patent reform in the STRONG Patents Act meant 2015 would not be remembered as the year for additional patent reform.

On October 7, 2015, I moderated a Google Hangout on the topic of patent reform, which was sponsored by the Innovation Alliance’s save the inventor campaign. Joining me for the conversation was United States Senator Chris Coons (D-DE), a member of the Senate Judiciary Committee and the driving force behind the STRONG Patents Act, and Congressman Thomas Massie (R-KY), an inventor and patent owner who is a member of the House Science, Space and Technology Committee. Louis Foreman, the CEO of Edison Nation, also joined the conversation remotely from his office in North Carolina. During this conversation Senator Coons told me that patent reform is stalled, but the danger is that since both the Innovation Act and the PATENT Act have both passed the relevant Committees the bills could be brought to the floor at any time, perhaps with little or no warning. That means that patent reform, which is stalled at the moment, could return with sudden vengeance in 2016.

What could rekindle patent reform efforts and give it momentum? Pharma and bio are lobbying hard for a solution to the IPR problems presented by Kyle Bass (see above). If they are given a legislative fix, which seems unlikely, they will agree to whatever else needs to be into the legislation to get it across the finish line. As long as pharma and bio are opposed to the current patent reform bill nothing will happen, but if they get their special interest handout patent reform could become the biggest story we talk about in 2016.

For more on patent reform please see:

• Patent Reform 101 – A Primer on Pending Patent Legislation
• Vocal minority cannot keep PATENT Act from passing Senate Judiciary
• House Judiciary approves Innovation Act despite clear lack of consensus