It is that time once again when we look back on the previous year in preparation to close the final chapter of 2017 in order move fresh into the year ahead. 2017 was a busy year in the patent world, although change was not as cataclysmic as it had been in past years, such as 2012 when the PTAB and post grant challenges began, in 2013 when AIA first to file rules went into effect, or in 2014 when the Supreme Court decided Alice v. CLS Bank. It was, nevertheless, still an interesting year.
Those following the patent industry realize that 2018 is shaping up to quite possibly be another year with cataclysmic change, but that is another story for next week when we take a look ahead at 2018.
Personally, in 2017 I was recognized by IAM Magazine as one of the top IP Strategists in the world, which certainly isn’t a top story, but a recognition I am humbled to have received.
In any event, to come up with the list below I’ve reviewed all of our patent articles, and have come up with these top 10 patent stories for 2017. They appear in chronological order as they happened throughout the year. If you’d like to review my selections from past years see Top 10 Patent Stories from 2016 and Top 10 Patent Stories from 2015.
Before proceeding it is worth noting two things. First, that my list focuses on specific and identifiable events. Steve Brachmann will write an article on 2017 Trends, which will focus on the trends and themes that played out over the entire year and their significance. Second, there are a number of stories worth mentioning, but which just missed the cut for one reason or another.
Missing the cut for inclusion below were:
- Oil States v. Greene’s Energy Group and SAS Institute v. Matal, both argued at the Supreme Court on November 27, 2017, which will undoubtedly make the 2018 list after the decisions are reached.
- President’ Trump’s nomination of Andrei Iancu to be the next Director of the USPTO, and the Senate Judiciary’s unanimous confirmation of Iancu. While significant, Iancu remains unconfirmed and a relative unknown to many in the patent community.
- Chinese President Xi Jinping says: “Wrongdoing should be punished more severely so that IP infringers will pay a heavy price.” This will be discussed in Steve Brachmann’s 2017 trends article.
- The United States Supreme Court issued its decision in SCA Hygiene Products Aktiebolag et al. v. First Quality Baby Products, LLC, et al., relating to laches no longer being a defense to patent infringement. See our summary of the decision and our SCA Hygiene Products archive.
- South Korea upholding a nearly $1 billion fine against Qualcomm. This will also be discussed in Steve Brachmann’s 2017 trends article.
- Senator Coons’ introduction of the STRONGER Patent Act, which would be a great step forward and represents excellent reforms that make sense. Unfortunately, at the moment it seems to stand little chance of being enacted.
Happy New Year, and thanks for reading IPWatchdog.com!
1. Michelle Lee Remained USPTO Director
Those who believed Friday, January 20, 2017 would be the last day for USPTO Director Michelle Lee received a big surprise.
On January 18, 2017, just two days before President Trump’s inauguration, I learned from a credible source that Lee was either refusing to resign or perhaps attempting to revoke her letter of resignation. Shortly thereafter I was told that senior Obama officials were upset with what was happening at the Patent Office and that Lee had “gone rogue.” And thus began a crazy story that saw the USPTO and Department of Commerce refusing to acknowledge whether Michelle Lee remained as Director or had left the USPTO (see here, here, here and here). The USPTO even postponed addressing my FOIA request pertaining to the matter citing unusual circumstances.
Unusual circumstances was an understatement. Lee remained Director of the USPTO without any official statement on her status until March 10, 2017, when the USPTO finally confirmed she was the Director of the USPTO. After all of this, apparently without giving anyone at the USPTO any advance notice (and certainly not notifying her Communications Team), Lee resigned as Director on June 6, 2017, by sending an all-employee e-mail.
This story represented a most bizarre series of events. The refusal to announce whether Lee remained Director created questions of the provenance of the patents issued with her signature, fueling anxiety that was only flamed by the fact that the Commerce Department website continued to list the position of Director of the USPTO as vacant throughout this saga.
2. IP Organizations Propose Amending 35 U.S.C. 101
Beginning in January 2017, several major intellectual property organizations began proposing legislative fixes to patent subject matter holdings by the courts. The American Bar Association/ Intellectual Property Law Section (ABA/IPL), the Intellectual Property Owners (IPO), and the American Intellectual Property Law Association (AIPLA) have all released proposals. All remove the novelty requirement from 101 since it is already contained in 102. Each provides that an applicant be “entitled” to a patent as long as the requirements of 101 and the other sections of the statute are met. The similarity of the proposals largely ends there.
At the moment there seems to be little or no momentum to these proposed amendments, but there are some who believe Congress has woken up to the patent crisis, with Conservative groups champion patent rights as a property right and several Democrats on the Senate Judiciary Committee — particularly Senator Chris Coons (D-DE) and Senator Dick Durbin (D-IL) very skeptical about patent litigation reform. These proposals make the list despite a status quo prevailing at the moment with respect to patent reform because many believe that at some point Congress will be required to step in and rescue the patent system, particularly as China and Europe become more lenient and are granting patents that could once be obtained in America but are no longer patent eligible.
3. U.S. Falls to 10th on Patents in 2017 Chamber IP Index
The United States was once again the top ranked country for intellectual property protection in the U.S. Chamber of Commerce’s annual Global IP Index for 2017, released in February 2017, but the rankings were closer than ever. The closeness of the rankings was no doubt in significant part due to the fact that the United States tumbled to 10th overall on the issue of patents.
The omnipresent threats of more patent reform, a Supreme Court that has created unprecedented uncertainty surrounding what is patent eligible, and a Patent Trial and Appeal Board that has been openly hostile to property owners contributed to the U.S. fall to 10th place.
At this moment in history almost everything we thought we knew about the global patent landscape and patent protection in general is being challenged. The U.S. is not the most patent friendly jurisdiction in the world, instead being tied for 10th with Hungary, which really puts into perspective the fall from grace patent rights are having in America.
4. Conflict of Interest at the PTAB
In May 2017 we wrote several times (here, here, here and here) about a Patent Trial and Appeal Board (PTAB) situation that, in my opinion, symbolizes everything that is wrong with a tribunal that is out of touch with reality. Prior to being hired in March 2013 by the U.S. Department of Commerce to become an Administrative Patent Judge (APJ) on the PTAB, Matthew R. Clements represented Apple as patent infringement defense counsel while working for Ropes & Gray. Since September 2014, APJ Clements was assigned to numerous petitions filed by Apple, mostly CBMs but some IPRs. Clements’ record in deciding cases, perhaps predictably, is tilted overwhelmingly in Apple’s favor. Similarly, APJ Stacy Beth Margolies served as an APJ on at least two IPRs petitioned by Apple, both of which challenged patents owned by Voip-Pal.com, a developer of Internet telecommunications technologies. According to information from PACER, Margolies represented Apple as counsel in Fast Memory Erase LLC v. Spansion Inc. et. al. (ND Tex 3:08-cv-00977)(see screenshot).
On Thursday, May 11, 2017, I submitted a Freedom of Information Act (FOIA) request to the United States Patent and Trademark Office (USPTO). My FOIA request sought a copy of any and all rules of judicial conduct, ethical policies and/or codes of professional or judicial conduct that apply to Administrative Patent Judges (APJs) of the Patent Trial and Appeal Board (PTAB). On May 31, 2017, I received a reponse to my FOIA request that confirmed that there is no code of judicial conduct or ethics rules that apply to APJs on the PTAB. The judges of the PTAB are governed by the same ethics policy that applies to all USPTO employees, which requires a 1 year disqualification period.
No federal court judge would be able to decide a case involving a former employer after as little as 1 year, and indeed would be disqualified from cases involving former employers and clients indefinitely. Similarly, patent attorneys and patent agents could never represent a competitor of a former client without express permission from that former client. Thus, it seems federal judges and the patent bar are held to a significantly higher ethical standard than PTAB judges (see here and here).
Chief Judge Rushcke promised the Patent Public Advisory Committee at their May 2017 meeting that he would address this ethics issue at the August 2017 meeting. The August 2017 meeting came and went without discussion, and it seems the USPTO has managed to sweep this matter under the rug.
5. Supreme Court Reverses Federal Circuit on Patent Venue
On May 22, 2017, the United States Supreme Court issued its much-anticipated decision in TC Heartland LLC v. Kraft Food Group Brands LLC. In a unanimous decision of the Court delivered by Justice Thomas (minus Justice Gorsuch who did not participate in consideration of the case) the Supreme Court reversed the Federal Circuit and ruled that 28 U.S.C. 1400(b) remains the only applicable patent venue statute, that 28 U.S.C. 1391(c) did not modify or amend 1400(b) or the Court’s 1957 ruling in Fourco Glass Co. v. Transmirra Products Corp., and that the term “residence” in 28 U.S.C. 1400(b) means only the state in which a company is incorporated. We published a complete summary of the decision, as well as industry reaction to the decision as a part of our industry insiders series.
As you might expect, we have published numerous articles relating to TC Heartland since the Supreme Court’s decision. Ashley Keller & Katharine Wolanyk wrote that the decision was not as bad as it seemed, which was echoed by Bob Stoll who wrote explaining that not much as really changed. As explained by Keith Grady, initially many district courts were denying that TC Heartland changed the law because the Supreme Court merely said that Fourco remained the law of the land regardless of what the Federal Circuit had said. This was an important issue for those who did not originally challenge venue but who wanted to challenge venue after TC Heartland, which could only happen if there had been a change to the law. But then on November 15, 2017, the Federal Circuit ruled that TC Heartland did, in fact, change the law. We have also recently published an article by Jamie McDole explaining the options patent owners now have after TC Heartland. Still further, the Federal Circuit has substantively ruled that employees that work from home are insufficient to establish venue in a particular location (see here and here).
6. International Sales Exhaust U.S. Patent Rights
On May 30, 2017, the United States Supreme Court issued an opinion in Impression Products, Inc. v. Lexmark International, Inc., a case requiring the Court to revisit the patent exhaustion doctrine. In an opinion authored by Chief Justice John Roberts, and joined by all members of the Court except Justice Ginsburg (concurring in part and dissenting in part) and Justice Gorsuch (taking no part in the case), the Supreme Court determined that when a patent owner sells a product the sale exhausted patent rights in the item being sold regardless of any restrictions the patentee attempts to impose on the location of the sale. In other words, a sale of a patented product exhausts all rights — both domestic and international.
Justice Ginsburg concurred with respect to the Court’s ruling relating to the first issue pertaining to domestic patent exhaustion, but dissented relating to the issue of international exhaustion. Ginsburg would have ruled that a foreign sale does not exhaust a U.S. inventor’s U.S. patent rights. Because patent law is territorial, and because a sale abroad operates independently of the U.S. patent system, Ginsburg wrote that “it makes little sense to say that such a sale exhausts an inventor’s U.S. patent rights.”
7. Allergan Transfers Patents to St. Regis Mohawk Tribe
On September 8th Allergan announced that it had partnered with the St. Regis Mohawk Tribe, a sovereign nation located in Upstate New York State, in an attempt to dismiss the IPR proceedings at PTAB. Under the terms of the deal, Allergan transferred ownership each of the Orange Book patents covering RESTASIS to the St. Regis tribe and received back an exclusive license to those patents from the tribe. The St. Regis tribe receives an upfront payment of $13.75 million along with annual royalties of $15 million.
In return for paying this high price to transfer IP assets, Allergan and the tribe would mount a sovereign immunity defense at the Patent Trial and Appeal Board (PTAB), seeking to dismiss the IPR proceedings pending against RESTASIS.
Preeminent constitutional scholars Laurence Tribe and Erwin Chemerinsky filed an amicus brief at the PTAB in support of the St. Regis Mohawk Tribe assertion of tribal sovereign immunity. Notwithstanding, given the recent ruling from the PTAB that a State waives its Eleventh Amendment immunity when it files a patent infringement lawsuit in federal district court (see below), the PTAB is virtually guaranteed to deny the St. Regis Mohawk assertion of tribal sovereign immunity. Appeals are guaranteed, and this issue will likely find its way onto our 2018 list and perhaps the 2019 list if and when the Supreme Court gets involved.
8. Aqua Products: Burden on Petitioner for Amended Claims
On October 4, 2017, the United States Court of Appeals for the Federal Circuit issued its much anticipated decision in Aqua Products, Inc. v. Matal, addressing en banc whether the patent owner has the burden of proving patentability with respect to submitted amended claims during an inter partes review (IPR) proceeding. Previous panels of the Federal Circuit had ruled that the burden of persuasion to demonstrate patentability was with the patent owner, not with the challenger. Sitting en banc the Federal Circuit issued a narrow ruling saying that the burden of persuasion must remain at all times on the petitioner, including with respect to demonstration of unpatentability of amended claims.
The ruling of the court was described to be “narrow” by Judge O’Malley, who wrote for the majority, because there was no consensus among the Judges with respect to the judgment that should be reached and the rationale that should be employed. Judge O’Malley did, however, explain that the majority of the Federal Circuit found the statute on this point to be ambiguous and, therefore, no deference was given to any interpretation of the United States Patent and Trademark Office (USPTO) under Chevron, U.S.A., Inc. v. Natural Resources Defense Counsel, Inc., 467 U.S. 837 (1984).
9. House Judiciary Chair Bob Goodlatte Announces Retirement
On November 9, 2017, several days after the recent election, Congressman Bob Goodlatte (R-VA), who has been Chair of the House Judiciary Committee and a strong proponent for patent reform, announced that he would be leaving Congress at the end of his current term and not standing for reelection in 2018.
With Goodlatte exiting the fate of further patent reform efforts in the House will largely depend upon who ultimately is tapped to wield the Chair’s gavel. Congressman Darrell Issa (R-CA) can be expected to make an internal push for the gavel, but his handling of the House Oversight Committee during the Obama Administration rubbed many Republicans the wrong way, and he almost lost his reelection campaign in 2016 to retired Marine Colonel Doug Applegate. Issa ultimately prevailing by only 1,600 votes, which suggests he may not be around for the 116th Congress either.
Also of note, former House Judiciary Chair Lamar Smith announced he was retiring and would not seek reelection in 2018. Smith has similarly been a strong supporter of patent reform, having championed the Leahy-Smith American Inventors Act.
10. Waiver of 11th Amendment Sovereign Immunity
On December 19, 2017, the Patent Trial and Appeal Board (PTAB) of the United States Patent and Trademark Office (USPTO) denied a motion filed by the University of Minnesota in a series of inter partes review (IPR) cases. See Order Denying Patent Owner’s Motion to Dismiss. The University of Minnesota, the patent owner, argued that it is entitled to avoid IPR proceedings entirely because the State is entitled to sovereign immunity under the Eleventh Amendment of the U.S. Constitution. An expanded PTAB panel disagreed.
The PTAB, in a majority opinion authored by Chief Judge David Ruschke, agreed with the University of Minnesota that an IPR proceeding is an adjudicatory proceeding of a federal agency from which state entities may be immune. Nevertheless, the PTAB ruled that the University of Minnesota “waived its Eleventh Amendment immunity by filing an action in federal court alleging infringement of the patent being challenged in this proceeding.”
For more on this please see PTAB: State Waives Eleventh Amendment Immunity by Filing Patent Infringement Lawsuit.