Five Patent Law Lessons Learned in 2018

By John Hsu & Christopher Bruno
December 28, 2018

Lessons learnedAs we look ahead towards 2019, it is worth reflecting on several high-profile patent cases and brewing developments from the past year. Here are five lessons we learned from 2018 that may be useful in developing IP litigation strategies for the coming year:

Lesson 1:  Some patent law doctrines do not apply in inter partes reviews (IPRs). In the widely publicized St. Regis Mohawk Tribe v. Mylan Pharmaceuticals Inc. (Case No. 18-1638), the Federal Circuit affirmed the Patent Trial and Appeal Board (PTAB)’s finding that tribal sovereign immunity does not apply in IPRs. The issue arose when Allergan sold its patents covering its drug Restasis to the St. Regis Mohawk tribe and retained a license. When Mylan challenged the patents by filing an IPR petition, the Tribe argued that its sovereign immunity shielded its patents from invalidation in an IPR. The case and its underlying transaction raised alarm bells, both in the legal community and on Capitol Hill, with concerns about the same entity using patents offensively without being subject to an IPR. But those concerns have not materialized, or at least not yet. The Federal Circuit held that tribal sovereign immunity does not apply in IPRs because they are “hybrid proceeding[s]” with “adjudicatory characteristics” that make them “less like a judicial proceeding and more like a specialized agency proceeding.” In 2019, we will see whether the United States Supreme Court shows any interest in St. Regis and, on a related note, whether the Federal Circuit reaches the same result for the doctrine of state sovereign immunity in Regents of the University of Minnesota v. LSI Corp. (Case No. 18-1559).

The Federal Circuit also addressed this year whether assignor estoppel applied in IPRs and found that it did not. In district court, this equitable doctrine prohibits inventors and assignors (and those in privity) from later challenging an assigned patent’s validity. But recently in Arista Networks, Inc. v. Cisco Systems, Inc. (Case No. 2017-2336), the Federal Circuit held that assignor estoppel has “no place” in IPR proceedings. Because the AIA allows “a person who is not the owner of a patent” to petition for review, the Court found no statutory basis to preclude assignors from filing petitions against the patents they assigned. This case may also find its way to further review in 2019, either by an en banc Federal Circuit or at the Supreme Court.

Lesson 2:  Section 101 might be more unsettled now than it was in 2017. In a pair of cases issued within one week of each other—Aatrix Software, Inc. v. Green Shades Software, Inc. (Case No. 17-1452) and Berkheimer v. HP Inc. (Case No. 17-1437)—the Federal Circuit challenged conventional wisdom about resolving Section 101 claims. Historically, district courts analyzed Section 101 challenges on motions to dismiss, or at the latest, on summary judgment. Yet in Aatrix and Berkheimer, the Federal Circuit concluded that the second step of the section 101 analysis—whether the claims are directed to an inventive concept—can in some cases have underlying factual questions not amenable to resolution as a matter of law. Patent owners are likely to rely upon these decisions to defend against Section 101 challenges, but these cases may only be a temporary tool as they likely will not be the final word on the issue. Indeed, dissenting from denials of en banc rehearing in both cases (see Aatrix and Berkheimer), Judge Lourie (joined by Judge Newman) wrote that “the law needs clarification by higher authority, perhaps by Congress, to work its way out of what so many in the innovation field consider are § 101 problems.” And Judge Reyna, dissenting separately, explained that in his view, the status quo “offers no meaningful guidance to the bar, the government, or the public on how to proceed” in addressing Section 101 determinations. This is an area that the Federal Circuit will likely further explore next year.

There may also be increased uncertainty in the line of Section 101 cases in the pharmaceutical and biotech areas with the Federal Circuit’s decision in Vanda Pharmaceuticals Inc. v. West-Ward Pharmaceuticals International Limited (Case No. 16-2707). The court held that claims covering a method for treating patients with iloperidone based on an identified biological relationship were patent eligible, and tried to distinguish the Supreme Court’s Mayo Collaborative Services v. Prometheus Laboratories, Inc. decision. According to the Federal Circuit, the claims in Vanda applied the biological relationship instead of merely claiming the relationship itself. But consistent with Chief Judge Prost’s dissent in Vanda, some have perceived that distinction as a thin one: Like Vanda, Mayo also involved claims including the step of administering a drug to a patient, although those claims did not specify the dosages like the claims in Vanda.

Lesson 3:  The United States Patent & Trademark Office is using its rulemaking authority to address patent owner criticisms. One significant example was harmonizing the standards for claim construction between IPR proceedings with their district court counterparts. Previously, the PTAB applied the “broadest reasonable interpretation” (BRI) standard, which allowed IPR petitioners to rely on a broader scope of potentially invalidating publications. In Cuozzo Speed Technologies v. Lee—decided just two years ago—the Supreme Court expressly upheld the PTO’s use of the BRI standard as a reasonable exercise of its rulemaking authority. But this year, the PTO reversed course and adopted the Phillips approach to claim construction—the same standard used in district courts (final published rule here).

Another area that has received much attention is the procedure for a patent owner to amend its claims during an IPR. As a matter of statute, patent owners have the right to file one motion to amend the patent to propose substitute claims. 35 U.S.C. § 316(d). How that is applied has been a subject of PTO regulation, see 37 C.F.R. § 42.121, and those procedures may soon change. The PTO recently proposed introducing a step where, after the patent owner files a motion to amend, the PTAB issues a preliminary non-binding decision conveying a tentative view on the merits of the amendment (proposed rule here). Thereafter, the patent owner would have the opportunity to file a revised motion to amend. This proposed practice was intended to answer critics who have repeatedly noted the low motion-to-amend grant rate.

Lesson 4:  Statutory interpretation is playing a big role in the Supreme Court patent cases. Historically, many patent law disputes had little to do with the Patent Act’s statutory language. But the AIA has provided, and will likely continue to provide, opportunities for statutory interpretation. This year, the Supreme Court determined in SAS Institute, Inc. v. Iancu that 35 U.S.C. § 318(a)’s requirement that the Patent Office must “issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner” means that it cannot institute a trial on only some of the claims challenged. And two more cases focusing on specific AIA language are on the horizon at the Supreme Court. In Helsinn Healthcare v. Teva Pharmaceuticals USA Inc., the Court heard arguments recently about whether the AIA’s on-sale bar deems only public sales to be invalidating acts. Helsinn turns on whether the meaning of “on sale” differs between the AIA’s “in public use, on sale, or otherwise available to the public” and the pre-AIA “in public use or on sale.” Second, Return Mail, Inc. v. United States Postal Service, a case the Supreme Court agreed to hear in November, presents the question of whether the government is a “person” entitled to file an IPR petition.

Lesson 5: IPRs do not violate Article III, but that does not necessarily make them constitutional. In Oil States Energy Services v. Greene’s Energy Group, LLC (Case No. 16-712), the Supreme Court concluded that the AIA’s establishment of inter partes review did not impermissibly vest the executive branch with cases committed to the judicial branch through Article III. But in doing so, the Supreme Court left open other avenues of attack, noting that Oil States did “not challenge the retroactive application of inter partes review” “even though that procedure was not in place when its patent issued” and did not “raise[] a due process challenge.” That language invites future constitutional challenges on these grounds, for example, to address the alleged possibility that the PTAB could stack its panels to achieve a specific outcome.

Those questions are being raised now. For example, last month the Federal Circuit heard argument in Goodson Holdings LLC v. Titeflex Corp. (Case No. 18-1134), a case that addresses whether a patent owner’s due process is violated when a patent that issued before the AIA is reviewed in an IPR. And in a class action pending before the Court of Federal Claims, Christy, Inc. (owner of a patent invalidated in IPR), is arguing that the process amounts to an unconstitutional taking. See Christy, Inc. v. United States (Case No. 18-657 (Fed. Cl.)). Though doubt has been raised about the likelihood of success in these cases, the cases still form an interesting and developing part of the patent landscape.

The Author

John Hsu

John Hsu is a Partner in the Washington, DC office of Schiff Hardin. John has deep experience in intellectual property litigation and regularly litigates patent infringement and trade secret cases. Since 2006 his practice has focused on pharmaceutical litigation, representing generic drug manufacturers in high-stakes patent litigation brought under the Hatch-Waxman Act. With a Ph.D. in chemistry, John’s depth of scientific knowledge makes him uniquely qualified to advise his pharmaceutical clients and develop trial strategies for effective trial presentations or negotiating favorable settlements.

For more information or to contact John, please visit his Firm Profile Page.

John Hsu

Christopher Bruno is an Associate with Schiff Hardin who focuses on intellectual property litigation with a specialty in pharmaceutical products. He has litigated Hatch-Waxman cases at every stage, from pre-complaint investigation through appeal, across many district courts, the Federal Circuit, the Supreme Court, and the International Trade Commission. He was one of the first attorneys with experience litigating the meaning of provisions of the Biologics Price Competition and Innovation Act of 2009, and continues to play a role in decoding the relatively nascent territory of biosimilar litigation.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 11 Comments comments.

  1. Anon December 28, 2018 8:44 am

    Thank you for the synopsis.

  2. valkyrie December 28, 2018 9:28 am

    My long post that follows is intended to give a bit of perspective about the current state of the U.S. patent system. When I started working in the U.S. patent law business in 1974 the filing fee for a U.S. patent application was $65. Attorney fees for the preparation and filing of a U.S. patent application were about $2,000-$4,000 depending on the nature and complexity of the invention. Prosecution involved one or two office actions that were about 2-3 pages long and one or two short amendments each costing around $600-$800 in attorney fees. While they may not have had technical degrees from Caltech or MIT, many U.S. patent examiners had graduated from good technical colleges like Lehigh and Rochester. Lots of U.S. patent examiners had gone to college on the GI bill, worked at the USPTO for 25 years or more, and then retired. They were quite proficient, good communicators, and very reasonable most of the time. The issue fee for a U.S. patent application was variable in the mid-1970’s depending on its length, but typically it was around $85. Sometimes you paid a small supplemental “balance of issue fee.” Prosecution from filing to issuance generally took about 24 months. When the U.S patent issued, it had a term of 17 years from the date of grant. There were no maintenance fees for utility patents. Appeals from final rejections were very rare. I recall that re-issue was available under very limited circumstances, but there were no other post-grant proceedings in “the Patent Office” like re-examination. Patent validity was determined solely by federal courts. In general, patent litigation was handled by registered U.S. patent attorneys who worked in patent law firms. The term “intellectual property” was not yet in vogue. Alleged infringers would not infrequently change their designs or take a license after receiving a demand letter. A significant percentage of patent infringement lawsuits in the U.S. were eventually settled through licensing and/or the payment of damages. Innovation and entrepreneurship were well established under the U.S. patent system in the 1970’s and were clearly growing trends in the United States.

    Fast forward to 2018. It often takes 4-5 years to obtain a U.S. patent. Attorney fees can easily total $20,000-$30,000 or more to prepare and prosecute an original application and then a series of RCEs and/or continuation applications. Appeals from final rejections are now commonplace and take a very long time to be decided. Government maintenance fees for a full 20-year patent term can total close to $10,000. A significant percentage of U.S. patent examiners are inexperienced. Their Primaries and/or SPE’s are apparently comfortable to have them reject, reject, reject, and effectively allow private attorneys (and their clients) to bear the burden of training them in the intricacies of the MPEP, 37 CFR, and U.S. patent law. After going through what is often an arduous prosecution, roughly 80-90% of the time when U.S. patents are asserted in an infringement lawsuit, the case is stayed in favor of IPR proceedings and most, if not all, of the claims of the patent are subsequently invalidated by the PTAB. More often than not, the CAFC affirms the PTAB’s decisions, often with a terse Rule 36 judgment without a written opinion explaining its reasoning. With the advent of IPR, the requirement for an alleged infringer to overturn the statutory presumption of validity by clear and convincing evidence in a jury trial has been effectively eliminated. U.S. patents are now “public rights” instead of private property. Over the past 10 years, without any basis in Title 35 whatsoever, the SCOTUS has issued a series of decisions that severely impair the ability to protect commercially valuable inventions.

    At the behest of non-pharma big-tech, the passage of the AIA has severely impaired the U.S. patent system. The worst thing that could happen to non-pharma big-tech, and the best thing for the public, would be to have an upstart come to the marketplace with game changing technology that non-pharma big-tech cannot not appropriate to maintain its monopolies. I predict a decline in the filing of U.S. patent applications by U.S. companies and inventors. Eventually the word will leak out to foreign companies that the cost of seeking and maintaining a U.S. patent cannot be justified in many cases and the filing of U.S. patent applications by foreign entities will also begin to abate. Innovation, entrepreneurship, and new product development in the U.S. will decline as a direct result of the passage of the AIA. The big question that remains is whether Congress will eventually get the message, fix the fatally flawed aspects of IPR, and rein in the SCOTUS, before it is too late for the U.S. economy.

  3. JTS December 28, 2018 1:24 pm

    “And Judge Reyna, dissenting separately, explained that in his view, the status quo “offers no meaningful guidance to the bar, the government, or the public on how to proceed” in addressing Section 101 determinations.”

    True, but then Reyna is in a position to rein in 101 activism. What is he waiting for?

  4. Shoko Bo December 29, 2018 3:48 am

    My no. 1 lesson in 2018: American inventors prefer to litigate in China…

  5. Night Writer December 29, 2018 11:12 am

    @valkyrie Really good post. But remember inflation. About 5x since 1974. So that $2,000-$4,000 to prepare a patent application in today’s dollars is $10,000-$20,000, which is about what it is today.

    I agree, though, that what is going to happen is the decline in innovation and patent filings.

    @4 Shoko Bo —Yes this is perhaps the most shocking thing that has happened in the patent world since Alice and the AIA. Should be a wake-up call.

    @JTS “Reyna is in a position to rein in 101 activism”. Reyna is not qualified to sit on the CAFC. Reyan is an anti-patent judicial activist who is near the top of the list of judges who have used 101 to invalidate claims. He is a disgrace and should resign. Thanks Obama.

  6. Paul Morgan December 29, 2018 1:29 pm

    Excellent summary of key 2018 patent practice developments.
    But it is misleading to keep encouraging more fond hopes that the Sup. Ct. is likely to so soon re-address, reverse itself, and strike down IPRs as unconstitutional, after so many attempts and after not getting more than two votes for that even in the granted certs on IPRs. Also, while the IPR change from BRI to Phillips is noted, the case law change, and the pending rule changes, on IPR claim substitutions should also be noted. [More CLE is needed on how to deal with their unavoidable reality.]

  7. mike December 29, 2018 2:52 pm

    If I were Goodson Holdings LLC, I would fire their counsel. Mark Strachan of Sayles Werbner failed miserably during the oral arguments. (link to audio mp3 is above in the article)

    Not only did Strachan not bring hard copy documents to which he referred in his argument (the judges were annoyed by this and expressed such), but Strachan tried to argue something he did not even provide in his opening brief. In light of this, I would not consider this case sufficient for determining whether a patent owner’s due process is violated when a patent that issued before the AIA is reviewed in an IPR, simply due to poor counsel. Either get better counsel, or don’t even argue, lest you screw everyone else in subsequent case law.

    Here is the bit regarding constitutionality of IPRs in the oral argument, which occurred immediately after the judges expressed their frustration with Strachan’s not bringing of hard copies:

    =========

    Judge: On the constitutional question, the arguments that you’re raising now were not in your opening brief. Correct?

    Strachan: Your honor, I would disagree. In the opening brief we raised the 5th amendment, the 7th amendment, and uh, Article III challenge. We acknowledge —

    Judge: Did you raise the takings issue in your opening brief?

    Strachan: Yes sir, in the 5th amendment.

    Judge: Where?

    [literally 30 seconds of silence and fumbling]

    Strachan: Your honor, in the, on page 58, of the brief, we raise the due process challenge. [long silence] It is our position that this encompasses the taking. And then after the Oil States case, uh, was delivered, we expanded —

    Judge: That’s a retroactivity argument, right?

    Strachan: Well, your honor, I, I would, I, I would, submit that, the due process argument does encompass the retroactive taking.

    Judge: Where did you argue retroactivity in your opening brief?

    Strachan: Your honor, I would, su-, uh, submit that’s assumed in this due process challenge.

    Judge: So you didn’t say the word “retroactive” in your —

    Strachan: That is correct, your honor.

    Judge: You didn’t say the word “takings” in your brief.

    Strachan: That is correct, your honor. We —

    Judge: You used the word “due process”. The term “due process”.

    Strachan: That is, that is, absolutely correct, your honor.

    Judge: And then in support of your due process argument, you’re claiming things like the whole structure of the IPR process is somehow biased.

    Strachan: Uh, your honor, not just the structure, but the, but the, procedures used, um, on a retroactive basis, take away the benefit of the bargain of the original applicant.

    Judge: Ohh! Where does it say THAT in the blue brief?

    Strachan: Your honor, there –, the –.

    Judge: The blue brief. No, the blue brief. Your opening brief.

    Strachan: No. I — I — I. No, your honor. I, w–, concede, as I thought I did awalla go, we, did not use the word “retroactive” with regard to the, in the opening brief.

    Judge: Right, so we’re, we’re investigating right now: what did you actually preserve in your opening brief?

    Strachan: Your honor, we preserve the due process challenge.

    Judge: Due — Okay.

    Strachan: And we, and I submit —

    Judge: Is this separate from, as I understand, from a takings claim, based on a retroactive application of the AIA to your pre-AIA patent.

    Strachan: Well your honor. I – I – I think that is encompassed with that. Your honor, I would close by, a- a- asking —

    Judge: OK. We are out of time. We’ll give you two minutes for rebuttal.

    =========

    Did Strachan just say “I – I – I – I think that is encompassed with that”? That’s his argument? Fail. Get better counsel, lest you screw yourself and everyone else in the same stack of dominoes.

  8. Paul Morgan December 29, 2018 6:43 pm

    Thanks Mike, a great CLE lesson. Raising somewhere in the same IPR appeal brief re pre-AIA patents [which almost all IPR decisions to date are about, including the one in Oil States] the 5th amendment, the 7th amendment, Article III, the takings issue, and due process. Reads like the epitome of the oft-criticized “shotgun brief” aka “throw it all at the wall and hope something sticks.” Not a good start for a cert either.

  9. Night Writer December 30, 2018 2:25 pm

    @7 Mike

    He should just have said that Constitutional arguments can always be made no matter if they are in the brief or not.

  10. Anon December 30, 2018 3:55 pm

    Saying “Constitutional argument” and actually making a Constitutional argument are two very different things.

    As noted on other recent threads, Night Writer, merely making a quip with words from the Constitution does NOT make a (proper) Constitutional argument.

    Much more is required than that. As would any decent amount of critical thinking make certain!

  11. B December 30, 2018 10:50 pm

    “Lesson 2: Section 101 might be more unsettled now than it was in 2017.”

    Might be?

    It’s worse than you think. Did anyone read the latest s101 case from the Federal Circuit? IN RE: MARCO GULDENAAR HOLDING

    http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/17-2465.Opinion.12-28-2018.pdf

    Judge Mayer, who signed on to the Berkheimer en banc decision, now wants to repeal Berkheimer making patent eligibility a pure question of law. “Eligibility questions mostly involve general historical observations” he states.

    Did Mayer get his law degree by mail? That’s called JUDICIAL NOTICE under FRCP 201. Still issue of evidence, not law.

    Also, how do “general historical observations” address issues relating to detailed and specific claim language?

    Pathetic and lawless.