Five years after the last of the four decisions in patent eligibility doctrine by the Supreme Court—creating what is now referred to as the Alice-Mayo framework—the impact of this upheaval in the patent system has become even more clear. Ongoing court decisions and new data confirm that the Alice-Mayo framework has wrought an unsettling revolution and sowed uncertainty in what former U.S. Patent and Trademark Office (USPTO) Director David Kappos has referred to as the “the greatest innovation engine the world has ever known.” As policy debates on subject matter eligibility ramped up this past year, it is time to return back to the original dataset created by Robert Sachs and David Kappos that we presented in Turning Gold to Lead and provide an update.
In November, the Federal Circuit issued an opinion reversing the Patent Trial and Appeal Board’s (the PTAB or the Board) decision that claim 8 of IPR Licensing Inc.’s (IPRL) wireless communications patent—U.S. Patent No. 8,380,244 (the ‘244 Patent)—was unpatentable as obvious. The Board’s obviousness finding as to claim 8 was erroneous as it relied on a prior art reference that IPRL could neither anticipate nor rebut. Furthermore, its finding was, for the second time, unsupported by substantial evidence. See In re IPR Licensing, Inc. (Fed Cir. Nov. 22, 2019) (Before Newman, O’Malley, and Taranto, Circuit Judges) (Opinion for the Court, O’Malley, Circuit Judge).
Rare Diseases as A Strategic Springboard: Leveraging Orphan Drug Designations and Patent Protection for Increased Investment
Drug innovators are providing much needed focus on rare diseases and, at the same time, leveraging early-stage rare disease results to facilitate down-stream market entry in broad-spectrum diseases. This paper provides a data-based demonstration of how early- and mid-stage pharmaceutical companies are using the Orphan Drug Program—in combination with pursuing patent portfolio protection—to secure investment and de-risk their platforms, thus lowering the financial barrier for expanding their product pipeline. The Orphan Drug Program—which is available for drugs that treat diseases affecting fewer than 200,000 patients annually in the United States—provides a number of incentives that can lower the barrier for successfully getting a drug to market. For instance, due in part to the reduced size of clinical trials associated with rare diseases, gaining regulatory approval for treating rare diseases is widely perceived to be simpler and more cost-effective than gaining approval for broad-spectrum diseases. Indeed, the Food and Drug Administration (FDA) allows a number of alternative clinical trial designs to meet approval standards, and orphan drugs are also more likely to qualify for expedited review and approval procedures. On top of this, orphan drugs are eligible for a 25% tax credit for clinical trial expenses (which can be claimed up to 20 years after receipt of the designation, and can in some instances be applied to offset payroll taxes), eligibility for research grants, waiver of FDA user fees, and a seven-year post-approval market exclusivity.
Since the passing of the America Invents Act (AIA) and the implementation of the inter partes review (IPR) process, IPR has become a popular and important avenue for companies and individuals to challenge the validity of a patent in an administrative proceeding through the U.S. Patent and Trademark Office (USPTO). In the past five years, patent owners and challengers alike have presented new and sometimes novel challenges to the way the Patent Trial and Appeal Board (PTAB), comprised of a panel of administrative law judges that review and decide cases, conduct trial proceedings, causing the PTAB to reevaluate and tweak the process along the way. Building on the scores of changes and interpretations the PTAB has made since the first AIA trial, the USPTO provided guidance in August 2018 and more recently in July 2019 summarizing and clarifying how the PTAB handles the IPR process. On November 20, 2019, the Patent Office issued a consolidated Office Patent Trial Practice Guide (“Practice Guide”) incorporating the updates from August 2018 and July 2019, providing practitioners with a single streamlined blueprint for the overall review process.
Ask ten professionals for their attitude on the current state of patents in 2019, and you’ll receive ten distinctly different opinions ranging anywhere from the incredibly negative patents-are-dying attitude to the overly optimistic everything-is-fine-here outlook. The consternation of it all is that each of those ten professionals would be absolutely right in their estimations, and entirely wrong as well. And that’s the patent world in which we’ve found ourselves during the entirety of 2019—everyone is wrong, and everyone is right, because no one actually knows which way is up anymore. We have officially entered the upside down.
On November 27, briefing concluded at the Supreme Court with the filing of Fossil’s respondent’s brief in Romag Fasteners, Inc., v. Fossil, Inc., et al. The final briefing sets the stage for the Court to hear the case on January 14, 2020. The Court will hopefully resolve a current Circuit split on the availability of disgorgement of profits as damages for trademark infringement. Currently, the First, Second, Eighth, Ninth, Tenth and D.C. Circuits all require willful infringement before allowing disgorgement of an infringer’s profits (the First Circuit requires willfulness if the parties are not direct competitors and there is also some disagreement on where the Eighth Circuit falls on the issue). The Third, Fourth, Fifth, Sixth, Seventh and Eleventh Circuits all allow for disgorgement of profits without willful infringement. There has been a Circuit split for some time on this issue and the Supreme Court previously denied certiorari on similar cases but the Court is now set to resolve the split.
Amateurism for Assets: NCAA to Allow Student Athletes to ‘Benefit’ from Personal Intellectual Property
The National Collegiate Athletic Association (NCAA) recently took a step toward letting student athletes “benefit” from use of their name, image, and likeness. The move comes after California Governor Gavin Newsom signed into law a Fair Pay to Play Act allowing collegiate athletes in the Golden State to accept endorsement deals once the law takes effect in January 2023. On Tuesday, October 29, the NCAA’s Board of Governors voted “unanimously to permit students participating in athletics the opportunity to benefit from the use of their name, image, and likeness in a manner consistent with the collegiate model.” The key phrase here is “in a manner consistent with the collegiate model,” which invokes the NCAA’s commitment to the nebulous tenet of “amateurism.” Pragmatically, this vote amounts to two things for student athletes. First, this process will not happen immediately: the Board set a deadline of January 2021 for changing the rules. Second, and most notably, the Board carefully refused to acknowledge or confirm that student athletes would actually be paid. In other words, this vote is merely a shuffle in the direction of college athlete compensation by way of their “right of publicity.”
Businesses often resort to placing keywords in the html code of a web page, meta tags, or in contextual advertising templates for promoting their products on the internet. And in many cases, rivals successfully recover compensation from competitors who use someone else’s trademark to promote their products. But the use of other people’s trademarks is not always intentional. Recently, a Russian entity proved that there was no infringement of intellectual property rights when a trademark that was similar to another mark had been included in an advertisement by a web service. In this landmark case, the courts of all instances, including the Supreme Court, reaffirmed that key words that are automatically generated in search systems cannot infringe as defined by Russian intellectual property law. The Arbitration Court of the Stavropol region found no violations because the search results were not dependent on the actions of the defendant, were technical, and were not aimed at signifying the goods on the internet.
New Bill Would Empower U.S. Customs to Enforce Design Patents at U.S. Border to Combat Imported Counterfeit Goods
Yesterday, the Counterfeit Goods Seizure Act of 2019 was introduced in the U.S. Senate to empower U.S. Customs and Border Protection to enforce U.S. design patents at the U.S. border. The bill is co-sponsored by Senators Thom Tillis (R-NC), Chris Coons (D-DE), Bill Cassidy (R-LA), and Mazie Hirono (D-HI). Currently, Section 1595a(c)(2)(C) of Title 19 of the U.S. Code empowers Customs to enforce copyrights and trademarks that have been previously recorded with Customs. The bill proposes amending 19 U.S.C. § 1595a(c)(2)(C) to give Customs similar discretionary power to seize and detain imported goods that infringe a recorded U.S. design patent. The bill is publicly supported by Nike Inc. and the 3M Company, as well as the Intellectual Property Owners Association (IPO) and the American Intellectual Property Owners Association (AIPLA).
In early 2019, we undertook a comprehensive research project to develop a forensic understanding of European Patent Office (EPO) oppositions, particularly in the life sciences sector, analyzing EPO opposition data in far greater depth than in any publicly available report. We examined more than 5,000 opposition cases filed at the EPO over the last 10 years and studied the timelines for hundreds of life sciences oppositions. The resulting report, entitled EPO Opposition Trends in the Life Sciences Sector, offers a granular understanding of the EPO opposition procedure and its various nuances. Introduced in July 2016, the EPO’s streamlining initiative was designed to simplify opposition proceedings and deliver decisions more quickly, thus providing “early certainty”. The EPO’s target pendency is 15 months by 2020 (opposition pendency here being measured from expiry of the nine-months-from-grant period for filing an opposition to the Opposition Division issuing its decision). Our research revealed that the streamlining initiative is on track to meet its target in the life sciences sector. The mean opposition pendency has been reduced from just over 22 months in 2015 (pre-streamlining) to 17 months in 2018 (post-streamlining).
OSI Pharmaceuticals Decision Has Limited Use in Supporting Patentability of Method of Treatment Claims
Earlier this month, Mallinckrodt succeeded in its inter partes review (IPR) challenge against patent owner Biovie, Inc. (Biovie). The Patent Trial and Appeal Board’s (PTAB’s) final determination held that all claims of Biovie’s U.S. Patent No. 9,655,945 (the ‘945 patent) were unpatentable. The claims of Biovie’s ‘945 patent, directed to administering terlipressin to ascites (abnormal buildup of fluid in the abdomen) patients, were deemed anticipated and/or obvious over the prior art. During the IPR, Biovie attempted to use the recent Federal Circuit decision from OSI Pharmaceuticals v. Apotex (OSI) as a shield to patentability, but the shield was unsuccessful. As such, OSI is unlikely to be a cure-all for pharmaceutical method of treatment claims, in IPR proceedings or otherwise.
No Justice for Small Company Innovators: Make Your Voice Heard on the America Invents Act, IPRs, and the CAFC’s Rule 36
My company, Chestnut Hill Sound Inc. (ChillSound), has been victimized by a U.S. patent system that for nearly a decade has been in a sorry state. Changes wrought by the America Invents Act (AIA) in 2011 and other recent developments cost my company, its investors and inventors millions of dollars. These changes have allowed a large company to reap great profits at our expense. Even more unfortunately, our story is too typical of many other inventors and small companies. Small businesses are the backbone of our economy and need to be cultivated, as they are the most dynamic source of new jobs and competitive products and technologies. There have always been reports of large corporations stealing inventions from small businesses, but it used to be possible via the courts to vindicate the patent rights of owners and obtain ultimate redress. The AIA—sold by the “efficient infringers” lobby as a measure to protect big business from the expense and nuisance of so-called “patent trolls”—has turned into a weapon of deep-pocketed big businesses that enables them to steal with impunity inventions from small businesses and independent inventors. The AIA brought with it the Patent Trial and Appeal Board (PTAB) and Inter Partes Review (IPRs), a post-grant adversarial proceeding at the United States Patent and Trademark Office (USPTO). As has been amply discussed here on IPWatchdog, the Court of Appeals for the Federal Circuit (CAFC) recently opined that the so-called Administrative Patent Judges (APJs) were unconstitutionally appointed from the beginning. Yet these unconstitutionally appointed APJs continue to kill patents, especially when the patent owner is a small company that has sued a large company for infringement, as was the case with ChillSound.
It is not unusual for there to be unintended consequences in the law or life. A loved one gives you something you don’t really like, but you do such a good job of feigning happiness that it becomes a regular gift. Who knew you could ever have too many “lovely” ties or too much single malt Scotch? Congress is in the process of giving the patent bar some welcome relief on some important issues, but may be throwing in that unwanted gift along with it. The STRONGER Patents Act intends to address the potential for inconsistent rulings between district court cases and inter partes reviews (IPRs). The Act achieves this by expressing a preference for district court rulings and by requiring IPRs to apply the same standards for validity determinations that are used in the district court. This is already the case by USPTO regulation with respect to claim construction, but the Act would make it statutory for both claim construction and validity, and thus not subject to change by the USPTO. While the use of the same standard for validity in both forums will make the rulings more consistent, the statutory preference for the district court over the IPR may have an unintended consequence.
Since inventors are rarely allowed to participate in patent discussions in Congress, I would like to submit my testimony here. In Arthrex, the Federal Circuit in effect decided that our rights are subordinate to the government, so the government has the authority to giveth them to us or taketh them away. I would like to remind the Federal Circuit, the Supreme Court, and Congress that you are tasked with the honor, privilege and duty to defend our rights. That is the very basis on which you are employed, and you have no function other than that. Our rights preexist you, supersede you, and come from sources that are above your pay grade. They exist as a matter of our birth. You have no legitimate authority to take those rights just because it is inconvenient for the huge multinational corporations that have to now deal with the illegitimate position of owning our rights because so-called judges unconstitutionally took them from us and gave them to those huge corporations.
In order for rights in a trademark to persist, the mark must be used in commerce continuously. Wallack v. Idexx Labs., Inc., No. 11CV2996-GPC(KSC), 2015 WL 5943844, at *4 (S.D. Cal. Oct. 13, 2015). Abandonment of a mark is, therefore, an affirmative defense to a trademark infringement claim. One form of trademark abandonment is non-use of the mark. A second form of trademark abandonment is uncontrolled or “naked” licensing of one’s trademark. The policy behind prohibiting uncontrolled licensing is reflected in 15 U.S.C. § 1127, which states that “[a] mark will be deemed abandoned … [w]hen any course of conduct of the owner, including acts of omission as well as commission, causes the mark to … lose its significance as a mark.” 15 U.S.C. § 1127 (emphasis added); Already LLC v. Nike Inc., 568 U.S. 85, 99 (2013). “Naked licensing is an uncontrolled licensing of a mark whereby the licensee can place the mark on any quality or type of goods or services, raising a grave danger that the public will be deceived by such a usage.” Doeblers’ Penn. Hybrids, 442 F.3d at 823 (internal quotations and citations omitted). The way to protect against this danger to the consuming public is to require the licensor to actively police use of the licensed mark.