American Intellectual Property Law Association Releases IP Wishes Letter to Incoming Trump Administration

The AIPLA has released a letter to the Trump Administration that highlights concerns with the IP system in the United States.  The letter addresses patent eligibility, patent quality, AI and IP, digital piracy and counterfeiting, trade secrecy and international IP harmonization.  The letter is available, here. 

The PTAB Ruining the American Dream (?)

The BBC has a wonderful video of a “patent burning” outside the United States Patent and Trademark Office.  Who is burning patents?  American inventors who are protesting the Patent Trial and Appeal Board (PTAB), once called the, “Patent Death Squad,” by former Chief Judge Randall Rader.  The inventors are upset that the PTAB is killing the American Dream and are making an appeal to President Trump to overturn the Obama Administration’s creation.  (Yes, it is the PTAB not skyrocketing home ownership costs that is ruining the American dream.  I guess that bubble will pass as well.) 

This is a nice angle to take since getting the U.S. Supreme Court to overturn itself is much more difficult.  I wonder how attempts to overturn Alice legislatively are doing in Congress. 

The Most Important Patent Case in Modern History: Oil States Energy Services and the Constitutionality of IPRs

Yesterday, June 12, 2017, the U.S. Supreme Court surprisingly granted cert to hear the Oil States Energy Services v. Green’s Energy Group’s case (Notably, a Rule 36 affirmance by the Federal Circuit which means there is not an opinion—the Federal Circuit is just affirming without giving reasons.).  The U.S. Supreme Court has limited its review to one question: “Whether inter partes review, an adversarial process used by the Patent and Trademark Office (PTO) to analyze the validity of existing patents, violates the Constitution by extinguishing private property rights through a non-Article III forum without a jury.”  Could this case completely wipe out inter partes review proceedings (IPRs)?  That is certainly the hope of some.  Notably, the U.S. Supreme Court refused cert to hear the MCM Portfolio v. HP case in 2016 which raised a very similar issue.  As stated by Judge Dyk in the below Federal Circuit opinion: “On the merits, we reject MCM’s argument that inter partes review violates Article III and the Seventh Amendment, and we affirm the Board’s decision that claims 7, 11, 19, and 21 of the ’549 patent would have been obvious over the prior art.”

Notably, that particular case was graced with several amicus briefs, including by 13 law professors, the Houston Inventors Association and the University of New Mexico.  The conservative Heritage Foundation has a piece discussing the importance of the MCM Porfolio case and a call for congressional action on IPRs after the U.S. Supreme Court denied cert in 2016.  Part of the attack on IPRs includes the argument by the University of New Mexico that it essentially devalues university patent rights.  The amicus brief by 13 law professors, led by Professor Adam Mossoff, specifically confronts the question of whether patent rights are public rights or private rights:

By resting its decision on the premise that “patent rights are public rights,” MCM Portfolio LLC, 812 F.3d at 1293, the Federal Circuit directly contradicts these numerous, longstanding, and binding decisions of this Court. Furthermore, the two primary administrative law cases relied on by the Federal Circuit, see id. at 1292–93, are inapplicable in determining whether the PTAB is respecting vested property rights secured under the separation of powers doctrine and under other substantive constitutional provisions, such as the Due Process Clause of the Fifth Amendment or the Seventh Amendment. These two modern cases address solely creatures of modern administrative statutes—procedural entitlements solely created in and adjudicated by modern regulatory regimes. See, e.g., Atlas Roofing Co. v. Occupational Safety & Health Review Comm’n, 430 U.S. 442, 455–56 (1977) (addressing procedural rights within the administrative regime created by the Occupational Safety and Health Act of 1970); Tull v. United States, 481 U.S. 412, 425–27 (1986) (addressing procedural rights within administrative regime created by the Clean Water Act of 1972). Decisions by this Court addressing modern regulatory procedural entitlements are distinct from the constitutionally protected private property rights in patents long recognized by this Court and by Circuit Courts for over two hundred years. This Court recently and repeatedly confirmed the principle that patents are private property rights that are secured under the Constitution. See, e.g., - 10 - Horne, 135 S. Ct. at 2427; Fla. Prepaid, 527 U.S. at 642. This Court also warned the Federal Circuit in Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., 535 U.S. 722, 739 (2002), that it must respect “the legitimate expectations of inventors in their property” and not radically unseat such expectations by changing doctrines that have long existed since the nineteenth century. Moreover, Chief Justice John Roberts specifically stated in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006), that nineteenth-century patent law should be accorded significant weight in modern patent law in determining the nature of the private property rights secured to patent-owners. Id. at 393–94 (Roberts, C.J., concurring).

So, the question is why now?  Why does the U.S. Supreme Court grant cert now (especially a Rule 36 affirmance without a written opinion below) and not in 2016?  For sure, inter partes review proceedings, perhaps intended to wipe out bad software patents has been used surprisingly against biotech/pharma patents.  Could it be new Associate Justice Neil Gorsuch?  Assuming the timing works out, it takes four justices to take a case by writ of certiorari. (Gorsuch, Thomas, Alito and Roberts?)  Would Kennedy swing?  Curiously, over the years, I have heard many complain about the loss of the American jury system.  

Public Universities Bringing More Patent Suits and May Be Immune to IPRs

A recent Technology Transfer Tactics article by Jesse Schwartz published on February 22, 2017 states that universities are bringing more intellectual property suits, particularly patent infringement actions, against large companies.  Notably, the article points to the University of Minnesota infringement suit against Gilead Life Sciences and states:

Litigation like the UM lawsuit indicates that universities are warming up to the idea that fighting for their patent rights is worth the effort and expense, says Joshua H. Haffner, JD, an attorney with Haffner Law in Los Angeles. The UM case continues a trend of schools stepping up and demanding payment for use of their patents, he notes. Carnegie Mellon University settled a patent infringement case with Marvell Technology Group for $750 million in 2016, and later that year a jury ordered Apple to pay the University of Wisconsin more than $234 million for using its microchip technology in iPhones and iPads without permission. In 2015, a jury awarded Boston University more than $13 million from three companies that infringed on its patent for blue light emitting diodes (LEDs).

“This trend is continuing because they’re making money off the cases,” Haffner says. “Patent infringement cases can be very profitable, and with every win by a university others are looking at that and saying maybe they could reap the same rewards. There are other principles at play, like protecting the inventors and the principle of ownership, but really if the invention is not making money those principles tend to fall by the wayside.”

Interestingly, the Patent Trial and Appeal Board (PTAB) recently decided the Covidien v. University of Florida Research Foundation (UFRF) matter.  In that matter, the PTAB analogized inter partes review proceedings (IPRs) to litigation and decided that public (state) universities have 11^th Amendment immunity against IPRs.  Basically, this means that parties cannot bring IPRs against public universities to challenge their patents.  Notably, this immunity may be waived by the public university.  Interestingly, UFRF brought an action in state court for breach of a license agreement.  Covidien counterclaimed for a declaratory judgment of noninfringement and then filed IPRs at the United States Patent and Trademark Office challenging UFRF’s patents.  Covidien then removed the action to federal court; however, the federal district court sent the action back to state court because of UFRF’s 11^th Amendment immunity.  That decision is pending resolution at the U.S. Court of Appeals for the Federal Circuit (Federal Circuit). 

Interestingly, the PTAB states:

Petitioner additionally argues that “immunizing patents owned by alleged state entities from IPR proceedings would have harmful and far-reaching consequences.” Opp. 15–17. Here, Petitioner’s arguments are three-fold. One, invalid patents would stand simply because they are assigned to a state entity. Two, a patent owned by a monetization foundation affiliated with a state university would be insulated from the inter partes review process. Three, determining whether an entity is entitled to sovereign immunity is a fact-intensive inquiry that the Patent Office is not designed to adjudicate.

With respect to the first two arguments, we are cognizant of the fact that applying an Eleventh Amendment immunity to inter partes review, absent waiver by the state entity4, precludes the institution of inter partes review against a state entity entitled to Eleventh Amendment immunity. This, indeed, is precisely the point of the Eleventh Amendment, which is the preservation of the dignity afforded to sovereign states. “The preeminent purpose of state sovereign immunity is to accord States the dignity that is consistent with their status as sovereign entities.” FMC, 535 U.S. at 760 (citing In re Ayers, 123 U.S. 443, 505 (1887)). When sovereign immunity conflicts with legislation, Congress may abrogate sovereign immunity if it has unequivocally expressed its intent to abrogate the immunity and has acted pursuant to a valid exercise of power. Seminole Tribe, 517 U.S. at 55. Petitioner does not point to, and we do not find there is, an unequivocal, express intent by Congress in the AIA to abrogate immunity for the purposes of inter partes review.  

[Footnote 4 states: Because there is no related federal district court patent infringement (or declaratory judgment of validity) case brought by Patent Owner, we do not decide here whether the existence of such a case would effect a waiver of sovereign immunity.]

Further, we are not persuaded that an application of sovereign immunity to inter partes review will do violence to the patent system. The Supreme Court in Florida Prepaid Postsecondary Education Expense Board v. College Savings Bank, 527 U.S. 627 (1999) held that Congress does not have authority to abrogate Eleventh Amendment immunity with respect to patent infringement by the States, for “Congress identified no pattern of patent infringement by the States, let alone a pattern of constitutional violations.” Id. at 640. Based on the record before us, there is no evidence that the harm to the patent system, described by the Petitioner, will come to pass, let alone exists as a basis to divest States of sovereign immunity.

Finally, we are not persuaded that our tribunal cannot perform the fact-finding duties that Petitioner alleges would be required to determine whether an entity is entitled to sovereign immunity. Our rules and procedures provide for discovery and motion practice which, at a minimum, would provide the parties an opportunity to present arguments and supporting evidence pertaining to sovereign immunity.  

The Federal Circuit decision on this issue will be interesting, particularly if public universities continue to bring more litigation matters involving patents.  However, if there is a pending federal patent infringement claim brought by the university, I believe the PTAB (and Federal Circuit) will find a waiver of sovereign immunity.  The monetization firm argument is interesting.  [Hat tip to the Goodwin Keeping Tabs on the PTAB Alert for the lead to the case.]