IP News

Federal Circuit to Consider 35 U.S.C. ' 112

On Aug. 21, 2009, the Federal Circuit vacated its prior decision in Ariad Pharms., Inc. v. Eli Lilly & Co., 2008-1248, reinstated defendant-appellant Eli-Lilly's appeal and granted rehearing en banc on the issue of whether 35 U.S.C. ' 112 contains a written description requirement separate from an enablement requirement.

On April 3, 2009, a panel of the Federal Circuit reversed a ruling by the U.S. District Court for the District of Massachusetts denying Eli-Lilly's post-trial motion for judgment as a matter of law that U.S. Patent 6,410,516 (“the '516 patent”) was invalid for, inter alia, failure to meet the written description requirement of 35 U.S.C. ' 112. Ariad Pharms., Inc. v. Eli Lilly & Co., 560 F.3d 1366 (Fed. Cir. 2009). The asserted claims of the '516 patent relate to reducing activity of a transcription factor referred to as NF-KB. Transcription factors are molecules found in cells that regulate the extent to which genes are expressed. Eli-Lilly argued that the '516 patent specification was invalid under ' 112 for failing to describe how to achieve the claimed reduction of NF-KB activity. The Federal Circuit panel agreed, holding that the '516 patent specification hypothesized three classes of molecules potentially capable of reducing NF-KB activity, but that such disclosures failed to meet the ' 112 written description requirement because they were described only as a “wish, or arguably a plan” for “future research” without any descriptive link to the actual reduction of NF-KB activity.

The Federal Circuit vacated the April 3 panel decision, reinstated the appeal, and agreed to hear the case en banc. The court ordered the parties to file new briefs addressing the issues:

1. Whether 35 U.S.C. ' 112, paragraph 1, contains a written description requirement separate from an enablement requirement?
2. If a separate written description requirement is set forth in the statute, what is the scope and purpose of the requirement?
   

Supreme Court Asked to Take Obviousness Determinations from Jury

On Aug. 13, 2009, Medela AG and Medela, Inc. (collectively, “Medela”) petitioned the Supreme Court for a writ of certiorari to review the Federal Circuit's affirmance of a district court's denial of Medela's motion for judgment as a matter of law that the asserted patents were invalid as obvious. In its opinion, the Federal Circuit reviewed the “factual determinations [underlying the jury's determination of non-obviousness], whether explicit or implicit within the verdict, for substantial evidence” and rejected Medela's argument that the district court erred by not conducting its own independent obviousness analysis. Medela posed the question presented as:

Whether a person accused of patent infringement has a right to independent judicial, as distinct from lay jury, determination of whether an asserted patent claim satisfies the “nonobvious subject matter” condition for patentability.

Medela argued that the Federal Circuit's rule that an accused infringer has no right to an independent judicial determination of obviousness was in conflict with decisions from other circuits, Supreme Court precedent, and established principles of administrative law. Specifically, Medela argued that the Federal Circuit's approach of asking whether the jury's “presumed findings” support the nonobviousness determination is in tension with Supreme Court precedent holding that obviousness is a question of law and that an obviousness determination should be made explicit. Medela argued that a jury's “yes” or “no” answer made after receiving a “nutshell's nutshell” instruction of the law on obviousness was not “explicit.” Medela also argued that the Supreme Court should grant certiorari because the Federal Circuit's approach was impossible to reconcile with settled principles of administrative law, which mandate that where the invalidity of an administrative order is a proper defense to a claim, the court should “withhold from the jury the validity of the order.” Medela argued that, if anything, the Federal Circuit's rule insulated the PTO from effective judicial review.

Tenth Circuit Weighs in on Unix Copyright Dispute

In The SCO Group, Inc. v. Novell, Inc., No. 08-4217 (10th Cir. Aug. 24, 2009), the Tenth Circuit Court of Appeals reversed in part a district court's grant of summary judgment in favor of defendant Novell with respect to ownership of certain UNIX copyrights and held that the writing requirement of ' 204 of the Copyright Act is satisfied when parties express their intent in writing to transfer copyrights themselves, even if the writing does not specify the particular copyrights to be transferred.

UNIX is a computer operating system developed in the late 1960s by AT&T, which, by the 1980s, had built a substantial business by licensing UNIX source code (“SVRX”). In 1993, Novell bought UNIX System Labs, an AT&T spin-off that owned the UNIX copyrights and licenses. Two years later, Novell decided to sell its UNIX business to Santa Cruz, a predecessor to plaintiff SCO. However, because of Santa Cruz's financial constraints, the parties structured the deal so that Novell would retain a 95% interest in SVRX licensing royalties. The parties' agreement was memorialized in three documents: an asset purchase agreement (“APA”) and two amendments. The APA provided that Santa Cruz was to purchase all of Novell's rights and ownership of UNIX and UnixWare, but that “[t]he Assets to be ' purchased shall not include those assets set forth on Schedule 1.1(b).” Schedule 1.1(b) explained that “All copyrights and trademarks, except for the trademarks UNIX and UnixWare” were excluded from the deal. However, less than a year after entering the APA, the parties agreed to Amendment 2, which amended the APA's treatment of copyrights by revising Schedule 1.1(b) and limiting the intellectual property rights excluded from the transfer to “[a]ll copyrights and trademarks, except for the copyrights and trademarks owned by Novell ' required for SCO to exercise its rights with respect to the acquisition of UNIX and UnixWare technologies.”

In March 2003, SCO brought copyright claims against IBM on the basis of SCO's purported ownership in the UNIX copyrights. Novell then claimed publicly that it ' rather than SCO ' maintained ownership over the UNIX copyrights. SCO filed a slander suit, and Novell counterclaimed for slander of title, breach of contract, and unjust enrichment. On Aug. 10, 2007, the U.S. District Court for the District of Utah granted Novell's motion for summary judgment that it was the owner of the UNIX copyrights, holding that Amendment 2 did not sufficiently identify which copyrights were to change hands, and therefore failed to satisfy the requirements necessary to transfer ownership of a copyright under ' 204(a). The Tenth Circuit reversed, holding that the APA satisfied the writing requirement of ' 204(a) even though it did not specifically detail the copyrights to be transferred. Section 204(a) provides that “[a] transfer of copyright ownership, other than by operation of law, is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner's duly authorized agent.” The Tenth Circuit reasoned that “Section 204's writing requirement is best understood as a means of ensuring that parties intended to transfer copyrights themselves, as opposed to other categories of rights,” and that a “linguistic ambiguity concerning which particular copyrights” the parties intended to transfer should not create an “insuperable barrier invalidating the transaction.”

Federal Circuit Limits Reach of 35 U.S.C. ' 271(f)

In Cardiac Pacemakers, Inc. v. St. Jude Medical, Inc., 2007-1296, -1347 (Fed. Cir. Aug. 19, 2009), the Federal Circuit held en banc that 35 U.S.C. ' 271(f) does not apply to method claims.

In November 1996, Cardiac Pacemakers, Inc. (“Cardiac”) sued St. Jude Medical, Inc. (“St. Jude”) alleging infringement of, inter alia, claim 4 of U.S. Patent 4,407,288 (“the '288 patent”), which is directed to “a method of heart stimulation using an implantable heart stimulator. ' ” On March 26, 2007 (after an intervening jury verdict and reversal on appeal), the district court granted Cardiac's motion for summary judgment of infringement. The district court also denied St. Jude's motion to limit damages to U.S. sales of infringing devices, holding that Cardiac's potential damages included the sale of infringing devices supplied from the United States to other countries under 35 U.S.C. ' 271(f).

The Federal Circuit reversed and remanded, holding that ' 271(f) does not apply to method claims and that St. Jude was not liable for damages for sales of infringing devices supplied from the United States even if such supply was done with the intent that the infringing method would be practiced abroad. Section 271(f) provides:

(1) Whoever without authority supplies or causes to be supplied in or from the United States all or a substantial portion of the components of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.

(2) Whoever without authority supplies or causes to be supplied in or from the United States any component of a patented invention that is especially made or especially adapted for use in the invention and not a staple article or commodity of commerce suitable for substantial noninfringing use, where such component is so made or adapted and intending that such component will be combined outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.

The Federal Circuit reasoned that in the context of a method claim, the “components” of a patented invention are the steps that comprise the method, and not, as Cardiac argued, the apparatus that performs the process. The court further reasoned that ' 271(f) requires that the “component” be “supplied,” which in the case of a method claim (where the components are the steps themselves and not the apparatus that performs the method) was a physical impossibility. The Federal Circuit noted that its holding was fully consistent with the legislative history of ' 271(f). The court reasoned that ' 271(f) was intended by Congress to overturn the Supreme Court's holding in Deepsouth Packing Co., Inc. v. Laitram Corp., 406 U.S. 518 (1972) that a manufacturer who shipped unassembled parts of a patented shrimp deveining machine abroad was not liable for patent infringement. The Federal Circuit opined that Congress was focused on closing the Deepsouth loophole, i.e., avoiding patent infringement by shipping unassembled patented products abroad, and not on the protection of method patents.

Judge Pauline Newman issued a lengthy dissent, arguing that the statute unambiguously applied to all patentable subject matter (including methods) and that Federal Circuit precedent has previously held that process claims are infringed by one entity that “supplies” certain steps of a patented method to another party that performs the remaining steps.

Jeffrey S. Ginsberg is a partner and Matthew Berkowitz is an associate in the New York office of Kenyon & Kenyon LLP.

Federal Circuit to Consider 35 U.S.C. ' 112

On Aug. 21, 2009, the Federal Circuit vacated its prior decision in Ariad Pharms., Inc. v. Eli Lilly & Co., 2008-1248, reinstated defendant-appellant Eli-Lilly's appeal and granted rehearing en banc on the issue of whether 35 U.S.C. ' 112 contains a written description requirement separate from an enablement requirement.

On April 3, 2009, a panel of the Federal Circuit reversed a ruling by the U.S. District Court for the District of Massachusetts denying Eli-Lilly's post-trial motion for judgment as a matter of law that U.S. Patent 6,410,516 (“the '516 patent”) was invalid for, inter alia , failure to meet the written description requirement of 35 U.S.C. ' 112. Ariad Pharms., Inc. v. Eli Lilly & Co. , 560 F.3d 1366 (Fed. Cir. 2009). The asserted claims of the '516 patent relate to reducing activity of a transcription factor referred to as NF-KB. Transcription factors are molecules found in cells that regulate the extent to which genes are expressed. Eli-Lilly argued that the '516 patent specification was invalid under ' 112 for failing to describe how to achieve the claimed reduction of NF-KB activity. The Federal Circuit panel agreed, holding that the '516 patent specification hypothesized three classes of molecules potentially capable of reducing NF-KB activity, but that such disclosures failed to meet the ' 112 written description requirement because they were described only as a “wish, or arguably a plan” for “future research” without any descriptive link to the actual reduction of NF-KB activity.

The Federal Circuit vacated the April 3 panel decision, reinstated the appeal, and agreed to hear the case en banc. The court ordered the parties to file new briefs addressing the issues:

1. Whether 35 U.S.C. ' 112, paragraph 1, contains a written description requirement separate from an enablement requirement?
2. If a separate written description requirement is set forth in the statute, what is the scope and purpose of the requirement?
   

Supreme Court Asked to Take Obviousness Determinations from Jury

On Aug. 13, 2009, Medela AG and Medela, Inc. (collectively, “Medela”) petitioned the Supreme Court for a writ of certiorari to review the Federal Circuit's affirmance of a district court's denial of Medela's motion for judgment as a matter of law that the asserted patents were invalid as obvious. In its opinion, the Federal Circuit reviewed the “factual determinations [underlying the jury's determination of non-obviousness], whether explicit or implicit within the verdict, for substantial evidence” and rejected Medela's argument that the district court erred by not conducting its own independent obviousness analysis. Medela posed the question presented as:

Whether a person accused of patent infringement has a right to independent judicial, as distinct from lay jury, determination of whether an asserted patent claim satisfies the “nonobvious subject matter” condition for patentability.

Medela argued that the Federal Circuit's rule that an accused infringer has no right to an independent judicial determination of obviousness was in conflict with decisions from other circuits, Supreme Court precedent, and established principles of administrative law. Specifically, Medela argued that the Federal Circuit's approach of asking whether the jury's “presumed findings” support the nonobviousness determination is in tension with Supreme Court precedent holding that obviousness is a question of law and that an obviousness determination should be made explicit. Medela argued that a jury's “yes” or “no” answer made after receiving a “nutshell's nutshell” instruction of the law on obviousness was not “explicit.” Medela also argued that the Supreme Court should grant certiorari because the Federal Circuit's approach was impossible to reconcile with settled principles of administrative law, which mandate that where the invalidity of an administrative order is a proper defense to a claim, the court should “withhold from the jury the validity of the order.” Medela argued that, if anything, the Federal Circuit's rule insulated the PTO from effective judicial review.

Tenth Circuit Weighs in on Unix Copyright Dispute

In The SCO Group, Inc. v. Novell, Inc., No. 08-4217 (10th Cir. Aug. 24, 2009), the Tenth Circuit Court of Appeals reversed in part a district court's grant of summary judgment in favor of defendant Novell with respect to ownership of certain UNIX copyrights and held that the writing requirement of ' 204 of the Copyright Act is satisfied when parties express their intent in writing to transfer copyrights themselves, even if the writing does not specify the particular copyrights to be transferred.

UNIX is a computer operating system developed in the late 1960s by AT&T, which, by the 1980s, had built a substantial business by licensing UNIX source code (“SVRX”). In 1993, Novell bought UNIX System Labs, an AT&T spin-off that owned the UNIX copyrights and licenses. Two years later, Novell decided to sell its UNIX business to Santa Cruz, a predecessor to plaintiff SCO. However, because of Santa Cruz's financial constraints, the parties structured the deal so that Novell would retain a 95% interest in SVRX licensing royalties. The parties' agreement was memorialized in three documents: an asset purchase agreement (“APA”) and two amendments. The APA provided that Santa Cruz was to purchase all of Novell's rights and ownership of UNIX and UnixWare, but that “[t]he Assets to be ' purchased shall not include those assets set forth on Schedule 1.1(b).” Schedule 1.1(b) explained that “All copyrights and trademarks, except for the trademarks UNIX and UnixWare” were excluded from the deal. However, less than a year after entering the APA, the parties agreed to Amendment 2, which amended the APA's treatment of copyrights by revising Schedule 1.1(b) and limiting the intellectual property rights excluded from the transfer to “[a]ll copyrights and trademarks, except for the copyrights and trademarks owned by Novell ' required for SCO to exercise its rights with respect to the acquisition of UNIX and UnixWare technologies.”

In March 2003, SCO brought copyright claims against IBM on the basis of SCO's purported ownership in the UNIX copyrights. Novell then claimed publicly that it ' rather than SCO ' maintained ownership over the UNIX copyrights. SCO filed a slander suit, and Novell counterclaimed for slander of title, breach of contract, and unjust enrichment. On Aug. 10, 2007, the U.S. District Court for the District of Utah granted Novell's motion for summary judgment that it was the owner of the UNIX copyrights, holding that Amendment 2 did not sufficiently identify which copyrights were to change hands, and therefore failed to satisfy the requirements necessary to transfer ownership of a copyright under ' 204(a). The Tenth Circuit reversed, holding that the APA satisfied the writing requirement of ' 204(a) even though it did not specifically detail the copyrights to be transferred. Section 204(a) provides that “[a] transfer of copyright ownership, other than by operation of law, is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner's duly authorized agent.” The Tenth Circuit reasoned that “Section 204's writing requirement is best understood as a means of ensuring that parties intended to transfer copyrights themselves, as opposed to other categories of rights,” and that a “linguistic ambiguity concerning which particular copyrights” the parties intended to transfer should not create an “insuperable barrier invalidating the transaction.”

Federal Circuit Limits Reach of 35 U.S.C. ' 271(f)

In Cardiac Pacemakers, Inc. v. St. Jude Medical, Inc., 2007-1296, -1347 (Fed. Cir. Aug. 19, 2009), the Federal Circuit held en banc that 35 U.S.C. ' 271(f) does not apply to method claims.

In November 1996, Cardiac Pacemakers, Inc. (“Cardiac”) sued St. Jude Medical, Inc. (“St. Jude”) alleging infringement of, inter alia, claim 4 of U.S. Patent 4,407,288 (“the '288 patent”), which is directed to “a method of heart stimulation using an implantable heart stimulator. ' ” On March 26, 2007 (after an intervening jury verdict and reversal on appeal), the district court granted Cardiac's motion for summary judgment of infringement. The district court also denied St. Jude's motion to limit damages to U.S. sales of infringing devices, holding that Cardiac's potential damages included the sale of infringing devices supplied from the United States to other countries under 35 U.S.C. ' 271(f).

The Federal Circuit reversed and remanded, holding that ' 271(f) does not apply to method claims and that St. Jude was not liable for damages for sales of infringing devices supplied from the United States even if such supply was done with the intent that the infringing method would be practiced abroad. Section 271(f) provides:

(1) Whoever without authority supplies or causes to be supplied in or from the United States all or a substantial portion of the components of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.

(2) Whoever without authority supplies or causes to be supplied in or from the United States any component of a patented invention that is especially made or especially adapted for use in the invention and not a staple article or commodity of commerce suitable for substantial noninfringing use, where such component is so made or adapted and intending that such component will be combined outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.

The Federal Circuit reasoned that in the context of a method claim, the “components” of a patented invention are the steps that comprise the method, and not, as Cardiac argued, the apparatus that performs the process. The court further reasoned that ' 271(f) requires that the “component” be “supplied,” which in the case of a method claim (where the components are the steps themselves and not the apparatus that performs the method) was a physical impossibility. The Federal Circuit noted that its holding was fully consistent with the legislative history of ' 271(f). The court reasoned that ' 271(f) was intended by Congress to overturn the Supreme Court's holding in Deepsouth Packing Co., Inc. v. Laitram Corp. , 406 U.S. 518 (1972) that a manufacturer who shipped unassembled parts of a patented shrimp deveining machine abroad was not liable for patent infringement. The Federal Circuit opined that Congress was focused on closing the Deepsouth loophole, i.e., avoiding patent infringement by shipping unassembled patented products abroad, and not on the protection of method patents.

Judge Pauline Newman issued a lengthy dissent, arguing that the statute unambiguously applied to all patentable subject matter (including methods) and that Federal Circuit precedent has previously held that process claims are infringed by one entity that “supplies” certain steps of a patented method to another party that performs the remaining steps.

Jeffrey S. Ginsberg is a partner and Matthew Berkowitz is an associate in the New York office of Kenyon & Kenyon LLP.