It is that time once again when we look back on the previous year in preparation to close the final chapter of 2018 in order move fresh into the year ahead. 2018 was a busy year in the patent world, although change was not as cataclysmic 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 a very interesting year. A year that may well be remembered in the years to come as the moment in time when things finally started to settle down, when hope returned to the Patent Office, and even those judges of the Federal Circuit most unlikely to find inventions patent eligible began to find at least a few claims worthy of passing muster under §101.

Personally, in 2018 I was recognized by IAM Magazine as one of the top IP Strategists in the world for the second time, which certainly isn’t a top story, but a recognition I am humbled to have received. IPWatchdog also started offering training courses, with a patent prosecution training course aimed at those with 0-2 years of experience, and a real world seminar called Patent Masters™. We are looking forward to a great year in 2019, with more iterations of the Patent Masters™ symposium planned, more patent training courses, and our 20th Anniversary Celebration in October 2019!

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 2018. They appear in chronological order as they happened throughout the year. If you’d like to review my selections from past years see Top Patent Stories from 2017 and 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. Second, there are a number of stories worth mentioning, but which just missed the cut for one reason or another. The two that will probably be most glaring omissions are the Federal Circuit’s decision in Vanda Pharmaceuticals v. Westward Pharmaceuticals, 887 F.3d 1117 (Fed. Cir. 2018), and the final rules implementing the Phillips claim construction standard. With respect to Vanda, while it is a pro-patent decision, the claims found eligible are virtually indistinguishable from those held ineligible in Mayo, so it seems virtually certain a different panel of the Federal Circuit would have ruled differently. Thus, all Vanda did was seem to create uncertainty, which may be good for settlements, but likely not a repeatable decision. As for the Phillips standard, while it makes perfect sense for the PTAB to be using the same claim construction standard as used in federal district courts, many have questioned whether it will make any real difference in outcomes. Still, it is a big event and would have been 11th on my list. Had a chance to Phillips been accompanied by patent claims being presumed valid and requiring clear and convincing evidence to be declared invalid at the PTAB, that would certainly be worthy of top 10 inclusion. Alas, that would require an amendment to the statute and beyond the powers of Director Iancu. Thus, the banishment of BRI, while important, finds itself on the outside looking just in at this year’s top 10.

1. U.S. Patent System Falls to 12th

The United States was once again the top ranked country in overall score in the U.S. Chamber of Commerce’s annual Global IP Index for 2018, released in February 2018, but the rankings were closer than ever. The United States edged out the United Kingdom by a mere .01 points on the Chamber scale. The U.S. position was helped by improved scores relating to copyrights and trademarks, but was dragged down for the sixth consecutive year as the result of a patent climate that the Chamber characterizes as causing “considerable uncertainty for innovators.”

While the United States continues to do well overall, patent protection continues to be problematic. In 2017 the U.S. ranked 10th worldwide in terms of offering patent protection to innovators. In 208, the U.S. fell out of the top 10, tumbling to a tie for 12th with Italy. Countries ahead of the United States for patent protection were (in order from first place on the Chamber patent index): Signapore, France, Germany, Ireland, Japan, Netherlands, South Korea, Spain, Sweden, Switzerland, and the United Kingdom.

The U.S. Chamber is expected to release its 2019 ranking in early February 2019, with a further slide by the U.S. patent system a distinct possibility.

For more please see: U.S. Patent System Falls to 12th Place in Chamber Global IP Index for 2018

2. Federal Circuit Decides Berkheimer & Aatrix

On February 8, 2018, the United States Court of Appeals for the Federal Circuit issued a monumental decision in Berkheimer v. HP Inc., 881 F.3d 1360 (Fed. Cir. 2018). The Federal Circuit held that the district court erred in concluding there were no factual questions underlying the question of law relating to patent eligibility of certain of the asserted claims under § 101. “Whether something is well-understood, routine, and conventional to a skilled artisan at the time of the patent is a factual determination,” Judge Moore wrote. “Whether a particular technology is well-understood, routine, and conventional goes beyond what was simply known in the prior art. The mere fact that something is disclosed in a piece of prior art, for example, does not mean it was well-understood, routine, and conventional.”

“At this stage of the case… there is at least a genuine issue of material fact in light of the specification regarding whether claims 4-7 archive documents in an inventive manner that improves these aspects of the disclosed archival system,” Judge Moore wrote. “Whether claims 4-7 perform well-understood, routine, and conventional activities to a skilled artisan is a genuine issue of material fact making summary judgment inappropriate with respect to these claims.”

Then on February 14, 2018, the Federal Circuit issued a decision in Aatrix Software v. Green Shades Software, 882 F.3d 1121 (Fed. Cir. 2018), which found that the district court erred in applying the Alice two-step validity test at the motion to dismiss stage of the pleadings. The Federal Circuit vacated the decision of the district court on the motion to dismiss, and also reversed the district court’s denial of a motion by plaintiff Aatrix for leave to file a second amended complaint. The panel majority of Circuit Judges Richard Taranto and Kimberly Moore, who penned the opinion, acknowledged that the Federal Circuit has held that patent eligibility can be determined at the Rule 12(b)(6) stage. However, the district court granted the dismissal prior to claim construction “in the face of factual allegations, spelled out in the proposed second amended complaint, that, if accepted as true, established that the claimed combination contains inventive concepts and improves the workings of the computer.”

3. USPTO Issues Berkheimer Memo

Berkheimer absolutely deserves to take up two spots on this top ten list for 2018. It was a monumental decision, but one that strictly did not need to be adopted by the Patent Office. For example, the Patent Office does not follow standard for determining indefiniteness set forth in the Supreme Court’s decision in Nautilus, Inc. v. Biosig Instruments, Inc., 134 S.Ct. 2120 (2014). Instead, the Office believes the proper test for indefiniteness remains the Federal Circuit in In re Packard, 751 F.3d 1307 (Fed. Cir. 2014), which was decided prior to the Supreme Court’s Nautilus decision. This is because the Supreme Court has previously explained the Office can have a more restrictive test when allowing patents than would be applied in a litigation context. Therefore, although I and others would certainly disagree, an argument could be made that the procedural posture of Berkheimer as a patent infringement litigation matter might not have direct applicability to the Office.

Notwithstanding what might have been, Director Andrei Iancu, who had been at the Patent Office for just a few days by the time Berkheimer was decided, used the clear teaching and instruction of the case — that what is well understood, routine and/or convention is a question of fact — to apply across the board and into the patent prosecution universe. By April 2018, the Office issued fresh §101 guidance, which became known as the Berkheimer memo. The Berkheimer memo took a decidedly patent friendly approach to the §101 inquiry. Cases previously thought long lost were suddenly receiving Notices of Allowance. Cases up on Pre-Appeal Brief Conferences were being issued. Things have been different for well written applications in many Art Units at the Office since Berkheimer. Therefore, both the Federal Circuit decision and the Office guidance on the matter serve as two separate and critically important points for 2018.

4. Supreme Court decides Oil States

On April 24, 2018, the United States Supreme Court issued its highly anticipated decision in Oil States Energy v. Greene’s Energy Group, 138 S.Ct. 1365 (2018), which asked the Court to consider whether post-grant challenges to issued patents at the Patent Trial and Appeal Board (PTAB) of the United States Patent and Trademark Office (USPTO) are constitutional under Article III and the Seventh Amendment of the U.S. Constitution. As anticipated by many, in a 7-2 decision, the Court found that post-grant challenges, specifically inter partes review (IPR) challenges, are constitutional.

While the Supreme Court attempted to leave open the faint possibility that they were not foreclosing the possibility that patents are no longer property rights, the truth of the matter is the Supreme Court’s decision in Oil States effectively ends the discussion. Patents are not property rights and will not be property rights until Congress overrules Oil States.

Rather inexplicably, the Trump Administration argued that patents are a government franchise, and that is, in fact, what the Supreme Court ruled. Justice Thomas, writing for the majority, said that all inter partes review involves is “reconsideration of the Government’s decision to grant a public franchise.” Thus, patents are not property rights despite what the statute says to the contrary, and despite what the Supreme Court themselves have ruled to the contrary previously.

For more please see:

5. Supreme Court decides SAS Institute

On April 24, 2018, the Supreme Court issued a decision in SAS Institute Inc. v. Iancu, 138 S.Ct. 1348 (2018). In a 5-4 majority ruled that there is no authorization in the statute for the Patent Trial and Appeal Board (PTAB) to partially institute a petition for inter partesreview. Thus, the Supreme Court held that when the Patent Office institutes an inter partes review it must decide the patentability of all of the claims the petitioner has challenged.

As explained by Justice Gorsuch, writing for a 5-4 majority, the plain text of §318(a) resolves this case. The language of the statute is “both directive mandatory and comprehensive. The word “shall” generally imposes a nondiscretionary duty, and the word “any” ordinarily implies every member of a group. “So when §318(a) says the Board’s final written decision “shall” resolve the patentability of “any patent claim challenged by the petitioner,” it means the Board must addressevery claim the petitioner has challenged,” Gorsuch wrote. Thus, §318(a) means that the Board must address every claim the petitioner has challenged.

Furthermore, the USPTO argument that there is “partial institution” power at the prerogative of the Director is unfounded. “The Director’s claimed “partial institution” power appears nowhere in the text of §318, or anywhere else in the statute for that matter,” Gorsuch wrote. “And what can be found in the statutory text and context strongly counsels against the Director’s view.”

“§318(a) categorically commands the Board to address in its final written decision ‘any patent claim challenged by the petitioner.’ In all these ways, the statute tells us that the petitioner’s contentions, not the Director’s discretion, define the scope of the litigation all the way from institution through to conclusion.”

6. Supreme Court decides Western Geco

On June 22, 2018, the United States Supreme Court issued a decision in WesternGeco LLC v. ION Geophysical Corp., 138 S.Ct. 2129 (2018). In a 7-2 decision ruled that a patent owner may recover lost foreign profits for infringement under 35 U. S. C. 271(f)(2). The question decided, as set forth in the opinion by Justice Thomas, writing for the majority, was: “The question in this case is whether these statutes allow the patent owner to recover for lost foreign profits.” Thomas simply answered the question in the opening paragraph saying: “We hold that they do.”

The dispute between WesternGeco, a company that develops technology for surveying the ocean floor, and ION Geophysical Corporation, a competitor, dates back to late 2007. In late 2007, ION began manufacturing components for its competing surveying system and shipping them to companies abroad. Those companies combined the components to create the surveying system that was indistinguishable from WesternGeco’s patented systems.

The opinion concludes rather powerfully stating:

[A] patent owner is entitled to recover “‘the difference between [its] pecuniary condition after the infringement, and what [its] condition would have been if the infringement had not occurred.’” Aro Mfg. Co., supra, at 507. This recovery can include lost profits. See Yale Lock Mfg. Co. v. Sargent, 117 U. S. 536, 552–553 (1886). And, as we hold today, it can include lost foreign profits when the patent owner proves infringement under §271(f)(2).

7. Federal Circuit Finally Defines Real Party in Interest Correctly

On July 9th, the Court of Appeals for the Federal Circuit issued a decision in Applications in Internet Time v. RPX Corporation, 897 F.3d 1336 (2018), which vacated a series of final written decisions issued by the Patent Trial and Appeal Board (PTAB) invalidating patent claims held by Applications in Internet Time (AIT). The Federal Circuit panel of Circuit Judges Kathleen O’Malley, Todd Hughes and Jimmie Reyna found that the PTAB applied an unduly restrictive test in determining the statutory meaning of real party in interest for the purposes of instituting inter partes review (IPR) proceedings petitioned by RPX on patents asserted against RPX’s client Salesforce.

AIT filed discovery requests seeking documentation that RPX was the agent of Salesforce, which would have time-barred RPX’s IPR petitions under 35 U.S.C. § 315(b), the statute preventing the institution of IPR proceedings if the petition is filed more than one year after the date on which a real party in interest is served with a complaint for patent infringement. Among the relevant documents produced during discovery are included an RPX best practices guide for identifying patents to challenge, a declaration from RPX’s Vice President of Client Relations which identified conversations between RPX and Salesforce on the AIT patents and a history of payments from Salesforce to RPX which showed that Salesforce made a significant payment before RPX filed the IPRs against AIT’s patents. The PTAB, however, instituted RPX’s IPRs despite AIT’s time-bar claims.

The Federal Circuit found that the PTAB didn’t meaningfully examine Salesforce’s relationship with RPX and the nature of RPX as an entity that helps its clients extricate themselves from patent litigation.

“Two questions we must answer, then, are (1) what ‘right’ is being enforced; and (2) who is ‘entitled’ to enforce that right.” Judge O’Malley wrote. “In theR context of IPRs — adversarial proceedings… the ‘right’ being enforced is a petitioner’s right to seek administrative reexamination of the patentability of issued claims as an alternative to invalidating those claims in a judicial proceeding. Thus, the focus of the real-party-in-interest inquiry is on the patentability of the claims challenged in the IPR petition, bearing in mind who will benefit from having those claims canceled or invalidated.”

Thus, the question with respect to who is a real party in interest will now correctly focus on who will benefit from having claims canceled or invalidated, which is a much more traditional definition of real party in interest and in keeping with hundreds of years of case law from other areas, which we know the Supreme Court prefers since they view patent law as not particularly unique or special.

8. Director Iancu Speeches and Interviews

Since he was confirmed to serve as Under Secretary of Commerce and Director of the United States Patent and Trademark Office, Andrei Iancu has been traveling all over the country giving speeches. He has also appeared multiple times on Capitol Hill. He has told the House Judiciary Committee that it is unclear what is patent eligible. Iancu has told me in an interview that the current state of §101 weakens innovation. Iancu has told industry audiences that people have a right to know what is patent eligible. Iancu introduced new Standard Operating Procedures at the PTAB and then proclaimed at the annual AIPLA meeting that it is a new day at the PTAB. Iancu has said that the boundaries of the patent grant should not depend on the tribunal where one is litigating. Iancu has also called §101 a morass, saying that the way out of the 101 morass is to strictly follow what is really quite limited guidance from the Supreme Court. And Iancu has called the patent troll narrative Orwellian doublespeak.

While any one of these moments may not rise to a single pivotal moment for 2018, collectively they rather clearly demonstrate that the USPTO has a new sheriff in town. A sheriff not afraid to be a champion for innovators seeking patents, and not just innovators who use the technologies patented by others. This represents a significant departure from the previous regime at the Office, and is a breath of fresh air that has inventors and innovators of all sizes hopeful and optimistic for the first time in years.

9. Federal Circuit Says No to Tribal Sovereign Immunity in IPRs

On Monday, June 4th, the Court of Appeals for the Federal Circuit heard oral arguments in St. Regis Mohawk Tribe v. Mylan Pharmaceuticals, a case appealed from the Patent Trial and Appeal Board (PTAB), which asks the appeals court to determine whether tribal sovereign immunity can be asserted to terminate inter partes review (IPR) proceedings at the PTAB. On July 20, 2018, the Federal Circuit, in an opinion authored by Judge Moore, affirmed the determination of the PTAB, holding that “tribal sovereign immunity cannot be asserted in IPRs.”

“[I]mmunity does not apply where the federal government acting through an agency engages in an investigative action or pursues an adjudicatory agency action,” wrote Judge Moore. “There is not, however, a blanket rule that immunity does not apply in federal agency proceedings.”

The Federal Circuit found IPR to be more like an agency action than a litigation where private parties initiate because “[t]he Director bears the political responsibility of determining which cases should proceed.” While that sounds logical, it is not correct. While the statute gives the Director the authority and responsibility to determine whether to institute IPRs, that statutory responsibility and authority has always been delegated to the Administrative Patent Judges of the PTAB. Thus, the Director plays no role whatsoever in deciding what cases to institute, and in fact has never taken any action to exercise discretion to step in and end harassing filings.

The second rationale provided by the Federal Circuit relates to the fact that the PTAB may continue to decide petitions even if the patent owner does not participate. The PTAB explains this power because they have power over the patent. Sadly, the Federal Circuit made the same error the PTAB made, which I previously pointed out here.

If the PTAB is really exercising jurisdiction over the challenged patent and not the patent owner that by definition means the PTAB exercises only quasi in rem jurisdiction, not in personam jurisdiction, or even in rem jurisdiction as the panel incorrectly suggested. The importance of this is that in Shaffer v. Heitner, 433 U.S. 186 (1977), the Supreme Court extended the notions of fundamental fairness expressed in International Shoe v. Washington, 326 U.S. 310, (1945) relating to in personam jurisdiction to the exercise of in rem jurisdiction.The Supreme Court in Shaffer went further to recognize the obvious: “[A]n adverse judgment in rem directly affects the property owner by divesting him of his rights in the property before the court.” Shaffer, 433 U.S. at 206. Thus, there is no distinction between in rem proceedings and proceedings over the property owner. Thus, the PTAB decision and Federal Circuit decision were based on legal fiction.

10. Revised Standard Operating Procedures

After the August 2018 meeting of the Patent Public Advisory Committee (PPAC), I wrote: “[I]f Director Iancu can truly get the USPTO to operate as one agency on the same page that would be a tremendous legacy.” On September 20, 2018, the USPTO announced the substantial revision of Standard Operating Procedures (“SOPs”) for the paneling of matters before the PTAB (SOP1) and precedential and informative decisions (SOP2). The revisions deliver upon the repeated promises of USPTO Director Andrei Iancu to increase transparency, predictability, and reliability across the USPTO. These new SOPs update the procedures based upon feedback the Office received from stakeholders, courts, legislators, and six years of experience with AIA trial proceedings.

Revised SOP1 puts an end to the practice of expanding PTAB panels without notice to the parties or the public.

Revised SOP2 creates a Precedential Opinion Panel (POP), typically comprising the Director, the Commissioner for Patents, and the Chief Judge of the PTAB. The POP will serve two primary functions: (1) it may be convened to rehear matters in pending trials and appeals, for example on issues of exceptional importance; and (2) it may assist the Director in determining whether a decision previously issued by the PTAB should be designated as precedential or informative. It is expected that the POP and the procedures described in revised SOP2 will, in most cases, replace the prior practice of expanded paneling under SOP1, with a process that is more transparent and predictable. It is also expected that revised SOP2 will result in more decisions being designated as precedential.

Director Iancu, and his successors, now have the power to truly create uniform, all-Office policy that will not only need to be followed by patent examiners, but must also be followed by the PTAB.

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