Podcast: IP(DC): Patent Battles – New Patent Initiatives on the Hill & Notable CAFC/SCOTUS Decisions
Ropes & Gray’s podcast series, IP(DC), focuses on developments in intellectual property law from the vantage point of Ropes & Gray’s office on Pennsylvania Avenue in Washington, D.C.
June 19th marked the 5th anniversary of the Supreme Court’s impactful decision in Alice Corp. v. CLS Bank, which some argue shifted the landscape in an anti-patent direction. Currently, a bipartisan group of Congressional members are working to revise Section 101 of the Patent Act. In this episode, Washington, D.C.-based litigators Scott McKeown and Matt Rizzolo discuss the scope of the proposed legislation, its prospects for passage, and the actions that patent owners and potential defendants may want to take to minimize the uncertainty that comes with potential legislative action. Matt and Scott also discuss the recently proposed Term Act, which seeks to limit patent term for some Bio/Pharma patents as well as notable decisions of the Federal Circuit and SCOTUS.
Scott McKeown: Welcome to the IP(DC) podcast, a podcast covering developments in intellectual property law from our vantage point here on Pennsylvania Avenue in the Ropes & Gray Washington, D.C. office. I'm Scott McKeown, chair of Ropes & Gray's administrative patent trials practice at the United States Patent Trademark Office’s Patent Trial and Appeal Board, which is a very longwinded way of saying I am the chair of the PTAB practice. And I am joined, as always, by my partner, Matt Rizzolo, an IP litigator in Ropes & Gray's IP litigation group. In this episode we will be discussing the legislative effort currently underway before Congress to recalibrate the law of patentable subject matter eligibility – that is, what types of technology can be protected by a U.S. patent? We will get into the current legislative proposal, likely mark ups in the weeks ahead, and prospects and timing of passage of such a bill. Finally, we will also finish up with some interesting decisions out of the Court of Federal Appeals for the Federal Circuit, and preview future episodes.
But starting with 101, there's been a significant amount of litigation over this topic in recent years, in a growing consensus that the courts have muddied the waters so much on this topic that it has become completely unpredictable, so much so that emerging technologies in biopharma, medical diagnostics, blockchain, artificial intelligence, etc. are facing an uncertain patenting landscaping. Matt, I'm wondering if you can briefly summarize the state of 101 case law and how this matter has become so prominent before Congress.
Matt Rizzolo: Sure. No problem. So it seems particularly appropriate that we're sitting here almost five years to the day after the Supreme Court's decision is Alice v. CLS Bank, which back in June 2014 sort of started off all of this mayhem, if you will, in the 101 realm. So, many of you listening to this are probably already familiar with the two part Alice/Mayo test, referencing an earlier Supreme Court case but at a high level. The test basically looks at claims of a patent and says, “Are the claims directed to what would be historically unpatentable subject matter, such as an abstract idea or a natural law (gravity, for example)?” And then if it is directed to that unpatentable concept, the second part of the test looks at whether the claims adds significantly more to the unpatentable abstract idea or natural law, such that it renders the claims overall to be patent eligible. And if that all sounds somewhat vague, and unpredictable to apply, well, that's more or less what's happened in practice over the last five years.
We have seen dozens, and dozens, and dozens of cases – district court, Federal Circuit level where patents have been invalidated on 101 grounds not just further along in the proceeding after a summary judgment motion or judgment as a matter of law after trial, for example, but also on motions to dismiss. At the outset of the case, you have instances where a complaint is filed and a defendant files a motion to dismiss and says, “This patent is not directed to patentable subject matter” and courts have time and again granted those motions. Now, there have been some changes on that front that I'm sure we'll get to shortly, but that more or less sets the stage for what we're talking about today. And interestingly enough, since Alice, I just looked at this this morning because there was another cert denial on 101 issues, but since Alice there have been 43 separate petitions for certiorari to the Supreme Court on 101 issues that have been denied. So the Supreme Court has repeatedly refused to clarify further despite pleas from litigants, attorneys, and even sitting Federal Circuit judges.
Scott McKeown: So that's a pretty clear message that if you want to fix what is perceived as a problem that you have to go the legislative route, which gets us to the actual text of the proposal. And a large focus of the proposal although it, at least at present, all fits on a single page, is this idea of abrogating what's known as judicially created exceptions. So you had mentioned a concept such as abstract ideas, laws of nature – is this something that was created by the courts? And is that really the problem here, Congress stepping in and saying, "No, courts, you're going down the wrong path here, let's sort of recalibrate the landscape"?
Matt Rizzolo: Yes, these are judicial exceptions, but I would be remiss if I didn't point out that many of these judicial exceptions are long established judicial expectations. You know, we're going back into the 1800s where the Supreme Court and other courts have said these types of things can't be patented – you can't patent a law of nature, you can't patent a natural phenomena. Where you run into issues and where the PTO has tried to help clarify, or in situations like abstract ideas, it's well and good to say you can't patent an abstract idea, but that just simply raises the question of, “What is an abstract idea?” And we don't really have clarity from the Supreme Court on that – they've just said you can't get a patent on it.
Scott McKeown: So then let's get into the actual proposal here and how that confusion would be avoided. I guess looking at the proposal, the first thing you notice is 35 U.S.C. section 101 is reworded slightly, and then there's a second element that's added. And the rewording that I'm speaking of is taking this word “new and useful” out of the old 101 statute. What do you take from that change?
Matt Rizzolo: So it's interesting. They really seem to want to stop courts from conflating the different portions of the patent statute. So section 101 describes at a high level what's eligible for patenting, and then section 102 and 103 get into novelty and non-obviousness. And there's been a lot of concern about whether courts are improperly conflating novelty, you know, newness, for lack of a better word, with what's patent eligible in the first place. So I think that this was probably targeted towards that conflation issue.
Scott McKeown: And in fact there's actual additional legislative provisions that are in the current draft to expressly address that, which is as follows: "Whether individual limitations of a claim are well known, or conventional, or routine is not something that should be considered when determining the eligibility of a claimed invention."
Matt Rizzolo: Yes, they're saying look at that under 102 and 103.
Scott McKeown: Getting back to the confusion out there and in the industry, I think when you talk about provisions such as taking away this consideration of conventional or routine technology – there was that case back at the Federal Circuit in March, Charge Point, which dealt with charging station for hybrid vehicles – and when you think of claiming a charging station that just happens to be networked, the idea that something like that would not be patent eligible just seems wrong. It's cases like this that have brought the subject matter eligibility problem to the attention of Congress. So in addition to changing some of the language of 101, we also have a second provision stating that the claimed invention should be considered as a whole, which, frankly, is something that we should be doing right now, but it's certainly emphasized there. So just at a high level, and we'll get into this other change here about functional claim language and how that got into a 101 proposal, but at a high level, what is your sort of big picture takeaway on what this would do to the 101 landscape?
Matt Rizzolo: It would make it much more permissive – sort of return it to the days of, former Chief Judge Rader used to refer to it as a “course filter” – and that's what this proposal seems to be intended to do. You look at a very high level, “Is it eligible?” Okay. Well, then we pass onto, “Is it actually novel and non-obvious?” And 102 and 103 do more of the filtering mechanisms, and then to some extent, 112, as we'll discuss.
Scott McKeown: What about the myriad decision – there's been some criticism that perhaps these changes would allow the patenting of human genes?
Matt Rizzolo: I think there's been a lot of pushback there. You saw Senator Coons and Tillis wrote a op-ed in The Hill (It’s time to restore America’s patent system) where they specifically pushed back on this issue, and they said, “Nothing that we're doing here would allow you to patent genes as they occur in the human body, but there are other things that relate to genes that would still at least be eligible under this.” Whether they would actually ultimately be able to be patented is a different question.
Scott McKeown: And I think some of those areas might be medical diagnostics and the like, which has been adamant about the need for change in 101 in order to be able to protect some of those innovations. But let's talk about this 112 provision that I think caught a lot of folks by surprise when we're talking about fixing 101 – you typically don't think of, “Well, there's also problems with 112,” but nonetheless this provision appears in the current proposal about functional claim elements. And in a nutshell what it has done is taken the old, or I should say existing 35 U.S.C. 112(f) provision and taken out the words “means-plus-function” or “step-plus-function.” What do you take from that?
Matt Rizzolo: So its, I found this really interesting, you know, right off the bat. We've always referred to these as means-plus-function claims and now you would have, if this passes in this form or somewhat similar, you'd have means-plus-function claims that don't actually have to use the term “means,” and “means” isn't even in the statute. So that would just be funny to me off the top of my head. But more broadly what this would do, this would result in the narrowing of a lot of claims, and whether this is going to be applied to existing patents out there is an open question. I know some of the witnesses at the congressional hearings did raise that, and I think that's something that's going to be hashed out before the final legislation gets put to the floor. But instead of using 101 and saying, “Well, this isn't eligible at all, this overly broad concept that's claimed here isn't eligible at all,” this 112 revision might result in, “Well sure, you have an ineligible claim here, but it's very narrow.” It's only directed to what you've actually identified in the spec, and if that's the full scope of what your claims cover, maybe that's not quite what the patent owner anticipated when he used certain functional language in the claim. So that could result in patents, that while valid, are less useful for assertion or licensing purposes because they're very narrow.
Scott McKeown: So in some ways, we're offloading what has been to date a discussion about 101 really to a discussion about breadth and whether or not you really invented the full scope of what you've claimed, which I think some would argue is the way the system should work. And interestingly enough, when the PTO sort of led the charge on 101 change back in January introducing their own guidelines, which we won't get into in the interest of time, at the same time they also introduced their own 112, or at least reminder about how examiners should be treating functional claim elements. So the way I view this is, and we can talk a little bit about some of the folks that have come to the hearings at the Senate Judiciary in favor or against this provision, and big tech has been noticeably absent, but my view is that well, you've got this section 112 provision in here because this is an argument, I think that comes from big tech, which is, “Well, we see these claims out there that claim to own an entire function or way of doing something when the patent was actually much narrower. And we need help fighting those patents. And if you're taking away what we had in 101, we need to be able to get at this breadth problem by more a claim analysis.”
Matt Rizzolo: And I will say from a litigation perspective, I mentioned earlier that 101-related issues have been often resolved on motions to dismiss. I think if you were to see this change or something similar to it, the 112 issues are much more likely to have to wait until at the very least claim construction when often you see these things get hashed out. So that would take away that early motion to dismiss tool that defendants have used so often since Alice to dispose of cases.
Scott McKeown: Well, while we're talking about this provision, let's switch a little bit to what has happened since this was introduced, and you mentioned earlier the timing. You know, when would this functional claim element provision, for example, go into effect, or when would this 101 provision go into effect? We may see some tradeoff between the two where 112 may be prospective, where 101 is more retroactive to a certain extent, because those battling or concerned with this 101 problem want some immediate relief. And we don't see any date provisions in this proposal yet. So what are you expecting to see along those lines?
Matt Rizzolo: I think it's purposely vague at this point. They certainly did get an earful from a number of folks about whether these should apply only prospectively to patents that issue after the date of any enactment of this, or whether there's some sort of retroactive effect, whether it applies to cases that are currently filed or not to cases that are currently pending, or whether it applies to all patents when they were issued. I mean, I even saw some folks talk about potential takings clause, or due process clause violations if you eliminate the means-plus-function presumption that attach to certain claims with this 112 change. So, that's something that they are certainly going to evaluate. Now, as far as the introduction of the tweaked language based on the hearings, it seems like there's going to be some language coming out in a draft bill probably in July. I mean, they seemed like they were ready to move as soon as they could after the July 4th holiday. Now, whether that leads to an up or down vote, or even floor time for debate, who knows. You know, Congress is Congress, and there's only so much you can do there.
Scott McKeown: Right. It wouldn't surprise me if we saw a formal bill being introduced sometime in mid-July with a number of changes. As you say, there needs to be something in here about timing. There's also over the course of the hearings that were conducted in early June a lot of discussion about, “Well, what does technology mean? What about double patenting?” If you take new out of 101, doesn't that abrogate double patenting, and maybe does double patenting get codified separately? So there's a number of interesting developments – we'll have to see how they play out in the revised draft. But Senator Coons has promised to introduce something after the July recess, so I would expect that to happen, and then we'll see a more robust debate probably sometime in the fall.
Matt Rizzolo: Yes, I mean those hearings really were remarkable. We had three days, 45 witnesses – that's a lot of witnesses being trotted out in short order. And interestingly, it kind of looked at the split and ball parked it, and it seemed like you had about 30 to 32 witnesses or so, so around two thirds coming out in favor of Congress doing something here. And then about a third saying, “Hey, you know, we think the system is working okay, and 101 isn't the mess that people are saying it is.”
Scott McKeown: And that's definitely my impression – something is going to get done here. When you talk about a process that was only kicked off in December with some fact finding meetings that have now matured very quickly into 45 witnesses in the span of a week, and Senator Coons also having pushed the Stronger Patents Act prior to this initiative, there's definitely a lot of momentum behind this effort, and it would not surprise me if something was on the President's desk certainly by the holidays. So we will keep an eye on that. But while we're talking about legislation, there was another piece that dropped last week on the House-side, the Term Act, and what can you tell us about that?
Matt Rizzolo: Yes, so the Term Act is an interesting provision that came out, as you said, last week, and it was sponsored by Hakeem Jeffries, a Democrat from New York, and this was intended to combat what some have termed “evergreening.” At a high level, this is the concept where drug companies obtain multiple patents on the same drug in order to extend patent protection and prevent generics from entering the market. But this statute would impose a very significant change just on the biopharma industry – it wouldn't touch other types of patents. And what it would do is it would in litigation over drug patents, if there was a patent that had expired and covered the drug, there would be a presumption that any other patents directed to that drug would also expire, be invalid. So it would sort of flip the presumption of validity for patents, to just say that if one patent has expired they're all gone. And to say that this would be a significant change is probably understating things a bit, but it'll be interesting to see how that plays out.
Scott McKeown: Although it's somewhat interesting that in at least the text of the current proposal there's a preponderance of the evidence standard that you could avoid the presumption that you will not be using your patent term extension, or your extension of term based upon that standard, which obviously not a very difficult standard. And if you have to wonder if some of these patents were issued as divisionals, which were already recognized by the patent office as being distinct inventions, whether or not this legislation, at least as written, would really have the teeth that it sort of purports to have right now.
Matt Rizzolo: There's certainly a lot of pharmaceutical-related legislation going around on the Hill right now, so…
Scott McKeown: Well, I can't imagine biopharma would welcome it just because there's a preponderance of the evidence standard. So before we wrap up this episode, why don't we talk briefly, because there was a lot of movement last week at the Federal Circuit on some patent issues, and Matt, I know you have some thoughts on those cases.
Matt Rizzolo: Sure, before we go to the Federal Circuit, I'll start with the Supreme Court. There was a case that came down, I believe it was a week ago today, Return Mail v. The United States Postal Service, and this involved the interesting but not all together common issue of whether the government, the federal government, or an agency of the federal government can bring an AIA, a validity challenge. In this case it was a covered business method review that was brought by the U.S. Postal Service. The Federal Circuit had been confronted with the issue of whether the government is a person for purpose of the AIA, who could petition for CBM. And in a split decision, the Federal Circuit said that the federal government is a person for purposes of the statute, but the Supreme Court reversed. And applying a long standing presumption in the Dictionary Act and a number of Supreme Court cases, the Supreme Court said that the U.S. government as a sovereign entity is not a person who can file a petition for CBM review, or inter partes review. So ultimately, what this does is this means that if the government is sued for patent infringement in the Court of Federal Claims, where the only location where the government has waived its sovereign immunity for infringement, then the government itself can't actually file a petition for IPR or CBM review. Now, others could do it, but just not the government.
Scott McKeown: And it's something that certainly could be addressed in a technical fix to the statue, of course. With only one or two such filings per year, I don't know that it warrants that kind of attention, but we'll have to see just while we're talking about legislative proposals. But there's also been a fair number of decisions – well, there was a denial of cert, too, at the Supreme Court. Maybe you want to talk about that before we switch to the Federal Circuit?
Matt Rizzolo: Yes, so we've seen some interesting decisions. There was a denial of cert today in the Supreme Court in RPX v. ChanBond, and the JTEKT case, both of which dealt with standing issues involving appeals from PTAB proceedings. So while in the PTAB, any person, although not the federal government, can file a petition for IPR or CBM review, in district court, for example, you need have declaratory judgment standing – you have to have enough skin in the game to challenge someone's patent in a declaratory judgment action. And where this comes into play is when certain entities who might, you know, whether it's a nonprofit who challenges patents or otherwise, when they file a PTAB petition and lose at the PTAB, what recourse do they have? Well, the statute says that you can appeal to the Federal Circuit if you're dissatisfied with what happens at the PTAB. The statute isn't the last word on things. The Constitution requires that per Article III proceedings, which the Federal Circuit is, you need to have a case or controversy between the parties. And the Federal Circuit has time and again held that the mere fact that the statute tells you can appeal isn't enough to create a case for controversy. So these two cases raised it, and the Supreme Court has now elected not to hear it. There are still several percolating at the Federal Circuit – some of these involve competitors where they don't actually have a competing product at the time that they filed the PTAB challenge. But this is something worth keeping an eye on, because it's going to keep happening.
Scott McKeown: And those are some of the more interesting appeals at the Federal Circuit as you point out. When you have competitors, this idea of standing only comes up for the first time when you're at the Federal Circuit. So you have all of this information being filed in these briefs that in a lot of cases isn't in the record below, so you have the Federal Circuit sort of almost acting in a trial court capacity on those appeals. But there were a couple other interesting decisions at the Federal Circuit last week. Do you want to briefly hit those?
Matt Rizzolo: Yes, so I'll start with the sovereign immunity case, Regents of the University of Minnesota v. LSI. This was the second big sovereign immunity and the PTAB case that was decided over the last year or so. Many of you listening may have heard of the case involving the Saint Regis Mohawk tribe who engaged in a transaction with Allergan to take ownership of some patents that were covering Allergan's Restasis product to try and shield them from inter partes review. The Federal Circuit ultimately ruled there that tribal sovereign immunity didn't bar PTAB proceedings, and the Supreme Court denied cert on that issue earlier this year. Well, this case that was decided last week involved university-owned, and university-developed patents. There was a transaction that sort of shifted ownership around. And here there were a number of different underlying cases, some tech, some pharma, but all involving patents owned by the University of Minnesota. They had previously asserted these patents in district court. The patents were challenged in a variety of IPR proceedings. The University moved to dismiss the IPR proceedings asserting sovereign immunity, saying, “We are states who can't be sued, and even though this is an administrative proceeding, it's enough like litigation such that our sovereign immunity should apply.” The PTAB actually ruled that, yes, sovereign immunity did apply, but that by bringing the district court cases, the University had waived the right to seek sovereign immunity as a shield in the PTAB proceedings. So unsurprisingly, this was appealed to the Federal Circuit, and on Friday the Federal Circuit affirmed the PTAB, but for a different reason. They did not reach the waiver issue. They didn't need to because they said, “We are following our decision in the Saint Regis Mohawk tribe case and finding that the IPR proceedings are effectively the Agency reconsidering their original grant of the patent, and it's effectively like an agency enforcement action where the director is making the discretionary choice to proceed with this IPR proceeding.” And in those situations under the Supreme Court case law, sovereign immunity doesn't apply. So they looked heavily at the director's ability to institute or not and saying he's politically accountable, he's appointed by the President, he's confirmed, so really it's on him to decide whether to go forward.
Scott McKeown: It was interesting in that decision, in both decisions, the tribal and sovereign immunity decisions where they point out that as you say, while this is a dispute between private parties, you're bringing it to sort of this referee who's, you know, you as the third party petitioner, or the patent challenger, you're really kind of just helping the government along, and the government can continue, even if you drop out. So it's not like a traditional lawsuit. And yet they've sort of footnoted, “But there are these things called ‘interferences,’ which are different, right?” It's a dispute over ownership, and I wonder where these decisions leave patent derivation, which is very much akin to an interference in terms of your deciding ownership of a property right, and so that's a battle that perhaps we'll see down the road.
Matt Rizzolo: Yes, I think that we probably haven't heard the last of this case. There's a certain predilection of the Supreme Court to take on sovereign immunity cases. They've taken on four or five PTAB-related cases over the last four to five years, so I would expect to see more from this case in the future.
Scott McKeown: And just one last question before we wrap up. What do you take from the additional views that were filed in that state sovereign immunity case last week discussing this concept that patent reviews are in rem proceedings?
Matt Rizzolo: Yes, that was an interesting footnote to the University of Minnesota decision, that the entire panel, not just one or two judges, filed a separate additional views that don't form part of the opinion, sort of intentional dicta, so to speak. And they said that, “We believe, in our view, that these proceedings are in rem – they're just directed to the patent.” You mentioned earlier that the PTO has determined that they can proceed to the final written decision, whether or not the patent owner or the petitioner is participating. So in their mind, they simply decide the rights with respect to the patent at issue, the property there, the res – and therefore, sovereign immunity in those cases, they believe, does not apply. There have actually been some interesting Supreme Court cases that have punted a little bit on that issue over the last few years, so that's another thing that may ultimately be considered by either En Banc, Federal Circuit, or the Supreme Court.
Scott McKeown: And do you think that segregation of that intentional dicta is a way of the court saying, "Look, Supreme Court, we know you're interested in this stuff, but this really doesn't have anything to do with our holdings so don't take this up"? I mean, is there some takeaway on that level as to why they may have chosen to write that aspect of the decision response.
Matt Rizzolo: That's a great question. I mean, I do think it's worth noting that almost the entire section there just cites Supreme Court cases. So take with it what you will.
Scott McKeown: Alright, well, that's all the time we have for this episode and we hope that you're able to tune in on future episodes where we continue to discuss IP developments from the Washington D.C. perspective. So on behalf of Matt Rizzolo and Scott McKeown of Ropes & Gray, thank you for listening.