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Federal Circuit Review | August 2012


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The Federal Circuit Review is a monthly newsletter featuring the latest case summaries handed down from the U.S. Court of Appeals for the Federal Circuit.

In this Issue:

"Presumption of Validity Extends to Erroneously Issue Claims"

"Federal Circuit Finds Computer-Implemented Trading Method Patent-Eligible"

"Priority Claim Determines Filing Date when applying One-Year Time Bar for Copying Claim"

"Fairness Balancing Test Applies to Pre-Litigation Waiver of Attorney-Client Privilege"

"Using Computer Merely to Speed-Up Calculations Cannot Save Patent-Ineligible Method"

"Presumption of Enablement for Prior Art Extended to Non-Patent Publications"

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Federal Circuit Review | August 2012

  1. 1. Federal Circuit Review VOLUME 2 | ISSUE 8 AUGUST 2012Presumption of Validity Extends to Erroneously Issued ClaimsIn Sciele Pharma Inc. v. Lupin Ltd. (Docket No. 2012-1228), the Federal Circuit vacated and remanded the district court’s grantof a preliminary injunction.Shionogi owns a patent covering sustained release metformin and markets the drug under the name Fortamet. During prosecutionof the patent, the U.S. Patent and Trademark Office (PTO) rejected several claims as obvious over prior art, and the applicantcanceled the rejected claims. Nevertheless, the issued patent erroneously included the canceled claims. Shionogi sued Lupin forinfringing the patent — including the erroneously issued claims — based on Lupin’s request to the FDA to allow it to make and sella generic version of Fortamet. After expiration of the 30-month waiting period required under FDA regulations, Lupin attempted tolaunch its generic version without first obtaining a final judgment on the merits in the infringement suit, and Shionogi moved in thesuit for a preliminary injunction to prevent Lupin’s attempt to launch. Lupin countered by asserting that the Shionogi patent wasinvalid, basing its arguments on references that had previously been considered by the PTO. The district court disagreed with Lupinand considered these arguments insufficient to raise a substantial question of invalidity. In spite of the errors in the issued patent,the district court concluded it was required to show deference to the PTO as a qualified agency and reasoned that, because theprior art at issue was considered by the PTO, the case was fundamentally different from KSR (a recent supreme court case finding apatent invalid for obviousness). Accordingly, the court granted the preliminary injunction preventing Lupin from launching its genericversion.On appeal, Lupin argued against any presumption of validity because the canceled claims issued erroneously, and Shionogiargued that there should be a heightened presumption of validity because the cited references were considered by the PTO duringexamination. The Federal Circuit held that both parties were wrong. The presumption of validity and burden of proof, clear andconvincing evidence, is not altered based on facts from the file history. Instead, quirks from the prosecution history or the fact thata reference was previously before the PTO simply affect the weight that should be assigned to the evidence. Here, the prior artprovided a motivation to make a composition with the claimed pharmacokinetic profile, and the applicant had argued that it wasroutine for one of skill in the art to obtain a desired pharmacokinetic profile. Because Lupin raised a substantial question of validity,the Federal Circuit vacated the preliminary injunction and remanded. In This Issue • Presumption of Validity Extends to Erroneously • Fairness Balancing Test Applies to Pre- Issued Claims Litigation Waiver of Attorney-Client Privilege • Federal Circuit Finds Computer-Implemented • Using Computer Merely to Speed-Up Trading Method Patent-Eligible Calculations Cannot Save Patent-Ineligible Method • Priority Claim Determines Filing Date when applying One-Year Time Bar for Copying Claim • Presumption of Enablement for Prior Art Extended to Non-Patent Publications
  2. 2. Federal Circuit Finds Computer-Implemented Trading MethodPatent-EligibleIn CLS Bank International v. Alice Corp. (Docket No. 2011-1301), the Federal Circuit reversed the district court’s finding ofinvalidity based on ineligible subject matter.The asserted claims included system, method, and computer program product claims that covered a computerized trading platformfor exchanging obligations. The district court held that each claim asserted by Alice was invalid for failure to claim patent eligiblesubject matter. Specifically, the district court held that each claim fell within the “abstract ideas” exception to patent eligibility.The Federal Circuit reversed, finding that each asserted claim covered a practical application of a business concept in a specific waythat required computer-implemented steps. The majority found that the computer-implemented claim limitations played a significantpart in permitting the method to be performed and were not token, post-solution activity. The majority also found that the claimlimitations left room for other methods of exchanging obligations and so did not appear to preempt much in the way of innovation.The majority noted that, “[w]hile the use of a machine in these limitations is less substantial or limiting than the industrial usesexamined in [Diamond v. Diehr, 450 U.S. 175 (1981)] (curing rubber) or [In re Alappat, 33 F.3d 1526 (Fed. Cir. 1994)] (a rasterizer),the presence of these limitations prevents us from finding it manifestly evident that the claims are patent ineligible under [35 U.S.C.]§ 101.”Judge Prost dissented, arguing that the majority resisted the Supreme Court’s directive—e.g., in Bilski v. Kappos, 130 S.Ct. 3218(2010)—to apply the patentable subject matter test with more vigor and, in fact, created an entirely new framework that allows courtsto “avoid deciding a § 101 case unless unpatentability is ‘manifestly evident.’” The dissent argued that the majority did not followthe Supreme Court’s instructions in inquiring whether the asserted claims include an inventive concept and instead focused on thefact that the claims require “computer implementation,” while failing to explain why the specific computer implementation brings theclaims within the scope of 35 U.S.C. § 101.Priority Claim Determines Filing Date when applying One-YearTime Bar for Copying ClaimIn Loughlin v. Ling (Docket No. 2011-1432), the Federal Circuit affirmed a decision of the Board of Patent Appeals and Interferencescanceling an issued claim in view of an interfering claim.An interference, or dispute over inventorship, arose between Loughlin’s patent and Ling’s application. Loughlin’s patent issued froman application that published on November 18, 2004. Ling’s application was filed February 5, 2007, claiming priority under 35 U.S.C.§ 120 to an application filed on January 16, 2004. Following the procedure for alerting the patent office to an inventorship dispute,Ling copied claims from Loughlin’s application on February 21, 2007, and the PTO declared an interference.Loughlin attempted to end the interference using an alleged procedural defect under 35 U.S.C. § 135(b)(2), which provides that acopied claim “may be made in an application filed after the application is published only if the claim is made before 1 year after thedate on which the application is published.” The Board denied Loughlin’s motion, holding that § 135(b)(2) did not apply to Ling’sapplication because it claimed priority to January 16, 2004, which was before Loughlin’s application published. Loughlin appealed.The Federal Circuit agreed with the Board that § 135(b)(2) did not apply to Ling’s application, given that application’s effective filingdate in 2004. The Federal Circuit noted that, “[p]rovided the criteria in § 120 are met, applications ‘shall,’ without exception, receivethe benefit of the earlier filing date” and that § 120 “does not limit its effect to only certain provisions under the patent laws.” Thus,the Federal Circuit affirmed the Board’s judgment canceling Claim 1 of Loughlin’s patent.Fairness Balancing Test Applies to Pre-Litigation Waiver ofAttorney-Client PrivilegeIn Wi-LAN, Inc. v. LG Electronics, Inc. (Docket No. 2011-1626), the Federal Circuit vacated and remanded the district court’sproduction order and contempt sanctions, holding that in analyzing the scope of waiver of attorney-client privilege, the court shouldhave applied a fairness balancing analysis when assessing pre-litigation disclosures between the parties.Prior to suit, Wi-LAN sent a letter to LG requesting that LG pay a license under Wi-LAN’s patent. Wi-LAN attached a confidentialopinion letter from Wi-LAN’s outside counsel analyzing infringement of Wi-LAN’s intellectual property by LG’s technology. LGrefused to pay, and Wi-LAN sued for patent infringement. During discovery, LG demanded that Wi-LAN divulge documents andmake Wi-LAN’s outside counsel available to testify broadly regarding the subject matter of the opinion letter, under the theory 2
  3. 3. that Wi-LAN had waived the attorney client privilege by showing the opinion letter to LG. Wi-LAN’s outside counsel resisted LG’sdemand, claiming that any waiver of the attorney-client privilege should be limited to the letter itself. The district court agreed withLG and ordered Wi-LAN to produce the documents, eventually finding Wi-LAN’s counsel in contempt and entering sanctions forfailing to comply. Wi-LAN appealed.The Federal Circuit found that regional circuit law applied and that the district court erred by rejecting considerations of fairness indetermining the scope of the waiver. The Federal Circuit analyzed Federal Rule of Evidence 502(a) (which applies to disclosuresmade in a court proceeding), Ninth Circuit law, and other circuits’ law to hold that fairness balancing in analyzing the scope ofwaiver of attorney-client privilege applies to pre-litigation disclosures. The Federal Circuit vacated and remanded for the districtcourt to take into consideration fairness, that is, “whether LG would be unfairly prejudiced by Wi-LAN’s assertion of privilege againstdiscovery into attorney-client communications beyond the four corners of the [ ] letter.”Using Computer Merely to Speed-Up Calculations Cannot SavePatent-Ineligible MethodIn Bancorp Services, LLC v. Sun Life Assurance Co. of Canada (U.S.) (Docket No. 2011-1467), the Federal Circuit affirmed thedistrict court’s finding of invalidity based on ineligible subject matter.The asserted claims included method, system, and computer-readable medium claims that covered a computerized program formanaging life insurance policies. The district court held, on summary judgment, that the claims (whether formed as method, system,or apparatus claims) were invalid under 35 U.S.C. § 101 as directed to patent-ineligible “abstract ideas.”The Federal Circuit affirmed, distinguishing its previous CLS Bank decision that had held claims relating to computerized stocktrading platform eligible under 35 U.S.C. § 101, and explaining that “using a computer to accelerate an ineligible mental processdoes not make the process patent-eligible.” In this case, the Federal Circuit found that “the computer limitations did not play a‘significant part’ in the performance of the claimed invention” and “unlike CLS, the claims here are not directed to a ‘very specificapplication’ of the inventive concept.” Thus, despite the CLS precedent, the Federal Circuit rebuffed what it saw as Bancorp’sattempt to “broadly claim the unpatentable abstract concept of managing a stable value protected life insurance policy.”Presumption of Enablement for Prior Art Extended to Non-PatentPublicationsIn In re Antor Media Corp. (Docket No. 2011-1465), the Federal Circuit affirmed a decision by the Board of Patent Appeals andInterferences rejecting claims in an ex parte reexamination as invalid for anticipation and obviousness.The Board found the claims of a patent related to data networks to be anticipated and obvious during ex parte reexamination. Antorappealed, arguing that two of the references cited by the Board to reach its conclusions were not “enabled”—that is, neither theExaminer nor the Board had provided any evidence that these references were sufficient to enable anyone to practice the Antorinvention.The Federal Circuit agreed with Antor that cited reference must provide enabling disclosure for anticipation, but the Federal Circuitnevertheless affirmed the Board’s rejection, holding that even non-patent publications are presumed to be enabled. Thus, anexaminer need not conduct an enablement inquiry prior to relying on a reference. The Federal Circuit noted that a prior art referenceneed not enable its full disclosure, but only the portion of the disclosure alleged to anticipate. The Federal Circuit concluded thatonce the Examiner presented a prima facie case of anticipation, the burden shifts to the patent applicant to present rebuttal evidenceof nonenablement. In this case, Antor failed to rebut the presumption that the cited reference was enabled because he failed toshow that undue experimentation was needed to practice the claimed invention based on the cited reference.The Federal Circuit also affirmed the obviousness rejections, reiterating that a reference need not be enabled to qualify as anobviousness reference. 3
  4. 4. Knobbe Martens Offices Orange County San Diego San Francisco Silicon Valley Los Angeles Riverside Seattle Washington DC© 2012 Knobbe Martens Olson & Bear LLP, a Limited Liability Partnership including Professional Corporations. All rights reserved. The information contained in thisnewsletter has been prepared by Knobbe, Martens, Olson & Bear, LLP and is for general informational purposes only. It does not constitute legal advice. While every efforthas been made to ensure the accuracy of the information contained in this newsletter, Knobbe Martens Olson & Bear LLP does not guarantee such accuracy and cannot beheld liable for any errors in or any reliance upon this information. Transmission of this newsletter is neither intended nor provided to create an attorney-client relationship,and receipt does not constitute an attorney-client relationship. You should seek professional counsel before acting upon any of the information contained in this newsletter. Who We Are Over 95% of our litigators hold technical degrees, including electrical engineering, computer science, mechanical engineering, chemistry, chemical engineering, biochemistry, biology, and physics. Many of our litigators are former Federal Circuit or district court clerks. With eight offices, Knobbe Martens represents clients in all areas of intellectual property law. • Exclusive practice in the area of intellectual property since 1962 • M ore than 250 lawyers, many of whom have advanced degrees in various technologies • I nternationally recognized leaders in IP across a vast spectrum of technology areas 4