By Yuan Cao – Edited by Frederick Ding
Mere Commercial Benefit Not Enough to Trigger The On-Sale Bar
In The Medicines Company v. Hospira, Inc., Nos. 2014-1469, 2014-1504 (Fed. Cir. July 11, 2016) (en banc), the Federal Circuit held that a contract manufacturer’s sale to the inventor of manufacturing services where neither title to the embodiments nor the right to market the same passes to the supplier does not constitute an invalidating sale under 35 U.S.C. § 102(b) (2010) (pre–America Invents Act). § 102(b) set a statutory bar: it provided that an invention that was “in public use or on sale in this country, more than one year prior to the date of the application for patent” would be ineligible for patent protection. In Pfaff v. Wells Electronics, Inc., 525 U.S. 55 (1998), the Supreme Court had clarified that the on-sale bar under § 102(b) applies when, before the critical date, the claimed invention was (1) the subject of a commercial offer for sale, and (2) ready for patenting.
MedCo is a specialty pharmaceutical company that contracted with Ben Venue Laboratories in late 2006 to manufacture commercial quantities of Angiomax under a new process. The manufacturing protocol governing the produced batches stated that “the solution will be filled for commercial use.” In August 2007, MedCo released the batches for sale. On July 27, 2008, MedCo filed applications for two patents claiming the producing process. In August 2010, MedCo sued Hospira, alleging that the latter’s two ANDA filings infringed the said two patents. Hospira contended in response that MedCo’s patents were invalid because the on-sale bar had been triggered when MedCo paid Ben Venue to manufacture the medicine before the critical date.
Because the district court found the invention was “ready for patenting”, satisfying the second prong of Pfaff, the dispute thus focused on whether there was a sale under the first prong. Hospira argued that MedCo’s transactions with Ben Venue constituted a commercial sale because “this arrangement constituted commercial exploitation.” MedCo asked the Federal Circuit to hold en banc “that the on sale bar is not triggered by a inventor’s retention of a third party to develop or manufacture the claimed invention confidentially and under the inventor’s direction and control.” A merits panel of the Circuit Court found that the on-sale bar applies where the evidence clearly demonstrated that the inventor commercially exploited the invention before the critical date. In reaching this conclusion, the panel found no distinction between the offer to sell products prepared by a patented method and the commercial sale of services that result in a patented product-by-process. MedCo petitioned for rehearing en banc.
The court, sitting en banc, clarified that mere commercial benefit is not enough to trigger the on-sale bar under § 102(b). Instead, when assessing the first prong of Pfaff, the court must focus on those activities that would be understood to be commercial sales and offers for sale “in the commercial community.” Specifically, the court held that the on-sale bar will not be triggered if 1) only manufacturing service but not the invention was sold to the inventor; 2) the inventor maintained control of the invention; or 3) the purpose of the transaction is “stockpiling.”
By providing a clear guidance in interpreting the implication of the on-sale bar under the two-step Pfaff test, MedCo will likely assure patent holders that they can continue their partnership with other contract manufacturing organizations. Commenters also noted that MedCo may be another example of how the Federal Circuit may be making an attempt to reassert its earlier patent law preeminence and provide the benefit its expertise in this area to the patent community, and even the Supreme Court.
Technology-Based Software Solution Can Be Patentable
In BASCOM Global Internet Services, Inc. v. AT&T Mobility LLC, No. 2015-1763 (Fed. Cir. June 27, 2016), the Circuit Court held that information filtering system that overcomes certain shortcomings in previous filtering systems should be a patentable subject matter under 35 U.S.C. § 101. In Mayo Collaborative Servs. v. Prometheus Labs., Inc., the Supreme Court set forth a two-step analytical framework for such an inquiry. 132 S. Ct. 1289, 1293 (2012). First, the court must “determine whether the claims at issue are directed to a patent-ineligible concept.” If so, the court must then “consider the elements of each claim both individually and “as an ordered combination to determine whether the additional elements ‘transform the nature of the claim’ into a patent-eligible application.” Id. at 1298, 1297.
The patent-in-suit involves filter for Internet traffic. Previous filters were either susceptible to hacking and dependent on local hardware and software, or confined to an inflexible one-size-fits-all scheme. By comparison, BASCOM had developed a filtering system, for which it obtained U.S. Patent 5,987,606, that allows individual network accounts to customize the filtering of Internet traffic associated with the account. BASCOM sued AT&T Mobility LLC for patent infringement. AT&T moved to dismiss the complaint on the basis that BASCOM’s patent was invalid as a matter of law under 35 U.S.C. § 101 because it claimed unpatentable subject matter. AT&T argued that the claims were directed to the abstract idea of “filtering content,” which is a well-known “method of organizing human activity.”. Furthermore, AT&T argued that none of the limitations transforms the abstract idea of filtering content into patent-eligible subject matter because the claim limitations merely recite routine and conventional activities performed by generic computer components. BASCOM responded that the claims of the patent addressed a problem arising in the realm of computer networks, and the invention provides a solution entirely rooted in computer technology.
After concluding that information filtering is an abstract idea, the district court looked at each limitation individually and noted that all elements were “well known generic computer components.” The district court thus concluded that the claims did not adequately disclose an inventive concept because the limitations “considered individually, or as an ordered combination, are no more than routine additional steps involving generic computer components and the Internet, which interact in well-known ways to accomplish the abstract idea of filtering Internet content.” BASCOM Global Internet Servs., Inc. v. AT&T Mobility LLC, 107 F. Supp. 3d 639, 655 (N.D. Tex. 2015)
In vacating the district court’s order dismissing BASCOM’s complaint, the Federal Circuit noted that the district court’s analysis ignored the distinction between the inventive concept inquiry under § 101 and the obviousness analysis under § 103. Specifically, the court held that “the inventive concept inquiry requires more than recognizing that each claim element, by itself, was known in the art. As is the case here, an inventive concept can be found in the non-conventional and non-generic arrangement of known, conventional pieces.” While the panel agreed that filtering content is an abstract idea because it is a long-standing, well-known method of organizing human behavior, it found that the patent-in-suit recites a “specific, discrete implementation of the abstract idea of filtering content” and constitutes an improvement to an existing technological process because “BASCOM asserts that there could be a filter implementation versatile enough that it could be adapted to many different users’ preferences while also installed remotely in a single location”. Thus, the court held that the information filter mechanism should be patentable.
By holding that “an inventive concept can be found in the non-conventional and on-generic arrangement of known, conventional pieces,” BASCOM will likely provide some good news to patent applicants. On the other hand, commenters also opined that BASCOM rightly emphasized on the civil procedure aspects of a 12(b)(6) motion in a patent-infringement case, which was in contrast with previous cases that had been dismissed all too easily in district courts despite the rule that claims should be construed in favor of the nonmovant – usually patent holders faced with infringement in these cases.
Patent Disputes about Siri, iTunes, Notification Push, and Location
In Unwired Planet, LLC v. Apple Inc., No. 2015-1725 (Fed. Cir. July 22, 2016), the Federal Circuit resolved four claim construction issues in a dispute between Unwired Planet and Apple.
First, Unwired alleged that Apple’s Siri service infringed Unwired’s patent for extending speech recognition capabilities to mobile devices with limited resources by first allowing the mobile device to send a user’s voice input to a remote speech recognition server and then having the server translated the received voice input into a data file that can be processed by the mobile device. The parties disputed the construction of the claim term “voice input.” Unwired argued that the plain and ordinary meaning should be given to the term. Apple argued that the term should be construed to mean “speech provided over a voice channel,” and that because Siri sends a user’s speech over TCP/IP, the signal is not conveyed over a voice channel and does not infringe the disputed patent. Claim terms are generally given their ordinary and customary meaning as understood by a person of ordinary skill in the art with only two exceptions: 1) when a patentee sets out a definition and acts as his own lexicographer, or 2) when the patentee disavows the full scope of a term either in the specification or during prosecution. Thorner v. Sony Comput. Entm’t Am. LLC, 669 F.3d 1362, 1365 (Fed. Cir. 2012). Thus, the court concluded that the term “voice input” should be construed in accordance with its ordinary meaning on two grounds. First, the term “voice input”, by its plain language, does not dictate the manner in which voice is to be transmitted from a mobile device to a server. Second, there is no clear and unmistakable disclaimer of claim scope that supports the narrower construction that Apple proposed.
Second, Unwired alleged that Apple’s App Store and iTunes Store infringed its patent for provisioning a two-way mobile communications which receives user information required to establish a user account and generates a provisioning request comprising the user information and the user’s selection. When an iOS device user with an iTunes account first enters his Apple ID and password to the iOS device when she wishes to make a purchase, Apple’s servers will respond with an “X-token” which contains a hashed version of the user’s password and a timestamp generated by the servers. The X-token will stay valid for 15 minutes, and if the user wants to make another purchase within this time period, the iOS device will simply send a purchase request based on the previously entered user information. Unwired argued that the hashed version of the user’s password contained in the X-token corresponds to the claimed “user information.” The district court entered summary judgment for Apple on the ground that the hashed password could not be “the user information.” Unwired appealed and argued that a hashed password is merely a mathematical function applied to the user’s password. The Federal Circuit disagreed and opined that the plain meaning of the term “user information” does not require such information to be in a particular format.
Third, Unwired alleged that Apple’s Push Notification Service infringed its patent for securely transferring data, which requires a wideband channel to first exchange security information and a narrowband channel to then transmit encrypted data. The iOS device only needs to connect to APNS servers rather than connecting with multiple app provider servers because the multiple app providers all send messages to APNS servers which then relays the messages to the iOS devices. Unwired argued that the channel that carries communications between an app provider server and an iOS device is a narrowband channel because it is at a meaningfully lower data transfer rate. The district court entered summary judgment for Apple and Unwired appealed. The Federal Circuit affirmed the decision as to this term, on the ground that while the stipulated construction of the narrowband channel requires “a meaningfully lower data transfer rate or bandwidth than the wideband channel,” the characteristics of the data being transmitted by APNS cannot transform the wideband channel based on TCP/IP into a narrowband channel.
Fourth, Unwired alleged that Apple’s location-finding technology infringed its patent for identifying the location of a wireless station by receiving a plurality of device dependent location inputs provided by said location finding equipment. Apple argued that its iOS devices only use a single “location input.” The district court granted Apples motion for summary judgment of no induced or contributory infringement because it concluded that Apple’s non-infringement argument is strong enough that no reasonable juror could conclude that Apple acted with actual knowledge that it was inducing or contributing to infringement. The Federal Circuit held that the proper focus of indirect infringement analysis should be on the subjective knowledge of the accused infringer, not the district court’s own estimation of the objective strength of Apple’s defense. The order of summary judgment as to indirect infringement was vacated.
The Circuit Court’s decision revived the disputes between Unwired and Apple which have been brought to court in 2012. Moreover, as some commenters have pointed out, the Unwired decision provided important insights in considering mens rea in patent infringement cases, since it pointed out that “a noninfringement position that is objectively unreasonable cannot foreclose a finding of fault regardless of whether that unreasonable position was developed before infringement began or later on during litigation.”