Patents

Information Sharing: Tesla and the Open Patent Framework

Bernard Cryan, MJLST Staffer

Information Sharing: Tesla and the Open Patent Framework

By Bernard Cryan

Patents offer powerful protection of intellectual property, i.e., inventions. Patents confer the patent owner the right to exclude others from making, using, or selling the patented invention for a limited time. In return for a limited monopoly, the inventor must disclose the invention. This is the classic quid pro quo of the patent system—a limited monopoly granted by the government to an inventor in exchange for revealing helpful information to society. Tesla owns many patents on its electric vehicle technology. Under Elon Musk’s direction, Tesla has decided to allow others to use its patented technologies to “accelerate sustainable transport.”

The Patent System

The patent system often works as expected—the patent owner practices the patented invention and prevents others from doing so. Sometimes, however, the patent system can behave oddly. For example, contrary to popular belief, patents do not grant the patent owner automatic permission to practice the invention. This situation can occur in the pharmaceutical industry. For instance, a drug maker can acquire a patent on a pharmaceutical not yet approved by the Food and Drug Administration (FDA). As a result, the drug company cannot itself make, use, or sell the drug—even though it owns a patent on the drug. Therefore, a patent alone is insufficient to practice the invention. An additional inquiry is required, i.e., is the patent owner allowed to make, use, or sell the patented invention?

An opposite oddity can also occur. One can practice an invention that is patented by another. This occurs through either a formal license agreement or an open patent framework. A license, in the patent context, is simply an agreement between the patent owner and another party granting legal permission to use the patented invention. The more interesting framework, however, is the use of an open patent system. An open patent is a patent that is intentionally not enforced. In other words, the owner of the patent allows others to use the invention and actively avoids filing an infringement lawsuit—which is the main platform to enforce patent rights.

Tesla’s Pledge

Elon Musk believes the carbon crisis calls for joint efforts amongst all automakers to build electric vehicles. In 2014, Tesla pledged that it would not file patent infringement lawsuits against companies that use, in good faith, Tesla’s electric vehicle patented technology. In Tesla’s words:

“What this pledge means is that as long as someone uses our patents for electric vehicles and doesn’t do bad things, such as knocking off our products or using our patents and then suing us for intellectual property infringement, they should have no fear of Tesla asserting its patents against them.”

The Good

Another car company can use Tesla’s patented technology instead of spending resources developing similar electric vehicle technology. Tesla is the leading seller of electric vehicles and has sold more than 380,000 electric vehicles (as of April 2019). There is still opportunity for electric vehicle development as the electric vehicle market share is small (1.8% as of March 2019). As a result, Tesla’s pledge is significant because it encourages the sharing and use of powerful information in the auto industry, which should accelerate society’s move toward electric vehicles. The use of proven technology can facilitate a start-up company’s path to success or focus an established automaker’s efforts to develop electric vehicles. Further, Toyota has followed Tesla’s approach with respect to its hydrogen fuel cell technology. This open patent framework is not limited to only the auto industry. Google, for example, has pledged to open some of its patents directed at encryption technologies.

The Bad

While Tesla’s pledge may appear revolutionary, it has drawbacks. Some companies may fear the legal tools to enforce Tesla’s pledge are insufficient. As a result, automakers may be reluctant to use the patented technology out of fear that Tesla will not follow through on its promise. While a formal license agreement to use patented technology is enforceable through reliable legal tools, an informal pledge posted in blog format by a CEO on the company website may not carry the force of law. Is Tesla required to follow through with its pledge? Maybe, under the legal doctrine of estoppel. Will Tesla withdraw its pledge? It is unlikely as Elon Musk recently reminded the world of Tesla’s pledge. Nevertheless, Tesla’s pledge may have only limited impact if other automakers lack confidence to legally enforce the pledge.

The Takeaway

This open patent framework has enormous potential to facilitate innovation by concentrating companies’ efforts to build on each other’s prior work, rather than around it. Time will reveal the true impact of open patent pledges like Tesla’s. Most recently, XPeng, a Chinese automaker inspired by Tesla, has secured a $400M investment.

Perhaps the biggest impact of Tesla’s pledge is not the acceleration of the electric vehicle use, but rather teaching the world that openly sharing valuable information is priceless. This reminder may encourage other industries to adopt similar pledges, thereby accelerating all kinds of innovation.


TERMINAL DISCLAIMERS: QUICK FIX OR SIMPLE RUIN?

Amanda Jackson, MJLST Staffer

Terminal disclaimers, a limit on patent term of a patent that is substantially similar to another co-owned patent, are often thought of as a quick and easy way for a patent applicant to overcome a non-statutory double patenting rejection.  Non-statutory double patenting rejections arise when the claimed subject matter is not patentably distinct from the subject matter claimed in a commonly owned patent.  This judicially created doctrine arose to prevent extension of a patent term by filing subsequent patent applications claiming substantially similar subject matter as earlier applications.  In addition, non-statutory double patenting rejections seek to prevent multiple lawsuits against an alleged infringer by multiple assignees of the patentably indistinct patents (e.g., in the case where the patentably indistinct patents were assigned to different entities).

To overcome a non-statutory double patenting rejection, patent applicants can cancel the rejected claims, amend the claims to be patentably distinct, argue against the rejection, or file a terminal disclaimer.  By filing a terminal disclaimer, the patent applicant agrees that the later-filed patent (if granted) expires when the first patent does (the patent that resulted in the double patenting rejection).  Moreover, in order to alleviate the concerns of harassment by multiple assignees, 37 C.F.R. § 1.321 requires that a terminal disclaimer, to obviate a non-statutory double patenting rejection, must “[i]nclude a provision that any patent granted on that application . . . shall be enforceable only for and during such period that said patent is commonly owned with the application or patent which formed the basis for the judicially created double patenting.”  The patent office makes fulfilling that requirement easy by providing applicants with a standard terminal disclaimer form that states, “[t]he owner hereby agrees that any patent so granted on the instant application shall be enforceable only for and during such period that it and the prior patent are commonly owned.”  The terminal disclaimer runs with any patent granted from the application.

Seems harmless, right?  As long as the applicant does not have a problem with a reduced patent term, including any patent term adjustment, terminal disclaimers seem like a relatively painless fix to a non-statutory double patenting rejection.  Terminal disclaimers might also be appealing to avoid characterizing prior work by the applicant (e.g., putting statements on the record construing aspects of the prior work that could be limiting in litigation).  It may also be difficult to overcome non-statutory double patenting rejections by arguments alone.  However, terminal disclaimers can render patents invalid or unenforceable, many times without the patent owner realizing it.

As a first example, when less than all of the patents attached to a terminal disclaimer are owned by one entity, the patent may be rendered unenforceable.  In Voda v. Medtronic, Inc., Voda had filed a terminal disclaimer linking three patents together.  At the time of filing the terminal disclaimer, Voda owned all three patents.  Voda later assigned two of the patents to another entity.  One of those patents was reassigned to Voda, but the other remained owned by the third party.  Medtronic asserted that the patent at issue was unenforceable because Voda did not own one of the patents included in the terminal disclaimer.  Dismissing Voda’s argument that the patents only had to be commonly owned during the period of infringement, the court stated,

Terminal [d]isclaimers, however, do not speak in terms of ownership during times of infringement; rather, they require common ownership for enforceability. . . . To enforce the ‘195 patent, plaintiff must not only own all three patents for the period he seeks enforcement of the ‘195 patent he must also own all three patents during the period he files suit to do so. As it is undisputed that plaintiff does not own the ‘625 patent, the ‘195 patent is unenforceable as a matter of law under the plain language of the [t]erminal [d]isclaimers.

When a patent owner fails to have common ownership of terminally disclaimed patents, some courts have held that the plaintiff lacks Article III standing.  However, other courts have held the opposite, namely that “enforceable title” is required to have standing to bring a patent infringement suit, but that “enforceable title” is not the same as “enforceability” (e.g., with respect to lack of common ownership of terminally disclaimed patents).

As another example, terminal disclaimers involving patents (or applications) that are not commonly owned at the time of filing the terminal disclaimer may be invalid due to non-statutory double patenting.  For example, in In re Fallaux, the court asserted that “[i]f the Fallaux application and the Vogels patents were commonly owned, the terminal disclaimer filed in this case would have been effective to overcome the double patenting rejection. We note that this defect was of the applicant’s creation as through assignment it allowed ownership of the applications to be divided among different entities.”  Joint ownership and ownership by subsidies may also present enforceability issues with respect to terminal disclaimed patents.

Thus, patent owners and practitioners should be a little more weary in filing terminal disclaimers to overcome non-statutory double patenting rejections.  And if a terminal disclaimer is filed, patent owners should pay close attention to patents that have a terminal disclaimer, as well as to the patents to which the patent is terminally disclaimed.  This is especially important in licensing agreements and assignments, when patents—even in different patent families—may be unknowingly linked by terminal disclaimers.


New Year, New Chinese Intellectual Property System

Sherrie Holdman, MJLST Staffer 

Since the beginning of the new year, China has implemented various new Intellectual Property (“IP”) changes. Three major changes are particularly critical for promoting an enhanced IP system in China.

The first change is the establishment of a new IP appellate court. On October 26, 2018, China’s National People’s Congress (NPC) Standing Committee issued the Decision on Several Issues Concerning the Litigation Procedures in Patent and Other Intellectual Property Cases. On December 3, 2018, in a plenary session of the Judicial Committee of the Supreme Court chaired by Chief Justice Zhou Qiang, the Committee passed the Supreme Court Guidance Re Intellectual Property Tribunal. The official IP court was finally launched in January 2019. The new body is expected to hear appeals from both civil and administrative matters. According to Chief Justice Zhou Qiang, handing civil and administrative patent appeals to the new IP court will help unify adjudications related to patent validity and infringement, improve the efficiency and quality of court proceedings, and thus improve judicial protection of IP rights. The protection of IP rights has been a key issue of the trade war between the United States and China. China has been criticized for its lax IP protection for many years. The new IP court seems to come as a trade negotiation of the two countries.

Another change is China’s new policy on IP enforcement. On December 4, 2018, the National Development and Reform Commission, along with 37 government departments, released a Chinese interagency Cooperation Memorandum of Understanding. The goal of the Memorandum was to punish entities who seriously violate the patent law, including acts such as repeated patent infringement, non-compliance with the patent law, and serious illegal patent agency conduct. Like the new IP court, this policy seems to be another negotiation between the United States and China. Indeed, the policy was released days after the meeting of United States President Donald Trump and Chinese leader Xi Jinping at a summit in Argentina. The policy took a further step to enhance the IP protection in China.

The third change is the Fourth Amendment of the Chinese Patent Law. On December 5, 2018, the latest Draft of the Chinese Patent Law was presented to China’s State Council in a meeting chaired by Premier Li Keqiang. The new Amendment aimed to strengthen the protection of patent rights holder’s legitimate rights and interests, stimulate innovations, and promulgate legislations to effectively protect patent rights. Specifically, the Draft aimed to increase the penalties for IP infringement, to increase the amount of compensation and fines for willful infringement and counterfeiting patents, and thus increase the infringement cost in order to deter illegal acts. Particularly, the Draft proposed to raise the minimum fine to 100,000 RMB and the maximum fine to 5 million RMB. The Draft also stated that an infringer shall be cooperative in an infringement lawsuit. The Draft further set forth that network service providers shall bear joint liability for not stopping infringement in a timely manner. The Draft provided an incentive mechanism for employee inventors so that they could equitably share profits from inventions invented by the employees in the course of their employment.. Further, the Draft introduced a patent term extension system for innovative drugs, strengthened public information systems, and proposed to make basic patent data available in the China National Intellectual Property Administration (“CNIPA”) website. In order to foster patent dissemination and utilization, the Draft provided national and local authorities to increase public patent services and introduced an open patent license system. In addition, the Draft introduced a domestic priority of six months for design applications, extended patent term for design patents to fifteen years, and extended the time period for priority document submission for patents/utility models applications. The Draft Amendments were released for public comment from January 4, 2019 to February 3, 2019. The final rule is expected to come out soon this year.

It remains to be seen how these changes would improve China’s IP system. Nevertheless, the impact of these changes should not be underestimated. China is known as a big market for technology and business. However, foreign investors have been hesitate to invest in China due to China’s lax patent protection. With these changes aiming to establish an enhanced IP system, China is expected to build a friendly commercial environment to foreign inventors and investors, continue to improve domestic innovations, and encourage collaborations between foreign corporations with local companies. For instance, it has been said that these changes would attract global pharmaceuticals and tech companies to China because an enhanced IP system would enable foreign companies to uphold their IP in specialist courts, which is a great reassurance for foreign investors and inventors.


Artificial Intelligence as Inventors: Who or What Should Get the Patent?

Kelly Brandenburg, MJLST Staffer

Ever since the introduction of electronic computers, innovators across the world have focused on the development of artificial intelligence (“AI”), the goal being to enable machines to act like humans by making decisions and responding to situations. Generally considered to be the first artificial intelligence program, the Logic Theorist was designed in 1955 and enabled a machine to prove mathematical theorems. Since then, people have developed machines that have beat humans in some of the most strategic and intuitive games, such as Chess, Scrabble, Othello, Jeopardy, and Go.

As new innovations are developed, whether in AI or other areas of technology, patents are a common means for the inventors to protect their ideas. However, what happens when the AI technology advances to the point where the machines are making the innovations? Does the protection afforded to human inventions by Article I, Section 8 of the Constitution apply to new AI inventions? While this capability is still to be developed, the questions of patentability and patent ownership have been brought up previously, and will potentially need to be addressed by the United States Patent and Trademark Office (“USPTO”) in the future.

An initial question is whether the invention can even be patented. There are a variety of terms in patent statutes that indicate that the inventor has to be a human in order to get a patent, including “whoever,” “person,” and “inventor.” Therefore, if the invention is developed by a non-human entity, the same patent protection may not be applicable. However, assuming the inventions are patentable, then the next question is who should have the ownership rights to the patent. Should the AI itself get the patent, or should it instead go to the owner of the machine, or maybe to the inventor/programmer of the AI program?

The main purpose of providing patents to inventors is to “promote the progress of science and useful arts” by allowing the inventors to exclusively benefit from their efforts; it is an incentive-based program. From the AI perspective, there would not be much benefit in providing the AI with the exclusive rights of a patent, assuming the AI does not desire the money, recognition, or any other benefit that might come with it. Its innovation is more likely to be due to the natural development of its programming over time, rather than the incentivization of any reward it might get. However, since this technology is still being developed, maybe AI will learn to act similar to humans when it comes to incentives, which would then mean that giving it a patent could induce more innovative efforts.

For owners, depending on how the owner uses and interacts with the AI, the ownership rights of a patent may or may not have its desired effect. If the owner has the desire to use the AI to potentially invent something and exposes it to unique environments or equipment, then perhaps they deserve the exclusive rights to the AI’s patent. However, if the AI just happens to invent something with no direction or intent of the owner, it would not make much sense to reward the owner for exerting no effort.

Lastly, the patent could also go to the initial programmers of the AI. This would also likely depend on whether or not enough effort was put into the development of the AI after its initial programming. When the owner puts in the effort, then the owner might get the patent over the programmer, but if the AI just happens to invent something regardless of what the owner does, then the programmer could have rights to the patent. Again, if programmers would benefit from the AI’s invention, that would incentivize the programmers to further enhance their programs.

Since these specific capabilities are mostly hypothetical at this point, it is impossible to predict exactly how the AI technology is going to advance, and actually work, in the future. However, the technology is definitely changing and getting closer to making AI innovation a reality, and patent law will have to adapt to however it unfolds.


Tribal Sovereign Immunity May Shield Pharmaceutical Patent Owner from PTAB Inter Partes Review

Brenden Hoffman, MJLST Staffer

 

The Eleventh Amendment to the United States Constitution provides for State Sovereign Immunity, stating: “The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.”   Earlier this year, the Patent Trial and Appeals Board dismissed three Inter Partes Review proceedings against the University of Florida, based on their claim of State Sovereign Immunity. See Covidien LP v. University of Florida Research Foundation Inc., Case Nos. IPR 2016-01274; -01275, and -01276 (PTAB January 25, 2017).

Early last month, the pharmaceutical company Allergan announced that it had transferred its patent rights for the blockbuster drug Restasis to the Saint Regis Mohawk Tribe. Restasis is Allergan’s second most profitable drug (Botox is the first), netting $336.4 million in the second quarter of 2017.  Under this agreement, this tribe was paid $13.75 Million initially and will receive $15 Million in annual royalties for every year that the patents remain valid. Bob Bailey, Allergan’s Executive VP and Chief Legal Officer, indicated that they were approached by the St. Regis tribe and believe that tribal sovereign immunity should shield the patents from pending IPRs, stating “The Saint Regis Mohawk Tribe and its counsel approached Allergan with a sophisticated opportunity to strengthen the defense of our RESTASIS® intellectual property in the upcoming inter partes review proceedings before the Patent Trial and Appeal Board… Allergan evaluated this approach closely, with expert counsel in patent and sovereign immunity law. This included a thorough review of recent case law such as Covidien LP v. University of Florida Research Foundation Inc. and Neochord, Inc. v. University of Maryland, in which the PTAB dismissed IPR proceedings against the universities based upon their claims of sovereign immunity.”

IPRs are highly controversial.  The United States Supreme Court recently granted cert. in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC  to determine “whether inter partes review, an adversarial process used by the Patent and Trademark Office (PTO) to analyze the validity of existing patents, violates the Constitution by extinguishing private property rights through a non-Article III forum without a jury.” Until this issue is resolved, IPRs will continue to be by companies such as Allergan seeking to protect their patent rights.  Over the past few years, hedge fund manager Kyle Bass made headlines as a “reverse troll,” by filing IPRs against pharmaceutical companies while simultaneously shorting their stocks. Bailey has stated that “the IPR process has been a thorn in our side…We get a call from reverse trolls on a regular basis. Now we have an alternative.” This move has been well regarded by many critical of IPRs, including an October 9, 2017 post on ipwatchdog.com titled “Native Americans Set to Save the Patent System.”  In addition, the St. Regis Mohawk tribe has indicated that these types of arrangements can help the tribe generate much-needed capital for housing, education, healthcare and welfare, without requiring the tribe to give up any land or money.

However, this arrangement between Allergan and the St. Regis Mohawk tribe has attracted strong criticism from others.  Mylan Pharmaceuticals, a party in the IPR proceedings challenging multiple Allergan patents on Restasis, has called this transfer a “sham” and made comparisons to racketeering cases with lending fraud.  “Allergan Pulls a Fast One” on the Science Translational Medicine Blog states, “‘The validity of your patents is subject to review, unless you pay off some Indian tribe’ does not seem like a good way to run an intellectual property system,” this is a “slimy legal trick,” and “this deal smells.” He suggests that “legal loopholes” like this sully the whole pharmaceutical industry look bad and that this will force Congress to take action.  

In fact, U.S. Senator Claire McCaskill, the top-ranking Democrat on the Homeland Security and Governmental Affairs Committee, has already written a letter to the Pharmaceutical Research and Manufacturers of America urging  them to review “whether the recent actions Allergan has taken are consistent with the mission of your organization.”  She believes that “This is one of the most brazen and absurd loopholes I’ve ever seen, and it should be illegal…PhRMA can and should play a role in telling its members that this action isn’t appropriate, and I hope they do that.”  On October 5, 2017, McCaskill introduced a bill to the Senate “To abrogate the sovereign immunity of Indian tribes as a defense in inter partes review of patents.”


Invisible Cryptography: Should Quantum Communications be Subjected to Legal Restraint?

Jacob Weindling, MJLST Staffer

Sending secret messages across the world has traditionally required sending messages that risked interception or eavesdropping by unintended recipients. Letters sent on horseback, telegraphs sent over wires, and radio transmissions through the atmosphere were all theoretically capable of interception in transit between the sender and the receiver. This problem was particularly pronounced in World War II, when the Allies easily intercepted secret Axis transmissions and vice versa. To ensure secrecy the messages were consequently encoded, resulting in seemingly random jumbles of characters to unintended recipients.

Message encoding in World War II operated on two separate principles. For particularly sensitive messages, ‘one-time pads’ were created using (theoretically) random values as starting points. This technique for encryption, while essentially ‘unbreakable’ without access to a copy of the one-time pad, required both the sender and the recipient to hold identical copies of the pads. The second method used machines to transform plaintext messages into code. This second method, famously employed by Nazi Germany’s Enigma machine, substituted true randomness for a complicated but non-random algorithm that provided convenience and reliability. While Enigma proved a sufficient safeguard against traditional pen-and-paper codebreakers, early computers proved adept at quickly defeating the encryption, as dramatically highlighted in “The Imitation Game,” the recent film detailing Alan Turing’s invention of a codebreaking computer during World War II.

Perhaps unsurprisingly, cryptographic systems were added to the State Department’s International Traffic in Arms Regulations (“ITAR”) Munitions List shortly after World War II. Thus, while the U.S. government was severely limited in its ability to shield secret messages from foreign adversaries, it categorized the tools, methods, and development of cryptographic systems as munitions and severely regulated their export to foreign entities. While today the Department of State has narrowed the scope of cryptography to exclude civilian products, regulations remain on specialized military applications. A key assumption of this regulatory regime is that sensitive diplomatic and military information will be transmitted ‘in the clear’ for all who happen to have access to the channel of communications. While today many communications have moved from radio waves to fiberoptic cables, both systems remain vulnerable to surveillance over the air and online.

Last year however, China took a major step toward a vast departure in the philosophy of secret communication. With the launch of the Quess satellite, China hopes to enable quantum entanglement communication between two ground sites. The satellite would in principle transmit a photon to the ground, while retaining a photon that is ‘entangled’ with the released photon. Any changes to the photon on the satellite would thus be reflected in the photon on the ground, serving as a rudimentary method for transmitting binary information. This test comes on the heels of an experiment at Delft University of Technology in the Netherlands, which demonstrated the transmission of information between two electrons separated by a distance of 17 kilometers.

A unique feature of this mode of transmission is that information is not propagated from the sender to the receiver via radio waves, which can be intercepted, but rather via the principle of quantum entanglement. Any attempt to eavesdrop would theoretically be perfectly detectable, as the act of observing the photons being transmitted would potentially change their state and render the communication either unreadable or otherwise obviously tampered with. A system could therefore be developed to automatically cut off communications if disturbances are detected.

Interestingly enough, the U.S. Patent and Trademark Office has granted a patent that describes a similar method for transmitting information via quantum entanglement. The invention, claimed by Zhiliang Yuan and Andrew James Shields on behalf of Toshiba Corporation, was filed with the PTO on September 8, 2006 and published August 7, 2012. This patent builds on prior art that envisioned quantum cryptography, much of which was quietly filed with the PTO during the preceding two decades. Nevertheless, neither Congress nor the Department of State has acted to incorporate any reference to quantum communications into law, perhaps reflecting an unwillingness to address emerging technology that sounds like science fiction, as with self-driving cars and cyberspace before it.

Despite Congress’ history of lethargy in addressing new innovations and the State Department’s regulatory silence on the matter, legislative action or regulation may yet be premature. China has claimed its satellite has successfully sent a ‘hack-proof’ communication from its satellite, but the results have not been studied by the scientific community. Furthermore, no public demonstration has been made of a practical, non-laboratory quantum entanglement communication product. Even if the technology were to be brought to market, any early application will likely have severely low bandwidth by today’s standards, more closely resembling the telegraph than a gigabit internet connection. But with organizations around the world exploring ground- and space-based experiments with quantum communications, the technology appears poised to exit science fiction and enter practical application. Within the next generation, the codebreaking arms race may ultimately become obsolete, and Congress will be faced with a need to address the new secret communication regime.


U of M Asserts Sovereign Immunity Prevents USPTO from Invalidating Its Patents

Prof. Richard Stern, MJLST Guest Blogger

The University of Minnesota owns a number of patents on cell phone signal processing technology that was invented by Professor Georgios Giannakis of U of M’s Department of Electrical and Computer Engineering and his colleagues. The U of M claims that AT&T, Sprint, T-Mobile, and Cellco Partnership (a joint venture between Verizon and Vodaphone, doing business as Verizon Wireless) are infringing five of these patents, and in 2014 it sued the companies in Minnesota federal district court for patent infringement. The U of M is “a great research university,” President Eric Kaler said, and “must vigorously protect our faculty, [their] discoveries and the overall interests of our university.” (The U collects about $40 million annually in royalties from licensing and the commercialization of faculty work.) Apparently, the cell phone carriers infringed the patents by utilizing Ericsson radio chips that code signals for wireless transmission and practicing patented methods the chips performed.

 

The case was assigned to Chief Judge John R. Tunheim in Minneapolis, who denied the defendants’ motion to dismiss the case for defective pleading, in September 2015. He did reject the U’s claim, however, that the defendants engaged in “willful blindness” in infringing the patents. Judge Tunheim said that the U “alleges no actions that would constitute deliberate avoidance of knowledge” that they were infringing, although they did know of the patents and they “actively entice[d] their customers through advertising, marketing and sales activity to use [their] infringing products.”

 

Ericsson, the wireless carriers’ equipment supplier, then acted to protect its defendant customers against the U by intervening in the Minnesota infringement suit. Ericsson then filed inter partes review (IPR) proceedings in the USPTO to invalidate the U of M patents on which the U was suing the carriers. An IPR is a new type of administrative proceeding that the recent America Invents Act established to provide a swifter and supposedly cheaper way for small companies to resist demands by trolls that they pay patent tribute. Instead of engaging in district court litigation, an aggrieved party can seek an IPR before the USPTO, which then employs its patent expertise to determine whether the patents it issued are invalid, and (if so) consequently relieving the aggrieved party from infringement liability (an invalid patent cannot be infringed).

 

Here is where the complications set in. The 11th Amendment preserves state sovereign immunity against suit—“The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States . . . .” Thus, when a patent owner sued a Florida state agency that provided college tuition payment plans, for patent infringement, the Supreme Court held the law subjecting states to infringement liability unconstitutional under the 11th Amendment. Florida Prepaid Postsecondary Ed. Expense Bd. v. College Savings Bank, 527 U.S. 627 (1999). Accordingly, in two January 2017 IPR cases, the USPTO held that the 11th Amendment required it not to allow proceedings before it against Maryland and Florida. Neochord, Inc. v. Univ. of Maryland, Baltimore and Harpoon Medical, Inc., IPR2016-00208 (May 23, 2017), http://www.ptablitigationblog.com/wp-content/uploads/2017/06/IPR2016-00208.pdf; Covidien LP v. University of Florida Research Found. Inc., IPR2016-01274 (Jan. 25, 2017), http://www.finnegan.com/files/upload/LES_Insights_Column/2017/CovidienvUFIPRNos20160126476.pdf. Although waiver was urged, the USPTO said it was inapplicable because the 11th Amendment is jurisdictional—it deprived the tribunal of any jurisdiction to act, so that jurisdiction could be considered at any time. Waiver requires an affirmative act of invoking federal jurisdiction in the relevant tribunal, and that had not occurred.

 

Ericsson argued, in support of its claim that there was jurisdiction to hear its IPR challenges, that the U had waived its 11th Amendment immunity by suing Ericsson’s customers in the Minnesota district court. Ericsson said that the U “has consented to jurisdiction,” when it sued Ericsson’s customers in the district court, because by filing lawsuits against Ericsson’s customers, “it could surely anticipate” that Ericsson would bring an IPR case at the USPTO to invalidate the patents asserted against its customers for using its products. The U has now urged the USPTO to dismiss Ericsson’s IPR cases, insisting that it has not waived its sovereign immunity by suing the phone carriers—not Ericsson, a third party to the U’s patent infringement suits.

 

The U argues that the law is clear that a waiver must be personal, i.e., filing a lawsuit or counterclaims in the same action and in the same forum. Thus, in Regents of Univ. of New Mexico v. Knight, 321 F.3d 1111, 1125 (Fed. Cir. 2003), the Federal Circuit held that it would be unfair to let New Mexico sue in federal court to enforce a right to ownership of patents arising from contracts “and, at the same time, to claim immunity from liability [in the same case] for royalties or other compensation arising from those same contracts and conduct.” The court added, “Moreover, because a state as plaintiff can surely anticipate that a defendant will have to file any compulsory counterclaims [in the same case] or be forever barred from doing so, it is not unreasonable to view the state as having consented to such counterclaims.” Id. at 1126. On the other hand, the Federal Circuit has held that “a state that files a [patent infringement] lawsuit in one district court does not waive its immunity in a related [invalidity declaratory judgment] lawsuit filed by a party in another district court.” Board of Regents of the Univ. of Wis. Sys. v. Phoenix Int’l Software, Inc., 653 F.3d 448, 462 (7th Cir. 2011) (citing Tegic Communications Corp. v. Board of Regents of the Univ. of Texas Sys., 458 F.3d 1335, 1342 (Fed. Cir. 2006)).

 

In the Tegic case, in which UT sued Tegic’s customers for patent infringement in Texas, the Federal Circuit held that UT waived its immunity against a declaratory judgment counterclaim in Texas. But UT did not waive immunity against the separate declaratory judgment action that Tegic wanted to bring in Washington (where Tegic resided). The court said that if Tegic wanted to litigate patent validity, it could intervene in the Texas case and subject itself to infringement liability if the patent was valid and infringed. This is consistent with the Supreme Court’s concept in the College Savings Bank that the 11th Amendment is more about where a state is willing to be sued than whether it can be sued—for example, most states allow suits against them in their own courts of general jurisdiction. (But they don’t want to be sued in another jurisdiction.)

 

Based on this case law, the U argued: “IPR petitions are [not] counterclaims nor adjudicated in the same forum—they are a different action brought in a different forum.” Further, “a state that files an infringement action does not waive its immunity from a different action challenging the patent in a different forum.” The USPTO had said previously that it was not passing on what would happen if the patentee did file a patent infringement suit, as U of M did here. Furthermore, Ericsson did intervene in the Minnesota district court patent infringement suit, as the Tegic court said the equipment seller should if it wanted to challenge validity. But the Minnesota district court has stayed the federal patent action (at Ericsson’s request) to await the result in the IPR case, as district courts usually do in order to let the experts in the USPTO resolve the patent issues for them. (Presumably, the court will vacate its stay if the IPR case is dismissed.)

 

The U quoted the Federal Circuit opinion in Tegic that insisted that Tegic could not show that adjudication of its claim of invalidity was “not available in the Texas action,” and the U then argued, “Similarly, Ericsson cannot show that adjudication of invalidity counterclaims is not available in the Minnesota court,” where the U has (constructively) waived its immunity. There is a serious conflict here between the respective policies of the 11th Amendment that states should not be subjected to forums not of their choice and of the America Invents Act that a cheap, fast, expert determination of patent validity should be available in lieu of litigation in courts. Like the College Savings Bank case, this case may well end up in the Supreme Court. One important issue, not raised or resolved so far, is whether Congress may constitutionally impose, as a condition of the statutory right to acquire the benefit of a patent, and thus make as an integral element of the patent right, that the patent is subject to validity determination in IPR proceedings. Or would the 11th Amendment make that an unconstitutional condition on a benefit, as applied to a state, rather than a legitimate part of the statutory definition of a patent right?


This Time It’s Personal(ized): Pharmaceutical Companies, Dosing Regimen Patents, and Personalized Medicine

Peter Selness, MJLST Staffer

An area of developing healthcare garnering attention in both the medical community and areas of intellectual property law is that of personalized medicine.   Personalized medicine changes the old one-size-fit-all approach of medication dosing to instead tailor medications to each individual patient based upon their genetic make-up.  This practice promises numerous benefits for patient healthcare, but also has some substantial road blocks to overcome before becoming a reality.  Among the issues facing this field of medicine is the controversy surrounding the patentability of personalized medicine methods.  Several recent cases such as Mayo Collaborative Services v. Prometheus Laboratories and Association for Molecular Pathology v. Myriad Genetics, Inc. have raised serious concerns over whether or not personalized medicine methods are based on patentable subject matter.

This concern was taken one step further in the recent article Decline of Dosage Regimen Patents in Light of Emerging Next-Generation DNA Sequencing Technology and Possible Strategic Responses, which discussed the potential impact this may have on the pharmaceutical industry.  Among the concerns addressed was the impact of not being able to obtain patents on dosing regimens for drugs developed by pharmaceutical companies.  While a pharmaceutical company should have no problem patenting a novel medication it has developed, adding additional patent protection to its patent portfolio surrounding that product, such as patents on dosing regimens, has long been a practice utilized to keep competitors at bay.  Considering the massive investment in research and development required to bring a new drug to market (sometimes billions of dollars), pharmaceutical companies are rightly alarmed by any potential loss of patent protection they may experience on their product.  As the article mentioned, this issue will also surely be compounded by the transition to personalized medicine and integrated healthcare, but it may also be a self-solving problem.

Though the article is concerned with the impact personalized medicine may have on pharmaceutical companies if they no longer can obtain patent protection on dosing regimens, researchers developing personalized medicine methods currently face the same issues.  In order for personalized medicine to have an impact on pharmaceutical companies, it must be a fully developed method that has been integrated into everyday healthcare practices.  For that to happen, researchers must have a fundamental understanding of what specific genes give rise to differences in patients’ responses to medication.  This has proven to be a long and expensive process requiring the systematic sequencing of millions of genes from numerous subpopulations of patients; and all of this work is expensive.  Given that the end result of personalized medicine research is a method of administering medication based on an individual’s genetic make-up, patents on personalized medicine fall victim to the same issue facing pharmaceutical companies’ dosing regimen patents.

Lacking the ability to obtain patent protection on personalized medicine methods, the economic feasibility of research in this area becomes more questionable.  To circumvent this dilemma, those within the field of personalized medicine will most certainly be looking for the same solutions as pharmaceutical companies.  Therefore, one of two results will likely occur, both of which may solve the issues of dosing regimen patentability facing the pharmaceutical companies.  One possibility is that the field of personalized medicine will be unable to economically sustain future research without patent protection and fully integrated healthcare will never become a reality; making this issue disappear for pharmaceutical companies.  The other, more likely, possibility is that in order for research in the field of personalized medicine to continue, those researchers will solve the very dilemma that pharmaceutical companies fear will be brought about by the emergence of integrated healthcare.  Either way, pharmaceutical companies’ dosing regimen patents are so closely tied to the fate of personalized medicine patents that the emergence of integrated healthcare most likely cannot occur in a manner that will be detrimental to pharmaceutical companies’ patent portfolio.


Broad Inst. Inc. v. Regents of the Bd. of the Univ. of Cal: PTO to Decide CRISPR Gene Editing Ownership

Jeffrey Simon, MJLST Staffer

The Broad Institute and the University of California will argue claims related to ownership on Patents relating to CRISPR (clustered regular interspaced short palindromic repeats) gene editing technologies. The arguments will be heard on Dec, 6 by the Patent Trial and Appeals Board.

CRISPR technology utilizes prokaryotic DNA segments to confer immunity to foreign genetic elements. CRISPR editing technology has the potential to alter human DNA sequences by removing existing genes or inserting new ones. Moving forward, CRISPR technology has the potential to develop into a form of gene therapy, whereby the human genome can be edited to fortify one’s immune system against infectious diseases or other hereditary issues. CRISPR technology raises ethical concerns, especially relating to the potential use in altering the genes of human embryos.

Although CRISPR technology has been understood for over a decade, the current case revolves around an improvement using cas9 protein that splices DNA at a specific locus. The Broad Institute asserts that patents filed on behalf of the Massachusetts Institute of Technology and Harvard University Researchers (Broad Institute being the eventual assignee of the patents) maintain priority over those owned by University of California. However, the relevant patents have been asserted pre-AIA. Therefore, priority date will be established by date of the invention rather than under the AIA standard of application date. The Patent Trial and Appeals Board (PTAB) initially maintained that the date of invention was properly asserted prior to the patents upon which the challenge was brought. If the decision of the PTAB is upheld, the University of California patents will invalidate the patents held by MIT and Harvard. It’s important to note that both parties are asserting priority date to a previous University of California patent relating to CRISPR technology. The PTAB may determine that both parties failed to prove priority date ahead of the US Patent Application No. 13/842,859, thus invalidating both parties claims.

The Broad Institute is a research institute associated with MIT and Harvard University. It’s unclear how the decision will affect CRISPR technology moving forward. CRISPR technology has attracted lucrative investments from government agencies and private entities alike. Additionally, since the initial patenting of CRISPR, University of California has licensed out the use of CRISPR technology to numerous firms interested in its applications.


A New Year! A New You!: Update Your Look on Regenerative Healing Law

Angela Fralish, MJLST Invited Blogger

Stephen Breyer, Associate Justice for the Supreme Court remarked that in this age of science, we must build legal foundations that are sound in science as well as in law, because a judge is not a scientist and a courtroom is not a scientific laboratory. Further, our decisions should reflect a proper scientific and technical understanding so that the law can respond to the needs of the public.

Human regenerative healing from embryonic stem cell research has sparked many debates on the public’s needs. On one hand, this research has the ability to relieve great suffering and even death, but on the other hand, it is accompanied by the using and destroying of human life. Moral controversy is a dark cloud looming over any courthouse looking to rule on the science of regenerative healing.

Legislative measures have ebbed and flowed with presidencies. Presidents Clinton, Bush and Obama have used executive orders to either expand or reduce federal funding of regenerative healing. President-Elect Trump’s policy is unknown. According to an NPR article issued in November 2016, “his campaign said little about research and development in general, or health research in particular.” This will be an important point in the near future as a Swedish scientist broke taboo in September of this year by altering healthy human embryos. Further, the NIH plans to lift the ban on regeneration in chimeras in early 2017. As it stands, the federal perspective towards future regenerative healing technology remains unclear.

The most recent executive response has been the Cures Act signed on December 13th of last year by President Obama. Sections 3033-3036 support an expedited FDA review of regenerative therapies and demand an update to regulatory law. Practically speaking, this means that clinical trials will be shortened to get the product on the market faster. While some worry this change will compromise ethics, others worry about the United States ability to keep up with a global market. Dr. Brenda Canine quotes, “If concerted long-term investments in research are not made, America will lose an entire generation of young scientists.”

One established principle in regenerative healing is ownership rights under intellectual property law. Challenges have been made on the grounds that researchers are attempting to patent “life,” but courts have allowed ownership rights to certain cell lines. Dr. Nicholas Zachariades wrote in his article titled Stem Cells: Intellectual Property Issues in Regenerative Medicine that “with respect to the stem cells and their use in the field of regenerative medicine, the U.S. Patent and Trademark Office has recognized inventions involving stem cells as patent-eligible subject matter.” He cites to Consumer Watchdog v. Wisconsin Alumni Research Foundation (WARF)  where the plaintiff sued WARF for the patent being too broad, but lost because they lacked standing. WARF maintains a valid patent for “in vitro cell culture.”

Keeping up with science will continue to be a challenge. While it is against norms to destroy healthy embryos, there is a pressing need for the U.S. to compete in a global market. Hopefully, researchers, lawyers and politicians will eventually find a way to merge ethical, legal and federal funding policies related to stem cell research and regenerative healing into a solid legal foundation.