The Federal Circuit held that the evidence of the patentee’s litigation misconduct and objectively-baseless lawsuit filed without reasonable pre-suit investigation properly supported the district court’s finding that the case was exceptional under 35 U.S.C. § 285 and warranted Rule 11 sanctions.

Eon-Net LP v. Flagstar Bancorp, No. 2009-1308 (Fed. Cir. July 29, 2011).

The patents-in-issue relate to document processing systems. After claim construction, the patentee stipulated to noninfringement. Upon motions from the accused infringer, the district court found the case exceptional under 35 U.S.C. § 285 and in violation of Rule 11 of the Federal Rules of Civil Procedure. The Federal Circuit affirmed the exceptional case finding, which was supported by evidence of both litigation misconduct and the filing of an objectively baseless lawsuit in bad faith.

Many varieties of misconduct can support an exceptional case finding, including lodging frivolous filings, engaging in vexatious or unjustified litigation, as well as litigation misconduct and unprofessional behavior. Absent litigation misconduct or misconduct in securing the patent, exceptional case sanctions may only be imposed against the patentee if the litigation was brought in bad faith and the litigation is objectively baseless.

The patentee’s litigation misconduct included destroying relevant documents, intentionally not implementing a document retention plan, failing to engage in claim construction in good faith, displaying a lack of regard for the judicial system, and having a cavalier attitude towards the patent litigation process as a whole. The patentee’s lawsuit was objectively baseless because the specification unequivocally compelled a construction which limited the claims to processing information originating from hard copy documents. The accused infringer only processed information originating from a website.

Rule 11 sanctions were appropriate because the patentee’s infringement allegations were legally baseless and the patentee’s attorney failed to perform a reasonable pre-suit investigation. A reasonable pre-suit investigation requires counsel to perform an objective evaluation of the claim terms when reading those terms on the accused device.

A copy of the opinion can be found here.

Federal Circuit panel concludes isolated DNA molecules are patent eligible subject matter because they do not exist in the same form in nature.

Association for Molecular Pathology v. USPTO, No. 2010-1406 (Fed. Cir. July 29, 2011) ("the Myriad case").

The plaintiffs brought a declaratory judgment action against an owner of patents for isolated gene sequences and methods of comparing and analyzing specific gene sequences for the presence of cancer-predisposing mutations, arguing that the claims all addressed non-patentable subject matter.  The district court held that all of the patentee’s claims for isolated DNA molecules, for comparing and analyzing gene sequences, and for methods of screening DNA sequences were invalid, because the claims did not cover patent eligible subject matter.   

The Federal Circuit reversed the district court’s decision that isolated DNA molecules are not patentable because they are not the same products found in nature but instead are modified and isolated from naturally-existing material attached to the sequences.  The Federal Circuit affirmed that the method claims for comparing and analyzing gene sequences were not patentable, because these claims only covered abstract mental processes.  Lastly, the Federal Circuit concluded that one method claim for screening potential cancer therapeutics was patent eligible, because this claim included transformative steps for growing cells transformed with an altered gene,  and thus involves “functional and palpable applications,” and is not so “manifestly abstract” as to claim only a scientific principle.     

The law does not allow patents on products of nature.  However, this rule does not extend to compositions where human intervention has given the composition “markedly different” characteristics from naturally occurring compositions.  According to the Federal Circuit, isolated DNA sequences are patent eligible subject matter, because isolated DNA molecules are distinct from DNA in its native form.  This is true irrespective of whether the isolated DNA molecules were synthesized in a laboratory or chemically cleaved from their native DNA structures.  With respect to the method claims for comparing and analyzing gene sequences, claims that only involve inspection and abstract mental processes, without physical manipulation, are not patentable.  However, processes that involve one or more abstract mental steps can, in some cases, be patentable if they also include other “transformative steps.”  Here, the one patent eligible method claim included two transformative steps, or physical manipulations, that were central to its purpose.  The patent eligible method claim was also limited to an extent where it presented concrete applications. 

This decision is expected to be further appealed, either to the Federal Circuit en banc or to the Supreme Court.

A copy of the opinion can be found here.

Issues of priority that could have been, but were not, considered during a patent's original examination, are not prohibited from being properly addressed during a reexamination.

In re NTP, Inc., No. 2010-1277 (Fed. Cir. Aug. 1, 2011).

During reexamination of an NTP patent related to wireless email technology, the PTO rejected all 764 claims as anticipated by a prior art patent.  The decision was appealed to the Board of Patent Appeals and Interferences (“the Board”) and affirmed.  Although the patent-in-suit claimed priority to a parent application that pre-dated the prior art patent, the Board concluded that NTP’s patent was not entitled to claim that priority.  NTP appealed to the Federal Circuit, which affirmed the Board’s decision.

On appeal, NTP agreed that the prior art would anticipate all the claims of the patent-in-suit if it could not maintain its claimed priority date.  However, it challenged the Board’s construction of the claim term “destination processor,” arguing that its own construction was proper and would allow priority to the parent application.  NTP further questioned whether the PTO and the Board properly considered priority during the patent’s reexamination.  The Federal Circuit reviewed the Board’s factual determinations for substantial evidence and evaluated all questions of law de novo. 

Considering NTP’s claim construction arguments, the Federal Circuit found that the Board’s construction of “destination processor” was legally correct and supported by the patent’s written description.  In contrast, NTP’s construction was not supported by the written description.  Under the Board’s correct construction, the patent claims were not supported by the written description of the claimed parent application.

The Federal Circuit next addressed whether it was appropriate to consider priority during a patent reexamination.  35 U.S.C. § 303(a) limits the scope of reexamination proceedings to “substantial new question[s] of patentability,” which are questions that have not been previously considered by the PTO.  These new considerations must be based only on “prior art consisting of patents or printed publications.”  The court held that these limitations did not bar a review of priority arguments that were not addressed during the original patent prosecution, even though they could have been considered.  Rejecting NTP’s argument that the original examiner must have considered its priority claim since he did not deny it, the court pointed to Congress’s 2002 amendment to section 303(a).  The 2002 amendment eliminated the presumption that an examiner must have considered all evidence before him—even though the MPEP requires that he consider whether the parent application’s written description supports the claims of the patent.  Because it was undisputed that the examiner did not examine the parent application and its written description, the Federal Circuit found that the issue of priority was not considered during the original examination, and thus was properly addressed during the reexamination.

A copy of the opinion can be found here.

During reexamination, the BPAI’s “broadest reasonable claim construction” was overly broad because it encompassed prior art specifically excluded by the inventors. The Board’s rejection of the argument that prior art was not authentic was upheld because it was established that the library received the reference before the critical date, and there was no specific evidence suggesting that the reference was significantly modified after the critical date.

In re NTP, Inc., No. 2010-1243 (Fed. Cir. Aug. 1, 2011).

During litigation, alleged infringer Research In Motion (“RIM”) filed reexamination requests as to certain patents being asserted against RIM’s BlackBerry products.  The patents are directed toward a system for sending information from an originating processor to a destination processor using a Radio Frequency (“RF”) receiver as an intermediary.  The USPTO Board of Patent Appeals and Interferences (“Board”) affirmed the rejection of claims in all reexamined patents as obvious and anticipated.  The applicant appealed. 

Among several issues considered on appeal, the Federal Circuit rejected the Board’s construction of “electronic mail message” as being over broad to the extent that the Board’s construction did not require the capability for entry of message content, an identification of an originating processor, and a subject.  The court held that the over broad construction relied upon by the Board encompassed prior art that the inventors specifically sought to exclude by using the term “electronic mail” (e.g. pager messages).  The court also rejected the Board’s construction of “electronic mail system” for over breadth on the basis that it required only one processor, rather than a plurality as indicated by the patent language.   

The Federal Circuit rejected the applicant’s argument that a prior art reference underpinning many of the rejections affirmed by the Board was not a “printed publication” under 35 U.S.C. § 102(b).  The court held that the Board’s findings that the reference was authentic and reasonably accessible were supported by substantial evidence.  The authenticity finding was based in part on evidence of general library practice establishing a date of receipt earlier than the critical date, and in part because aside from vague allegations that the document may have been tampered with, the applicant provided no specific evidence to suggest that any relevant pages might have been altered after the critical date.

A copy of the opinion can be found here.