Ready or Not, Here I Come: When Is a Trade Secret Publicly Accessible?
In Ams-Osram USA Inc. v. Renesas Electronics America, Inc., Appeal No. 22-2185, the Federal Circuit held that under Texas law, a trade secret becomes publicly accessible on the earliest date it could be reverse engineered from publicly available products.
Plaintiff ams-OSRAM USA, formerly known as TAOS, sued Defendant Renesas, formerly known as Intersil, alleging misappropriation of trade secrets and breach of a confidentiality agreement. Defendant began selling products incorporating Plaintiff’s trade secret. Subsequently, Plaintiff publicly released a product that could have been reverse-engineered to discover the trade secret. The district court measured damages from the date of Defendant’s earliest misappropriation until the date the trade secret became “properly accessible” due to Defendant’s product release. Then, the district court factored in a “head-start” period—the period of time it would have taken the misappropriator to recreate the trade secret in its own products. At issue in this appeal is whether the district court correctly calculated (1) the date the trade secret became “properly accessible”; (2) the correct length of the “head-start” period; and (3) the proper resulting damages.
The Federal Circuit first held the district court incorrectly determined the trade secret became “properly accessible” when Defendant actually reverse-engineered the trade secret; under Texas law, the correct date is when the misappropriator could have reverse-engineered the trade secret. Next, the Federal Circuit found no clear error in the district court’s determination of the length of the “head-start” period. Therefore, the resulting window for damages was the same length but shifted earlier; however, the Court found that this change did not affect the district court’s calculation of damages, and therefore affirmed. Finally, the Federal Circuit vacated the district court’s award of prejudgment interest and remanded for further consideration by the district court.
Hard to Stomach: Things You Say to Prosecute a Patent Can and Will Be Used Against You
In Azurity Pharmaceuticals, Inc. v. Alkem Laboratories Ltd., Appeal No. 23-1977, the Federal Circuit held that Arguments and amendments made during prosecution of a parent application can provide “clear and unmistakable” evidence of a disclaimer of claim scope in a continuation application.
Azurity Pharmaceuticals sued Alkem Laboratories alleging Alkem’s Abbreviated New Drug Application (“ANDA”) infringed a patent directed to drinkable drugs for treating colon infections. Azurity’s patent was a continuation of another application (“’059 Application”) that had been rejected numerous times during prosecution over a prior-art reference (“Palepu”) which contained “a polar solvent including propylene glycol.” The district court determined that Azurity’s arguments and amendments during prosecution of the ’059 Application “clearly and unmistakably” disclaimed propylene glycol from the claimed invention. Because Alkem’s ANDA contained propylene glycol and Azurity’s patent claims used the closed “consisting of” transition phrase, the district court found that Alkem’s ANDA did not infringe Azurity’s patent.
Further, the district court rejected Azurity’s argument that a discovery stipulation overcame the disclaimer of propylene glycol. Specifically, Azurity’s patent claims recited a “flavoring agent” and the parties had stipulated that “[s]uitable flavoring agents for use in the Asserted Claims include flavoring agents with or without propylene glycol.” Azurity interpreted the stipulation to mean that products with flavoring agents that include propylene glycol could infringe regardless of the “consisting of” transition and disclaimer. However, the district court rejected that argument and found that the disclaimer of propylene glycol was dispositive.
The Federal Circuit affirmed. The Federal Circuit noted that during prosecution of the ’059 Application, the examiner repeatedly cited Palepu as prior art and, at every opportunity, Azurity clearly and unmistakably distinguished its invention from Palepu by asserting the claimed formulations did not contain propylene glycol. Azurity also argued that it did not disclaim propylene glycol because during prosecution of another patent application (“’421 Application”), Azurity stated in an office action response that the ’059 Application did not disclaim propylene glycol. The Federal Circuit did not consider that statement relevant because the ’421 and ’059 Applications were prosecuted in parallel with each other and Azurity made that statement after the claims at issue were allowed. Finally, the Federal Circuit affirmed the district court’s conclusion that the parties’ stipulation did not preclude the disclaimer. Alkem stated contended in the stipulation that it did not infringe due to the presence of propylene glycol and the Federal Circuit found it implausible that Alkem would have conceded infringement just several lines later.
No Error: The Board Committed No Procedural Error by Relying on Evidence Outside of the Prior Art Reference
In Sage Products, LLC v. Stewart, Appeal No. 24-1283, the Federal Circuit held that the Board did not abuse its discretion by relying on evidence beyond the prior art references to determine how a POSITA would understand a reference.
Sage appealed the Board’s determination in an IPR that challenged claims of its patents were anticipated and obvious in view of the prior art. On appeal, Sage argued that the Board abused its discretion by creating arguments not raised by the petitioner and by considering evidence outside the prior art references.
The Federal Circuit held that the Board did not abuse its discretion by permitting the petitioner to reply to arguments raised by Sage in its patent owner response. Further, it was not improper for the Board to rely on evidence outside the prior art, including both parties’ expert testimony to determine what a POSITA would know. Finally, the Federal Circuit held that even if the Board’s reference to evidence outside the prior art was in error, it was harmless and did not prejudice Sage. Therefore, the Board committed no procedural error, and the decision was affirmed.
Applying Established Methods of Machine Learning to a New Environment does not Render Claims Patent Eligible under § 101
In Recentive Analytics, Inc. v. Fox Corp., Appeal No. 23-2347, the Federal Circuit held that claims that do no more than apply established methods of machine learning to a new data environment are patent ineligible under § 101.
Recentive sued Fox, alleging infringement of four patents. Two of the patents were the “Machine Learning Training” patents, which concerned the scheduling of live events. The other two patents were the “Network Map” patents, which concerned the creation of network maps for broadcasters. Fox moved to dismiss on the grounds that the patents were ineligible under § 101. The district court applied the Alice two-step inquiry, finding that the asserted claims were directed to the abstract ideas of live event scheduling and network map creation, and that the claims were not directed to an “inventive concept.” Accordingly, the district court granted Fox’s motion to dismiss. Recentive appealed.
The Federal Circuit affirmed. Under step one of Alice, the Federal Circuit noted the patents relied on generic machine learning to carry out the claimed methods. Furthermore, Recentive had conceded that it was not claiming machine learning itself nor a method for improving machine learning. There was no technological improvement to the machine learning. As such, the Federal Circuit reasoned that the claims only disclosed use of machine learning in a new environment and further rejected Recentive’s argument that its claimed methods are patent eligible because they apply machine learning to a new field of use. The Federal Circuit also rejected the argument that the claimed methods are patent eligible for increasing the speed and efficiency of a task previously undertaken by humans. Accordingly, the Federal Circuit held that the district court correctly held that the patents were directed to abstract ideas at step one of Alice.
Under step two of Alice, Recentive claimed that the inventive concept was “using machine learning to dynamically generate optimized maps and scheduled based on real-time data and update them based on changing conditions.” The Federal Circuit found that the district court correctly held that this did no more than claim the abstract idea and thus the claims were not directed to an “inventive concept” sufficient to transform the claims to patent-eligible subject matter at step two of Alice.
IPRs Cannot Use Applicant Admitted Prior Art as Part of the Basis of Invalidity
In Qualcomm Incorporated v. Apple Inc., Appeal No. 23-1208, the Federal Circuit held that applicant Admitted Prior Art (“AAPA”) cannot be the basis of an invalidity ground in an IPR under 35 U.S.C. §311(b).
Apple filed inter partes review (IPR) petitions challenging the validity of a patent owned by Qualcomm. Some of the invalidity grounds in the IPR petitions relied upon applicant admitted prior art (“AAPA”), i.e., disclosure from the specification of the challenged patent on the prior art. Qualcomm argued that this ground violated 35 U.S.C. §311(b), which requires that an IPR petition may request to cancel claims as unpatentable “only on the basis of prior art consisting of patents or printed publications.” The Board initially determined that the use of AAPA complied with §311(b) because the AAPA is from the challenged patent and is thus “prior art consisting of patents or printed publications.” Qualcomm appealed. In February 2022, the Federal Circuit held that to form the “basis” of an invalidity ground, the “prior art consisting of patents or printed publications under §311(b) does not encompass AAPA, and remanded for the Board to determine whether the AAPA in Apple’s petitions formed the basis of the invalidity ground.
On remand, consistent with guidance from the USPTO Director, the Board ruled that AAPA does not form the basis of an invalidity ground if the ground relies on the AAPA in combination with prior art patents or printed publications. The Board then determined that the AAPA in Apple’s petitions did not violate §311(b) because the AAPA did not form the basis of the invalidity ground because the AAPA was combined with prior art patents. Qualcomm appealed.
The Federal Circuit reversed, holding that the Board erred in interpreting §311(b). The Federal Circuit determined that the plain meaning of the statute clearly limits “the basis” to “prior art consisting of patents or printed publications.” And AAPA is not a prior art patent or printed publication as previously held. Thus, from the plain meaning of the statute, §311(b) does not permit the basis of an invalidity ground to include AAPA. The Board’s interpretation doesn’t exclude the situations when the AAPA is actually used as part of the basis. Accordingly, the Federal Circuit concluded that the Board failed to properly interpret §311(b).
The Federal Circuit also reversed the Board’s finding that Apple’s IPR petition complied with §311(b). Apple admitted in its petitions that the AAPA is included in the basis of its invalidity grounds. Thus, the Federal Circuit concluded that Apple’s statements established that the AAPA is part of the basis of the invalidity grounds, thereby violating §311(b). The Federal Circuit reversed the Board’s finding that the challenged claims are unpatentable.
