Federal Circuit Review - August 2022

| Irfan LateefDaniel Kiang

August 2022 Federal Circuit Newsletter (Japanese)

August 2022 Federal Circuit Newsletter (Chinese)

Inventors, Not Ai-Ventors: An “Inventor” Must Be a Natural Person

In Thaler v. Vidal, Appeal No. 21-2347, the Federal Circuit held that, under the Patent Act, an “inventor” must be a natural person. Therefore, an AI system cannot be an inventor.

Thaler filed two patent applications with the PTO listing DABUS, an AI system, as the sole inventor. The PTO sent Thaler Notices to File Missing Parts requesting that Thaler identify valid inventors. Thaler petitioned the PTO director to vacate the notices. The PTO denied the petitions on the ground that a machine does not qualify as an inventor. Thaler sought review, and the parties cross-moved for summary judgment. The district court granted the PTO’s motion for summary judgement, denied Thaler’s request to reinstate the applications, and concluded that an inventor under the Patent Act must be an “individual,” which as used in the statute means a natural person.

On appeal, the Federal Circuit concluded that the Patent Act was unambiguous in requiring that inventors be natural persons. The Federal Circuit explained that, although the Patent Act does not define “individual,” the Supreme Court has stated that when used in a statute, “individual” ordinarily means a human being unless there is an indication Congress intended a different meaning. Finding no such indication, the court concluded that the term “individual,” in the context of the Patent Act, encompasses only human beings. The Federal Circuit affirmed the district court’s decision.

Claim Cancellation Before Assignment Does Not Preclude Assignor Estoppel

In Hologic, Inc. v. Minerva Surgical, Inc. Appeal No. 19-2054, the Federal Circuit held that cancellation of a claim prior to assignment triggered assignor estoppel with respect to a related claim, because the assignor warranted the validity of the cancelled claim and the cancelled claim was not materially broader than the related claim.

Hologic, Inc. (“Hologic”) sued Minerva Surgical, Inc. (“Minerva) for patent infringement and the district court barred Minerva’s invalidity defenses under the doctrine of assignor estoppel. The Federal Circuit affirmed the decision and Minerva petitioned the Supreme Court, requesting that the Court “discard this century-old form of estoppel.” The Supreme Court held that assignor estoppel remains a valid doctrine, but that it comes with limits, and remanded the case for the Federal Circuit to determine whether the asserted claim was “materially broader” than the claims assigned to Hologic such that assigner estoppel should not apply. On remand, the Federal Circuit affirmed upon analyzing whether (1) the inventor warranted the validity of a claim from a parent application that was cancelled prior to assignment; and (2) whether the cancelled claim was materially broader than an asserted claim.

Regarding validity, Minerva argued that the inventor had not warranted validity of the cancelled claim because it was cancelled prior to assignment. The Federal Circuit rejected this argument because the claim was cancelled “without prejudice” due to a restriction requirement. Moreover, the inventor successfully overcame the Examiner’s rejection of the claim for anticipation prior to its cancellation. Given this posture, the Federal Circuit explained that the cancellation was for reasons other than patentability and was not a concession of unpatentability. Furthermore, the Federal Circuit explained that cancellation did not nullify the claim, that it remained viable for further prosecution in a divisional application, and the inventor’s assignment conveyed rights to any divisional applications not yet filed. Thus, the cancelled claim traveled with the assignment to Hologic and its validity had been warranted by its original filing, its successful defense during prosecution, and in the inventor’s assignment stating that he had “no present knowledge from which [he] could reasonably conclude” that the assigned rights were invalid or unenforceable.

As for claim breadth, Minerva argued that the cancelled claim was “materially broader” because it was limited to a “moisture-permeable” device while the asserted claim was directed to a “moisture-impermeable” device. The Federal Circuit disagreed upon analyzing the claim language (which did not contain an express limitation), the written description (which described “moisture-permeability” only as being “preferable”), and applied the doctrine of claim differentiation to hold that the cancelled claim was not limited to “moisture-permeable” devices and instead encompassed both “moisture-permeable” and “moisture-impermeable” devices. Thus, the asserted claim was not materially broader than the cancelled claim, and assignor estoppel applied.

University Successfully Argues Prior Art’s Disclosures Were Not “By Another”

In Lsi Corporation v. Regents Of The University Of Minnesota, Appeal No. 21-2057, the Federal Circuit held that determining whether a patent or application’s disclosure is “by another” under § 102(e) requires evaluating the relied-upon portions of the disclosure to determine if the source of the disclosure is truly “by another;” and that a Board’s determination of untimeliness must be appealed even if the Board reaches the merits of the argument.

LSI petitioned for inter partes review of U.S. Pat. No. 5,859,601 (“’601 patent”) owned by the University of Minnesota (“UMN”) and relating to computer coding and bit processing. The Board held that claims 14 and 17 of the ’601 patent were not anticipated by either U.S. Pat. No. 5,392,270 (“Okada”) or U.S. Pat. No. 5,731,768 (“Tsang”). With respect to Okada, the Board found that certain arguments were untimely and, in any event, failed on the merits because they did not address the claimed constraints on processing. Tsang, in contrast, did address the claimed constraints, but those aspects of Tsang’s disclosure were not “by another” under 35 U.S.C. § 102(e). LSI appealed.

With respect to anticipation by Tsang, the Federal Circuit reviewed the Board’s determination as to whether the relevant portions of Tsang described an invention “by another.” Tsang undisputedly recited a different inventive entity than the ’601 patent. And LSI relied upon the disclosure of processing constraints from the background section as anticipating claims 14 and 17. However, that section of Tsang was a summary of an annual report written by the ’601 patent’s inventors and describing their work that was provided to Tsang’s named inventor. Thus, even though LSI technically relied on Tsang and not the annual report written by the ’601 patent’s inventors, the relevant inquiry was whether the relied-upon portions of Tsang were “by another.” Because they were not, the Federal Circuit affirmed the Board’s decision that Tsang did not anticipate under § 102(e).

Regarding Okada, LSI admitted at oral argument that it did not appeal the Board’s decision regarding timeliness and asserted this was not necessary because the Board reached the merits of the argument. The Federal Circuit disagreed, holding that it was necessary for LSI to have appealed the Board’s timeliness decision despite the Board having reached the merits of the argument because untimeliness was an independent ground for the decision. Accordingly, the Federal Circuit concluded that LSI forfeited any challenge to untimeliness and affirmed the Board’s determination without addressing the merits.

The Patent Office Need Not Consider Requests for Director Review of IPR Institution Decisions

In Re: Palo Alto Networks, Inc. Appeal No. 22-145, the Federal Circuit held that the USPTO policy of refusing to consider requests for Director rehearing of decisions denying institution of IPR and PGR does not violate the Appointments Clause of the Constitution.

Palo Alto Networks, Inc. (“PAN”) petitioned for inter parties review (“IPR”) of one patent and post-grant review (“PGR”) of another. While the petitions were pending, the U.S. Patent and Trademark Office (“USPTO”) updated its interim guidance to note that the agency does not accept requests for Director review of institution decisions. The Patent Trial and Appeal Board denied institution of PAN’s IPR and the PGR. PAN filed requests for Director rehearing of these denials, but the USPTO refused to consider the requests. PAN petitioned the Federal Circuit for writ of mandamus, challenging the USPTO’s policy.

Relying on United States v. Arthrex, Inc., 141 S. Ct. 1970 (2021), PAN argued that the USPTO’s categorical refusal to accept requests for Director review of institution decisions violated the Appointments Clause. Arthrex found a violation of the Appointments Clause where the Director—an executive officer appointed by the President—lacked control over final written decisions by administrative patent judge, who are inferior officers not appointed by the President. The Federal Circuit distinguished PAN’s situation from Arthrex because PAN sought review of institution decisions, rather than final written decisions. No structural impediment prevents the Director from reviewing institution decisions, and the Director has occasionally done so sua sponte. Thus, the USPTO’s policy of refusing to consider requests for such review did not violate the Appointments Clause.

Missing Experience Undermines Expert’s Rebuttal of Obviousness Arguments

In Best Medical International, Inc. v. Elekta Inc., Appeal No. 21-2099, the Federal Circuit held that expert testimony was properly discounted when substantial evidence supported the Board’s finding that a POSA would have possessed experience that the expert was missing; and that there is no standing to appeal an unpatentability determination in an IPR when the claim is finally canceled during a parallel ex parte re-examination prior to any appeal of the IPR determination.

Elekta filed petitions for inter partes review challenging four claims of Best Medical International’s (“BMI”) patent directed towards the radiation therapy of tumors by computing an optimal radiation beam arrangement. When the Board instituted a review, ex parte reexamination of two challenged claims (1 and 18) was underway in a parallel proceeding. In the re-examination, BMI canceled claim 1 in response to a rejection. In the IPR, however, the Board proceeded to analyze claim 1, reasoning that it had not yet been statutorily disclaimed or canceled by any final action in the re-examination. Ultimately, the Board concluded in the IPR that challenged claims 1, 43, 44, and 46 would have been obviousness. In reaching this conclusion, the Board found that a person of ordinary skill in the art (“POSA”) would have had formal computer programming experience. Because BMI’s expert did not have this experience, the Board discounted BMI’s expert testimony in its obviousness analysis.

On appeal from the IPR decision, the Federal Circuit affirmed the Board’s determination that claims 43, 44, and 46 would have been obvious. The Federal Circuit observed that the parties provided little evidence relating to factors that could have guided the Board regarding the level of skill in the art. Though the record contained competing expert testimony regarding a POSA’s training, the Federal Circuit held that it was not unreasonable or lacking in substantial evidence for the Board to conclude that a POSA would have had formal computer programming experience. The court noted that the specification repeatedly referred to the invention being implemented on a computer and that, though not discussed by the Board, an inventor’s deposition also supported the Board’s conclusion. As for claim 1, BMI argued that its cancellation before the Board issued a final written decision rendered the patentability question moot and denied the Board authority to analyze the claim. However, BMI conceded during oral argument that claim 1 was only finally canceled when it failed to appeal the Examiner’s rejection of the claim, which occurred after the Board issued its final written decision but prior to the appeal of the Board’s IPR decision. Thus, the Federal Circuit held it was proper for the Board to analyze claim 1 during the IPR under the Supreme Court’s decision in SAS Institute. However, because of the timing of the final cancelation of claim 1, there was no case or controversy as to claim 1’s patentability at the time the IPR determination was appealed to the Federal Circuit, and BMI therefore lacked standing to appeal the Board’s determination as to claim 1 and the Federal Circuit lacked jurisdiction over that part of BMI’s appeal.

Mere Capability by Itself Is Not Enough to Establish Patent Essentiality

In Invt Spe LLC v. International Trade Commission, Htc America, Inc., Htc Corporation, Appeal No. 20-1903, the Federal Circuit held that determination of reasonable functional capability requires proof that an accused product executes all the claimed functions at least some of the time or at least once in the claimed environment when put into operation.

INVT SPE LLC filed a case in the International Trade Commission (ITC) alleging that the respondents’ 3G-enabled and certain LTE-enabled communications infringed five INVT patents, including the ’439 patent. The ’439 patent at issue related to a wireless communication system in which a user device (receiving side) determines and sends some parameters to a base station (transmission side) which encodes the data using the same parameters and sends the encoded data back to the user device for decoding. INVT SPE LLC asserted that the ’439 claims were essential to the LTE standard and the accused products practiced the asserted claims. The ITC disagreed and determined that the asserted claims of the ’439 patent were not essential to the LTE standard and were not infringed.

The Federal Circuit affirmed the Commission’s decision with respect to the ’439 patent. The court acknowledged that the ’439 patent claims were drawn to “capability” and not to actual operation. However, the Federal Circuit held that the asserted claims were not standard-essential as they did not cover every possible implementation of the LTE standard. The court also held that there was no infringement as INVT failed to establish that the accused devices will ever perform the functions recited in the asserted claims.