Ecolochem, Inc. v. Southern California Edison Co., 227 F.3d 1361 (Fed. Cir. 2000).

Facts:

Ecolochem owned two patents directed to methods of demineralization and deoxygenation of water. Ecolochem developed the underlying technology while contracting its water purification and supply services to Southern California Edison Company. Edison at the time was constructing its own water purification facility. Ecolochem filed suit against Edison upon completion of the project, alleging that Edison’s facility infringed Ecolochem’s patents. The district court granted partial summary judgment in favor of Edison and held that the claims of the two patents were invalid as either anticipated or obvious.

On appeal, the Court of Appeals for the Federal Circuit reversed and remanded for retrial, holding that disputed issues of material fact remained pertaining to evidence of secondary indicia of nonobviousness presented by Ecolochem.

Following a bench trial on remand, the district court found that Edison had willfully infringed Ecolochem’s patents. The court also found, however, that the infringed claims were invalid as obvious in light of a combination of prior art including references that taught the use of mixed-bed ion exchange resins. Ecolochem appealed the finding of invalidity regarding the claims of the ‘411 patent but did not assert the other patent on appeal.

Issues:

1. Whether process patent claims are anticipated by prior art articles or by a scientist’s public presentation if the entire process is not fully described in any one reference.

2. Whether an invention that combines two known elements is obvious when nothing in the prior art as a whole suggests, teaches, or motivates one of ordinary skill in the art to make the combination.

3. Whether evidence of secondary considerations can rebut a prima facie case of obviousness and raise a genuine issue of fact that requires a remand for trial of the issue.

Holding:

1. No. Prior art references that do not expressly teach each and every element of the process described in a patent do not anticipate the patent.

2. No. Obviousness cannot be established by combining the teachings of the prior art unless the prior art contains a teaching, suggestion or motivation to combine.

3. Yes. Evidence of secondary indicia of nonobviousness may raise a material issue of fact necessitating a remand for trial on the issue.

Discussion:

The Court of Appeals for the Federal Circuit reviewed de novo the district court’s finding that the claims were obvious and invalid. The court noted that the prior art taught the use of hydrogen to deoxygenate water but did not teach the deoxygenation of water using hydrazine with mixed-bed ion exchange resins. With the exception of claim 20, the court reversed the district court’s finding that Ecolochem’s claims were anticipated by a scientist’s public presentation because a key part of the claimed process had been omitted from the presentation. The court found that the presentation included every limitation of claim 20 and affirmed the district court’s finding of invalidity regarding that claim.

The court held that the combination of two prior art references does not render patent claims obvious absent a teaching, suggestion, or motivation to combine the information and where there was evidence of teaching away in the prior art. Here, the court held that the prior art taught away from the mixed-bed ion exchange process and that the claims were therefore not obvious in light of secondary indicia of nonobviousness.

The Federal Circuit considered evidence of secondary indicia of nonobviousness offered by Ecolochem to overcome a prima facie showing of obviousness for claim 20 and affirmed the district court’s determination that the claim was obvious. The court reasoned that the lack of evidence of copying by others in addition to evidence that showed that Ecolochem’s process was not developed in response to a “long felt need” pointed more strongly toward a finding of obviousness than commercial success and teaching away supported the opposite conclusion.

Disposition:

Affirmed with regard to the district court’s finding that claim 20 was invalid, reversed with respect to all of the other claims, and remanded for a determination of damages to Ecolochem for infringement of the remaining valid claims.

3D Systems, Inc. v. Aarotech Labs., Inc., No. 97-1514, 1998 U.S. App. Lexis 28583, 160 F.3d 1373, 48 U.S.P.Q.2d (BNA) 1773 (Fed. Cir. Nov. 12, 1998).

Facts:

3D Systems filed a patent infringement suit against Aarotech, Aaroflex, and Young in the Central District of California. The defendants moved to dismiss for lack of personal jurisdiction. The district court granted the motion and dismissed the claims against all of the defendants, finding that the plaintiff had not established the elements for personal jurisdiction under the Ninth Circuit’s due process test.

Aarotech, the parent corporation of Aaroflex, was incorporated in Oklahoma and had its principle place of business in Virginia but had taken no actions in the state of California.

Aaroflex, a subsidiary of Aarotech, was incorporated in West Virginia and had its principle place of business in Virginia. As of the date of the district court’s decision, Aaroflex had sold a total of five machines, none of which had been shipped, and none of which had been sold in California. Promotional materials had been distributed in California, however.

Young was the President and Chairman of the Board of Aaroflex and the CEO of both Aaarotech and Aaaroflex and resided in Washington, DC.

Issue:

1) What personal jurisdiction law does the Federal Circuit apply – its own or that of the lower court?
2) Were Aaroflex’s promotional materials and price quotations offers for sale under 35 U.S.C. § 271(a), despite stating that they were not an offer for sale until executed by recipient?

Holding:

1) The Federal Circuit applies its own personal jurisdiction law, deferring to the state’s highest court’s interpretation of the state’s long arm statute.
2) Yes. Using the conceptualization of “offer to sell” under federal law and not the law of the state, the promotional materials were an offer for sale.

Discussion:

The Federal Circuit applied the Akro test for minimum contacts (see Akro Corp. v. Luker, 45 F.3d 1541, 1545-46, 33 U.S.P.Q.2d 1505, 1508-09 (Fed. Cir. 1995)). The three prongs of the Akro test are:

1) whether the defendant purposefully directed its activities at the forum,
2) whether the claim arises out of or relates to those activities, and
3) whether an assertion of personal jurisdiction is reasonable and fair.

Whether the second prong had been satisfied depended on whether the promotional materials constituted an offer for sale. The Federal Circuit held that “offer to sell” under 35 USC § 271 was intended to prevent potential infringers from generating interest in an infringing product to the detriment of the patentee. The Federal Circuit held that the promotional materials constituted offers for sale and that minimum contacts had been established, and that therefore the district court had had personal jurisdiction over Aaroflex.

Disposition:

Affirmed-in-part as to the district court’s finding that it lacked personal jurisdiction over Aarotech and Young, reversed-in-part as to the district court’s finding that it lacked personal jurisdiction over Aaroflex, and remanded.

Facts:

Gould and Schawlow filed patent applications directed to lasers. The parties became involved in an interference. Gould was the junior party and sought to establish earlier conception and reasonable diligence through reduction to practice. Gould produced evidence including a notebook, notarized papers, and his wife’s testimony. The Board of Patent Appeals and Interferences awarded priority of the invention to Schawlow, finding that Gould had established neither earlier conception nor diligence through reduction to practice.

Issue:

What must the applicant prove to establish earlier conception and reasonable diligence through reduction to practice?

Holding:

1) Rule for Interference

In order for the junior party to prevail in an interference, the party must prove by a preponderance of the evidence (1) conception of the invention and (2) reasonable diligence in reducing it to practice through reduction to practice (usually a constructive reduction to practice established by filing the patent application).

2) Conception:

The court held that Gould had not established an earlier reduction to practice. Gould relied on pages in a notebook that he had had notarized. The court found that the notebook pages were insufficient to establish Gould’s earlier conception.

Rule for Conception: The court held that the evidence must show “a complete conception, free from ambiguity” or doubt sufficient to enable the inventor or a person having skill in the art to reduce the invention to practice without “further exercise of inventive skill”. See Mergenthaler v. Scudder, 11 App.D.C. 264 (D.C. Cir. 1897).

3) Diligence through Reduction to Practice:

The court held that Gould had not established diligence through reduction to practice because he did not produce specific evidence of what he had done and when he had done it. Stating that he took off a certain number of days from his regular employment to work on the laser over a three month period was not enough.

Rule for Diligence through Reduction to Practice: “The party chargeable with diligence must account for the entire period during which diligence is required.” The party must prove what was done and when it was done.

4) Attorney’s diligence:

The court found that the diligence requirement was met where Gould’s attorney took four months during which he was involved in a forty day trial to prepare the application.

5) Corroboration:

His wife’s testimony was insufficient to corroborate Gould’s evidence of his diligence because it was not specific regarding dates and facts. Gould’s notebook was insufficient to corroborate his testimony because it is not enough to show what was done if there is no indication of when it was done.

Disposition:

Affirmed.

Facts: The inventors filed a patent application directed to DNA and cDNA molecules that encoded heparin binding growth factor (HBGF). The examiner rejected the claims as obvious and the Board of Patent Appeals and Interferences affirmed. The examiner cited two prior art references. The Bohlen references provided a partial amino acid sequence of HBGF and did not address the DNA coding of the enzyme. The Maniatis reference disclosed the method of gene cloning that the applicants had used.

Issue: Whether the combination of a prior art reference teaching a method of gene cloning, together with a reference disclosing a partial amino acid sequence of a protein, may render DNA and cDNA molecules encoding the protein prima facie obvious under 35 USC § 103.

Holding: No. In order to establish that a structurally novel chemical compound is prima facie obvious, the teachings of the prior art must suggest the claimed compounds to a PHOSITA (person having ordinary skill in the art).

Reasoning: Obviousness is normally based on structural similarity between the claimed and prior art compounds. Structural similarities may provide a motivation or suggestion to prepare new analogs of known compounds. Such similarities can include geometric or positional isomers or homologs.

In such cases, “the question becomes whether the prior art would have suggested making the specific molecular modifications necessary to achieve the claimed invention.” See In re Dillon. Only then does the burden shift to the inventor to rebut the prima facie case of obviousness.

The court held that the prior art did not disclose any relevant DNA molecules or close relatives of the claimed compounds. While the protein sequence was known, the redundancy of the genetic code provided too many alternatives for one to have contemplated or focus on the claimed compounds. One could not have conceived of the sequence until it was isolated and purified and what cannot be contemplated or conceived cannot be obvious. A motivation to search for a gene with a known property does not make the specific gene that is found obvious.

Brief Summary of Holding:

(1) Combination of prior art reference teaching method of gene cloning, together with reference disclosing partial amino acid sequence for a protein that stimulated cell division did not render claims prima facie obvious;

(2) Conceived method of preparing some unidentified DNA does not define it with precision necessary to render it obvious over protein it encodes; and

(3) Patent claims generically encompassing all DNA sequences encoding human and bovine proteins to stimulate cell division were not invalid as obvious.

Disposition: Reversed.

In re Thomas F. DEUEL, Yue-Sheng Li, Ned R. Siegel and Peter G. Milner.

In re Deuel, 51 F.3d 1552, 1558-59, 34 USPQ2d 1210, 1215 (Fed. Cir. 1995).

Facts:

Pioneer owned several patents directed to plants and seeds of new varieties of hybrid and inbred corn. When Pioneer sued J.E.M. for infringement, J.E.M. moved for summary judgment on the basis that sexually reproduced plants are not patentable subject matter under 35 U.S.C. § 101. Citing Diamond v. Chakrabarty, the district court denied J.E.M.’s motion and held that 35 U.S.C. § 101 covers plant life and that sexually reproducing plants are patentable subject matter. A unanimous panel of the Court of Appeals for the Federal Circuit affirmed the district court’s decision.

Issue:

Whether sexually reproduced plants and seeds are patentable subject matter within the scope of 35 U.S.C. § 101, despite being unpatentable under the later enacted and more specific Plant Variety Protection Act (PVPA).

Holding:

Yes. Plants are patentable subject matter under both the PVPA and 35 U.S.C. § 101.

Reasoning:

J.E.M. had argued that 35 USC § 101 did not apply to seeds and seed grown plants because Congress intended that they be protected under the Plant Protection Act of 1930 (PPA) and the (PVPA), and that the general statute was superseded by the more specific PVPA.

The Court held that Congress did not intend for the PVPA to exclude new plant varieties from protection under the patent statues. The court held that 35 USC and the PVPA differ in the rights and obligations imposed on a prospective patentee in order to obtain patent protection, but that plants are patentable subject matter under both.

Disposition: Affirmed.

In re Brana, 51 F.3d 1560 (Fed. Cir. 1995).

Facts:

Brana filed a patent application directed to antitumor compounds. The compounds were very similar to other known antitumor compounds but had not been tested in human subjects. The known compounds had been evaluated using a computer test that was used to identify compounds as candidates for further testing by the National Cancer Institute. The National Cancer Institute then performed in vitro tests for antitumor activity against human tumor cells, and in vivo tests for efficacy against two lymphatic leukemias in mice. The patent application pointed out the similarity between the claimed compounds to the known antitumor compounds and demonstrated the cytotoxicity of the compounds against human tumor cells in vitro.

The examiner rejected the application on the grounds that the application failed to specify a specific disease against which the compounds were effective, and because the test results were insufficient to establish that there was a reasonable expectation that the compounds had a practical utility. On appeal, the Board of Patent Appeals and Interferences affirmed the examiner’s rejection.

Issue: The issue is what the applicant must prove regarding the practical utility or usefulness of pharmaceutical inventions.

Holding: The court held that while the examiner’s rejection and the Board of Patent Appeals and Interferences decision appeared to be based on the issue of whether the compounds had a practical utility, the real issue pertained to the requirements for patentability under 35 USC 112 p 1. The court considered two issues.

Specific Utility:

The first basis for the Board’s decision was that the application had failed to disclose that the compounds were active against a specific disease and that one of ordinary skill in the art would be unable to use the invention without undue experimentation. (See Hybritech Inc. v. Monoclonal Antibodies, Inc.)

The court held that the applicants’ favorable comparison to the compounds with known activity implicitly asserted that the claimed compounds were highly effective against lymphocytic leukemia and therefore useful. In light of the comparison to the known compounds, the court held that the specification alleged a sufficiently specific use. The court held that while the tumors were man made, they nevertheless represented real tumors and it was unnecessary to wait for them to occur naturally.

Utility:

The Board also affirmed the rejection of the claims on the basis that even if the specification disclosed a specific utility, the application did not prove that the claimed compounds are useful. The court held that the PTO has the initial burden to make a prima facie showing that the invention lacks utility. The PTO must challenge the application’s presumptively correct utility disclosed in the application. Only after the PTO has provided evidence that one of ordinary skill in the art would reasonably doubt the asserted utility does the burden shift to the applicant to provide evidence sufficient to convince such a person of the invention’s asserted utility. The court found that the PTO failed to make a prima facie showing that the invention lacked the asserted utility and that the applicants should not have been required to substantiate their disclosure to avoid the rejection. The court also found that even if the PTO had meet this initial burden, the applicants submitted sufficient evidence to convince one of skill in the art of the asserted utility. The court noted that the requirements to obtain the approval to market a drug are not the same as the requirements to obtain a patent. The court stated that

[u]sefulness in patent law, and in particular in the context of pharmacological inventions, necessarily includes the expectation of further research and development. The stage at which an invention in this field becomes useful is well before it is ready to be administered to humans. Were we to require Phase II testing in order to prove utility, the associated costs would prevent many companies from obtaining patent protection on promising new inventions, thereby eliminating an incentive to pursue, through research and development, potential cures in many crucial areas such as the treatment of cancer.

The court also reaffirmed that proof of an alleged pharmaceutical property for a compound through statistically significant tests using standard laboratory animals is sufficient to establish utility. Namely, one who has taught the public that a compound exhibits some desirable pharmaceutical property in a standard laboratory animal has made a significant and useful contribution to the art, even though it may eventually appear that the compound is without value in the treatment of humans. (See In re Krimmel.)

Disposition: Reversed.

In re Ochiai, 72 F.3d 1565 (Fed. Cir. 1995).

Facts:

Ochiai filed a patent application directed to cephem compounds and a process for preparing them. Both the starting material and the product were novel and nonobvious although the process involved and an amine used in the claimed process were otherwise known and unpatentable. The examiner rejected the claim as obvious in light of six cited references which demonstrated that the same acylation process had previously been performed using the same amine starting material.

Holding:

The test for obviousness “requires that one compare the claim’s “subject matter as a whole” with the prior art “to which said subject matter pertains.”” The Court reversed the obviousness rejection, holding that it would not have been obvious to choose the reagent because the reagent was unknown and nonobvious.

“[T]he examiner discussed no references containing any suggestion or motivation either (a) to modify known acids to obtain the particular one recited in claim 6, or (b) to obtain the particular new and nonobvious cephem produced by the process of claim 6. In short, the prior art contains nothing at all to support the conclusion that the particular process recited in claim 6 is obvious.”

The court cited In re Dillon, stating that “[w]hen any applicant properly presents and argues suitable method claims, they should be examined in light of all . . . relevant factors, free from any presumed controlling effect of Durden” or any other precedent.

Rule: A process claim is not prima facie obvious if the starting material and product are novel and nonobvious.

Disposition: Reversed.

See Apfel v. Prudential-Bache Sec., Inc. for another case involving the patenting of investment related business methods.

Facts:

Signature Financial Group obtained a patent entitled “Data Processing System for Hub and Spoke Financial Services Configuration”. The invention involved a computer program in connection with a system in which mutual funds (“spokes”) pooled their assets in an investment portfolio (“hub”) that was organized as a partnership. The system managed the daily allocation of assets for mutual funds with investments in the same portfolio and made daily determinations of the true assets held by each fund. State Street made an unsuccessful attempt to obtain a license and subsequently brought a declaratory judgment action asserting that the patent was invalid because it was not patentable subject matter under 35 USC 101. The district court found that the patent was invalid and granted summary judgment in favor of State Street.

Issue: Is a machine or program that stores and calculates numbers in a useful manner eligible for a patent?

Holding:

Yes. A machine or program that stores and calculates numbers in a useful manner is patentable subject matter. The patent claim at issue was directed to a data processing system and recited each element as a means plus function. The court, citing In re Allapat, held that “”machine” claims having “means” clauses may only be reasonably viewed as process claims if there is no supporting structure in the written description that corresponds to the claimed “means” elements.” The court held that the claim was not invalid for lack of patentable subject matter because machines are patentable under 35 USC 101. The court also noted that the question of whether the claim was directed to a machine or a process was irrelevant because both are patentable subject matter.

The district court had also found the claim invalid because it fell within two judicially created exceptions to statutory subject matter. The district court held that the claimed subject matter fell within the “mathematical algorithm” exception and the “business method” exception. The Federal Circuit rejected these arguments. Citing Diamond v. Chakrabarty and Diamond v. Diehr, the court stated that Congress intended 35 USC 101 to extend to “anything under the sun that is made by man.”

“Today, we hold that the transformation of data, representing discrete dollar amounts, by a machine through a series of mathematical calculations into a final share price, constitutes a practical application of a mathematical algorithm, formula, or calculation, because it produces “a useful, concrete and tangible result”–a final share price momentarily fixed for recording and reporting purposes and even accepted and relied upon by regulatory authorities and in subsequent trades.”

Disposition: Reversed and remanded.

State St. Bank & Trust Co. v. Signature Fin. Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998).

Additional case briefs are available at Lawnix.

In re Dillon, 919 F.2d 688 (Fed. Cir. 1990) (en banc).

Facts:

Diane Dillon filed a patent application entitled “Hydrocarbon Fuel Composition” directed to fuel compositions comprising tetra-orthoester compounds and their use in reducing the emission of soot during combustion. The PTO Board of Patent Appeals and Interferences affirmed the examiner’s rejection of all of the claims of the patent application and Dillon appealed to the Court of Appeals for the Federal Circuit.

The tetra-orthoester compounds were a known class of compounds, but the compounds had not been used in combination with hydrocarbon fuels previously. The soot-reducing properties of the compounds had not been disclosed in the prior art.

The Board rejected all of the claims as obvious in light of two key primary references. One of the references disclosed fuel compositions comprising tri-orthoesters as a dewatering agent. The other reference disclosed the use of tri-orthoesters in fuel compositions to prevent the phase separation of alcohol and fuel. The references did not address tetra-orthoesters. The Board also cited references that disclosed the use of tri- and tetra-orthoesters in non-hydrocarbon based fuels as dewatering agents.

The Board concluded that the structural similarity between tri- and tetra-orthoesters gave rise to a reasonable expectation that the claimed compounds would have similar properties and that it had been established that the claims were prima facie obvious. Dillon did not present secondary indicia of non-obviousness and the examiner’s rejection was affirmed.

Issue:

The issue was whether a prima facie case of obviousness had been established when the claimed additives were structurally similar to compounds appearing in the prior art with a different disclosed utility, and where the utility disclosed in the application was neither taught nor suggested in the prior art.

Holding:

A prima facie case of obviousness does not require showing both a structural similarity and a suggestion or expectation that the claimed compound will have the same or similar properties as those disclosed in the application.

The court held that “structural similarity between claimed and prior art subject matter, proved by combining references or otherwise, where the prior art gives reason or motivation to make the claimed compositions, creates a prima facie case of obviousness, and that the burden (and opportunity) then falls on an applicant to rebut that prima facie case. Such rebuttal or argument can consist of a comparison of test data showing that the claimed compositions possess unexpectedly improved properties or properties that the prior art does not have, that the prior art is so deficient that there is no motivation to make what might otherwise appear to be obvious changes, or any other argument or presentation of evidence that is pertinent. There is no question that all evidence of the properties of the claimed compositions and the prior art must be considered in determining the ultimate question of patentability, but it is also clear that the discovery that a claimed composition possesses a property not disclosed for the prior art subject matter, does not by itself defeat a prima facie case. Each situation must be considered on its own facts, but it is not necessary in order to establish a prima facie case of obviousness that both a structural similarity between a claimed and prior art compound (or a key component of a composition) be shown and that there be a suggestion in or expectation from the prior art that the claimed compound or composition will have the same or a similar utility as one newly discovered by applicant.”

Disposition: Affirmed.

In re Diane M. Dillon

Lear, Inc. v. Adkins, 395 U.S. 653 (1969).

Facts:

Lear hired Adkins as an engineer, agreeing that Adkins would retain ownership of any inventions he developed. The agreement also provided that Adkins would license his inventions to Lear.

Adkins filed a patent application directed to an improvement he developed. Lear and Adkins entered into a licensing agreement that provided that if no patent issued or any issued patent were subsequently held to be invalid, Lear would be able to terminate the agreement. See American Machine & Metals v. De Bothezat Impeller.

During prosecution, Lear claimed that a reference uncovered during a search by the USPTO anticipated fully Adkins’ invention. Lear subsequently ceased paying the full amount of royalties due under the agreement.

Upon issue of the patent, Adkins brought suit against Lear for breach of the licensing agreement. The trial judge held that Lear was estopped by its licensing agreement from arguing that the patent was invalid as a defense to infringement. On appeal, the California Supreme Court held that the licensing agreement was still in effect, that Lear did not have the right to cease paying royalties, and that Lear was estopped from challenging the validity of the patent.

Holding:

The court overruled the holding of Automatic Radio Manufacturing Co. v. Hazeltine Research, Inc., 339 U. S. 827, 339 U. S. 836 which had held that a licensee was estopped from challenging the validity of a patent. The licensee is not estopped from challenging the validity of a patent and is not obligated to continue to make royalty payments after the date of issue of the patent if it can prove that the patent is invalid. Whether Lear was obligated to pay royalties under the agreement for the period prior to issue of the patent was left as a matter of state law.