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Fresh From the Bench: Recent Patent Cases ‎From the Federal Circuit

July 25, 2014

Overview

Digitech – In this first patentable subject matter case decided by the Circuit since CLS, the panel affirms a ‎decision by the district court and rules that claims defining a device profile and a method for creating a device ‎profile within a digital image processing system are not patent eligible under ‎35 U.S.C. § 101‎.‎

Troy – The Circuit vacates and remands a district court decision in an interference action because the district ‎court erred in refusing to consider evidence that was not presented in the PTO but was pertinent to the ‎determination of priority.‎

Align Technology – The Circuit reverses and remands the ITC's review of an ALJ's "order," since that order was not ‎either a "decision" or an "initial determination," both of which are reviewable by the ITC.‎

Digitech Image Technologies, LLC v. Electronics for Imaging, Inc., et al.,Fed. Cir. Case ‎‎2013-1600-18, (July 11, 2014)‎

Digitech owns a patent directed to the generation and use of an "improved device profile" that describes spatial ‎and color properties of a device within a digital image processing system. Digitech filed infringement suits ‎against 32 defendants, asserting claims directed to a "device profile," and claims directed to methods for ‎generating a "device profile." The district court granted the defendants' motions for summary judgment of ‎invalidity, finding all of the asserted claims were subject matter ineligible. ‎

Device Profile Claims

Digitech argues on appeal that its device profile claims recite eligible subject matter under section 101 because ‎the claims define a tangible object that is an "integral part of the design and calibration of a processor ‎device within a digital image processing system." ‎

Independent claims 1 and 26 describe a device profile as a collection of information; specifically, a description ‎of a device dependent transformation of spatial and color information:‎

‎1. A device profile for describing properties of a device in a digital image reproduction system ‎to capture, transform or render an image, said device profile comprising:‎

first data for describing a device dependent transformation of color information content of the ‎image to a device independent color space; and

second data for describing a device dependent transformation of spatial information content of ‎the image in said device independent color space.‎

‎***‎

‎26. A device profile for describing properties of a de- vice in a digital image reproduction ‎system to capture, transform or render an image, said device profile comprising data for ‎describing a device dependent transformation of spatial information content of the image to a ‎device independent color space, wherein through use of spatial stimuli and device response for ‎said device, said data is represented by spatial characteristic functions.‎

In an opinion written by Judge Reyna, the Circuit first set forth the patentable subject matter tests it must follow. ‎Pursuant to section 101, an inventor may obtain a ‎patent for "any new and useful process, machine, manufacture, ‎or composition of matter, or any new and useful ‎improvement thereof." For all categories ‎except process ‎claims, the eligible subject matter must exist ‎in some physical or tangible form. To qualify as a ‎machine under ‎section 101, the claimed invention must be ‎a "concrete thing, consisting of parts, or of certain devices ‎and ‎combination of devices." Burr v. Duryee, 68 U.S. 531 (1863). To qualify as a manufacture, the invention ‎must be ‎a tangible article that is given a new form, quality, property, or combination through man-made or artificial ‎means. Diamond v. Chakrabarty, 447 U.S. 303 ‎(1980). ‎

‎Digitech argues that a device profile is subject matter eligible because it is "hardware or software within a ‎digital image processing system" and exists as a tag file appended to a digital image. The panel rejects this ‎argument, ruling that Digitech's position is not supported by the claim language, which does not describe the ‎device profile as a tag or any other embodiment of hardware or software. The claims' only description of the ‎device profile is that it comprises "first data for describing" color information and "second data for describing" ‎spatial information. The panel notes that data in its ethereal, non-physical form is simply information that does ‎not fall under any of the categories of eligible subject matter under section 101. The panel therefore holds, in its ‎de novo review of these claims, that the device profile claims do not encompass patent-eligible subject matter.‎

Method Claims

Digitech also argues that the asserted method claims are patent eligible because they describe a process for ‎generating a device profile that is specifically tied to a digital image processing system and is integral to the ‎transformation of a digital image. ‎

The panel first notes that the Supreme Court recently reaffirmed that fundamental concepts, by themselves, are ‎ineligible abstract ideas, Alice Corp. Pty. Ltd. v. CLS Bank Int'l., 134 S. Ct. 2347 (2014), but, in determining ‎whether a process claim recites an abstract idea, "an application of a law of nature or mathematical formula to a ‎known structure or process may well be deserving of patent protection." Diamond v. Diehr, 450 U.S. 175 (1981). ‎A claim may be eligible if it includes additional inventive features such that the claim scope does not solely ‎capture the abstract idea. Alice Corp. But a claim reciting an abstract idea does not become eligible "merely ‎by adding the words ‘apply it.'" Bancorp Servs., LLC v. Sun Life Assurance Co. of Can., 687 F.3d 1266 (Fed. Cir. ‎‎2012).‎

Method claim 10 is exemplary and claims a process of organizing information through mathematical correlations ‎and is not tied to a specific structure or machine.‎

‎10. A method of generating a device profile that describes properties of a device in a digital ‎image reproduction system for capturing, transforming or rendering an image, said method ‎comprising:‎

generating first data for describing a device dependent transformation of color information ‎content of the image to a device independent color space through use of measured chromatic ‎stimuli and device response characteristic functions;‎

generating second data for describing a device dependent transformation of spatial information ‎content of the image in said device independent color space

through use of spatial stimuli and device response characteristic functions; and

combining said first and second data into the device profile.‎

The claim recites a process of taking two data sets and combining them into a single data set, the device profile. ‎The two data sets are generated by taking existing information—i.e., measured chromatic stimuli, spatial stimuli, ‎and device response characteristic functions—and organizing this information into a new form. According to the ‎panel, claim 10 thus recites an ineligible abstract process of gathering and combining data that does not require ‎input from a physical device. Without additional limitations, a process that employs mathematical algorithms to ‎manipulate existing information to generate additional information is not patent eligible. "If a claim is directed ‎essentially to a method of calculating, using a mathematical formula, even if the solution is for a specific ‎purpose, the claimed method is nonstatutory." Parker v. Flook, 437 U.S. 584, 595 (1978).‎

Troy v. Samson Manufacturing Corp., Fed. Cir. Case 2013-1565 (July 11, 2014)‎

In an interference between Troy's '451 patent and Samson's '665 application in which Samson was the senior ‎party, the Patent Trial and Appeal Board awarded priority to Samson because Troy failed to prove actual ‎reduction to practice prior to Samson's earliest date and rejected Troy's claims of inurement and derivation ‎because he did not establish prior conception. The Board entered judgment against Troy and ordered all claims ‎of the '451 patent cancelled. Troy challenged the Board's decision in district court under § 146, where he ‎proffered new evidence of prior conception at the various conception dates he asserted at the Board, and new ‎evidence of actual reduction to practice in February 2004. He also introduced new evidence of actual reduction ‎to practice in July 2004—the Chin affidavit and the Conley deposition testimony. Additionally, Troy argued that ‎Samson engaged in "inequitable conduct" by including in its provisional application confidential drawings that ‎Samson misappropriated from Troy. Troy contended that he proved in state court that Samson misappropriated ‎his company's trade secrets, which included the subject matter of the count. He argued that this state court ‎finding of misappropriation established that Samson derived its alleged invention from Troy.‎

The district court affirmed the Board's order canceling all claims of Troy's patent, ruling that the Chin affidavit or ‎the Conley deposition were barred because "a party is generally precluded from raising issues or theories of ‎law in a section 146 proceeding that were not previously raised before the board." The court also rejected as a ‎new issue Troy's argument that Samson used Troy's confidential proprietary drawings in its provisional ‎application, which Troy alleged demonstrated Samson's inequitable conduct. ‎

The district court acknowledged that Troy proved in state court (1) that Samson improperly submitted to the PTO ‎as its own at least one drawing of Troy's and (2) that Samson violated a confidentiality agreement with Troy ‎Industries in the course of developing its patented inventions, and noted that these actions may constitute ‎inequitable conduct by Samson. But the district court concluded that "neither action proves Troy conceived of all ‎the elements of the Count and timely reduced them to practice," so the district court entered judgment ‎against Troy.‎

Troy challenges the district court's refusal to consider evidence pertaining to issues not raised before the Board. ‎He contends that the Supreme Court rejected the rule against new issues when it held that "there are no limitations ‎on a patent applicant's ability to introduce new evidence in a § 145 proceeding beyond those already present ‎in the Federal Rules of Evidence and the Federal Rules of Civil Procedure." Kappos v. Hyatt, 132 S. Ct. 1690, ‎‎1700–01 (2012).‎

In its amicus brief, the PTO argues that the Circuit's opinion in Hyatt "expressly endorsed the district court's ‎ability to prohibit parties from raising new issues during its review of Board decisions." (citing Hyatt v. ‎Kappos, 625 F.3d 1320, 1335 (Fed. Cir. 2010) (en banc), aff'd, 132 S. Ct. 1690). The PTO argues that the ‎Supreme Court's affirmance of Hyatt did not overrule the Circuit's holding regarding new issues because the ‎Hyatt case concerned only the presentation of new evidence on issues that were raised before the Board.‎

The panel concludes that the Supreme Court's decision in Hyatt permits new evidence to be admitted without ‎regard to whether the issue was raised before the Board. Analyzing the language of § 145, the Supreme ‎Court concluded: "By its terms, § 145 neither imposes unique evidentiary limits in district court proceedings nor ‎establishes a heightened standard of review for factual findings by the PTO." The Court expressly rejected the ‎notion that administrative law principles could form the basis for limiting the evidence admissible in a § 145 ‎proceeding: The Supreme Court continued: "We reject the Director's contention that background principles of ‎administrative law govern the admissibility of new evidence. Consequently, the district court must make its own ‎findings de novo and does not act as the ‘reviewing court' envisioned by the APA. We also conclude that the ‎principles of administrative exhaustion do not apply in a § 145 proceeding." ‎

Samson also argues that even if Hyatt requires that the district court admit such new evidence, this holding is ‎applicable to § 145 actions only. Samson argues that the proceeding at issue in this case, an interference arising ‎under § 146, ought not be governed by the same rules. Troy responds that there is no meaningful difference ‎between § 145 and § 146 and that both types of proceedings ought to be subject to the same evidentiary ‎rules. The PTO argues that, in its view, our ruling on new issues will apply to both § 145 and § 146; it contends ‎that any distinction on admissible evidence between the two sections would be "difficult" to make. ‎

However, the panel noted that, exactly like § 145, § 146 provides for a "remedy by civil action." Section ‎‎145 further states that the district court "may adjudge that such applicant is entitled to receive a patent for ‎his invention as the facts in the case may appear." It is true that § 146 does not contain this "adjudge" language. ‎Nonetheless, the panel concludes that the language of § 146 is stronger in its indication that new evidence be ‎admissible. Section 146 explains: "In such suits the record in the Patent and Trademark Office shall be admitted ‎on motion of either party . . . [and] when admitted shall have the same effect if originally taken and produced in ‎the suit." By its express terms, the PTO record is not required to be part of the § 146 civil action at the district ‎court. The panel interprets this language as contemplating a fresh start in the district court. Moreover, § 146 ‎expressly states that the parties have the right to take further testimony. Section 145 has no explicit mention ‎of the permissibility of additional evidence. Based upon the language of the statute, the panel sees no ‎basis for concluding that new evidence is permitted in § 145, but not in § 146, and therefore concludes that the ‎Supreme Court's decision in Hyatt applies with equal force to both § 145 and § 146 actions.‎

Turning to the case before it, the panel vacates the district court's decision and remands with instructions to ‎consider the new evidence and arguments raised by Troy in his district court filings. ‎

Comment:‎

While the AIA eliminated interferences for ‎patent applications filed after March ‎‎16, 2013, it is still possible to ‎have ‎interferences declared as to applications ‎and patents filed prior to ‎that date, as long as the interference ‎claim is ‎submitted within one year of issuance of ‎a patent or within ‎one year of the publication of an ‎application. ‎Interferences in which priority of invention is determined will ‎therefore be with us for at ‎least the next ‎several years, so this decision remains pertinent.‎ ‎

Align Technology, Inc. v. International Trade Commission, et al., Fed. Cir. Case 2013-1240, ‎‎-1363 (July 18, 2014)‎

This case arises out of a proceeding before the Commission to enforce a Consent Order entered into by the ‎complainant Align and respondent OrthoClear.‎

Align develops, manufactures, and markets clear aligners to treat malocclusion—i.e., teeth misalignment. Align ‎conceived of and developed its clear aligners, which use a series of clear dental aligners—"incremental ‎positioning adjustment appliances"— that are worn sequentially over a fixed time period to adjust the position of ‎a patient's teeth. To design these aligners, dental professionals generate complex three-dimensional digital ‎models of each incremental configuration for each aligner in order to create a "digital data set," which is used to ‎manufacture a series of successive aligners to be worn by a patient. Align's asserted patents are directed to ‎various methods and orthodontic treatment plans using these digital data sets.‎

In 2005, Align's founder and former Chief Executive Officer, Muhammad Chisti, founded OrthoClear and used ‎former Align employees in Pakistan and the United States to manufacture and sell dental aligners. ‎Believing OrthoClear to be infringing its patents and using its trade secrets, Align filed a complaint with the ‎ITC. ‎

In August 2006, OrthoClear negotiated a global settlement with Align that required OrthoClear to assign its entire ‎intellectual property portfolio to Align, to agree to entry of the Consent Order, and to file a joint motion to ‎terminate the investigation. The ALJ granted the joint motion, and the Commission entered the Consent Order ‎and terminated the underlying investigation. The Consent Order prohibited from importation into the U.S. the ‎incremental dental positioning adjustment appliances manufactured by or for OrthoClear referenced in the ‎complaint and any other articles manufactured in violation of the patents or trade secrets described therein. The ‎Consent Order also included successor and aiding-and-abetting provisions that extended the importation ‎prohibition beyond OrthoClear to its officers, directors, agents, servants, employees, successors and assigns, ‎and all persons, firms, or corporations acting on its behalf.‎

After suspecting that OrthoClear and others were violating the Consent Order, Align filed a new complaint, ‎this time for an enforcement proceeding, and the Commission instituted an investigation against various ‎ClearCorrect companies that were formed by one of OrthoClear's customers shortly after OrthoClear ceased its ‎operations and transferred its intellectual property and customers' patients to Align. The new complaint alleged ‎that ClearCorrect Pakistan creates the digital data sets used ‎to create the molds on which the aligners are ‎formed, and then imports the digital data sets by ‎electronic transmission to ClearCorrect USA, who manufactures ‎and sells aligners in the ‎U.S. ‎

The Commission instituted the investigation and recommended that the ALJ consider whether the accused ‎digital datasets identified are within the scope of the articles covered by the Consent Order, noting that the ‎ALJ's decision should be issued in the form of an "initial determination." Rather than issuing an initial ‎determination, the ALJ issued Order No. 57, finding that "the accused digital datasets identified in the ‎enforcement complaint are within the scope of the term ‘articles manufactured' as that term appears in the ‎Consent Order. The ALJ therefore denied ClearCorrect's motion to terminate, and scheduled the trial. ‎

ClearCorrect sought the Commission's review of Order No. 57, and Align opposed the petition for review, arguing ‎that the ALJ correctly interpreted the Consent Order, and that the Commission should deny review because Order ‎No. 57 was a non-final order, not subject to review by the Commission unless ClearCorrect moved for ‎interlocutory appeal, which they did not. The Commission ultimately concluded that Order No. 57 constituted an ‎‎"initial determination," and thus was subject to its review. In January 2013, the Commission reversed Order No. ‎‎57 and terminated the enforcement proceeding, concluding that the accused digital data sets were not covered ‎by the scope of the Consent Order "because the subject consent order did not contain an express provision ‎prohibiting the electronic transmission of data." ‎

The panel first described the standard of review as requiring it to set aside any findings or conclusions of the ‎Commission that are "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." ‎According to the panel, the Commission has broad authority to issue rules and regulations governing ‎administration of its cases, but an agency must abide by its own regulations. At the time of the orders in ‎question, the Commission's Rules of Practice and Procedure, 19 C.F.R. § 210.1, et seq., explicitly ‎distinguished between rulings by the ALJ that must be issued as "initial determinations" and those that ‎must be issued as "orders." The rules stated that the ALJ's rulings on motions "may not be appealed to the ‎Commission prior to the administrative law judge's issuance of an initial determination," unless the requirements ‎for interlocutory review are satisfied. Rule 210.42(c) requires that the ALJ "shall grant the following types of ‎motions by issuing an initial determination or shall deny them by issuing an order." ‎

One of the types of motions covered by Rule 210.42(c) is a motion for termination. Because ClearCorrect filed a ‎motion for termination under 19 C.F.R. § 210.21, which the ALJ denied, the ALJ properly denied that motion via ‎an order required by Rule 210.42(c), not as an initial determination.‎

According to the panel, whether an ALJ's ruling issues as an initial determination or an order is important ‎because it determines whether the Commission may review the ALJ's decision. The ITC's regulatory regime ‎contemplates that an ALJ's grant of certain kinds of relief, such as to terminate a proceeding or permit a party ‎to intervene, justifies immediate Commission review. But, at the same time, the regulations treat the denial of ‎such requests for relief as not warranting immediate review. Moreover, the regulations provide a mechanism ‎for interlocutory review of Order No. 57 that ClearCorrect could have used, but did not. Therefore, the rules ‎clearly prohibited the Commission from reviewing orders like this one. The Commission exceeded its authority ‎by reviewing the order below. The ALJ issued an order (not an initial determination) denying (not granting) ‎ClearCorrect's motion to terminate the investigation. This order was not subject to Commission review under ‎Rule 210.24.‎

The Circuit therefore vacates the Commission's decision and remands for further proceedings.‎

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