Form Complaint No Longer Safe Harbor in Patent Infringement Cases

By Vincent J. Allen

Prior to filing a patent infringement suit, an attorney must conduct an investigation into the alleged infringement and how a particular product or process infringes at least one claim of the patent. Until Rule 84 and its Appendix of Forms were abrogated as of December 1, 2015, the plaintiff was only required to provide a short and plain statement of the claim in the complaint, which could be satisfied by using a Form 18 complaint that recites basic factual allegations. The form did not require the identification of any asserted patent claims or any specific accused product models, nor did it require an explanation of how any products infringed the patent.

After Form 18 was removed from the rules, the courts have been in general agreement that the use of the allegations of Form 18 no longer provides a safe harbor for patent infringement claims. Patent infringement suits, like all other federal court claims, are subject to dismissal if the complaint does not contain enough facts to state a claim for relief that is plausible on its face. The deletion of Form 18 eliminates the perceived conflict that some argued existed previously between the Supreme Court’s Twombly and Iqbal cases from 2007 and 2009, respectively. However, the courts have not been consistent in their decisions as to what facts are sufficient to state a patent infringement claim that is plausible on its face.

In Lyda v. CBS Corp., the Federal Circuit recently held that Form 18 does not apply to a claim of joint patent infringement and further that the complaint failed to state a claim for relief under the Twombly/Iqbal pleading standard. However, the decision was based on the failure of the plaintiff to allege any facts to support its assertion that the defendant directed or controlled either independent contractors or unnamed third parties to commit specific steps required for infringement of the claims. The decision did not shed any light on whether allegations in Form 18 would satisfy the Twombly/Iqbal pleading standard for a claim of direct infringement. In the McZeal case from 2007, the Federal Circuit found that Twombly does not require the specific claims and claim elements of a patent to be alleged in a complaint for patent infringement provided there is enough detail in the complaint to allow the defendant to answer the claim.  Similarly, in K-Tech, the Federal Circuit, although applying Form 18 as a safe harbor prior to its elimination from the rules, suggested that a complaint containing just enough information to satisfy Form 18 may well be sufficient to satisfy the Twombly/Iqbal pleading standard.

Consistent with this logic, a number of district courts have held that despite the abrogation of Form 18, the Twombly/Iqbal pleading standard does not require the identification of specific claims of the patent or factual allegations regarding each particular element of the claims asserted.  For example, in Telebrands Corp. v. Ragner, decided August 25, 2016, the New Jersey District Court recently held that a plaintiff in a patent infringement suit need not identify the specific claims asserted in order to survive a motion to dismiss.  In that case, the counterclaim at issue described the accused products, the functionalities of the products that were alleged to infringe the patents, and also alleged that the products practice one or more claims of the patents.  The defendants also attached both patents to their pleadings and alleged what is claimed by each patent.  From this, the court held that it could reasonably infer that the accused products practice one or more claims of the patents.

District courts in both the Northern District and Central District of California have likewise found that identification of specific claims is not required.  On the other hand, in RainDance Techs. v. 10x Genomics, the District of Delaware dismissed a claim of patent infringement on the grounds that the plaintiffs failed to relate any of their factual assertions with any of the asserted claims.  The opinion suggests that the judge did his own examination of the patent claims and determined that there was a particular element of the exemplary claims that was not discussed in the complaint.  However, this holding that the complaint must have factual allegations regarding specific claim elements is an outlier and is not supported by prior Federal Circuit precedent.

In conclusion, while practitioners should no longer rely on Form 18 in drafting a complaint for patent infringement, if the complaint has factual allegations sufficient to put the opposing party on notice of what it will need to defend against, this will be found sufficient by the Federal Circuit to avoid dismissal.  However, it is prudent practice to include some factual background with respect the patents, what they are claiming, and how the patent is infringed even if specific claims are not identified in the complaint.  It is also important to consider the venue where the case is filed in drafting the complaint as some may be more lenient than others until the standard is further clarified by the Federal Circuit.

Clarifying the Distinction Between the “Inventive Concept” and “Patentability” Requirements When Determining Patent-Eligible Subject Matter

By James Ortega

In the continuing wake of the U.S. Supreme Court’s attempt in Alice v. CLS Bank to define what is eligible to be the subject matter of a patent, two recent decisions have been issued by the Federal Circuit that provide an important piece of the puzzle the Supreme Court left us with more than two years ago. In the Alice decision, which held that abstract ideas merely implemented using a computer are not eligible for patent protection, the Supreme Court created an “inventive concept” requirement in its two-part test, which requires the finding that a claim either is not directed to an abstract idea, or that if it is so directed, the claims recite “something more” than what has been done conventionally. Although Congress had seemingly removed any “inventiveness” requirement from patent law decades ago, its resurrection in Alice has caused confusion as to what exactly is needed to meet this new “inventive concept” standard. Numerous district courts, as well as the Patent Office itself, have equated an “inventive concept” with satisfying the patentability requirements of novelty under 35 U.S.C. § 102 and nonobviousness under 35 U.S.C. § 103. The two recent Federal Circuit decisions help shed light on whether the patent eligibility analysis under § 101 and the Alice decision implicate the novelty determination under § 102 and/or the nonobviousness determination under § 103.

The first of these decisions is Bascom Global Internet Services Inc. v. AT&T Mobility LLC, decided June 27, 2016. The Federal Circuit reversed a Northern District of Texas court’s decision that found patent-ineligible Bascom’s patent claims directed to an internet filtering system located on a remote ISP server that associates each network account with (1) one or more filtering schemes and (2) at least one set of filtering elements. The district court held that “filtering content” is merely an abstract idea, regardless of whether the content being filtered is provided on the internet or through older mediums such as books. However, the Federal Circuit recognized this as yet another reviewing entity overly simplifying a patent’s claims so that it can meet the still-undefined term “abstract idea.” More specifically, the district court had found that the claims at issue did not contain an “inventive concept” under the second step of the Alice analysis.  In so finding, the district court stated that each individual claim element was a well-known, generic computer component or standard filtering mechanism, and that even the combination of these elements was not “inventive” because filtering software and the use of ISP servers to filter content was well known.  In sum, this district court proved once again that most patent reviewing entities still confuse the term “inventive concept” from the Alice decision with “patentability,” which is probably the most glaring problem created by the Supreme Court in the  Alice decision. 

In an analysis that has been asserted by countless patent practitioners since the Alice decision, the Federal Circuit in Bascom condemned the district court’s analysis that it “looks similar to an obviousness analysis under 35 U.S.C. § 103.” This well overdue acknowledgment of the district courts’ (and the Patent Trial and Appeal Board’s) inclusion of an obviousness analysis into step two of the Alice test makes clear that the patent-eligibility inquiry of § 101 does not include the obviousness analysis of § 103.  In elaborating on what is required during an analysis under step two of the Alice test, the Federal Circuit held that step two cannot be satisfied merely by conclusory statements regarding the prior art, explaining that the “inventive concept inquiry requires more than recognizing that each claim element, by itself, was known in the art.”  The court went on to state that “an inventive concept can still be found in the non-conventional and non-generic arrangement of known, conventional pieces.”  Unfortunately, these statements follow the reasoning of the Supreme Court in KSR v. Teleflex, 550 U.S. 398 (2007), which was a decision under the obviousness standard of § 103 and not § 101.

So unfortunately, after condemning the district court for conducting an obviousness-style analysis under the Alice test, the Federal Circuit used reasoning from a prior holding directed only to an obviousness inquiry.  Thus, what was almost a completely positive decision for patent owners, became another decision conflating the “inventive concept” of the Alice decision with an obviousness type determination. While the Bascom holding at least helps patent owners by making clear that a more thorough analysis under step two of the Alice test is required, the Federal Circuit has proven that even it  does not understand that § 103 is a different section of the patent statute from § 101 and thus not only requires a separate analysis, but  also a recognition that obviousness determinations have no place in a § 101 analysis.

The most basic canons of statutory construction make clear that one statute cannot be interpreted in a way that obviates another statute.  Requiring an obviousness inquiry in a § 101 analysis eliminates the need for § 103 and therefore that interpretation cannot be correct.  It would seem then that the search for an “inventive concept” as required by the Supreme Court in Alice is not the search for a “patentable invention” (which includes satisfying §§ 102, 103 and 112, in addition to 101), but is simply the search for an attempt by an inventor to claim a concept that is more than the implementation of an abstract idea on a computer, but still may later be found obvious or not novel.

After the Bascom decision, the Federal Circuit decided McRO Inc. v. Bandai Namco Games America Inc., on September 13, 2016.  McRO provided the opportunity for the Federal Circuit to clarify that its use of the language from the KSR decision in a § 101 analysis should not be interpreted to mean that such a nonobviousness analysis should be used when determining patent-eligibility. 

In McRO, the Federal Circuit reversed a Central District of California court’s decision that found patent-ineligible McRO’s claims directed to automating the matching of audio to three-dimensional computer animation of mouth movements to provide lip-synchronized animation.  The district court analyzed the claims under a “point-of-novelty” style test, and the judge determined the claims’ “point of novelty here is the idea of using rules, including timing rules, to automate the process of generating key frames.”  But because the claims did not identify what those specific timing rules were, the judge found that “the claim merely states ‘an abstract idea while adding the words ‘apply it.’”  In overturning the district court, the Federal Circuit distinguished between eligible and ineligible types of computer-based automation.  Specifically, if automating a previously manual process simply involves programming a computer with the exact same steps as the manual process, such a process will be considered abstract, and thus such claim(s) would be patent-ineligible.  But if, by automating a process on a computer, new steps must be developed that did not exist before, then the process will be considered new and not abstract so long as those specific, new steps are actually recited in the claims.  “It is the incorporation of the claimed rules, not the use of the computer, that improved the existing technological process by allowing the automation of further tasks,” the court found that it was different from the invention in cases like Alice, “where the claimed computer-automated process and the prior method were carried out in the same way.”  And importantly, this is this case even if the computer being used is a “general-purpose computer.” 

So although the McRO decision provided patent practitioners with a valuable decision regarding software-type patent claims, it also included this novelty-style analysis in reaching that holding.  While this appears at odds with the Federal Circuit’s Bascom admonition not to conduct a § 103 obviousness analysis as part of the § 101 eligibility determination, it appears that the court may have been simply using novelty to show that the invention was not an abstract idea. .  If we assume that Bascom did in fact hold that a § 103 analysis should not be done during an Alice test, then it should follow that a § 102 novelty analysis should also not be part of the § 101 analysis under Alice.  And looking more closely at the court’s reasoning in McRO, it did not actually conduct a full § 102 novelty analysis when determining that the software claims at issue included process steps not included in the previous manual approach to the audio matching process.  Instead, the court simply stated that claims at issue required additional process steps necessary for computer automation that were not shown to be part of the prior manual process.  Therefore, the McRO decision could be read to mean that the identification of additional steps required for computer automation of a process, that was not performed in the original manual process(es),  is evidence that the claims do not simply recite an abstract idea.

This interpretation of both Bascom and McRO would comport with a separation of the analyses under the different sections of the patent statute, and thus that a patent owner need not prove that those additional recited steps not found in the prior manual process are also novel and nonobvious under the requirements of §§ 102 or 103.  As a result, patent owners should at the least proceed with process claims that do not simply recite the use of a computer as a tool to automate the same steps of a conventional activity, and instead recite an automated process that has specific additional (or alternative) steps from what had been manually done before.  And importantly, the flip-side of this interpretation should also hold true – that specific limitations in a claim that distinguish the invention from the prior art not only overcome concerns under §§ 102/103, but can provide the additional benefit of making the claims so specific that they should not be considered abstract.  Thus, if those recited additional or alternative process steps are also novel and nonobvious over the prior art, then the likelihood the claims will be found to satisfy § 101 will be further increased.

Who Carries the Burden in IPR—And, Does it Matter?

By Shaukat Karjeker

The Inter Partes Review (“IPR”) proceeding, part of the America Invents Act, sets up a streamlined procedure for any party (“petitioner”) to challenge the validity of the claims of an issued patent, not in a court, but in the US Patent Office, generally at a much lower cost when compared to federal court. An IPR is based on prior art patents and publications that the petitioner argues show that the claimed invention is not novel or is obvious. At the outset, in order for an IPR to be instituted, the petitioner must show a “reasonable likelihood” that it would prevail on a challenge to the validity of at least one claim of the patent. Once the petitioner meets this initial burden of proof, the inter partes “trial” of the patent claims can proceed before the Board.

During the trial phase, both petitioner and patent owner can take limited depositions and develop evidence in support of its position as to the validity or invalidity of a patent claim at issue. When validity of a patent claim is a close question, as is often the case, the outcome might turn on which party carries the burden of proof on invalidity. (The burden of proof is viewed as having two components: a burden of persuasion, and a burden of production of evidence.) Further, an outcome can also turn on whether at some point the burden shifts to the other party.

So it becomes important to identify who carries the burden as this could be outcome-determinative. How the Patent Office assigns the burdens of proof and of production might have been a significant factor in the high rates of patent claims that have been found invalid to date. The Federal Circuit has recently weighed in on the issue, and the subtle but meaningful ruling could have a significant effect in reducing the number of patent claims ruled invalid. (See In re Magnum Oil Tools Int’l, Ltd., (2016 U.S. App. LEXIS 13461, 119 U.S.P.Q.2D (BNA) 1541 (Fed. Cir. July 25, 2016).

This appeal to the Federal Circuit arose from an IPR that was decided in favor of the petitioner, and the patent owner appealed the invalidity of the claims. When the petitioner then withdrew due to a settlement with the patent owner, the Director of the Patent Office then intervened to defend the Board’s ruling of invalidity in the appeal.

The patent owner did not appeal the Board’s institution of the IPR, but instead attacked the finding of invalidity that was based on a shifting of the burden of proof to the patent owner.   The  Director countered that once an IPR was instituted, the Board was justified in shifting of the burden to the patent owner to produce evidence of patentability of the claims.  Putting aside the complexities of the factual details of the case, the legal issues boil down quite simply to:

  1. In an IPR, who has the burden of persuasion on the invalidity of a patent claim and what is the standard?
  2. In an IPR, does the burden of persuasion of invalidity shift to the patent owner when a petitioner has made a prima facie case of invalidity?
  3. In and IPR, who has the burden of production of evidence, and under what conditions does the burden shift to the other party?

As to points (1) and (2), the court ruled that the petitioner has the burden of persuasion that the patent claim is invalid, by “a preponderance of the evidence.”  Moreover, that burden of persuasion never shifts to the patent owner.  It is interesting that in dicta, the court analogized IPRs to patent litigation, where burden shifting does not take place.  In so doing, it distinguished IPR proceedings from patent application prosecution where burden shifting may take place. The court reasoned that in a prosecution context, once the Examiner had made a prima facie case of unpatentability, it is merely a “procedural device” to shift the “burden of production” of evidence supporting patentability to the applicant.  (The Patent Office conceded these points in its Briefs.)

As to point (3), the court ruled that the Patent Office incorrectly asserted that the burden of production shifted to the patent owner once the Board had determined that an IPR should be instituted.  In other words, the Board’s practice of shifting the burden of production of evidence to support patentability to the patent owner after it had found a “reasonable likelihood of success on the merits” in order to institute the IPR, was error. Instead, the court ruled that, because the petitioner has the burden to prove invalidity, by a “preponderance of the evidence”, it is inappropriate to shift the burden of production at the very outset to the patent owner.  As one might imagine, this reversal of the Board’s practice of shifting the burden to the patent owner at the point of institution of the IPR could have a potentially major impact in reducing the number of patent claims that are invalidated.  To that extent, albeit that the Magnum Oil Tools opinion is “procedural,” it could be outcome-determinative in many cases.  

Finally, the court addressed whether the improper shifting of the burden resulted in reversible error. The court examined the Board’s written decision and found that the decision was “replete” with instances where it was clear the Board inappropriately placed the burden on the patent owner by expecting it to explain, and faulting it for failing to explain, why the claims were not invalid.  The court also found that the petitioner failed to show motivation to combine the cited prior art on which the invalidity argument was based.

Interestingly, and perhaps unusually, the Board substituted a reference for one that had been advanced by the petitioner in the combination used to reject the patent claims.  This led the court to rebuke the Board: it was not empowered to make arguments on its own initiative that the petitioner could have raised, but did not raise.  While the Board has “broad authority” in procedural matters in an IPR, it does not have authority to decide unpatentability on theories not proposed by the petitioner.  In short, the Board cannot help the petitioner in its arguments to invalidate a patent.

© Shaukat Karjeker, 2016         

Interview with Hope Shimabuku of Dallas Regional Office of USPTO

Less than a year ago, the US Patent and Trademark Office (USPTO) officially opened the doors to its new Texas Regional Office in Dallas. This regional office provides outreach services for inventors and entrepreneurs in the state of Texas, as well as Alabama, Arkansas, Louisiana, Mississippi, New Mexico, Oklahoma and Tennessee. David Carstens (DC) recently had the opportunity to interview the Director of the Texas Regional USPTO, Ms. Hope Shimabuku (HS), to discuss the benefits of having a regional office so close to home.

DC: Will the Texas Regional Office be hosting any open house events for patent or trademark applicants to come see where the office is located and learn more about it?

HS: One of the missions of the Texas Regional Office is to provide outreach and to bring events and services to our local stakeholders. We hold workshops, trainings, conferences, roundtables, and events on a regular basis for K-12 students and educators, inventors, entrepreneurs, legal practitioners, and university and corporate stakeholders. For example, the Texas Regional Patent and Trademark Seminar is held at the Texas Regional Office and is a class designed to educate inventors and entrepreneurs about patent and trademark basics. Each month we host onsite Meet the Trademark Experts and Meet the Patent Experts, as well as provide public tours. Some of our upcoming events include an Advanced Patent Seminar and a Texas Regional Patent and Trademark Seminar in Spanish.

DC: Does the Texas Regional Office make it easier for applicants and their counsel to interact with patent examiners?

HS: The Texas Regional USPTO has an examiner interview room where applicants and/or their counsel can meet face-to-face with the eventual 110 examiners who are located at the USPTO Texas Regional Office. They can also meet with any examiner anywhere in the country using our secure video link capability in the examiner interview room.

DC: Will the Texas Regional Office speed up the patent or trademark application process?

HS: One of the strategic goals of the USPTO is to reduce patent pendency, and in order to meet this goal, the USPTO is hiring patent examiners to increase its capabilities. The Texas Regional Office will eventually hire hire approximately 100 new patent examiners, hiring about 25 patent examiners every 4 months.  Currently, the Texas Regional Office has 47 new examiner and 25 new patent examiners, our third class of examiners, will start on September 19, 2016.  Our fourth class of patent examiners will begin in January 2017.

DC: With the Regional Offices opening, will they reduce the cost of filing a patent?

HS: The USPTO assesses its fees based on how much it actually costs for the USTPO to process and examine the patent application.  There have been situations in which we have reduced fees because we have found our cost to be less than what is actually being assessed.

DC: How can a patent or trademark applicant most effectively utilize the Texas Regional Office?

HS: The Texas Regional Office has a number of services available to patent or trademark applicants.  Inventors, entrepreneurs, startups, researchers and others can attend a workshop, training, conference or roundtable at our office. Events are listed on our website at  Applicants can use our interview rooms to connect with patent examiners working at the Texas Regional Office or anywhere else across the country.  Applicants can search existing patents and trademarks on designated workstations using the same software tools that our patent and trademark examiners use.  Additionally, the Texas Regional Office also has a hearing room so that applicants and other interested stakeholders can attend and/or participate in live oral hearings.

Don’t Go to the Trouble of Creating a Website and then Ignoring the Trademark Infringement Lawsuit – Neutron Depot LLC v. Bankrate, Inc.

By Gregory Marcum

If you’ve taken the time and effort to create a website in a competitive industry and your trademark is arguably close to an industry competitor, don’t make the mistake of ignoring a subsequent trademark infringement lawsuit.  In a recent case set in the federal court for the Southern District of Texas, Insurance Depot Marking Corporation did not file an answer to Neutron Depot’s lawsuit that alleged:

  • Trademark infringement
  • Unfair competition
  • Dilution
  • Cybersquatting

Neutron Depot owned the mark INSURANCE DEPOT.  Defendant Insurance Depot Marketing used the mark on its website.  Plaintiff asked for statutory damages under the Lanham Act and the Anti-Cybersquatting Consumer Protection Act based on Defendant’s use of INSURANCE DEPOT on its website that offered competing insurance services and use of the mark in website advertisements and links. Plaintiff also asked for an injunction against Defendant’s further use of the mark, an order of forfeiture or cancellation of the mark, a permanent injunction against use of the domain ‘’, and attorney fees and costs.

Plaintiff’s complaint further alleged gross negligence, willful, deliberate, and intentional acts that were done with full knowledge and conscious disregard for plaintiff’s rights, i.e. Defendant knew Plaintiff owned the mark. This was important because these allegations made it an ­exceptional case.  The legal implication of this is that a prevailing party is entitled to its reasonable attorney fees in an exceptional case.

All the allegations went unchallenged because defendant did not file an answer and thus defaulted.  It is important to know that this court, and others, have found that defendants are deemed to have admitted knowingly and intentionally conduct when they default.

The evidence submitted at the final hearing were screenshots depicting search results for “Insurance Depot” that resulted in a link to Insurance Depot America’s website.  No evidence of defendant’s profits or saved expenses of developing the value of the mark was presented.

In a Lanham Act case, statutory damages are intended to provide adequate compensation and deter the use of counterfeit marks.  When a party elects to recover statutory damages the court has discretion to award an amount between $1,000 and $200,000 per counterfeit mark per type of goods or services sold, offered for sale, or distributed.  When the court finds willful use of a mark it can award up to $2 million per counterfeit mark.  Here the plaintiff asked for $100,000 for counterfeit use of the INSURANCE DEPOT mark and $1 million for willful infringement.

As to the claims for cybersquatting, statutory damages of $1,000 to $100,000 per domain name are available at the court’s discretion.  Here the plaintiff asked for $100,000—which the court awarded.  The total award for all statutory damages was $1.2 million.

It is important to note that the legal standard for establishing willful and intentional conduct is very high and requires evidence of a high degree of culpability, such as bad faith or fraud. As this case illustrates, a severe penalty can be imposed when a party defaults.  Not filing an answer can lead to deemed admissions of knowing, willful, and intentional conduct which can result in an award of attorney fees in addition to statutory damages.

An injunction against use of the subject mark can have severe consequences to a party that has invested time and resources in establishing consumer recognition under a trademark.  It makes sense for a party to invest in a trademark search well prior to formulating its marketing plan or designing its website using a trademark—especially in a competitive industry like insurance.