America-Israel Patent Law

New York Times Gets It Wrong, But What’s New?

Once upon a time the New York Times was a respected publication. These days it’s overpriced toilet paper (and not very soft at that, let alone perforated for easy use). Case in point: a piece it ran at the end of January under the heading, “Colombians Ask: Who Would Dare Patent Panela?”.

The impetus for the article was the issuance in April 2020 of US patent no. 10632167, entitled “System and method for processing raw sugarcane maximizing the preservation of policosanols during production of a shelf stable potable cholesterol-reducing product”.  The premise of the NYT piece is that this patent covers a long-known method to make a long-known product (panela), and thus the issuance of this patent, and related patents in Colombia and other parts of the world, will preclude Colombians from practicing a process, and producing the resulting product, that they’ve been practicing, producing and consuming for generations, and that they will be closed out of the market for export of panela to the USA and Europe. 

In what has become typical fashion for its hit pieces on patents and other disfavored subjects, the piece weaves in select facts and select omissions of facts to imply that the End of World is Nigh. Had the “reporter” done her homework, she would have asked pertinent questions, like, “Does this US patent have effect in Colombia? Does it actually cover the traditional product or the traditional way of making that product? Will it preclude importation of the product into the USA?”  But God forbid that the Times engage in actual reportage.  (Hey, if you can spend eight years doing nothing but deifying an incompetent president, and then more than four years doing nothing but smearing his successor who actually did many things right, not to mention assert, repeatedly and loudly, the canard that the USA was founded in order to perpetuate slavery of black Africans, what’s a hit piece on a single patent, right?)  So let’s delve into those questions ourselves.

First, some history: the US patent mentioned in the piece, 10632167, while constituting the maturation of USSN 15/803,037, filed in October 2017 and the first application in a chain, is not the first US patent to issue from that chain.  That distinction goes to US 10,493,121, granted in December 2019, which was filed as USSN 16/163,365, a continuation-in-part of the ‘037 application.  Those two applications served as the priority applications for PCT/US2018/058537, filed in October 2018.  It is the PCT that gave rise to related applications in Australia, Cuba, the EPO, China, Ecuador, Nicaragua, Peru and Mexico.  A third US application, 16/702,238, was filed in December 2019 on the day that the ‘121 patent issued.

Second, neither of the US patents, nor the pending US application, nor the published PCT application, nor the claims pending in Europe or Australia, claim a product per se.  All of them claim a method to produce a juice, not to produce panela, which is a solid.  Taking US 10632167 as an example, this patent has a single independent claim, which reads:

“A method for processing a quantity of unwashed raw sugarcane sticks to produce a policosanol-rich sugarcane juice product via a sugarcane juice product processing system, the unwashed raw sugarcane sticks each including a sugarcane stalk outer cortex containing natural policosanol-rich waxes and minerals, the method comprising steps of:

shredding the unwashed sugarcane sticks and conveying the shredded and unwashed sugarcane sticks toward a first one of a series of mechanical roller mills;

extracting sugarcane juice from the unwashed shredded sugarcane sticks via the series of roller mills, the shredded sugarcane sticks, while being conveyed through the series of roller mills, macerated with water having a temperature maintained within a temperature range that prevents dissolution of said policosanol-rich natural waxes and minerals in the sugarcane stalk outer cortex, to produce a volume of water-diluted extracted policosanol-rich sugarcane juice product;

filtering the diluted extracted policosanol-rich sugarcane juice product through at least one filter;

stabilizing the pH of the extracted and filtered policosanol-rich sugarcane juice product in a non-acidic solution of calcium hydroxide to a stabilized pH level within a pH range of 7.0 to 7.6;

heating the pH-stabilized sugarcane juice to a temperature maintained within a temperature range precluding evaporation of policosanols from said extracted policosanol-rich sugarcane juice product;

clarifying the heated and pH-stabilized sugarcane juice, wherein the heated and pH-stabilized sugarcane juice is flocculated using a mixture of water and at least one flocculate product, the flocculated sugarcane juice forming a glutinous froth, the glutinous froth retained and subjected to further processing in order to preserve a rich concentration of policosanols contained therein, the policosanol-rich processed froth subsequently reintroduced into the sugarcane juice product being processed;

evaporating the clarified sugarcane juice product via an evaporation apparatus including a series of evaporators, thereby incrementally increasing a sugar and policosanol concentration of the sugarcane juice product to create a post-evaporation, policosanol-rich concentrated sugarcane juice syrup having a desired post-evaporation Brix value, wherein the Brix value of the sugarcane juice product is maintained at or below 70° Bx during the entire evaporation step; and

extracting the evaporated sugarcane juice concentrate from the evaporation apparatus at said desired post-evaporation Brix value,

wherein, the sugarcane processing method maintains a juice product temperature within a temperature range precluding evaporation of policosanols from said extracted policosanol-rich sugarcane juice product throughout said process.”

That’s a method claim with a lot of steps, and the independent claims in the other US patent and pending applications are similar.  Under US law, in order to infringe, the infringer would need to practice every single one of those steps - leave out a step and there’s no infringement.  Or if some of the steps are practiced by one entity, and the other steps are practiced by another entity, and those entities aren’t acting in concert, there’s no infringement.  In this particular case, there also seems to be an easy and inexpensive out: since the starting material is unwashed sugarcane, rinsing the sugarcane with water before beginning the process would apparently result in non-infringement.  (Presumably the law is similar in this regard in the other countries where patent applications were filed.)

And of course, a US patent has no force outside the USA against actors who are acting entirely outside the USA. Patents are territorial.

Those are all facts the “reporter” could easily have ascertained, had she troubled herself to talk to a patent attorney…or, in the case of the requirements for infringement of a method claim, even to an L1 taking a patent law course. 

Similarly, she could easily have learned that in the USA, a claim on a method does not prevent others from making, using or selling the product resulting from practice of that method, unless they actually practice the claimed method to produce the product.    

And if the “reporter” had a friend who’s a more experienced patent attorney – or if she had just spoken with a patent attorney looking for some free publicity – she would have learned that 35 USC §271(g) ostensibly makes it an act of infringement to import into the USA the product of a process that is protected by a US patent, but that the case law has taken most of the teeth out of §271(g), so that if the product can be produced commercially by a non-infringing process, the imported product won’t infringe under §271(g), even if produced by the infringing process.

Why is all that relevant? Because at one point, she notes that (a) Colombia exported about 9000 tons of panela to the USA and Europe in 2019, (b) in Colombia, producers of refined sugar are precluded by law from producing panela, but (c) those same producers are not precluded from producing panela outside Colombia, so (d) if a Colombian sugar producer could control the production (and importation) of panela in (and into) the USA, such a producer could foreclose the market to the (much smaller) Colombian panela producers.  Had she done her homework as outlined above, she would have found that that’s an unlikely outcome, since, as noted, panela can produced by non-infringing methods, so §271(g) can’t be used to enjoin the importation of panela, even if produced by the patented method. 

Moreover, if indeed the process for producing panela is in the public domain (see below), then there’s nothing NOW to stop someone from producing panela in the USA and competing with the Colombian producers. Well, nothing but economics, which would seem to require a good local supply of sugarcane, and expertise in production, which the article states is difficult to find, even in Colombia.

All that, of course, is before we get to the most glaring issue, which is that if any of the claimed processes were known or were obvious before the patent applications were filed, then the claims on those processes are invalid.  This is evident from the prosecution of the European case, in which the Examining Division in its search opinion both took note of third party observations that were filed by the Federacion Nacional de Productores de Panela – FEDEPANELA (an organization mentioned in the article as trying to stymie the grant of the patents), requiring the applicant to respond to the issues raised therein, and raised its own bases for prior art rejection of the claims (in addition to raising other grounds of rejection).  To the extent the applicant admits that its own processes differ from prior art processes, that will provide others with a blueprint for how to avoid infringement.

The “reporter” has a point in that, if indeed the process claimed in the issued US patent was anticipated or obvious in view of what was known, then that’s a defect in the examination process.  What she neglects to mention in that regard is that there are now several mechanisms in place to put a check on poorly-examined US patents. 

If what she’s really lamenting is the fact that someone might seek to obtain a competitive advantage by securing the issuance of a patent, then all I can say is, Welcome to the world, honey. But it goes beyond that, because the unstated implication of her piece is that because the USPTO makes mistakes, there shouldn’t be patents.  

Hmm.  I wonder if the author has been vaccinated against the Wuhan virus. Because if she has, then among the many things and people she can thank are the patent system and President Trump, for providing the incentives to get those vaccines developed and into people’s arms in record time.  Now THAT’S a story worth covering.

One final note: the patent specification explains that panela contains alcohols collectively called policosanols, and asserts that these reduce cholesterol levels.  The method alleged maximizes the concentration of policosanols in the final product.  If indeed the product of the claimed process is novel and non-obvious, then the applicant could have tried to claim it.  For example, it could have written a claim such as, “A solid food product comprising between n-m% glucose, o-p% fructose, q-r% sucrose, and s-t% policosanols.”  Such a claim, if granted, would be much more effective than a claim on a process (at least in the USA), as it would be easy to ascertain whether or not a product infringes.  And if there’s no written analysis of old samples of panela, it would be hard to invalidate such a claim.  Whether the failure to include such a claim was deliberate or merely the result of poor lawyering, the lack of such a claim would have been worth mentioning.

Do As I Say, Not As I Do: More Hypocrisy From The USA Regarding Israel’s IP Regime; Death Knell for a Bad Supreme Court Decision?

To the extent I’ve had time to post over the last few months, most of the posts have been devoted to the adoption of legislation enabling 18-month publication of patent applications in Israel, and in particular to the ongoing deliberations in the Knesset’s Constitution, Statute and Law Committee in this regard.  Today’s post is no different, since today and tomorrow, the committee will meet again to consider this bill.  

Early Publication

At present it appears likely that the bill will pass in a form that requires publication of all patent applications, including those that are presently pending.  As I’ve argued before, I think this is unfair to applicants who filed their patent applications under the current, no-publication-until-acceptance-of-the-application system.  I have no doubt that the vast majority of applicants have no objection to their presently pending applications publishing, particularly since, in most cases, corresponding applications have published abroad.  Nevertheless, I am equally certain that there are a handful of applications that were filed because their owners knew that the contents of the applications would stay secret until the conclusion of substantive examination, and/or whose owners have made business plans in reliance on such secrecy.  It’s not fair to change the rules for those applicants in the middle of the game.  If one conceives of the patenting process as a contract between the state and the applicant, forcing early publication of an application after telling the applicant that his application will remain secret constitutes a breach of the contract on the part of the state.  (For that reason, one wonders if a clause forcing publication of all pending applications would hold up to so-called constitutional scrutiny before the so-called High Court of Justice.)

Rather than requiring publication of all pending applications, the statute should provide an opt-in clause: those applicants who want their pending applications to publish now should be allowed to tell the ILPTO to publish such applications.  This would largely achieve the goals of early publication, without adversely affecting those applicants who have relied on the non-publication in making their businesses decisions until this point.

There is, however, another aspect of this legislation that I haven’t previously discussed: the hypocrisy that lies behind this amendment.  It’s no secret that the USA, in particular the Department of Commerce and the U.S. Trade Representative, been pressuring Israel for some time to adopt an 18-month publication regime.  To this end, the U.S. Commerce Secretary and Israel’s Minister of Trade signed an agreement two years ago that stipulated, inter alia, that Israel would adopt such regime (in exchange for the USA calling Israel a good guy and taking off the USTR’s list of bad guys who don’t honor IP, like China; I’ve written before about the ludicrousness of that comparison).  

Now, there are good arguments in favor 18-month publication regimes, which explains why they are the standard in the developed world.  Indeed, Israel likely would eventually have adopted such a regime even without prodding from the USA, as there’s no real opposition in Israel to 18-month publication.  But in negotiating with the USA, apparently no one on either side checked to the situation regarding 18-month publication in the USA itself before proposing what Israel should do.  That, or the Americans feel free to be hypocrites.  I say that because, as anyone familiar with US patent law knows, when the USA adopted early publication in 1999, it didn’t make publication compulsory for all applications.  Publication only applied for applications filed after a certain date, and even then, applicants could opt out of publication, by signing a statement that no corresponding application had been filed in an early-publication country.  The penalties for falsely making such a statement are draconian – you lose your patent – but in principle your application need not be published before it is granted.  

That being the case, why on earth has Israel agreed not only to publish all applications in the future, but even to publish currently pending applications?  The USA did neither of these things.  In this case, what’s good for Uncle Sam should be good enough for Uncle Moshe.  I doubt that today and tomorrow, the Knesset committee is going to tell the Americans where can they put their “early publication for all” demands, but it would sure be sweet if it did.  

Rescinding A Wrongly-Decided Supreme Court Decision

Israel’s Supreme Court has a reputation as the world’s most activist court.  This reputation has been earned primarily in its role as the so-called High Court of Justice, which hears claims against state activity, but the Court’s activism extends to the civil sphere too, including the IP arena.  To illustrate:

Imagine you’re a manufacturer of air conditioning vents.  You see that a competitor has a very successful model of vent.  After doing some research you discover that his vent is a copy of a vent that was invented abroad by someone else many years ago.   Or you find that although your competitor developed the vent himself, he never sought to protect it via a patent or registered design, even though such protections are available by statute in Israel.  Or that in fact, he patented it, but the patent expired last year.  Being a logical person, you would conclude that under the circumstances, not only are you free to manufacture and sell your own version of the vent, but that you can market for a lower price, thus benefitting consumer. 

Unfortunately, you’ve overlooked the fact that you’re in Israel, where marriages between logic and public policy are infrequent and purely coincidental.  In the present case, we have a flawed 1998 Supreme Court decision, popularly known as the AShI”R decision, that gums up the works.   In AShI”R, various parties who produced articles which were not protected by patent or other intellectual property laws – either because the parties hadn’t sought IP protection, or because IP protection wasn’t available (e.g. because the article was already known and therefore not patentable), or because the parties had availed themselves of statutory IP protection but it had expired – sought relief against competitors who copied their products.  The Supreme Court ruled that they were entitled to protection.  In so doing, the Court turned logic, and the rationale behind the country’s patent and design legislation, on its head.  How so? (If you’re an IP practitioner, the next paragraph will be clear to you, so skip ahead.)

Modern patent regimes are based on a quid quo pro: in exchange for disclosing a new and non-obvious invention, in a manner that enables competitors to copy the invention, the state grants the inventor a limited period of exclusivity – currently 20 years from the date of filing the patent application – during which the inventor can prevent others from making, using, selling, or offering to sell the invention.  The expected receipt of such a period of exclusivity encourages investment in R&D, particularly in areas where high outlays of capital are necessary to bring a product to market.  The grant of the exclusivity, which is a matter of public record, encourages others to develop new, non-infringing ways to compete, which usually leads to more efficient technologies and lower prices.  The temporal limitation of the exclusivity ensures that even if no non-infringing alternatives are developed, competition will eventually be possible, along with concomitantly lower prices; it also allows competitors to make business decisions on the basis of predictable dates, viz. the expiration date of the patent.  The logic behind design protection is similar, although the investment involved is usually smaller, and the scope and duration of protection more limited.

In AShI”R, the Supreme Court ignored the patent and design statutes and the public policy considerations underlying them, and in effect said that copying per se is bad, even though the Knesset, in accordance with sound economic policy, had already determined that copying per se isn’t bad.  As the Aramaic expression goes, kulei alma lo pligei (everyone agrees – except, apparently, Israel’s Supreme Court) that a party that chooses not avail itself of the protection afforded by IP statutes should not be entitled to such protection through the backdoor of the courts; among other things, to provide protection in such cases undermines the predictability that the patent statute seeks to provide, and discourages the public disclosure that the patent statute seeks to obtain. 

The egregiousness of the Court’s decision is all the more true in cases in which patent protection isn’t available, either because the article in question isn’t substantively patentable (it was known or is obvious over what was known) – society has no interest in granting exclusivity on something that’s already known – or because patent protection for the article being copied has already been exhausted, in which case the Court’s decision effectively amounts to an extension of the patent term for an indeterminate length of time, and an abrogation of the contract between the state and inventor when the state agreed to give the inventor a 20-year term of protection.  (Indeed, the patent statute includes provisions for the extension of patent term, but they apply to a narrow set of circumstances that do not include any of the situations under consideration in AShI”R.)

More than 13 years after the AShI”R decision was handed down, the Knesset may finally be poised to lay this bit of judicial folly to rest.  The 18-month publication to be discussed in committee today and tomorrow also contains language that would effectively rescind AShI”R with respect to patents, in so doing reinforcing the patent regime in Israel.  According to the bill, a court would be precluded from hearing a claim based on the manufacture, use, sale or offer for sale of an invention that is unpatented, irrespective of the reason why that invention is unpatented. 

Of course, it ain’t over till it’s over, so it’s possible that despite unusual consensus in the legal, business and academic communities about the need to rescind AShI”R, political machinations may do their worst, and this provision of the bill may be buried in committee in order to placate the whims of certain individuals with their own agendas.   Here’s cautious optimism that the MKs on this committee will do the right thing and restore the patent statute’s primacy in governing the protection of new and non-obvious inventions.

 

Cross-Pollination Coming Through The Rye? eBay v MercExchange Cited as Basis for Lifting Injunction in Copyright Case

A copyright case on the US Supreme Court’s docket for next year has caught the attention of the patent community.  Recently the Second Circuit showed why that interest is justified. 

 

The copyright case, Costco Wholesale Corp. v Omega S.A., Docket No. 08-1423, involves the sale by Costco of Omega watches originally purchased outside the USA.  Costco sold the watches in the USA for significantly less than the retail price suggested by Omega.  Since the watches were imprinted on the back with what Omega calls a “globe design”, which Omega had registered with the Copyright Office, Omega filed suit and sought an injunction.  Apparently Omega had put the design on the watches specifically for the purpose of being able to file a copyright infringement suit. 

 

Costco argued that, by virtue of the Supreme Court’s holding in Quality King v L’Anza, Omega’s rights were exhausted by the first sale of the watches abroad.  But in 2009 the Ninth Circuit agreed with Omega that Quality King could be distinguished, since there the first sale had taken place in the USA (with the goods subsequently being exported and then re-imported), whereas in Omega’s case the first sale occurred abroad.  Quality King, said the Ninth Circuit, was silent about the situation in which the first sale occurred outside the USA.  On this basis, the Ninth Circuit held that the first sale abroad did not exhaust Omega’s rights. 

 

The grant of cert in Costco caught the attention of the patent community because of the Federal Circuit’s holding in a series of cases involving Fuji Photo Film and Jazz Photo Corp. (see, e.g. here, here and here).  In the Fuji/Jazz cases, the CAFC ruled that the importation of patent-protected cameras by a third party did not infringe the patentee’s rights if those cameras were originally sold in the USA, exported, and then subsequently purchased by the third party and imported back into the USA.  In such a case, the patentee’s rights were exhausted by the first sale.  However, said the CAFC, if the cameras had first been sold outside the USA (i.e. they were manufactured and first sold abroad), then the first sale did not exhaust those rights. 

 

Thus in substance, the CAFC’s holding in the Fuji/Jazz cases is analogous to the Ninth Circuit’s holding in Costco.  The question then arises, if Omega is reversed by the Supreme Court, will that reversal also apply to patent cases?  In other words, would extension of first sale exhaustion in a copyright case to first foreign sales mean that the doctrine of exhaustion in patent cases also extends to foreign first sales?

 

Technically, exhaustion in the two situations can be distinguished: copyright exhaustion is based in the copyright statute, 17 U.S.C. 109(a), whereas exhaustion in patent cases is doctrinal, owing its existence to judges rather than the statute.  However, beyond this formal distinction, it’s possible to identify underlying policy reasons why universal exhaustion should apply with respect to copyright but not with regard to patents. 

 

For starters, copyright holders (think Disney, the RIAA and the like) have pushed to make copyright universal, and in many ways this has been accomplished through international copyright treaties.  Indeed, outside the USA, you don’t need to register a copyright to enforce it – the second you’ve created an original work in one treaty country that’s embodied in a tangible medium, copyright inheres in that work in all treaty-member countries.  So it’s not a stretch to say that a first sale of a copyrighted work should exhaust the rights in that work, since the rights are in effect universal.  Patents, in contrast, remain territorial – you still need to register the patent in each jurisdiction of interest in order to enforce the patent in that jurisdiction.  Which would correlate with national rather than universal exhaustion upon sale of a patented product by the patent holder, in accord with the CAFC’s position. 

 

These differences in turn can be attributed to the different natures of the things protected by the two bodies of law, and the types of protection afforded.  Patents have a high threshold for validity, viz. novelty, non-obviousness and utility on the substantive side and enabling description (and in the USA, written description) on the formal side.  Furthermore, patents can protect more than is actually disclosed in the patent, and more than just the commercial embodiment of the invention sold by the patentee – in fact, in some countries a patentee doesn’t even need to work his invention in order to for his patent to remain valid.  Also, patents are intended to be a commercial tool, and a means of disseminating knowledge.  In contrast, copyright has a low threshold – originality – and in principle is narrowly limited to the particular expression embodied in the tangible medium.  While copyright has pecuniary component, it also has a personal component attached to it (think of moral rights in civil law jurisdictions), unlike patents.  And the dissemination of useful knowledge is not a prerequisite for copyright, which can in inhere in works of art as well as books.   

 

So it’s possible that even if the SCOTUS decides that under the copyright statute, a first sale abroad can exhaust the copyright holder’s rights, the CAFC could distinguish patent law and still hold that such sales do not exhaust patentee’s rights.  In fact, in the Fuji/Jazz cases, that’s exactly what the CAFC did: in those cases, the CAFC stated – in contrast to the view adopted by the Ninth Circuit in Omega – that Quality King held that first sales, irrespective of where made, exhausted a copyright holder’s rights, but since Quality King was a copyright case, it was distinguishable from patent cases.  Thus, said the CAFC in the Fuji/Jazz cases, Fuji’s first sales abroad did not exhaust its patent rights. 

 

However, it’s also possible that the SCOTUS will treat exhaustion under the copyright and patent contexts as equivalent.  That’s what happened a few years ago in eBay v MercExchange, in which the Supreme Court explicitly drew parallels to the copyright context in reiterating that patent cases are no different from any other kind of case in which the equitable remedy of injuction is sought.  There the Supreme Court reminded the CAFC that, just as in copyright cases, all four factors of the standard test for determining if an injunction is warranted (irreparable injury, remedies at law insufficient to compensate for the injury, balance of hardships, and no disservice to the public interest) apply when awarding injunctions in cases of copyright infringement. 

 

At the end of April, the Second Circuit cited eBay in vacating an injunction given to the heirs of the late J.D. Salinger.  Plaintiffs had alleged that another author’s use of the character of Holden Caulfield, the protagonist in Salinger’s The Catcher In The Rye, in a book set sixty years after Catcher (titled, appropriately enough, 60 Years Later: Coming Through The Rye), infringed Salinger’s copyright in Catcher.  The district court found that (1) Salinger had a valid copyright in Catcher and the Holden Caulfield character, (2) absent a successful fair use defense, Defendants infringed Salinger’s copyright in both Catcher and the Holden Caulfield character, (3) Defendants’ fair use defense was likely to fail, and (4) on the basis of the Second Circuit’s own precedent, which enunciated a two-part test, a preliminary injunction should issue.  The Second Circuit agreed that under its own precedent, an injunction should issue, but that eBay had overturned that precedent and must be adhered to.  Since the District Court had not considered all four eBay factors, the Second Circuit vacated the injunction and remanded to the District Court.

 

It’s unclear if the equivalence drawn between patent and copyright cases by the Second Circuit has implications for the question of first sale exhaustion.  As the Second Circuit noted, “eBay strongly indicates that the traditional principles of equity it employed are the presumptive standard for injunctions in any context”, that the Court in eBay cited to two non-IP cases in noting the proper four-factor test for injunctions, and that the Court had noted that “the creation of a right is distinct from the provision of remedies for violations of that right”.  In contrast, in Omega, no one is asserting that exhaustion by first sale is a universal legal principle in all areas of law – and indeed, unlike injunctions which are applicable in a wide variety of circumstances, exhaustion is a notion that only makes sense in a narrow sphere of law.

 

So the SCOTUS may decide Omega narrowly, and limit its holding to copyright cases; or it may explicitly state that patent cases also have first sale exhaustion.  The latter would be bad news for many companies that practice price discrimination across jurisdictions, but particularly drug manufacturers, who utilize the fact that a sale in one jurisdiction doesn’t exhaust their patent rights in another jurisdiction.  This enables drug manufacturers to charge significantly more for their patented drugs in the USA than in many other jurisdictions, where those prices are often controlled by the government.