Tag: USPTO
A. Introduction
The dipartite structure of the American patent system, comprising the U.S. Patent and Trademark Office and the federal Article III court system, leads to interesting interactions between rulings made in each of the distinct subsystems. This is especially relevant to the patent system in the context of claim construction. Moreover, because the Federal Circuit has sole jurisdiction over patent cases, their unique frameworks for analyzing procedural and substantive legal issues lead to facially surprising outcomes. Two recent cases applying Federal Circuit precedent illustrate this in relation to the judicial application of collateral estoppel, or issue preclusion.
B. The Broad Strokes of Issue Preclusion
Issue preclusion stands for the idea that, “[o]nce a matter [has been] properly litigated, that should be the end of the matter for the parties to that action.” It is similar, in that sense, to res judicata, but issue preclusion has a distinct scope. Issue preclusion applies where the issue had been previously, properly litigated and the decision on the matter was material to the case in which it was decided. The more important distinction, however, between issue preclusion and res judicata is that issue preclusion does not require “mutuality” between the parties in the case where issue preclusion is being asserted. In other words, the second litigation does not need to be between the same two parties, as is the case with res judicata.
The Federal Circuit, the relevant circuit for this discussion, recognizes exceptions to issue preclusion. The exception with the most interaction with rulings from the PTAB (the appeals board of the USPTO) is that issue preclusion does not apply where the subsequent proceeding applies “a different legal standard.” This was the deciding exception in the two cases that help us understand the implications of this Federal Circuit exception to issue preclusion.
C. Standard Disparities Between PTAB and Article III Courts
The USPTO applies its own particular standards during PTAB proceedings. These are statutorily defined, further interpreted in federal regulations, and expounded upon from the Manual for Patent Examination and Procedure. For the purpose of understanding how PTAB rulings interact with decisions of Article III courts, we will focus primarily on rules relevant to claim construction and patent validity.
- Claim Construction in Front of the PTAB and the Courts
In evaluating the validity of patent claims, the USPTO applies a “broadest reasonable interpretation” when constructing, or determining the meaning of, the claims of the patent under examination. This is relevant during initial examination of the patent by the USPTO’s examiners and on appeal of a final rejection to the PTAB. In other words, the USPTO and PTAB look for the broadest interpretation of the language of the claims that remains reasonable. The courts, on the other hand, apply the Phillips Standard, which “constructs” the claim as one of ordinary skill in the field would understand it in light of the specification and prosecution history any record produced during the original examination of the patent.
This was a potential factor in the rejection of the application of collateral estoppel in our first case, DDR Holdings, LLC v. Priceline.com LLC. Interestingly, it was not a deciding factor in the disposition of the question of issue preclusion. As issue preclusion is an affirmative defense, it must be raised in the answer a complaint. DDR Holdings, however, failed to raise issue preclusion until their brief. The court explicitly notes that this is fatal, in and of itself, but nevertheless evaluates the merits of the request for collateral estoppel. In this case, DDR Holdings sought to estop Priceline from arguing that “merchants providing a service” were not merchants covered under DDR Holdings’ ‘399 patent’s definition of a merchant. Priceline was arguing this based on the prosecution history of the ‘399 patent. During prosecution and initial examination, DDR Holdings had deleted any reference of “providing services” from the definition of merchant within the specification. DDR Holdings had, however, incorporated this earlier, service-inclusive definition, by incorporating the containing preliminary application by reference.
In light of this, the PTAB, during Inter Partes Review initiated by Priceline over the asserted ‘399 patent, found that the portion of the specification nominally defining “merchant” was not, in fact, definitional. Instead, the PTAB applied the broadest reasonable interpretation standard during the Inter Partes Review and found “merchants” to include “producers, distributors, or resellers of the goods or services to be sold.” In other words, the specification did not limit “merchants” because the PTAB did not find sufficient evidence to show that DDR Holdings intended to define “merchant” restrictively via the specification. As such, the broadest reasonable interpretation of “merchant” within the claims would necessarily include purveyors of services.
With this particular ruling, DDR Holdings asserted that the matter had been properly litigated and, therefore, Priceline should be collaterally estopped from asserting their differing construction of merchants in the case before the court. The court noted, however, that it was not bound by the decision of the PTAB because that decision applied the “Broadest Reasonable Interpretation” instead of the court’s Phillips Standard. Because the Federal Circuit, and by extension the district court, must apply the Phillips Standard, issue preclusion could not apply. In other words, Priceline could assert its construction that would exclude “service” providing from the ‘399 patent’s definition of merchants.
Under this standard, the Federal Circuit found the discussion in the ‘399 patent’s specification of “merchant” to be definitional. Furthermore, the Federal Circuit found that the deletion of “services” between the provisional and non-provisional patent to be material and, under the Phillips Standard, found it to explicitly exclude services from the ‘399 claim coverage.
- Inter Partes Review and Collateral Estoppel
The second case, Kroy IP Holdings, LLC v. Groupon, Inc., is more narrowly focused on challenges to invalidity, in the form of Inter Partes Review, before the PTAB. During an IPR proceeding, the PTAB applies a preponderance of evidence standard when determining if a patent is valid or invalid. This is at odds with the standard applied in Article III courts, which instead apply the clear and convincing evidence standard.
In Kroy, Groupon had previously initiated IPR of patents asserted by Kroy IP Holdings. In the IPRs, Groupon prevailed and the asserted patents were found to be invalid. The district court then held that Kroy IP Holdings was collaterally estopped from re-litigating the patent validity presented. After Groupon’s motion to dismiss was granted, Kroy IP Holdings sought appeal, arguing that, given the differing standards, collateral estoppel should not have applied, among other things.
The Federal Circuit ultimately decided in Kroy IP Holding’s favor. First, they noted that, on its face, collateral estoppel—or issue preclusion—could not apply here. This finding was the result of the lowered standard of proof required in front of the PTAB versus that required in front of the court.
The court then addressed a further exception to this exception. Groupon had argued, in favor of precluding Kroy IP Holding form re-litigating patent validity, that the Federal Circuit’s previous decisions stated that PTAB invalidity findings were themselves preclusive. The Federal Circuit disagreed and clarified. The Court explained that PTAB findings on validity only became preclusive once the Federal Circuit had affirmed them. A natural result of this, as described by the court, is that claims found invalid by the PTAB remain in existence until the decision is appealed to the Federal Circuit and affirmed or a district court, applying their heightened standard, independently finds the claims invalid. In other words, only once patent validity has been evaluated under the clear and convincing standard, either on appeal to the Federal Circuit or as a matter of first impression in front of a district court, does the disposition gain preclusive effect.
Because the District Court based its dismissal on the preclusive effect of the PTAB findings and said PTAB findings had not been appealed to the Federal Circuit, the court reversed and remanded.
D. Conclusion
The cases discussed above illustrate a distinct challenge that faces the dipartite American patent system. Because of the differing standards applied by the two bodies that hold sway over patent litigation, parties can be given a functional second bite at the apple when moving between the USPTO and Article III courts. This system is ultimately imperfect and creates duplicative litigation, as demonstrated in both of these cases. This is counterbalanced by the increased efficiency the USPTO and PTAB ostensibly provide to the American intellectual property system. In summary, because of the structure of the American patent system, issue preclusion—or collateral estoppel—remains difficult to invoke in patent litigation.
The development of AI systems has reached a point at which these systems can create and invent new products and processes just as humans can. There are several features of these AI systems that allow them to create and invent. For example, the AI systems imitate intelligent human behavior, as they can perceive data from outside and decide which actions to take to maximize their probability of success in achieving certain goals. The AI systems can also evolve and change based on new data and thus may produce results that the programmers or operators of the systems did not expect in their initial plans. They have created inventions in different industries, including the drug, design, aerospace, and electric engineering industries. NASA’s AI software has designed a new satellite antenna, and Koza’s AI system has designed new circuits. Those inventions would be entitled to patent protection if developed by humans. However, the United States Patent and Trademark Office (USPTO) has refused to assign the patent rights of these inventions to the AI systems.
The USTPO Denies Patent Rights to AI Systems
In a patent application that listed an AI system, DABUS, as the inventor, the USPTO refused to assign the patent right to DABUS and thus denied the patent application. DABUS invented an emergency warning light and a food container. The USPTO based its decision mainly upon a plain reading of the relevant statutes. 35 U.S.C § 115(a) states that “[a]n application for patent that is filed … shall include, or be amended to include, the name of the inventor for any invention claimed in the invention.” 35 U.S.C § 100(a) defines an “inventor” as “the individual, or if a joint invention, the individuals collectively who invented or discovered the subject matter of the invention.” 35 U.S.C § 115 consistently refers to inventors as natural persons, as it uses pronouns specific to natural persons, “himself” and “herself.” 35 U.S.C § 115 further states that the inventor must be a person who can execute an oath or declaration. The USPTO thus refused to extend its interpretation of “inventor” to an AI system, and it has stated that “interpreting ‘inventor’ broadly to encompass machines would contradict the plain reading of the patent statutes that refer to persons and individuals.
The Federal Circuit follows the same approach. In Beech Aircraft Corp. v. EDO Corp., the Federal Circuit held that “only natural persons can be ‘inventors.’” Therefore, in the current U.S. legal system, patent rights cannot be assigned for AI-generated inventions even though such inventions would be entitled to patent protection had they been created by humans.
Decisions regarding the patent protection for AI-generated inventions have spurred some disputes among academics. The creator of DABUS, Stephen Thaler, insisted that the inventions created by DABUS should be entitled to patent protection because DABUS is a system that can devise and develop new ideas, unlike some traditional AI systems that can only follow fixed plans. Stephen Thaler contends that DABUS has not been trained using data that is relevant to the invention it produced. Therefore, he claims, that DABUS independently recognized the novelty and usefulness of its instant inventions, entitling its invention patent protection. Thaler also raises an argument regarding the moral rights of inventions. Although current U.S. patent law may recognize Thaler as the inventor of these inventions, he emphasizes that recognizing him rather than DABUS as the inventor devalues the traditional human inventorship by crediting a human with work that they did not invent.
Some legal academics support the contentions of Stephen Thaler. For example, Professor Ryan Abbott agrees that AI systems should be recognized as inventors and points out that if in the future, using AI becomes the prime method of invention, the whole IP system will lose its effectiveness.
However, there are also objections to Thaler’s contentions. For example, AI policy analyst Hodan Omaar disagrees that AI systems should be granted inventor status because she believes that the patent system is for protecting an inventor’s economic rights, not their moral rights. She points out that the primary goal of patent law is to promote innovations, but Thaler’s proposed changes to patent law do little to do so. She argues that the value of protecting new inventions is for a patent owner rather than an inventor, which means that it makes no difference who creates the value. Thus, she concludes that listing DABUS as inventor makes no difference to the patent system. Omaar further argues that the proposed changes would introduce a legally unpunishable inventor that threatens human inventors, because the government cannot effectively hold AI systems, unlike individuals or corporations, directly accountable if they illegally infringe on the IP rights of others.
Patent Rights to AI Systems in Other Jurisdictions and Insights on U.S. Patent Law
Some foreign jurisdictions take the same stance as the United States. The UK Court of Appeal recently refused to grant patent protection to the inventions generated by DABUS because the Court held that patent law in the UK requires an inventor to be a natural person.
Despite failing to in the US and UK, Thaler succeeded in getting patent protections for the inventions created by DABUS in some other jurisdictions that allowed listing DABUS as the inventor. South Africa granted patent protection to a food container invention created by DABUS. This is the first patent for an AI-generated invention that names an AI system as the inventor. The decision may be partially explained by the recent policy landscape of South Africa, as its government wants to solve the country’s socio-economic issues by increasing innovation.
Thaler gained another success in Australia. While the decision in South Africa was made by a patent authority, the decision in Australia is the first decision of this type made by a court. The Commissioner of Patents in Australia rejected the patent application by Thaler, but the Federal Court of Australia then answered the key legal questions in favor of permitting AI inventors. Unlike patent law in the US, the Australian Patents Act does not define the term “inventor.” The Commissioner of Patents contended that the term “inventor” in the Act only refers to a natural person. However, Thaler successfully argued to the Court that the ordinary meaning of “inventor” is not limited to humans. The Court noted that there is no specific aspect of patent law in Australia that does not permit non-human inventors.
Examining the different decisions regarding the patent application of DABUS in different jurisdictions, we can see that the different outcomes may result from different policy landscapes and different patent law provisions in different jurisdictions.
For example, South Africa has a policy landscape where it wants to increase innovation to solve its socio-economic issues, while in the U.S., the government may not have the same policy goals related to patent law. Australia’s patent law does not limit an “inventor” to mean a natural person, while U.S. patent law specifically defines the word “inventor” to exclude non-human inventors in this definition. Thus, it is reasonable for U.S. patent law not to grant patent rights to AI-systems for AI-generated inventions, unless the legislature takes actions to broaden the definition of “inventor” to include non-human inventors.
The primary goal of the U.S. patent law is to promote innovation. If those who want to persuade the U.S. legislature to amend the current patent law to allow non-human inventors cannot demonstrate that such a change is in line with that primary goal, then it is unlikely that the legislature would support such a change. Whether granting patents to AI systems and allowing those systems to be inventors can promote innovation is likely to be an ongoing debate among academics.
Jason Chen is a third-year law student at Northwestern Pritzker School of Law.