Welcome to the first 2018 edition of Skilled in the Art. I'm Law.com IP reporter Scott Graham. I've always heard that the holiday season is a slow time for news. Not so in IP world. All heck broke loose on PTAB sovereign immunity and panel stacking —with potential collateral consequences for the pending Oil States case. Plus the Federal Circuit ordered the PTO to register the FUCT trademark and any other no matter how scandalous or immoral. There was much more but let's consider those two developments then take a peek forward at 2018.

What are you watching in 2018? What would you like to see covered in this briefing? Email me at [email protected].

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PTAB Rules on Sovereign Immunity—and Not Just for Tribes

A Patent Trial and Appeal Board panel led by Chief Judge David Ruschke(above) ruled Dec. 19 that the University of Minnesota waived its state sovereign immunity at the PTAB by asserting its patents on wireless communications in federal district court. In one fell swoop the decision would appear to neutralize the Allergan strategy of “renting” a Native American tribe's sovereign immunity while also pulling state research universities into the PTAB's orbit. Cue the alleged infringer victory lap.

But wait a second. Judge Jennifer Bisk concurred separately in Ericsson v. Regents of the University of Minnesota, saying waiver was the wrong framework to view the case. That's a bright red flag because a) separate opinions are rare at the PTAB and b) Ruschke is Bisk's boss, after all.

So what are the pain points here? Well, the Federal Circuit has said that states do waive their immunity when they sue for patent infringement and the accused then counterclaims for invalidity. Ruschke is analogizing IPRs to counterclaims. He notes that IPRs are “similar to court proceedings inasmuch as they involve adverse parties, examination of witnesses, cross-examination by deposition, findings by an impartial adjudicator, power to implement the adjudicator's decision, the ability of the adjudicator to set a time for filing motions and for discovery, and application of the Federal Rules of Evidence.”

And a litigant sued for infringement must bring an IPR within one year, which makes it similar to a compulsory counterclaim, Ruschke reasoned.

Three problems. The Federal Circuit has said that “where a waiver of immunity occurs in one suit, the waiver does not extend to an entirely separate lawsuit, even one involving the same subject matter and the same parties.” Plus, as Ropes & Gray counsel Matthew Rizzolo points out, this IPR doesn't involve the same parties as the district court litigation—the University of Minnesota asserted its patents against Ericsson's customers in district court. So Ericsson arguably wasn't facing the one-year deadline.

“It's clearly teed up for the Federal Circuit,” says Rizzolo, who expects the university to bring a mandamus action or an appeal under the collateral order doctrine.

Finally, didn't the PTO just tell the Supreme Court in the Oil States constitutional challenge that IPRs are nothing at all like district court litigation? Let's see, page 24, solicitor general's brief on the merits: The argument that IPR “is an adversarial proceeding with all the trappings of litigation … lacks merit,” according to the SG.

Bisk does a better job of staying on message in her concurrence. “To my eye, therefore, far from implicating the sovereignty or dignity of the states, inter partes review simply provides a streamlined, specialized mechanism by which the Patent Office may reconsider a patent grant and correct any mistake,” she wrote. Bisk compares IPRs to in rem proceedings, where the focus is on the property, not the parties. Therefore, sovereign immunity shouldn't attach in the first place.

Rizzolo notes that the high court just last month took up the issue of whether in rem jurisdiction can overcome tribal sovereign immunity. Good luck with this one, Federal Circuit!

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PTAB Not Backing Off Expanded Panels

Ruschke also used Ericsson as an attempt to clear the air—and perhaps respond to the Supreme Court's concerns—about PTAB panel “stacking.”Ruschke added himself and the PTAB's three vice chief judges to the panel that decided the sovereign immunity motion.

Ruschke explained that under PTAB Standard Operating Procedure No. 1, the chief judge has the authority to expand panels to secure uniformity of decision or decide issues of “exceptional importance.” Ericsson, he wrote, fell into the latter category.

Chief Justice John Roberts and Justice Neil Gorsuch had raised concerns at the Nov. 28 Oil States arguments about the PTAB “stack[ing] the deck with judges whom we like.” Deputy Solicitor General Malcolm Stewart told Roberts this had only happened three times, and former PTO director Michelle Lee publicly disclaimed responsibility for the practice last month. But the PTAB continues to assert the authority under the Federal Circuit's 1994 ruling In re Alappat and the practice has become fairly routine. In the last four months expanded panels have set down new rules on serial petitions, statutory disclaimers and now sovereign immunity.

Saint Regis Mohawk Tribe Seeking Discovery—Into the PTAB

Of course, the Saint Regis Mohawk Tribe and its counsel aren't taking this lying down. The tribe, which acquired patents from Allergan and then argued they're immune from challenge at the PTAB, is sensing that the fix is in with regard to its own sovereign immunity argument.

Alfonso Chan of Shore Chan DePumpo formally moved today for discovery and a hearing into which PTAB judges will sit on the panel that decides the issue, and whether it will include Ruschke; how and when the assignments were made; and whether any members of the panel have discussed sovereign immunity with members of Congress. (Rep. Darrell Issa held a hearing on tribal immunity last fall, while Sen. Claire McCaskill introduced a bill that would limit it.)

Chan is also asking for the methodology used to determine bonuses for any member of the panel; their annual reviews and the identity of the person who performs them; and projections of the amount of fee revenue the PTAB would lose “if sovereign immunity were respected by PTAB.”

He also wants discovery on the panel that decided Ericsson and a companion decision that was released the same day, LSI Logic v. Regents of the University of Minnesota. In that case Ruschke and the three vice chief judges joined three other PTAB judges and produced a near carbon-copy decision on sovereign immunity. It even had its own separate concurrence, signed by Judge Jacqueline Harlow, that tracked Bisk's concurrence word for word—notwithstanding that both are written in the first person. “To my eye, therefore, far from implicating the sovereignty or dignity of the states, inter partes review simply provides a streamlined, specialized mechanism by which the Patent Office may reconsider a patent grant and correct any mistake,” Harlow wrote.

Chan asserts that the tribe is entitled to all of this discovery “in the interest of justice.” That includes “due process, the impartiality of the merits panel in this case, and whether political or third-party pressure has been asserted to reach an outcome inconsistent with the binding Supreme Court and Federal Circuit precedents.”

Son-of-Tam—PTO Can't Refuse 'Scandalous' or 'Immoral' Trademarks

“It is undisputed that the word 'fuck' is vulgar.”
That was the easy part of Federal Circuit Judge Kimberly Moore's Dec. 15 In re Brunetti decision striking down the Lanham Act's prohibition on “scandalous” or “immoral” trademarks. Of course it was Judge Moore who got this party started two years ago by ruling that the PTO's refusal to register marks that “disparage” groups or persons violate the First Amendment. The Supreme Court affirmed, and now Moore has ruled that the same goes for the “scandalous” and “immoral” provisions.

Once again Moore turned the PTO's apparent capriciousness in registering trademarks against the agency. She cited an academic paperwhich found that of 40 attempts to register the acronym MILF, 20 were accepted and 20 were rejected. The PTO also registered FCUK despite turning away Erik Brunetti's FUCT mark, Moore noted.

“Although the language in these marks is offensive, we cannot discern any pattern indicating when the incorporation of an offensive term into a mark will serve as a bar to registration and when it will not,” the judge wrote. Even the Trademark Trial and Appeal Board has acknowledged that it's “necessarily a highly subjective” inquiry, she noted.

Brunetti was represented by Stussy GC John Sommer, who occasionally represents third parties. Sommer told my ALM colleague Jennifer Williams-Alvarez that listening to the Tam arguments helped him prepare his own case. Read more here.

What Will 2018 Hold

That's enough looking backward. Let's talk about 2018. What will be the big IP issues of the year? I'm eager to hear your suggestions. I've spoken to several IP lawyers in recent days and I've already got one slam-dunk: worldwide damages for domestic patent infringement.

The solicitor general's office recommended Dec. 20 that the Supreme Court take up Western Geco v. ION Geophysical, a dispute over the damages available under Section 271(f)2 of the Patent Act. That relatively obscure provision allows for a finding of patent infringement if a party supplies a specialized component for assembly of an infringing invention abroad. The Federal Circuit ruled two years ago that ION infringed Western Geco's patents related to marine seismic surveys used to search for oil and gas below the ocean floor. The appellate court upheld an award of $12.5 million in royalties but by a 2-1 vote threw out $93.4 million in lost profits from surveys conducted beyond U.S. territorial waters. Awarding those damages, the court held, would violate the presumption against extraterritorial application of U.S. patent laws.

Last summer, when the Supreme Court requested the SG's views, reaction around the patent bar was muted, perhaps because the question was presented within the narrow 271(f) context. But the SG has taken an expansive view in response, encouraging the Supreme Court to throw out any limit on worldwide patent damages for domestic infringement, including the Federal Circuit's decisions in Power Integrations v. Fairchild Semiconductorand Carnegie-Mellon v. Marvell Technology.

“The presumption against extraterritoriality does not bar courts from taking notice of foreign evidence or events in fashioning appropriate relief for a domestic act of patent infringement,” the SG's brief states.

“With the solicitor general's guidance, the court seems poised to take it up. We'll find out in the first quarter,” said Gregg LoCascio, part of the Kirkland & Ellisteam that's litigating the case.

If the Supreme Court does grant cert, expect a stampede of amicus briefs from the technology industry imploring the high court to stick with the Federal Circuit's approach.

Western Geco is the most obvious candidate for attention in 2018 because of the stakes involved and its likelihood of going to the Supreme Court. Here are a few other cases being mentioned:

➤ For sheer size and complexity, AbbVie's suit against Boehringer Ingelheim over Boehringer's Humira biosimilar is worth some attention. Filed last summer in Delaware, it's been described as the biggest ever biologic patent case. AbbVie contends Boehringer is infringing 74 patents, but has agreed under compulsion of the Biologics Price Competition and Innovation Act to assert only eight. For now. “If and when Boehringer provides its 180-day Notice of Commercial Marketing, and as circumstances otherwise warrant, AbbVie will have the opportunity to assert the remainder of the patents,” the company warned in its complaint. AbbVie did settle an almost-as-big suit against Amgen Inc. over Humira last summer.

➤ Could “assignor estoppel” be on the lips of every patent lawyer next fall? Synopsys Inc. hopes so. With Orrick partner Josh Rosenkranz leading the charge, the company argues in Eve-USA v. Mentor Graphics that it's time to abolish the “judge-made rule” that precludes inventors from challenging the validity of their patents after assigning them to someone else. Assignor estoppel began as a simple rule of equity, but because so many inventions nowadays are automatically assigned to employers, the rule is inhibiting employee mobility, Rosenkranz argues in a Nov. 30 cert petition. This case also presents a damages apportionment issue that generated a couple of dissents from denial at the Federal Circuit. An amicus push is likely in the offing.

➤ And you just never know, 2018 could be the year that Oracle v. Googlecopyright battle makes it to the Supreme Court. After all, Apple v. Samsunggot its moment in the sun last year—why not Silicon Valley's other long-running legal melodrama? The Federal Circuit sure sounded last month as if it's gearing up to throw out Google's fair use verdict. If that happens, Google could ask the high court to wade back into what everyone agrees is a FUBAR area of law. It also could ask the Supreme Court to reinstate Judge William Alsup's original ruling that held the Java APIs not copyrightable.

But what do you all think? What's going to be the Oil States of 2018? Email me your suggestions, as I'm planning to revisit this topic soon. In the meantime, I hope you all had a happy new year and avoided waiving any affirmative defenses.

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