Welcome to Skilled in the Art. I'm Law.com IP reporter Scott Graham. Here's a quick rundown of today's briefing:

• The Federal Circuit has answered a question left open by the Supreme Court's Oil States ruling (and wrapped it in a bow if the justices want their own say).

• Medical device company Nevro has made lemonade out of what once seemed like a lemon of a patent ruling. 

• Amazon.com is one tech company Wilson Sonsini won't be representing any time soon.

As always, you can email me your own thoughts and follow me on Twitter.

Chief Judge Sharon Prost (Photo by Diego Radzinschi/ALM)

Now Serving: AIA Retroactivity 

If the Supreme Court really does think that the America Invents Act has a retroactivity problem, it will never have a better opportunity to say so than in Celgene v. Peter.

The Federal Circuit seemed to double-dog dare the justices to take up the issue Tuesday, picking one of Kyle Bass' short-selling cases as its vehicle for ruling that pre-AIA patents remain subject to IPRs.

“IPRs do not differ significantly enough from preexisting PTO mechanisms for reevaluating the validity of issued patents to constitute a Fifth Amendment taking,” Chief Judge Sharon Prost wrote in the opinion. Judges William Bryson and Jimmie Reyna concurred.

The court even hung the loss on the lawyer who defeated the PTO before the Supreme Court last year in SAS Institute v. Iancu. Jones Day partner Greg Castanias would seem to have as good a shot as anyone of putting Celgene on the high court's docket.

The justices dangled this issue last year while ruling in Oil States v. Greene's Energy that Congress properly authorized the PTAB to decide challenges to patent validity. The high court emphasized that its holding was narrow and that it was not deciding whether owners of patents that predate the AIA might have a takings claim.

Castanias argued to the Federal Circuit last month that the Celgene inventors had applied for their patents in the late 1990s. “When Celgene received its property right, it had every reason to believe that the only adversarial litigation it would face to take away its patent would be conducted in district court under a strong presumption of validity, which would have to be [overcome] by clear and convincing evidence,” he said.

Instead, Bass' Coalition for Affordable Drugs pulled Celgene into an IPR, where administrative patent judges decide validity based on a preponderance of the evidence, resulting in much higher “kill rates” than in previous PTO review procedures.

The Federal Circuit has had several opportunities to address the retroactivity issue this year. It chose Celgene to pull the trigger.

Prost reasoned that previous administrative review proceedings at the USPTO, such as ex parte reexamination and inter partes reexamination, are sufficiently similar to IPRs that the difference does not constitute a taking. In all three proceedings, patents are reviewed on the same substantive grounds—anticipation and obviousness, based on the same categories of prior art. They also use the same preponderance standard of proof.

“Celgene is correct that IPRs are 'adjudicatory in nature,'” involving discovery, briefing and an oral hearing. “These differences do not disrupt the expectation that patent owners have had for nearly four decades—that patents are open to PTO reconsideration and possible cancellation if it is determined … that the patents should not have issued in the first place.”

The Federal Circuit also affirmed the PTAB on the merits, finding it properly invalidated almost all of the claims on two Celgene patents that outlined safe steps for administering drugs such as Thalidomide without risking birth defects.

The Coalition for Affordable Drugs—an entity designed to drive down drug prices and manipulate stock values—dropped out of the case after winning and left the PTO to defend the PTAB judgment on appeal. PTO Director Andrei Iancu was recused, probably because of ties between Celgene and his former law firm, Irell & Manella, so Deputy Director Laura Peter appears in the case caption.

Amy Nelson of the Solicitor General's office argued the appeal for the PTO.

Ropes & Gray partner Matthew Rizzolo, who's not involved in the case, said the court's reasoning might not apply to covered business method review, in which review can be expanded to include patent eligibility and indefiniteness.

“Say you got a patent in 2005 on a business method,” Rizzolo said. The patent owner might argue that, had it known about CBM review, “maybe it would have kept it as a trade secret.”

Rizzolo also suggested the Court of Federal Claims might have been the more appropriate venue for determining the takings issue in the first instance, something Judge Reyna asked about during oral argument.

MoFo partner Michael Jacobs. (Photo by Jason Doiy/ALM)

When Bad Rulings Come Back to Help You

Medical device company Nevro got off to an awkward start with patent litigation last year before U.S. District Judge Vince Chhabria. Chhabria found some patents covering Nevro's high-frequency spinal stimulators invalid for indefiniteness, and ruled that potential rival Boston Scientific didn't infringe others.

Since then Nevro and Morrison & Foerster have been reclaiming momentum. Last week Nevro persuaded U.S. District Judge Colm Connolly to enjoin another competitor, Stimwave, from marketing devices that infringe Nevro's patented method of blocking pain via high-frequency signals that don't cause numbness or tingling, also known as paresthesia.

Analysts from JP Morgan Chase and Wells Fargo described the decision as a surprise to the upside, given the difficulty of obtaining injunctions in patent cases. “Big picture, we believe this ruling demonstrates that Nevro has strong, defensible IP for high-frequency stimulation,” Wells Fargo analysts wrote.

Redwood City-based Nevro even got an assist from Chhabria—Connolly cited a portion of his 2018 ruling that is supportive of the company's patents.

Things didn't look so rosy a year ago in the Northern District. Nevro's stock price plunged after Chhabria's order hit the public docket, though most of it was gained back the next day as investors chewed it over.

That didn't stop the Saxena White firm from filing a securities class action against Nevro, based on allegations that Nevro had misled investors about its competitive advantage. Chhabria seemed baffled at a hearing last December.

“It doesn't seem like you really understand my ruling or the implications of it for Nevro,” Chhabria said. “It may be that I'm mis-remembering, but there was nothing in my ruling that affected Nevro's hold on the United States market for this product.” Nevro has asked Chhabria to dismiss the suit.

Then in March, Stimwave announced that it had obtained FDA approval to market its own high-frequency spinal stimulator. Nevro's team, led by MoFo partner Michael Jacobs, moved for a preliminary injunction. Instead of asserting system claims this time, the company asserted the same types of method claims that Chhabria had found valid.

Connolly ruled for Nevro on Wednesday. “I find that Nevro has shown that it will very likely prove Stimwave infringed claims 24 and 28 of the #222 patent and that those claims will also likely withstand Stimwave's invalidity challenges,” Connolly wrote. Without an injunction Nevro would suffer reputational harm from the entry of an inferior Stimwave device into the market, he added.

Stimwave, which was represented by Paul, Weiss, Rifkind, Wharton & Garrisonand Potter Anderson & Corroon, argued that “paresthesia” as claimed by Nevro is subjective and nearly impossible to define. But Stimwave's expert had provided a construction that was “generally consistent” with Chhabria's: “the artificial sensation produced by electrical stimulation, commonly described as tingling or buzzing.”

“I will therefore adopt the construction of 'paresthesia' adopted by the Northern District of California court,” Connolly wrote.

Nevro has plenty of work left to do. Boston Scientific has its own patent infringement suit pending against Nevro in Delaware. Both sides are appealing various aspects of Chhabria's ruling and Stimwave will no doubt appeal the injunction order.

But for now Nevro is feeling good. “Protecting our core intellectual property has always been important to Nevro's success as a business, and today's order affirms once again the strength of our intellectual property,” said General Counsel Kashif Rashid in a statement issued Wednesday.

Also providing counsel to Nevro were MoFo partners Bita Rahebi, Kenneth Kuwayti and associate John Lanham, plus partner Rodger Smith II and associate Lucinda Cucuzzella of Morris, Nichols, Arsht & Tunnell. 

VoiceBox Technologies' Cybermind prototype

Who Got the Work?

Wilson Sonsini Goodrich & Rosati is helping early pioneers of voice recognition technology take a run at Amazon.com.

The Silicon Valley tech law firm is representing VB Assets, the owner of IP developed by Kirkland, Washington's VoiceBox Technologies. VB alleges that VoiceBox developed a prototype voice assistant in the early 2000s called Cybermind. In response to voice queries, Cybermind could provide weather, recipes, sports scores, calendar updates, or play a song.

Toyota and other auto manufacturers used VoiceBox technology to power their speech interfaces, the complaint alleges. (VoiceBox even created an assistant called “Alexus” for the Lexus auto brand.) Company executives began pitching Amazon on their technology in 2011. Amazon allegedly bled them for details of how the technology worked, but rejected a partnership and instead hired VoiceBox's chief scientist and dozens of other VoiceBox engineers.

“Amazon decided to build its Alexa Products—without telling VoiceBox Technologies or asking permission to use VoiceBox Technologies' patented technology,” the complaint states. That “crushed” VoiceBox's business. The founders sold it to Nuance Communications last year, but apparently held onto some of the IP.

VB Assets' complaint is filed in Delaware and signed by Wilson of counsel Ian Liston. Also on the complaint are Wilson partners Edward Poplawski, James Yoon and Ryan Smith; and associates Erik Carlson and Ryan Benyamin.

No word yet on who'll be filing Amazon's motion to transfer to the Western District of Washington. 

That's all from Skilled in the Art today. I'll see you all again on Friday.