Within the last several weeks, the U.S. Court of Appeals for the Federal Circuit (CAFC) has issued two precedential decisions on the topics of inventorship (how does one qualify as an inventor?) and patent-eligible subject matter (what is too abstract to qualify for a patent?). Providing some helpful guidance, these decisions are discussed below. Vapor Suppression System On Aug. 10, 2016, in Vapor Point v. Elliot Moorhead, 1 the Federal Circuit (Kathleen O’Malley, Raymond Chen, Kara Stoll) affirmed per curiam a district court order correcting inventorship to add co-inventors to two different issued patents. Plaintiffs-cross-appellants Vapor Point, LLC, Keith Nathan, and Kenneth Matheson (collectively Vapor Point) brought suit against Elliott Moorhead, NanoVapor Fuels Group, Inc., and Bryant Hickman (collectively NanoVapor) in the U.S. District Court for the Southern District of Texas, seeking to have Nathan and Matheson added as co-inventors on NanoVapor’s U.S. Patent Nos. 7,727,310 (‘310 patent) and 8,500,862 (‘862 patent). Vapor Point alleged Nathan and Matheson were hired by NanoVapor to help Moorhead re-engineer and bring a vapor suppression system to market, that the ‘310 and ‘862 patents wrongfully claimed all of Nathan and Matheson’s work, and that Moorhead wrongfully filed for these patents without consent, notice, or compensation to the plaintiffs. In turn, NanoVapor countersued for infringement of the ’310 patent, and sought to name Moorhead as a coinventor on Vapor Point’s U.S. Patent Nos. 7,740,816; 7,803,337; 8,337,585; 8,337,604; 8,337,763 on the grounds that these five patents are based on Moorhead’s conceptions in the ’310 patent. After an evidentiary hearing on inventorship, the district court issued an order to add Nathan and Matheson as co-inventors on the ‘310 and ‘862 patents and denied each of NanoVapor’s motions. The district court dismissed the case with prejudice. NanoVapor appealed to the CAFC, arguing that the district court erred in its determination of inventorship and ownership. Inventorship Order. The Federal Circuit held that given the evidence uncovered in the evidentiary hearing, the district court was correct in concluding that both Nathan and Matheson should be listed as co-inventors under 35 U.S.C. §256 on the ‘310 patent. The court held that all inventors, even those who contribute to the conception of an invention covered by only one claim or one aspect of one claim of a patent, must be listed on that patent. The district court found, from the evidentiary hearing, that Nathan had contributed to three out of four key aspects of the invention in the ‘310 and ‘862 patents and that Matheson contributed to two out of SERVING THE BENCH AND BAR SINCE 1888 Volume 256—NO. 64 Friday, September 30, 2016 Federal Circuit Addresses Inventorship And Patent-Eligible Subject Matter Patent and Trademark Law Expert Analysis Robert C. Scheinfeld is the partner-in-charge of the New York office of Baker Botts and the head of its intellectual property group in New York. Arun P. Swain, a scientific advisor at the firm, assisted in the preparation of this article. www. NYLJ.com By Robert C. Scheinfeld In ‘Vapor Point,’ the Federal Circuit affirmed per curiam a district court order correcting inventorship to add co-inventors to two different issued patents. the four key concepts. Accordingly, the Federal Circuit affirmed the district court’s inventorship judgment for being supported by substantial evidence. Obligation to Assign. The Federal Circuit also affirmed the district court’s finding that NanoVapor had waived its right to ask the court to rule on ownership. Below, both parties had asserted state law torts claims—including common law fraud, fraud by nondisclosure, unjust enrichment, tortious interference, misappropriation of trade secrets— and, as an affirmative defense to such state law claims, NanoVapor claimed that Nathan and Matheson, who were former employees of NanoVapor, had an obligation to assign their inventions to NanoVapor. But the parties agreed to voluntarily dismiss their state law claims when they also agreed to an evidentiary hearing on inventorship. And, upon dismissing the state law claims, the district court found that NanoVapor had waived its claim relating to the obligation to assign. The Federal Circuit agreed, and further clarified that inventorship and ownership are separate issues and held that “inventorship is a question of who actually invented the subject matter claimed in a patent. Ownership, however, is a question of who owns legal title to the subject matter claimed in a patent.” The CAFC held that both parties’ voluntary dismissal of the state law claims and NanoVapor’s affirmative representation to the district court that resolution of the inventorship issue would dispose of the infringement issue mooted NanoVapor’s affirmative defense that Nathan and Matheson had an obligation to assign any rights in the ‘310 patent to NanoVapor. Judge O’Malley’s Concurrence. O’Malley opined that, pursuant to 35 U.S.C. §261, a written agreement is required for assignment of patent rights. Since NanoVapor admitted that no such writing existed, Nathan and Matheson could not have given NanoVapor legal title to the patents. Accordingly, NanoVapor’s defense would not have survived even if the court addressed it on the merits. Lip-Sync Animation On Sept. 13, 2016, in McRO v. Bandai Namco Games Am., 2 the Federal Circuit (Jimmie Reyna, Richard Taranto, and Kara Stoll) reversed and remanded a California federal court’s decision to invalidate the asserted claims of software patents for lipsync animation technology under 35 U.S.C. §101, holding that the specific types of rules specified in the asserted claims are not directed to abstract ideas and constitute patent-eligible subject matter. In the post-Alice v. CLS Bank3 world, McRO is only the fourth Federal Circuit decision to reverse a lower court’s holding of patent ineligibility and, in this decision, the Federal Circuit provides clear guidelines to what it considers non-abstract, patent-eligible claims. In Alice, the Supreme Court discussed the analysis for determining patent eligibility under §101 and set forth a two-part test: 1) whether the claims at issue are directed to a patent-ineligible concept (e.g., laws of nature, natural phenomena, and abstract ideas) and 2) whether the claims include an inventive concept that ensures that the claims amount to “significantly more” than the patent-ineligible concept. Plaintiff-appellant and patentee McRO, Inc., DBA Planet Blue (collectively McRO) sued several video game developers and publishers (collectively Bandai) in a number of different suits in the Central District of California and the District of Delaware for infringement of U.S. Patent Nos. 6,307,576 (‘576 patent) and 6,611,278 (‘278 patent). Several of the Delaware lawsuits were transferred to the Central District of California, and the defendants filed a Rule 12(c) motion to invalidate the claims of the ‘576 patent and the ‘278 patent as being directed to ineligible subject matter under 35 U.S.C. §101. The combined cases from that court were the subject of the appeal. The ‘576 patent and the ‘278 patent describe motion capture technology and specifically an automated process for animating lip synchronization and facial expressions of animated characters. After holding a claim construction hearing, the district court granted the defendants’ motion on summary judgment that the asserted claims were directed to patent-ineligible subject matter under 35 U.S.C. §101. The district court found the asserted claims too broadly preemptive to satisfy §101 because the claims were not limited to specific rules but rather purported to cover all rules and, consequently, an unprotectable abstract idea. The Federal Circuit applied the Alice two-step test for analyzing whether the asserted claims are patent-eligible. The court reached its holding without reaching step two of the Alice test. After performing a detailed preemption analysis in step Friday, September 30, 2016 one of the Alice test, the court held that the claims were not directed to an abstract idea and therefore protectable. In performing the preemption analysis, the court held that the asserted claims do not preempt all processes for achieving automated lip synchronization because they include specific limitations not directed to an abstract idea. In reversing the district court’s determination, the Federal Circuit cautioned “that courts ‘must be careful to avoid oversimplifying the claims by looking at them generally and failing to account for the specific requirements of the claims.’”4 The court performed an initial claim construction and opined that (1) the specific claimed rules allow for improvements by allowing computers to produce accurate and realistic lip synchronization and facial animation that previously could only be performed by human animators; and (2) that the claims are limited to rules with specific characteristics by setting out meaningful requirements for the claimed rules. The court further held that the claimed rules were limited to a genus of the invention and noted that while genus claims create a greater risk of preemption, genus claims are not unpatentable. The preemption concern arises, the court noted, when claims are not directed to a specific invention and instead improperly monopolize “the basic tools of scientific and technological work.” To determine whether the asserted claims risk preemption, the court instructed courts to consider whether the claims focus on a specific means that improve the relevant technology or are instead directed to a result or effect that itself is the abstract idea and merely invoke generic processes and machinery. The Federal Circuit found that the asserted claims focused on a specific improvement in computer animation technology by automating the use of rules of a particular type. Unlike the inventions in Parker v. Flook, 5 Bilski v. Kappos, 6 and Alice v. CLS Bank, the computer automation and the prior human-performed methods are different. Particularly, the computer in McRO is employed to automate a task previously performed by humans which was driven by subjective determinations rather than mathematical rules implemented by the computer. The court addressed the preemption concern by noting that the asserted claims’ limitations prevent the claims from preempting all techniques for automating 3-D animation that rely on rules. The specific structure of the claimed rules would not prevent broad preemption of all rules-based means of lip synchronization automation unless the limits of the rules themselves are broad enough to cover all approaches. The court further opined that “the description of one set of rules does not mean that there exists only one set of rules, and does not support the view that other possible types of rules with different characteristics do not exist.” Instead, the CAFC pointed to academic literature about the relationship between speech and face shape points to conclude that there are many other possible approaches to automating lip synchronization using rules that can be developed. It concluded that future discoveries in the field are therefore not foreclosed. Importantly, the court advised that by incorporating the specific features of the rules as claim limitations, the asserted claims were limited to a specific process for automatically animating characters using particular information and techniques to achieve an improved technological result in conventional industry practice—and that the asserted claims do not preempt approaches that use rules of a different structure or different techniques. ••••••••••••••••••••••••••••• 1. Vapor Point v. Moorhead, Nos. 2015-1081, -2003 (Fed. Cir. Aug. 10, 2016). 2. McRO v. Bandai Namco Games Am., Nos. 2015-1080, -1081, -1082, -1083, -1084, -1085, -1086, -1087, -1088, -1089, -1090, -1092, -1093, -1094, -1095, -1096, -1097, -1098, -1099, -1100, -1101 (Fed. Cir. Sept. 13, 2016). 3. Alice Corp. Pty. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014). 4. McRO v. Bandai Namco Games Am., (Fed. Cir. Sept. 13, 2016). 5. Parker v. Flook, 437 U.S. 584, 98 S. Ct. 2522 (1978). 6. Bilski v. Kappos, 561 U.S. 593, 130 S. Ct. 3218 (2010). Friday, September 30, 2016 Reprinted with permission from the September 30, 2016 edition of the NEW YORK LAW JOURNAL © 2016 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382 or [email protected]. # 070-09-16-67 In ‘McRO,’ the Federal Circuit noted that the preemption concern arises when claims are not directed to a specific invention and instead improperly monopolize “the basic tools of scientific and technological work.”