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Patent Infringement: Defensive Strategies for IP Violators.

The progressive development of man is vitally dependent on invention. It
is the most important product of his creative brain. Its ultimate
purpose is the complete mastery of mind over the material world, the
harnessing of the forces of nature to human needs. (Tesla, 1919, p.2)

In 2014, Merck & Company acquired ownership of Idenix Pharmaceuticals, LLC. With this acquisition, Merck assumed ownership over four Idenix patents related to the treatment of the Hepatitis C virus (Balkundi, 2018). Gilead Sciences, Inc. is a competitor of both Merck and Idenix in the pharmaceutical industry. In 2013, Gilead Sciences applied for a new drug application (NDA) with the Food and Drug Administration. This NDA was for a pharmaceutical medication containing the compound Sofosbuvir. In their experimentation, Gilead Sciences had discovered that this compound yielded higher cure rates and less side effects compared with alternative medications (Balkundi, 2018). Gilead utilized this compound to produce and market two treatments for Hepatitis C. These medications were respectively Solvadi and Harvoni (Balkundi, 2018).

The sale of these two medications by Gilead Sciences triggered the filing of multiple legal actions by Merck and Idenix for infringement of their Hepatitis C-related patents (Balkundi, 2018; Weiss, 2016; Yasiejko & Decker, 2016). In defense of these patent infringement suits, Gilead attempted to both (1) invalidate the Merck/Idenix patents; and (2) disqualify the Merck/Idenix patent claims through use of an equitable defense strategy of "unclean hands and waiver" [i.e., inequitable conduct] (Gilead Sciences., Inc. v. Merck & Co., 2016:2). In March 2016, a jury sought to evaluate whether two Merck/Idenix patents (#712 and #499) were invalid as claimed by Gilead. These two patents dealt respectively with chemical compounds and methodologies for administering these compounds in conjunction with other medications in order to treat Hepatitis C. Gilead also claimed ownership of these same chemical compounds through their Sofosbuvir and other methods patents involving the administration of the Sofosbuvir-based drugs Solvadi and Harvoni (Gilead Sciences., Inc. v. Merck & Co., 2016). After an eight day trial, a federal jury rejected the attempt by Gilead to invalidate the 712 and 499 patents. The jury rejected assertions by Gilead that the Merck patents were deficient by virtue of their lacking the characteristics of (a) enablement; (b) novelty; (c) use of adequate/specific language in patent claims; and (d) nonobviousness (Idenix Pharmaceuticals, LLC and Universita Degli Studi di Cagliari v. Gilead Sciences, Inc., 2017). The jury awarded Merck/Idenix record damages of $2.54 billion as compensation for patent infringement by Gilead (Weiss, 2016; Yasiejko & Decker, 2016). In another legal action, Merck/Idenix also sought compensation for lost revenues attributable to the sales of Slovadi and Harvoni by Gilead. In this litigation, the court awarded Merck/Idenix and additional $200 million in damages (Gilead Sciences., Inc. v. Merck & Co, 2016; Balkundi, 2018).

Subsequent to these judicial outcomes, Gilead implemented a defensive legal strategy in order to vacate these damage awards and re-visit the validity of the Merck/Idenix patents. In mounting these defensive strategies, Gilead challenged the descriptive character and terminology used to identify specific claims in the original Merck/Idenix patent filings (Idenix Pharmaceuticals, Inc. Universita Degli Studi Di Cagliari, Centre de la Recherche Scientifique and L'Universite Montpellier II v. Gilead Sciences, Inc. and Gilead Parmasset, LLC, 2015; Idenix Pharmaceuticals, Inc. Universita Degli Studi Di Cagliari v. Gilead Sciences, Inc.,.2015). In February 2016, the U.S. District Court for Delaware overturned the $2.5 billion patent award for violation of Merck/Idenix on the basis that the original patent lacked enablement (Idenix Pharmaceuticals, LLC and Universita Degli Studi Di Cagliari v. Gilead Sciences, Inc., 2018). Under this legal doctrine, the original patent claims of Merck/Idenix were invalidated because descriptive elements of the 712 and 499 patents were not specific enough to permit recreation of the formula by a scientist familiar with this field of research (Idenix Pharmaceuticals, LLC and Universita Degli Studi Di Cagliari v. Gilead Sciences, Inc., 2018; Green, 2018).

Secondly, the U.S. Court of Appeals also affirmed a lower court ruling that negated patent infringement claims and prior judicial verdicts based on business misconduct and litigation misconduct by Merck/Idenix (Gilead Sciences, Inc. v Merck & Co., Inc., Merck, Sharp & Dohme, and Ionis Pharmaceuticals, Inc. 2018). In this appellate case, the court found that under the doctrine of unclean hands, Merck had abrogated its rights to enforce patent infringement claims against Gilead. Merck's unclean hands or misconduct began in the early 2000s with a proposed business alliance with another firm (Pharmasset) which was later acquired by Gilead. The information sharing alliance between the two firms permitted Merck to test compounds invented by Pharmasset for purposes of treating Hepatitis C. The alliance agreement stipulated that while Merck was permitted to test Pharmasset formulations, it could not engage in any activity that would attempt to reverse engineer or disseminate information related to the chemical compounds underlying these experimental discoveries. Additionally, the agreement also required Merck to erect an informational "firewall" that was intended to restrict the distribution of experimental data to any personnel directly involved in the creation of the company's own research and commercialization of Hepatitis C medications. A Merck chemist and patent attorney, Dr. Phillipe Durette, was a participant in information exchanges with Pharmasset regarding the latter firm's research activities into Hepatitis C. Dr. Durette was also in charge of assisting Merck in developing their own patent applications for Hepatitis C drugs and treatment modalities. During discussions with Pharmasset, he did not disclose these work responsibilities which were a clear violation of the informational "firewall" requirement associated with the business alliance. After acquiring Pharmasset, Gilead alleged that Durete's access to experimental research communicated in these exchanges permitted him to submit revised/narrowed patent applications on behalf of Merck that had a higher probability of being granted by the U.S. Patent and Trademark Office [USPTO] (Gilead Sciences, Inc. v Merck & Co., Inc., Merck, Sharp & Dohme, and Ionis Pharmaceuticals, Inc. 2018).

In subsequent litigation, both the trial and appellate courts found evidence that Dr. Durette had provided false testimony regarding his access to Pharmasset experimental activities. Citing prior precedents (Keystone Driller Co. v. General Excavator Co., 1933; Precision Instrument Manufacturing Co. v. Automotive maintenance machinery Co., 1945), the trial and appellate courts concluded that this misconduct by Dr. Durette served to negate the legal rights of Merck to enforce their patent infringement claims against Gilead (Gilead Sciences, Inc. v Merck & Co., Inc., Merck, Sharp & Dohme, and Ionis Pharmaceuticals, Inc. 2018). Thus, the trial court vacated the prior jury award of $200 million to Merck for lost revenues associated with sales of Slovadi/Harvoni by Gilead (Mehrotra & Maclean, 2016).

The legal disputes between Gilead and Merck & Company demonstrate a number of important issues associated with patent infringement litigation. The jury award for damages against Gilead demonstrates the high level of financial risk that firms may experience when attempting to engage in product development activities which infringe on the protected IPs/patents of other innovative companies. Secondly, this pattern of litigation also suggests that firms can deploy effective defensive strategies in order to circumvent the dire legal consequences of patent infringement.

The purpose of this present paper is to explore the range of defensive strategies available to firms/individuals accused of patent infringement. Pursuant to this objective, the paper will undertake a review of the evolution of patent protection and the legal mechanisms for combatting patent infringement litigation in the United States. Through a comprehensive analysis of statutory and case law, the paper will examine how product substitute developers can defend themselves from alleged patent infringement through the defensive strategies of (1) noninfringement (Ford, 2013; Kasdan, 2013; Schwartz, 2008; Warner-Jenkinson v. Hilton Davis Chemical Co., 1995; Brooktree Corporation v. Advanced Micro Devices, Inc., 1993); (2) patent invalidation (Kasdan, 2013; Ford, 2013; Toprani, Maher, & Oliner, 2018; Gugliuzza & Lemley, 2018; Milleman, 2008; Bilski v. Kappos, 2010; Beer Barrel, LLC v. Deep Wood Brew Prods., LLC, 2016; KSR Int'l Co. v Teleflex, Inc., 2007); (3) patent misuse (Belvis, 2008; Quinn, 2011; 2017; Impression Prods. v. Lexmark Int'l, Inc., 2017; Kimble v. Marvel Entertainment, 2015; Boston Store of Chicago v. American Graphophone Co., 1918); and (4) inequitable conduct (Mark & Anenson, 2014; U.S.P.T.O., 2017c; Lex Machina, 2011; Precision Instruments Manufacturing Co. v. Automotive Maintenance Machinery Co., 1945). Finally, based upon a review of associated statutory/case law and other scholarly literature, the paper will highlight the legal requirements and limitations associated with these defensive strategies.

A country without a patent office and good patent laws was just a crab,
and couldn't travel any way but sideways or backways. (Twain, 1889, p.

Patents represent a class of intellectual properties which seek to stimulate innovation, provide competitive advantages and enhance the overall economic performance of firms (Mann & Roberts, 2011; Publius, 1788; Burk & Lemley, 2002; May & Cooper, 2014). Like trademarks and copyrights, patents derive their economic value through securing formal governmental recognition of (a) the IPs' unique design/processes/ideas; (b) the inventor's exclusive rights to commercially develop/utilize their creation; and (c) legal sanctions which can be enforced against entities which may seek to infringe upon the ownership rights of the patent holder (Mann & Roberts, 2011; August, Mayer, & Bixby, 2009; Fitzpatrick & Dilullo, 2017).

Historical Antecedents of Modern Day Patent Protection

European Precursors of Patent Rights

Modern patent rights/protections can be traced to Venice Italy during the late 14th and early 15th centuries (Walterscheid, 1994; Ponchek, 2016; Ladas & Parry, LLP, 2014). During this time period, the Venetian city-state was attempting to bolster its economic and trading position in the Mediterranean by creating a series of laws which (a) restricted the migration of skilled workers from the city-state; (b) provided a 2 year tax holiday/incentive to encourage the immigration of skilled workers (Ladas & Parry, LLP, 2014); and (c) in 1474 formally granted limited-term monopolies to inventors for purposes of commercially exploiting the product of their creative efforts (Ladas & Parry, LLP, 2014; Ponchek, 2016; Walterscheid, 1994).

During the Elizabethan era, the English Queen Elizabeth I also utilized the granting of royal monopolies as a means for attracting skilled artisans to the kingdom for purposes of stimulating technological and economic development (Ponchek, 2016). In fact, toward the end of Elizabeth I's rein, English courts began to restrict the issuance of royal monopolies unless they were related to the creation of new industries (King's Bench, 1615; Ladas & Parry, LLP, 2014). Legislatively, the English Parliament sought to ratify these emerging trends in case law through the passage of the Statute of Monopolies in 1624 (Pasquale, 1929). This statute had
the effect of limiting the power of the Crown to grant monopolies to
making such grants only to inventions for limited periods (14 years--the
duration of two training periods for craft apprentices) and most
importantly only for "manners of new manufacture" that were introduced
into the realm by the recipient of the monopoly. Such grants were,
however, conditioned on their not being "mischievous to the state" (for
example, by raising prices of commodities) or "generally inconvenient."
(Ladas & Parry, LLP, 2014, p. 2)

Thus, the Statute of Monopolies (1624) also had an underlying purpose of granting royal monopolies for inventions that had the ultimate purpose of benefiting society (Ladas & Parry, LLP, 2014). This English tradition of issuing patents for the betterment of society also subsequently influenced the framers of the U.S. Constitution in the development of the IP protection clause for Article 1 of this founding document (Ladas & Parry, LLC, 2014; United States Constitution, 1789; Publius, 1788).

The French Patent Statutes of 1791 reflected a somewhat different focus in the development of inventor rights and IP protections (Galves-Behar, 2010; 2015). In the immediate aftermath of the French Revolution, egalitarianism permitted inventor associations to actively lobby the Republican Government for the adoption of a new patent law (Galves-Behar, 2015). The driving force behind the development of patent law during this time period was Stanislas de Boufflers (Grangeat, 1976). De Boufflers proposed that the thoughts and ideas of inventors constituted their own personal property. For de Boufflers, these personal creative properties were viewed to evolve from the natural rights of man. Therefore, formal examination of patent applications by governmental entities was viewed as being both unnecessary and/or inappropriate (Archives parlementaires, 1ere serie, 1790). He also advocated that the creative property of inventors also deserved protection for specific time intervals (Galves-Behar, 2015; Grangeat, 1976). In France, patent statutes were adopted in both January and May of 1791. As a result of these statutory enactments, approximately 15 patents were issued annually by the French government between 1791 and 1801 (Galves-Behar, 2015). This slow rate of patent issuance was attributed to the relatively high cost of obtaining patents from the government. The governmentally imposed tax for a 15-year patent was 1500 francs. This monetary amount was equivalent to 100 times the annual daily wage of most French workers (Galves-Behar, 2015). Additionally, the legal complexities necessary to defend an inventor's intellectual properties against infringers was also identified as a significant impediment to the growth of patents in the French Republic (Archives Nationales, 1819).

Prior to the French Revolution, the transfer or sale of inventions/IPs by their creators to other individuals required royal permission (Galves-Behar, 2015). However, with the passage of the French Patent Statute of 1791, patent owners were
entitled to form establishments throughout the Kingdom, and even to
allow other individuals to put it into practice and to use its resources
and processes; and in any case, may use it as a movable property.
(Patent Law of the French Republic, 1791: Article 1)

The amended French patent statute of May 1791 also sought to provide a systematic registration process for patent assignments or licenses. Agreements underlying the transfers of patented IPs had to be notarized and then filed in the Directoire of the Department (i.e., geographic region) of the patent owner and assignee. This registration process was required in order for patent owners to initiate infringement litigation against other persons/entities for violation of these assignment/licensing agreements (Regnault, 1825). These early patent regulations were again amended in 1844. These amendments required that patent sales or transfers had to be recorded in a government document entitled the Bulletin des lois (Galves-Behar, 2015). Consistent with prior legislation, the Act of 1844 also failed to create a formal government department tasked with conducting reviews to determine the validity of proposed patents. Thus, patents were issued
sans garantie du gouvernement ("without governmental guarantee", the
famous "SGDG"). As a consequence, the risk of having a non-valid
patent--because of default of novelty, for instance--was only supported
by the patentee. Such a feature had some implications for the patent
transfer. Selling a patent could be void if the patent itself was
invalidated by a court. In the French patent system, since no state
administration took the responsibility to give the patent a mark of
recognition, the value of a patent depended only on the confidence of
stake-holders or on a court decision: patents gave, in fact, highly
risky rights. (Galves-Behar, 2015, p. 7-8)

Development of Patent Systems and Patent Rights in the United States during the 18th Century

In its founding documents, the United States took definitive steps in order to preserve and protect intellectual properties by means of patents and copyrights (May & Cooper, 2014). Prior to ratification of the U.S. Constitution (1789), the Federalist Papers advocated that the national government should undertake steps to secure the ownership rights of intellectual properties (IPs) to their creators (Publius, 1788). Writing as Publius in Federalist Number 43 (Publius, 1788), James Madison proposed that individuals have a right to control and utilize their inventions. Madison further theorized that preservation of these individual rights to IPs was essential to supporting the public good and was not a matter that should be delegated to the States (Publius, 1788). These observations by Madison were critical in creating constitutional responsibilities for Congress in both protecting IPs and promoting technological innovation in the United States (May & Cooper, 2014). As articulated in Article 1 of the U.S. Constitution, Congress is given the responsibility to "promote the progress of science and useful arts, by securing, for a limited time, to authors and inventors, the exclusive right to their respective writings and discoveries" (United States Constitution, 1789: Article 1, Section 8).

As a supporter of intellectual property rights, President George Washington utilized his first State of the Union Address to challenge Congress to develop legislation in fulfillment of this constitutional mandate. In his address to Congress, Washington stated that:
The advancement of Agriculture, Commerce and Manufactures, by all proper
means, will not, I trust, need recommendation. But I cannot forbear
intimating to you the expediency of giving effectual encouragement as
well to the introduction of new and useful inventions from abroad, as to
the exertions of skill and genius in producing them at home... Nor am I
less persuaded, that you will agree with me in opinion, that there is
nothing, which can better deserve your patronage, than the promotion of
Science and Literature. Knowledge is in every Country the surest basis
of public happiness. (Washington, 1790, p. 2)

Congress responded to this Presidential mandate by enacting the Patent Act of 1790. Under this initial patent law, the authority to issue patents was granted to a Board consisting of three Cabinet-level government officials. These officials were respectively the Secretary of State, the Attorney General and the Secretary of War (Federico, 1954). The Act of 1790, also sought to deal with the issue of patent infringement by recognizing that patent holders should be entitled to monetary damages as determined by jury (Means, 2013). A number of deficiencies in the nation's original patent law were addressed in the Patent Act of 1793. While the Cabinet-level Board of government officials was favorably disposed to review and grant patents to inventors, (a) their other duties precluded them from effectively managing the nation's fledgling patent process; and (b) their efforts were hampered by the 1790 statute's failure to specify adequate criteria to be used in screening the patent applications of inventors (Federico, 1954; Ladas & Parry, LLP, 2014). The Act of 1793 sought to resolve these issues by implementing several changes in the 1790 Act. The 1793 statute made the patent application largely a clerical function whereby patents were granted to applicants filing all required paperwork and after payment of appropriate fees (Patent Act of 1793; Federico, 1954). Another major change in patent law occurred with the 1793 Act's specification of the subject matter that could be afforded legal recognition and protection by the U.S. Government. Under the 1793 statute, inventors could be awarded a patent for "any new and useful art, machine, manufacture or composition of matter, or any new and useful improvement on any art, machine, manufacture or composition of matter" (Patent Act 1793: Section 1). This original definition of patentable IPs has largely remained the basis for determining the type of inventions which can be awarded patent protection under current U.S. patent law (35 U.S.C. 101). The only major distinction between the 1793 Act and current law is that the modern statute replaces the term "art" with "process" (Ladas & Parry, LLP, 2014). The 1793 Patent Act also sought to (1) better articulate the compensatory principles governing patent infringement awards by U.S. courts; and (2) exclude foreigners from the patent rights/protections available to U.S. citizens under the Act. With respect to compensatory issues, the 1793 Act stated that monetary damages for patent infringement "shall be at least equal to three times the price, for which the patentee has usually sold or licensed to other persons, the use of the said invention" (Patent Act of 1793, p. 122).

Development of Patent Systems and Patent Rights in the United States during the 19th Century

For the next 220 years, U.S. patent law was incrementally changed through both statutory action and judicial decisions (Federico, 1954; Ladas & Parry, LLP, 2014). Congress enacted changes to U.S. patent law in both 1800 and 1832 in order to expand the IP rights of foreign citizens. In 1800, Congress amended the 1793 statute to permit foreigners that had been U.S. residents for two years to apply for patents provided that they made an "oath" certifying their belief that their invention had not been previously known/utilized in the United States or other nations (Ladas & Parry, LLP, 2014). The issue of public knowledge of and/or novelty of the invention also created both legislative issues for the U.S. Congress (Patent Act of 1790; Patent Act of 1793) and litigation issues for the U.S. judiciary (Bedford v. Hunt, 1817). The 1790 patent statue required patent applicants meet two requirements. Thus, inventors had to certify that they were (1) the first and true inventor of the IP; and (2) that the IP had not been previously known or utilized by the public. The 1793 statute further refined these regulations by requiring that successful patent applicants be the true inventor of the IP and that their invention could not have been known or utilized prior to the patent application. The 1800 amendments to the 1793 statute altered this requirement by mandating that the invention could not be known/utilized previously either in the United States or other countries (Ladas & Parry, LLP, 2014).

From 1800 to 1832, the federal courts attempted to resolve a number of legal issues that resulted from both the application and emergent deficiencies in U.S. patent law. Since the amended 1793 patent statute had not created or resourced a governmental infrastructure to properly screen/evaluate patent applications, multiple inventors often claimed to be the true inventor of an IP (Ladas & Parry, 2014). This legal dilemma was initially dealt with by the federal courts in Bedford v. Hunt (1817). In its decision, the federal court ruled that in situations where multiple parties claimed to be true inventors, a patent should be awarded to the party that first commercialized (i.e., reduced to practice) the IP. The public use of inventions prior to submitting patent applications was also a legal issue raised in Pennock v. Dialogue (1829). This case afforded the Supreme Court an opportunity to evaluate the legitimacy of a common inventor practice. This practice was exemplified by inventors both publicly utilizing their inventions/discoveries while simultaneously delaying the filing of patent applications until emergent competition entered the marketplace. Given these circumstances, the Supreme Court ruled that it was appropriate to deny patent protection to any inventor that had publicly utilized their inventions in prior situations (Pennock v. Dialogue, 1829). In 1832, another landmark case decided by the Supreme Court would have implications for drafting the patent acts of both 1832 and 1836. This case, Grant v. Raymond (1832), established legal precedents related to both initial patent filings/applications and corrections of deficiencies in these documents. The Court's decision in Grant v. Raymond (1832) had great significance for defendants in patent infringement litigation. The Court stated that inventors were required in their patent filings to provide a detailed description of their IPs. These requirements would be later codified in the Patent Act of 1836 whereby inventors were required to differentiate their IPs from prior inventions by "specify[ing] and point[ing] out the part, improvement, or combination, which he claims as his own invention or discovery" (Patent Act 1836: Section 6). The Court reasoned that a failure to include this detailed information in a patent filing by plaintiffs could be used by defendants as a valid defense in patent infringement litigation. The Supreme Court also authorized the federal government to permit inventors to resubmit patents in order to correct errors/deficiencies in their original patent filings. This ruling was also codified in amendments to patent law in 1832. These 1832 changes in patent law also expanded the ability of resident aliens to secure U.S. patents. Requirements of the statute required (1) these resident aliens to affirm their intention to become a U.S. citizen within 2 years; and (2) the voiding of their patent should they not undertake action to publicly utilize their invention within 1 year of the patent issuance (Ladas & Parry, LLP, 2014).

By 1836, the Congress of the United States was again compelled to craft legislation in order to remedy deficiencies in prior law. In these legislative activities, Congress had perceived the need to resolve inventor frustration over the federal government's failure to evaluate or screen patent applications based upon novelty and other criteria included in the 1793 statute (Federico, 1954). In responding to these patent review criticisms, the patent statute of 1836 (Chapter 357, 5 Stat. 117) was enacted. This patent statute formally created the U.S. Patent Office and allocated to this Office the responsibility for reviewing patent applications in order to verify the applicant's compliance with statutory requirements for obtaining government recognition and legal protections for their IPs (Chapter 357, 5 Stat. 117; Federico, 1954). The U.S. Patent Office was also given the authority to refuse the issuance of patents to inventors not meeting statutory requirements of the Act (Federico, 1954). Additionally, the Act of 1836 also eliminated any restrictions on foreign citizens participating in the U.S. patent applications process (Ladas & Parry, LLP, 2014). In 1839, Congress amended the 1836 statute by permitting inventors to have a 2-year grace period which permitted them utilize their IP before filing a patent application (Ladas & Parry, LLP, 2014).

The Supreme Court also crafted a landmark decision in 1850 regarding the validity of patents based on novelty or nonobviousness (Hotchkiss v. Greenwood, 1850). In this litigation, Hotchkiss and his colleagues had sought to patent a method for making knobs out of potter's clay or porcelain. Greenwood disputed the validity of the patent on the grounds that the actual design of the knobs was subject to earlier patents and that Hotchkiss had merely substituted a different material system in the exterior fabrication of the knob. Hotchkiss countered this legal contention by observing that no prior inventor had been successful in uniting the iron components of earlier designs with the clay/porcelain exterior components contained in their patent application. In deciding the case, the Court ruled that the Hotchkiss patent was invalid because it was neither novel nor non-obvious to persons skilled in the manufacture of these devices. In invalidating the Hotchkiss patent, the Court stated
that knobs of metal, wood, & connected with a shank and spindle, in the
mode and by the means used by the patentees in their manufacture, had
been before known, and were in public use... the only novelty which
could be claimed on their part was the adaptation of this old
contrivance to knobs of potter's clay or porcelain; in other words, the
novelty consisted in the substitution of the clay knob in the place of
one made of metal or wood... In other words, the improvement is the work
of the skillful mechanic, not that of the inventor. (Hotchkiss v.
Greenwood, 1850, pp. 265, 267)

Two other significant revisions were made in U.S. patent law in the 19th century with the passage of the Act of 1861 and Act of 1870 (Federico, 1954). The 1861 statute provided for the appointment of three examiners-in-chief tasked with the responsibility for evaluating appellate activities associated with patents that had been previously reviewed by other examiners. Patent grants for (1) utility patents were set at 17 years; and (2) design patents were to be issued for either 3 1/2, 7 or 14 years based upon applicant preferences. Another major change in the patent law involved requirements for right holders to identify/mark their IPs with patent designations and/or inform infringers of the existence of their patents. These marking and patent notification activities by right holders were a necessary precondition for being able to secure compensatory damages from patent infringers (Patent Act of 1861). The Act of 1870 was an outgrowth of a governmental commission that sought to examine, consolidate and potentially revise all statutory law in the United States (Federico, 1954). While focusing on patents, the 1870 statute also sought to address issues associated with copyright and trademark law (Federico, 1954). Additionally, the statute also created within the U.S. Patent Office a new position (i.e., examiner in charge of interference) in order to resolve disputes among multiple patent applicants claiming to be the first inventor of an IP. The statute further codified provisions in the 1836 Act which had permitted inventors to have a 2-year grace in using their IPs before filing patent applications. Under the Act of 1870, patent applications could be rejected for lack of novelty if there was any evidence of the public sale or utilization of the IP prior to the start of the 2-year grace period. The Act provided for the rejection of the patent application for lack of novelty "irrespective of whether that sale or use was by the applicant for the patent" (Ladas & Parry, LLP., 2014, p. 5). Finally, despite 60 amendments or slight revisions to the statute over the next 78 years, the Act of 1870 remained the principal legal framework for reviewing/granting patents, invalidating patents and resolving patent infringement litigation (Federico, 1954).

Development of Patent Systems and Patent Rights in the United States during the 20th and 21st Century

The Patent Act of 1952 (with amendments) constitutes the modern statute impacting inventors, the protection of patented IPs and the rights of plaintiffs/defendants in patent infringement litigation (Federico, 1954). The Act of 1952 was a byproduct of the efforts of the U.S. House of Representatives Judiciary Committee to perform a comprehensive review, consolidation and/or revision of Congressional patent initiatives and amendments to the 1870 patent statute as codified in the U.S. Code in 1926. These activities were conducted by a subcommittee of the Judiciary Committee that had oversight responsibility for patents (Federico, 1954). The Patent Act of 1952 and its subsequent amendments now constitute Title 35 (sections 1-390) of the U.S. Code.

Title 35 is comprised of multiple parts/sections dealing with a range of topics associated with the granting and enforcement of patents in the United States (35 U.S.C. 1-390). Currently Title 35 consists of five Parts which articulate regulations covering (a) Operations and Authority of the U.S. Patent and Trademark Office (Part 1: Sections 1-42); (b) Patentability of Inventions and Grant of Patents (Part 2: Sections 100-212); (c) Patents and Protection of Patent Rights (Part 3: Sections 251-329); (d) The Patent Cooperation Treaty (Part 4: Sections 351-376); and (e) The Hague Agreement Concerning International registration of Industrial Designs (Part 5: Sections 381-390).

Patenting Inventions under Title 35 Of the U.S. Code

Patentable Inventions

As noted above, Title 35-Part 2 concerns itself with the patentability of inventions and patent grants issued by the U.S. Patent and Trademark Office (USPTO). Section 101 of Title 35 states that patents can be issued to:
Whoever invents or discovers any new and useful process, machine,
manufacture, or composition of matter, or any new and useful improvement
thereof, may obtain a patent therefor, subject to the conditions and
requirements of this title. (35 U.S.C. 101)

Title 35 identifies two major conditions/attributes that influence whether a patent may be granted to an invention under U.S. law. Consistent with prior case and statutory law, the current patent statue identifies these conditions as reflecting both the prior art/novelty and non-obviousness of the invention (35 U.S.C. 102, 103).

Prior Art/Novelty Requirements

When addressing the prior art/novelty requirements for patent issuance, Section 102 (a) of the patent statute states that:
A person shall be entitled to a patent unless--(1) the claimed invention
was patented, described in a printed publication, or in public use, on
sale, or otherwise available to the public before the effective filing
date of the claimed invention; or (2) the claimed invention was
described in a patent issued under section 151, or in an application for
patent published or deemed published under section 122(b), in which the
patent or application, as the case may be, names another inventor and
was effectively filed before the effective filing date of the claimed
invention. (35 U.S.C.: Chapter 10, Section 2012(a))

Therefore, under the prior art/novelty requirement, a patent will not be issued by the USPTO if the invention described in the patent application was previously known or used by other persons/entities prior to the filing of the application (Quinn, 2017; Miao & Grimm, 2014;, 2018). These persons/entities can reside either in the United States or foreign countries (Quinn, 2017). Evidence of prior art or lack of novelty can occur if IPs contained in the invention have previously appeared or been disclosed prior to the patent filing date (35 U.S.C. 102). Prior art or a lack of novelty can be evidenced through a variety of mechanisms including (a) prior patents; (b) professional/scientific journals or printed publications; (c) presentations at professional/scientific conferences; (d) videos, lectures and voluntary information exchanges with other persons/entities; (e) sales presentations; (f) the existence of competitive products containing IPs included in the patent filing; and (g) any public use or sale of the invention-related IPs prior to the patent filing date (Quinn, 2017; Miao & Grimm, 2014;, 2018;, 2018). The current patent statute provides one exception to these prior art/novelty restrictions for inventors. Thus, under the statute, disclosures/use of IPs contained in the patent would not violate the prior art/novelty requirement if made by the inventor within one year of the date of the patent filing. Public disclosures/use of these IPs (1) by the inventor prior to the 1-year grace period; and/or by (2) other persons at any time do not qualify for this statutory exception (35 U.S.C. 102; Quinn, 2017).

Non-obviousness of Subject Material Claimed in the Patent Filing

Section 103 of the current patent statue creates a second hurdle or requirement for issuance of patents to inventors. This requirement involves the degree to which IPs included in a patent filing are obvious and thereby lack novelty or evidence of true inventiveness (USPTO, 2017). The statute states that:
A patent for a claimed invention may not be obtained... if the
differences between the claimed invention and the prior art are such
that the claimed invention as a whole would have been obvious before the
effective filing date of the claimed invention to a person having
ordinary skill in the art to which the claimed invention pertains.
Patentability shall not be negated by the manner in which the invention
was made. (35 U.S.C.: Chapter 10, Section 103)

The federal courts have attempted to address the issue of non-obviousness of patented inventions numerous times in the past 168 years. As previously noted, the U.S. Supreme Court originally dealt with the issue of obviousness/non-obviousness of patentable inventions in Hotchkiss v. Greenwood (1850). A 1966 case involving the John Deere Company (Graham v. John Deere Company, 1966) also provided the Court with an opportunity to readdress the obviousness/non-obviousness requirement of the patent statute. In this case, William Graham had filed a patent for a shock absorbing device that would lessen damage to plows operating in rocky soil. This original patent (US 24943811) was granted by the USPTO. Graham developed improvements to his original design and applied for a subsequent patent on the device in 1953. This patent was also granted by the USPTO (US 2627798). Subsequent to the issuance of this second patent, Graham sued the John Deere Company for infringing on his improved patented design. The District Court of the Western District of Missouri concluded that the John Deere Company had infringed upon the improved patent issued to Graham. This decision was upheld by the U.S. Court of Appeals for the Fifth Circuit but later overturned in an additional appeal initiated by the John Deere Company to the U.S. Court of Appeals for the Eight Circuit (John Deere Company v. Graham, 1964). The Eight Circuit invalidated the improved Graham patent and thereby concluded that an infringement action could not be sustained against a patent that no longer existed. In providing a final resolution to this case, the U.S. Supreme Court stated that the "determination of 'nonobviousness' is made after establishing the scope and content of prior art, the differences between the prior art and the claims at issue, and the level of ordinary skill in the pertinent art... With respect to each patent involved here, the differences between the claims in issue and the pertinent prior art would have been obvious to a person reasonably skilled in that art" (Graham v. John Deere Company, 1966: 2). Based upon elements of the improved design being obvious to persons skilled in this technology, the U.S. Supreme Court upheld the invalidation of both Graham's improved patent and his associated patent infringement suit (Graham v. John Deere Company, 1966). Finally, in adjudicating KSR International Co. v. Teleflex Inc. (2007), the U.S. Supreme Court issued a ruling that required the U.S. Patent and Trademark Office (USPTO) to craft an explicit rationale supporting any rejection of a patent on the basis of obviousness. In response to this judicial ruling, the USPTO developed a list of criteria that examiners were to use in evaluating an invention's obviousness or lack of this attribute (USPTO, 2017). Thus, USPTO patent examiners may reject a patent application for obviousness if the patent filing exhibits any of the following criteria:

(A) Combining prior art elements according to known methods to yield predictable results;

(B) Simple substitution of one known element for another to obtain predictable results;

(C) Use of known technique to improve similar devices (methods, or products) in the same way;

(D) Applying a known technique to a known device (method, or product) ready for improvement to yield predictable results;

(E) "Obvious to try"--choosing from a finite number of identified, predictable solutions, with a reasonable expectation of success;

(F) Known work in one field of endeavor may prompt variations of it for use in either the same field or a different one based on design incentives or other market forces if the variations are predictable to one of ordinary skill in the art;

(G) Some teaching, suggestion, or motivation in the prior art that would have led one of ordinary skill to modify the prior art reference or to combine prior art reference teachings to arrive at the claimed invention (USPTO, 2017a, p. 4).

Stephen Hawking: "We think we have solved the mystery of creation. Maybe
we should patent the universe and charge everyone royalties for their
existence." (, 2018)

Patent Infringement

Title 35 Section 271 of U.S. patent law outlines a series of actions in which individuals/entities can infringe or violate the patents assigned to inventors by the U.S. government. These actions have been referred to by members of the legal community as representing either (1) direct infringement [Section 271 (a)]; (2) inducement [Section 271(b)]; and (3) contributory infringement [Section 271 (c)] (Bartholomew & McArdle, 2011; Lemley, 2005; Karshtedt, 2014; Rantanen, 2011; Toprani, Maher, & Oliner, 2018). Of the three types of patent infringement, direct infringement constitutes the primary basis of most patent infringement litigation (Ratanen, 2011). This mode of infringement occurs whenever a person/entity without permission or authorization from the patent holder "makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent" (35 U.S.C. 271(a)). Both the courts and the patent statute have sought to conceptualize inducement "as a broad range of actions by which one in fact causes, urges or encourage[s], or aids another to infringe a patent" (Fromberg, Inc. v. Thornhill, 1963:407). Contributory infringement is exemplified by the actions of third parties who facilitate patent infringement by selling, offering for sale or importing components of patented inventions which can be subsequently used by others to craft products/devices which directly infringe on the patent owner's IPs (35 U.S.C. Section 271(c), Karshedt, 2014). Prior to the passage of the Patent Act of 1952, the judiciary often linked both inducement and contributory infringement. Their rationale was that third parties were often induced to support the infringement of others by providing components of patented inventions (Thomson-Houston Elec. Co. v. Ohio Brass Co., 1897; Lemley, 2005).

Based upon contemporary jurisprudence, Toprani, Maher, and Oliner (2018) have attempted to compile a series of actions which may constitute evidence of each of the aforementioned modes of infringement. According to these attorneys,

1. Direct Infringement. Occurs when:

* A party imports a patented invention into the United States.

* Depends on strict liability. This means that no intent is required for infringement to take place.

* A party deliberately uses, sells, manufacturers, or offers for sale a patented invention within the United States.

2. Contributory Infringement. Occurs when:

* A party sells, offers to sell, or imports a component, material, or apparatus for manufacturing or practicing any process protected by patent.

* The only use of that component, apparatus, or material is for the purpose of practicing that patented process.

* There must be no other substantial use for the infringing material other than to violate the existing patent. Such materials are called 'staple goods'.

* Requires that the person had knowledge of and the intent to infringe upon the patent.

* Finally, for this standard to hold up, a third party has to commit direct infringement.

3. Inducement. Occurs when:

* A party induces or encourages another to participate in an action that infringes the patent. The party must also have knowledge that the acts undertaken comprise infringement.

* Requires knowledge of and intent by the defendant. Demonstrates that the defendant believed there was a possibility of infringement. They actively attempted to avoid confirmation of the fact.

* There must be active efforts to avoid confirming a suspicion of infringement. Mere clumsiness or negligence is not enough (Toprani, Maher, & Oliner, 2018: 4).

Financial Consequences for Patent Infringers

In patent infringement cases, damages are generally awarded in order to compensate the IP right holder for lost profits, the effects of price erosion and lost royalties (35 USC Section 284; McGrath & Kendrowski, 2010). Between 2000 and 2008, the majority of damages (81%) awarded by federal courts have been to compensate patent holders for royalties they should have received if infringers had legally licensed their patented IPs (McGrath & Kendrowski, 2010). In only 18% of patent infringement cases were damages awarded to compensate patent holders for lost profits. Compensation for the effects of price erosion were awarded in only 1% of cases (McGrath & Kendrowski, 2010). McGrath and Kendrowski (2010) also reported the 10 largest damage claims awarded by U.S. courts between 1982 and 2008. The average of these "top 10" damage awards was $241,379,731. The Center for Global Innovation/Patent Metrics (2015) published a 22-page table which recorded a sample of damage awards and settlements associated with patent/copyright infringement in the United States between 1958 and 2015. The authors of this present paper tabulated data contained in this table in order to identify damages awarded by U.S. Courts for patent infringement between 2000 and 2015. Data in this secondary analysis (a) was aggregated by industry; and (b) included only those awards which were not subsequently overturned by U.S. appellate courts. A total of 92 lawsuits in the Center's table met these data sampling conditions. An examination of this secondary data set revealed that the largest number of damage awards occurred for patent infringement associated with (1) electronics; (2) IT/software; (3) pharmaceuticals; (4) medical devices; (5) chemicals; and (6) mechanical devices. The largest monetary patent award in the sample emanated from a law suit involving a patented electronic device. The amount of this damage award was $1.54 billion. Average damage awards also varied by industry. Litigation in the pharmaceutical industry yielded the highest average damage awards for infringed patents at $227.8 million. Average monetary damages awarded for infringement among the remaining industries/products included in this secondary data set were (a) $147,343,120 (electronics); (b) $132,362,345 (software/IT); (c) $112,094,768 (medical devices); (d) 49,281,250 (chemicals); and (e) $12,541,863 (mechanical devices).

Tesla: "I don't care that they stole my idea... I care that they don't
have any of their own." (Brown, 2016, p. 8)

Infringement litigation represents a significant strategic and financial threat to firms desiring to develop competitive substitutes for patented IPs/products (Fitzpatrick & Dilullo, 2006). However, there exist a number of defensive strategies that firms can utilize in order to avoid both (a) the financial penalties associated with patent infringement; and (b) disruptions in the use/commercialization of their product substitutes. The two major strategies used as primary affirmative defenses in patent infringement litigation involve attempting to (1) prove that the product substitute does not infringe on the patented IPs (i.e., noninfringement defense); and (2) invalidate the patent of the original inventor (Toprani, Maher, & Oliner, 2018; Ford, 2013). Additionally, alleged patent infringers have also successfully deployed patent misuse and inequitable conduct as defensive strategies in infringement litigation (Toprani, Maher, & Oliner, 2018; Mark & Anenson, 2014; Belvis, 2008; Quinn, 2011).

Noninfringement Defenses

Patents convey to their owners the legal right to monopolize the IPs contained in their inventions (Ford, 2013; 35 U.S.C. 112). Claims or inventive attributes included in the patent filing/application describe the parameters of legal protection sought by the inventor and thereby impose limitations on their legal monopoly to exclusively exploit the invention (Philips v AWH Corp., 2005). The basis of a noninfringement defense is that the attributes of a product substitute either (1) do not violate the specific protected claims/inventive attributes included in the patent; and/or (2) fall outside the legal monopoly granted to the inventor by the USPTO (Ford, 2013). In addressing these legal arguments, the manner in which courts interpret specific claims and/or terminology in the patent application have a profound impact on judicial decisions rendered in patent infringement cases (Ford, 2013; Kasdan, 2013). In Markman v. Westview Instruments, Inc. (1996), the U.S. Supreme Court ruled that judges in initial trial courts have the responsibility for interpreting the claims or descriptive language used in defining the inventive attributes contained in patent applications/filings. This activity is generally referred to as the claims construction process (Kasdan, 2013).

Both the plaintiff (i.e., patent owner/right holder) and the defendant (alleged infringer) have the opportunity to participate in the claims construction process.

The claim construction process generally includes:

* Each party's identification of the claim terms they would like the court to construe.

* Each party's proposals on claim construction.

* Each party's submission of briefing on claim construction, where it presents its arguments to the court.

* The Markman hearing (Kasdan, 2013, p. 3).

The Markman Hearing presents both the plaintiff(s) and defendant(s) in the patent infringement lawsuit an opportunity to present their claim construction arguments to the trial judge. Additionally, parties to the litigation may also be permitted to call expert witnesses in order to further validate the interpretation of specific descriptors in the patent (Kasdan, 2013). Typically, legal arguments regarding interpretation of patent language/terminology tend to be rather pedantic. This was exemplified in the recent litigation involving Apple Computer and Samsung concerning potential infringement of Apple's patent related to the display screens in its I Phone products (Apple, Inc. v. Samsung Elecs. Co., 2011). Both Apple and Samsung engaged in a significant debate over the meaning of terms related to "area beyond the edge of the document", "displayed" and "first direction" (Apple, Inc. v. Samsung Elecs. Co., 2011, p. 26-27).

At the conclusion of the Markman Hearing, the judicial interpretation of terminology associated with these patent claims/descriptors is communicated to the jury in order to assist them in deciding whether a patent has been infringed (Kasdan, 2013). Overall, the judicial outcomes associated with these Markman Hearings have demonstrated that when claims/descriptors are broadly defined, trial court decisions tend to favor the patent owner/right holder. Conversely, narrow interpretations or definitions of patent claims/descriptors tend to result in more noninfringement verdicts by courts (Ford, 2013; Schwartz, 2008). Thus, defensive strategies should attempt to craft a claims construction process that seeks narrow and highly specific definitions of claims/descriptors comprising the patent.

Defendants, in patent infringement litigation, also have different legal thresholds for success depending on whether the case is decided on the basis of the Literal Infringement Doctrine or the Doctrine of Equivalents (Kasdan, 2013). Under a Literal Infringement Doctrine, liability for patent infringement is governed by the "all elements" or "all limitations rule" (Johnson v. IVAC Corp., 1989). Thus, plaintiffs must demonstrate that alleged infringers have violated each claim in the patent application with their product substitute. Failure to demonstrate that each claim/descriptor is evident in the product substitute will generally result in a noninfringement outcome/verdict for the defendant (Kasdan, 2013). The Doctrine of Equivalents adopts a slightly different standard in determining whether a patent has been infringed (Kasdan, 2013). In applying the Doctrine of Equivalents, the courts have often instructed juries to analyze patent claims/descriptors through use of the triple identity test function. In the triple identity test function, juries are tasked with examining patent claims/descriptors in terms of three evaluative criteria (Fitzpatrick & Dilullo, 2006). These criteria include the functional characteristics, operational characteristics and outcomes associated with patented IP (Warner-Jenkinson, v Hilton Davis Chemical Co., 1995). For a patent infringement verdict to be sustained, patent/right holders must demonstrate either that (a) all the patent claims/descriptors associated with functional/operational characteristics and outcomes are present in the product substitute; and/or (b) the patent claims/descriptors not present in the substitute are insubstantial or not properly constructed (Kasdan, 2013; Seal-Flex, Inc. v. Athletic Track & Court Construction, 1999). Therefore, in mounting a defensive strategy, the defendant should attempt to demonstrate either that (1) their product substitutes differ significantly from each of the claim constructions derived from the Markman Hearing; and/or (2) patent claims absent from the product substitute create significant IP differences with the patented invention (Kasdan, 2013; Ford, 2013; Seal-Flex, Inc. v. Athletic Track & Court Construction, 1999).

Patent Invalidation Defenses

Attempting to invalidate or nullify previously issued patents, constitutes another major defensive strategy available to defendants in patent infringement litigation (Kasdan, 2013; Ford, 2013; Ma, 2014; Millemann, 2008; Toprani, Maher, & Oliner, 2018 ). This strategy attempts to demonstrate that the USPTO erred in its original decision of issuing a patent because the inventor failed to comply with the fundamental requirements of patent law (Ford, 2013). Numerous researchers and legal practitioners have identified techniques that can be used for purposes of challenging the validity of previously issued patents. These techniques include attempting to nullify previously issued patents on the basis of (a) the existence of prior art; (b) lack of novelty and/or obviousness of the patent's IPs; (c) lack of enablement and/or disclosure of best mode requirements; and (d) patent eligible subject material (Kasdan, 2013; Ford, 2013; Toprani, Maher, & Oliner, 2018; Bilski v. Kappos, 2010).

Prior Art

The federal judiciary has concluded that the law "is grounded on the principle that once an invention is in the public domain, it is no longer patentable by anyone" (In re Hall, 1986:899). Reflecting this case law principle, the current patent statute states that the IPs claimed in a patent application cannot have been previously (1) described in printed publications/documents, (2) in public use; (3) available for sale; and/or (4) available to the public prior to the filing date of the patent (35 U.S.C. 102[a1]). As noted previously, inventors are granted a 1-year grace period in this disclosure restriction. Therefore, disclosures of potential patent claims by the inventor within 1 year of filing the patent application are not considered to be a violation of the prior art constraint. However, evidence of public disclosures of these IPs/patent claims in any form before this grace period may constitute sufficient grounds to invalidate patents previously granted by the USPTO (Kasdan, 2013).

Illustrative of this legal standard for prior art in invalidating patents is the judicial decision rendered in Beer Barrel, LLC v. Deep Wood Brew Prods., LLC, (2016). Beer Barrel, LLC is both a brewer and seller of beer-related products. One of their product lines is the production/sale of beer growlers and associated nozzle attachments. Growlers are containers used to transport draft beer and can be manufactured of glass, ceramic or stainless steel materials (Flowers, 2014). Deep Wood Brew Products, retailing products under the trade name ManCan, possessed multiple patents and copyrights on a variety of minigrowler designs/products. In 2016, Deep Woods informed Beer Barrell that they were infringing on two patented designs for growler products. Amazon was also notified of this alleged patent infringement and subsequently suspended the sales of Beer Barrel product substitutes on their e-commerce platform. When faced with this commercial disruption to their marketing efforts, Beer Barrel initiated litigation challenging the Deep Woods' patents on both noninfringement and invalidity grounds. In its judicial decision, the trial court ruled against Beer Barrel on its noninfringement accusation. However, they did conclude that Beer Barrel had "sufficiently pled its claim for invalidity" (Beer Barrel, LLC v. Deep Wood Brew Prods., LLC, 2016:17) by virtue of presenting evidence of the existence of prior art. This prior art consisted of 29 other patents containing IPs claimed in the Deep Woods' patent filings/applications initiated in November 2013. The court stated "A patent is invalid if it was 'patented, described in a printed publication, or in public use, on sale, or otherwise available to the public' more than one year before the effective filing date of the patent. Here, both... [Deep Woods']... '436 and the '839 Patents were filed on November 4, 2013. If the information in those patents was previously patented or was published before November 4, 2012, one year before the filing date of the '436 and '839 Patents, they are invalid" (Beer Barrel, LLC v. Deep Wood Brew Prods., LLC, 2016:16). The court furthermore concluded that Beer Barrel had presented sufficient factual evidence to "plausibly state a claim for invalidity" (Beer Barrel, LLC v. Deep Wood Brew Prods., LLC, 2016, p. 17).

While the Beer Barrel/Deep Woods case focused on pre-existing patents as a prior art defense, the Leahy-Smith America Invents Act (2011) also includes a variety of other public disclosures that qualify as prior art. These include (a) patent applications published in the United States or in foreign countries; (b) scientific articles; (c) product brochures and/or materials listing IP specifications; (d) instruction manuals; (e) textbooks; (f) actual products or prior sales of products containing relevant IPs; and (g) product demonstrations (Leahy-Smith America Invents Act, 2011; Kasdan, 2013;, 2018). Case law has also extended evidence of prior art to include publicly accessible (1) IPs contained in data, storage and transmission technologies (In re Hall, 1986); (2) microfilm/xerox copies of documents and properly cataloged college theses containing IPs/inventive technologies (In re Wyer, 1981); and (3) sales memorandums (Torin Corp. v Philips Industries, Inc., 1985).

Fortunately, for individuals/firms pursuing invalidity defenses, there exist a variety of competitive intelligence resources that can be used to discover evidence of prior art (Fitzpatrick, 2017). Patent data bases offer potential litigants the opportunity to initiate searches of the patenting/IP developments by competitors and the types of IPs included in their patent filings. Searches of these data bases can be accomplished for granted patents/patent applications in both the United States and other major knowledge creation centers throughout the world. Data bases/search utilities offered through Derwent Innovation (formerly Thompson Intellectual Property Solutions) represent an example of search engine and data base capability permitting identification of both prior art and current IP threats from domestic/global competitors (Derwent, 2018). Lexis Nexis also affords litigants the opportunity of searching the academic and scientific literatures for evidence of scholarly publications containing evidence of IP/prior art that may have been published or presented at scientific/professional conferences (Fitzpatrick, 2017). Additionally, attendance of trade shows can often permit litigants to discern evidence of prior art through observing demonstrations of competitor "pipeline" products. Trade shows can create opportunities for obtaining relevant data on competitor IPs through product-related brochures, specification/sell sheets, and instruction manuals (Fitzpatrick, 2017). Again, if public disclosure of IPs through scholarly/trade show-related publications or events has occurred prior to the 1-year disclosure "grace period" afforded to inventors, alleged infringers may seek to nullify previously issued patents based on prior art criteria (Beer Barrel, LLC v. Deep Wood Brew Prods., LLC, 2016; Kasdan, 2013; 35 U.S.C. 102; Quinn, 2017).

Lack of Novelty and Nonobviousness

Demonstrating that a patent lacks the characteristics of novelty and nonobviousness also represents a viable methodology for invalidating patents (Ford, 2013; Kasdan, 2013; 35 U.S.C. 102, 103). The novelty doctrine "generally requires that the claimed invention not have been known, used, or described by others before the patent applicant came up with the claimed invention. Nonobviousness doctrine adds to this by requiring that an invention not have been obvious to a person having ordinary skill in the art at the time of invention" (Ford, 2013, pp. 78-79). Therefore, once again, the existence and examination of prior art becomes critical in determining whether the defendant in patent infringement litigation can invalidate an existing patent through either of the aforementioned evaluative criteria (Kasdan, 2013). In attempting to invalidate a patent on the basis of lack of novelty, the anticipation defense is deployed. The anticipation defense requires each claim/IP attribute in the patented invention to be compared with prior art dealing with the same/similar IPs (Cheese Sys., Inc. v. Tetra Pak Cheese & Powder Sys., Inc., 2013; Trintec Indus., Inc. v. Top-U.S.A. Corp., 2002). These comparisons are evaluated on the basis of the strict identity test or examination. Should all elements/claims contained in the patented invention be identified in examples of prior art, then defendants can (1) infer an absence of novelty because its IPs were created by other persons in prior time periods; and (2) thereby invalidate the patent (Kasdan, 2013; Cheese Sys., Inc. v. Tetra Pak Cheese & Powder Sys., Inc., 2013; Trintec Indus., Inc. v. Top-U.S.A. Corp., 2002).

If a patented IP is determined to be an obvious extension of prior art, then defendants in an infringement litigation can effectively argue that the patent should also be nullified or invalidated (Ford, 2013; Kasdan, 2013; KSR Int'l Co. v. Teleflex, Inc. 2007). When adjudicating whether a patent should be invalidated for obviousness, courts compare claims/IPs included in patented inventions to the scope/content of IPs included in prior art. The magnitude of differences in these comparisons are noted and a subsequent determination is made in order to assess whether a person of ordinary skill in these technologies/IPs would conclude that the patent is merely a logical or expected extension of prior art/inventions. If this latter conclusion is accepted by the court, there is a legal justification for invalidating the patent (Graham v. John Deere Co., 1966). Additionally, the courts have also invalidated patents for reasons of obviousness when they are comprised of a "combination of familiar elements according to known methods... [and]... yield predictable results" (KSR Int'l Co. v. Teleflex, Inc., 2007, p. 416).

The case of KSR Int'l Co. v Teleflex, Inc. (2007) presents an interesting example of patent invalidation for reasons of obviousness. In this litigation, Teleflex sued KSR International for patent infringement related to an adjustable pedal assembly containing an electronic throttle. KSR sought to market an adapted version of this patented product which permitted it to be compatible with vehicles utilizing computer-controlled throttles. In mounting its defense, KSR asserted that the Teleflex patent should be declared invalid because of its obviousness. The court decided this case based on the TSM test (i.e., teaching-suggestion-motivation test). This legal standard suggests that a patent may be considered obvious whenever IP claims in prior art have anticipated the evolution of future inventions based on emergent technologies. Thus, in the KSR case, the court invalidated the Teleflex patent because "the state of the industry would lead inevitably to combinations of electronic sensors and adjustable pedals" (KSR Int'l Co. v Teleflex, Inc., 2007, p. 404) based upon disclosures contained in prior patents.

Enablement and Best Mode Requirements

Enablement and best mode conditions of the patent statute address the desire of the government to empower others to readily utilize inventions after the expiration of their associated patents (Ford, 2013). In interpreting 35 U.S.C. Section 112 of the patent statute, the USPTO has concluded that in order to conform to enablement requirements, patent applications must contain "sufficient information regarding the subject matter of the claims as to enable one skilled in the pertinent art to make and use the claimed invention" (USPTO, 2018, pp. 2164.01). Case law has also determined that the enablement requirement of the patent statue should require disclosure of adequate information about IPs claimed in the patent application so that persons with relevant skills would be able to duplicate these IPs without "undue experimentation" (United States v. Telectronics, Inc., 1988; In re Wands, 1988; AK Steel Corp. v. Sollac, 2003). Thus, if a Markman Hearing were to result in patent claims being constructed in a broad or highly general manner, an individual of reasonable skill may be unable to duplicate or clone the invention based upon descriptions provided in the patent application. Under these circumstances, courts would be likely to invalidate the patent and dismiss any associated inventor allegations of patent infringement (Milleman, 2008; Automotive Technologies International, Inc. v. BMW of North America, Inc., 2007; Sitrick v. Dreamworks, LLC, 2008).

As noted by Kasdan (2013), best mode requirements for patent applications/filings obligate inventors to disclose the best or most effective methodology for practicing their inventions. Failure to include this relevant information in patent applications has been used as a defensive strategy in invalidating patents (Chemcast Corp. v. Arco Indus. Corp., 1990). However, with the passage of the Leahy-Smith America Invents Act (2011), this defensive strategy can now only be utilized as an invalidation defense in legal actions initiated prior to September 16, 2011 (Kasdan, 2013; USPTO, 2017b).

Patent Eligible Subject Material

Current patent law seeks to define patentable subject material as "any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof" (35 U.S.C. 101). The issue of whether an invention meets the requirement of usefulness has been a legal basis for challenging the validity of patents (Gugliuzza & Lemley, 2018). For example, some challenges to a patent's validity have been sustained when courts have determined that the subject matter of the patent concerns itself with laws of nature, natural phenomenon and abstract ideas (Alice Corp. Pty. Ltd. v. CLS Bank International, 2014). The Alice court sought to address the issue of patent invalidity based on the subject material dealing with abstract ideas. In the case, Alice Corporation had alleged that CLS Bank had infringed on several of its patents dealing with settlement risk. As noted in the case, settlement risk relates to the probability that one party to financial transactions will meet its financial objectives/obligations. The Alice patents sought to manage these settlement risks by patenting a conceptual framework which (a) provided descriptions of methods to promote the exchange of information on financial obligations; (b) specified that a computer system could be used to facilitate these data exchanges; and (c) crafted suggestions which could guide the subsequent creation of a computer-related code for facilitating information exchanges associated with settlement-related risk management activities. CLS Bank is a currency transaction facilitator and had implemented its own methods for managing settlement risks. Alice Corp. contended that these CLS methodologies violated the claims contained in their patents and subsequently filed suit for patent infringement. In its defense, CLS Bank sought to invalidate the Alice patents on the grounds that they constituted an abstract idea and not a true patentable invention. In its eventual resolution of the case, the U.S. Supreme Court affirmed that the Alice IPs did not constitute patentable subject material. When ordering the invalidation of the Alice patents, the Court stated that an "instruction to apply the abstract idea of intermediated settlement using some unspecified, generic computer is not 'enough' to transform the abstract idea into a patent-eligible invention" (Alice v. CLS Bank International, 2014, p. 2351).

Patent Misuse and Inequitable Conduct Defenses

The legal defenses of patent misuse and inequitable conduct can be used by alleged infringers in order to obtain a judicial order that inhibits right holders from enforcing their patents (Belvis, 2008). To secure a court order to accomplish this objective, defendants in infringement litigation must demonstrate that the patent right holder has committed (a) illegalities with respect to use of the patent (Belvis, 2008); or (b) fraudulent misrepresentations in either patent applications and/or in patent infringement litigation (USPTO, 2017c; Gemveto Jewelry Co. v. Lambert Bros., Inc., 1984; Gilead Sciences, Inc. v Merck & Co., Inc., Merck, Sharp & Dohme, and Ionis Pharmaceuticals, Inc. 2018). As defensive strategies to patent infringement, both patent misuse and inequitable conduct seek to render valid patents unenforceable by the courts (Quinn, 2011).

Patent Misuse Defense
The concept of patent misuse arose to restrain practices that did not in
themselves violate any law, but that drew anticompetitive strength from
the patent right, and thus were deemed to be contrary to public policy.
The policy purpose was to prevent a patentee from using the patent to
obtain market benefit beyond that which inheres in the statutory patent
right. (Mallinckrodt, Inc. v. Medipart, Inc., and Jerry A. Alexander,
1992, p. 704)

Thus, patent misuse by inventors is evidenced when they attempt to broaden their patent-related IP rights/claims in a manner which is both (1) unauthorized by the original patent grant; and (2) anticompetitive vis-a-vis the market place (Quinn, 2011). Patent owners have often attempted to use licensing agreements as a method to facilitate both unauthorized expansion of patent rights and other forms of noncompetitive behaviors (Quinn, 2011). In a recent case, the U.S. Supreme Court addressed the issue of illicit expansion of patent rights in a case involving Lexmark International and Impression Products (Impression Prods. v. Lexmark Int'l, Inc., 2017). At issue in this litigation was the legality of Lexmark's attempt to restrict the buyer's use/disposition of its toner cartridges under the company's Return Program. Pursuant to this program, Lexmark had constructed a contract that inhibited buyers from transferring empty toner cartridges to Lexmark competitors for "refilling". Under the contract, buyers wishing to recharge their empty toner cartridges had to return these products to Lexmark. In dealing with the legitimacy of these post-sale restrictions, the Supreme Court decided the case based on the doctrine of patent exhaustion. This doctrine proposes that once sold, purchasers of patented products are free to utilize, resell or dispose of these products without restrictions imposed by patent law. Writing for the Court's majority, Chief Justice Roberts noted that:
When a patentee chooses to sell an item, that product 'is no longer
within the limits of the monopoly' and instead becomes the 'private,
individual property' of the purchaser, with the rights and benefits that
come along with ownership... A patentee is free to set the price and
negotiate contracts with purchasers, but may not, 'by virtue of his
patent, control the use or disposition' of the product after ownership
passes to the purchaser. (Impression Prods. v. Lexmark Int'l, Inc.,
2017, p. 1531)

U.S. courts have also evaluated both (1) tying agreements; and (2) extending royalty payments beyond a patent's expiration date as potential evidence of anti-competitive behavior and patent misuse in licensing/sales agreements (Quinn, 2011; O'Korn, 2016). The courts sought to address the issue of extending royalty payments beyond a patent's expiration in Brulotte v. Thys Co., (1964). In this case, the Supreme Court ruled that an attempt by a patentee to extend a royalty beyond the expiration of patent was unenforceable. More recently, the Supreme Court affirmed this ruling in a case involving Kimble v. Marvel Entertainment (2015). This litigation involved the sale of a patent for a Spiderman toy by Stephen Kimble to the predecessor corporation Marvel Entertainment. The sales agreement involved payment of both a lump sum payment and a 3% royalty on future revenues to Mr. Kimble. This agreement of sale also did not specify a date for the expiration of royalties associated with use of the patented toy. Marvel attorneys subsequently determined that the ruling in the Brulotte v. Thys Co., (1964) case might permit them to end royalty payments upon expiration of the Kimble patent. Pursuant to this objective, Marvel applied for and was granted by the federal district court a declaratory judgement officially ending the requirement to pay royalties to Mr. Kimble. Kimble then filed suit in order to overturn the 1964 Bruolotte decision and reinstate Marvel's royalty obligations. Unfortunately for Kimble, both the appellate and Supreme Court reaffirmed the Bruolotte ruling and again declared the extension of royalties after patent expiration to be unenforceable.

The federal judiciary has also sought to determine the validity of tying arrangements in the licensing of patented products (Quinn, 2011; Belvis, 2008). "A tying arrangement occurs when the purchase of one item is conditioned on the purchase of another (i.e., tie-in) or the purchase of one item is conditioned on refusal to buy a competitor's product (i.e., tie-out)" (Belvis, 2008, p. 14). The Supreme Court initially addressed the issue of tying agreements in Motion Picture Patents Co. v. Universal Film Mfg. Co., (1917). Motion Picture Patents Company (MPP) had both developed and patented a mechanical device to facilitate the feeding of film through motion picture projectors. MPP subsequently licensed another company (Precision Machine Company) to manufacture and sell its patented technology. In this licensing agreement, MPP placed some commercial constraints on the subsequent sale of its technologies. The commercial constraints placed upon the buyer included a requirement that the machine/technology could only be used with motion pictures incorporating other MPP patented technologies that were available for sale through its licensees. The Universal Film Manufacturing Company had made two films that were sold to a company (Prague Amusement Company) that had leased a theatre which possessed a projector that included the MPP film feeding device. Upon learning of this Universal's sale of the films to Prague, MPP sued both companies for infringement of its patents. In resolving this case, the Supreme Court "stated the patent laws only granted the patent holder the right to the exclusive use of the patented device but did not grant it any right to restrict the materials to be used in operating the patented mechanism or in fixing other terms regarding the mechanism's use." (Motion Picture Patents Co. v. Universal Film Mfg. Co., 1917, p. Overview).

In 1988, Congress enacted Public Law 100-70. This legislation sought to amend the patent statute by limiting the ability of defendants in infringement cases to use tying arrangements as the basis of a patent misuse defense. Under amendments to 35 U.S.C. 271, a patent misuse defense based on tying arrangements may only be advanced by litigants if the patentee has been found to possess market power. Market power is generally defined as "a company's relative ability to manipulate the price of an item in the marketplace by manipulating the level of supply, demand or both" (Investopedia, 2018, p. 1).

Inequitable Conduct Defense

Inequitable conduct defenses seek to render patents unenforceable due to either fraud or misrepresentations committed by the patentee during (a) the patent application process (Mark & Anenson, 2014; U.S.P.T.O., 2017c); and/or (b) the patent infringement litigation process (Gilead Sciences, Inc. v Merck & Co., Inc., Merck, Sharp & Dohme, and Ionis Pharmaceuticals, Inc. 2018).
Traditional inequitable conduct analysis in patent cases involves two
elements. The accused patent infringer must show by clear and convincing
evidence that: (1) an individual associated with the filing and
prosecution of a patent application made an affirmative
misrepresentation of a material fact, failed to disclose material
information, or submitted false material information to the PTO; and (2)
did so with the intent to deceive the PTO. If both requirements are met,
the trial judge has the discretion to declare the subject patent
unenforceable. An unenforceable patent is effectively useless to the
patentee. As courts have recognized, 'because only the patent holder
possesses the right to enforce a patent against infringement, the
inequitable conduct doctrine operates solely against the patent holder'.
(Mark & Anenson, 2014, p. 364-365)

The aforementioned criteria indicative of inequitable conduct is well illustrated in patent infringement litigation brought before the U.S. Supreme Court. In Keystone Driller Co. v. General Excavator Co., (1934), Keystone had intentionally failed to report the existence of prior art when submitting its patent application. Additionally, after the patent was issued by the USPTO, the company compensated a prior user of the IP to file a false affidavit which was intended to suppress evidence of this prior art. Automotive Maintenance Machinery Company (AMM) also experienced a similar situation (Precision Instruments Manufacturing Co. v. Automotive Maintenance Machinery Co., 1945). During product development activities associated with torque wrenches, one of AMM's employees shared design information with an outsider. This latter individual then proceeded to develop their own version of the AMM torque wrench and subsequently patented this design. This patent did not disclose the fact that it was largely based on prior art/R&D created at AMM. Additionally, the patent application by this person fraudulently predated the description of product development activities filed with the USPTO so as to convey the impression that their inventive actions were completed prior to AMM discoveries/designs. These activities eventually resulted in a patent infringement suit filed by AMM against this individual and the assignee of their patent (i.e., Snap-On Tools). A settlement was originally reached with these parties whereby the alleged infringers agreed that (1) AMM had inventive priority (i.e., invented first) with respect to the IPs included in the torque wrench design; and (2) agreed that AMM would become the new assignee for the offending patent. However, in additional infringement litigation with Precision Instruments Manufacturing Company, AMM failed to disclose the tortuous and potential criminal history associated with the aforementioned settlement of prior infringement claims. The Supreme Court concluded that since this "settlement is grounded upon knowledge or reasonable belief of perjury which is not revealed to the Patent Office or to any other public representative, the settlement lacks the equitable nature which entitles it to be enforced and protected in a court of equity" (Precision Instruments Manufacturing Co. v. Automotive Maintenance Machinery Co., 1945: HN5).

As noted in the introduction to the present paper, Gilead Sciences, Inc. v Merck & Co., Inc., Merck, Sharp & Dohme, and Ionis Pharmaceuticals, Inc. (2018) represents perhaps one of the more recent and dramatic applications of the inequitable conduct defense. When initially sued for patent infringement, Gilead utilized traditional strategies in defense of its product substitute for combatting Hepatitis C. Unfortunately, Gilead's initial attempt to deploy an invalidation defense proved to be an unsuccessful challenge to Merck's patents. However, on appeal, the court was persuaded that fraudulent testimony by a key Merck witness constituted egregious evidence of inequitable conduct and thereby rendered their patents unenforceable against Gilead.

However, as a defense, inequitable conduct has not appeared to replicate these prior successes within the broader context of patent infringement litigation. Lex Machina (2011) conducted a study of federal patent infringement cases between 2005 and 2010. Their initial data set was comprised of 13,786 infringement cases. The study sought to determine the number of cases where defendants raised inequitable conduct as a strategy for rendering patents unenforceable. Of the 13,786 infringement incidents in the data set, only 211 cases raised inequitable conduct as a litigation issue. Analysis of this subsample of infringement proceedings demonstrated that the federal courts (a) found evidence of inequitable conduct in only 19% (N= 41) of these cases; and (b) discovered no evidence of inequitable conduct in 81% (N= 170) of the lawsuits examined. Therefore, it would appear that inequitable conduct is a legal defense which is rarely used and has had a relatively low probability of success in the federal court system.

Voltaire: "Originality is nothing but judicious imitation" (Anonymous,
1786, p. 410).

Implicit to both the U.S. Constitution and patent law is the assumption that the granting and publication of patented IPs will serve as a stimulus for innovation (May & Cooper, 2014). However, R&D personnel that seek to create comparable products for patented inventions face the ominous specter of infringement litigation (Fitzpatrick & Dilullo, 2006; Dawn Equipment Co. v. Kentucky Farms, Inc., 1998). Infringement litigation and/or associated compensation to inventors for lost profits, the effects of price erosion and lost royalties can cost product substitute developers hundreds of millions of dollars (35 U.S.C. Section 284; McGrath & Kendrowski, 2010; Center for Global Innovation/Patent Metrics, 2015). Additionally, some researchers have reported that litigation costs associated with patent infringement can amount to 17.6% of claimed losses by patent owners (Neumeyer, 2013). "Adding insult to injury, more than 60% of all patent suits are filed by non-practicing entities (NPEs) that manufacture no products and rely on litigation as a key part of their business model" (Neumeyer, 2013, p. 1). Thus, the developers of product substitutes are even being legally victimized by patent trolls who have chosen not deploy/commercialize their patented IPs and seek merely to financially benefit by exploiting the legal protections afforded to legitimate inventors under U.S. patent law (Neumeyer, 2013; Carhart v. Carhart-Halaska Int'l, LLC, 2015; In re Packard, 2014).

When dealing with both the legally responsible and predatory infringement allegations of patent owners, product substitute developers have a number of defensive strategies available to them. For those alleged infringers seeking to minimize their financial risks, capitulation to the settlement demands of patent owners may constitute a viable option (Allison & Lemley, 1998; Ford, 2013; Global Innovation/Patent Metrics, 2015). However, alleged infringers may also seek to mount affirmative legal defenses in order to neutralize the litigation activities of patent owners. As articulated in this paper, the implementation of affirmative defenses to patent infringement requires product substitute developers to have a comprehensive understanding of (a) patent law; (b) the manner in which prior defendants have successfully mounted their legal strategies based on statutory law and legal precedents; and (c) the invention deployment activities of patent owners or their assignees (Kasdan, 2013; Toprani, Maher, & Oliner, 2018; Quinn, 2017). These research activities can often result in the discovery of evidence indicating that the infringement allegations of patent owners are baseless [i.e., noninfringement defense] and/or that patents should be nullified because of failure to meet patent eligibility requirements [i.e., invalidation defense] (Ma, 2014; Millemann, 2008; Kasdan, 2013; Ford, 2013; Toprani, Maher, & Oliner, 2018). Additionally, through the use of competitive intelligence and other legal research methods, alleged infringers may also be able to uncover proof that can render an inventor's patent unenforceable based on patent misuse and/or fraud (Derwent, 2018; Fitzpatrick, 2017; Mark & Anenson, 2014).

Collectively, these defensive strategies can enable alleged infringers/IP violators to (1) better manage the financial risks and legal outcomes associated with patent infringement litigation; and (2) implement a "morphed" application of legendary boxer Jack Dempsey's strategy for unarmed combat (Miller, 2016)---The Best Offense is a Good Defense!!!


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William M. Fitzpatrick, Villanova University

Samuel A. Dilullo, Villanova University
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