On April 19, 2018, the Court of Appeals for the Federal Circuit handed down Droplets, Inc. v. E*Trade Bank,[1] in a case dealing with the formal issue of preparing a proper claim of priority in the specification. The absence of one will cause major problems downstream, as it did for Droplets, Inc.
The facts are as follows.
E*Trade Bank filed a petition for inter partes review of the U.S. Patent No. 8,402,115 (‘115), owned by Droplets, Inc. The PTAB instituted review and found all claims of the ‘115 patent invalid as obvious under 35 U.SC. §103. The PTAB concluded that 1) the ‘115 patent failed to include a proper priority claim, and 2) an incorporation by reference was insufficient to satisfy notice of priority under 35 U.S.C. §120.
The ‘115 patent relates to a method and system for delivering interactive links for presenting applications and information at a client computer from remote sources. The proper chain of priority should have been as illustrated in the diagram below:
The ‘115 patent, filed January 26, 2009, contained the following priority paragraph in the specification:
CLAIM OF PRIORITY
The present application is a continuation of allowed U.S. patent application Ser. No. 10/720,729, entitled “SYSTEM AND METHOD FOR DELIVERING REMOTELY STORED APPLICATIONS AND INFORMATION” filed on Nov. 24, 2003 now U.S. Patent No. 7,502,838, the disclosure of which is hereby incorporated by reference in its entirety.
CROSS-REFERENCE TO RELATED DOCUMENTS
Priority is herewith claimed under 35 U.S.C. §119(e) from copending Provisional Patent Application No. 60/153,917, filed Sep. 14, 1999, entitled “METHOD AND SYSTEM FOR DELIVERING APPLICATIONS IN CLIENT/SERVER ENVIRONMENT,” by Louis M. Franco et al. The disclosure of this Provisional Patent Application is incorporated by reference herein in its entirety.
(Emphasis added.)
It was undisputed that the ‘115 patent properly claims priority to the ‘838 patent (MPEP 211).[2] The portion in italics and underline were included in a preliminary amendment after the ‘115 patent application was filed. During prosecution, a filing receipt issued by the USPTO showed priority to the ‘838 patent, but also to two other applications which are essential to the ‘115 patent’s chain of priority (and extend its priority back to the provisional filing date): U.S. Patent No. 6,687,745 (‘745), and the above-mentioned ‘917 provisional. However, prior to issuance, the USPTO issued a corrected filing receipt showing only the ‘838 patent in the priority. A subsequent amendment was filed to correct a typographical error in the priority, but no amendment was made to the claim of priority. The ‘115 patent then issued on March 19, 2013.
In May 2011, during the ‘115 patent application’s prosecution, Droplets filed a patent infringement suit against E*Trade in a district court in New York, alleging infringement of the ‘838 and ‘745 patents. In December 2014, E*Trade initiated its IPR against Droplets asserted against the ‘115 patent’s claim of priority. During the IPR proceeding, E*Trade introduced Droplet’s own PCT Application No. PCT/US00/25390 (“Franco PCT”), filed on September 14, 2000, and published on March 22, 2001, intervening prior art.[3] The PTAB found the ‘115 patent was not entitled to the ‘917 provisional filing date because 1) the ‘838 patent failed to qualify as a specific reference to either the ‘745 patent or the ‘917 provisional, and 2) an incorporation by reference[4] is insufficient to serve as a priority claim under 37 C.F.R. §1.57.
The Fed Circuit panel was composed of Judges Dyk, O’Malley, and Wallach, with Judge O’Malley writing for the court. O’Malley wrote the opinion as a roadmap on the law of patent priority. First, she noted that determining the priority date is purely a question of law if the underlying facts are undisputed.[5] Further, she noted §120 requires a “specific reference” to a prior-filed application:
A application for patent for an invention [1] disclosed in the manner provided by the first paragraph of section 112 . . . [2] which is filed by an inventor named in the previously filed application shall have the same effect, as to such invention, as though filed on the date of the prior application, [3] if filed before the patenting or abandonment of . . . an application similarly entitled to the benefit of the filing date of the first application and [4] if it contains or is amended to contain a specific reference to the earlier filed application.[6]
The specific reference to the prior-filed application requires that the present application must be copending with the prior-filed application. She further noted that §119(e) governing provisionals requires that:
No application shall be entitled to the benefit of an earlier filed provisional application . . . unless an amendment containing the specific reference to the earlier filed provisional application is submitted at such time during the pendency of the application as required by the Director.[7]
Even further, she noted that the USPTO’s own regulation on claiming priority, 37 C.F.R. §1.78, requires that a claim of priority contain a specific reference to each prior-filed application to which the application seeks to claim priority. §1.78 specifies that the application number and family relationship (i.e., CON, DIV, etc.) are required. The ‘115 patent did not contain this linking of patent applications or patents back to the ‘917 provisional from which the original priority date is being claimed.
Droplets had tried arguing the incorporation by reference saved their priority claim, but Judge O’Malley was not having any of that. To incorporate material by reference, the application must identify “detailed particularity what specific material it incorporates and clearly indicate where that material is found in the various documents” (emphasis added).[8] Essential material are defined as 1) written description under 35 U.S.C. §112(a), 2) claims particularly pointing out and distinctly claiming the subject matter under §112(b), or 3) “means for” structure, material, or acts under §112(f). Nonessential material is all patents, U.S. and foreign, and patent publications, commonly-owned U.S. applications, and non-patent publications.[9]
Judge O’Malley pointedly noted:
MPEP §608.01(p) describes essential and nonessential material as two categories that together serve to fulfill the invention disclosure requirements of §112 . . . . Material [] may be incorporated by reference.[] In other words, essential and nonessential material cover 100% of the universe of potential material that can be incorporated by reference . . . [b]ut a recitation of priority is not part of the “written description of the invention” described in §112. Instead, a priority claim appears in its own separate section of the specification and provides information distinct from sections describing “the invention.”[10]
The panel concluded that §120’s “specific reference” requirement does not cover incorporation by reference.
This is another example of how improper patent drafting creates headaches downstream for the patentee. As described here, the priority claiming rules may be confusing, especially with its Byzantine structure spread out over numerous patent statutes, codes of regulation, and examining procedures. However, it is sometimes better to spend the extra thirty or so minutes to verify and enter the cross-reference to related applications (i.e., claim of priority) into the first paragraph of the specification (MPEP 608.01(a) ¶6.02), in a preliminary amendment under 37 C.F.R. §1.115 (MPEP 714.01(e)), or the best option yet, in an Application Data Sheet under 37 C.F.R. §1.76 (MPEP 601.05(a)), at the time of filing the application.
[1] ___F.3d___ (Fed. Cir. 2018), aff’g E*Trade Fin. Corp. v. Droplets, Inc., Case No. IPR2015-00470, 2015 WL 3476939 (PTAB Jun. 23, 2016) (slip op.).
[2] See MPEP 211.01(b): “When a later-filed application is claiming the benefit of a prior-filed nonprovisional application under 35 U.S.C. 120, 121, 365(c), or 386(c), the later-filed application must be copending with the prior application or with an intermediate nonprovisional application similarly entitled to the benefit of the filing date of the prior application.”
[3] See 35 U.S.C. §102(e) (pre-AIA).
[5] See Medtronic CoreValve, LLC v. Edwards Lifescience Corp., 741 F.3d 1359, 1363 (Fed. Cir. 2014).
[6] See Droplets, supra (slip op. at 9).
[7] Id. (slip op. at 10).
[8] Id. (slip op. at 15), citing Cook Biotech Inc. v. Acell, Inc., 460 F.3d 1365, 1376 (Fed. Cir. 2006).
[9] Id. (slip op. at 16).
[10] Id. (slip op. at 18-19).