XY, LLC v. Trans Ova Genetics, LC (Fed. Cir. 2020)

McDonnell Boehnen Hulbert & Berghoff LLP

McDonnell Boehnen Hulbert & Berghoff LLP

Last week, the Federal Circuit took the opportunity presented in an appeal from judgment on the pleadings in XY, LLC v. Trans Ova Genetics, LC to distinguish claims directed toward a patent-eligible invention from invalidation under the Supreme Court's imperfectly applied Alice Corp. v. CLS Bank Int'l (2014) test.

The case arose over XY's assertion of Reissue Patent No. RE46,559 as well as U.S. Patent Nos. 6,732,422, 7,723,116, and 8,652,769 against Trans Ova.  The claims of the '559 reissue patent were directed to improving flow cytometric analysis.  As set forth in the opinion, the claimed invention related to "apparatus and methods for real-time discrimination of particles while being sorted by flow cytometry . . . resulting in enhanced discrimination between populations of particles" which could include cells, specifically sperm cells based on whether the sperm carried an X or a Y chromosome.  Useful applications included animal husbandry.  The opinion contains this illustration of the functional geometry of apparatuses encompassed by the asserted claims:

FIG. 1and the following explanation:

After passing through a laser beam (34), particles coupled to a light-emitting element may emit signals, such as fluorescence, which are then collected by at least one signal detector, such as a forward scatter detector (30).  . . .  The "signal detector may be connected to a system . . . in which signal data indicative of the signals may be processed and analyzed in order to determine a sort decision."  "While a sort decision []n is being determined, particles may pass through a drop delay (35)." . . .  Following a sort decision, "a pulse of charge (37) may be applied to a droplet (23) containing a particle.  Droplets may pass through charged deflection plates (38) in order to sort particles into a desired sort receptacle (40)" [citations to the specification omitted].

The data produced in this way provides the basis for the apparatus to produce a more discriminating assessment of particles in a mixture, including differences between X- and Y-bearing sperm.  These methods involve signal processors programed to detect differences including "rotational alteration, translation operation, scaling operation, any combination of these and the like."

Claim 1 is representative:

1.  A method of operating a flow cytometry apparatus with at least n detectors to analyze at least two populations of particles in the same sample, the method comprising:
    (a) establishing a fluid stream in the flow cytometry apparatus with at least n detectors, the at least n detectors including a first detector and a second detector;
    (b) entraining particles from the sample in the fluid stream in the flow cytometry apparatus;
    (c) executing instructions read from a computer readable memory with a processor, the processor being in communication with the first detector in the flow cytometer, to detect a first signal from the first detector based on individual particles in the fluid stream;
    (d) executing instructions read from the computer readable memory with the processor, the processor being in communication with the second detector in the flow cytometer, to detect a second signal from the second detector based on the individual particles in the fluid stream;
    (e) executing instructions read from the computer readable memory with the processor to convert at least the first signal and the second signal into n-dimensional parameter data for detected particles in the sample, wherein the n-dimensional parameter data for particles from the at least two populations overlap in at least one of the dimensions;
    (f) executing instructions read from the computer readable memory with the processor to rotationally alter the n-dimensional parameter data so that spatial separation of the data from the particles from the at least two populations in the at least one dimension that is overlapped is increased;
    (g) executing instructions read from the computer readable memory with the processor to real-time classify each of the individual detected particles into one of a first population and a second population of the at least two populations based on at least the rotationally altered n-dimensional parameter data; and
    (h) using the real-time classification, sorting the individual particles with the flow cytometer.

Trans Ova filed a motion for judgment on the pleadings based on the '559 reissue patent being invalid because the claims were not patent-eligible under § 101.  The District Court granted this motion, applying its understanding of the Supreme Court's two step analysis as set forth in Alice Corp. v. CLS Bank Int'l, 573 U.S. 208 (2014).  The Court held that the claims were directed to an abstract idea, specifically a "mathematical equation that permits rotating multi-dimensional data."  Under step two of the Alice test, the District Court held that there was no "inventive concept" to render the claims patent eligible, based on XY's admission that all claim elements were known in the prior art (albeit not in the arrangement or order recited in the asserted claims).  The District Court also granted Trans Ova's motion to dismiss because asserting the '422, '116, and '769 patents was barred by the doctrine of claim preclusion based on an earlier lawsuit.

The Federal Circuit reversed the District Court on its patent eligibility decision, vacated the District Court's judgment on claim preclusion, and remanded, in an opinion by Judge Stoll joined by Judges Plager and Wallach.  With regard to judgment and invalidation for patent ineligibility, the panel held that the District Court had erred in its application of the Alice test.  Specifically, the Federal Circuit held that the asserted claims were not directed to an abstract idea; thus, if properly applied, the Alice test would have mandated that the District Court deny Trans Ova's motion.  The panel considered the Supreme Court's jurisprudence on patent eligibility to include the principle that "[l]aws of nature, natural phenomena, and abstract ideas are not patentable" to be tempered by the further Supreme Court instruction that "[a]t some level, 'all inventions . . . embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas,'" citing Mayo Collaborative Servs. v. Prometheus Labs, Inc., 566 U.S. 66, 71 (2012), and that further "[t]hus, an invention is not rendered ineligible for patent simply because it involves an abstract concept," citing Diamond v. Diehr, 450 U.S. 175, 187 (1981).  The District Court's error, according to the Federal Circuit, arose in its application of step one of the Alice test, because the asserted claims did not recite an abstract concept in the Court's view.  Even Trans Ova's counsel in argument before the Federal Circuit (according to the opinion) admitted that the claims of the '559 reissue patent were "not merely directed" to the mathematical concept, but rather to "a purportedly improved method of operating a flow cytometry apparatus to classify and sort particles into at least two populations in real time, wherein first and second detectors detect signals from individual particles and a processor converts the signals to n-dimensional parameter data and rotationally alters that data to increase spatial separation among the data, thereby facilitating classification and sorting of each individual particle."  The opinion expressly relied on the Supreme Court's Diehr opinion (as it must), as well as its own opinion in Thales Visionix Inc. v. United States, 850 F.3d 1343 (Fed. Cir. 201), for this conclusion.  The Court found the asserted claims of the '559 reissue patent to be analogous to the claims in Diehr because "the asserted claims 'describe in detail a step-by-step method' for accomplishing a physical process," citing Diehr.  The panel perceived a similar analogy with the Thales claims, which recited methods "in which at least two sensors or detectors gather data about an object before mathematical operations are applied to the gathered data to generate more accurate information about the object than was previously possible in the art."  And both sets of claims "purport to improve results" of previously practiced methods.  The panel appreciated the distinction between a claim directed to a mathematical formula and claims that apply a formula or algorithm to achieve "a function which the patent laws were designed to protect," citing Diehr.

The opinion expressly rejected Trans Ova's contention (and a basis for the District Court's decision) that the asserted claims of the '559 reissue patent were analogous to the claims in Parker v. Flook that were held ineligible because those claims "'simply provide[d] a new and presumably better method for calculating alarm limit values,' requiring nothing more than updating an alarm limit—a number—through application of the recited formula" according to the Flook opinion.  And the panel further understood there to be a distinction between this case and Flook because "[t]he patent application [in Flook] contained no 'disclosure relating to the chemical processes at work, the monitoring of process variables, or the means of setting off an alarm or adjusting an alarm system.'"  Bringing to mind Judge Lourie's emphasis on "specificities" in Vanda Pharmaceuticals Inc. v. Hikma Pharmaceuticals USA Inc., the opinion recites in distinguishing Flook the specifically recited steps in the claimed method.  The opinion cites in support of these distinctions the Supreme Court's holding in Diehr that "a process is not unpatentable simply because it contains a law of nature or a mathematical algorithm."  Finally, the panel distinguished these claims from those in Cleveland Clinic Foundation v. True Health Diagnostics LLC, 859 F.3d 1352 (Fed. Cir. 2017), which were held ineligible on Section 101 grounds, because the Cleveland Clinic claims "used a known laboratory technique to observe a previously unknown natural phenomenon," whereas here the '559 reissue patent claims were directed toward improving a known laboratory technique using the application of the mathematical formula.

With regard to the claim preclusion issue, the panel agreed with XY that the District Court erred by not comparing the claims of the '422, '116, and '769 patents asserted in this action with the asserted claims in the prior lawsuits.  While the District Court recited the proper test ("whether the scope of the patent claims asserted in the 2012 and 2016 lawsuits was 'materially' the same"), the Federal Circuit held that the court did not provide the required comparison.  "Instead," according to the panel opinion, "the district court concluded that claim preclusion applied to XY's '422 and '116 patent-infringement allegations simply because (1) these patents issued before XY filed the 2012 lawsuit; and (2) XY's allegations of infringement 'address the same, or substantially the same subject matter as previously filed claims and [are] directed at a previously accused product or process,'" citing to the District Court's ruling on the motion to dismiss.  The panel considered the District Court to have concluded, without explanation on the record, that this action was "'part of the same transaction that prompted the 2012 [l]awsuit,' because they were 'related in time, origin, and motivation' to, and would have been 'a convenient trial unit' with, the patents asserted in the 2012 lawsuit."  As for the '769 patent, which had not issued when the earlier lawsuits were commenced, the District Court believed litigation over this patent to be "a continuation of a patent already in suit" and thus that XY should have moved the District Court in that earlier litigation to amend its complaint to add the '769 patent.  The Federal Circuit consider its precedent, SimpleAir, Inc. v. Google LLC, 884 F.3d 1160, 1165 (Fed. Cir. 2018), to be "materially indistinguishable" from the circumstance here; in that case, the District Court had held separate lawsuits on two related patents involved the same cause of action solely because the two patents shared the same specification and were both terminally disclaimed over another prior patent.  The Federal Circuit held that later-asserted patent claims "could provide a larger claim scope to a patentee than earlier-asserted patent claims.  According to the Federal Circuit, here "[t]he district court did not even mention the asserted claims of the '422, '116, or '769 patents, let alone analyze their scope as compared to the scope of the patent claims asserted in XY's 2012 lawsuit," which comparison was required under its Simple Air decision.  On this basis, the Federal Circuit vacated and remanded the case to the District Court for a proper analysis of the similarities and differences of the claims asserted in this action and the prior lawsuits.

This case illustrates hopeful and less hopeful trends in the Federal Circuit's jurisprudence on Section 101 subject matter eligibility.  On the one hand the decision illustrates the ease with which a district court can be convinced by an emphasis on the underlying basis for a claimed invention that the claims are directed to the "abstract idea" underlying the invention.  On the other hand, this decision follows a trend of the Federal Circuit distinguishing claims directed to the abstract idea itself and those directed to an application thereof (see, e.g.Rapid Litigation Management Ltd. v. Cellzdirect, Inc.) But before anyone become giddy at the prospect of the Court finding a reliable guide to subject matter eligibility, it must be considered that on the same day the Court handed down its decision in this case it also denied a petition for rehearing en banc in American Axle & Mfg. v. Neapco Holdings LLC, which will be the subject of a subsequent post.

XY, LLC v. Trans Ova Genetics, LC (Fed. Cir. 2020)
Panel: Circuit Judges Wallach, Plager, and Stoll
Opinion by Circuit Judge Stoll

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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