Chinese Invention Patent Grants Down Almost 21% in First Quarter of 2025; Trademark Registrations Down Almost 15%
Per statistics released by China’s Intellectual Property Administration (CNIPA) on April 15, 2025, Chinese invention patent grants are down 20.99% in the first quarter of 2025 versus the first quarter of 2024. Specifically, the number of invention patents granted decreased by 52,870 to 199,012 grants. Utility model grants also dropped slightly by 2.33% year-on-year to 408,419 grants (down by 11,032 grants). However, design patent grants increased by 10.11% year-on-year to 161,058 grants (up by 14,788 grants). The number of trademark registrations from January to March 2025 decreased by 193,996 compared with that in 2024 (a year-on-year decrease of 14.97%).
CNIPA did not provide any reasons for the drop in invention patent grants but may be related to China’s push for quality over quantity including:
the end of subsidies for patent grants in 2025;
the continuing crackdown on “abnormal” patent applications; and
setting a goal for high-value patents per 10,000 people (instead of only patents per 10,000 people).
In addition, the decrease in trademark and patent grants may be related to a slowdown in China’s economy although grants would be a lagging indicator.
Note though per CNIPA’s 2025 budget, CNIPA is expect over 5 million patent application filings this year and to examine over 2 million invention patent applications.
The full data set is available here: 2025年3月国家知识产权局审查注册登记统计月报（外部版) (Chinese only).
2024 Federal Circuit Case Summaries
We are excited to present the second edition of Sheppard Mullin’s “Year in Review” report, which provides a comprehensive summary of the key precedential Federal Circuit decisions related to patent law in 2024. Building on the success of our inaugural report covering 2023, we continue our commitment to keeping you informed with detailed analyses.
Click here to read more.
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CNIPA Reminds Applicants Not to Include Political Content in Patent Applications
On April 11, 2025, China’s National Intellectual Property Administration (CNIPA) issued the Business Reminder on Further Standardizing the Requirements for Drafting Patent Application Documents (关于进一步规范专利申请文件撰写要求的业务提醒). The Reminder states that the background section of the specification specifically should not introduce political content not directly related to the technology and only use official maps from China’s Ministry of Natural Resources “to ensure accuracy, legality and authority of the map.” However, this represents difficulties for foreign applicants as the Ministry’s map website appears to be unavailable for foreigners.
A full translation follows. The original text can be found here (Chinese only).
In order to further improve the standardization of patent application documents and save the application and authorization procedures, the following reminders are made for the writing of patent application documents in accordance with the relevant provisions of the “Patent Examination Guidelines”:1. The core of the patent application document is the technical solution it records, and the introduction of content unrelated to the technical solution should be avoided as much as possible, especially the background technology and drawings of the specification.2. The background technology part of the specification should state the background technology and corresponding documents that are useful for understanding, searching, and reviewing the invention or utility model. When explaining the problems and shortcomings in the background technology, it should focus on the technical content and try to avoid introducing political, economic, cultural and other information that is not directly related to the technology.3. For the drawings of the specification, it is recommended to introduce maps only when they are closely related to the scope of protection. When it is necessary to introduce, the applicant should use standard maps, such as those obtained through the “Standard Map Service System” (http://bzdt.ch.mnr.gov.cn/ ) on the website of the Ministry of Natural Resources to ensure the accuracy, legality and authority of the map. When making drawings based on standard maps, relevant laws, regulations and departmental regulations should be observed.
The Sunflower State (Kansas) Passes Employer-Friendly Restrictive Covenant Legislation
Consistent with our previous reporting that states would continue to address noncompete issues even after the apparent end of the FTC Noncompete Rule, Kansas has joined the growing list of jurisdictions to pass or introduce legislation addressing restrictive covenants.
The difference between Kansas and the other states’ legislation and proposed legislation is that Kansas’s legislation is employer friendly.
On April 8, 2025, Kansas enacted a law “concerning restraint of trade; relating to restrictive covenants; providing that certain restrictive covenants are not considered a restraint of trade and shall be enforceable; amending K.S.A. 2024 Supp. 50-163” (the “Kansas Law”). Pursuant to the Kansas Law, Kansas’s “restraint of trade act shall not be construed to apply to … any franchise agreements or covenants not to compete.”
Although the Kansas Law sets forth requirements for non-solicit provisions (as discussed below), it does not place requirements or restrictions on the use of noncompetes. Thus, it is likely that noncompetes will continue to be enforced consistent with Kansas case law. The “freedom to contract” and “wide discretion” for parties to entered into employment agreements “extends to restrictive covenants in employment contracts. Doan Family Corp. v. Arnberger, 522 P. 3d 364, 369-70 (Kan. App. 2022) (citing Foltz v. Struxness, 215 P. 2d 133 (Kan. 1950)). Under Kansas law, “noncompete agreements are ‘valid and enforceable if the restraint on competition is reasonable under the circumstances and not adverse to the public welfare.’” Id. at 370 (quoting Weber v. Tillman, 913 P. 2d 84 (Kan. 1996)).
Under the Kansas Law, customer non-solicits that seek to limit a former employee’s ability to provide or offer any product or service that is competitive with those provided by the employer “shall be conclusively presumed to be enforceable and not a restraint of trade[,]” provided that the customer non-solicit “is limited to material contact customers and the covenant is between an employer and an employee and does not continue for more than two years following the end of the employee’s employment[.]” The statute broadly defines “material contact customers” as any “customer or prospective customer that is solicited, produced or serviced, directly or indirectly, by the employee” or any customer or prospective customer about whom the employee, directly or indirectly, had confidential business or proprietary information or trade secrets in the course of the employee’s relationship with the customer.” Customer non-solicits must be in writing.
Employee non-solicits must also be in writing. The Kansas Law states that employee non-solicits “shall be conclusively presumed to be enforceable and not a restraint of trade if the covenant is between an employer and one or more employees[,]” and the covenant: (i) seeks, on the part of the employer, to protect the employer’s confidential or trade secret business information or customer or supplier relationships, goodwill or loyalty; or (ii) is not for a period longer than two years following the end of the employee’s employment. Thus, as long as the restricted period of the employee non-solicit is no longer than two years, then the non-solicit covenant is presumed to be enforceable.
For covenants that are not presumed to be enforceable and are determined to be overbroad or otherwise not reasonably necessary to protect a business entity’s legitimate business interest, a “court shall modify the covenant, enforce the covenant as modified and grant only the relief necessary to protect such interests.” Thus, the Kansas Law explicitly authorizes courts to modify overbroad restrictive covenants, thereby further demonstrating the legislature’s intention that restrictive covenants be enforced to the fullest extent permitted by law.
We expect other states to continue to restrict noncompetes, including a recently passed Wyoming law that we will report on soon, as well as pending legislation in Texas and New York. Stay tuned for our posts on those bills. The Kansas Law is an example of a jurisdiction enacting an employer-friendly restrictive covenant law. It remains important for employers to review their restrictive covenants to ensure they are complying with applicable law.
Face the inMusic: A Corporate Patent Owner Cannot (Yet?) Recover the Lost Profits of a Subsidiary
The Federal Circuit has long held that “the general rule” of patent infringement damages law is “a patentee may not claim, as its own damages, the lost profits of a related company.” More than 15 years ago, one patent owner argued that an exception to this general rule should be when a subsidiary’s profits “flow inexorably” to the parent patent owner. In that case, the Federal Circuit avoided deciding the legal question, concluding that the patent owner had failed to prove that its wholly owned subsidiary’s profits flowed inexorably to it. The same legal question came before the Federal Circuit again in Roland Corp. v. inMusic Brands, Inc. and the result was, well, the same: no dice.
The circumstances were as follows. Roland sued inMusic for infringement of several patents relating to electronic drums and cymbals. Roland, the sole plaintiff, is a Japanese company that does business directly in the U.S. and through its wholly owned U.S. subsidiary, Roland U.S. (Roland U.S. buys product from Roland and then resells it in the U.S.). Roland’s case against inMusic went to trial and the jury returned a verdict in Roland’s favor, awarding $2.7 million in lost profits to Roland (and an additional $1.9 million in reasonable royalties). The jury rendered a single lost profits verdict, i.e., one that that did not separate out Roland’s lost profits from Roland U.S.’s lost profits. inMusic appealed the judgment entered on the verdict.
On appeal, the Federal Circuit vacated the entire damages award and remanded the case to the district court for a new trial on damages. With respect to lost profits, after reciting the “general rule” of lost profits recovery noted above, the court held that Roland had failed to introduce substantial evidence that Roland U.S.’s profits “inexorably flowed” to Roland. The only evidence introduced was testimony from an executive of both Roland and Roland U.S. that Roland U.S. was a wholly owned subsidiary, and the court held this to be conclusory and insufficient. The court noted the absence of any evidence of (1) who controlled Roland’s U.S.’s distribution of profits, (2) corporate controls to ensure that Rolan U.S.’s profits became those of its corporate parent, Roland, or (3) “historical financial information showing an unwavering flow of profits” from Roland U.S. to its parent. Moreover, because the jury did not render a Roland-only lost profits finding, the Federal Circuit vacated the jury’s lost profits award.
Though designated nonprecedential, Roland is yet another example of the Federal Circuit demanding rigor from patent owners and their damages experts in supporting patent damages claims. See my recent post for other examples. The key takeaways from Roland are as follows. First, the Federal Circuit has yet to embrace the legal principle that patent owners can recover lost profits of a non-party subsidiary. (This is to be contrasted with the court’s acceptance of the notion that a subsidiary with an exclusive license under the corporate parent’s patent is eligible to recover its lost profits.) Second, an “inexorable flow” theory of damages is unlikely to succeed in the future unless a patent owner pursuing this theory of recovery proves that it has structured its financial arrangement with its U.S. subsidiary such that, in fact, the subsidiary’s profits from the sale of the patented product systematically flow to the parent patent owner.
Eleventh Circuit Revives Trade Secret Misappropriation Claim in Long-Running Litigation
On April 4, 2025, the Eleventh Circuit reversed the U.S. District Court for the Northern District of Alabama’s ruling dismissing Alabama Aircraft Industries’ (“AAI”) trade secret misappropriation claim against Boeing, thereby allowing AAI to pursue unjust enrichment damages in addition to amounts previously recovered on its breach of contract claim. See Alabama Aircraft Industries Inc. v. The Boeing Co., No. 20-11141.
Background
In 2005, the parties entered a “teaming arrangement” to jointly pursue a maintenance contract with the U.S. Airforce. The agreement consisted of three contracts: a master agreement, a work share agreement, and a non-disclosure agreement. In 2011, AAI filed suit against Boeing alleging misappropriation of trade secrets and breach of contract with respect to the master agreement and non-disclosure agreement. In 2013, the Northern District of Alabama dismissed AAI’s trade secrets claim as barred by the Alabama statute of limitations. But in 2020, AAI’s two remaining claims for breach of contract proceeded to trial where a jury returned a verdict in favor of AAI and awarded AAI $2.1 million in damages.
In February 2022, the Eleventh Circuit reversed and remanded the dismissal of AAI’s trade secrets claims, holding that the claim was not time-barred. On October 26, 2022, the district court dismissed AAI’s trade secrets claim on the grounds that AAI had already recovered all the damages that were available on its breach of non-disclosure agreement claim, and therefore it could not pursue a Missouri Trade Secrets Act “for the same injury arising from the same course of conduct.” AAI appealed.
Eleventh Circuit’s Holding
On April 4, 2025, the Eleventh Circuit reversed and remanded the dismissal of AAI’s trade secrets misappropriation claim, holding that the Missouri Trade Secrets Act expressly permits the remedy of unjust enrichment recovery, so long as the amount is not duplicative of the actual loss damages stemming from the misappropriation. According to the Eleventh Circuit, the unjust enrichment recovery AAI sought is distinct from the consequential damages awarded in the jury verdict (which compensated AAI for out-of-pocket expenses resulting from the breach of contract). In contrast, an unjust enrichment remedy would deprive Boeing of the gain it purportedly obtained from allegedly misappropriating AAI’s trade secrets.
Further, pointing to the parties’ master agreement, the Eleventh Circuit noted that the remedy of unjust enrichment was “conspicuously absent from the list of categorically barred damages” under the limitation of liability provision. Acknowledging that AAI and Boeing were both “sophisticated parties,” the Eleventh Circuit reasoned that if the parties “had wanted the liability limitation provision to categorically bar an unjust enrichment award, they could have added it to the list of remedies they specified were barred by the contractual provision. They didn’t.”
Implications
While trade secret misappropriation statutes typically offer a broad range of remedies, the Eleventh Circuit’s ruling suggests that sophisticated parties may potentially limit such remedies through carefully drafted agreements.
Don’t Get Lazy, Timely Complete Your Arguments
This Federal Circuit Opinion[1] analyzes statutory estoppel under 35 U.S.C. § 315(e)(1) and examines offensive and defensive arguments related to § 103 obviousness.
Background
Gesture Technology Partners, LLC is the owner of U.S. Patent No. 7,933,431 (“the ’431 patent”), which generally claims a method for controlling a device based on a user’s gestures. In February 2021, Gesture filed a patent infringement lawsuit against Apple Inc., LG Electronics Inc., Google LLC, and others regarding the ’431 patent.
On May 14, 2021, Unified Patents, LLC, a multi-member organization of which Apple is a member, filed an Inter Partes Review petition against the ’431 patent, challenging a subset of the claims. On May 21, 2021, Apple, LG, and Google separately filed IPR petitions, which were eventually joined, challenging the patentability of all claims of the ’431 patent. Both the Unified IPR and Apple IPR relied on U.S. Patent No. 6,144,366 (“Numazaki”) as prior art, arguing the ’431 patent was obvious under 35 U.S.C. § 103 when combined with the knowledge of a person of ordinary skill in the art and/or at least one other prior art reference.
On November 21, 2022, based on the Unified IPR, the Board held claims 7-9 and 12 were unpatentable and claims 10, 11, and 13 were not unpatentable. On November 30, 2022, based on the Apple IPR, the Board held claims 1, 7, 12, and 14 were unpatentable and claims 11 and 13 were not unpatentable. Apple appealed, and Gesture cross appealed, the Apple IPR holdings.
35 U.S.C. § 315(e)(1) on estoppel states, “[t]he petitioner in an inter partes review of a claim in a patent . . . that results in a final written decision . . . , or the real party in interest or privy of the petitioner, may not . . . maintain a proceeding before the [Patent] Office with respect to that claim on any ground that the petitioner raised or reasonably could have raised during that inter partes review.” Gesture contended that Apple lacked standing to appeal because Apple was a real party in interest in the Unified IPR, which was decided before the Apple IPR. Accordingly, Gesture argued Apple was estopped and had no standing to appeal the final written decision issued in the Unified IPR. However, Gesture, despite knowing this fact for more than a year before the final written decision in the Unified IPR, did not raise the argument that Apple was a real party in interest in the Unified IPR proceeding during the Apple IPR proceeding.
With regard to claims 11 and 13, Apple’s claim construction, which the Board adopted, defined the claimed function “means for transmitting information,” in claim 11, as “at least a wireless cellular transceiver.” The Board found claims 11 and 13 were not unpatentable because Apple’s IPR petition lacked an explanation of how the “transmission unit” in Numazaki, alone or in view of the knowledge of a person of ordinary skill in the art, equates to the defined “wireless cellular transceiver” or a cell phone described in claim 13. Apple appealed this finding, arguing the Board applied the wrong legal standard for obviousness by considering only the explicit disclosure of Numazaki, and not considering the prior art in view of the knowledge of a person of ordinary skill in the art.
Finally, Gesture filed a cross-appeal, arguing that substantial evidence contradicted the Board’s invalidity decision. Gesture highlighted several terms it believed the Board failed to analyze correctly, particularly arguing that certain elements were not expressly disclosed in the prior art.
Issue(s)
Did Apple have standing to appeal given the estoppel provision of 35 U.S.C. § 315(e)(1) and the previously decided Unified IPR?
Did the Board apply the correct legal standard for obviousness and ignore Apple’s arguments in holding that Apple did not show claims 11 and 13 were unpatentable?
Did the Board err by finding a claim obvious even though certain elements were not expressly disclosed in the prior art?
Holding(s)
Gesture waived the argument that Apple lacked standing by not presenting it before the Board.
The Board applied the correct legal standard for obviousness and properly considered Apple’s arguments, including not only the explicit disclosure in Numazaki but also how a person of ordinary skill in the art would have understood the disclosure, and thus correctly found that claims 11 and 13 were not shown to be unpatentable .
The Board correctly found a claim to be obvious despite certain elements not being expressly disclosed in the prior art.
Reasoning
Whether Apple Was Statutory Estopped Under 35 U.S.C. Sec. 315(e)(1)
The Federal Circuit reiterated that an appellate court may not decide questions of fact in the first instance on appeal. This principle also applies to factual questions regarding the real party in interest. The Federal Circuit cited Acoustic Technology Inc. v. Itron Networked Sols., Inc., 949 F.3d 1360 (Fed. Cir. 2020), a similar case involving statutory estoppel under 35 U.S.C. § 315(b). In that case, the estoppel argument was unavailable because the patent owner did not make the common real party in interest argument to the Board, and thus waived the argument for purposes of appeal. The Federal Circuit held that the same outcome applies here, even though the estoppel here was based on a previous IPR decision, which occurred nine days earlier. The Federal Circuit held that the fact regarding the real party in interest was disclosed in the Unified Patents IPR more than a year before the final written decision. Accordingly, the court held that Gesture should have presented this argument to the Board during the IPR proceeding.
The Board Applied The Correct Legal Standard
The Federal Circuit found the Board correctly analyzed Numazaki, alone or in view of the knowledge of a person of ordinary skill in the art, and properly considered Apple’s evidence. The Federal Circuit held it is the petitioner’s burden to present a clear argument in the petition. The Board found, and the Federal Circuit agreed, that Apple failed to explain the evidence “with particularity” in the petition because the petition did not explain how the “transmission unit” in Numazaki, alone or in view of the knowledge of a person of ordinary skill in the art, equates to the defined “wireless cellular transceiver” or a cell phone. The Federal Circuit found the Board did not ignore Apple’s assertion regarding Numazaki in view of the knowledge of a person of ordinary skill in the art, but rather agreed with Gesture that Apple’s explanation was lacking. Accordingly, the Board applied the correct legal standard and correctly held claims 11 and 13 are not unpatentable.
Whether Elements Must Be Expressly Disclosed In The Prior Art
The Federal Circuit also addressed Gesture’s argument that claim elements need to be expressly disclosed in the prior art. The Federal Circuit relied on KSR Int’l Co. v. Teleflex Inc., where the Supreme Court held that express disclosures are not required to render a claim obvious. 550 U.S. 398, 418 (2007). The Federal Circuit further specified that Numazaki’s silence on how the claimed elements were implemented is irrelevant because, “in general, a prior art reference asserted under § 103 does not necessarily have to enable its own disclosure, i.e., be ‘self-enabling,’ to be relevant to the obviousness inquiry.” Accordingly, Gesture’s argument that Numazaki did not expressly disclose certain elements of the ’431 patent carried no weight.
FOOTNOTES
[1] Apple Inc. v. Gesture Technology Partners, LLC, No. 2023-1475, 2023-1533, pending cite (Fed. Cir. March 4, 2025)
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A Patent Without a Pulse: Provisional Rights Don’t Outlive the Patent
The US Court of Appeals for the Federal Circuit dismissed an appeal from a patent applicant seeking provisional rights on a patent that would issue only after it had already expired, finding that the applicant lacked the necessary exclusionary rights to support a claim for provisional rights. In re: Donald K. Forest, Case No. 23-1178 (Fed. Cir. Apr. 3, 2025) (Taranto, Schall, Chen, JJ.)
Donald K. Forest applied for a patent on December 27, 2016. Forest’s patent application claimed priority through a chain of earlier-filed patent applications dating back to March 27, 1995. If Forest’s patent application matured into a patent, it would have expired 20 years after the 1995 priority date (i.e., prior to the 2016 filing date). The patent examiner nevertheless examined and rejected the proposed claims. The Patent Trial & Appeal Board partially affirmed the examiner’s rejection of certain claims on grounds of obviousness and double patenting. Forest appealed.
The Patent & Trademark Office raised a threshold issue that since Forest’s application could only result in an expired patent, he lacked a personal stake in the appeal sufficient to establish jurisdiction. Forest countered that he could still acquire “provisional rights” under 35 U.S.C. § 154(d) – a limited right to royalties for certain pre-issuance activities – despite the expiration of any issued patent as it issued.
The Federal Circuit dismissed the appeal, explaining that since Forest could not be granted a patent until after the patent’s expiration date, he would never receive any exclusionary rights. The Court clarified that provisional rights only arise once a patent issues and crucially do not extend beyond the statutory patent term. Because Forest sought the issuance of a patent that would confer no enforceable rights – either exclusionary or provisional – the Court dismissed the appeal for lack of jurisdiction.
The Federal Circuit’s primary conclusion was predicated on the principle that provisional rights are only available when a patent issues with enforceable exclusionary rights, meaning the patent must issue before its expiration date. The Court emphasized that provisional rights under § 154(d) are expressly provided “in addition to other rights provided by” the patent statute. Because this statutory language indicates that provisional rights are not standalone, the Court determined that provisional rights depend on the existence of a valid, enforceable patent.
According to the Federal Circuit, the entire purpose of provisional rights is to provide temporary relief to the patentee during the gap between publication of a patent application and issuance of a patent. However, such rights only arise if the issued patent provides enforceable rights. The Court reasoned that provisional rights are meant to encourage early publication and protect patentees from pre-issuance infringement, but only as a precursor to full patent protection.
The Court rejected Forest’s interpretation of § 154(d), explaining it would create an anomalous situation where provisional rights could survive without any corresponding enforceable rights, allowing a patentee to collect royalties on a patent that could never be asserted in infringement litigation.
Practice Note: Patent rights, whether provisional or exclusionary, cannot survive beyond the 20-year term dictated by statute. Applicants seeking patents long after a priority date must ensure that enforceable rights remain possible, or risk pursuing an expired patent.
When Is a Trade Secret Accessible? As Soon as It Can Be Reverse Engineered
Although the US Court of Appeals for the Federal Circuit upheld a damages award for trade secret misappropriation and breach of a confidentiality agreement, it found that the district court erred in its determination of when the trade secret became publicly accessible for the purpose of applying a reverse engineering defense. The Federal Circuit also vacated and remanded the prejudgment interest award, finding that interest should not accrue on future sales. ams-OSRAM USA Inc. v. Renesas Elect. America, Inc., Case No. 22-2185 (Fed. Cir. Apr. 4, 2025) (Taranto, Schall, Chen, JJ.)
In 2008 ams sued Renesas for patent infringement, trade secret misappropriation, and breach of contract for using information that ams revealed in confidence. In 2015 a jury found for ams, and the district court entered judgment for trade secret misappropriation damages, but not for breach of contract. The district court determined that the breach award was duplicative of the misappropriation award. On appeal, in 2018 the Federal Circuit affirmed Renesas’ liability for misappropriation on a more limited basis than had been presented to the jury. The Court vacated the misappropriation award and remanded, instructing that disgorgement of profits damages should be decided by the judge, not the jury.
On remand, ams argued that it was entitled to “re-elect its remedy” and narrowed to the misappropriation and contract claims, which required the case to be retried. The new jury also found in favor of ams. The district judge then determined the monetary award for trade secret misappropriation, consisting of disgorgement of profits for one product and exemplary damages of double that sum. On ams’s breach of contract claim, the jury awarded a reasonable royalty on sales of products, other than the one subject to disgorgement damages. ams was also awarded prejudgment interest on both its misappropriation and contract claims, and attorneys’ fees on its breach of contract claim. Both parties appealed.
Trade Secret Accessibility and Reverse Engineering
The district court ruled that ams’s trade secrets became accessible in January 2006 when Renesas successfully reverse engineered the trade secret embodied in ams’s product. The district court determined that the relevant inquiry for accessibility is what the misappropriator actually did rather than what the misappropriator or other parties could have done. Renesas argued that the trade secret first became accessible when it could have reverse engineered the trade secret in February 2005.
The Federal Circuit agreed with Renesas, explaining that the district court’s ruling was inconsistent with Texas law. Under Texas law, information that is generally known or readily available by independent investigation does not qualify as a trade secret. Citing Fifth Circuit precedent, the Federal Circuit emphasized that the public is free to discover and exploit trade secrets through reverse engineering of products in the public domain. The Court found that Renesas could have accessed ams’s trade secrets through proper and straightforward means by February 2005. While acknowledging that the trade secret may not have been immediately apparent through casual inspection, the Court pointed out that reverse engineering is a common and widespread practice within the industry and could have been completed within approximately one week.
Prejudgment Interest
Renesas argued that the district court erred in awarding prejudgment interest on the entire damages amount from the date the complaint was filed, including future sales. Renesas contended that a portion of the sales for which disgorgement (trade secret) or reasonable royalty (breach) awards were made occurred after the complaint was filed, and thus ams “could not have been entitled to disgorged profits or a reasonable royalty for sales that had not yet occurred.”
Applying California law to the contract claim and Texas law to the trade secret claim, the Federal Circuit found that interest cannot accrue on a recovery-triggering event until that event has actually occurred. While the district court has discretion to award prejudgment interest, it cannot allow interest to accrue before the actual loss-causing event (product sales), because no right to recover damages vests until then. The Court remanded the case for recalculation of prejudgment interest, ensuring that interest is applied only to sales that actually occurred.
Litigation Funding: The Good, The Bad, The Future
Third party litigation funding is the process where third party funders provide money to a plaintiff or to plaintiff’s counsel in exchange for a cut of the proceeds resulting from the underlying litigation or settlement. Until recently, outside funding for litigation was prohibited by the concepts of “maintenance” and “champerty”. The erosion of these common law concepts first began in Australia, then moved to the United Kingdom, before entering the U.S. and changing the litigation landscape.
Over the last fifteen years, litigation funding in the U.S. has expanded from a prohibited practice to a $15 billion market, and one that is expected to grow to over $25 billion by 2030. In patent litigation, conservative estimates presume funding undergirds about 30% of all patent litigation.
Litigation funding shifts the financial risks of lawsuits away from firms and individual plaintiffs to outsiders willing and able to shoulder that risk. In contrast to the traditional contingency fee model, litigation funding shifts the risk from the firm to the funders. The financial model of litigation funders allows the risk-shifting. Such investments in litigation are non-recourse loans, meaning that whether the suits are won or loss, the lawyers get paid.
In addition, litigation funding may help smaller entities and individuals compete with corporations. Without capital from funders, small businesses and even some non-practicing entities would not be able to take their cases to court because they could not compete against a large corporations’ legal departments, outside counsel, and sizeable budgets. Here, funding gives some patent holders a fighting chance.
Litigation funding also benefits patent holders by monetizing their claims up front. For example, an influx of capital from a funder can sustain a small startup, help launch its technology, and defends its interests. Without funding, smaller and startup businesses would need to take on all the risk and costs of litigation; and, if they won, at trial or settled, they would need to wait for the resolution of the case to receive that money.
Further, there is an argument that litigation funding increases access to justice. When a smaller entity holds an otherwise valuable patent, but one that it cannot litigate due to financial constraints, litigation funding allows the smaller entity access to litigation. Without funding, a small-time patent holder may have no other recourse or access to justice.
Nonetheless, litigation funding is not without criticism. For example, funders may exercise significant control over litigation. This could come in from form the terms of the agreement. Or the control may come from calculated decisions about where to file to maximize likely return. Or a funder may determine the parameters of settlements. This type of influence can interfere with the professional independence of lawyers and their loyalty to clients.
In a similar vein, funding may contravene the Model Rules of Professional Conduct, which are designed to ensure that lawyers act in the best interest of their clients. For example, Model Rule 1.2(a) says, “[a] lawyer shall abide by a client’s decision whether to settle a matter.” But, in some funding agreements, provisions allow funders to make decisions about whether and when to settle. And, unlike attorneys, funders do not owe a fiduciary duty to the plaintiffs and may not be acting in their best interest.
As another example, Model Rule 5.4 prohibits fee-splitting between a lawyer and a nonlawyer, except under some outlined exceptions. However, some funding agreements violate Rule 5.4’s fee-splitting provision because funders are paid a percentage of the legal fees secured by the plaintiff’s attorney.
Another criticism of litigation funding is that it allows outsiders to use courtrooms as a trading floor. Such funding can incentivize the filing of non-meritorious litigation. Litigation is expensive, so most businesses avoid it. Indeed, businesses often settle cases rather than engage in protracted and costly litigation, regardless of whether the claims are legitimate. Since litigation funding shifts the risk from plaintiffs to outsiders, there is less risk associated with non-meritorious claims.
Lastly, third party funding in patent suits may pose a threat to national security where the identities of funders are hidden. The fear is that this secrecy could allow foreign adversaries to benefit by influencing the American legal system, devaluing existing patents, interfering with innovation, gaining access to sensitive information, including military technology, evading sanctions, or otherwise harming U.S. interests.
With these national security concerns in mind, about two years ago fourteen state attorneys general signed a letter expressing their concerns. As Vice Chairman of the Senate Intelligence Committee, current U.S. Secretary of State Marco Rubio and Senator John Kennedy (when he was Ranking Member of the Subcommittee on Federal Courts) have also echoed these concerns. In Washington, U.S. Representative Darrell Issa, Chairman of the House Judiciary Subcommittee on Courts, Intellectual Property, and the Internet, is leading the charge to regulate. The related hearing, “The U.S. Intellectual Property System and the Impact of Litigation Financed by Third-Party Investors and Foreign Entities,” examined IP litigation financed by third party investors and foreign entities, including the impact of those developments on the U.S. IP system and U.S. national security.
Following the hearing, Rep. Issa released the Litigation Funding Transparency Act of 2024, which requires the disclosure of any third-party that has a right to receive any payment contingent on the outcome of the civil action and require the agreement creating the right to receive payment be produced to the court and named parties. It would not, however, require disclosure of any individuals or entities who do not receive payouts from funds obtained in settlements or court judgments. The Act further includes exceptions for funders who receive payments solely for the purposes of reimbursement or loan repayment. Ultimately, the Act would require transparency and the disclosure of the third-party funders’ involvement to ensure the court and parties are aware of the agreement.
Following the hearing, Rep. Issa released the Litigation Funding Transparency Act of 2024, Litigation Funding Transparency Act of 2024, which requires the disclosure of any third-party that has a right to receive any payment contingent on the outcome of the civil action and require the agreement creating the right to receive payment be produced to the court and named parties. It would not, however, require disclosure of any individuals or entities who do not receive payouts from funds obtained in settlements or court judgments. The Act further includes exceptions for funders who receive payments solely for the purposes of reimbursement or loan repayment. Ultimately, the Act would require transparency and the disclosure of the third-party funders’ involvement to ensure the court and parties are aware of the agreement.
In sum, litigation funding may improve access to justice to smaller entities, shifts the risk from lawyers and or clients to others, and keeps many lawyers employed. On the other hand, litigation funding may threaten the professional independence of lawyers, contravene the Model Rules of Professional Conduct, decrease transparency in the legal system, and pose national security risks. Regardless, as a $15 billion industry occurring in about 30% of patent infringement suits, it is a behemoth that has invited much criticism and some government response.
Federal Circuit’s Xencor Decision: Considerations for Jepson Claims and Implications for 35 U.S.C. § 101 Analysis
Go-To Guide:
Federal Circuit’s Xencor decision raises new challenges for Jepson claim format users.
Ruling requires more detailed descriptions of prior art in Jepson claims.
Decision may impact subject matter eligibility analysis under 35 U.S.C. §101.
Heightened need for articulating specific technical problems and solutions in patent applications.
Potential implications for demonstrating “significantly more” in §101 eligibility examinations.
The Federal Circuit’s March decision in In re Xencor, Inc., No. 24-1870 (Fed. Cir. Mar. 13, 2025) has altered the landscape for patent applicants using a Jepson claim format, creating new challenges that may warrant careful consideration. The ruling not only impacts written description requirements but has potential implications for subject matter eligibility analysis under 35 USC §101. As practitioners navigate these new waters, understanding both the Xencor decision and its broader ramifications appear to have become essential for effective patent prosecution strategy. The Xencor Decision: Raising the Bar for Jepson Claims
The Federal Circuit upheld the rejection of Xencor Inc.’s patent application for an antibody treatment method, finding that the company’s Jepson-formatted claims failed to adequately describe the state of the prior art. Named after a 1917 ruling, claims in Jepson format recite a preamble detailing previously known art followed by an improvement clause describing the applicant’s novel contribution that improves that art.
The court’s decision sets forth a critical new principle: “The invention is not only the claimed improvement, but the claimed improvement as applied to the prior art, so the inventor must provide written description sufficient to show possession of the claimed improvement to what was known in the prior art.” In Xencor, while the application described an improved method for treating patients with specific antibodies, the court found the evidence to establish that such antibody treatments were well-known in the field insufficient.
This ruling may create a hurdle for Jepson claim users, as it requires applicants to adequately describe both their improvement and the underlying technology it builds upon. The court expressly rejected the position that inventors could assert something is “well-known” without proper description, using a hypothetical example of someone claiming an improvement to a “time machine” without sufficiently describing such a device in their patent. According to the Federal Circuit, allowing such practice would leave the patent system vulnerable to abuse.
The decision does acknowledge that description requirements will vary based on factors including “the unpredictability of the art and the newness of the technology.” For example, while “automobile” needs little explanation today, the term would have required extensive elaboration in the 19th century. However, beyond this example, the court provided limited guidance on when technology becomes sufficiently well-known to forgo detailed description in a Jepson claim.
While patent examiners may sometimes recommend a Jepson-style claim to more quickly advance prosecution, practitioners that may have agreed to such a suggestion should now consider rejecting such an offer, given the heightened scrutiny these claims will face. Examiners and courts will need to evaluate whether the applicant’s description of prior art is adequate, creating new validity concerns that many applicants may prefer to avoid entirely.
Potential Implications for 35 USC §101 Analysis: Technical Problems and Solutions
The Xencor decision’s impact extends beyond written description requirements and into the realm of subject matter eligibility under 35 USC §101. This ruling reinforces the USPTO’s existing guidance that patent applications should clearly articulate technical problems and technical solutions to overcome subject matter eligibility challenges.
Heightened Need for Technical Problem-Solution Discussion
The Federal Circuit’s emphasis on “possession of the claimed improvement to what was known in the prior art” parallels the USPTO’s approach to analyzing eligibility under the Alice/Mayo framework. When examiners evaluate whether claims are directed to abstract ideas, they look for “meaningful limitations” that demonstrate the invention improves computer functionality or other technology. The Xencor ruling effectively raises the bar for these demonstrations, likely requiring more robust technical disclosures in the specification for some technical fields.
Patent applicants should consider being more diligent in clearly identifying the specific technical problem being addressed and precisely how their claimed solution resolves this issue. Rather than generic statements about efficiency, accuracy, or convenience, specifications should articulate concrete technical challenges in the prior art and explain how the claimed solution overcomes these challenges through technical means. Just as the Xencor court rejected vague assertions about “well-known” prior art, examiners may scrutinize vague claims of technical improvement without supporting technical explanation.
For example, an application claiming improved data processing algorithms should detail the specific technical limitations of existing processing methods (such as, for example, excessive memory usage, processing bottlenecks, or inability to handle specific data formats) and then explain how the claimed invention overcomes these specific technical hurdles. This enhanced focus on the problem-solution paradigm directly aligns with the “significantly more” analysis under Step 2B of the USPTO’s subject matter eligibility examination procedure.
Particularized Technical Component Details
Perhaps the most significant §101-related implication of the Xencor decision is the heightened need for particularized technical details regarding claim components. The ruling’s emphasis on describing prior art with specificity creates a parallel requirement for describing the technical implementation of claimed elements with similar specificity to overcome §101 rejections, where articulating the distinction over the prior art and how it is improved is paramount.
In light of this decision, practitioners should consider drafting specifications that:
Detail specific implementations: Rather than broadly claiming “a processor configured to perform X,” specifications should detail how that processor is specifically configured, what technical adaptations enable the claimed functionality, and how these configurations differ technically from conventional implementations.
Explain technical interactions: Practitioners may wish to clarify how different components interact in technically innovative ways, avoiding descriptions that merely string together conventional components performing their routine functions.
Provide technical metrics: Where possible, practitioners should consider including quantifiable improvements (e.g., processing speed increases, memory usage reductions, improved accuracy rates) that demonstrate the technical advancement over prior solutions.
Link technical details to claims: Ensure that the technical details in the specification are clearly reflected in the claims, creating a coherent narrative that examiners can follow from problem to solution.
The Xencor court’s “automobile” example provides a useful framework – while certain technologies are well understood today, emerging technologies may require more extensive explanation. Similarly, under §101 analysis, applications in cutting-edge fields may need particularly robust technical disclosures to overcome the presumption that claimed elements are merely abstract ideas implemented on generic components. Beyond Mere ‘Application’ to ‘Specific Practical Application’
The Xencor decision reinforces the distinction between a general application of known technology and a specific practical application of an improvement to technology that has become central to §101 analyses. Just as the court found that Xencor needed to describe more than just a general improvement to antibody treatments, the USPTO guidance requires that eligible claims do more than merely apply abstract ideas in a particular field using routine and conventional components. Applications thus should demonstrate specific technological improvements that go beyond mere conceptual applications. This potentially means:
Narrowing from general concepts to specific implementations: While the application may begin with broader concepts, practitioners might wish to narrow it to specific technical implementations that can be claimed.
Demonstrating transformative elements: Consider highlighting how the claimed elements transform the underlying technology rather than using existing technology in expected ways.
Avoiding result-oriented claiming: Applicants should consider focusing claims on specific technical means rather than claiming desired outcomes or results.
Creating technological interdependencies: Consider demonstrating how claimed elements work together in technically innovative ways that produce results that individual components could not achieve independently.
Conclusion
The Xencor decision represents a shift in the landscape for both Jepson claims and subject matter eligibility analysis. While directly addressing written description requirements, the decision’s underlying principles effectively raise the bar for demonstrating technical improvements necessary to overcome §101 rejections. For patent practitioners, this may mean crafting specifications that thoroughly document both the technical problem and solution, with particular attention to detailing how specific claimed components implement the invention in technically novel ways. Evolving and embracing a more rigorous approach to technical disclosure may help applicants and practitioners navigate both the Xencor requirements and the increasingly stringent §101 analysis framework examiners and judges apply.
China’s State Council Releases White Paper “China’s Position on Certain Issues in China-US Economic and Trade Relations” – China Continuously Improves IP Protection and Prohibits Forced Technology Transfer
On April 9, 2025, China’s State Council Information Office released a white paper entitled “China’s Position on Certain Issues in China-US Economic and Trade Relations” (关于中美经贸关系若干问题的中方立场) in response to the ongoing trade war. With respect to intellectual property, the white paper states that China has continuously improved intellectual property protection and prohibits forced technology transfer. The white paper appears to address allegations made in the America First Trade Policy and the Report to the President on the America First Trade Policy Executive Summary but not the more recent and detailed United States Trade Representative 2025 National Trade Estimate Report on Foreign Trade Barriers.
The following are IP-related excerpts from the Chinese version of the white paper. The full text of the white paper is available here (Chinese). An English version of the white paper is available here.
II. China conscientiously implements the first phase of the China-US economic and trade agreement
As a responsible major country, China has conscientiously fulfilled its obligations under the agreement, protected intellectual property rights, increased imports, and expanded market access, creating a good business environment for investors from all countries, including American companies, to participate in sharing the dividends of China’s economic development.
1. Continuously improving intellectual property protection
Innovation is the primary driving force for development, and protecting intellectual property rights is protecting innovation. China has taken multiple measures to protect trade secrets, protect pharmaceutical intellectual property rights, combat online infringements, and tighten intellectual property law enforcement, and has conscientiously implemented the relevant commitments in the intellectual property chapter of the agreement.
Strengthen the protection of trade secrets. In September 2020, the Supreme People’s Court issued the “Regulations on Several Issues Concerning the Application of Law in the Trial of Civil Cases of Infringement of Trade Secrets”, the Supreme People’s Court and the Supreme People’s Procuratorate issued the “Interpretation on Several Issues Concerning the Specific Application of Laws in Handling Criminal Cases of Infringement of Intellectual Property Rights (III)”, and the Supreme People’s Procuratorate and the Ministry of Public Security issued the “Decision on Amending the Regulations on the Standards for Filing and Prosecuting Criminal Cases under the Jurisdiction of Public Security Organs”. In December 2020, the National People’s Congress passed the Criminal Law Amendment. The above regulations cover the definition of the scope of prohibited acts that constitute infringement of trade secrets, the definition of criminal acts of theft of trade secrets, the application for temporary injunctions in cases of theft of trade secrets, and the adjustment of the threshold for initiating criminal investigations.
Improve the pharmaceutical intellectual property protection system. In October 2020, the Standing Committee of the National People’s Congress reviewed and adopted the decision to amend the Patent Law, adding relevant provisions on the early resolution mechanism for pharmaceutical patent disputes [patent linkage] and the patent term compensation system. In July 2021, the National Medical Products Administration and the National Intellectual Property Administration jointly issued the “Implementation Measures for the Early Resolution Mechanism for Pharmaceutical Patent Disputes (Trial)“, the National Intellectual Property Administration issued the “Administrative Adjudication Measures for the Early Resolution Mechanism for Pharmaceutical Patent Disputes“, and the Supreme People’s Court issued the “Regulations on Several Issues Concerning the Application of Law in Civil Cases of Patent Disputes Related to Drugs Applied for Registration“, establishing an early resolution mechanism for pharmaceutical patent disputes to ensure the effective implementation of the system. In December 2023, the State Council announced the decision to amend the Implementing Rules of the Patent Law, and the National Intellectual Property Administration simultaneously completed the revision of the patent examination guidelines and made detailed provisions on the patent term compensation system. In addition, in the revision of the patent examination guidelines completed by the National Intellectual Property Administration in 2021, the relevant content of supplementary experimental data was further improved.
Improve the trademark and geographical indication protection system. In April 2019, the Standing Committee of the National People’s Congress reviewed and adopted the decision to amend the Trademark Law, adding relevant content to regulate malicious trademark registration, increasing the penalties for infringement of trademark exclusive rights, and significantly increasing the illegal costs of counterfeiters of registered trademarks. Since then, the National Intellectual Property Administration has successively formulated and issued the “Several Provisions on Regulating Trademark Application and Registration Behaviors”, “Trademark Infringement Judgment Standards”, “Trademark General Violation Judgment Standards” and other regulations to continue to crack down on malicious trademark registration applications. In December 2023, the National Intellectual Property Administration formulated and issued the “Geographical Indication Product Protection Measures” and “Collective Trademark and Certification Trademark Registration and Management Regulations”, further improving the legal rules for the protection of geographical indications.
Actively promote Sino-US intellectual property exchanges and cooperation. Through consultations on work plans and signing of memorandums of understanding on cooperation with the US intellectual property authorities, deepen mutually beneficial and pragmatic cooperation in various technical fields such as intellectual property review, expert exchanges, and awareness raising. Maintain good communication and exchanges with US-funded enterprises with a positive and open attitude, listen to opinions and suggestions on China’s intellectual property system, and coordinate to resolve the reasonable intellectual property demands of enterprises in China.
Step up efforts to combat online infringement. In September 2020, the Supreme People’s Court issued the “Guiding Opinions on the Trial of Civil Cases Involving Intellectual Property Rights on E-commerce Platforms” and the “Reply on Several Legal Application Issues in Disputes Involving Internet Intellectual Property Infringement”, which involved issues such as rapid removal, the effectiveness of notifications and counter-notifications. In November 2020, the Standing Committee of the National People’s Congress passed amendments to the Copyright Law, including the addition of civil remedies for copyright infringement. In August 2021, the State Administration for Market Regulation issued the “Decision on Amending the E-commerce Law of the People’s Republic of China (Draft for Comments)”, which amended the procedures and penalty provisions of the notification and removal system.
Strengthening intellectual property law enforcement. In August 2020, the State Administration for Market Regulation and other departments issued the “Opinions on Strengthening the Destruction of Infringing and Counterfeit Goods”, and the State Council amended the “Regulations on the Referral of Suspected Criminal Cases by Administrative Law Enforcement Agencies”, requiring that cases involving intellectual property crimes be referred to public security agencies by administrative law enforcement agencies. China has also continuously strengthened infringement and counterfeiting law enforcement actions. In 2024, market supervision departments organized special actions such as intellectual property law enforcement to further strengthen the governance of key areas, key commodities, and key markets. Various special actions investigated and dealt with nearly 675,000 cases, including 43,900 trademark infringement and counterfeit patent cases, and carried out about 88,000 law enforcement actions against key physical markets with high incidence of infringement and counterfeiting. The General Administration of Customs further strengthened the enforcement of intellectual property protection, taking special actions as a starting point, and maintained a high-pressure situation to combat infringement in the import and export links. 41,600 batches and 81.6051 million pieces of suspected infringing goods were detained throughout the year.
2. Prohibition of forced technology transfer
China firmly opposes any form of forced technology transfer, always takes mutual benefit and win-win as the basic value orientation in conducting international technology cooperation, encourages and respects Chinese and foreign companies to voluntarily conduct technology transfer and licensing in accordance with market principles, provides a good market environment for Chinese and foreign technology holders to obtain benefits through technology transfer and licensing, and also provides support for promoting global scientific and technological progress and international economic and trade development. The US calls the voluntary contractual behavior of foreign-invested enterprises and Chinese companies to conduct technical cooperation and jointly obtain commercial returns in the Chinese market “forced technology transfer”, which is inconsistent with the facts.
Forced technology transfer is clearly prohibited from a legal perspective. The Foreign Investment Law, issued in March 2019, stipulates that “administrative organs and their staff shall not use administrative means to force technology transfer”. The Administrative Licensing Law, revised and issued in April 2019, stipulates that “administrative organs and their staff shall not directly or indirectly require technology transfer in the process of implementing administrative licensing”. The Regulations for the Implementation of the Foreign Investment Law, issued in December 2019, further refine the above provisions and prohibit any form of forced technology transfer.
Comprehensively strengthen the confidentiality responsibility of administrative agencies and staff. Chinese law clearly stipulates that administrative agencies and their staff shall keep confidential the commercial secrets of foreign investors and foreign-invested enterprises that they learn about in the course of performing their duties. The Foreign Investment Law stipulates that “administrative agencies and their staff shall keep confidential the commercial secrets of foreign investors and foreign-invested enterprises that they learn about in the course of performing their duties, and shall not disclose or illegally provide them to others”; administrative agency staff “who disclose or illegally provide to others commercial secrets learned in the course of performing their duties shall be punished in accordance with the law; if a crime is constituted, criminal liability shall be pursued in accordance with the law.” The Administrative Licensing Law also makes similar provisions in this regard.
Continuously expand market opening and investment access. China insists on optimizing the market environment, expanding foreign investment access, increasing the choice and freedom of foreign companies to invest in China, and creating good conditions for foreign companies to voluntarily carry out technical cooperation with Chinese companies in accordance with market principles. China has established a national treatment plus negative list management system for foreign investment access, replacing the “case-by-case approval” system for the establishment and change of foreign-invested enterprises with a convenient and fast information reporting system. China has also launched a series of measures to encourage foreign investment and continuously improve the foreign investment environment. In 2024, the General Office of the CPC Central Committee and the General Office of the State Council issued the “Opinions on Improving the Market Access System”, requiring “strengthening the coordination of domestic and foreign investment access policy adjustments, and adhering to the principle of national treatment without reducing the access opportunities of existing business entities”, and further improving the construction of the market access system, optimizing the access environment, and improving market access efficiency at the central level.