PTAB Rejects AI-Driven Medical Patent – Not for Novelty, But Eligibility
In a recent decision with important implications for artificial intelligence (AI) driven innovation, the Patent Trial and Appeal Board (PTAB) denied a patent for an AI-based medical tool.[1] The refusal was not because the invention was not new or inventive. Rather, the refusal was because the invention did not meet a fundamental rule of U.S. patent law. In Ex parte Michalek, the PTAB specifically acknowledged that the patent claims at issue recited new information about the nexus between certain biomarkers and the development of lung cancer as facilitated by machine learning. In fact, prior to appeal, the applicant had successfully refuted all arguments raised by the patent examiner that the invention was not new or nonobvious. That said, based on U.S. Patent Office guidance and a related example from that guidance, the PTAB still determined the claims were flawed based on the legal principle of subject matter eligibility. Although the facts in this decision concern medical health innovation, the decision is helpful to inform patent strategy for AI-enabled inventions across various disciplines and industries.
In its patent application, the applicant submitted patent claims covering a machine learning enabled capability to predict a disease state of a human based on certain biomarkers. During prosecution, the applicant had overcome all prior art rejections. Thus, the issue of novelty and nonobviousness of the claims had been specifically raised, considered, and resolved in the applicant’s favor. Patentability rested on the only remaining issue of subject matter eligibility.
Subject matter eligibility refers to whether an invention is of the required type to qualify for patent protection under U.S. patent law. Processes, machines, manufactures, and compositions of matter are patentable but natural laws, mathematical concepts, and abstract ideas, for example, are not. In practice, distinguishing between the two categories has proven difficult. Because of this difficulty and the unique complexities posed by AI driven innovation, the U.S. Patent Office has issued specific guidance on subject matter eligibility of AI-related inventions. The guidance sets forth principles that inform how patent examiners should assess whether AI-driven innovations meet subject matter eligibility requirements. To illustrate these principles, the USPTO has provided various specific “examples” demonstrating when AI-related inventions are patent-eligible and when they are not.
Although it acknowledged that the invention involved a new idea, the PTAB in Michalek found that the invention was a natural law and a mathematical concept. The PTAB relied on an example from Patent Office guidance that characterizes an invention relating to determination of patient risk for a medical condition as ineligible because it involved an improvement to an abstract idea, not to the functioning of a computer or other technology. According to the cited example, the recital of a treatment for the medical condition in theory could have helped the applicant to demonstrate the subject matter eligibility of the invention. However, the PTAB did not discuss this option and, in any event, no evidence indicated that a treatment had been described in the patent application. As perhaps more relevant, the PTAB did not discuss other examples from Patent Office guidance that might have better applied to save the invention.
While this case involved medical health technology, the implicated issues inform patent strategies for AI-enabled inventions across all industries. Patent applicants working with AI should be prepared for the Patent Office to apply similar reasoning to their applications. Patent applicants should be prepared to address strained reliance on certain examples from Patent Office guidance or, better yet, highlight more analogous examples. It is critical for patent applicants at the preparation stage to proactively devise an application drafting strategy supported by the guidance and examples to invite smoother prosecution.
FOOTNOTES
[1] Ex parte Michalek, Appeal No. 2023-004204 (PTAB Dec. 27, 2024).
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The Importance of Preserving Issues for Appeal
This Federal Circuit opinion analyzes claim construction arguments and requests for remittitur in the context of preserving issues for appeal.
Background
Belanger is a manufacturer of car wash systems. Belanger owns the ‘041 patent, which generally discloses a spray type car wash system with lighted spray arms that uses visual cues to help center vehicles within the wash apparatus while entering the bay.
Belanger accused Wash World’s “Razor EDGE” car wash system of infringing the ’041 patent. Wash World responded by seeking a declaratory judgment of noninfringement, and Belanger counterclaimed for infringement and damages. The jury found the “Razor EDGE” system infringed the ’041 patent, and awarded Belanger $10,060,000. The district court subsequently denied Wash World’s motion for judgment as a matter of law of non-infringement and, alternatively, for a new trial or remittitur of the damages award.
Wash World appealed to the Federal Circuit on two issues. Wash World first contended to overturn the infringement judgment due to alleged claim construction errors. Specifically, the disputed claim terms, which relate to how the claimed car wash operates, were (i) “outer cushioning sleeve”, (ii) “predefined wash area”, and (iii) “dependingly mounted”.
In addition, Wash World also contended to reduce the damages award through remittitur by approximately $2.6 million in lost profits from auxiliary products that allegedly lacked any functional relationship to Belanger’s patent claim, i.e., Wash World contended Belanger’s lost profits included improper convoyed sales. The alleged auxiliary products at issue here were unpatented dryers sold with the patented car wash system.
Belanger asserted both of these issues were forfeited.
Issues
Did Wash World forfeit its claim term construction proposals, and if not, did they fail on the merits?
Did Wash World forfeit its request for remittitur, and if not, did the district court abuse its discretion in awarding lost profits from auxiliary products?
Holdings
Mixed. Wash World forfeited its arguments on the (i) “outer cushioning sleeve” and (ii) “predefined wash area” terms. The (iii) “dependingly mounted” argument was not forfeited, but it failed on the merits.
Mixed. Wash World did not forfeit its request for remittitur. The district court did abuse its discretion in awarding lost profits from auxiliary products.
Reasoning
Claim construction. The Federal Circuit first held Wash World forfeited its claim construction arguments regarding the (i) “outer cushioning sleeve” and (ii) “predefined wash area” terms. However, the Federal Circuit held Wash World did not forfeit its claim construction argument regarding (iii) the “dependingly mounted” term. For the first and second terms, the Federal Circuit reasoned Wash World failed to preserve its claim construction arguments because Wash World proposed materially different constructions on appeal than those presented at the district court. Nor were there any exceptional circumstances here: Wash World chose what constructions to propose, was fully heard, and has never indicated to the trial court the new constructions it proposed on appeal. For the (iii) “dependingly mounted” term, the Federal Circuit reasoned although neither party identified such term as requiring construction during the claim construction stage, a dispute over the scope of this term became apparent during briefing on Wash World’s summary judgment motion in the district court. Thus, the proposed construction was not forfeited. Regardless, the Federal Circuit did not find the district court’s claim construction as legally erroneous having a prejudicial effect. The Federal Circuit rejected Wash World’s argument that “dependingly mounted” is limited to a direct connection, as nothing in the claim language suggests so and it is not dispositive that the ’041 patent’s specification only depicts embodiments that have a direct connection.
Remittitur. The Federal Circuit first held Wash World did not forfeit its request for remittitur because although Wash World could have been clearer in its opening brief regarding a remittitur of approximately $2.6 million, the review of the record showed the district court and Belanger understood this was a component of Wash World’s request. Even if such request was forfeited, the Federal Circuit found there were three exceptional circumstances here to reach the merits nonetheless. The first exceptional circumstance was the court can discern here the precise amount of damages awarded based on convoyed sales, as seen through Belanger’s own arguments to the district court which confirmed Belanger understood such precise amount. The second exceptional circumstance was one of estoppel: it would be inequitable to allow Belanger to prevail on appeal by arguing the court cannot determine the amount of damages based on convoyed sales as it would directly contradict Belanger’s previous arguments that the court could identify the amount of damages based on convoyed sales. The third exceptional circumstance was the requirements for obtaining lost profits for convoyed sales were plainly not satisfied. Moving onto the merits, the Federal Circuit likewise held the requirements for obtaining lost profits for such sales were plainly not satisfied here: there was no evidence of a functional relationship between Belanger’s car wash and the listed additional components (unpatented dryers) it sells. Belanger selling such products together as a package is simply only a “matter of convenience or business advantage.”
Conclusion
The Federal Circuit (i) affirmed the district court’s infringement judgment and (ii) vacated and remanded the damages judgment to remit approximately $2.6 million. This opinion highlights the importance of clearly and timely preserving arguments for appeal as exceptional circumstances may not always be present, and the requirements for remittitur in relation to lost profits.
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CAFC Ruling Questions How and When Tools Built Using Machine Learning are Patentable
CAFC affirms that applying generic machine learning to industry-specific problems is not enough for patent eligibility under §101, reinforcing the importance of how innovations are framed in patent applications — especially in emerging tech like AI.
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In a decision with major implications for AI-related patent strategy, the U.S. Court of Appeals for the Federal Circuit (CAFC) held on April 18, 2025 that four patents related to machine learning in live-event scheduling and broadcasting were ineligible under 35 U.S.C. §101. The court affirmed a decision from the U.S. District Court for the District of Delaware, concluding that the innovation merely applied generic machine learning techniques in the data environment for the entertainment industry, without demonstrating any specific technological improvement or inventive concept.
This ruling has significant implications for innovators, businesses, and legal practitioners in the technology and intellectual property fields, particularly those working with machine learning and AI, because it further defines the boundaries of patent eligibility under judicially created exceptions to patent subject matter eligibility.
Background
These exceptions — categories of subject matter that include laws of nature, natural phenomena, and abstract ideas — are not eligible for patent protection. Notably, the “abstract idea” category, which encompasses mathematical formulas and business methods, is often applied against software-implemented inventions. The judiciary and the United States Patent and Trademark Office (USPTO) have ruled that such categories are considered the basic tools of scientific and technological work — which, if patentable, would stifle innovation and restrict access to knowledge.
In considering whether claims are eligible for patent protection, the USPTO or a federal court looks to whether the claims recite more than the subject matter deemed to be within the judicial exception. Under this framework, a claim that recites a judicial exception but also includes additional elements that transform the nature of the claim into a patentable application is typically considered eligible.
Notably, although the CAFC stated that “[m]achine learning is a burgeoning and increasingly important field and may lead to patent-eligible improvements in technology,” patents that “do no more than claim the application of generic machine learning to new data environments, without disclosing improvements to the machine learning models to be applied,” are nevertheless “patent ineligible under § 101.”
Still, it is worth noting that patent owner repeatedly conceded that it was not claiming machine learning itself. Thus, the ruling highlights that application of known machine learning techniques to new contexts will not constitute a patent-eligible invention unless the claims disclose specific improvements to the machine learning technique itself. Such an approach is a further extension of the Supreme Court rulings of Alice Corp. v. CLS Bank International and Mayo v. Prometheus Labs, in that it effectively limits the eligibility analysis to a determination of how machine learning itself is improved rather than the use of machine learning to build systems and methodologies to address technological problems in particular industrial applications.
Implications and Takeaways
The USPTO’s most recent patent eligibility guidance examples are fairly aligned with the CAFC’s recent decision. However, it remains to be seen whether such an approach effectively serves the underlying goal of enabling free use of known “basic tools” such as machine learning technology.
As a result, patent applicants should understand and anticipate that patent eligibility will hinge on both how an innovation is framed in the application text as well as the underlying technology used to generate that innovation.
Bancor Sues Uniswap for Patent Infringement
Bancor Sues Uniswap for Patent Infringement. Bprotocol Foundation and LocalCoin Ltd., the developers behind the Bancor Protocol, have filed a lawsuit against Uniswap Labs and the Uniswap Foundation, accusing them of infringing on patented technology used in automated crypto trading. At the center of the case is a smart contract system known as the constant […]
Federal Circuit Provides Clarity on Use of Applicant Admitted Prior Art (“AAPA”) in IPRs
Qualcomm Incorporated v. Apple Inc., No. 23-1208 (Fed. Cir. 2025)—On April 23, 2025, the Federal Circuit reversed the Patent Trial and Appeal Board’s finding that claims of Qualcomm’s U.S. Patent No. 8,063,674 (“the ’674 Patent”) are unpatentable as being obvious over the prior art.
Background
In 2018, Apple filed two IPR petitions each directed to different claims of the ’674 Patent. The IPR petitions included a table listing the grounds for the IPR challenge and the basis of each ground, with the basis for Ground 2 being “§103: Applicants [sic] Admitted Prior Art (AAPA) in view of Majcherczak.” The AAPA included a circuit diagram that was labeled as “PRIOR ART” in the ’674 Patent. In January 2020, the Board issued a consolidated final written decision finding the challenged claims of the ’674 Patent unpatentable under Ground 2.
Qualcomm appealed and argued that Ground 2 violated 35 U.S.C. § 311(b) because under § 311(b) only “prior art consisting of patents or printed publications” may form the basis for a petitioner’s request to cancel claims and that AAPA did not qualify as a patent or printed publication.
In February 2022, the Federal Circuit found that the Board “incorrectly interpreted § 311(b)’s ‘prior art consisting of patents or printed publications’ to encompass AAPA contained in the challenged patent.” However, the Federal Circuit clarified that “the use of AAPA can be permissible in an [IPR].” The Federal Circuit vacated the Board’s final written decision and remanded for the determination of “whether AAPA improperly formed the ‘basis’ of Apple’s challenge.”
In June 2022, the USPTO issued “Updated Guidance on the Treatment of Statements of the Applicant in the Challenged Patent in [IPRs] Under § 311(b)” that stated under § 311(b), if an IPR petition “relies on admissions in combination with reliance on one or more prior art patents or printed publications, those admissions do not form ‘the basis’ of the ground.” Relying on this Updated Guidance, the Board determined that Apple’s use of AAPA in Ground 2 did not violate § 311(b) because it relied on AAPA “in combination” with a prior art patent (i.e., Majcherczak). The Board rejected Qualcomm’s argument that Apple “conceded that AAPA forms the basis of the Ground 2 challenge” by expressly stating the “Basis” of Ground 2 was “[AAPA] in view of Majcherczak,” because per the Federal Circuit in Qualcomm’s appeal, AAPA can be relied on without violating § 311(b), so the Board determined that Apple’s express statements are “not determinative as to what the ground is based on.” Accordingly, the Board decided on remand that the challenged claims of the ’674 Patent are unpatentable as obvious under Ground 2.
Qualcomm again timely appealed the Board’s determination of unpatentability.
Issues
The primary issues on appeal were:
Whether under § 314(d), a petitioner’s compliance with § 311(b) is reviewable by the Federal Circuit due to institution decisions being nonappealable?
Whether the Board misinterpreted § 311(b)?
Whether the Board erred in determining that Ground 2 complied with § 311(b)?
Holdings and Reasoning
1. Under § 314(d), a petitioner’s compliance with § 311(b) is reviewable by the Federal Circuit.
Apple argued that Qualcomm’s argument regarding non-compliance with § 311(b) due to “the basis” of Ground 2 relying on AAPA was “not permissible” under § 314(d), because Qualcomm’s argument effectively was a challenge of the decision to institute the IPRs.
The Federal Circuit held that Qualcomm’s appeal is not barred from review under 35 U.S.C. § 314(d), which states: “The determination by the Director whether to institute an [IPR] under this section shall be final and nonappealable.”
The Federal Circuit rejected Apple’s argument because “Qualcomm’s challenge does not pertain to the Board’s determination about a run-of-the-mill statutory provision of a procedural nature regarding the threshold question whether to institute an IPR. Rather, as in [SAS Inst., Inc. v. Iancu, 584 U.S. 357 (2018)], Qualcomm’s appeal presents a question about the manner in which the agency’s review proceeds once instituted.”
2. The Board misinterpreted § 311(b).
The Federal Circuit held that “the Board’s interpretation of § 311(b) contravened the plain meaning of the statute.”
In Qualcomm’s previous appeal, the Federal Circuit found that “AAPA is not a prior art patent or printed publication.” Thus, the Federal Circuit reasoned that “because [under § 311(b)] the basis can only include prior art consisting of patents or printed publications . . . it follows that the plain meaning of § 311(b) does not permit the basis to include AAPA.” The Board interpreted § 311(b) to provide that AAPA does “not form ‘the basis’ of the ground” where “an IPR petition relies on admissions in combination with reliance on one or more prior art patents or printed publications.” The Federal Circuit rejected the Board’s interpretation because “[u]nder the plain meaning of § 311(b), the question is whether a petitioner has used AAPA as the basis, or part of the basis, of a ground—not whether the request relies on AAPA in combination with prior patents or printed publications.”
3. The Board erred in determining that Ground 2 complied with § 311(b).
The Federal Circuit agreed with Qualcomm that “the Board misapplied § 311(b) to conclude that Ground 2 complies with the statute.” The Federal Circuit found that “the Board erred when it applied its incorrect statutory interpretation to conclude that ‘it is the prior art patents—Majcherczak and, when used, Matthews—that form the basis of the challenge and AAPA is simply being used to provide missing limitations,’ and not as the basis of Ground 2 in violation of § 311(b).”
In addition, the Federal Circuit agreed with Qualcomm that Apple’s IPR petitions “conceded that AAPA forms the basis of the Ground 2 challenge” because “[e]ach petition opened with a table that prominently labeled the ‘Basis’ of Ground 2 as ‘AAPA in view of Majcherczak’ . . . .” The Federal Circuit held that “[r]eliance on AAPA in combination with prior art patents or printed publications is not dispositive of whether AAPA is included in the basis of a ground. But what is dispositive are express statements—as in Apple’s petitions—that AAPA is in the ‘Basis’ of a ground.”
The Federal Circuit noted that due to the “unequivocal use of ‘basis’ in Apple’s petitions, we need not consider whether, in substance, Ground 2 included AAPA in its basis.” The Federal Circuit further left open however the question of how much reliance on AAPA may be permitted in an IPR and that “[w]e expect future cases may require the PTO and this court to consider the substance of a petition to determine compliance with § 311(b).”
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Is it Prior Art? Check the Provisional Application!
This Federal Circuit Opinion analyzed collateral estoppel and the extent to which the non-provisional document would benefit from the provisional application’s priority date, as it relates to Pre-AIA 35 U.S.C. § 102(e).
Background
U.S. Patent Application No. 11/005,678 (“‘678 application”), filed on December 7, 2004 that claims priority to a provisional application filed on July 28, 2000, is directed to logistic systems and methods for transportation of goods that connect and share customer order information between various shippers across different transportation modes. The Examiner rejected the ‘678 application under pre-AIA 35 U.S.C. § 102(e) and 35 U.S.C. § 103. Specifically, claims 1, 2, 8, 10-13, and 24-25 were rejected as anticipated under pre-AIA 35 U.S.C. § 102(e) by U.S. Patent Application Publication No. 2002/0049622 A1 (“Lettich”), which was filed April 26, 2001 and published on April 25, 2002 , and claims 3, 5-7, 9, 15-20, and 22 were rejected as obvious under 35 U.S.C. § 103 over Lettich in view of Karen Rojek’s, How Baxter Improved Data Exports, dated 1998. In addition, Lettich is a non-provisional U.S. patent application that claims priority to provisional application No. 60/200,035, filed on April 27, 2000 (the “Lettich Provisional Application”).
In April 2016, the Patent Trial and Appeal Board (the “Board”) reversed the Examiner’s rejections, finding that Lettich was not prior art under 35 U.S.C. § 102(e). In September 2016, the Examiner filed a Request for Rehearing, alleging that the Board had applied an incorrect version of 35 U.S.C. § 102(e) to determine whether Lettich qualified as prior art. Thereafter, the real party in interest, Odyssey Logistics & Technology Corp., filed a complaint in the U.S. District Court for the Eastern District of Virginia challenging the Request for Rehearing. See Odyssey Logistics & Tech. Corp. v. Iancu, 959 F.3d 1104, 1106–07 (Fed. Cir. 2020). In Odyssey, the Eastern District Court of Virginia disagreed with Odyssey’s argument that “the rehearing proceedings are an ultra vires action by the PTO.” Id. at 1109. The court dismissed Odyssey’s challenge, and the Federal Circuit affirmed.
In the rehearing, the Board agreed with the Examiner’s argument and amended its original decision to find that Lettich was prior art. The Board, referencing MPEP § 2136.03, found that because there was written description support in the Lettich Provisional Application for Lettich’s claim 1 limitations, the entire Lettich specification benefited from the Lettich Provisional Application’s priority date. The Board further found that the subject matter (e.g., paragraphs, figures, and claims) in Lettich that was referenced in the Examiner’s rejection of the ‘678 claims appropriately addressed the ‘678 claim limitations. Accordingly, the Board affirmed the Examiner’s anticipation and obviousness rejections.
The Appellants, the named inventors for the ‘678 application, appealed the Board’s rehearing decision. They raised three distinct issues: (1) whether the Board’s decision to grant the request for rehearing was ultra vires; (2) whether the Board properly afforded Lettich the earlier filing date of its provisional application for purposes of determining that it was prior art under pre-AIA 102(e); and (3) whether substantial evidence supported the Board’s finding as to anticipation and motivation to combine.
Issues
Are the Appellants estopped from asserting the ultra vires challenge?
Did the Board properly afford Lettich the earlier filing date of its provisional application for purposes of determining that it was prior art under pre-AIA 102(e)?
Was there substantial evidence supporting the Board’s finding as to anticipation and motivation to combine?
Holding(s)
The Appellants are estopped from asserting their ultra vires challenge.
The Board improperly found that Lettich, in its entirety, benefited from the earlier Lettich Provisional Application filing date.
The Federal Circuit did not address the substantial evidence issue.
Reasoning
Whether Appellants Were Estopped From Making The Ultra Vires Challenge
The Board argued that the Appellants are estopped from asserting this argument. In assessing the Board’s argument, the Federal Circuit, citing VirnetX Inc. v. Apple Inc., 909 F.3d 1375, 1377 (Fed. Cir. 2018), listed the four elements of collateral estoppel: (1) a prior action presented an identical issue; (2) the prior action actually litigated and adjudged that issue; (3) the judgment in that prior action necessarily required determination of the identical issue; and (4) the prior action featured full representation of the estopped party. Here, the Federal Circuit held the previous decision in Odyssey estopped the Appellants from arguing that the Board acted ultra vires.
Regarding elements (1) and (2), the Federal Circuit in Odyssey rejected Odyssey’s argument that “the rehearing proceedings are an ultra vires action by the PTO,” which was the same argument advanced by the Appellants in this appeal. Regarding element (3), the judgment on the ultra vires issue necessarily required resolution of whether the Board’s actions satisfied the Administrative Procedure Act’s finality requirement, which Odyssey decided. Regarding element (4), the Certificate of Interest for this appeal listed Odyssey as the real party in interest. Because all four elements were satisfied, the Appellants were estopped from asserting the ultra vires challenge.
Whether The Board Properly Afforded Lettich The Earlier Filing Date
The Federal Circuit held that whether Lettich was prior art under pre-AIA 102(e) turned on whether Lettich was entitled to the priority date of the provisional application. The Board and the Examiner interpreted MPEP § 2136.03 in a manner where, if one claim in Lettich were supported by written description in the Lettich Provisional Application, then the entire Lettich publication benefited from the Lettich Provisional Application’s filing date. However, the Federal Circuit rejected this interpretation.
The Federal Circuit held that in order to apply the provisional application’s priority date to a referenced subject matter in a non-provisional document on which an examiner may rely on to reject a claim, a provisional application must provide written description for it. The Federal Circuit held that support for a single claim in a non-provisional document found in a provisional application did not carry the benefit of the provisional application date to the entire non-provisional document, including subject matter that was not supported in the provisional application.
Here, the Federal Circuit affirmed the Board’s claim 1 rejection because the Board found that the referenced subject matter in Lettich was supported by the Lettich Provisional Application. However, this analysis had not been completed for other claims rejected under 35 U.S.C. 102(e). Accordingly, the Federal Circuit vacated the Board’s decision and remanded the case with instructions for the Board to determine if the subject matter in Lettich referenced in rejecting the remaining claims was supported in the Lettich Provisional Application.
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New Procedural Rules for Trade Secrets in Germany
On April 1, 2025, the Act to Strengthen Germany as a Location for Justice—formally titled Justizstandort-Stärkungsgesetz of October 7, 2024 (Federal Law Gazette 2024 I No. 302)—entered into force. This legislation aims to enhance Germany’s attractiveness as a venue for international commercial litigation by, among other things, establishing commercial courts and permitting the use of English in civil proceedings.
To strengthen the protection of trade secrets, the new law amends both the German Code of Civil Procedure (ZPO) and the Introductory Act to the Code of Civil Procedure (EGZPO). These changes respond to a growing practical need for stronger procedural safeguards for trade secrets across a broader range of legal disputes.
Procedural protection for trade secrets is primarily governed by Sections 16–20 of the Trade Secrets Act (Geschäftsgeheimnisgesetz, or GeschGehG). However, these provisions only apply directly to proceedings involving claims brought under the Trade Secrets Act itself. They do not extend to other civil cases where trade secrets could be relevant—such as disputes over confidentiality obligations in employment or service contracts, or in copyright matters.
This limited scope was confirmed by the Higher Regional Court of Düsseldorf in a decision dated January 11, 2021 (Case No. 20 W 68/20, GRUR-RS 2021, 7875, paras. 12–13), where the court held that Sections 16 ff. GeschGehG could not be applied analogously to copyright disputes.
While certain provisions of the German Courts Constitution Act (GVG)—namely Sections 172 no. 2, 173(2), and 174(3)—do allow for some restriction of public access in civil proceedings, they offer only limited protection. For one, parties do not have a legal entitlement to a non-public hearing. More importantly, these provisions only take effect from the oral hearing onward and do not protect sensitive information disclosed in earlier stages, such as in the statement of claim. As a result, litigants may be forced to choose between withholding crucial information—thereby risking procedural disadvantages—or disclosing trade secrets and compromising confidentiality.
Furthermore, under the current legal framework, the confidentiality obligation in Section 174(3) sentence 1 GVG does not restrict the use of information acquired through the proceedings. This means an opposing party may legally use trade secret information for their own benefit outside the courtroom (see Bundestag printed matter 20/8649 of October 6, 2023, p. 32).
To address this gap, the newly introduced Section 273a ZPO now provides a comprehensive framework for the procedural protection of trade secrets in all civil proceedings governed by the ZPO—not just in commercial court matters. Upon request by a party, the court may designate certain disputed information as confidential, in whole or in part, if it qualifies as a trade secret under Section 2 no. 1 GeschGehG. Notably, it is sufficient for the information to potentially be a trade secret.
Once such a designation is made, the procedural protections of Sections 16–20 GeschGehG apply accordingly. This includes, for example, the obligation to treat the information confidentially under Section 16(2) GeschGehG, and the prohibition on using or disclosing it outside the proceedings—unless the information was already known to the parties independently of the litigation.
According to the transitional provision in Section 37b EGZPO, the new Section 273a ZPO applies immediately upon the Act’s entry into force, including to cases that were already pending at the time. Parties and practitioners must therefore be aware that the new rule is applicable to ongoing proceedings.
Why This Matters
The new Section 273a ZPO marks a significant shift in the procedural protection of trade secrets in German civil litigation. Whether you’re navigating ongoing proceedings or planning future litigation strategy, it’s crucial to understand how these changes affect your rights and obligations.
AI Drives Need for New Open Source Licenses – Linux Publishes the OpenMDW License
For many reasons, existing open source licenses are not a good fit for AI. Simply put, AI involves more than just software and most open source licenses are designed primarily for software. Much work has been done by many groups to assess the open source license requirements for AI. For example, the OSI has published its version of an AI open source definition – The Open Source AI Definition – 1.0. Recently, the Linux Foundation published a draft of the Open Model Definition and Weight (OpenMDW) License.
The OpenMDW License is a permissive license specifically designed for use with machine‑learning models and their related artifacts, collectively referred to as “Model Materials.” “Model Materials” include machine‑learning models (including architecture and parameters) along with all related artifacts—such as datasets, documentation, preprocessing and inference code, evaluation assets, and supporting tools—provided in the distribution. This inclusive definition purports to align with the OSI’s Open Source Definition and the Model Openness Framework, covering code, data, weights, metadata, and documentation without mandating that every component be released. The Model Openness Framework is a three-tiered ranked classification system that rates machine learning models based on their completeness and openness, following open science principles.
The OpenMDW License is a permissive license, akin to the Apache or MIT license. It grants a royalty free, unrestricted license to use, modify, distribute, and otherwise “deal in” the Model Materials under all applicable intellectual‑property regimes—including copyright, patent, database, and trade‑secret rights. This broad grant is designed to eliminate ambiguity around the legal permissions needed to work with AI assets.
The primary substantive compliance obligation imposed by OpenMDW is preservation of the license itself. Any redistribution of Model Materials must include (1) a copy of the OpenMDW Agreement and (2) all original copyright and origin notices. Compliance is as easy as placing a single LICENSE file at the root of the repository. There are no copyleft or share‑alike requirements, ensuring that derivative works and integrations remain as unconstrained as possible.
There is however a patent‑litigation‑termination clause. If a licensee initiates litigation alleging that the Model Materials infringe their patents—except as a defensive response to a suit first brought against them—all rights granted to that licensee under the OpenMDW are terminated. This provision serves to discourage aggressive patent actions that could undermine open collaboration.
Any outputs generated by using the Model Materials are free of license restrictions or obligations. The license also disclaims all warranties and liabilities “to the greatest extent permissible under applicable law,” placing responsibility for due diligence and rights clearance squarely on the licensee.
We all know that AI will be transformative, but we do not yet know all the ways in which it will be so. One of the transformations that AI will undoubtedly drive is a redefinition of what it means to be “open source” and the type of open source AI licenses. As a leader of my firm’s Open Source Team and its AI Team, the intersection of these areas is near and dear to my heart. While many lawyers and developers may not yet have focused on this, it will be a HUGE issue. If you have not yet done so, now is a good time to start.
One of the core issues is that traditionally, under an open source license, the source code is made available so others can copy, inspect, modify and redistribute software based thereon. With AI, the code alone is often not enough to accomplish those purposes. In many cases, other things are or may be necessary such as the training data, model weights and other non-code aspects that are important to AI. This issue is significant in many ways. So much so that, as mentioned above, the Open Source Initiative, stewards of the Open Source definition, developed the Open Source AI Definition 1.0 to REDEFINE the meaning of open source in the context of AI. To learn more about these issues, check out the OSI Deep Dive initiative here.
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New Kansas Law Will Presume Nonsolicitation Agreements Enforceable
Kansas Governor Laura Kelly recently signed a bill into law that deems certain nonsolicitation agreements with business owners and employees to be presumptively enforceable and not a restraint on trade. While generally consistent with existing Kansas case law, the legislation comes as many states are moving to limit or ban the use and enforceability of restrictive covenants in employment and reaffirms Kansas’s status as a relatively employer-friendly jurisdiction for the enforcement of well-tailored restrictive covenant agreements.
Quick Hits
Kansas recently enacted a law to make certain written agreements not to solicit customers or employees “conclusively presumed” to be enforceable.
The legislation applies to nonsolicitation agreements between businesses and their owners, which are limited to four years after the end of their business relationship, and agreements with employees, which are limited to two years following employment.
The legislation will take effect on July 1, 2025.
Kansas Senate Bill (SB) 241, which was signed on April 9, 2025, clarifies guidelines for what constitutes reasonable and enforceable nonsolicitation agreements and noninterference agreements regarding employers’ customers and employees under the Kansas Restraint of Trade Act.
Unlike the trend of scrutinizing restrictive covenants in employment, SB 241 sets forth a more employer-friendly approach, deeming certain types of restrictive covenants in writing to be “conclusively presumed to be enforceable and not a restraint of trade.” (Emphasis added).
Enforceable Covenants
SB 241 applies to certain nonsolicitation agreements “in writing” between businesses and/or the business’s owners and employees regarding interference with the business’s employees and/or customers.
Owner Nonsolicitation of Employees—Covenants in which an owner agrees not to recruit or otherwise interfere with employees or owners of a business entity for up to four years after their business relationship ends.
Owner Nonsolicitation of Customers—Covenants in which an owner agrees not to solicit a business entity’s “material contact customers” for up to four years after their business relationship ends.
Employee Nonsolicitation of Employees—Covenants between a business and one or more of its employees where an employee agrees not to solicit employees or owners of the business. The agreement must either: (1) seek to “protect confidential or trade secret business information or customer or supplier relationships, goodwill or loyalty,” or (2) not last for more than two years after employment.
Employee Nonsolicitation of Customers—Covenants where an employee agrees not to solicit or interfere with a business entity’s “material contact customers” for up to two years after their employment ends are enforceable if they are limited to material contact customers.
Owner Notice Provisions—Provisions requiring an owner to provide prior notice before terminating, selling, or disposing of their ownership interest in a business entity.
SB 241 defines “material contact customer” as an “any customer or prospective customer that is solicited, produced or serviced, directly or indirectly, by the employee or owner at issue or any customer or prospective customer about whom the employee or owner, directly or indirectly, had confidential business or proprietary information or trade secrets in the course of the employee’s or owner’s relationship with the customer.”
Modification and Interpretation
Under the Kansas Restraint of Trade Act, the act’s provisions for covenants presumed to be enforceable control even if they conflict with federal court decisions on U.S. antitrust law. SB 241 adds that “[i]f a covenant that is not presumed to be enforceable … is determined to be overbroad or otherwise not reasonably necessary to protect a business interest of the business entity seeking enforcement of the covenant” courts must “modify the covenant” and “enforce the covenant as modified,” granting “only the relief reasonably necessary to protect such interests.”
Despite the “presumption of enforceability,” SB 241 will allow employees or owners to “assert any applicable defense available at law or in equity” in a court’s consideration of a written covenant.
Next Steps
Restrictive covenants have come under scrutiny in recent years. In 2024, the Federal Trade Commission (FTC) finalized a rule that sought to ban nearly all noncompete agreements in employment, but that effort was struck down in court. The Trump administration has since asked to halt appeals while the administration considers whether to drop the FTC’s rule. Still, the FTC under the Trump administration has indicated it will scrutinize restrictive covenants that unreasonably harm competition in labor markets, even if it is unlikely to do so through formal rulemaking. Moreover, at the state level, Virginia and Wyoming enacted restrictions on noncompete agreements in 2025.
However, Kansas’s SB 241, while not applying to noncompete agreements, goes against the broader scrutiny of restrictive covenants in employment. Instead, the law presumes certain nonsolicitation agreements to be enforceable, providing guidelines for employers to craft reasonable and enforceable agreements to protect legitimate business interests and trade secrets. The law is set to take effect on July 1, 2025.
Copyright Infringement Liability for Generative AI Training Following the Copyright Office’s AI Report and Administrative
When multiple forces act on an object, its direction of motion is determined by the net force, which is the vector sum of all individual forces.
When this happens within our federal government, we call it “interesting times.”
Not unlike other areas of the United States federal government of late, the U.S. Copyright Office has been thrown into turmoil following a stunning sequence of events this past week. As reported in multiple news outlets:
On Thursday, May 8, 2025, President Donald Trump fired Librarian of Congress Carla Hayden, the first woman and the first African American to be librarian of Congress.[i] The Library of Congress is the larger federal agency within which the U.S. Copyright Office resides.
On Friday, May 9, 2025, the U.S. Copyright Office released a “Pre-Publication Version” of the third and final part of its three-part Report on Artificial Intelligence.[ii] This Part 3 of the Report is entitled “Generative AI Training” and makes the case for finding copyright infringement where copyrighted works are used without permission to train generative AI models (more on this below).[iii] The Report was posted to the Copyright and AI landing page of the Copyright Office’s website a day after the firing of the Librarian of Congress and roughly 5 months after the official Publication of Part 2, which is about a month shorter than the interval between Parts 1 and 2 of the Report.[iv]
On Saturday afternoon, May 10, 2025, the Registrar of Copyrights, Shira Perlmutter, received an email from the White House informing her that her job as Register of Copyrights and Director at the U.S. Copyright Office had been “terminated effective immediately.”[v]
These recent events follow earlier criticism by prominent leaders of technology companies regarding perceived constraints posed by U.S. intellectual property laws on the development of artificial intelligence products and services. For example, on April 13, 2025, Jack Dorsey, co-founder of the companies formally known as Twitter and Square, posted: “delete all IP law,” to which Elon Musk replied, “I agree.”[vi] More broadly, as lobbying in favor of regulatory relief has increased with the change of administration,[vii] the mood in Washington appears to have shifted from caution to pro-development of the AI industry, as shown by the current President’s repeal[viii] of his predecessor’s sweeping executive order and the more recent attempt by Congressional Republicans to insert into the tax and spending bill a moratorium on state AI legislation.[ix]
Given all of this, interested parties may be left to wonder whether and to what extent they should rely upon the guidance and analysis of the Copyright Office’s AI Report. The question is particularly acute for parties involved in active litigation concerning the question of copyright infringement for generative AI training.
What’s next?
Let’s deal with what we know and leave the political speculation to other sources.
First, IP law is not going away anytime soon. Patent and copyright law are enshrined in the U.S. Constitution.[x] And nobody is calling for the end of all trademarks. We all have a brand, after all, and the ability to control one’s reputation by excluding others from unauthorized use is essential to all businesses. Bold statements aside, the law will continue to evolve but the need to support innovation though intellectual property rights retains broad recognition by serious people.
Second, Jack Boyle’s words, spoken in another context, seem to best capture the dynamic environment in Washington these days: “nobody knows ‘nothin.”[xi] Speculation on motive and the future direction of any particular legal issue or policy, including those involving AI, is a risky bet. While a pattern has emerged showing a preference by the administration for prioritizing pro-growth of the AI sector through relaxed legal barriers, ultimately these issues will play out in federal courts where considerations of legal precedent and constitutionality may impose restraints on executive and certain legislative actions.
Third, the U.S. Copyright Office’s AI Report does not carry the force of law. It does signal the Office’s approach to important legal issues within its purview, which approach could theoretically change with the change in leadership. And, more relevantly to the subject matter of this most recent portion of the Report, it can also serve as a roadmap for litigants, persuasive authority for courts, and input to the legislative process.
Fourth, agree with it or not, the Report as written is now in the public domain. Whether or not its authors continue to draw a paycheck from the federal government, and whether their successors write a new chapter or revision, the analysis speaks for itself and has been widely disseminated. A party who ignores this in-depth and well sourced treatment does so at its own peril.
So, what does the Report say?
Prima Facie Case for Infringement. The Report begins by finding that a prima facie claim for copyright infringement is easily met. In the Office’s view, multiple steps required to produce a dataset useful for generative AI “clearly implicate” the copyright owners’ right to control the reproduction of their works. These steps include the collection and curation of the copyrighted works, their use in training, and deployment of the model.[xii] Less clear, in the Office’s view, is whether or not the output material of the resulting generative AI model (which may, in some cases, look very much like and even compete with the original work) may implicate the copyright owners’ rights to control public display and performance of their works.[xiii]
Fair Use Defense. The Report proceeds with an analysis of the “fair use” defense to copyright infringement, including each of the statutory fair use factors set forth in 17 U.S.C. § 107, which are:
the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;
the nature of the copyrighted work;
the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
the effect of the use upon the potential market for or value of the copyrighted work.
After an in-depth consideration of each of the factors,[xiv] as informed by existing legal precedent and the comments received through the Notice of Inquiry (NOI) process that gave rise to the Report, the Copyright Office offers the following somewhat equivocal perspective:
As generative AI involves a spectrum of uses and impacts, it is not possible to prejudge litigation outcomes. The Office expects that some uses of copyrighted works for generative AI training will qualify as fair use, and some will not. On one end of the spectrum, uses for purposes of noncommercial research or analysis that do not enable portions of the works to be reproduced in the outputs are likely to be fair. On the other end, the copying of expressive works from pirate sources in order to generate unrestricted content that competes in the marketplace, when licensing is reasonably available, is unlikely to qualify as fair use. Many uses, however, will fall somewhere in between.[xv]
Recommendation for Licensing. Licensing, the Copyright Office suggests, is a workable solution for both resolving the ambiguity of legal rights and fairly balancing the interests of content creators and AI developers.[xvi] Options suggested in the Report may include the forms of streamlined voluntary approaches already in the market as well as adapted statutory approaches such as compulsory licensing and extended collective licensing (“ECL”).
Final Analysis. Governmental turmoil aside, the Copyright Office’s AI Report, now completed with the delivery of its third installment, provides a solid starting point for litigants, courts, legislators, and businesses to understand the competing viewpoints and legal arguments related to artificial intelligence. This guidance will likely show up in legal briefs in the near future and it may also motivate efforts to address these issues legislatively.
ENDNOTES
[i] “Trump administration fires top copyright official days after firing Librarian of Congress,” Associated Press, May 11, 2025 (last visited May 11, 2025).
[ii] See Copyright Office statement on May 9, 2025 accompanying the posting of Part 3 of its Report on Artificial Intelligence (last visited May 11, 2025).
[iii] U.S. Copyright Office Report on Artificial Intelligence, Part 3: Generative AI Training, Pre-Publication Version, May 2025 (herein, “Copyright Report, Part 3”) (last visited May 11, 2025).
[iv] For an analysis of Parts 1 and 2 of the Copyright Office Report on Artificial Intelligence, see “Charting a Course on AI Policy: the U.S. Copyright Office Speaks!,” Krabacher, April 2, 2025.
[v] “Trump fires top US copyright official,” Politico, May 10, 2025 (based on POLITICO receipt of internal Library of Congress communications (last visited May 11, 2025); “Trump administration fires top copyright official days after firing Librarian of Congress,” Associated Press, May 11, 2025 (last visited May 11, 2025).
[vi] “Jack Dorsey and Elon Musk would like to ‘delete all IP law’,” April 13, 2025, Techcrunch (last visited May 11, 2025).
[vii] See, e.g., “Emboldened by Trump, AI Companies Lobby for Fewer Rules,” New York Times, March 24, 2025 (last visited May 13, 2025).
[viii] Executive Order: Removing Barriers to American Leadership In Artificial Intelligence, January 23, 2025 (last visited May 13, 2025).
[ix] State AI Regulation Ban Tucked Into Republican Tax, Fiscal Bill, Bloomberg, May 12, 2025 (last visited May 13, 2025).
[x] U.S. Const. Article I, Section 8, Clause 8 of the U.S. Constitution (the “Patent and Copyright Clause”).
[xi] See. e.g., John Boyle interview posted on Sensible Investing YouTube, September 26, 2012: “All You Need To Know About Investing In Three Words,” (last visited May 16, 2025).
[xii] Copyright Report, Part 3, pg. 26 – 31.
[xiii] Copyright Report, Part 3, pg. 31.
[xiv] Copyright Report, Part 3, pg. 32 – 74.
[xv] Copyright Report, Part 3, pg. 74.
[xvi] See U.S. Copyright Office Report at page 103.
Tenth Circuit Affirms Dismissal of Trade Secret Claims for Lack of Particularity and Secrecy
On April 22, 2025, the Tenth Circuit affirmed summary judgment in favor of a sales manager and his new employer on claims under the Defend Trade Secrets Act (“DTSA”), the Oklahoma Uniform Trade Secrets Act (“OUTSA”), and common law claims for misappropriation of confidential business information and civil conspiracy, which were brought by his former employer, Double Eagle Alloys, Inc. (“Plaintiff”). Double Eagle Alloys, Inc. v. Hooper, 24-5089 (10th Cir. Apr 22, 2025).
Plaintiff alleged that the former employee misappropriated files containing pump shaft quality (“PSQ”) specifications (internal standards for specialty metal products), along with pricing data and customer drawings. The district court granted summary judgment in favor of Defendants, dismissing Plaintiff’s DTSA and OUTSA claims for failing to identify the alleged trade secrets with sufficient particularity and for not differentiating protected trade secrets from unprotected information. The court also dismissed Plaintiff’s common law misappropriation claim due to insufficient evidence of secrecy and consequently dismissed the civil conspiracy claim for lack of an underlying tort.
On appeal, the Tenth Circuit agreed with the district court, finding there was insufficient evidence that the allegedly stolen information qualified as a trade secret under the DTSA. The Tenth Circuit held that Plaintiff had failed to establish these elements, noting that much of the information had been publicly disclosed or shared with third parties, and that Plaintiff had not demonstrated what efforts it took to maintain the secrecy of the information.
The Tenth Circuit rejected the OUTSA claim for the same reason. Plaintiff grouped the allegedly misappropriated files into broad categories—namely, PSQ, pricing information, and customer drawings—but offered little detail to distinguish what, if anything, qualified for protection. Some documents were sourced from customers, some were shared online, and others reflected information available from competitors. According to the court, Plaintiff relied on affidavits containing conclusory statements asserting confidentiality, but provided no evidence identifying specific trade secrets or explaining how the information was secured or economically valuable.
This ruling illustrates how courts approach trade secret claims built on broadly described information and minimal factual support.
China’s National People’s Congress Passes Promoting the Private Economy With IP Provisions
China’s National People’s Congress recently passed the Law of the People’s Republic of China on Promoting the Private Economy (中华人民共和国民营经济促进法) with several intellectual property provisions. The Law goes into effect on May 20, 2025 and aims to “help create a stable, fair, transparent and predictable environment for the development of the private economy,” e.g., to restrict government overreach that hurts private companies such as the 2021 crackdown on the private tutoring industry.
A translation of the relevant IP provisions follow. The full text is available here (Chinese only).
Article 21 Banking financial institutions and others shall, in accordance with laws and regulations, accept guarantee methods that meet the requirements of loan business, and provide loans secured by accounts receivable, warehouse receipts, equity, intellectual property rights, and other rights pledges to private economic organizations.
People’s governments at all levels and their relevant departments shall provide support and convenience for the registration, valuation, trading circulation, and information sharing of movable property and rights pledges.
Article 30 The State shall ensure that private economic organizations participate in standard-setting work in accordance with the law, and strengthen information disclosure and social supervision in standard-setting.
The State shall provide private economic organizations with services and convenience in terms of scientific research infrastructure, technology verification, standards and norms, quality certification, inspection and testing, intellectual property rights, demonstration applications, and other aspects.
Article 33 The State shall strengthen the protection of original innovations by private economic organizations and their operators. The protection of intellectual property rights for innovation achievements shall be strengthened, a punitive damages system for intellectual property infringement shall be implemented, and illegal acts such as infringement of trademark rights, patent rights, copyrights, trade secrets, and counterfeit confusion shall be investigated and dealt with in accordance with the law.
Regional and departmental collaboration for intellectual property protection shall be strengthened to provide private economic organizations with rapid collaborative protection of intellectual property rights, diverse dispute resolution, rights protection assistance, guidance on responding to overseas intellectual property disputes, and risk early warning services.
Article 36 Private economic organizations shall, in their production and business activities, comply with laws and regulations concerning labor employment, work safety, occupational health, social security, ecological environment, quality standards, intellectual property rights, network and data security, fiscal and taxation, finance, and other aspects; they shall not seek illegitimate interests through bribery, fraud, or other means, nor shall they disrupt market and financial order, damage the ecological environment, harm the legitimate rights and interests of workers, or compromise social public interests.
State organs shall supervise and manage the production and business activities of private economic organizations in accordance with the law.