Patent Law Blog (Patently-O)

Patent Prosecution Tips: Drafting Preambles

In a recent posting on Patently-O, I asked for advice on whether it is a better practice to use a generic preamble (e.g., "A method comprising") versus a more detailed preamble (e.g., "A method for content selection of digital media stored in a memory…., the method comprising"). Ron Slusky has provided his suggestions in this guest post. Ron's two-day seminar based on his book Invention Analysis and Claiming: A Patent Lawyer's Guide is being offered in Philadelphia on November 16-17.

By Ron Slusky

Any extra word in a claim "can and will be used against you in a court of law." Thus on the one hand, recitations in a detailed preamble may unduly limit the claim in unintended ways. By contrast, a generic preamble can never get you in trouble in that regard.

Patently-O Bits and Bytes

• Pirates: The EU Parliament now has two members from the Swedish Pirate Party. The Pirates platform is based on weakening copyright laws and eliminating patents. The first line of the party website reads: "The Pirate Party wants to fundamentally reform copyright law, get rid of the patent system, and ensure that citizens' rights to privacy are respected." [LINK]
• Billion Dollar Trade Secret Trial: The top semiconductor manufacturer in Taiwan (TSMC) sued the top mainland China semiconductor manufacturer (SMIC) for stealing its trade secrets (in state court in California). The jury sided with the plaintiff, although the damage calculation is still underway. [LINK]
• JOAO Control & Monitoring v. Playboy & Penthouse: The JOAO patent holding company has sued a dozen online pornography providers alleging patent infringement. The asserted patent claims an apparatus for transmitting audio and video information from a vehicle to a website. The inventor Ray Joao is also a patent attorney and is represented by Andrew Spangler.
• Who Owns Patents being Reexamined: The folks at Westerman Hattori have been writing about reexaminations. In a recent post, they list the top-ten patentees whose patents are undergoing reexaminations (based on reexaminations granted since January 2009). The top five include Rambus, LGE, Weatherford/Lamb, Mondis Tech, and ADC Tech. [LINK]

Abandoning software patents?

Editorial by Ciarán O'Riordan, Exective Director of End Software Patents

Scope

On Monday, November 9th, the Supreme Court will hear the case of Bilski's business method patent. Being the first review of patentable subject matter since 1981, this decision could make the rules for decades to come. The court will review the 2008 ruling of the CAFC which created the "particular machine or transformation" test. This test, depending on who's reading it, could significantly narrow the scope for patenting software ideas.

The Supreme Court isn't obliged to rule on the patentability of software ideas. Bilski's patent is a business method patent, not a software patent. So why might the court make a broad ruling which would cover software? For people who are already aware of the legal arguments, I'd like to offer a review of the socio-economic arguments for abandoning software patents.

Practitioner profile

To see how different software is from most patentable fields, you just have to look at the practitioners. There is a small number of large companies with well known products, and there is a mass of small companies. The low cost of entry to software development means the number of small companies is particularly large, but we'll leave that aside to look at a bigger difference. In most patentable fields, this pyramid of big and small companies describes how products are made. If this were true for software, then the decision of patentability would be an economic decision, and some costs might have to be reduced, but there'd be no fundamental incompatibilty. But in software, this is only half the story.

In software, unlike in other patentable fields, there are two additional categories of developers. The first is the software developers that sit in the IT departments of every medium sized company. They're the folk that keep the emails flowing, who make internal software, extend software bought by the company, and who run the website. The second group is individuals, informal groups and communities who program for their own benefit or for social reasons such as providing alternatives to software seen as overly restrictive.

The existence of these two categories changes everything because it's obviously unreasonable to require them to work within the patent system, and it's unjustly restrictive. Not only are patent incentives obviously not necessary to motivate IT departments to fix problems, the timeline and budgets are orders of magnitude out of sync with the speed and costs of writing software. When a company manager reports a website problem, they don't expect the IT department to reply about first seeking legal advice for a patent search, and they don't expect to later have a bill from a patent holder because of the way in which the IT department happened to fix the problem.

For user communities programming to suit their own needs, the costs and timeline are also unreasonable, but there is also the bigger problem that the patent holder gains veto power over the distribution of the software. If the software is written for the purpose of having a freely redistributable program, then this third-party veto spoils the developer's efforts. There will be no direct profits from which to offer royalty payments, so the result is a lose-lose situation where the developer's goal is blocked, and there's isn't even anything in it for the patent holder (although the patent will still be enforced to sink the piece of software so that computer users are pushed toward a program which will pay royalties to the patent holder).

Standards

This issue is further exasperated by a problem which applies to all types of software developer: in no other domain are modern standards as crucial as they are in software. If you want to cure rubber, there are many ways to do it. When patents block a product developer from using one method, there's the possibility of useful innovation when that developer looks for an alternative method. In software, being blocked from using an email, image, or document format equates to being prohibited from writing a functional email reader, image viewer or word processor. Can you imagine the utility of an innovative word processor that can't read any existing documents? Nobody would use this, which means any innovations therein would have been wasted effort.

For video, this problem is a reality. The MPEG-LA group claims to represent more than twenty patent holders which each have one or more essential patents for implementing the commonly used mpeg video format. There's no licence available for freely redistributable software, and even royalty payers have to agree to MPEG-LA's terms. The committee developing the next standard for webpages, HTML5, spent months searching and debating which video format they could recommend in the standard, and the final answer was that, due to software patents, there is today no format they can recommend.(ref-1)

When "user communities" grow up

Now, it's important to look at the output of the mentioned user communities. If like, say, hobbiest watchmakers, they just catered for themselves and a few friends without attracting the attention of patent holders, then this wouldn't be a big problem. The system would still be unjust, but if the injustice never manifested itself, then it would be theoretical issue.

Indeed, freely redistributable software and the work that was begun by idealists and hobbyists has now lead to the world's most used webserver, the world's second most used web browser, and the GNU/Linux operating system. Indeed, the "users" are nowadays often employees, and their collaborative development models have emerged as the primary competitors in many software domains. Blocking collaboration turns out not only to be a restriction on useful individual activities, but it also stiffles competition and the mass production of useful software.

In software, rather than supporting innovators, patents protect the old against the new.

Although large firms now contribute to these projects, many of the developers are still individuals and people who don't directly profit. The terms of distribution for this software are the same now as they always have been. It's a proven formula, and a key clause is that you can't distribute if patent royalties will be required.

Example: GNU/Linux

The kernel of the GNU/Linux operating system was examined by patent attorney Dan Ravicher, who announced on August 2, 2004, that he had found no court-validated patents to be infringed but 283 *issued patents* existed which could potentially be used to support patent claims.(ref-2) Thereafter, Microsoft in the 2007 began claiming that the kernel violates 235 of its patents - although the patents have never been specified.(ref-3) Neither could be precise, but they these give us ballpark figures.

The kernel one component, and because the human-written source code is online, we can see it contains approximately 4,000,000 lines of source code. Given that a distribution of the GNU/Linux operating system, complete with applications, can contain software with more than 225 million lines of source code, when we extrapolate from the kernel numbers, we arrive at the possibility of 13,160 or 15,848 patent infringements per complete distribution.(ref-4) All of this in something that can be distributed once or a thousand times, usually at no cost, sometimes large corporations, sometimes by individuals.

This is a degree of uncertainty that can't be fixed by changes in evaluation standards.

As for innovation, lists and lists of research suggests that patents reduce software innovation.

There was a time when if you wrote something, you owned it, you could sell it, you could give it away. It could be put in the accounts and it could be used as the base for collaboration. Now, ownership of a piece of software is hopeful speculation. There is no reliable way to have a settled expectation regarding the boundaries or the extent to which you own a piece of software. This uncertainty, and this unfair regulation is what the Supreme Court has the chance to rid us of by giving the USPTO a reliable tool for excluding software ideas from patentable subject matter.

-- Ciarán O'Riordan is Exective Director of End Software Patents

Trademark Cancellation: Presumption of Validity includes Presumption of Acquired Distinctiveness for Marks Registered under Section 2(f)

Cold War Museum v. Cold War Air Museum (Fed. Cir. 2009)

In 2004, the appellant registered the service mark THE COLD WAR MUSEUM under Section 2(f) after providing evidence that the mark had acquired distinctiveness through "substantially exclusive and continuous use in commerce for at least the previous five years."

Three years later, the Air Museum filed a cancellation proceeding. In that proceeding, the TTAB cancelled the mark based on its finding that the mark was merely descriptive of the service being provided.

On appeal, the Federal Circuit reversed TTAB and instead held that the party seeking to cancel the mark had not overcome the presumption "the registered mark has acquired distinctiveness."

A mark registered on the Principal Register is presumed to be valid. . . . [T]he presumption of validity that attaches to a Section 2(f) registration includes a presumption that the registered mark has acquired distinctiveness. To rebut this presumption, a party seeking to cancel a Section 2(f) registration must produce sufficient evidence for the Board to conclude, in view of the entire record in the cancellation proceeding, that the party has rebutted the mark's presumption of acquired distinctiveness by a preponderance of the evidence.

TTAB had refused to consider the mark-holder's originally submitted evidence of distinctiveness. On appeal, the Federal Circuit also held that evidentiary ruling to be in error.

[T]he Board acknowledged that the applicant had submitted evidence of acquired distinctiveness during prosecution. However, the Board decided that it could not consider this evidence because the Cold War Museum did not resubmit the evidence in the cancellation. This was error. The unambiguous language of 37 C.F.R. § 2.122(b) provides that the entire file of the registration at issue is automatically part of the record, without any action necessary by the parties. Therefore, the evidence of the mark's acquired distinctiveness submitted during prosecution was automatically part of the record before the Board, and the Board was required to consider this evidence in determining whether Air Museum had met its burden of proving a lack of acquired distinctiveness by a preponderance of the evidence.

rules indicate that the "evidence of record" in an opposition includes the entire registration file history .

Federal Circuit: When are Subsidiaries Covered in a License Agreement?

Imation v. Koninklijke Philips Electronics (Fed. Cir. 2009)

At its heart, this case is simply one of contract interpretation.

Philips and Imation (via 3M) had originally cross-licensed a set of patents relating to CD and DVD technology. The agreement expired in 2000, although the licenses themselves were irrevocable and continued. After 2000 several subsidiaries were formed (GDM and Memorex), and Philips argued that those companies activities were not licensed because the companies were formed after expiration of the agreement.

On appeal, the Federal Circuit held that the later-formed subsidiaries were included within the original grant of rights just like future inventions are included within properly drafted assignment agreements. In the license states that Philips “agrees to grant and does hereby grant to [Imation] and its Subsidiaries a personal, non-exclusive, indivisible, nontransferable, irrevocable, worldwide, royalty-free license.” According to the court, that grant is a " singular, present grant to a class composed of Imation and its Subsidiaries of rights to existing and future patents that fall within the definition of 'Licensed Patents.'" Philips (losing) argument was that the grant language formed "multiple licenses over time." Under that theory, no license would be granted to subsidiaries formed after 2000.

Reversed and Remanded

Notes:

• Read the Decision: 09-1208.pdf
• Oddly in July 2009, the parties announced that the litigation had been settled. Link.

Challenging the Constitutionality of Gene Patents: Ass'n for Medical Pathology v. USPTO

Association for Medical Pathology & ACLU v. USPTO & Myriad, 09-cv-4515 (S.D.N.Y. 2009)

Earlier this year, a group of organizations and individuals filed suit against the USPTO, Myriad, and individual directors of the University of Utah Research Foundation (ex parte Young action) demanding that the breast cancer gene patents (BRCA1 & BRCA2) be found invalid or unenforceable and that the PTO's policies and practices with respect to genetic patents be declared unconstitutional. The federal lawsuit argues (1) that the genes are not patentable because they are "products of nature" and (2) that the patentee's use of patent rights to limit scientific research on the genes violates constitutional First Amendment protections. The defendants moved to dismiss based on various standing and jurisdictional issues. In an 85 page opinion, Southern District of New York Judge Robert Sweet has denied all of the defendants' motions to dismiss.

Judge Sweet recognized this case as important:

This action is unique in the identity of the parties, the scope and significance of the issues presented, and the consequence of the remedy sought. . . . The challenges to the patents-in-suit raise questions of difficult legal dimensions concerning constitutional protections over the information that serves as our genetic identities and the need to adopt policies that promote scientific innovation in biomedical research.

Jurisdiction & Standing to Sue the USPTO: The court found that the overarching statutory scheme of the Patent Act did not preempt the court's jurisdiction over the PTO in this case since the Patent Act does not "provide a remedy for persons who complain about the constitutionality of patents issued by the USPTO and/or the policies and practices of the USPTO. . . . The novel circumstances presented by this action against the USPTO, the absence of any remedy provided in the Patent Act, and the important constitutional rights the Plaintiffs seek to vindicate establish subject matter jurisdiction over Plaintiffs' claim against the USPTO."

The court also found that the plaintiffs have standing to sue the USPTO for their Constitutional grievances; declaratory judgment jurisdiction over Myriad and the Directors, and personal jurisdiction over the Directors as representatives of the State of Utah.

In the final few pages, Judge Sweet outlined plaintiffs' case against the USPTO:

In this case, the Plaintiffs have pled sufficient factual allegations to satisfy the standard set forth in Iqbal. The Complaint alleges the existence of a specific, written policy for the patenting of genes and the parameters of the policy. . . . The Complaint further alleges that the information encoded in the BRCA1/2 genetic sequences, rather than being the result of an inventive process, exists in nature. . . . Based on these factual allegations, the Plaintiffs assert that the patents-in-suit grant Myriad ownership rights over products of nature, laws of nature, natural phenomena, abstract ideas, and basic human knowledge and thought in violation of the First Amendment's protections over freedom of thought. In addition, the Plaintiffs assert that Myriad's ownership of correlations between certain BRCAl/2 mutations and an increased risk of breast and/or ovarian cancer has inhibited further research on BRCA1/2 as well as genes that interact with BRCA1/2. As a result, the patents-in-suit are alleged to violate Article I, section 8, clause 8 of the Constitution which directs Congress to "promote the Progress of Science and useful Arts . . . ."

The facts alleged in the Complaint are plausible, specific, and form a sufficient basis for Plaintiff's legal arguments. Consequently, the pleading requirements as set forth in Iqbal are satisfied.

The next decision in the case is expected in January based on the Plaintiffs' motions for summary judgment.

MTD decision.pdf

Stays Pending Reexamination

The following guest post is by Matthew Smith

The grant rate of motions to stay is highly judge-dependent and (somewhat less obviously) district-dependent. The table below shows the approximate grant rate of contested motions to stay in major patent litigation districts since about the beginning of 2008. These data included around 150 motions, after excluding follow-on or duplicate motions on the same facts (e.g., in parallel cases against different defendants), stipulated motions, patent-owner-initiated motions, and motions initiated by declaratory judgment plaintiffs. The districts below are listed in order of decreasing frequency of the occurrence of such motions.

The Eastern District of Virginia, Western District of Wisconsin, and Northern and Middle Districts of Florida had relatively few orders, and were excluded.

A review of the orders confirms a relatively clean division into favorable and unfavorable judges for stays. This division is often flawlessly mirrored in the reasoning of written orders. Courts usually analyze three factors when considering stays: prejudice, timing and simplification. Where stays are disfavored, courts focus on the prejudice that delay may cause to the patent owner, find excessive delay in filing the request a few months after service of the complaint, and identify a plethora of issues that will be left unresolved by reexamination. Courts where stays are favored search in vain for particularized prejudice to the plaintiff (e.g. deteriorating evidence), find that requests submitted on the eve of trial are timely, and focus on the possibility that the claims could be canceled by the PTO when analyzing simplification.

Despite this division, some courts are breaking out of the paradigm of binary yes-or-no orders. The relatively few stays granted in East Texas pending ex parte reexamination, for example, have usually required the defendant to forego defenses on the merits of prior art considered in reexamination (see QPSX Dev. v. Ciena Corp., Case No. 2:07-CV-118-CE (E.D.Tex. Aug. 27, 2009) or submitted to reexamination unless combined with new art (see Premier Int’l Assoc. LLC v. Hewlett Packard Co., Case No. 2:07-CV-395 (DF)(E.D.Tex. May 18, 2009). One court has required non-requesting defendants to agree to be bound by inter partes estoppel (see Riparius Ventures LLC v. Skype Technologies, S.A., Case No. 07-cv-00812 (N.D.Ill. June 6, 2009). Some courts are also more flexible with timing, granting stays even prior to the PTO’s decision on the request for reexamination, (see, e.g. CTC Cable Corp. v. Mercury Cable & Energy, LLC, Case No. SACV 09-261 DOC (C.D.Cal. Aug. 3, 2009), or pending some specific event in reexamination (see, e.g. HTC Corp. v. Technology Properties Ltd., Case Nos. C 08-00882 JF and C 08-00877 JF (N.D.Cal. June 16, 2009)).

There also appears to be a recent trend favoring stays pending inter partes reexamination, as opposed to ex parte reexamination. The estoppel associated with inter partes reexamination is sometimes viewed as a simplifying factor for issues in litigation. See, e.g., Anascape Ltd. v. Microsoft Corp., Case No. 9:06-CV-158 (E.D. Tex. Feb. 23, 2007); see also Ceiva Logic Inc. v. Frame Media Inc., Case No. SACV 08-00636-JVS (C.D.Cal. June 9, 2009); Wall Corp. v. Bonddesk Group LLC, Case No. 07-844 GMS (D.Del. Feb. 24, 2009).

The data for this study were helpfully provided by the Docket Navigator.

Supreme Court Clustering of Patent Cases

The last time that the Supreme Court directly addressed the issue of subject matter eligibility under 35 U.S.C. § 101 was in the early 1980's. In the waning days of the pre-CAFC era, the Supreme Court decided Diamond v. Chakrabarty, 447 U.S. 303 (1980) and Diamond v. Diehr, 450 U.S. 175 (1981).

An interesting tidbit of history involves the grant of certiorari in the 1981 Diehr case. The Diehr grant of certiorari occurred on March 17, 1980 – the same day that the court heard oral arguments in Chakrabarty. By that time the court had apparently realized that the patent office needed more Section 101 guidance than the one biotechnology case could provide.

Today's parallel of Bilski v. Kappos and Mayo v. Prometheus is strikingly similar. Of course, the Supreme Court is a different body than it was in 1980 and the Court hears about 50% fewer cases than it did back then. In patent cases where the Government is not a party - such as Mayo v. Prometheus – the court has more recently tended to ask for the views of the Solicitor General (CVSG) before moving forward with a grant of certiorari. The CVSG delay would push-back any decision on certiorari in Mayo v. Prometheus until the spring of 2010 – well after the scheduled November 9 oral arguments in Bilski. Although the Court may not have released a decision in Bilski by that time, the justices will almost certainly know the eventual outcome of that case.

If (1) the Supreme Court's Bilski decision substantially shifts the patentable subject matter doctrine and (2) the Supreme Court sees Mayo v. Prometheus as important, the court may issue a "grant, vacate, and remand" or GVR order. In that scenario, the Federal Circuit would be asked to apply the new law of patentable subject matter to the facts in the case. In an e-mail, Hal Wegner suggested to me that this is a likely outcome.

• Chakrabarty
  • Certiorari Granted October 29, 1979
  • Argued March 17, 1980
  • Decided June 16, 1980
• Diehr
  • Certiorari Granted, March 17, 1980
  • Argued October 14, 1980
  • Decided March 3, 1981

As an aside, up-to-date versions of Mr. Wegner's highly informative top-ten lists are being maintained online here.

Mayo v. Prometheus: Medical Methods and Patentable Subject Matter at the Supreme Court

Mayo v. Prometheus Labs., (on petition for writ of certiorari 2009)

The Mayo Clinic has filed a petition asking the Supreme Court to hear its case challenging the patentable subject matter of Prometheus Labs' patents that cover a method of optimizing the dosing of a drug. U.S. Patents 6,355,623 and 6,680,302.

The invention basically offers an iterative approach to dosing that involves three steps: (1) administer a drug to a subject; (2) then determine the level of drug in the subject; and (3) decide whether the next dose should be the same, higher, or lower. The decision on the next dose is made by comparing the the level of the drug in the subject against predetermined thresholds. Claim 1 of the '302 patent adds additional detail including identifying the active ingredient (6-thioguanine), the diagnosis (a GI disorder), and the predetermined thresholds (e.g., 230 pmol of drug per 8108 red blood cells). Claim 46 of the '623 is a broad claim in that it does not not require the administration step (step 1 from above).

Broad Functional Language: You'll note that the claims are written in broad functional language without tying the the claimed methods to any particular technology. Thus, the "administering" step could potentially be accomplished by any effective method (that has or will be invented) of getting the drug into the subject. Likewise, the patent offers potential methods of "determining the level" of drug in the body (e.g., liquid chromatography) but the claim is broadly written to seemingly cover any mechanism that fulfills that method.

Novelty Involves the Mental Step: Of course, the general iterative process is well known, what makes the Prometheus claims novel is that they identify the particular thresholds that are important (e.g., 230 pmol). In practice, the process of comparing the thresholds to the subject's drug level is done in the mind of a physician. As Mayo explains, this merely involves the physician's mental recognition of a natural correlation between metabolite levels and patient condition.

With these facts in mind, Mayo presents the following question: Whether 35 U.S.C. § 101 is satisfied by a patent claim that covers observed correlations between patient test results and patient health, so that the claim effectively preempts all uses of these naturally occurring correlations.

The Federal Circuit held the method patentable under its Bilski test by finding that the required administration of the drug transformed an article into a different state or thing -- essentially creating a per se rule that a method requiring administration of a drug will be deemed patentable subject matter under Section 101. The court also held that the "determining the level" step was necessarily transformative since "those levels cannot be determined by mere inspection."

Chances for Supreme Court Review: The fact that Bilski - another Section 101 case - is already pending before the Supreme Court does not mean that the court will reject this case. Rather, the court has often granted certiorari in tandem. The Supreme Court has regularly used case clustering in the past when considering patent issues: Nonobviousness (John Deere (1966), Adams (1966), & Anderson's-Black Rock (1969)); Patentable subject matter (Flook (1978), Charkabarty (1980), Diehr (1980)); Prosecution history estoppel (Warner-Jenkinson (1995) & Festo (2000)).

The case also represents a growing trend of pitting patient advocates (who want cheaper access to medicine) against innovators (who create better medicine).

Notes & Documents:

• Read Mayo's Petition for Certiorari: MayoCertPet.pdf.
• Mayo is represented by Fish & Richardson (John Dragseth); Mayer Brown (Stephen Shapiro); and Professor Eugene Volokh (UCLA).
• Professor Collins discusses the Federal Circuit decision
  
• My initial discussion of the Federal Circuit decision

Claim 1 of the '302 patent: A method of optimizing therapeutic efficacy for treatment of an immune-mediated gastrointestinal disorder, comprising:

   (a) administering a drug providing 6-thioguanine to a subject having said immune-mediated gastrointestinal disorder; and

   (b) determining a level of 6-thioguanine or 6-methyl-mercaptopurine in said subject having said immune-mediated gastrointestinal disorder,

   wherein a level of 6-thioguanine less than about 230 pmol per 8108 red blood cells indicates a need to increase the amount of said drug subsequently administered to said subject and

   wherein a level of 6-thioguanine greater than about 400 pmol per 8108 red blood cells or a level of 6-methyl-mercaptopurine greater than about 7000 pmol per 8108 red blood cells indicates a need to decrease the amount of said drug subsequently administered to said subject.

Bits and Bytes

• The new website Found Persuasive looks to be an excellent addition to the online patent discussion. The authors promise a practical discussion of "patent prosecution strategies and templates for the patent practitioner. Patent attorneys Michael Leonard, Jared Olson, and Sheetal Patel are the authors.
• The ReexamCenter is full of practical information about Reexamination Issues. The new site is run by Robert Sterne's team at Sterne Kessler.
• Professor Ho at Loyola (Chicago) sent in information about an upcoming event: IP Day in Chicago on November 3.
• The PTO Central Reexamination Unit (CRU) has a new website design and updated statistics.
• USPTO Ombudsman: The PTO has invited public comment on its Ombudsman Pilot Program. The program is intended to create a direct-line of communication for applicants who believe that their applications are being improperly examined. e9-25798.pdf.

Slowing Down RCEs and Lengthening the Patent Term

In a prior post, I discussed the USPTO's planned docket-change for applications associated with a request for continued examination (RCE). See Nudging Against RCE Filings. According to the RCE Docket proposal, when an applicant files an RCE, the pending application will be taken off the examiner's in-prosecution docket and placed in the "special-new" queue that is primarily filled with continuation applications. This new approach will result in RCE's being handled much more slowly.

The graph below is a rough-cut attempt to compare the "special-new" queue with the RCE queue. The data comes from a set of eight thousand randomly selected patent applications filed 2001-2006 whose file histories have been made public on PAIR. The graph shows three groupings or application scenarios and the average delay from applicant filing to the receipt of a first office action for each. In my sample of continuation applications, the average PTO delay in mailing a first office action was a bit over six hundred days. On the other hand, after receiving an RCE, the average PTO delay in issuing an office action was less than three months.

The proposed change docket-change would essentially take the RCE group and combine it with the continuation group – likely adding over 18-months delay to RCE processing. As Scott Kamholz suggested, this will likely lead to a patent term adjustment (PTA) "bonanza." This may become a favored approach for applicants looking to extend their patent term. Submarine anyone?

Because of the large sample size, the differences in delay between the groupings are all significant (P<.01). However, there are a number of potential confounding factors – perhaps most notably is a selection bias associated areas of technology. I did not correct for those potential problems in this rough-cut.

UPDATE: The following comment comes from a PTO Insider:

The difference here is the initial docketing to examiners. An RCE will cause the application to be automatically redocketed to an examiner's Special New tab immediately once the LIE processes the RCE. Continuations, on the other hand, are not automatically docketed to examiners in this fashion, hence the pendency on the same order as normal non-continuation filings. Most of this time (after pre-exam) is spent on a SPE docket or no docket at all, awaiting eventual docketing to an examiner, just like normal non-continuation apps. While it's likely that RCEs on the Special New docket will increase the time to next action for those cases, it won't be anything even remotely comparable to 600+ days.

Does a Reference's Priority Claim to a Provisional Application Alter its 102(e) Prior Art Date?

In re Giacomini (Fed. Cir. 2009) (discussion of the briefs)

Giacomini is appealing the BPAI's 102(e) rejection -- arguing that the patent asserted as prior art does not actually qualify as prior art. Giacomini's application claims priority back to November 2000. The asserted prior art patent issued in 2006, but was filed in December 2000. The prior art patent also claims priority to a provisional application filed in September 2000. The PTO claims that the 102(e) date of the patent is the filing date of the provisional -- thus making it prior art over Giacomini.

When a patent is asserted under 102(e)(2), the patent's filing date is considered the priority date. In the language of the statute, the PTO must consider whether the putative prior art patent was "granted on an application for patent ... filed in the United States before the invention by the applicant for patent." The provision makes clear that a patent claiming priority to an international application will be given the international application filing date if that application "designated the United states and was published . .. in the English Language." Under US case law, when being considered as prior art, divisional and continuation patents are also given the filing dates of their parents as their 102(e) date. See In re Klesper (CCPA 1968)("provided the disclosure was contained in substance in the earliest application"). However, patents claiming priority to a foreign filing under Section 119 are not given the foreign priority date.

The novel question here on appeal is how to interpreted the statute's silence regarding provisional applications.

• Appeal Brief: cafc_appeal_brief_2009-1400_500-002us-2.pdf
• cafc_appeal_brief_2009-1400_500-002us-2.pdfPTO Opposition: Giacomini - Director's Brief (Red Brief).pdf
• BPAI Decision: BPAI Decision in Giacomini
• Related Discussion: Patently-O Discussion of Ex Parte Yamaguchi (BPAI 2008)

Federal Circuit Proposed Changes to Rules of Practice

The Federal Circuit has proposed a set of about two-dozen amendments to its Rules of Practice. Under 28 U.S.C. § 2071(b), the court is required to provide "public notice and an opportunity for comment." Any comments on the rules are due to the Federal Circuit clerk by November 5, 2009. Below, I discuss some of the proposed changes.

Rules 8(d) and 18(d) Stays Pending Appeal: Often a losing party will almost simultaneously ask both the district court and the appellate court to stay injunctive relief pending appeal. The proposed rule would require the movant to identify "when it filed the motion in the district court [or agency] and why it is not practicable to await a ruling by the district court on that motion." The purpose of this rule is to help the appellate court avoid unnecessarily stepping on the toes of the district court judges.

Rule 21 Mandamus: Because the court often acts quickly in Mandamus actions, any reply brief "should be expedited if appropriate" or else the "court may act on the petition before the receipt of any reply." The Federal Circuit has been receiving a marked increase in the number of mandamus requests in the wake of its TS Tech decision where the court ordered a case moved out of the Eastern District of Texas.

Rule 29 Amicus Brief: Rule 29 is amended to clarify that a third party filing an amicus brief does not need to file a motion for leave to file if "all parties consented to the filing."

Caution for those using USPS: If your document "must be received by the court on a particular date, then the file might consider using an alternative method of delivering the document to the court, such as a commercial carrier or hand-delivery. The court cannot waive the deadlines for filing a notice of appeal or petition for review, even if the document was deposited in the mail in a timely fashion."

• RuleChange16Oct2009.pdf
• CAFC Rules Page

Tracking the Use of Continuations

Mark Lemley and Bhaven Sampat have released a new working paper that uses PAIR data to draw some conclusions about the current patent system:

Conclusion: The evidence illuminates the patent prosecution process as a continuing negotiation between examiner and applicant. That negotiation does not end with an initial or even a final rejection. Interviews and amendments after final play an extremely significant role in generating patents, and in limiting the scope of those claims as well. Nor is that the end of the process. Continuation applications are flourishing. They have broken into two roughly equal groups, with different uses. Many applicants are using RCEs to keep fighting for claims that the examiner wasn't willing to give them. The second group is filing continuation applications rather than RCEs. They have opted for a slower process, either because they want delay so that they can modify their application to track developments in the marketplace or because they want multiple patents to build an effective fence around a single invention.

In the paper, the authors implicitly retreat from earlier work criticizing the patent examination process –suggesting that their results here "may be a hopeful sign for patent examination: even though the PTO ultimately grants patents on a large majority of the applications it receives, it may still be serving an important gatekeeper function by requiring applicants to narrow their claims. (This assumes that most of those amendments narrow the claims; that seems likely, but we cannot test it empirically)."

Read the paper on SSRN.

The Role of the Washington DC District Court in Patent Cases

Stuart Soffer has provided information on an interesting spike in patent litigation filings in the Washington DC Federal District Court (DDC). As the chart below shows, more patent cases against the USPTO have already been filed in DDC in 2009 than in any other year in recent history.

What's Going On: On my review, of 39 of the DDC patent cases filed thus far in 2009 (including those not-against the PTO), all of the cases fell into one of these two categories:

Most of the DDC cases are suits against the PTO. The 2009 spike appears to be largely driven by patent holders asking for a review of PTO calculations of patent term adjustment. See Daido v. Doll, 09-628; Biogen IDEC v. Doll, 09-754; Novartis v. Doll, 09-804. The outcome of these cases will likely be dictated by the Federal Circuit's decision in Wyeth v. Kappos. That case focuses how to calculate an adjustment when the patentee is eligible under both Section 154(b)(1)(A) and Section 154(b)(1)(B). Oral arguments were held in early October, 2009.

The remaining cases involved declaratory judgment actions filed against non-US patent holders under 35 U.S.C. § 293. That section of the Patent Act provides that DDC has in rem jurisdiction over the patent and is a proper venue unless the foreign entity has identified a designated agent in another US jurisdiction. In the case of HTC v. Luzzatto, 08-998, the Taiwanese company HTC sued to invalidate Luzzatto's patent covering a "telephone identification calling apparatus." That case is interesting because the district court refused to dismiss the case against Luzzatto even though he had assigned his rights to the patent to another entity. The court reasoned that Section 293 explicitly creates jurisdiction over the "patentee", and Section 100(d) defines a patentee to include "not only the original patentee to whom the patent was issued but also the successors in title to the patentee."

Nudging Against RCE Filings

Following the Sunstein-Thayler nudge theory, the new PTO administration is taking small non-rule-based steps to discourage the filing of Requests for Continued Examination (RCEs). RCE's are already fairly expensive - $810. That outlay is relatively low compared with the cost of preparing and filing an appeal - especially when it appears that an applicant's arguments have not been fully considered or when the applicant perceives the opportunity for an amendment that would lead to allowance.   

Timing: In the past, one benefit of RCEs was that they were quickly examined as part of the theory of compact-prosecution - in essence, RCE filings were treated almost just like an office action response. Under a new procedure, the PTO will now be placing RCE applications in the same queue as divisional and continuation applications. Although that category is identified as "special new," cases are typically taken-up more slowly than ones already on the docket and in-prosecution. According to a memo from Director Kappos, "The change to the docketing of requests for continued examination means that examiners are no longer required to act on a request for continued examination within two months of the entry of the request for continued examination on their docket. This change to the docketing of requests for continued examination is being made to allow examiners greater flexibility in managing their workload and allocating their time among requests for continued examination and new applications." [Note - I'll see if I can pull-up data on the typical delay from filing a continuation until a First Action on the Merits (FAOM)]. [Kappos Memo - rce_docket.pdf]

Examiner Incentives: One of my students - Jaron Brunner - recently wrote an excellent paper applying negotiations theory to the patent prosecution process. Jaron is certainly correct that many aspects of patent prosecution can be thought of as a negotiation process. With that mindframe, it is easier to recognize that - although applicants are the parties that actually file the RCE's - examiners do play a role in taking prosecution to the point of RCE filing. The new examiner count-system addresses this problem by reducing the credit (counts) that examiners receive for examining RCE filings and increasing the credit for initial office actions. As part of the nudge toward focusing on the important issues early-on in prosecution, the PTO is also providing more incentives to examiners to have discussions (interviews) with applicants rather than rely solely on formal paper filings that are often misunderstood and left unread.

Allowing Allowable Claims: Perhaps the biggest nudge is a change in philosophy - dropping the notion that "a lower allowance rate equals higher quality." At least in their speeches, PTO management is encouraging examiners to work more directly with applicants to "find the patentable subject matter and get it clearly expressed in claims that can be allowed."

In both FY2008 and FY2009, applicants filed over 100,000 requests for continued examination.

More Bits and Bytes

• New Counts: The Patent Office Examiner Union (POPA) has voted to approve the PTO's proposed changes to the examiner count system. [POPA][Washington Post]
• Novo Nordisk v. Caraco: The Federal Circuit has temporarily stayed an Eastern District of Michigan court ordered injunction that would force the patentee to amend its Orange Book listing for its diabetes treatment drug Prandin. The court is now considering whether to leave the stay in place for the remainder of the appeal. [CAFC Order][FDA Law Blog]
• Baker Hughes v. Nalco: Nalco moved for a stay of a preliminary injunction pending appeal. Going even further, the Federal Circuit vacated the preliminary injunction. In its non-precedential order, the appellate court held that preliminary injunction could not be sustained because the lower court had failed to explain its irreparable harm finding. The improvement patent relates to a method for purifying crude oil. [CAFC Order]
  
• Tafas Steps Back: Following the PTO's withdrawal of its rule package, Tafas has filed a motion with the Federal Circuit to dismiss the pending appeal in Tafas v. Kappos but not vacate the District Court's injunction. It appears likely that Tafas will seek fees and costs as the prevailing plaintiff. Donald Zuhn at Patent Docs includes more details.

Bits and Bytes: Personnel - Past and Present

• Duke Law Professor Arti Rai has started work at the USPTO as the "Administrator for External Affairs." Although not a registered patent attorney, Rai had a focus on biochemistry at Harvard and attended one year of Harvard Medical School before heading to law school (again at Harvard). [cv] In addition to her extensive knowledge of the patent system, Rai is an expert on administrative law. In her writings, she typically argues that the PTO should be given more independence and power.
• Professor Rai's new position will likely focus on PTO relations with other US governmental entities as well as with foreign governmental entities.
• Professor Rai offered remarks at the Collegiate Inventors Competition in Chicago on Monday evening. Here are a few quotes:
• "As I know from my research, and from my own sister’s experience with her biotech startup, inventors need this protection in order to attract research and development capital. The challenge we face at the USPTO is ensuring that inventors can always look to us for strong and speedy protection."
• "Since taking office a little over two months ago, Director Kappos has moved aggressively to reform the office, expedite the way in which we examine patents, update our IT infrastructure, and reach out to stakeholders and members of Congress to provide a sustainable funding mechanism for the USPTO. We are committed to using all of the tools at our disposal to reduce the amount of time it takes for inventors to get the patents they need to bring products to the marketplace. You will be hearing more in the months to come, so stay tuned and keep believing in your ability to change the world with your inventions."
• IP Hall of Fame Nominations: Nominations have opened for IAM Magazine's Annual Award to "honour those who have made an outstanding contribution to the development of IP law and practice." http://www.iphalloffame.com/
• Call for Papers: Next Generation of Antitrust Scholarship Conference

Supreme Court Citation to Federal Circuit Decisions in Patent Cases

[Updating of this post in-progress]

Misuse of a Patent Pool: En Banc Federal Circuit To Decide Whether CD-R/RW Patentees Improperly Sequestered Alternative Technologies

Princo Corp. v. International Trade Commission (ITC) (Fed. Cir. 2009)

The long-running Princo cases involve questions of when bundled licensing of patent rights may be seen as patent misuse (and thus rendering the patents unenforceable). The underlying pools of patents cover compact discs that are recordable (CD-R) and re-writeable (CD-RW).

In its most recent panel decision, the Federal Circuit (Judges BRYSON, GAJARSA, and DYK) rejected several theories of patent misuse, but remanded to consider whether the patentees has improperly sequestered alternative technologies. Judge Bryson did not agree with the novel misuse theory and dissented-in-part. Princo, US Philips, and the ITC each requested rehearing en banc.

The Federal Circuit has now granted the requests from US Philips and the ITC to hear the case en banc. (The court rejected Princo's request for rehearing its questions en banc).

US Philips presented two questions:

1. Whether a supposed agreement, between developers of new technology and a new product standard, to license one of the resulting patents only for use under that standard, thus foreclosing the possibility that it might be used to create a competing standard, could be held anticompetitive without (i) defining a relevant market in which the standards compete and (ii) proving that the agreement injured or was likely to injure competition in that market.
2. Whether such an agreement, even if deemed anticompetitive, would be a proper basis for invoking the doctrine of patent misuse to refuse enforcement of different patents used to practice the joint standard.

The ITC did not explicitly list its en banc question, but basically argues that the remand is improper because (1) neither party raised the misuse theory that the court relied upon in its decision and (2) the ITC needs the Federal Circuit to define the "relevant market" before it can properly determine the market harm.

Briefs: US Philips en banc brief will be due at the end of November, and briefs from the ITC and Princo will be due thirty days from the date of service of US Philips. "Briefs of amici curiae will be entertained, and any such amicus briefs may be filed without leave of court but must otherwise comply with Federal Rule of Appellate Procedure 29 and Federal Circuit Rule 29."

US Philips is represented by Douglas Melamed at WilmerHale; Princo is represented by Eric Wesenberg at Orrick; the ITC's lead attorney is Clara Kuehn. Portions of the Melamed and Calebresi 1972 article on property rights is found in almost every property law casebook.

Ariad v. Lilly Amici Briefs

NYIPLA Amicus Brief.pdf: Supporting a strong written description requirement: "By the time of the O'Reilly v. Morse decision in 1853, 56 U.S. (15 How.) 62, it was understood that attempting to dominate an entire field by generic functional claiming was prohibited when the applicant had invented and disclosed only limited techniques or apparatus to carry out such function. Though phrased differently, this doctrine has continuing vitality and is today most closely embodied in the requirement that the specification enable the full scope of the claimed invention."

Professors Janis & Holbrook.pdf: Section 112 does not support a separate written description requirement - not even one limited to the context of new matter.

Morris.DOC: The text of Section 112 does not create a separate written description requirement. Professor Morris suggests giving teeth to Section 112p2 in requiring the applicant to "particularly point[] out and distinctly claim[] what he regarded as his invention."

Novozymes.pdf: WD should be limited to new matter issues.

Holman in Support of Neither Party.PDF: The genus and species possession requirements unjustifiably discriminate against biotech inventions by creating a technology-focused super-enablement requirement. [Read Prof. Holman's Biotech IP Blog where he is following the case.]

University of California (and other major patent-holding universities): The requirements prejudice university researchers who "often make the most important basic science discoveries. . . . As a result [of the written description requirement], university researchers are denied the recognition and reward of inventorship due solely to lack of a available resources rather than lack of inventive contribution."

Patent Reform: Reverse Payments

Most patent infringement lawsuits are resolved with an agreement for the accused infringer to pay money to the patent right-holder. Generic drug-maker challenges to pharmaceutical patents occasionally follow a different path – with the patent holder paying money to the accused infringer to stay off the market for an extended period of time. This summer, the Obama administration (through the DOJ) indicated that these "pay for delay" settlements are "presumptively unlawful." (WSJ Article). The FTC has opposed these reverse-payment settlements for many years – arguing that they tend to allow a company holding vulnerable patents to maintain monopoly-level drug prices.

Now, the Senate has joined the fray. The Senate Judiciary Committee has approved a ban on reverse-payment settlements. (Prior Art Blog citing Reuters).

S.369 was co-sponsored by Senators Kohl, Grassley, Feingold, Durbin, and Brown. The Bill would amend the Clayton Antitrust Act to make it "unlawful under this Act for any person, in connection with the sale of a drug product, to directly or indirectly be a party to any agreement resolving or settling a patent infringement claim in which-- (1) an ANDA filer receives anything of value; and (2) the ANDA filer agrees not to research, develop, manufacture, market, or sell the ANDA product for any period of time." Such an agreement would then result in antitrust liability as well as the ANDA losing its 180-day exclusivity right. (Download S369)

Bits and Bytes

• I am teaching obviousness this week in my introductory patent law course here at the University of Missouri School of Law. The Justice Douglas concurrence in the 1950 A&P case always gives me pause: 
• • "The Constitution never sanctioned the patenting of gadgets. Patents serve a higher end--the advancement of science." 
  • Douglas quotes the 1882 case of Atlantic Works v. Brady, 107 U.S. 192, 200 (1882). “It was never the object of those laws to grant a monopoly for every trifling device, every shadow of a shade of an idea, which would naturally and spontaneously occur to any skilled mechanic or operator in the ordinary progress of manufacturers. Such an indiscriminate creation of exclusive privileges tends rather to obstruct than to stimulate invention. It creates a class of speculative schemers who make it their business to watch the advancing wave of improvement, and gather its foam in the form of patented monopolies, which enable them to lay a heavy tax upon the industry of the country, without contributing anything to the real advancement of the arts. It embarrasses the honest pursuit of business with fears and apprehensions of concealed liens and unknown liabilities to lawsuits and vexatious accountings for profits made in good faith." 
• Lichtman's IP Colloquium: Can Content Survive Online with Guests: Brad Smith (General Counsel, Microsoft); Scott Martin (Executive Vice President, Paramount Pictures); Dan Cooper (Vice President of Business & Legal Affairs, MySpace).
• Kappos Events:
• AIPLA: Oct 15 (Link) (I’m late posting this, but webcast is available)
• Association of Corporate Counsel: Oct 20 (session 205) (Link)
• IPO: Dec 7 (Link)
• The Fifth Annual Finnegan Distinguished Lecture on Intellectual Property at American University: Oct 20.  Professor Rochelle Dreyfuss (Pauline Newman Professor of Law at NYU) speaks on “What the Federal Circuit Can Learn from the Supreme Court--and Vice Versa” (Live; Webcast).

Helium Balloon for Carrying a Human Pilot

The Heene family may have wanted to consult with Joseph Meadows of Los Angeles. His Patent No. 6,325,329 covers a helium balloon of sufficient volume and buoyancy to allow a human pilot to float above the ground and to glide over the ground.

The Increasing Role of Published Applications in Patent Examination

In 2001, the USPTO began publishing pending patent applications at approximately 18-months after the application's priority date. Over the past eight years, this publication rule has slowly become more integrated with the examination system. As the first chart shows below, most issued patents now cite to at least one US publication. (Patents issued January 1, 2009 - June 23, 2009 cite 4.2 US published applications, on average).

Moving toward Transparency in Prior Art: Patent applicants have historically been frustrated by prior art defined under Section 102(e) of the Patent Act. That section defines a class of "secret prior art" that was not publicly available at the time of an applicant's filing, but that was already on-file with the patent office. By opening-up the application files at an earlier date, the potential unfairness of secret 102(e) prior art is beginning to be reduced because the early publication makes the prior art searchable by the public. Although not directly proving this point, the second chart categorizes the cited US published applications according to their prior art classification. As time moves forward, more applications have become 102(b) prior art (published for more than one year before the applicant's filing) and the percentage of cited applications categorized as 102(e) prior art continues to drop.

Notes:

• This study is based on an analysis of all US patents issued between January 1, 2000 and June 23, 2009.
• A cited published application was counted as 102(e) prior art if the publication date of the cited application was later than the filing date of the issued patent that cited the application.
• A cited published application was counted as 102(b) prior art if the publication date of the cited application was more than one-year prior to the filing date of the issued patent that cited the application.  The graph shown limits the analysis to only issued patents that do not claim a priority date based on a prior patent filing.  Patents that claim an earlier priority date tend to eliminate a portion of 102(b) prior art.
• See also Dennis Crouch, Published Applications as Prior Art, Patently-O, http://www.patentlyo.com/patent/2009/07/published-applications-as-prior-art.html (July 28, 2009).

   

   

   

   

  

USPTO Removes Rule Changes

ACTION: Final rule.

The United States Patent and Trademark Office (Office) published a final rule in the Federal Register in August of 2007 to revise the rules of practice for patent cases pertaining to continuing applications and requests for continued examination practices, and for the examination of claims in patent applications (Claims and Continuations Final Rule). The Office is revising the rules of practice in this final rule to remove the changes in the Claims and Continuations Final Rule from the Code of Federal Regulations.

…

The changes in the Claims and Continuations Final Rule were added to the Code of Federal Regulations, but have been the subject of litigation since August of 2007 and have never taken effect. … The changes in the Claims and Continuations Final Rule addressed the Office's patent application pendency and quality issues, but did so with provisions that were objectionable to a large segment of the patent user community. In addition, the circumstances have changed since the Office published the Claims and Continuations Final Rule in August of 2007, and the Office is now considering other initiatives that would garner more of a consensus with the patent user community to address the challenges it currently faces. Thus, the Office has decided that it is no longer interested in pursuing the changes in the Claims and Continuations Final Rule that were the subject of the District Court's decision in Tafas. Therefore, the Office is revising the rules of practice in title 37 of the Code of Federal Regulations for patent cases to remove the changes in the Claims and Continuations Final Rule from the Code of Federal Regulations.

See 74 FR 52686

Microsoft Questions Strong Presumption of Patent Validity over Newly Found Prior Art

Lucent v. Gateway, Dell, and Microsoft (Fed. Cir. 2009)

In its original opinion, the Federal Circuit vacated a $350+ million verdict against Microsoft based on improper damages calculations. On remand, the court must conduct a new damages assessment, but in that scenario Microsoft will certainly be on-the-hook for millions of dollars.

As an end-run, Microsoft has petitioned the Federal Circuit for a rehearing of the Lucent case en banc with a special focus on a particular issue that was ignored by the original opinion: the standard of proof for proving invalidity when the defendant presents prior art evidence that was not considered during patent prosecution. In particular, the software giant asks the court to “overrule its precedents requiring clear and convincing evidence of invalidity when the PTO did not consider the asserted prior art.”

Microsoft argues that the justification for a clear-and-convincing disappears when the patent challenge is based on newly uncovered prior art:

As the Supreme Court noted in KSR, however, "the rationale underlying the presumption [of validity]-that the PTO, in its expertise, has approved the claim-seems much diminished" where the claim of obviousness is based on prior art that was never before the PTO. 550 U.S. at 426. See also Penn Int '1 Indus., Inc. v. New World Mjg. Inc., 69 1 F.2d 1297, 1300-01 (9th Cir. 1982) ("'The basis for the presumption-that the Patent Office has compared the claim of the patent with the prior art and used its expertise to determine validity-can no longer exist when substantial evidence of prior art not considered by the Patent Office is placed in evidence at trial."). As the Supreme Court cogently observed, the force of the statutory presumption-which stems from the conclusion that the PTO has done "its job properly," see Superior Fireplace Co. v. Majestic Products Co., 270 F.3d 1358, 1367 & n.l (Fed. Cir. 2001)-dissipates when the PTO lacked essential evidence.

The case relies on the writings of several academics including the Lichtman & Lemley work on Gold Plated Patents.  In April 2009, I suggested that this type of frontal challenge on the strong presumption of validity would be coming soon.

Notes:

• File Attachment: Lucent petition.pdf (3850 KB)
• Prior Discussion of Presumption of Validity on Patently-O
• Prior Discussion of Lucent v. Gateway on Patently-O

Declaratory Judgment Standing: Must All Patent Owners be Joined?

In re KGK Synergize (Fed. Cir. 2009) (nonprecedential order)

KGK’s patent No. 6,987,125 covers the use of polymethoxyflavone to treat cardiovascular disease and is co-owned by the US Government. (Trade Name Sytrinol). It appears that two of the inventors were under an obligation to assign rights to the USDA while the other two assigned their rights to KGK. 

Classic declaratory judgment scenario: SourceOne is a former licensee who developed a competing product.  KGK allegedly began threatening customers and SourceOne filed for declaratory judgment of invalidity and non-infringement against KGK.  The problem is that the US government as co-owner is likely immune from a DJ action.

On motion, the district court refused to dismiss the case even though the US government had not been joined as a party to the litigation.  KGK then filed a petition for writ of mandamus with the Federal Circuit.  Writing for a three-member panel, Judge Gajarsa denied the petition – finding that KGK had not explored all of its alternatives or that it could not obtain adequate relief after waiting for final judgment.

The district court opinion on rehearing is interesting in the way that it differentiates between constitutional and prudential limitations on federal court jurisdiction.  Although prudential requirements do not allow a patentee to sue for infringement without joining co-owners, such an action is within Article III standing limitations.  On the flip side, the declaratory judgment act (28 U.S.C. 2201(a)) does not have the same prudential limitations.

Rather, as the Supreme Court indicated in the MedImmune case, the requirement for declaratory judgment is much broader and focuses on the existence of “a substantial controversy, between parties having adverse legal intersts, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.”

Links:

• David Donoghue discussed the original district court opinion here. He takes the following quote from that decision: “The approach urged by KGK (and the Government) would allow KGK to threaten legal action against SourceOne (or others) with impunity.  For those who gave into those threats, KGK would receive the benefit of the patent (a cessation of the alleged infringing conduct and perhaps compensation) without the need to do anything more.  For those who might rear up and seek a judicial resolution, KGK could retreat behind the Government's cloak of immunity and prevent the infringement or validity of the '125 Patent from ever being tested in court.”

Suing for Infringement Done "For the United States"

Advanced Software Design v. Federal Reserve Bank of St. Louis (Fed. Cir. 2009)

Advanced Software’s patents relate to software methods of detecting fraudulent bank checks. The patentee sued three Federal Reserve Banks and Fiserv for patent infringement in Federal Court in the Eastern District of Missouri. On a preliminary motion, the district court dismissed the infringement claims – finding that the claims must be litigated in the Court of Federal Claims because the alleged acts of infringement were “for the United States.”  28 U.S.C. 1498(a). Section 1498(a) provides that the the Court of Federal Claims is the forum to redress unauthorized use of a patent “by or for the United States.” Under Sectio 1498(a), work is considered “for the United States” if it is (1) conducted for the US and (2) with “authorization or consent” of the US. 

Advanced Software argues that the Federal Reserve banks are private entities and that the US government expressly avoided becoming a party to any contract relating to the technology at issue. As such, the Federal Reserve’s alleged infringing activities should not be considered activities done “for” the US.

On appeal, the Federal Circuit affirmed the dismissal – finding that the proper forum is the Court of Federal Claims.  In particular, the court noted that no particular or explicit authorization or consent is required.

The most interesting aspect of the decision is that the Federal Circuit appears to have allowed the US government to take-on liability post-hoc.  In the appeal, the US government filed an amicus brief and was offered time to argue. During that argument, the government gave its authorization and accepted potential liability under Section 1498.

Tafas v. Dudas Concludes: CAFC Must Choose Whether to Vacate District Court's Precedent

The USPTO has announced that it is rescinding the continuation rules package being litigated in Tafas v. Dudas. GSK has reportedly agreed to request that the Federal Circuit dismiss their appeal and to vacate the district court decision below.  According to his attorney, Tafas has not agreed to seek vacatur of the district court opinion and instead believes that the district court’s precedential decision should be to maintained in order to limit the USPTO’s substantive rulemaking power.

Patently-O Bits and Bytes

• Ariad v. Eli Lilly (Written Description): Ariad has filed its opening brief in the en banc Federal Circuit challenge to the statutory basis for a written description requirement that is separate and distinct from enablement requirement.  The patentee’s strongest arguments are textual and historic.  Although done with tact and persuasive skill, the brief asks the court to read the statute: “The specification shall contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same.” [File Attachment: Ariad v. Lilly Plaintiffs-Appellees Principal Brief.pdf (509 KB)]
• Forest Group v. Bon Tool False Marking Case: The question on appeal is whether mass production of a falsely marked product constitutes a single instance of false marking.  If the Federal Circuit agrees, the false marking statute will continue to have no impact because damages are limited by statute to $500 or less per offense.  Judges Rader, Plager, and Moore will likely issue a decision in January.  In oral arguments, the court struggled with the potential problem of “marking trolls” — suggesting that an amicus in this case is “pretty close to that.” 
• USPTO Website: Out of Beta
• Patent Reform: Senator Leahy has suggested a Senate debate on patent reform “before the end of the year.”
• Board of Patent Appeals: Numbers are in for FY2009 (ending September 30, 2009).  15,349 appeals docketed; 6,757 appeals completed; 12,489 appeals pending at the end of the FY.  The Board took heroic efforts to increase its throughput by over 35% in FY2009. However, the Board was already operating in a deficit and the number of cases received in FY2009 is more than double that of FY2008. 
• Board of Patent Appeals II: Despite the backlog, the Board reports an average pendency of only 7.7 months (calculated from assignment of appeal number to decision date).
• Patent Law Jobs:
• Vestas is looking to hire an experienced in-house patent attorney in Houston.
• Covidien is looking to hire an experienced in-house patent and trademark attorney in Boulder, Colorado.
• Metabolix is looking to hire an experienced intellectual property manager in Lowell, Massachusetts with a focus on polymer science.

USPTO Fees: Look for Increases

Gary Locke (Secretary of Commerce) has again indicated the Obama Administration’s support for the pending patent reform bill S. 515.  [Letter].  The letter also suggests that the PTO should be given authority to raise its fees, including “a limited interim fee adjustment.” 

For many years, the PTO has been funded entirely by user fees.  I hope that the same can continue to avoid such direct Congressional control over PTO spending.  But the PTO clearly needs money, and the alternative of cutting PTO services is likewise highly unappealing.  The third alternative: raise fees.

In the past, I have reported that patent applicant behavior is relatively inelastic to PTO fee changes. Although a 15% increase in fees would reduce the number of applications, the total revenue would increase. 

If the PTO is going to increase fees – how should it structure that increase? Notably, should more the burden be placed on (1) standard application fees; (2) issue and maintentance fees; or (3) luxury fees for excess claiming (20+) extensions of time?  All Universities qualify for the small-entity fee reduction. Does that still make sense?

Notes: The letter from Locke also promotes the idea of worksharing between patent offices when the same invention is being examined in multiple locations.

Supreme Court Indicates Interest in International Exhaustion Case

Costco Wholesale Corp. v. Omega, S.A. (Supreme Court 2009)

The Supreme Court has asked the Solicitor General to file a brief expressing the Obama Administration’s view on this pending international copyright exhaustion case. The law of exhaustion in copyright and patents run roughly parallel, and the outcome of this case will likely alter US patent law as well.

Under the first sale doctrine (aka exhaustion), once a copyright (or patent) owner has made an authorized sale of a protected product, the owner no longer has rights in that particular copy.  This allows the authorized purchaser to re-sell the particular product. 

Omega sells its watches for a higher price in the US than it does elsewhere. The discount retailler Costco purchased genuine Omega watches from overseas (through an importer) and began to sell them in its US stores.  The question on appeal is whether Omega’s authorized foreign sale exhausted its US copyright.

Under the Copyright Act’s first-sale doctrine, 17 U.S.C. § 109(a), the owner of any particular copy “lawfully made under this title” may resell that good without the authority of the copyright holder. In Quality King Distribs., Inc. v. L’Anza Research Int’l, Inc., 523 U.S. 135, 138 (1998), this Court posed the question presented as “whether the ‘first sale’ doctrine endorsed in § 109(a) is applicable to imported copies.” In the decision below, the Ninth Circuit held that Quality King (which answered that question af-firmatively) is limited to its facts, which involved goods manufactured in the United States, sold abroad, and then re-imported. The question pre-sented here is:

Whether the Ninth Circuit correctly held that the first-sale doctrine does not apply to imported goods manufactured abroad.

In Fuji Photo Film Co. v. ITC, 474 F.3d 1281 (Fed. Cir. 2007), the Federal Circuit held that US patent rights are only exhausted “through a first sale in the United States.” In that case, the Court recognized that “a different rule applies in copyright cases.”  However, at least one district court has held that the Supreme Court’s 2008 Quanta decision is inconsistent with this Federal Circuit precedent. See LG Electronics, Inc. v. Hitachi, 2009 WL 667232 (N.D.Cal. 2009)

If it takes the case, the Supreme Court is likely to link the parallel patent and copyright doctrines.

One of my former students (Shourin Sen) has been following the case on his copyright focused site: Exclusive Rights.

Expanding First Action Interview Pilot Program

“Washington — The Commerce Department's United States Patent and Trademark Office (USPTO) today announced that it is expanding its First Action Interview Pilot Program in which an applicant is entitled to an interview with the patent examiner prior to the first office action on the merits in a new utility application. The program will expand to additional technology areas for a six-month period beginning on October 1, 2009. . . .

 . . . [The] patent process benefits when interaction between the applicant and the examiner are enhanced at the beginning of examination because patentability issues can be resolved early when the applicant and the examiner discuss them one-on-one. For the applications involved in the initial pilot, the First-Action Allowance rate increased six-fold when compared to applications from the same technology area not involved in the pilot. . . .

Currently, an applicant may request an interview prior to a first action. Granting of an interview is within the discretion of the examiner who has not yet reviewed the case, and the applicant may be required to identify relevant documents and explain how the invention is patentable over these documents.

Under the expanded pilot program, the examiner will conduct a prior art search and provide the applicant a pre-interview communication, which is a condensed preview of objections or rejections proposed against the claims. Within 30 days from the issue date of the pre-interview communication, the applicant must either choose not to have a first action interview with the examiner, or schedule the interview and file a proposed amendment or remarks (arguments).”

Details: http://www.uspto.gov/web/offices/pac/dapp/opla/preognotice/faipp_v2.htm.

Bilski Briefs: Supporting the Government (In Name)

UPDATE: More briefs added Oct 5, 2009, 11:30 am

The final round of amicus briefs have been filed in the pending Supreme Court case of Bilski v. Kappos. Mr. Bilski is appealing the Federal Circuit's en banc rejection of his patent application. In that decision, the court held that Bilski's claimed method of hedging risk did not qualify as patentable subject matter under 35 U.S.C. 101 because the method was neither tied to a particular machine nor transformative of any physical article. Bilski challenges this "machine-or-transformation" test as unduly narrow. Bilski's legal position was supported in a large set of amicus briefs including a strong textualist argument made by Professor John Duffy.

Briefs supporting the government position have been filed. As summarized below, the vast majority of briefs also reject the Federal Circuit's machine-or-transformation test as the sole test of patentable subject matter for a claimed process. In my summaries, I have attempted to capture what I learned from each brief, of course the briefs and arguments are much more extensive and nuanced than my squibs suggest.

Electronic Frontier Foundation (EFF) and the Kauffman Foundation: Business method patents are harmful and should not be allowed. The long history of US patentable subject matter indicate that a patentable process must provide a technological advance. Likewise the mere fact that a process uses a machine or computer does not immediately render the process patentable subject matter. Rather to be patentable, the advance must be a technological advance. EFF etc amicus brief.pdf.

Red Hat: Software methods do not become patentable simply because they are tied to a computer. Benson. Download 08-964bsacRedHatInc.

William Mitchell College of Law IP Institute: This case does not properly present the issue of patentability of claims that include a mix of statutory and non-statutory subject matter. The court should wait for an appropriate case to decide that issue. Parsing Section 101 provides few real answers as to patentable subject matter. Download 08-964 William Mitchell College of Law Intellectual Property Institute.

SFLC (Moglen and Ravicher): Standing alone, software is not patentable. This result is derived from the Supreme Court's decision in Microsoft v. AT&T that “[a]bstract software code [uninstalled in a machine] is an idea without physical embodiment.” 550 U.S. 437, 449 (2007). Download 08-964 Software Freedom Law Center.

SIIA: The patent eligibility of software is well established and should not be disturbed. Download 08-964 Software & Information Industry Association.

Knowledge Ecology Int'l: The goal of the system is to encourage progress, not to reward inventors. Further, patent protection is not a "necessary policy intervention to reward successful investment in new medical technologies. . . . [M]any of the greatest medical advances have benefited significantly, and in some cases exclusively, from mechanisms that exist completely outside of the patent system." Download 08-964 Knowledge Ecology International.

Mark Landesmann: The evidence of the negative social impact of business method and software patenting is properly directed at the PTO's allowance of patents that were not substantially novel and that were not properly disclosed or claimed. There is no evidence that patents on novel, non-obvious and properly disclosed business-method process inventions create any harm. Download 08-964 Mark Landesmann.

Nevada State Bar Ass'n: The machine-or-transformation test harms emerging Nevada businesses - especially in the growing areas of solar energy, gaming, and digital communications. Download 08-964bsacintellectualpropertysectionnevadastatebar.

American Bar Ass'n: The court should use an incremental approach to excluding claims to subject matter where patenting does not make sense and creates a problem. Categorical limits such as the machine-or-transformation test may limit innovation. That said, the "[p]atent law should not interfere with the exercise of human intellect by granting a monopoly on processes in which thinking is central." A specific target of the ABA is to eliminate patents covering tax planning methods. Download 08-964 American Bar Association.

American Insurance Ass'n: Regardless of their novelty, insurance policies should not be the subject of patent protection - even when combined with a computer. Download 08-964 American Insurance Association.

Bank of America, Google, et al.: The patent laws should bar patentability of "accounting methods, tax mitigation techniques, financial instruments, and other means of organizing human behavior—or software used to implement those methods." Download 08-964 Bank of America et al..

Bloomberg: Limiting a method to use on a general purpose computer should not render the method patentable. Download 08-964 Bloomberg.

CCIA: It is important that the Federal Circuit eliminated the overbroad State Street test. The current tension in the patent system can largely be traced to that unprecedented over-expansion of the system. Tight limits on patentable subject matter are important because (inter alia) of the strict liability nature of patent infringement. "Tying patentability to physical subject matter is not a perfect solution. However, it limits the reach of patents in important ways that can significantly reduce the risks of inadvertent infringement and the scope of potential liability."Download 08-964 Computer & Communications Industry Association.

FFII: Patents on business methods have been considered and were rejected by the Statute of Monopolies in 1623. Patents greatly harm the Free & Open Source Software (FOSS) movement. Download 08-964 Foundation for a Free Information Infrastructure.

Professors Menell and Meurer: The Constitution creates a real limit on patentable subject matter - i.e., the subject matter of the patent must be within the "useful Arts." Economic evidence indicates that business method patents (especially internet related business methods) are harmful. 08-964 bsac Menell.pdf.

Law Professors and the AARP (Including Josh Sarnoff): Patents should only cover "inventions in the application." Patents can not cover "non-inventive applications of public domain science, nature, and ideas." The right interpretation of the statute requires that the invention "reside in the application, rather than in a discovery preceding or employed by it. This is because the science, nature, or ideas must be treated as if they are already in the prior art, i.e., are publicly known and free for all to use. Absent invention in applying such discoveries, there is simply no invention to patent." 08-964 bsac Brief of Eleven Law Professors and AARP.pdf.

Microsoft, Philips, and Symantec: Nobody (except Bilski) believes that his claims deserve patent rights. The machine-or-transformation test should not be seen as the exclusive test of patentable subject matter of a process claim - in part because the test has already "proven overly difficult to implement in practice." Like Professor Hollaar, Microsoft would simplify the test by requiring that the invention "involve one or more disclosed physical things." Today's computers - although complex - are not fundamentally different from Babbage's 1836 mechanical computer. Process claims that use computers should be patentable. Am Brief.pdf.

Professor Hollaar and the IEEE: Just restating the general principles of patentable subject matter is unhelpful. Rather, clear rules are needed - especially because the subject matter question is most frequently addressed by patent examiners who have little legal training and little time to ponder abstractions. A clear and time-tested rule would be: A process is patentable subject matter when it involves making or using a machine, manufacture, or composition of matter. This means that software method patents that require a computer would be patentable, but Bilski's method of hedging would not be patentable. bilski-sc-amicus.pdf.

American Medical Association: The machine-or-transformation test should not supplant the requirement that a patent claim "address a technology." A patent should not be allowed to cover "every possible application of a scientific observation." Rather, claims should be limited to "a particular new and useful application or use of the observation. The Supreme Court should use this case to make a statement especially directed to "overreaching claims in the life sciences. . . . Such patents chill research, and patents such as those in Labcorp and Prometheus chill talking and thinking of ideas by making talking and thinking into a tort." 08-964 bsac The American Medical Association.pdf.

Adamas Pharma and Tethys: Section 101 should be interpreted in a way that is objective, predictable, and not duplicative of the other patentability requirements. The machine-or-transformation (MoT) test does not meet any of these requirements. The Federal Circuit test also violates US treaty obligations under TRIPS and NAFTA and potentially subject the US to trade disputes adjudicated at the World Trade Organization (WTO). Under these US-initiated treaties member countries agreed to offer patent rights "in all fields of technologies." A major purpose of the agreements was to ensure that countries offered a full scope of patent rights, and by limiting the scope of rights, the US "will no longer be able to credibly argue in Special 301 trade disputes that failure to protect healthcare inventions made by cutting-edge U.S. companies constitutes inadequate protection of intellectual property rights." Some Congressional intent can be gleaned from the legislative history of Section 287(c) of the patent act. As originally proposed, that provision would have limited the subject matter eligibility of medical and diagnostic methods. After some debate, a compromise was reached to continue to allow their patenting, but to limit the remedies available. 08-964 bsac Adamas Pharmaceuticals.pdf.

Robert Sachs and Daniel Brownstone: Software should be patentable and has been for a long time. The Federal Circuit test greatly confuses the issue. Although software is an abstraction from the physical world, it is not "abstract." SF-5270929-v1-Bilski_v_Doll_Amicus_Brief_of_R_Sachs_and_D_Brownstone_as_amici_curiae_2009-08-06.PDF.

Big Internet Retailers, including Crutchfield, Overstock, and LL Bean: Patent Trolls are hurting online retailers and one way to stop them is to eliminate business method patents (including software business method patents). In effect, business method patents amount to a tax on Internet commerce. (The companies don't mention - unlike offline retailers - internet companies are often exempt from paying sales tax...) Internet Retailer Amicus Brief.pdf.

Brief of CASRIP (U. Washington): The US Constitution sets a bound on the scope of patentable subject matter - limiting them to the Constitutionally proscribed "useful Arts" as that term was understood at ratification. For new methods, one key is to consider the purpose of the method. Methods of entertaining a cat using a laser and telling a joke into a microphone should not be patentable regardless of their tie to particular machines because neither of those functions have ever "been considered a useful Art, and surely . . . is not the kind of discovery that the Patent Clause contemplates." Some methods also exist that should be patentable even though they fail the machine-or-transformation test. Despite its problems, the machine-or-transformation test is "superior to its competitors in filtering out preemptive claims to basic principles." However, it should not be the sole test of eligibility. Bilski's claim is unpatentable because hedging against price inflation (the purpose of the method) is not within the useful Arts. CASRIP am cur brf.pdf.

PTO Deputy Director: Sharon Barner

The USPTO has announced that Sharon Barner of Foley & Lardner has agreed to become Deputy Director of the USPTO. Barner is the head of Foley's large IP department and has been a supporter of Obama since his youthful days in the Illinois legislature. As was the case with Kappos, Barner will be taking an extreme pay cut, opening herself to public criticism; and moving to DC. She should be applauded for her willingness to become a public servant. Under the law, the USPTO Director has the power to nominate his Deputy, but the actual appointment is done by the Secretary of Commerce (Locke).

The patent office has substantial problems that need to be addressed and that would be addressed regardless of who is in charge at the PTO. The benefit of Kappos & Barner is that have decades of patent law experience and are both committed to building a better patent system for the long-term. They understand how patents are actually used and the motivation behind patentee actions. Hopefully, this means that the eventual changes to the system will be more successful; have fewer unintended consequences; and be less likely to unduly antagonize those already invested in the system.

Barner was on my (rather long) short-list of potential Federal Circuit nominees to replace Judge Schall who is moving to Senior Status next week. Many members of the patent litigation bar are calling for a district court judge to be nominated. Judge Kathleen O'Malley (N.D. Ohio) likely tops the list along with Judge Patti Saris (D.Mass.).

Another University Patent Ownership Dispute: Stanford Loses Rights Based on Researcher's Side Agreement

Stanford v. Roche (Fed. Cir. 2009) 08-1509r.pdf

Using federal NIH funding, Stanford scientists developed and patented a method of using PCR to measure HIV virus concentration in blood plasma. The development was done in partnership with the PCR leader Cetus. The Cetus PCR business was later purchased by Roche, and Stanford subsequently offered to license the patent rights to Roche (for a substantial royalty). After negotiations stalled, Stanford sued Roche for patent infringement. Roche claims that it has ownership rights or - at least - shop rights to the patents based on its acquisition of Cetus's PCR assets. The district court (Judge Patel, N.D. Cal.) rejected Roche's claim of rights, but did find the patents invalid as obvious (on summary judgment).

Roche's Ownership: Roche raised ownership rights both as a counterclaim and as a defense. The district court held those claims barred by California's statute of limitations. On appeal, however, the Federal Circuit held that the general statute of limitations does not operate to block defenses in litigation. Rather, "[u]nder California law, a defense may be raised at any time, even if the matter alleged would be barred by a statute of limitations if asserted as the basis for affirmative relief." (Quoting Styne v. Stevens, 26 Cal. 4th 42, 51 (2001)). Likewise, the statute of limitations to claiming rights does not apply when ownership is raised as a challenge to a plaintiff's standing to sue. "It is well settled that questions of standing can be raised at any time and are not foreclosed by, or subject to, statutes of limitation."

The law of patent ownership is somewhat complex because it involves a mixture of state law (or the law of the local jurisdiction) and federal law. State contract law serves as the baseline, but federal law (esp. Federal Circuit law) creeps into many situations. Here, for instance, the Federal Circuit has held that the "question of whether contractual language effects a present assignment of patent rights, or an agreement to assign rights in the future, is resolved by Federal Circuit law."

One of the listed inventors first signed an agreement with Stanford - promising to assign any future inventions that emerged from his employment. Later, the inventor signed an agreement with Cetus agreeing "to hereby assign" his interests. Under Federal Circuit law, these two contracts are treated differently. And, although the Cetus agreement came later, the company could claim equitable title immediately at the moment of invention while Stanford needed to actually obtain an assignment. The company also automatically held legal title in the patent application at the moment it was filed. (The inventor did not sign an assignment to Stanford until after filing).

"[B]ecause Cetus’s legal title vested first, Holodniy no longer retained his rights, negating his subsequent assignment to Stanford during patent prosecution."

Recordation of Rights: Patent ownership regularly transfers without the new owner recording the assignment with the USPTO. Recordation is not required, but it does offer some benefits. Notably, where two entities both claim ownership (as there are in this case), a second assignee can hold title if it records first.

A [prior] assignment . . . shall be void as against any subsequent purchaser or mortgagee for a valuable consideration, without notice, unless it is recorded in the Patent and Trademark Office within three months from its date or prior to the date of such subsequent purchase or mortgage. 35 U.S.C. 261

One caveat in the statute is that the subsequent assignee must be a bona fide purchaser - i.e., take "without notice" and pay "valuable consideration." Here, the Federal Circuit found that Stanford was at least on inquiry notice of the relationship between the inventor and Cetus and the potential for a rights-transfer.

Standing:

Stanford cannot establish ownership of Holodniy’s interest and lacks standing to assert its claims of infringement against Roche. Thus, the district court lacked jurisdiction over Stanford’s infringement claim and should not have addressed the validity of the patents. The district court’s grant of summary judgment of invalidity is therefore vacated, and the case is remanded with instructions to dismiss Stanford’s claim for lack of standing.

Notes:

• Stanford would have won the case (at least the ownership issue) if it had written its employee agreement to automatically transfer rights upon creation of the invention. Best practices in patent law dictate that patent ownership (and right to sue) be always maintained in a single entity.
• In Gerber Scientific Int'l v. Satisloh AG, No. 3:07-CV-1382, (D. Conn., September 25, 2009, order) (P. Dorsey), the court held that the assignment of patent rights in the original case did not include later-filed continuations-in-part (CIPs). "Although courts have found variously worded assignments to include CIPs, Defendants are correct that there is no binding precedent holding that an assignment with the exact terms cited above includes CIPs." The Court has certified that issue for interlocutory appeal to the Federal Circuit who will likely hear the case. [Zura]

Changing the USPTO Count System: Incrementally

USPTO Director David Kappos has announced a set of proposed changes to the patent examiner count system. The proposed changes are not dramatic, but they may have some incremental benefit of reducing RCE churning (see below). The proposal also provides for an additional hour of examination time per case with the expectation that the added time will be used up-front in an interview or in preparing a quality first office action on the merits (FAOM).

The Count System: Under the current count system, examiners receive "counts" for various actions and must meet a certain quota every two-weeks. (The quota varies according to art unit and examiner grade.) Under the rules, one count is awarded when the examiner issues an initial office action rejection and a second count is awarded when the case is disposed-of. Because no counts are awarded for second or subsequent office action rejections, the current system is supposed to encourage examiners to quickly move a case to its conclusion.

RCE Churning: When an applicant files a request for continued examination (RCE), the examiner receives a count as a disposal. At that point, the current count system treats the application as new - thus the examiner can receive a second count for mailing another office action rejection and one more count for eventually allowing the application to issue as a patent. Thus, by "forcing" the RCE, the examiner receives four counts instead of only two. (Note - "Forcing" is in quotation marks because examiner's do not actually applicants to file RCEs.) A similar practice takes place with restrictions where the examiner pushes an applicant to divide a single patent application into multiple applications. In that scenario, the examiner can at times earn multiple counts for reexamining what are essentially identical inventions.

The proposed package would make some modifications - focusing especially on RCE practice. Under the proposal, the first RCE would only be worth 1.75 total counts (rather than 2) and any subsequent RCE can only be worth 1.5 counts. Examination of the original application would still be worth the same 2 counts, but the distribution is slightly shifted. Under the proposal, the first office action on the merits (FAOM) would garner 1.25 counts; a final rejection earns 0.25 counts; and eventual disposal leads to 0.5 more counts. If no final rejection is issued, then the disposal would be worth 0.75 counts. Thus, examiners will still receive credit for examining RCE's - just less credit than before. The proposal does not appear to address the restriction practice.

Encouraging substantive interviews: The proposal would also regularly grant one-hour of "non-examining time" for preparing for and conducting interviews. This would effectively reduce the examination quota of examiners who conduct interviews.

Examiner Mistakes: The PTO management appears to have come to an agreement with the examiner union POPA on these reforms, although the membership will still be asked for their approval. Interestingly, the documents distributed by the joint task force appears to show some changes on the review of examiners for mistakes in office actions. Notably, the proposal would not allow an examiner to be negatively treated "based upon a single clear error in Patentability Determination" even if the examiner has already received a warning for prior mistakes.

The proposal also includes a new "formal policy" of "working on the earliest filed applications on [an examiner's] Regular New Case docket first." This would block the game played by some examiners of cherry picking easier cases to examine earlier.   

Documents: briefing_for_corps_final_draft-093009.pdf

Claim Construction: A Structured Framework*

Guest post by Professor Peter S. Menell (UC-Berkeley School of Law); Matthew D. Powers (Weil, Gotshal & Manges LLP); and Steven C. Carlson (Fish & Richardson PC) 

The construction of patent claims plays a critical role in nearly every patent case. It is central to evaluation of infringement and validity, and can affect or determine the outcome of other significant issues such as unenforceability, enablement, and remedies. Yet jurists and scholars have long lamented the challenges of construing patent claim terms. The Federal Circuit's en banc decision in Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005), stands as the most authoritative decision on claim construction doctrine. But while putting to rest various controversies, many core tensions in claim construction persist. Moreover, the decision itself does not provide a step-by-step approach to construing claims. This commentary provides a structured road map.

Bilski Briefing: Government Argues that Section 101 "Processes" are limited to "technological and industrial processes."

Bilski v. Kappos (Supreme Court 2009) 08-964bsUnitedStates.pdf

In its responsive brief, the Obama Administration asks the Supreme Court to confirm that a patentable process must be tethered to technology - either "directed to the operation of a particular machine or apparatus" or "involve the transformation of matter into a different state or thing."

Interpreted in light of the historical scope and development of the patent laws, as well as the statutory context, the term “process” encompasses all technological and industrial processes, broadly conceived. But it does not extend patent-eligibility beyond those bounds, to methods of organizing human activity that are untethered to technology—e.g., methods by which people conduct economic, social, or legal tasks, such as entering into contracts, playing poker, or choosing a jury. Such methods fall outside of the broad expanse of technological and industrial fields that “the statute was enacted to protect.” Parker v. Flook, 437 U.S. 584, 593 (1978). Because petitioners’ hedging method relates solely to human conduct, untethered to any technology—any machine or transformation of matter—it falls outside the coverage of Section 101.

. . .

This Court has long recognized that the distinguishing feature of a technological process is that it concerns a particular machine or apparatus or effects a transformation of matter to a different state or thing.

Although Bilski's claim does not relate directly to software, the machine-or-transformation could be seen to limit the patentability of software processes acting on a general purpose computer (as opposed to a "particular machine"). The Government brief suggests that the Federal Circuit test leaves software substantially patentable when tied to a general purpose computer - citing favorably to In re Alappat, 33 F.3d 1526, 1545 (Fed. Cir. 1994) (en banc) (“[A] general purpose computer in effect becomes a special purpose computer once it is programmed to perform particular functions pursuant to instructions from program software.”).

In any event, the machine-or-transformation test contemplates that many forms of “software” inventions are patent-eligible. . . . [However,] software code that is claimed by itself, uncoupled from any storage medium or computer, may be nothing more than “an idea without physical embodiment,” and therefore would not be patent-eligible.

Here, the brief did not address the reality that a software process can be "technological and industrial" without be limited in its association to a particular computer.

As a fall-back, the Government appears to suggest an additional exception to the patentable subject matter test for "methods of organizing human activity."

Methods of organizing human activity are not patent-eligible “process[es]” within the meaning of Section 101.

The brief spends a considerable amount of time focusing on the statutory interpretation on the word "process" and its predecessor "useful arts" - paying special attention to provide an originalist style analysis. Here, the government attempts to show that finance (i.e., business methods) were not originally considered useful arts. Additionally, the government argued that even though tremendous advances took place in finance and insurance industries during the 18th and 19th centuries, those innovations were not traditionally patented.

In sum, because the initial patent statutes were intended to foster the “useful arts,” they were directed to technological and industrial inventions, as opposed to fields of purely human activity—including financial and economic activity unconnected to technology—which fell within the sciences or liberal arts.

Amicus briefs in support of the government position are due this Friday.

Bits and Bytes

• IP Czar: George Mason visiting professor Victoria Espinel has been selected as the IP Enforcement Coordinator for the Administration - known as the IP Czar. The role will likely be more focused on international trademark and copyright issues rather than patent law issues. Her nomination must be confirmed by the senate. [LINK]
• DC in DC: Next Thursday (1:30 p.m., October 1), I'll be the opening speaker in GWU's IP Speaker Series. My presentation considers the proposed first-to-file legislation and includes a new set of data the (low) frequency that applicant's attempt to rely on their invention date during prosecution. The talk is open to GWU students, alumni as well as "friends." Other speakers include Edward Walterscheid (Oct. 27); Zahr Stauffer (Oct. 29); Joseph Miller (Nov. 5); and Chris Cotropia (Nov. 19). [LINK]

Using Reexaminations to Avoid Willfulness Damages

Most patents currently being reexamined at the PTO are also being litigated in parallel proceedings in district court. This rise in importance of parallel reexaminations leads directly to both Constitutional controversies and practical problems. Although the Federal Circuit has nimbly attempted to avoid the problem, the truth is that both the PTO (an Article II executive agency) and the Article III Courts focus on the same question of validity of patent claims. These races to conclusion raise questions of both separation of powers and res judicata.

A practical issue is raised by Microsoft in the i4i case relates to the relevance of non-dispositive reexamination events to the question of willful infringement. In Microsoft's case, the ex parte reexamination request was initially granted, and that grant was followed by a non-final office action rejection. On appeal, Microsoft argued that the PTO's rejections of i4i's claims on obviousness grounds should result in a per se finding that its its infringement defenses were not objectively reckless. Rather, according to Microsoft, the PTO's grant of reexamination and non-final rejection at least serve to prove that its defenses were credible. i4i argues on the other side that the non-dispositive reexamination events are irrelevant because of the different standard for review, different claim construction approach, and lack of finality.

At the Santa Clara Law School conference that I attended yesterday, one panelist made a seeming reasonable suggestion - that courts should begin to reexamination results once an applicant agrees to amend or cancel claims being asserted during litigation. At that point, it is a foregone conclusion that the resulting reexamination certificate will not confirm the patentability of those pre-amended claims.

BPAI Statistics

The Board of Patent Appeals and Interferences has seen a tremendous upswing in its workload over the past couple of years. The swing was largely triggered by the prospect of rules limiting the filings of requests for continued examination (RCEs). However, it appears that applicants and patent attorneys - who are now familiar with the process - are continuing to see appeals as a viable alternative even though the RCE limits appears dead-in-the-water. Of course, the appeals have also been driven by the increasing percentage of applications being finally rejected by examiners.

In a recent presentation, BPAI Chief Judge Fleming provided a useful survey of the "state of the Board." Highlights below.

• In FY2009, the BPAI is expected to have decided over 7,000 cases. That represents more than a 40% increase over FY2008.
• In addition, it is expected that over 15,000 cases will have been docketed to the BPAI in FY2009. That number is well over double those docketed in FY2008. This leaves an 'inventory' of about 12,500 cases.

In its current form, the BPAI cannot keep up with demand. By the end of FY2010, Judge Fleming expects the backlog to extend over 21,000 cases. The office currently has a three-prong approach to fixing the situation: (1) hiring more BPAI judges; (2) hiring more patent attorneys who essentially serve as law clerks, drafting opinions that are eventually approved by the Board; and (3) improving BPAI efficiency.

Notes:

View the presentation: bpai_092109.pps

Using Claim Terms and their Synonyms

Edwards Lifesciences v. Cook, Inc. (Fed. Cir. 2009)

The four Edwards patents all relate to internal blood-vessel grafts for treating aneurisms. The grafts are designed to be inserted endovascularly without the need for open surgery. After construing the claims, N.D. Cal. District Court Judge Jeffrey White granted summary judgment of non-infringement to the two defendants, Cook and Gore. On appeal, the Federal Circuit affirmed.

Lumpy Claim Construction: Patent claim construction serves as a prime example of how litigators can take a simple issue and make it quite complicated. For their part, judges are keen to limit the issues. A common approach in claim construction is to group similar claim terms together and give them identical meaning. In this case, the patent used the terms "graft," "graft body," graft structure", "bifurcated base structure," and "bifurcated base graft structure." Examining these terms, the appellate panel agreed that these terms could properly be analyzed together because the applicant had used them "interchangeably in the specification," at least with respect to the disputed differences.

This risk of synonymous meaning is not necessarily bad. Using various terms to describe the same idea helps to flesh out the detail and scope of the idea. However, in most cases, applicants would probably be better off emphasizing distinctions between similar terms. The distinctions may well be useful for ensuring varied claim coverage.

The point from this case is that the distinctions between similar terms must be explicitly emphasized if the applicant wants to have confidence that it can later rely on the differences.

Broadening Claims:During prosecution, Edwards seemingly broadened some of its claims by amending the "intraluminar graft" elements to simply "graft" elements. Despite that change, the court found that the specification's written description still required that all grafts be intraluminal.

Public Accessibility of Prior Art: PTO Must Provide Evidence of Indexing Date

In re Lister (Fed. Cir. 2009)

Lister is attempting to patent his method of playing golf that allows a player to tee-up each shot (except for hazards and greens). He filed his patent application in 1996. Two years prior, however, Lister had registered a copyright on his manuscript describing the game (acting pro se).

Based on the copyright submission, the examiner rejected the application as anticipated under Section 102(a) and barred under Section 102(b). The Board, however, eliminated the Section 102(a) rejection because "[Dr.] Lister could not have disclosed his own invention before he invented it." However, the board did agree that manuscript's availability at the copyright office did constitute prior publication under the statutory bar of Section 102(b). The touchstone for publication under Section 102(b) is public accessibility.

[The Board] concluded that an interested researcher would have been able to find the manuscript by searching the Copyright Office's catalog by title for the word "golf" in combination with the word "handicap." Additionally, the Board found that an individual seeking to view the manuscript would have been able to do so by visiting the Copyright Office. Finally, the Board rejected Dr. Lister's arguments that the inconvenience of visiting the Copyright Office and the Copyright Office's rules prohibiting individuals from making copies of the manuscript precluded a finding of public accessibility. With respect to the unavailability of copies, the Board found that the inventive concept was straightforward enough that it could be understood and retained by a person of ordinary skill in the art upon reading the manuscript without any need to obtain a copy.

Although there was no evidence that anyone actually looked at the manuscript, the Board held that public accessibility does not require that the document have been actually accessed.

On appeal, the Federal Circuit reversed – finding that (1) the availability of a manuscript in the copyright office does not necessarily meet the accessibility requirement of Section 102(b); and (2) in this case, the PTO did not prove that the document was publicly accessible.

This case is akin to other "library" cases where prior art is found covered in dust in a secluded section of a library. In those cases, the material is considered public if "it could be located by persons interested and ordinarily skilled in the subject matter or art exercising reasonable diligence."

Here, the court found that the Library of Congress records did not create accessibility because those records were (at that time) not searchable by subject or keyword. Rather the LOC records could on be searched by title (beginning with the first word of the title of the article) or author last name.

The automated catalog was not sorted by subject matter and could only be searched by either the author's last name or the first word of the title of the work.

On the other hand, LOC records (although not the full manuscript text) are also available through Westlaw and Dialog. In its decision, the appellate panel indicated that the search features available through those paid services were sufficient to make the records "publicly accessible." However, the record did not indicate when Lister's records became available through Westlaw or Dialog and thus those sources cannot be relied on as prior art.

Absent evidence of the date that the disclosure was publicly posted, if the publication itself does not include a publication date (or retrieval date), it cannot be relied upon as prior art under 35 U.S.C. 102(a) or (b). Quoting M.P.E.P. § 2128.

. . . .

Essentially, the evidence shows that at some point in time Westlaw and Dialog incorporated the Copyright Office's automated catalog information about the Lister manuscript into their own databases. There is no indication as to when that occurred or whether it was prior to the critical date. We see little difference between the evidence in this case and a situation in which an examiner comes across an undated reference that discloses an invention for which an applicant is seeking the patent. We surely would not view the mere existence of the reference in the latter scenario as prima facie evidence that it was available prior to the applicant's critical date.

. . . absent any evidence pertaining to the general practices of the Copyright Office, Westlaw, and Dialog, or the typical time that elapses between copyright registration, inclusion in the Copyright Office's automated catalog, and subsequent incorporation into one of the commercial databases, any presumption along those lines would be pure speculation.

On remand, the PTO can legitimately reject the application again if it can prove that the LOC records were available through Westlaw or Dialog more than one year prior to the 1996 patent application date.

President Obama's Strategy for American Innovation

President Obama's speech today focused on its newly formed "strategy for American innovation" -- his "strategy to foster new jobs, new businesses, and new industries by laying the groundwork and the ground rules to best tap our innovative potential. . . . [R]ooted in a simple idea: that if government does its modest part, there's no stopping the most powerful and generative economic force that the world has ever known, and that is the American people. . . . [Beginning with] the building blocks of innovation: education, infrastructure, research."

The Administration's policy paper focuses briefly on two aspects of intellectual property and patent law divided between a need for strong international enforcement and a call for reform of the US system.

Enforce our trade agreements to ensure access for American products abroad. Over the last eight years the enforcement of trade agreements slowed dramatically, with the United States bringing only an average of three WTO cases per year – as opposed to the approximately 11 annually from 1995 to 2001. In this era, the United States lost its focus on ensuring that other countries lived up to their promises to open their markets, not violate America’s intellectual property, and not use dumping or subsidies to penetrate America’s markets. Under President Obama, USTR and the Department of Commerce are committed to a new emphasis on enforcing our existing agreements.

Protect intellectual property rights. Intellectual property is to the digital age what physical goods were to the industrial age. We must ensure that intellectual property is protected in foreign markets and promote greater cooperation on international standards that allow our technologies to compete everywhere. The Administration is committed to ensuring that the United States Patent and Trademark Office has the resources, authority, and flexibility to administer the patent system effectively and issue high-quality patents on innovative intellectual property, while rejecting claims that do not merit patent protection.

The administration's talking points on the USPTO link-in with Professor Rai's calls for greater patent office power and autonomy - "ensuring that the [USPTO] has the resources, authority, and flexibility to administer the patent system efficiently."

• SEPT 20 Innovation Whitepaper_FINAL.PDF

Patently-O Bits and Bytes

New Job Postings:

• Klarquist Sparkman (Portland) is looking to hire a patent attorney or patent agent with an advanced degree in organic chemistry and 3+ years patent prosecution experience.
• AstraZeneca has listed four opening:
• • Senior Patent Attorney - Neuroscience (Wilmington, DE)
  • Principle Patent Attorney - Neuroscience (Wilmington, DE)
  • Senior Patent Litigation Attorney (Wilmington, DE)
  • Senior Patent Attorney - Oncology and Infection (Boston, MA)
    
• Leading-Edge Law Group - a small boutique firm in Richmond, VA is looking to find an experienced patent attorney to join their firm.

Upcoming Events:

• Sept 25 at Santa Clara Law School - Sources of Uncertainty in Patent Litigation. This looks to be an awesome half-day event at a low price: $150 for law firm folks; $75 for in-house counsel.
• Nov 5-3 in NYC: TechNet Patent Forum. Use code EAG476 to get a $300 discount.

Troll Tracker Defamation Lawsuit: Trial Underway

Eric Albritton's defamation lawsuit against Rick Frenkel and his former employer Cisco Systems is underway in the Eastern District of Texas. In my opinion, the case is ridiculous. However, it should serve as a reminder that those vehemently against certain types of speech can often shut-down that speech. Frenkel has indicated that he will not revive his troll tracker blog.

The whole controversy began when Albritton's litigation team (on behalf of ESN) filed a patent infringement action against Cisco in the Eastern District of Texas. The electronic timestamp of the filing was October 15, 2007 even though the patent did not issue until October 16. Of course, a patentee has no standing to file a lawsuit until the patent issues. I reported on that discrepancy in an October 16 Patently-O post. [Link].

A few days later, Frenkel reported that the filing date had been changed by the clerk without notice or motion. In his report, Frenkel suggested that

"ESN's local counsel called the EDTX court clerk and convinced him/her to change the docket to reflect an October 16 filing date, rather than the October 15 filing date. I checked, and sure enough, that's exactly what happened – the docket was altered to reflect an October 16 filing date and the complaint was altered to change the filing date stamp from October 15 to October 16. Only the EDTX Court Clerk could have made such changes. . . . This is yet another example of the abusive nature of litigating patent cases in the Banana Republic of East Texas."

In a later posting, Frenkel identified Albritton as ESN's local counsel.

Albritton apparently does not dispute the fact that the original docket sheet indicated October 15 or that his office convinced the clerk to change the date stamp. However, he explains that the change was proper because the electronic filing had been started prior to midnight, but was not finally submitted until after midnight.

Albritton subsequently filed a defamation suit against Frenkel, several of his colleagues at Cisco, and against Cisco itself. The basis of the defamation suit is the underlying implication that Albritton acted illegally in getting the docket sheet changed.

Complicating the case are the issues that: (1) Frenkel was at the time posting anonymously as the "Patent Troll Tracker;" (2) the docket sheet change involved a case against Frenkel's employer Cisco; (3) Frenkel also mentioned another attorney, Johnny Ward, son of E.D.Tex. Judge Ward; and (4) The lack of respect for the E.D.Tex. apparent in the Troll Tracker posts.

Joe Mullin has been reporting on the details of the trial. [Link]

An Appeal to the New Patent Office Director: Repeal the Single Sentence Rule

Guest Post by Stephen Schott of Volpe & Koenig 

[File Attachment: PDF Version of this Article (135 KB)]

Like all elementary school graduates, I learned that a single sentence should be short. One source suggests that a well-written work should average 20 to 25 word sentences.[1] With that as the guide, sentences averaging 50 words would raise the ire of a 3^rd grade teacher. Those averaging 100 words would drive a sane person mad. And a 250 plus word sentence would drive even Proust to distraction.

 

But sentences of such prodigious lengths are commonplace in patent law. The offending sentences are patent claims.[2] These claims are a U.S. patent’s most important feature. It is here that the inventor, or more likely the inventor’s attorney, sets forth the “metes and bounds” that define the invention. The claims serve as property lines: Cross into those lines with your product and you infringe the patent.

 

With such importance placed on claims, you would expect them to be quite readable. You would at least expect them to have been the subject of the “plain English” movement, perhaps best summed up by Albert Einstein when discussing science: “Most of the fundamental ideas of science are essentially simple, and may, as a rule, be expressed in language comprehensible to everyone.” But the claims—despite the substantial time spent drafting and interpreting them—are not a place where the discerning reader finds linguistic respite.

An Initial Comment on Prometheus: The Irrelevance of Intangibility

By Kevin Emerson Collins, Associate Professor of Law, Indiana University Maurer School of Law—Bloomington [BIO][Articles][PDF Version of this Post]

Background: The Machine-or-Transformation Test of Bilski

Last fall, the Federal Circuit articulated the "machine-or-transformation" test for patent eligibility in its landmark case In re Bilski, 545 F.3d 943 (Fed. Cir. 2008) (en banc). It held that a method is eligible for patent protection only if it is either (a) limited to a "particular machine" or (b) responsible for transforming a "particular article" into a different state or thing. Id. at 954. Additionally, in a classic example of language that adds judicial wiggle room, the machine or transformation that satisfies either of these prongs "must impose meaningful limits on the claim's scope," it "must be central to the purpose of the claimed process," and it must not be part of "insignificant extra-solution activity" or a "mere data-gathering step." Id. at 961–62 (emphases added).   

The Supreme Court has accepted certiorari in Bilski, but the impending Supreme Court opinion has not stopped the Federal Circuit from issuing what is perhaps its most important case to date applying the machine-or-transformation test: Prometheus Laboratories, Inc. v. Mayo Collaborative Services. There have been two distinct types of claims that have taken center stage in recent debates over the section 101 doctrine of patent eligibility: "business methods" and what I will call "determine-and-infer methods." The claim at issue in Bilski describes a classic business method. In contrast, Prometheus involves a determine-and-infer method. The Federal Circuit's opinion in Prometheus opens a new window into the import of the machine-or-transformation test. Regardless of one's views of the soundness of Federal Circuit's reasoning in Prometheus, herein lies one of the opinion's greatest virtues. By issuing Prometheus before the Court's oral arguments in Bilski, the Federal Circuit has helped to clarify the stakes of the Court's decision to sanction, reformulate, or reject the machine-or-transformation test.