October 2006

Patently-O TidBits

Patent

CrumbsRonald A. Katz: Five of the licensing guru’s patents have been put up for reexamination.  The requester is Patent Attorney John Welsh [Link].

Inequitable Conduct: Supreme Court has denied certiorari in Ferring v. Barr. The CAFC found the patent unenforceable because the patentee had submitted scientific declarations in support of patentabiliity but did not explicitly disclose that the scientists had financial relationships with the patentee. [Link].

LondonBusiness Methods and Software Patenting in the UK: The court gives its new patentability test . . . [IPKat]

(1) properly construe the claim
(2) identify the actual contribution;
(3) ask whether the contribution falls solely within the excluded subject matter;
(4) check whether the contribution is “technical” in nature.

Voda: Can anyone tell me what is happening with this case still pending at the CAFC?

WelchBlogger on the Move: Noted Bostonian and TTABloger John Welch is moving from Foley to the Lowrie Lando firm. Hopefully the excellent writing will continue. [TTABlog]

James Amend, Mediator: AmendThe CAFC is exploring alternative dispute resolution and has begun to make mediation mandatory for certain pending cases. To bolster the process, the court has appointed James Amend to head the mediation program. I worked with Mr. Amend when I was at K&E and expect to see more pending appeals settle. [Link]

Patent

NY Times Editorial on Patent Law:

The broken American patent system has a knack for sanctioning the ridiculous. In the latest example, businesses are receiving patents for devising ways to obey the law — the tax code, to be more specific. What’s next, a patented murder defense?

As Floyd Norris reported recently in The Times, the broad category known as business-method patents (like patenting the idea of pizza delivery rather than the pizza itself) has expanded once again. Now it includes the legal ways that accountants and lawyers help their clients pay less tax.

Once the Patent and Trademark Office has granted one of these patents, everyone who uses the same legal shelter — even if they draw the conclusion based on their own interpretation of the tax code — will be subject to lawsuits and even injunctions against using the method at all.

Defenders of these tax-strategy patents argue that they won’t affect the average person’s struggle with the 1040 form each April. The easy stuff should be rejected under the usual standard that requires patents to be novel and not obvious. Tax-strategy patents, they argue, are more geared toward the complicated tax returns of rich people.

While we don’t normally rush to make it easier for the rich to pay less tax, the precedent is a bad one. People should be treated the same under the law, and shouldn’t have to pay a licensing fee for the privilege. Congress needs to make spurious patents easier to challenge across the board, and should consider clarifying what may be patented. Recent technological advances raise questions about how patents apply to genes and life forms, or what standard should cover old business models on the Internet.

Patents are supposed to encourage innovation, rewarding the individual for the greater good of society. But excessive or overly broad patents can slow business activity to the pace of cold molasses. And we sure don’t need something else to worry about on tax day.

Parallel Finding of Invalidity Did Not Relieve Licensee’s Pressure to Pay Royalties for Urinary Catheter Patent

Patent, Patent Cases 2006

ScreenShot042Go Medical v. Inmed (Fed. Cir. 2006).

Go Medical owns a patent on a urinary catheter with a specialized sheath designed to reduce the chance of bacterial contamination. The parties entered into a long-term licensing contract and the defendant began manufacturing and selling the device.  In another lawsuit, Go’s patent was found invalid, but that finding was later reversed on appeal.  Several months after the invalidity finding (but before its reversal), the defendant stopped paying royalties — placing them in escrow. Go eventually sued for infringement, but the patent was found invalid. (invalidity affirmed on appeal).

The defendant then asked for some of its money back — arguing that the it should not have to pay for the licensing of an invalid patent. Under Kohle, however, a licensee is liable for contract damages up to the date “the licensee first challenges the validity of the patent.”

In other words, a licensee “cannot invoke the protection of the Lear doctrine until it (i) actually ceases payment of royalties, and (ii) provides notice to the licensor that the reason for ceasing payment of royalties is because it has deemed the relevant claims to be invalid.”

Thus, according to the CAFC, the original invalidity finding did not relieve the defendant of its responsibilities to continue to pay its license fees. Further, the defendant’s movement of payments to escrow was not sufficient to avoid license fees because the defendant did not explicitly state that it was “ceasing payments [because it deemed the] patent to be invalid.”  Merely placing royalty payments in escrow “until the validity of the patent was resolved on appeal” is insufficient to relieve a licensee from license payments.

Notes:

  • Zura discusses the best mode issues here. 

Evidence Based Prosecution: Non-Patent Prior Art Leads to Rejections

Academic Studies, Patent, Patent Prosecution

ScreenShot041Quality patents depend upon our ability to find and examine prior art regardless of its form. Most prior art cited by the USPTO arrives in the form of patent-related references — most notably, issued U.S. patents, published patent applications, and foreign patent documents. We know, for instance, from Columbia Professor Bhaven Sampat that about 90% of cited non-patent prior-art references are provided by the applicant, and that only 10% are examiner references. Link.

In some technologies where patenting has a long and extensive tradition, the lack of non-patent prior art is not a serious problem.  In other areas such as software and biotechnology, non-patent references harbor most of the important prior art. 

Results: My new study of 100,000 recently issued patents reveals that patent that cited non-patent literature are significantly more likely to receive rejections from the PTO.  Specifically, patents citing at least one non-patent reference have a 39% greater chance of receiving a final rejection when compared with patents that issued without citing any non-patent references. Regarding non-final rejections, citing non-patent prior art increased the likelihood of receiving a rejection by 9%.

(more…)

Accelerated Examination: PTO Training Session

Patent, Patent Prosecution

HerbThe PTO has established an extensive set of new rules for accelerated examination and the associated petition to make special (PTMS).  The new rules require much more from the applicant, but also lead to “a final decision by the examiner within 12 months from the application filing date.”

On Thursday, November 2nd at 1:00 Chicago Time, the PTO will hold a one-hour live web-cast to provide information on the process and its “benefits.”

  • Sign up for the webcast: here.
  • More info on the new PTMS regime: here [patently-o] and here [USPTO].
  • Russ Krajec will not be filing for accelerated examination: here.

Patent Reform and Foreign-Originated Patents.

Patent

David French recently sent me an e-mail that got me thinking about the rise in foreign-originated patents in the US patent system.

In most countries, the majority of newly issued patents are foreign originated. David notes that in Canada, for instance, “consistently has had over 90% foreign participation in its patent system for over 50 years.”


Although locals have a majority here in the US, foreign-originated patents are approaching the 50% mark and are quickly on the rise.  I suspect that our strong tradition of local innovation and patenting is a large driver in the political economy of the US patent system.  Because US patent owners are usually located in the US, there is political support for strong patent rights.  Will this support decrease as the percentage of foreign-owners rises?


Notes:


USPTO Survey

Patent, Patent Prosecution

The PTO is been conducting a quality survey of examination.  Here are some sample questions:

6. Consider all rejections you have received over the past 3 months. How often do you think the rejections made under the following statutes were reasonable in terms of being technically, legally, and logically sound with respect to:

35 U.S.C. 101 Rejections (Rarely – . . . – Always)
35 U.S.C. 102 Rejections (Rarely – . . . – Always)
35 U.S.C. 103 Rejections (Rarely – . . . – Always)
35 U.S.C.112 Rejections, P1 (Rarely – . . . – Always)
35 U.S.C. 112 Rejections, P2 (Rarely – . . . – Always)

7. In the past 3 months, how would you rate overall examination quality.

Very Poor    
Poor         
Fair         
Good         
Excellent 

10. What should the USPTO focus on to improve examination quality? Please be specific.

We will look forward to some interesting results. Since 103 is hot, lets do our own survey.

Create Free Polls

Book Review: Errors and Omissions

Book Review, Patent

Review-in-short by Mark Lemley,
William H. Neukom Professor of Law, Stanford University

ErrorsAndOmissions

Errors and Omissions
A novel by Paul Goldstein,
Stella W. and Ira S. Lillick Professor of Law, Stanford University

$17 from Amazon

A legal thriller about copyright law? And not even about trial, but about rights clearance in order to get errors and omissions insurance? Not likely. But my colleague Paul Goldstein‘s new novel, "Errors and Omissions," grabs your attention from the first page and never lets it go. He manages to work murder, chases, love, McCarthyism, the Hollywood blacklist, and a trip to Europe into the otherwise mundane life of a down-on-his-luck copyright lawyer. Along the way, he keeps us entertained with a quick and enjoyable read.

I am reliably informed that Paul’s next novel will be a thriller about patent law, featuring a Markman hearing.  Talk about raising the bar . . .

Links:

Arbitration: Incorporation of AAA rules in license creates clear and unmistakable intent to arbitrate

Patent, Patent Cases 2006

Qualcomm v. Nokia (Fed. Cir. 2006).

A 2001 license agreement between Nokia and Qualcomm includes an arbitration clause.  The agreement apparently does not cover all of Nokia’s products, and in 2005, and Qualcomm sued Nokia for patent infringement. The parties disputed whether the arbitration clause should apply here. Writing for a two-judge majority, Judge Prost explained that the parties “clearly and unmistakably” intended that the patent questions be arbitrated instead of a court as evidenced by the agreement’s incorporation of the AAA rules.

On remand, the district court will send the dispute to arbitration unless the arguments supporting arbitrability of the issues would be “wholly groundless.”

Notes:

E.D. Tex.: Halliburton’s Fragile Gel Patent Found Indefinite

Patent, Patent Cases 2006

HalliburtonHalliburton v. M-I LLC (E.D. Tex., Oct 18, 2006).

Halliburton decided to take advantage of the E.D. Texas patent excitement and sued M-I for infringing its patents directed to a method of drilling a borehole without losing “fragile gel” drilling fluid. 

On motion, the district court granted summary judgment of invalidity based on indefiniteness. In particular, the court could not find any way to give meaning to the claim term “fragile gel.”

Datamize makes clear that adequate support in the specification can make a purely subjective claim term definite. However, when, as here, the specification provides only a subjective definition for a subjective claim term, there is no “objective anchor” by which skilled artisans can identify the bounds of the claims.

Notes:

Evidence Based Prosecution V: Business Method Rejections

Patent

BusMethodRejections

Using a random sample of issued patents examined by the “business method” art units, I counted the number of issued patents that had received non-final and final rejections and also those where the applicant had filed a notice of appeal.  The results show that about 95% of business method patents were subject to non-final rejections as compared with about 80% of patents taken from the general population. The differences between the groups for final rejections and appeal notice filings are even greater. The conclusion here is the same as in Part-IV: Business method patent applications receive a higher level of resistance than do other technologies.

This study focuses on business methods, but I’m gathering data for other areas. Any guesses of which technologies have relatively high (or low) rates of rejection before issuance?

Notes:

  • For the purposes of this study, Business Method Art Unit 3620 includes Art unit 3621–3629. 
  • Patent range from 6,500,000 – 6,999,999.
  • Sample size 49,905 patents from the general population and 296 patents in the business method category.
  • There is some selection issues here because we are looking only at issued patents. Presumably, patents that did not issue are even more likely to have been rejected.

Evidence Based Prosecution:

Evidence Based Prosecution IV: Business Method PAIR Entries

Patent, Patent Prosecution

Pair Data: Patent Prosecution

The entries of Public PAIR are riddled with errors and discrepancies. However, it is still true that more PAIR entries in a file usually indicates that there were more filings by the applicant and more resistance from the PTO.

The Data: The above graph compares data from a random sample of 7,000+ issued patents with patent numbers ranging from 6,000,000 to 6,999,999 (General Population) with issued patents from the same range that were examined within Art Unit 3600 (a sample of 954 patents). I counted the number of PAIR entries for each patent and used that data to calculate histogram information. Data-points represent range-buckets — e.g,. 0–4 PAIR entries, 5–9 PAIR entries, …

The Results: The prosecution histories of Business Method patents include significantly more entries.  [33.4 entries for average BM patents as opposed to 27.0 for average GP patents].

As I have discussed before, business method patents are slow to make it through the patent office.  One reason for the delay is a large queue in applications awaiting initial examination.  However, this data preliminarily confirms that another reason for delay in Business Method is that the PTO is putting up a relatively higher level of resistance. Anecdotally, this resistance is seen in the “second pair of eyes” review and harder fights on Section 101 issues. The PTO might counter that many business method patents are poorly drafted, thus making the process more difficult.

Notes:

  • For the purposes of this study, Business Method Art Unit 3600 includes Art unit 3621–3629 and 3639.  [Pre-business method uses of 3600 were excluded].

Evidence Based Prosecution:

Patent Term Adjustment for Fun and Profit

Patent

PTAThe phrase “Patent Term Adjustment” elicits two divergent reactions from patent prosecution specialists.  PTA is wonderful because it provides a strong counterbalance to USPTO delays. On the other hand, PTA rules are complicated and it is easy for a practitioner to unintentionally lose-time.

In general, the PTA is an attempt to retain a patent term of approximately 17–years from issuance.  Under the rules, the statutory 20–year term is increased for certain PTO-related delays and is decreased for other Applicant-related delays.

Scott Kamholz of Foley Hoag has written a great guide to PTA entitled “Patent Term Adjustment for Fun and Profit.” The guide was originally published this Fall in IP Today, but is now available on Patently-O: File Attachment: PTA for Fun and Profit.pdf (147 KB).

Highlights of the article include:

  • CIP’s are more likely than continuations to capture PTA;
  • Extensions, non-compliant responses, and RCEs all decrease the PTA;
  • Late filing of formal drawings decreases PTA;
  • Written restrictions count as an office action — thus, consider making oral elections of species;
  • Express Mail or Fax improves PTA;
  • Terminal disclaimers are problematic;
  • Examine the PAIR system for docketing errors;
  • Appeal rejections;
  • Do not file papers after allowance;
  • Ask questions!

At some point, this may become moot as the PTO is considering simplifying the PTA.

CAFC Reverses Medrad Reissue Case

Patent, Patent Cases 2006, Patent Prosecution,

Patentlyo025Medrad v. Tyco (Fed. Cir. 2006).

In October 2005, I discussed the district court case involving Medrad.  In that case, the district court held that a Section 251 Reissue can only be used to correct an error in the specification, drawings or claims and cannot be used to correct a procedural error that is not reflected in the patent grant itself. During prosecution, the patentee had filed a second reissue to correct a mistake made during the prosecution of the first reissue. (The patentee failed to file a supplemental reissue declaration in compliance with PTO Rule 1.175). The lower court found that correction of that mistake did not fall within the guidelines of Section 251.

On appeal the CAFC sided with the patentee by giving a broad meaning to the statutory phrase “[invalid] by reason of the patentee claiming more or less than he had a right to claim in the patent.” In particular, the unanimous appellate panel found that the phrase does not literally mean “claim more or less” but rather that the phrase “encompass[es] any error that causes a patentee to claim more or less than he had a right to claim.”  Thus, a reissue can apparently be filed based on any error that would result in invalid claims.

Notes:

  • 35 USC 251 reads as follows:

Whenever any patent is, through error without any deceptive intention, deemed wholly or partly inoperative or invalid, by reason of a defective specification or drawing, or by reason of the patentee claiming more or less than he had a right to claim in the patent, the Director shall, on the surrender of such patent and the payment of the fee required by law, reissue the patent for the invention disclosed in the original patent, and in accordance with a new and amended application, for the unexpired part of the term of the original patent. No new matter shall be introduced into the application for reissue.

Patently-O TidBits

Patent

Courts should not invoke the drastic no-enforcement-at-all remedy unless they also find that an infringement plaintiff has a high degree of market power or a dangerous probability of obtaining it in the market for the tied product, and that enforcement of the patent against parties other than the infringement defendant would maintain that power or aid in acquiring it.

For defendants, you should be prepared with evidence (and perhaps pleadings) that show how the patentee’s misuse was particularly harmful to you.

  • TexasLaw Jobs: The guys at the Legal Job Board LegalMojo may have missed this one:
The U.S. Judicial Conference approved a new United States Magistrate Judge position for Marshall, Texas. Full public notice for the position; PDF version of application form for the position. The deadline for submitting applications is Friday, October 20, 2006.
  • Qualcomm Injunction Denied: The ITC is getting into the injunction-denial business. According to news reports, Qualcomm was found to infringe one of Broadcom’s patents, but the Administrative Law Judge (ALJ) recommended against any any injunction to block the importation of wireless handsets that incorporate infringing Qualcomm chips and software. [Reuters] [BusinessWeek]
  • Long Live Patent Reform: Sarah Lai Stirland is one of the few reporters who really does a great job with IP issues.  Last month she went in-depth on patent reform lobbying efforts, the players, and potential for 2007. [Read the Article].

CAFC OK’s Fee-Based Regulation at PTO

Patent, Patent Cases 2006

Barber of SevilleThe CAFC has now explicitly opened the door to fee-based regulation at the USPTO.

Figueroa v. U.S. (Fed. Cir. 2006).

Fighting a lost cause, Figueroa sued the U.S. government using PTO fees to fund other federal programs (fee diversion). From FY 1991 to FY 2004, for instance, the PTO collected about $11.1 billion in fee revenue and only spent about $10.6 billion.  The remaining $545 million was returned to the general fund.

Figueroa alleged that the PTO fees “exceeded congress’s power under the Patent Clause” of the Constitution and was also an un-apportioned (and thus unlawful) direct tax on intellectual property.

Using a rational-basis test, the two-judge majority found that Congress had plenty of reasons for charging the fees that it did. Most notably, the court found that an acceptable basis for high fees would be to provide incentives against certain types of patent prosecution activities.

[E]ven if fees exceeded the existing and predicted costs of operating the patent system, Congress could also rationally decide to set fees above what is needed to meet the funding needs of the PTO in order to deter the filing and prosecution of certain types of patent applications. The Supreme Court has recognized that Congress may legitimately impose taxes or fees in order to discourage undesirable behavior.

In particular, the court noted that high fees could be used to discourage the filing of applications associated with vanity patents, likely invalid patents, non-commercial uses, and patents designed to inhibit competition.

This gives constitutional backing to the fee-based regulation at the PTO, such as charging large fees for additional claims or continuations. In a recent letter to Jon Dudas, the IPO opposes any “collaborative” or “platinum plated” examinations because those “would discriminate against [patentees] with limited resources, draw the examining staff away from traditional examination, and create different classes of patents in the eyes of the courts.” [IPO Letter]

Links:

More Patently-O TidBits

Patent
  • Trademark Dilution Act: The law has changed. TTABlog; INFO Law.
  • Delaware IP Law Blog (new) notes an interesting DJ decision where the patent holder sent an ameliorative letter after the action was filed. The judge found that the letter did not mitigate the would-be infringer’s apprehension of suit. (The letter apparently did not rise to the level level of a promise not to sue).
  • Intellectual Property Research Canons: As part of a research canons project, several law professors are looking for the “books and articles that are essential to a new academic in the field” of intellectual property. Add your comment here. You may remember that last year, Patently-O won some award as “best blog.”  Based on the comments here, Patently-O has now become both canonical and scholarly.