Patent Law Blog (Patently-O)

IPO on Patent Reform: Congressional Reform is Moving Forward

The IPO disagrees with my conclusions that substantive patent reform will not pass this year:

TO:  ALL IPO MEMBERS
FROM:  Herb Wamsley, IPO Executive Director
RE:  Plans of House Leadership to Pass the Patent Reform Bill Next Week

IPO has confirmed today that the House Democratic leadership has scheduled a vote of the full House of Representatives on patent reform bill H.R. 1908 for next week.
The House Rules Committee, which is controlled by the leadership, has scheduled a meeting for 3:00 p.m. on Thursday, September 8, to set the rules for debate on the House floor, which means the bill will not come to a vote until after that time.
IPO understands that House IP subcommittee chairman Howard Berman (D-CA) plans to offer an amendment to the bill, but information on the content is not available.
We urge all IPO members to become engaged in the legislative debate.

Upcoming Events

When choosing a meeting or workshop to attend, I often prefer the smaller venues where you can really ask questions and easily meet your fellow attendees. Here are two that I have attended as a speaker and would recommend:

• Corporate Patent Seminar in Hilton Head SC — This is a great little meeting of corporate patent professionals. (http://www.corporatepatent.com/) – November 11–14.
• DunesCLE in Las Vegas — A small group in the Bellagio – October 12, 2007.

I will be speaking at the Ocean Tomo Fall 2007 Live Auction in Chicago on October 24^th & 25^th. My topic: The Three Branches of Patent Reform. Look me up if you are around.

Other events:

• FCBA Seagate Webcast on September 6, 2007.

Congressional Patent Reform is Dead; Long Live Administrative Patent Reform

Several months ago, I declared that new patent legislation is effectively blocked within Congress. [Link] Today, Congressional Republicans asked Speaker Pelosi to slow down as well. [Letter].  As it turns out, legislative reform is, for the most part, a sideshow as the executive and judicial branches are still running with the ball.

 

[Of course, the legislation will begin to move again if the opposition rests or the forces of change grow stronger]

The Roots of Patent Policy: Rethinking Early English Patent Policy

Dr. Chris Dent, an Australian Researcher, has written an interesting new paper on the history and value of original English patents. Although invention was not the basis of the patent grant, Dent argues that they may still have been based on sound public policy goals. I asked to provide a synopsis of the paper for Patently-O readers. The full paper is available here.

The manner in which the early modern English monarchs – Elizabeth I and James I – granted patents of monopoly is not seen in a good light in current legal discourse. There are many tales of the nepotism that was, allegedly, rife and the public outrage at the abuses of the Crown – circumstances that only ended with the “triumph” of the Statute of Monopolies in 1624. This simplistic understanding does not do justice to the good intentions of Elizabeth and James; and, to an extent, may be inaccurate. There is, for example, little evidence of public displays of disaffection at the grants beyond statements made by Parliamentarians, in Parliament, who may have been beholden to interests outside those of the average subject. The thoughts and attitudes of the average early modern person, however, may not be considered worthy of inclusion in a history of English patents.

The intentions, and actions, of the elites of the time are a matter of record. An investigation of the available material – whether as part of the legal, political or economic history of the time – demonstrates that there were good public interest motives behind many of the patents granted by Elizabeth and James. An exploration of the secondary literature on English politics, coupled with a reading of the mercantilist texts (the mercantilists were the closest the society had to economic theorists) and the analysis of court judgments shows that three key policy objectives informed the monopolies awarded by the two monarchs.

These goals – increased employment levels, an improved balance of trade with other countries and the better regulation of industries – not only appear to be modern, but also may be understood to have been fundamental to the modernisation of English society and its economy. Examples of these goals in practice include the granting of monopolies for water pumping inventions to more effectively mine for minerals (increasing both goods production and employment); grants for the establishment of local industries, based on imported technical knowledge, to reduce the reliance on foreign goods; and the regulation of manufacturers to improve the quality of goods available for sale. Economic historians note that the English economy underwent significant change in the 16^th and 17^th centuries; this change may have been, in part, a result of the policy actions of the Executive of the time. Actions that included the grant to individuals and companies of the now-maligned grants of monopolies.

Design Patents: Novelty Requires "Non-Trivial Advance Over The Prior Art"

Egyptian Goddess v. Swisa (Fed. Cir. 2007)

Judge Moore in the Majority: Egyptian Goddess owns a design patent covering an ornamental fingernail buffer design. (U.S. Design Patent No. 467,389). As is standard for design patents, the patent claims “the ornamental design … as shown and described.”

Design patent infringement requires proof of two separate infringement tests:

Satisfaction of the ordinary observer test requires proof that an “ordinary observer” would think the accused design as a whole is substantially the same as the patented design — thus creating some customer confusion.

Satisfaction of the points of novelty test requires proof that the accused device incorporates the “points of novelty” that distinguish the patented design from the prior art.

The real hurdle for most patent owners is the points of novelty test. Here, Egyptian Goddess listed four points of novelty — (1) an open hollow body; (2) square cross-section; (3) raised rectangular pads; and (4) exposed corners. Each of these elements are found in the prior art and thus do not server as individual points of novelty.

The combination of elements may also serve as a point of novelty. However, according to this court, a combination of known elements may only serve as a point of novelty if the combination is a “non-trivial advance over the prior art.”  This is a further clarification of the recent Lawman Armor decision.

Here, the court agreed that the combination of the various elements was trivial – and thus that the combination could not serve as a point of novelty. Consequently, the patent is not infringed.

Interestingly, there is one point of novelty that might not be found in the prior art — a fourth side without raised rectangular pads. However, that point of novelty could not be used in the infringement analysis because all four sides of the accused Swisa product included raised pads. (This example is useful for thinking about the difference between the point of novelty test of infringement and the tests for invalidity based on anticipation and obvousness.)

Judge Dyk dissents: Judge Dyk argues that the concept of a ‘non-trivial advance’ is antithetic to the notion of ‘points of novelty’ — essentially creating a new obviousness test.

 

http://patnetlyo.com - Typosquatter

In preparing for my e-commerce class on cybersquatting, I tried Veralab’s typo-squatting search engine on patentlyo.com. It turns out that someone has registered the typosquatting site http://patnetlyo.com/.

According to Network Solutions, the offending registrant:

Navigation Catalyst Systems, Inc
2101 Rosecrans Ave. #2000
El Segundo, CA 90245
Email: domainadmin@navigationcatalyst.com
Phone: 3106471592
Fax: 3106476001

I’d be interested in what action you would suggest to meet the following objectives: Cancel the registration; potentially walk away with money; but avoid any potential major loss of money. (I have handled UDRP Arbitration cases in the past, but am deterred by their lack of money damages)

Internet Gamer Loses Millions in Default Patent Judgment

Bodog is an offshore internet gambling operation.  The US Government considers internet gambling illegal. And, for some time, Bodog’s famous leader, Calvin Ayre, has reportedly avoided stepping back on US soil.

In 2006, Bodog was sued for patent infringement by 1^st Technology. Bodog failed to respond to the complaint, and now the Nevada district court has issued a default judgment of $46 million+. 1^st Technology has also requested an injunction to stop all Bodog advertisements of infringing products.

Bodog’s domain name is apparently being pulled-into the mix to satisfy the judgment. [LINK] Meanwhile bodog is operating at www.newbodog.com.

Notes

• The patent at issue is U.S. Patent No. 5,564,001.
• Several online gambling sites have previously licensed the patent from 1^st Technology including playtech.

BPAI Must Consider Evidence Rebutting Obviousness

In re Sullivan (Fed. Cir. 2007)

The Board of Patent Appeals (BPAI) found Sullivan’s rattlesnake antivenom immunoglobulins obvious in light of Sullivan’s own publications and another reference, “Coulter.” On appeal, the CAFC reversed – finding that the BPAI had improperly refused to consider Sullivan’s rebuttal evidence.

Once the PTO presents a prima facie case of obviousness, the patent applicant has a burden of presenting rebuttal evidence supporting the opposite conclusion. This rebuttal evidence may, for example, be evidence of unexpected results, teaching away from the invention, or secondary indicia of nonobviousness.  The BPAI must consider rebuttal evidence that is presented.

Here, the BPAI had failed to consider three declarations that potentially provided evidence of unexpected results of the claimed compound.

Vacated and remanded.

Prosecution Disclaimer Narrows SOME of the claims

Ormco v. Align Technology (CAFC 2007, 06–1240)

Here, prosecution disclaimer narrowed Ormco’s patent claim scope, but only for some of the claims.

Ormco’s invention relates to computer-aided design of orthodontics.  During prosecution Ormco distinguished its invention based on its automated calculation of final tooth position even though the claims do not explicitly require fully automated calculations.  Although finding the disclaimer clear, the CAFC required some relation between the disclaimer and any affected claim before narrowing claim scope. As a consequence, the scope disclaimer only applies to claims directed at finish tooth positions and not to other claims — such as those directed to preliminary organization of tooth data.

Dissent: Dissenting from the majority opinion, Judge Kathleen O’Malley (N.D.Ohio, sitting by designation) criticized both the majority and the lower court for their procedural sloppiness.  Judge O’Malley would have remanded to wait for a more developed opinion from the district court.

Notes:

• In passing, the court reminds us that the existence of prosecution disclaimer is determined within the claim construction phase – and thus reviewed de novo.
• The patents at issue are quite hefty for this type of technology – 97 pdf pages.

Patently-O TidBits

• Foreign Patent Applicants and the New Rules: Based on the set of 2992 patents that issued on August 21, 2007, it seems likely that the PTO’s new claim filing limits will impact US applicants at a much greater rate than it would foreign applicants. Patents ever_assigned to US corporations are more than twice as likely to issue with more than twenty five claims than patents ever_assigned to foreign corporations.  Even more pronounced within the study, US owned patents are more than three-times as likely to have more than twenty-five claims than are Japanese owned patents.  (Ever_assigned patents are patents that have been assigned at least once to the referenced group.) (See side graph)
• Niro v. Jackson: The famed Niro firm recently filed a declaratory judgment action against its former client alleging patent invalidity.  Niro wants the patent found invalid so that the firm can avoid malpractice charges arising out of patent infringement litigation. NiroVJackson.pdf
• Quanta v. LGE: The Solicitor General supports Quanta’s petition for certiorari covering the first sale doctrine and contractual limitations of patent licensing. [QuantaCVSG.pdf (110 KB)][Background]
• Race Specific Patents: Shubha Ghosh (SMU) has an interesting new paper examing patents that claim race-specific inventions. US Patent No. 6,465463, for instance, claims a drug with improved tolerence “in a black patient.”  Professor Ghosh argues that racial categories should be excluded from patent claims and from any nonobvousness analysis. [Read the Paper Here]

• Patent Law Jobs: New Jobs in Chicago, Atlanta, Oregon, Missouri, Cambridge, Denver, and Maryland.

McFarling Petitions Supreme Court to Hear RoundUp Ready Patent Case

Homan McFarling farms soybeans and other crops a few miles from my family’s farm in northern Mississippi.  Monsanto sued McFarling for replanting Monsanto’s patented GMO soybean seeds in violation of the “Technology Agreement.”

A Missouri jury found McFarling liable and awarded damages of $40 per seed-bag even though Monsanto typically charges only $6.50 license fee per seed-bag. On appeal, the CAFC found that the listed royalty rate did not provide any limit for the royalty calculation. Rather, infringement damages can properly include (a) the harm felt by Monsanto because of the infringement as well as (b) the additional benefits garnered by McFarling. In particular, these include: reputational harm due to rogue planters, potential lapses in monsanto’s database of planting techniques; bargaining power; as well as McFarling’s increased yield of $31 – $61 per acre.

Now, McFarling has petitioned the Supreme Court for a Writ of Certiorari with two questions (with subparts):

1. In determining a “reasonable royalty” under the patent-damages statute, 35 U.S.C. § 284, may the factfinder award the patentee either:
• (a) a hypothetically negotiated royalty that vastly exceeds the established royalty charged in the marketplace, or
• (b) a royalty that includes damages to the patentee’s third-party distributors and is intended to force the infringer to disgorge his profits—even though Congress eliminated the equitable disgorgement remedy in 1946?
2. Do the doctrines of patent exhaustion and patent misuse permit the purchaser of a patented good to use that good and dispose of its products as it sees fit, absent a valid contract?

Mark Lemley (Stanford) is McFarling’s attorney.

Notes:

• File Attachment: McFarlingPetition.pdf (187 KB)

Patents with More Than 25 Claims

The newly finalized claim rules would practically limit most patent applications to twenty-five or fewer claims. To get some sense of how this rule would affect current practice, I ran three separate searches:

• Important Patents: Approximately 4400 of the patents issued between January 1, 2002 and August 1, 2007 have been involved with some type of patent litigation. 35% of these “important” patents have more than 25 claims.
• Issued Patents: Approximately 3000 utility patents issued on Tuesday, August 21, 2007. 18% of those newly issued patents have more than 25 claims.
• Published Patent Applications: Approximately 6600 patent applications were published on August 16, 2007. 27% of those newly published applications include more than 25 claims.

A troubling aspect of the new rules is their potential to have a disproportional impact on important patents.  (See “Valuable Patents” by Allison, Lemley, Moore, & Trunkey).

Live comments on PTO Presentation on Continuation Changes

Live comments on PTO Presentation on Continuation Changes

• http://webexcomm.vo.llnwd.net/o16/usptolive823/


• http://www.uspto.gov/web/offices/pac/dapp/opla/presentation/ccfrslides.ppt

A recorded version of today’s seminar will be available at the PTO website by Monday, August 27, 2007.

Dr. Tafas Files Declaratory Judgment Action to Block Implementation of Continuation Rules

Dr. Tafas invented a high throughput diagnostic microscope sold through his company, Ikonisys. He also has a patent pending on a method for improving automotive efficiency. Tafas protects these inventions through patents and has now sued the USPTO. Tafas asks the E.D. Virginia District Court for a declaration that the PTO’s newly finalized rules are in conflict with the Patent Act and are thus invalid.

Commentary: Tafas will likely lose here. On its face, the rule may operate within the laws because it allows Tafas to file his continuations if he has good reason to do so. The law certainly does not require the PTO to examine clearly repetative or bad-faith continuation filings. If applied lightly, the new rules would simply block those “bad” continuation filings and the good ones will pass through.  The better case will be raised by an applicant who is denied a continuation filing despite having a “good” reason for the additional filing.

Files:

• File Attachment: TAFAS_Complaint.pdf (707 KB)
• File Attachment: TAF.PI.pdf (1570 KB)

Seagate II

In Seagate, the CAFC raised the burden of proof for enhanced damages — Enhanced damages are now only available for willful patent infringement that is at least “objectively reckless.”  And, as a consequence, “there is no affirmative obligation to obtain opinion of consel” to avoid a willfulness charge.  This essentially moves potential treble damages from a negligence standard of due care to a more stringent standard. (See pair of graphs below).

The question now on the minds of many patent attorneys: What role, if any, is there for the thick, formal opinions explaining in detail why a particular patent is invalid, unenforceable, and/or not infringed?

• Seagate I

In Reexamination, PTO is Not Bound by District Court Claim Construction

In re Trans Texas Holding Corp. (Fed. Cir. 2007)

Trans Texas holds two patents directed to a system of insulating both deposits and loans from inflationary and short-term interest rate fluctuations. In earlier litigation, a Texas district court construed various claim terms. Now, in reexamination, the PTO has taken a fresh look and offered its own interpretation of the claims.

Issue Preclusion (AKA Collateral Estoppel) traditionally blocks the same parties from relitigating the same issue in a later proceeding. CAFC caselaw has identified four elements of issue preclusion:

1. Identity of the issues in a prior proceeding;
2. The issues were actually litigated;
3. Determination of the issues was necessary for the prior judgment; and
4. The party defending against preclusion had a “full and fair opportunity to litigate the issues.”

Ex Parte Proceeding: Although reexamination is an ex parte proceeding, the CAFC considers the PTO to be a “party” as any other outcome “simply makes no sense.”

The PTO is plainly a party to these appeal proceedings, and if it were not treated as a party, there would be no basis for even considering the application of issue preclusion in the first place.

Since the PTO did not have an opportunity to litigate the issue in the Texas district court, it cannot be bound by that decision.

[T]he PTO was not even a party to the earlier district court litigation and cannot be bound by its outcome.

Obviousness affirmed.

Around the Horn: Continuation Rule Changes

• Peter Zura
• Filewrapper.com
• Don Zuhn
• Kevin Noonan
• Stephen Albainy-Jenei
• Rand Bateman
• Steve Nipper
• Dane Carlson
• Eagle Robinson
• Patent Hawk
• KC Jones
• Gene Quinn
• USPTO’s Page on the Final Rules

[Post other relevant links in the comment section (but add substantive comments to a different post)]

USPTO Webcast on New Claims and Continuation Rules

On Thursday, August 23, 2007 at Noon (Missouri time), the USPTO will hold a webcast to introduce the new rules. The title of the seminar is “Clarity Moves Innovation.”

During this live, two-hour webcast, USPTO officials will explain the new rules and answer questions. The presentation and audio for this event will be streamed over the Internet. All participants need is a computer with an Internet connection, sound card, speakers and the ability to view Windows Media presentations.

Links:

• Enroll for the Webinar [LINK].
• Watch without enrolling [LINK] (Link will be available only at the appropriate time).
• Submit questions beforehand [EMAIL] (no guarantee that they will be addressed).

Final Rule: Changes To Practice for Continued Examination Filings, Patent Applications Containing Patentably Indistinct Claims, and Examination of Claims in Patent Applications

Continuation Limitation: “The Office is revising the rules of practice to require that any third or subsequent continuing application that is a continuation application or a continuation-in-part application, and any second or subsequent request for continued examination in an application family, be filed to obtain consideration of an amendment, argument, or evidence, and be supported by a showing as to why the amendment, argument, or evidence sought to be entered could not have been previously submitted.”

Claim Limitation: “The Office is also revising the rules of practice to provide that an applicant must provide an examination support document that covers all of the claims in an application if the application contains more than five independent claims or more than twenty-five total claims.”

Patent Application Limitations: “The Office is also revising the rules of practice with respect to multiple applications that have the same claimed filing or priority date, substantial overlapping disclosure, a common inventor, and common ownership.”

Analysis to come: …

New Rules:

• File Attachment: Final Continuation Rules.txt (982 KB)
• File Attachment: Final Continuation Rules.pdf (657 KB)

In re Seagate Technology:

In a rare unanimous en banc opinion, the CAFC has overruled its prior precedent — holding that willful infringement enhanced damages now requires “at least a showing of objective recklessness.”

Accordingly, to establish willful infringement, a patentee must show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent. 

This eliminates the “affirmative duty of due care” that has historically been created by notice of infringement.

Attorney Client Privilege and Work Product: When asserting an opinion of counsel in defense to a willful infringement claim, any waiver of privilege or work product materials does not (normally) extend to trial counsel.

Read the opinion

Continuation Rules to Issue August 21

After some persistence, the PTO revealed the substance of the new continuation rules to Dow Jones reporter Stuart Weinberg:

Applicants will have the right to file two so-called continuations and one request for continued examination. Applicants seeking additional continuations will need to explain why the request is necessary. Current practice allows applicants to file an unlimited number of continuations. . . . [The PTO also] plans to limit the number of claims an applicant may include in an initial application to 25. Applicants that include more than 25 claims will be required to include a prior-art search, a detailed report that explains how their invention differs from what's already in the public domain. The new rules, which will be published on the PTO's Web site Tuesday [August 21], are scheduled to go into effect Nov. 1.

…The number of continuation requests has been rising in recent years. In 2006, almost 30% of applications were devoted to continuation requests, up from 27% in 2005 and 25% in 2004, Peterlin said. . . . Peterlin alluded to misuse of continuations when discussing the pending rule changes. "What we have found is, sometimes, people engage in a little
post-filing research," she said, adding that, while this may make good business sense, it doesn't make for an effective patent system.

Although we have not seen the final rules, it appears that applicants will not be losing rights at the time the final rules are published. Rather, the new rules will become effective on November 1, 2007. Do expect the rules to be retroactive in that they will apply to pending applications.

Pre-view of rules via Venable Law Firm

2007 Patent Litigation: Timing the Transition from Patent Issuance to Patent Litigation

In the past, I have filed patent infringement lawsuits on the same day that the patent issued.  That highly aggressive strategy is not the only approach — many patentees delay years before filing suit.

In order to determine how long patentees usually delay before filing suit, I pulled-up all twenty-one hundred US patents that have been asserted in patent litigation or reexamination cases in 2007. (Restricted to lawsuits filed 1/1/2007 to 8/15/2007 notice of litigation had been filed with the USPTO). 

For cases filed in year 2007, the ‘average’ patent issued seven years ago in 2000. The median issue year was 2001 — a six year delay in filing.  The histogram below provides an idea of the distribution of the number of years between patent issuance and commencement of litigation for the 2007 lawsuits.

Although most lawsuits are filed by the time a patent is six years old, it is striking that about twenty-five percent of the patents in the 2007 lawsuits are more than a decade old.

Patent Public Advisory Committee (PPAC)

It is time again to nominate three new members to the USPTO’s Patent Public Advisory Committee. The PPAC is a group of nine individuals selected by the Commerce Secretary (on the advice of the PTO Director).  The committee's purpose is to advise the PTO Director on the management of operations of the Office.  The nine-member PPAC is on a three-year rotating schedule.  Each year three new members are appointed. 

Nominations for this year’s appointment may be sent to PPACnominations@uspto.gov. Although formal nominations are required, I’m sure that the Chief of Staff would not mind receiving some informal suggestions as well.

Current PPAC Members:

• Chair - Kevin Rivette (VP IBM IP Strategy, Author of Rembrandts in the Attic) 2006
• Maximilian A. Grant (Latham & Watkins Partner)
• Carl E. Gulbrandsen (Managing Director of WARF)
• Dean L. Kamen (Inventor of Segway)
• Gerald J. Mossinghoff (Former PTO Director, Oblon Spivak)
• Lisa K. Norton (Associate at DLA PIPER)
• Douglas Patton (Patton Design – Product Designer) 2006
• M. Andrea Ryan (General Counsel TransForm Pharmaceuticals)
• W. David Westergard (Patent guy at Micron) 2006

Notes: 

• Request for Nominations
• PPAC Website

Patent Plaintiffs Continue to Push for Expanded notion of Joint Infringement.

AdvanceME v. RapidPay (E.D. Tex. 2007).

Traditionally, direct patent infringement requires a single actor that causes infringement of each element of the asserted patent claim. An agency doctrine allows for multiple actors acting under control of a single entity. However, the common law of patents has long resisted calls for liability for any looser form of "joint infringement."

In AdvanceME, the Texas court provided additional dicta expanding our notion of circumstances where two separate entities can combine to infringe a patent even when neither entity infringes all claim elements. Here, the court finds that multi-actor infringement requires (1) that all elements of the claim be performed and (2) that there be a “sufficient connection” between the accused actors. “A showing of ‘agency’ or ‘working in concert’ is not required.” The sufficient connection could instead “be shown through a contractual relationship.”

According to the court, joint infringement is easier to prove when a patent claim includes steps performed by two entities. The patent at issue here involves claims that move money from a customer to a merchant then to a merchant processor which is directly infringed by the merchant and merchant processor.

The infringement finding is, however, moot as the patent was also found invalid as anticipated and obvious.

Notes:

• Read the case


• The issue of joint infringement is “squarely raised” in another case – BMC v. PaymenTech. [See Divided Infringement]. Oral arguments were held in that case in April, and a decision is expected by October.


• The expanded joint infringement notion is supported by the CAFC's recent On Demand decision where the court noted that "[i]t is not necessary for the acts that constitute infringement to be performed by one person or entity."


• See Cross Medical (“However, if anyone makes the claimed apparatus, it is the surgeons, who are, as far as we can tell, not agents of Medtronic. Because Medtronic does not itself make an apparatus with the “interface” portion in contact with bone, Medtronic does not directly infringe.”)


• In PharmaStem, the CAFC did not decide the issue, but noted that the “viability and scope of [the theory of joint infringement] liability is a subject of considerable debate.”


• Applied Interact, LLC v. Vermont Teddy Bear Co., Inc.  2005 WL 2133416 (S.D.N.Y.,2005), the district court noted that infringement by separate entities requires “some connection” between the entities.


• Free Standing Stuffer, Inc. v. Holly Dev. Co., 187 U.S.P.Q. 323 (N.D. Ill. 1974), requires a “sufficient connection to, or control over” third party entities performing some of the elements.


• Cordis Corp. v. Medtronic AVE, Inc., 194 F. Supp. 2d 323 (D. Del. 2002) (requiring close relationship between defendant and the doctors performing part of the patented process).


• Shields v. Halliburton Co., 493 F.Supp. 1376 (W.D. La. 1980) (finding defendants liable for infringement based on the combined actions of two entities).


• Sriranga Veeraraghavan, Joint Infringement of Patent Claims: Advice for Patentees, 23 Santa Clara Computer & High Tech L.J. 211 (2006),

Unavoidable Delay: Ignorance as an Excuse?

FemSpec (FemSuite) v. Dudas (N.D.Ca. 2007)

Dr. Johnson invented an inflatable speculum for gyne exams. After Dr. Johnson was diagnosed with malignant cancer, the PTO expedited examination and the patent issued a few months before Dr. Johnson committed suicide.  The son, Mr. Johnson (who had no experience with patents) became owner of the patent.  The PTO was not given forwarding address information, and the patent eventually expired due to failure to pay the maintenance fee. After the patent had expired, FemSpec (a Gyne product manufacturer) bought the patent rights.

Late Maintenance Fee: Congress has designated three time-periods for late maintenance fee repayments.

• Within six months of due date: Late payment always allowed;
• Within thirty months of due date: Late payment allowed if delay was unintentional;
• Any time after that: Late payment allowed if delay was unavoidable. 35 USC 41(c).

After purchasing patent rights, FemSpec immediately filed its petition to accept late payment of maintenance fees due to an unavoidable delay – citing the following evidence: 

• Dr. Johnson was suffering from terminal cancer and was prosecuting the patent pro se – and thus did not provide any instructions for maintenance fees to be paid by his heirs.
• Even if he had provided a calendar notation of maintenance fees, his heirs would not have understood its meaning because of their lack of patent law experience.
• Mr. Johnson (the heir) had no idea that a maintenance fee was due. And, because he moved, he did not receive any notice from the PTO regarding fees due.

For an unavoidable delay, however, the PTO requires due care in docketing the relevant dates and a showing that the applicant “treated payment of the maintenance fee as his most important business. In addition, the PTO requires a showing that the entire delay be unavoidable and that, despite all precautions, the patentee was “prevented from making the payment.”

Ignorance as an Excuse: On appeal from the PTO, the District Court noted “that there are situations in which ignorance of the requirements to pay maintenance fees may support a finding of unavoidable delay.” Citing In re Mattulath (D.C. Cir. 1912).  However, the ignorance excuse requires that the unrepresented patent holder make some “effort to inform himself of the legal obligations associated with owning a patent.” See California Med. v. Tecnol Med. (D. Del. 1995).  Complete ignorance of the fact that the patent exists can also create an avoidable excuse.

Petition to for late payment denied — Patent is expired.

Cite: FemSpec L.L.C. v. Dudas, 2007 U.S. Dist. LEXIS 8482 (N.D.Ca. 2007)

DC is Improper Venue for Appeal of PTO Petition by Foreign Patentee

Michilin Prosperity v. Dudas (D.D.C 2007)

Michilin’s patented shredder is designed for handling both paper and CDs. Michilin’s claim 1 requires a “paper touch switch” and a “disc touch switch.” Claim 4, which depends upon claim 1, indicates a “single touch switch.”  Seeing a technical error, Michilin filed for a certificate of correction to transform claim 4 into an independent claim.  The PTO denied that request — indicating that a reissue may be the proper recourse. Michilin, a Taiwanese company, appealed the PTO’s denial to district court in the District of Columbia.

On appeal, the PTO quickly requested dismissal based on venue — arguing that the case must be brought in Virginia.

Venue Statutes:

• 28 U.S.C. § 1391(e): Actions against a US Gov’t officer acting in his official capacity must be filed in a jurisdiction where (1) the defendant resides; (2) a substantial part of the claim arises; (3) the property is located; or (4) where the plaintiff resides if no real property is at issue.
• 35 U.S.C. § 1(b): The residence of an official defendant is the “official residence” of the officer or agency.

The PTO’s Virginia headquarters is both Mr. Dudas’s official residence and the site of the denial of Michilin’s request. That, according to the court makes Virginia the only proper venue for an appeal of this case. Case transferred to E.D.Va.

Two failed arguments:

1. Dudas is also an officer in the Department of Commerce, which is located in DC. This fails because Dudas is being sued in his capacity as Director of the USPTO.
2. The patent is “located” in DC because Michilin had filed parallel patent infringement litigation in DC. This argument may have some weight, but failed here because that case had already been dismissed.

Cite: Michilin Prosperity Co. v. Dudas, 2007 U.S. Dist. LEXIS 55216 (D.D.C. July 31, 2007).

CAFC: Patent Attorney Has No Right to Defend Himself Against Charges of Inequitable Conduct

Nisus Corp. v. Perma-Chink Sys. v. Michael Teschner (Fed. Cir. 2007).

Nisus Corp’s patent relates to a method of putting Boron in a tree to kill termites and prevent forest fires. After a bench trial, the patent was found unenforceable due to inequitable conduct.  Apparently, Nisus had failed to disclose material documents from a prior lawsuit involving closely related patents.  The court specifically mentioned Nisus’s former patent attorney, Michael Teschner, as one cause of the inequitable conduct.

Teschner sued to intervene in the case and clear his name, but the district court denied him the opportunity. On appeal, the CAFC likewise found Teschner without standing.

Appeal by Nonparty: Usually, a nonparty has no standing to appeal. However, an attorney that is formally reprimanded may appeal to the CAFC.  However, other (informal) “judicial criticisms of lawyers’ actions are not reviewable.”  The court’s comments regarding Teschner here do not rise to a formal reprimand, and thus offer no standing for appeal.

To allow appeals by attorneys, or others concerned about their professional or public reputations, merely because a court criticized them or characterized their conduct in an unfavorable way would invite an appeal by any nonparty who feels aggrieved by some critical statement made by the court in an opinion or from the bench. Treating such critical comments by a court as final decisions in collateral proceedings would not only stretch the concept of collateral proceedings into unrecognizable form, but would potentially result in a multiplicity of appeals from attorneys, witnesses, and others whose conduct may have been relevant to the court’s disposition of the case but who were not parties to the underlying dispute. Nor would it be appropriate to limit such appeals to attorneys, while forbidding others from appealing from critical court comments, as such a limitation would smack of special treatment for members of the bar and would be difficult to justify as a matter of principle.

Thus, a finding of inequitable conduct does not create any standing for an aggrieved prosecuting attorney to appeal.

Postscript: Mr. Teschner declined my offer for an interview, noting that the matter is still pending at the PTO. His lone statement is that he is “glad that the Federal Circuit found merit in [his] argument.”

New Proposed Rules: Maiming Markush Claims

A new set of proposed rules were published in the Federal Register on August 10, 2007. The new anti-Markush rules would close down a potential loophole in the soon-to-be-finalized claim limitation rules. 

Highlights:

• An intra-claim restriction is proper unless all species share a feature that is substantial and essential for common unity.
• A claim may not incorporate part of the specification by reference unless absolutely necessary.
• Markush alternatives must be substitutable; may not encompass other alternatives; may not be a set of further alternatives; and must not make the claim difficult to construe.

Documents:

• File Attachment: Markush Rules.pdf (96 KB)

Other upcoming finalized rules:

• Rules limiting continuations are expected to be finally implemented within the next few weeks.
• Rules limiting the number of claims being examined are expected to be finally implemented within the next few weeks.
• Rules requiring more extensive IDS submissions are being reviewed by White House staff and are expected to be finally implemented in early 2008.

 

Overall, has your company made money from the patent system?

On August 7–8, 2007, I conducted a simple survey through Patently-O. [See Survey].  Readers were asked whether the patent system, taken as a whole, had been positive (made money) or negative (lost money) for their company.  The results below show the responses of 131 corporate employees who are all highly involved with their company patents.

The results here follow a predictable pattern: On average, pharmaceutical companies see patents as a profit center while software companies see patents as an overall loser.  (At 95%CI, Software & EE results each differ significantly from Pharm results).

Notes:

• Next time: Is this an important question?
• The Survey [LINK]
• Bessen & Meurer: Negative Return on the Patent System
• On the process:
• The above graph merges responses from small corporations with those from large corporations. It also excludes individuals at law firms, government entities, and educational institutions. 
• Individuals responded to the question: “Overall, has your company made money from the patent system?”  There were three potential responses: “Clearly positive (made money”, “Unsure whether positive or negative”, and “Clearly negative (lost money).” For the graph above, these responses were converted to a simple numerical scale: 1, 0, and -1, respectively. The y-axis above ranges from -1 to 1.

Priority to Foreign Application Requires "Inventor's Knowledge or Consent" at the Time the Foreign Application was Filed

Boston Scientific SciMed v. Medtronic Vascular (Fed. Cir. 2007).

SciMed’s patent application was originally filed by a European company (MinTec) in February 1994 as an European Patent Application. At that time, however, the inventors (Cragg & Dake) had not yet assigned rights to MinTec. Cragg assigned his rights a few months later. Dake did not assign his rights until 1996.

Medtronic has a US priority filing date of June 1994 on the same invention. In the interference, the question is whether a US patent applicant claim priority to a foreign application filed by an entity that was not acting on behalf of the US applicant at the time of filing? CAFC Answer: No priority unless foreign application was filed on behalf of the US applicant.

Under the court’s ruling here, 35 USC 119(a) provides a personal right to the inventor. Consequently, there must be a “nexus…between the inventor and the foreign applicant at the time the foreign application was filed.” That nexus requires at least “knowledge or consent” of the inventor.

“Indeed, as a matter of pure logic, an entity could not have filed a foreign application “on behalf of” an inventor without the inventor’s knowledge or consent; that the foreign application may have been filed in accordance with the laws of the country in which it was filed has no bearing here.”

Holding:

“[A] foreign application may only form the basis for priority under section 119(a) if that application was filed by either the U.S. applicant himself, or by someone acting on his behalf at the time the foreign application was filed.” (emphasis in original)

Notes:

• This decision [LINK]: Scimed Life Sys., Inc. v. Medtronic Vascular, Inc., — F.3d — (Fed. Cir. 2007).
• Final BPAI Decision: Patent Interference No. 104,192, Paper No. 187, 2001 WL 1339890 (B.P.A.I. July 21, 2001).
• Trial Court Decision: Scimed Life Sys., Inc. v. Medtronic Vascular, Inc., 486 F. Supp. 2d 60 (D.D.C. 2006).

 

Survey: Is the patent system beneficial for your company or clients?

Patent holders make money from their patents in lots of different ways. They may, for instance, receive a check based on a licensing agreement or infringement damage awards; or raise prices after excluding competitors from their market niche.  Of course, those same companies will also spend money on patents — paying for prosecution and litigation of their own patents; licensing and litigating against other patents; and avoiding market opportunities because of competitor patents.

When you have a few moments, please complete the following survey on the microeconomics of patents:

======================================================

Where do you work:	Law Firm Large Corporation Small Corporation Government Educational Other
Major area of technology for your company / clients:	Biotechnology Electrical / Electronic Mechanical Software Other Chemical Pharmaceutical Other
How involved are you with your company / client's patents:	Highly involved Somewhat involved Not involved
Overall, has your company made money from the patent system?	Clearly positive (made money) Unsure whether positive or negative Clearly negative (lost money)
Please explain why your company/client made/lost money.
Email Address: (OPTIONAL)

free forms

Law Job Map:

Find your patent law job via Google maps. [PATENT LAW JOB MAP]

Accelerated Examination Success for Business Method Applicant

Although the procedure is expensive and full of potential pitfalls, applicants continue to use the PTO’s accelerated examination program. 

Some of the largest backlogs are found on the desks of examiners handling business method patent applications. Technology Center 3620 (e-commerce), for instance, is currently issuing first office actions on applications filed about four years ago.

Now, the first business method patent has issued under the accelerated examination program. U.S. Patent No. 7,251,621 – a “Method and apparatus for the home delivery of local retail e-commerce orders” – was filed on December 29, 2006 and issued July 31, 2007.  The applicant used a smart approach of first filing an original application; then filing a continuation application along with the request for accelerated examination.

According to reports that I have received, the PTO commonly rejects requests for accelerated examination based on deficient element-by-element analysis of the claims with reference to the cited prior art. (The original application has not yet been examined).

Many patent attorneys appear quite afraid of providing an element-by-element analysis of the submitted prior art. However, on examination of the ‘621 prosecution history, the analysis does not appear to significantly differ from what is commonly included in an office action response.

Notes & Documents

• Thanks to Aaron Feigelson for submitting this tidbit.
•  File Attachment: Accelerated Exam Petition (1MB) (Original) (corrected was also filed…)
• Find it on PAIR

V-Chip Declaratory Judgment Patent Case Reinstated by CAFC

Sony Electronics v. Guardian Media (Fed. Cir. 2007).

Guardian holds several patents for blocking naughty TV shows based on program classification codes. In 1999, Guardian sent a “notice of patent infringement” to Sony asserting that its V-Chip products “infringe the claims,” and later followed-up with a claim chart. Four years later, Guardian sent another letter offering to license its patents. After unsuccessful negotiations, Sony filed a declaratory judgment action in the Southern District of California — alleging non-infringement, invalidity, and unenforceability.

On motion, the district court dismissed the suit for lack of declaratory judgment jurisdiction — finding no actual controversy as required by the Constitution. In particular, the court noted that Guardian had not threatened to sue and the circumstances did not imply a threat of immediate suit. The court then went on to hold that even if jurisdiction existed it would use its discretion to decline hearing the case because (1) the question of jurisdiction is “close” and (2) it appears that the DJ plaintiffs are using the case as a negotiation tool rather than as a means to settle the dispute.

Particular Adverse Positions => DJ Jurisdiction: On appeal, the CAFC determined that an actual controversy certainly existed between Sony and Guardian at the time of the complaint. The parties had taken particular adverse positions regarding infringement and validity (associating particular claims with particular products; requesting a particular amount of money; arguing whether particular prior art references demonstrated particular claim elements). The facts of this dispute make it “manifestly susceptible of judicial determination.” (quoting 300 US 227 (1939)).

In short, because Guardian asserts that it is owed royalties based on specific past and ongoing activities by Sony, and because Sony contends that it has a right to engage in those activities without a license, there is an actual controversy between the parties within the meaning of the Declaratory Judgment Act.

Discretionary Dismissal: The Declaratory Judgment Act allows a court “substantial discretion” not to hear cases even when there exists an actual controversy. However, here, the CAFC found that the lower court’s two reasons for declining to hear the case were arbitrary and thus insufficient. Specifically, the question of jurisdiction is not a close call as the lower court had determined — rather it was only close because of an error of law. Additionally, the CAFC could not discern any “affirmative evidence” of plaintiffs’ nefarious reasons for filing suit.

Vacated and remanded to determine whether there may be other reasons for discretionary dismissal.

Notes:

• Four other DJ plaintiffs had similar experiences and are discussed in the decision.

Summary Judgment of Non-Infringement: Downward Force <> Upward Force

SafeTCare v. Tele-Made (Fed. Cir. 2007).

SafeTCare’s patent covers a bariatric hospital bed designed for obese patients. On summary judgment, the district court found that the Tele-Made beds do not infringe. Other defendants and counterclaims are still pending.

Jurisdiction: On appeal, the CAFC sua sponte questioned jurisdiction. Because the judgment was not complete as to all parties and the judge had not issued a Rule 54(b) order of appealability (See Bashman), the CAFC did not have jurisdiction at the time of oral arguments. However, the CAFC allowed the parties time to ask for such an order from the district court before dismissing the appeal. (This pragmatism is perhaps due to Judge Robinson’s place on the panel).

Upward Force: SafeTCare’s patent requires a plurality of motors exerting a pushing or upward force on the bed.  Tele-Made’s motors are essentially attached to one end of a lever, and by pulling down, cause an upward force on the other end of the lever. However, because SafeTCare’s specification implied a direct link between the motor and the bed, the levered approach was non-infringing. Prosecution history estoppel blocks DOE coverage.

Non-infringement affirmed.

Ernie L. Brooks 1942-2007

Sad news today in the patent law world. Ernie Brooks, head of Brooks Kushman was killed yesterday in an automobile accident. Mr. Brooks litigated over 50 cases to decision — including last year’s case of z4 v. Microsoft. In z4, Mr. Brooks lead the trial team to a $133 million verdict for its tiny client. He was 64 years old.

• Law.com article by John Bringardner [LINK]
• Law.com article by Leigh Jones on z4 victory [LINK]
• Brooks Kushman News

Sarnoff: Granting Patents Immunity from Market Regulation is Neither Warranted Nor Sensible

In the most recent Patent Law Journal article, Professor Joshua Sarnoff discusses implications of BIO v. DC. He opens with the following:

In Biotechnology Industry Organization v. District of Columbia,  the U.S. Court of Appeals for the Federal Circuit took another big step toward assuring that a granted patent conveys immunity from market regulation. 

Professor Sarnoff then explains why granting such immunity is “neither warranted nor sensible.”

• Joshua D. Sarnoff, BIO v. DC and the New Need to Eliminate Federal Patent Law Preemption of State and Local Price and Product Regulation, 2007 Patently-O Patent L.J. 30.
• Patent Law Journal.
• Patently-O on BIO v. DC. 

Reasonable Pertinence may be Sufficient to Combine References in Obviousness Rejection

In re Icon Health and Fitness (Fed. Cir. 2007).

ICON has been a party in more than 50 patent infringement lawsuits and has asserted its treadmill patent (5,676,624) against at least six defendants.  In the midst of litigation, ICON also filed for reexamination, and now appeals the PTO’s final rejection of its patent to the CAFC.

ICON admits that all but one of the claimed elements are disclosed in a Danmark International advertisement.  The remaining element, a gas stabilizing spring, is found in Teague where it is used to assist in opening and closing of a Murphy style bed.

Reasonably Pertinent Art: To be used in an obviousness rejection, prior art must be “reasonably pertinent to the problem addressed” by the patent applicant. Usually this is satisfied by references in the same field of technology or that address the same problem. Here, the CAFC saw enough similarity to find the bed art pertinent:

“Nothing about Icon’s folding mechanism requires any particular focus on treadmills; it generally addresses problems of supporting the weight of such a mechanism and providing a stable resting position. Analogous art to Icon’s application, when considering the folding mechanism and gas spring limitation, may come from any area describing hinges, springs, latches, counterweights, or other similar mechanisms—such as the folding bed in Teague.”

Although the patent applicant lost this argument, this portion of the case is good news for applicants – because of what the opinion did not say. Specifically, the court could have begun with the announcement that “In KSR, the Supreme Court expanded the notion of pertinent obviousness-type prior art when it announced that ‘patent examiners should look [beyond] the problem the patentee was trying to solve.’ . . .”  Instead, the CAFC decided to stick to its narrower jurisprudence.

All elements = Obvious: Under KSR, once the elements are shown in reasonably pertinent art, then an obviousness determination is as simple as connecting the dots. The court says as much:

[W]hile perhaps not dispositive of the issue, the finding that Teague, by addressing a similar problem, provides analogous art to Icon’s application goes a long way towards demonstrating a reason to combine the two references.

Here, the Court explained a connection be tween Teague and the claimed invention by showing that both used the spring in similar ways.

Notes:

• A report from Steve Sereboff indicates that the PTO has already taken this decision to heart in its new examiner training: “Basically, the examiners can make a prima facie case of obviousness simply by showing that all of the elements in the claim were known.”

CAFC Finds Washington DC Drug Price Law to be Unconstitutional

BIO and PhRMA v. District of Columbia (Fed. Cir. 2007).

In 2005, the District of Columbia (DC) adopted a set of legislation to reduce prescription drug costs. In particular, the law would bar a manufacturer from placing minimum retail price restrictions or from charging “excessive prices.”

The two major innovator pharmaceutical organizations quickly sued and won a ruling that the law was unconstitutional as (1) preempted by the patent laws and (2) invalid under the commerce clause because the new law restricted transactions that occur outside of DC borders. On appeal, the CAFC affirmed that law is unconstitutional.

CAFC Jurisdiction: Normally, the CAFC has jurisdiction over cases that arise under the patent laws. In addition, the CAFC claims jurisdiction in this type of case because interpretation of patent law is a “necessary element” of the plaintiffs’ claim.

Patent law is indeed a necessary element of the claim here. If the plaintiffs are able to show that the patent laws preempt the Act, the Act will be declared unenforceable and enjoined, but if they cannot, their preemption claim will fail and their members may be required to defend against suits under the Act.

Standing of BIO and PhRMA: BIO and PhRMA are not involved in any of the activities covered by the Act. However, their members would be affected. The Supreme Court has held on several occasions that an organization may sue on behalf of its members if (i) the members would have standing on their own; (ii) the suit is related to the purpose of the organization; and (iii) the member’s are not individual claimants.  The individual members certainly would have standing here because the Act creates injuries that are “(a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical.” (Quoting 528 U.S. 167). This issue is likely the sticking point for the Aharonian-Peterlin lawsuit.

Preemption: Federal Law is the Supreme Law and when State law (or here, DC law) is in conflict, it is the State Law that must yield. Even when there is no direct conflict, a state law may still be found invalid if it “stands as an obstacle” to accomplishing the full goals and purposes of Federal Law.  For the Patent Laws, the fundamental goal is to “promote the progress of science and useful arts.” This goal is accomplished, according to the CAFC, by offering exclusive rights that allow for above market pricing during the term of the patent. However, there is also the competing issue of keeping prices reasonable for consumers. As the Supreme Court outlined in Bonito Boats, Congress has taken charge of balancing these competing interests.

Here, the DC Act would limit the “full exercise of market power” by restraining excessive prices. That action is contrary to the incentive goals of the patent act, and thus preempted.

Affirmed

Notes.

• It is important here that the DC Act focused exclusively on patented drugs. If it had a broader focus – perhaps all health care related equipment, drugs and services – then the court would have had a more difficult time shooting it down.
• Patently-O previous discussion of the case
• BIO = Biotechnology Industry Organization
• PhRMA = Pharmaceutical Research and Manufacturers of America

   

Rules of Federal Procedure: Timing of an Answer to an Amended Complaint

General Mills v. Kraft Foods (Fed. Cir. 2007)

On petition for rehearing, the CAFC panel clarified its holding that a defendant’s filing of a motion dismiss does not toll the deadline for filing an answer or counterclaim to an amended complaint unless the motion to dismiss is filed before the date that the original answer would have been due.

Under the Federal Rules of Civil Procedure, a response to an amended complaint is governed by Rule 15, that does not provide for tolling. The tolling section (Rule 12(b)(4)) only applies to timing of responses filed under Rule 12 – such as answering an original complaint.

Because Rule 15 allows a response to an amended complaint either within 10 days or within the time for responding to the original complaint, the due date for responding will be tolled if the motion to dismiss is filed before the original answer would have been due.

Practice Tip: The court has discretion to push-back the response due date. If you are filing a motion to dismiss an amended complaint, first request that the date be tolled.

• Discussion of the original CAFC Opinion.
• Crafty lawyers may now choose to file amended complaints to trip-up their opponents. . .
• This is now a case begging for a student law review article or note.