August 2007

IPO on Patent Reform: Congressional Reform is Moving Forward

Patent

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

Patent

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:

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

Other events:

Congressional Patent Reform is Dead; Long Live Administrative Patent Reform

Patent
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

Patent

PatentLawPic023Dr. 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 16th and 17th 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”

Patent,

PatentLawPic024Egyptian 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

Patent

Patent.Law028In 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

Patent

PatentLawPic022Bodog 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 1st Technology. Bodog failed to respond to the complaint, and now the Nevada district court has issued a default judgment of $46 million+. 1st 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 1st Technology including playtech.

BPAI Must Consider Evidence Rebutting Obviousness

Patent

PatentLawPic021In 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

Claim Construction, Patent, Patent Cases 2007

ScreenShot025Ormco 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

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  • ScreenShot024Foreign 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

Patent,

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.”

Soybean.USDAA 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:

Patents with More Than 25 Claims

Patent

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:

ScreenShot020ScreenShot021ScreenShot019

  • 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).

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

Patent

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:

(more…)

Seagate II

Patent

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).

PatentLawPic020PatentLawPic019

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?

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

Patent, Reexamination,

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.

USPTO Webcast on New Claims and Continuation Rules

Patent

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

Patent

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:

In re Seagate Technology:

Patent, Patent Cases 2007

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