Patent Law Blog (Patently-O)

Patenting Tax Strategies Under Bilski

Except for the few patent holders and Accenture, the tax strategy business community has been largely anti-patent – going so far as to lobby congress to introduce legislation to create a specific exception that would block enforcement of those patents.

In Bilski, the Federal Circuit refused to categorically exclude any particular fields of business or technology from the scope of patent protection. The court specifically mentioned software and business methods as still patentable. Presumably, tax strategies are still patentable as well. The closest the court came to creating an exclusion is for purely 'mental' processes – where each step of the process could be performed in the human mind.

Rather than an approach focusing on specific exclusions, the court applied the machine-or-transformation rule: A process is patent eligible under §101 if "(1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state of things." Bilski's claim was not patentable as a mental process. Additionally the Bilski claim failed the machine-or-transformation test because it was (1) not tied to any machine and (2) the alleged transformations in Bilski were not sufficient because they did not transform "physical objects or substances" nor did the transform articles "representative of physical objects or substances." Notably, transformation of "legal obligations or relationships, business risks, or other such abstractions" do not qualify as 'transformations' under the new test. The Federal Circuit left the State Street patent hanging – we know the test used in State Street was wrong, but we don't know whether the claimed invention would be patentable under the new test.

Going forward, tax strategies (and business methods generally) that necessarily need computer assistance will be able to obtain protection by including sufficient recitation of ties to "particular machines." Practically, the links should be tied to particular portions of the computer to ensure that the tied machine is "particular" enough. On the transformation side, it is unclear whether the transformation of money will be considered sufficiently "representative of physical objects or substances."

Links:

• Tax Law Prof
• Linda M. Beale

In re Bilski: Patentable Process Must Either (1) be Tied to a particular machine or (2) Transform a Particular Article

In re Bilski, __ F.3d __ (Fed. Cir. 2008)(en banc)

The Federal Circuit has affirmed the PTO's Board of Patent Appeals (BPAI) finding that Bilski's claimed invention (a method of hedging risks in commodities trading) does not satisfy the patentable subject matter requirements of 35 U.S.C. § 101. In doing so, the nine-member majority opinion (penned by Chief Judge Michel) spelled out the "machine-or-transformation" test as the sole test of subject matter eligibility for a claimed process.

The Supreme Court … has enunciated a definitive test to determine whether a process claim is tailored narrowly enough to encompass only a particular application of a fundamental principle rather than to pre-empt the principle itself. A claimed process is surely patent-eligible under § 101 if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing. …. Because the applicable test to determine whether a claim is drawn to a patent-eligible process under § 101 is the machine-or-transformation test set forth by the Supreme Court and clarified herein, and Applicants' claim here plainly fails that test, the decision of the Board is AFFIRMED.

State Street Test Is Out: In State Street, the Federal Circuit used the "useful, concrete, and tangible result" of a process as a touchstone for patentability. In Bilski, the en banc panel found the State Street formulation "insufficient to determine whether a claim is patent-eligible under § 101."

[W]e also conclude that the "useful, concrete and tangible result" inquiry is inadequate and reaffirm that the machine-or-transformation test outlined by the Supreme Court is the proper test to apply.

Some Business Methods and Software Are Still In: Still, the court made clear that business methods and Software will still be patentable – if they meet the machine-or-transformation test.

We rejected [a categorical] exclusion in State Street, noting that the so-called "business method exception" was unlawful and that business method claims (and indeed all process claims) are "subject to the same legal requirements for patentability as applied to any other process or method." We reaffirm this conclusion. … [A]lthough invited to do so by several amici, we [also] decline to adopt a broad exclusion over software or any other such category of subject matter beyond the exclusion of claims drawn to fundamental principles set forth by the Supreme Court

To be clear, the machine-or-transformation test is not a physicality test – i.e., a claim can still be patentable even if it does not recite sufficient "physical steps." On the flip-side, "a claim that recites 'physical steps' but neither recites a particular machine or apparatus, nor transforms any article into a different state or thing, is not drawn to patent-eligible subject matter." Here, the court spelled out the specific issue in mind: a claimed process where every step may be performed entirely in the human mind. In that situation, the machine-or-transformation test would lead to unpatentability. "Of course, a claimed process wherein all of the process steps may be performed entirely in the human mind is obviously not tied to any machine and does not transform any article into a different state or thing. As a result, it would not be patent-eligible under § 101."

Along this line, the court also dispelled two rising concerns, noting that that (1) neither novelty nor obviousness have any relevance to the section 101 inquiry, and (2) the fact that an individual claim element is – standing alone – patent ineligible does not render the claim unpatentable because patent eligibility is considered while examining the claim as a whole.

What is a Transformation?: The courts have already developed an understanding of transformation as it relates to the Section 101 inquiry. Here, the Federal Circuit referred to the distinction made in the 1982 Abele case. There, the court distinguished between two of Abele's claims – finding only one patentable. The unpatentable claim recited "a process of graphically displaying variances of data from average values" without specifying "any particular type or nature of data … or from where the data was obtained or what the data represented." The patentable dependent claim identified the "data [as] X-ray attenuation data produced in a two dimensional field by a computed tomography scanner." In retrospect, the Federal Circuit sees the difference between these two claims to be that of transformation. The second claim included sufficiently specific transformation because it changed "raw data into a particular visual depiction of a physical object on a display." Notably, the transformation did not require any underlying physical object. As the court noted later in the opinion, the transformed articles must be "physical objects or substances [or] representative of physical objects or substances."

The Bilski claims themselves were not seen as transforming an article:

Purported transformations or manipulations simply of public or private legal obligations or relationships, business risks, or other such abstractions cannot meet the test because they are not physical objects or substances, and they are not representative of physical objects or substances. Applicants' process at most incorporates only such ineligible transformations. . . . As discussed earlier, the process as claimed encompasses the exchange of only options, which are simply legal rights to purchase some commodity at a given price in a given time period. The claim only refers to "transactions" involving the exchange of these legal rights at a "fixed rate corresponding to a risk position." Thus, claim 1 does not involve the transformation of any physical object or substance, or an electronic signal representative of any physical object or substance.

The principle behind the test is to prevent a patentee from obtaining claims that preempt the use of fundamental principles. That principle reaches back more than 150 years to the Morse case where the inventor was precluded from claiming all uses of electromagnetism to print characters at a distance.

We believe this is faithful to the concern the Supreme Court articulated as the basis for the machine-or-transformation test, namely the prevention of pre-emption of fundamental principles. So long as the claimed process is limited to a practical application of a fundamental principle to transform specific data, and the claim is limited to a visual depiction that represents specific physical objects or substances, there is no danger that the scope of the claim would wholly pre-empt all uses of the principle.

What is a "Particular Machine"?: For software and business methods, the question will remain as to whether a general purpose computer is sufficiently particular to qualify as a "particular machine." "We leave to future cases the elaboration of the precise contours of machine implementation, as well as the answers to particular questions, such as whether or when recitation of a computer suffices to tie a process claim to a particular machine." As Professor Duffy noted in an earlier Patently-O article, the PTO Board of Patent Appeals (BPAI) has already answered this question: "A general purpose computer is not a particular machine, and thus innovative software processes are unpatentable if they are tied only to a general purpose computer." See Ex parte Langemyr (May 28, 2008) and Ex parte Wasynczuk (June 2, 2008). More commonly, the claim may tie the software to computer memory or a processor – is that sufficiently particular? I suspect this fact pattern will arise shortly.

Unpatentability Affirmed

Notes:

• Although three dissenting opinions were filed, Judge Newman is the only judge who found patentable subject matter in Bilski's claim.
• In Dissent, Judge Mayer thought the decision did not go far enough: "Affording patent protection to business methods lacks constitutional and statutory support, serves to hinder rather than promote innovation and usurps that which rightfully belongs in the public domain." Citing work by Professors Dreyfuss and Pollack, Mayer argues that business method patents have the overall effect of stifling innovation by restricting competition.
• In his Dissent, Judge Rader asks the insightful question of why a new test is necessary when settled law already answers the question. Rader would have decided the opinion with one line: "Because Bilski claims merely an abstract idea, this court affirms the Board's rejection." I believe Rader's position is quite defensible. In particular, the majority justifies its need for the test as a way to ensure that we avoid the "preemption of fundamental principles." In the majority construct, the machine-or-transformation test serves as a fairly accurate proxy for preventing preemption. The court does not, however, answer why any proxy is necessary – if the purpose is to exclude overbroad abstract ideas why not simply rely on the current rule preventing patenting of abstract ideas (as well as the law requiring full enablement)?

Concurring opinion by Judge DYK (joined by Judge LINN) attempt to reconcile the history of the patent system with the new rule of patentability.

Reasonable Billing Rates

Matlink v. Home Depot & Lowes (S.D. Cal. 2008)

Matlink sued the big box retailers for infringement of its patent covering a supply re-ordering system. After some discovery "stonewalling," the district court awarded attorney-fees to the defendants for their time wasted on a motion to compel. Here, the attorney fees were calculated based on the rates charged by the defendant's three Southern California Winston & Strawn attorneys:

Partner with 15 years experience	$630 per hour
Associate with 6 years experience	$455 per hour
Associate with 1 year experience	$280 per hour

In awarding fees, the court found these rates "not … excessive in this context."

A similar situation recently arose in Quantronix v. Data Trak (D. Minn 2008). There, the district court looked at the hourly billing rates for several Salt Lake City patent litigators from the Trask Britt firm:

Partner with 15 years experience	$350 per hour
Associate with 3 years experience	$195 per hour
Associate with 2 year experience	$175 per hour

The Quantronix court found these rates reasonable as well. "Considering the experience levels of the individuals on the Quantronix billing statements and the Court's own experience with and knowledge of prevailing rates in this market, the Court finds that the hourly billing rates submitted by Quantronix are reasonable and commensurate with the rates of other attorneys in this area with similar knowledge and practice experience."

When Richmond based attorneys from Troutman Sanders requested attorney fees earlier this year, they used the following rate chart:

Partner with 20 years experience	$350 per hour
Partner with 14 years experience	$350 per hour

Thomas & Betts Power Solutions v. Power Distrib., Inc., (E.D. Va. 2008).

The Florida IP firm of Allen Dyer requested similar rates in AC Direct, Inc. v. Kemp (M.D. Fla. 2008)

Founding partner with 40 years experience	$325 per hour
Attorney with 6 years experience	$190 per hour

The AC Direct court found those rates reasonable. "In the Court's experience, the rates charged by the attorneys and paralegals assigned to this case are within the range of reasonable legal fees for the Orlando, Florida marketplace. Further, the fees are appropriate given the level of skill displayed in this case."

Notes:

• I saw the original report of Matlink in the Docket Navigator; The other cases were found in Westlaw.

Patently-O Bits and Bytes No. 74

• Our thoughts and prayers go out to Peter Zura of the great 271 Patent Blog. Peter is now officially cancer free.
• Professor Doug Lichtman is offering free CLE Credit. Listen online: www.ipcolloquium.com
• DMCA is 10 years old. [EFF] [News]
• The US Government has Seized the Mongol's trademark and is now "seiz[ing] all products, clothing, vehicles, motorcycles … or other materials bearing the Mongols trademark" [Randazza] I don't know what they will do with this guy's head…

Via Kelly Talcott: $125 Million is a Lot to Pay for Fair Use

PTO To Delay IDS & Markush Rules Until 2009

According to an AIPLA release, the PTO will not finalize its proposed rules on IDS statements or Markush claims before a new president takes office in January 2009. Peggy Focarino (PTO Deputy Commissioner) reportedly made this announcement on October 24, 2008 at the AIPLA Annual Meeting. This decision falls in line with the OMB Memo to all federal agencies that any "final regulations should be issued no later than November 1, 2008."

As discussed earlier on Patently-O, IDS statement proposal would require an applicant to provide supplemental information for any submissions more than 25 pages in length or written in a foreign language. Likewise, the supplemental information would be required when more than 20 documents are submitted in a single case. The supplemental information includes pin-citation to important features of the document and a discussion of how the disclosed features relate to the applicant's claims.

Patently-O Bits and Bytes

• Publications: A little over 60,000 patents issued May-September 2008. Of those, 90% were also published as applications under 35 U.S.C. §122(b). (This excludes the 1.5% filed prior to December 2000). How has this shift changed the business of patents?
• Needed: Senior ANDA Litigator.
• Bilski Coming?: IPO has planned a December 1 session to discuss "Patentable Subject Matter after In re Bilski" (via Hal Wegner).

 

Co-Inventors Contribution Must Be “More Than The Exercise of Ordinary Skill”

Oren Tavory v. NTP (Fed. Cir. 2008)(nonprecedential)

In March 2006, RIM settled its patent dispute with NTP for $600 million+. In the wake of that settlement, Tavory filed an inventorship claim against NTP arguing that he was a co-inventor of at least one of the NTP patents. The district court dismissed the case – finding that Tavory did not provide "sufficient independent evidence to corroborate his inventorship allegations." On appeal, the Federal Circuit affirmed in NTP's favor.

Back in the late 1980's and early 1990's Tavory worked with Tom Campana as a computer programmer for Telefind. While there, Tavory developed a computer program to facilitate an e-mail-to-pager system. He was also part of a team that created the pager-to-laptop e-mail system. Telefind ran out of money in 1991 and Tavory left for greener pastures. When Don Stout later filed Campana's patent applications, he appended a copy of the code that Tavory had co-authored. During the RIM trial, Tavory testified for NTP. At that time, he did not claim inventorship.

Correcting Inventorship: An issued patent is presumed to name the correct inventors. Thus, an inventorship challenge must bring "clear and convincing evidence" that the newly surfaced inventor "contributed to the conception of the claimed invention." "Simply reducing to practice that which has been conceived by others is insufficient for co-inventorship." Under the clear and convincing standard, the inventorship challenge "must be corroborated by independent evidence."

Contribution Must Be "More Than The Exercise of Ordinary Skill": Tavory suggested that his contribution was the claimed "interface switch." However, the Federal Circuit rejected that claim because (1) Tavory did not prove that the "interface switch itself was not in the prior art"; and (2) Tavory likewise did not prove that "his alleged contribution to the claimed invention—the interface switch—was the result of anything more than the exercise of ordinary skill in the art." Consequently, "he has failed to establish co-inventorship."

Judge Newman concurred with this result, but would have decided the case on laches (based on the long delay in making the claim) and estoppel (based on Tavory's silence during the NTP trial).

 

The Health Impact Fund

Last week I spoke with Yale Professor Thomas Pogge about his proposal for a "Health Impact Fund." The mission is to provide incentives to develop and distribute drugs that will achieve major global health impacts. Pogge sees the current patent system as valuable, but lacking. The problem is that the most innovative pharmaceutical companies find it very difficult to make money from treatments that are focused on the problems of the developing world. Although helpful, charity donations of drugs are typically insufficient and lead to the problem of parallel imports.

The solution proposed by Pogge is to form a global fund and pay innovator companies based on the global health impact of their new treatment. The more "quality adjusted life years" (QALYs) saved, the more money a company gets. The intent of this reward scheme is to focus the innovators on developing and distributing treatments that will have the greatest worldwide health impact.

The system is intended simply as an additional incentive layer. A drug developer may obtain patents as usual. However, in order to qualify for the program, the patentee would agree to sell its drugs at cost and guarantee access.

Pogge's models suggest that the fund would have a major impact if funded with $6 billion annually.

Notes:

• HIF Book is online
• I like the idea of aligning economic interests of the innovators with a health impact. If structured correctly, innovators will like this program because it does not take away the option of simply using the traditional patent system. The problems are primarily logistical: who pays the $6b?; how do you measure health impact?; how do you prevent gaming the system (by, for example, only using the program when the patents are likely to be challenged)?; etc.
• President Bush's "Emergency Plan for AIDS Relief" is set to spend about $6 billion on global AIDS treatment this year. [Link]

Judge Posner on Inequitable Conduct

New Medium (J. Carl Cooper) v. Barco N.V. (N.D. Ill. 2008) (J. Posner)

Sitting by designation, Seventh Circuit Judge Richard Posner recently found New Medium's asserted patent unenforceable due to inequitable conduct during ex parte reexamination of the patents. This case is important as one of the first decisions to consider inequitable conduct in the wake of Star Scientific.

Barco presented two theories of inequitable conduct: (1) that New Medium had misled the PTO by failing to disclose that its expert declarants had been 'retained' and paid; and (2) that inventor/owner Carl Cooper made false statements to the PTO regarding his association with the experts. Judge Posner rejected the first theory, but agreed with the second.

Disclosing Payment to Declarants: All four of New Medium's experts were retained and paid by the company. However, only two of the experts disclosed their relationship to the PTO. Judge Posner found the lack of disclosure to be "not misleading." As a default, the PTO should expect that the patent applicant retained and paid its experts.

"[A]ll expert reports in an ex parte proceeding before the Patent Office are procured by the patent owner or applicant, and it is customary to pay the experts for their time, as was done in this case. There is nothing in the reports of the two experts who didn't say they had been retained to suggest they were charging no fee—no suggestion that they had been moved by altruism or a strong conviction of the rightness of the application to volunteer to submit an expert report gratis."

This pragmatic default rule makes some sense. If the failure to disclose the payment was not misleading, it could not be material to patentability or lead to a finding of inequitable conduct.

False Statements About Cooperation: In his declaration to the PTO, Mr. Cooper stated that he had "never met or talked with any of these experts" before contacting them to submit reports. Judge Posner found that statement "false." Cooper had solicited and paid for a bid from one of the experts (Klughart) seven years prior. (Klughart is also a patent attorney). Judge Posner also found that Cooper and Klughart's testimony about forgetfulness difficult to believe:

"I conclude that Klughart is not neutral and that his forgetfulness may be strategic. . . . Cooper testified that when he submitted his report in August of 2001 he had forgotten his prior dealings with Klughart. I do not believe that testimony. . . . I am also disturbed by the statement in Cooper's brief that 'Mr. Cooper didn't think his past contact with Dr. Klughart was 'material' and that's why he didn't disclose it.' That is an admission that Cooper lied in his declaration, though I imagine it is unintended."

Judge Posner had no problem finding intent to deceive the PTO. The second question then is whether the deception was material to patentability. Several prior opinions have held that failure to disclose relationships can be material. See Ferring v. Barr (Fed. Cir. 2006); Nilssen v. Osram (N.D. Ill. 2006). Here, Judge Posner also found materiality:

"Clearly the fabrication was material. It bore centrally on the credibility of one of the expert reports. . . . Suppose Cooper had explained the circumstances to the patent examiner—that Klughart, a practitioner of modest means and prospects, had submitted to Cooper a $250,000 proposal that Klughart may at the time he prepared his expert report have thought he still had a chance of winning; Cooper had not responded to his proposal and Klughart was unaware that the project had been awarded to someone else. Klughart testified that the $250,000 proposal would have netted him about $200,000—a good deal more than a year's income for him. . . . Had these circumstances been disclosed to the patent examiner in Cooper's declaration, Klughart's report would have been rejected and perhaps the other reports as well, contaminated by the evidence of Cooper's bad judgment in soliciting a report from Klughart."

The question of whether deception was material to patentability is an issue of predictive fiction. Here Judge Posner recognized that the reexamination might have had the same result even with full disclosure. However, he implicitly applied the rules of equity to block New Media from such an argument, Quoting Refac, "an inventor cannot submit a misleading affidavit among a plurality of affidavits and later argue that it was the nonmisleading affidavit that resulted in allowance, thus effectively curing the defective affidavit."

Inequitable conduct: After finding both intent and materiality, the court next determines whether their combined harm is sufficient for a finding of inequitable conduct. Here, Judge Posner found that the intentional submission of false statements tipped the scales.

"The making of a deliberate, material misrepresentation to a patent examiner is extremely serious misconduct because of the ex parte nature of most patent proceedings, including the reexamination proceeding at issue in this case. . . . Because even material misrepresentations made to the Patent Office will usually not be detected, it is necessary to impose a severe sanction for such misrepresentations when they are detected, at least when as in this case they are deliberate. The appropriate sanction will normally be, and in this case I have decided that it should be, the cancellation of the patents."

Claim by Claim: The expert reports focused only on a few claims. Cooper argued that the court should only hold those claims unenforceable. Following precedent, Judge Posner rejected that approach.

"The suggestion is that since the expert reports pertained to only a fraction of the claims in the '780 patent, I should declare unenforceable just those claims. The Federal Circuit has repeatedly ruled that if inequitable conduct is proved, the entire patent is unenforceable and not just the claims affected by that conduct."

Holding: Asserted patents are unenforceable.

Notes:

• Posner also suggested that the PTO take some action in this case – noting that it "might warrant discipline by the Patent Office (Cooper, as a registered patent agent, is subject to such discipline)."
• Hat Tip to David Donoghue for originally noting the case [Link]

The Trade Secret Value of Early Patent Filing

The patent laws promote an early filing doctrine.  Most directly, by filing patent application documents early, an applicant can avoid problems created by pre-filing disclosures that can negate patentability.[1]  Inter alia, early filing also provides a presumptive date of invention and reduction to practice that may have important evidentiary benefits for the applicant.[2]  Some doctrines push against early filing. Notably, earlier filed applications may be more likely to have inadequate disclosure.  A rushed disclosure could result in the patent application being rejected under the utility, written description, or enablement requirements of the Patent Act.[3] Alternatively, if the application is filed prior to gaining an understanding of the eventual market, an applicant may have insufficient disclosure to support the most valuable claims potential. 

Going unrecognized is another benefit of early filing – the ability to keep secret later developed innovations and parameters.  That secret information can then be protected and exploited as trade secret information.

At the time of filing, the applicant must provide a complete description including the best mode contemplated by the inventor. However, many if not most patent applications are filed well before the associated product or method is ready for public consumption – before the inventor knows the best commercially viable mode.  Post-application developments could take any number of forms, such as particularly operative formulations; ideal antibiotic manufacturing parameters; software code that implements a novel algorithm; a more durable circuit arrangement; etc. Commonly, these tweaks and advances may take the form of a specific species of a disclosed and claimed genus.  Of course, this later-stage developments could be incredibly important to anyone wanting to practice the invention or develop some follow-on technology.

Even though product development typically continues after the patent application is filed, the law allows the patent applicant to legitimately keep any later developed information as trade secret.  Patent applications are not allowed to add ‘new matter’ to a patent application during prosecution. Likewise, the applicant has no duty to otherwise inform the patent office or the public of ongoing development. Rather, the application is set at filing and ex post developments are generally irrelevant to patentability.[4]

In a later post, I’ll explore whether this potential overlap of patent and trade secret rights is good from a policy perspective.

---

[1] 35 U.S.C. §102(b).  This is especially critical if filing foreign applications.

[2] See, for example, 35 U.S.C. §102(g) and §102(a).

[3] See 35 U.S.C. §101 and §112¶1.

[4] There may be some exception here when arguing secondary factors of nonobviousness.

Tags: Trade+Secret

BPAI: Under §102(e), Provisional Application Considered Prior Art as of its Filing Date.

Ex parte Yamaguchi (BPAI 2008)(Precedential Opinion)

In prosecution, the Examiner cited the Narayanan reference against a Texas Instruments patent application filed by Yamaguchi. The rejection identified Narayanan as prior art under 35 U.S.C. § 102(e). The issue on appeal to the BPAI was whether the Narayanan reference can be considered 102(e) prior art as of the filing date of its provisional application.

Section 102(e) allows for submarine prior art – these are typically pending US patent applications that, when published or patented, suddenly become prior art as of their filing date. The statute allows that "[a] person shall be entitled to a patent unless . . .the invention was described in . . .a patent granted on an application for patent by another filed in the United States before the invention by the applicant for patent.. . ." 35 U.S.C. § 102(e).

102(e) Provisional: The issue here is whether Narayanan's provisional application can be used in 102(e) analysis. The expanded BPAI panel agreed with the examiner that the 102(e) prior art date does reach-back to the date of provisional filing. This result is based on their analysis of 35 U.S.C. § 111(b). Section 111(b) requires that "provisions of this title relating to applications for patent shall apply to provisional applications for patent."

"Based on this express intent to apply the provisions of Title 35 relating to "applications for patent" to provisional applications (except for four enumerated sections noted in §111(b)(8)), a provisional application can therefore be reasonably considered an "application for patent" within the meaning of §102(e). The plain meaning of these provisions of Title 35 as noted above is outlined in MPEP 2136.03(111) for establishing the critical reference date under §102(e) of a U.S. patent or U.S. application publication that is entitled to the benefit of the filing date of a provisional application under §119(e). Based on the statutory scheme of Title 35, we hold that Appellants have not shown harmful error in the rejections on appeal."

This holding is in tension with the controlling precedent of In re Wertheim, 646 F.2d 527 (CCPA 1981). In Wertheim, the CCPA held that for a continuation-in-part application, the parent's filing date may serve as a §102(e) date, but only if the parent contains full §§120 and 112 support for the disclosure.

In this case the Examiner found that the Narayanan provisional application fully supported the eventual publication – and thus that the 102(e) date for narayanan was the filing date of the provisional. The applicant was unable to disprove these findings and the BPAI affirmed the rejection.

Intellectual Property in a Public Health Crisis

On Friday, I will be speaking at the Seton Hall Law Review's Health Law Symposium. This year's topic is focused: Preparing for a Pharmaceutical Response to Pandemic Influenza. [LINK] A portion of my talk will focus on how patent law may react during a public health crisis.

The reality is that in a pandemic situation, the patent rights covering important treatments will be ignored. Under TRIPS, during a national emergency would-be patent infringement becomes a legitimate unauthorized use. At some later point, the patent holder should receive payment based on "the economic value of the authorization." In all likelihood, however, that ex-post payment will be a small fraction of the potential monopoly profits that could have been earned.

There are several legal avenues to allow "unauthorized use" in the US. One avenue is by denying injunctive relief. Even before eBay, no court would order an injunction in the face of a public health crisis that could be mitigated by allowing infringement. The test for injunctive relief specifically looks to the public interest. And here, easy access to treatments would weigh heavily in the public interest. Further, a patentee has no right to injunctive relief if the infringer is the US Government. 28 U.S.C. §1498. Thus, another avenue for unauthorized use is through direct government intervention. In 2001, Congress and the Administration were reported to have seriously considered "breaking" Bayer's patent on Cipro in order to stockpile the drug against a potential anthrax attack. In the Cipro case, the Government apparently used the threat of breaking the patent to negotiate a long-term contract with Bayer at an unusually low price. This approach might be termed 'bending' the patent. Individual states within the US may also apply pressure and threat of unauthorized use while retaining immunity from suit under the 11^th Amendment of the Constitution.

What Incentive?: We all understand that governments will not be able to avoid the temptation of breaking (or bending) patents covering important treatments that may be useful in some future crisis. Unfortunately, this prediction of the likely future greatly diminishes today's incentives to innovate crisis-specific treatments. Many empirical questions remain: Will the ex post compensation be a sufficient incentive to innovate? Will the most valuable treatments have non-crisis uses where patent rights will operate more normally? Are the potential crises so well defined that a grant or prize system could work better?

Notes:

• The tables below show patenting and patent application data for patents relating to influenza (search influenz$). For applications filed in 2001, almost 2,500 have been published. Less than 50% of those published applications have issued as patents in the seven year interim. Although we will never be sure, it looks like a little under 20% of the "influenza" applications filed in 2001 kept secret rather than publishing.

• The next chart shows the average number of non-patent references cited in the influenza patents as compared to patents in general.

   

Rethinking the four ‘factors’ of preliminary injunctive relief

Abbott Laboratories v. Sandoz, Inc., (Fed. Cir. 2008)(Newman, J.)

Preliminary injunctions decisions are blessed with their own four-factor equitable test. I like to think of the test as having two required elements (likelihood of success on the merits and potential irreparable harm) and two optional factors (balance of the equities and public interest). A preliminary injunction (PI) will only issue when (1) the first two elements are demonstrated by the patentee and (2) the combined result of all four elements/factors weighs in favor of a PI.

The district court granted a preliminary injunction to Abbott to stop Sandoz from making or selling a generic version of its extended release clarithromycin antibiotic. In 75 pages of split opinion, the Federal Circuit affirmed with Judge Newman writing the majority opinion; Senior Judge Archer signing-on except for the two juicy parts: I and VI; and Judge Gajarsa in vigorous dissent.

The dispute revolves around the meaning of the required PI element of 'likelihood of success on the merits.' To win on this element, the patentee typically needs to provide evidence of infringement of at least one valid claim. Often this element turns on the defendant's rebuttal proof of invalidity. Here, the defendant provided some evidence of potential invalidity, but not conclusive evidence. Thus, while the defendant did raise a substantial question of the vulnerability of the patent, it did not provide any clear and convincing evidence of invalidity.

Judge Gajarsa argued that Federal Circuit precedent requires a PI be denied when substantial questions of validity are raised. This standard is exemplified in the Federal Circuit's recent Erico decision – which found the threshold "substantial question" met by evidence which simply "cast[s] doubt on the validity" of the asserted claims.

Judge Gajarsa: "Under our precedent, the likelihood of success factor is properly analyzed by considering whether the alleged infringer raises a substantial question as to validity."

 

On the other side, Judge Newman argues that a patentee may still be likely to succeed on the merits even when vulnerabilities and substantial invalidity questions are raised by the defense.

Judge Newman: "The question is not whether the patent is vulnerable; the question is who is likely to prevail in the end, considered with equitable factors that relate to whether the status quo should or should not be preserved while the trial is ongoing. The presentation of sufficient evidence to show the likelihood of prevailing on the merits is quite different from the presentation of substantial evidence to show vulnerability. "

Both sides are well supported by conflicting precedent, and this case may well be a good vehicle for an en banc discussion of preliminary injunctive relief.

Patenting the Statue of Liberty

One of the more famous design patents is that of the Statue of Liberty, patented by Auguste Bartholdi of Paris in 1879.

Anticipation Requires More Than Disclosing All the Elements

Net MoneyIn v. Verisign (Fed. Cir. 2008)

NMI sued Verisign and others for infringing its credit card processing patent. One of NMI's claims was found anticipated by a single prior art reference. That reference taught each element in the invalidated claim. However, there was no single example that taught all the elements together.

On appeal, the Federal Circuit reversed – holding that anticipation takes more than simply locating each element within the four corners of a single document.

In its rebuttal, the appellate panel focused on the concept anticipating the invention. To anticipate, the prior art must teach all the claim elements and the claimed arrangement.

Section 102 embodies the concept of novelty—if a device or process has been previously invented (and disclosed to the public), then it is not new, and therefore the claimed invention is "anticipated" by the prior invention. . . . Because the hallmark of anticipation is prior invention, the prior art reference—in order to anticipate under 35 U.S.C. § 102—must not only disclose all elements of the claim within the four corners of the document, but must also disclose those elements "arranged as in the claim."

Focusing for a moment on arrangement – to anticipate, the reference must teach "all of the limitations arranged or combined in the same way as recited in the claim."

Applying the rule to this case, the appellate panel found that the prior art reference was not anticipating. The reference disclosed two transaction protocols, but neither protocol contained all of the elements combined in the manner claimed. "Thus, although the iKP reference might anticipate a claim directed to either of the two protocols disclosed, it cannot anticipate the system of claim 23. The district court was wrong to conclude otherwise."

Means Plus Function: After claim construction, the district court also found NMI's means-plus-function claims invalid because they lacked any corresponding structure in the specification. On appeal, the Federal Circuit affirmed.

The patent statute allows patentees to draft claims in more generic 'means plus function' language. That language allows a patentee claim various elements based on their function. However, means plus function claims are only valid if the specification describes some structure to carry out the proposed function. According to the courts, this structure requirement is separate from any enablement requirement. Thus, some structure must be provided in the specification even if one skilled in the art would not need that disclosure to make the invention.

Here, NMI claimed a "[a bank computer including] means for generating an authorization indicia" but did not provide any corresponding structure in the specification to perform that structure.

On appeal, NMI incredibly argued that the claim was not a means-plus-function claim. The Federal Circuit disagreed – finding that the claim lacks structure.

Searching for structure in the specification, NMI pointed to its recitation of a "bank computer." Of course that recitation is insufficient.

'To avoid purely functional claiming in cases involving computer-implemented inventions, we have "consistently required that the structure disclosed in the specification be more than simply a general purpose computer or microprocessor." Quoting Aristocrat … Consequently, a means-plus-function claim element for which the only disclosed structure is a general purpose computer is invalid if the specification fails to disclose an algorithm for performing the claimed function.

Holding of MPF claim invalidity affirmed.

Patent Term Adjustments Just Got Longer

Wyeth v. Dudas (D.D.C., Sept. 30, 2008).

35 U.S.C. § 154(a) establishes the patent term at twenty years from the filing date. Section 154(b) introduces various term adjustments due to PTO delay. One of the adjustment provisions broadly works toward a "guarantee of no more than 3-year application pendency." The other primary adjustment provision more narrowly focuses on the timeliness of individual PTO actions – such as providing an office action within 14-months. (These are §154(b)(2) and (b)(1) respectively).

Because some delays may qualify under multiple provisions, the statute also includes a clause to prevent double counting. This double counting statute – §154(b)(2)(A) – is written to ensure that "the period of any adjustment granted under this subsection shall not exceed the actual number of days the issuance of the patent was delayed."

In calculating the adjustment, the PTO calculates the adjustment under the broad rule and separately calculates the adjustment under the narrow rule. Then, to avoid double counting, uses only the adjustment that is greater. Thus, the applicant only gets credit for either the broad rule adjustment or the narrow rule adjustment, whichever is larger.

In this case, Wyeth has successfully challenged the PTO's interpretation. As the court holds, the double-counting problem does not arise when the specific PTO (b)(1) delay occurs before the application has been pending for 3-years.

This case, if it holds on appeal, will potentially add 22-months to the eventual term of the patents awaiting examination in the PTO bottleneck.

Already issued patents: 37 C.F.R. § 1.705(d) provides a two month deadline for reconsidering the PTO's calculations.

Notes:

• MBHB Patent Docs have written a more thorough interpretation of the case. [Patent Docs][Patent Hawk]
• File Attachment: pta.pdf (46 KB)

 

Tags: Patent+Term+Adjustment

Judge Improperly Cut Patentee’s Million Dollar Jury Verdict Without Offering a New Trial

Minks v. Polaris (Fed. Cir. 2008)

Floyd Minks won a jury verdict of $1.3 million based on a judgment of infringement by Polaris. The district court slashed that award by 95% -- finding that Minks was adequately compensated by $27,000 in damages and $117,000 in attorney fees and an extra $27,000 for willfulness. On appeal, the Federal Circuit vacated the reduction in damages based on a procedural issue.

As a safety device, many all-terrain vehicles (ATVs) include a reverse-direction governor to prevent operating the vehicle at high speeds while driving backwards. The Minks patent covers a particular type of electronic governor to accomplish this goal.

Through his company, Minks Engineering, Minks designed the electronic governor for Polaris and also patented the design. Later, Polaris found a cheaper vender with a redesigned governor. At that point, Minks sued for infringement.

After the $1.3 million dollar verdict, the district court granted the Polaris motion for a reduction of the damage award "as a matter of law" under Fed. R. Civ. Pro. 50.

In the appeal, the Federal Circuit agreed that some reduction may be proper. However, the appellate panel held the Seventh Amendment of the US Constitution requires that a new trial on damages as a prerequisite to any reduction.

"The issue before us on appeal is whether the Seventh Amendment required the district court to offer Minks the option of a new trial in lieu of accepting the reduced damages award"

The fact-law distinction found throughout patent law is important because of Seventh Amendment's high regard for factual decisions by a jury. The "reexamination clause" of the Seventh Amendment reads as follows: "no fact tried by a jury, shall be otherwise re-examined in any Court of the United States, than according to the rules of common law." Here, the damage amount is a factual inquiry, and the Seventh Amendment has been interpreted to usually require that a district court offer a new trial on damages as an option when considering setting aside an excessive jury award.

The Eleventh Circuit (where this case arose) allows a judge to reduce a jury verdict without offering a new trial in the limited case where the error was a "legal error" as opposed to an error in adjudging a factual issue. Here, however, the error was in the jury's determination of the number of infringing sales, royalty base, and royalty rate – all factual issues.

"A comparison of the Georgia-Pacific factors and the standard of a hypothetical negotiation to the evidence of record in this case makes clear that the district court's reduction of compensatory damages necessarily amounted to an assessment of the sufficiency of the evidence, and as such, the option of a new trial was required."

This case is in tension with Tronzo v. Biomet (Fed. Cir. 2001). In that opinion, the Federal Circuit agreed that a new trial was not necessary even though the district court had reduced compensatory damages from seven million dollars to only five hundred dollars. The distinction may be that in Tronzo, the reduction was a legal issue because the patentee had presented no credible damages evidence. Here Minks presented at least "limited evidence" of damages.

Vacated and remanded for a new trial on damages.

Protecting Design Patents on Shoes

Nike v. Wal-Mart (N.D. Ill. 2008)

Nike has sued Wal-Mart for design patent infringement asserting infringement of Pat Nos. D498,914 and D499,248. As with many design patent lawsuits, the patentee here (Nike) also makes a product covered by the design. Design patents have become more important to Nike as the company's trademark 'swoosh' has been less prominent in recent shoe designs. Every year during the past decade, Nike has ranked in the top ten owners of newly issued design patents. 

Damages for design patent infringement may be calculated a few different ways. Section 284 calls for compensatory damages with a base of a “reasonable royalty.” Section 289 looks to disgorge profits from the infringer.

In the late 1990’s, Nike won another shoe design patent case against Wal-Mart. In a damages appeal, the Federal Circuit found that Nike had not properly marked its products — holding that to take advantage of the marking statute, a patentee must prove “that substantially all of the products being distributed were marked, and that the marking was substantially consistent and continuous.” Nike Inc. v. Wal-Mart Stores, 138 F.3d 1437 (Fed. Cir. 1998) (Newman).

Notes:

• The top image is a portion of the infringement claim chart from the complaint. The second (pink) image is a Nike shoe.
• First seen on Patent Hawk
• Nike Complaint

Does the Piracy Paradox apply for Patents?

A 2006 paper by Kal Raustiala (UCLA) and Chris Sprigman (UVA) titled the Piracy Paradox discusses intellectual property and the fashion industry. The authors conclude that the legal ability of manufacturers to create knock-off versions of fashion designs actually promotes innovation and investment in that industry. Similar phenomena have been explained in other industries. In music, for instance, some studies have shown that peer-to-peer file sharing of copyrighted work actually increases sales because of the increased popularity of the artist. Since the dawn of radio, record companies have paid stations to broadcast their music – even though the broadcast would be considered infringement.

My question is whether there are patent specific examples of this process going on? Are there times when 'piracy' of a technology actually encourages further R&D?

Patently-O Bits and Bytes: Partners, Events, and Jobs

New Partners at the Patently-O Job Board:

• Invention Analysis & Claiming Strategies Seminar. Register for Ron Slusky's unique program for patent prosecutors and receive a $50 discount as a Patently-O reader. The conference offers 13 hours of accredited CLE. Discount code: PO50. The seminar presents principles that enable patent prosecutors to better identify the broad inventive concept and its fallback features and to develop a suite of claims that will maximize the patent's value to the patent owner.
• Expert Consultant and Analytical Services. Scitemex, a provider of technology and litigation support, is now a sponsor of the Patently-O Job Board.
• Michael Heath is working one-on-one with Patently-O Job Board readers to help link employers and employees.
• American Conference Institute (ACI) has an updated list of conferences. One recently added is a conference on High Tech Patent Prosecution.

Other upcoming events:

• October 23-24, 2008: I will be speaking at the Seton Hall Law Review's upcoming conference titled "Preparing for a Pharmaceutical Response to Pandemic Influenza." Our panel on intellectual property issues includes Professor Kane (Penn State); Professor Ho (Loyola Chicago); and Professor Opderbeck (Seton Hall). The event (including CLE) is open to the public and free. However, you should pre-register.
• January 30, 2009: I will be part of the Santa Clara Computer and High Technology Law Journal's 25th Annual Symposium – speaking on inequitable conduct issues.
• February 6, 2009: I will be part of the Texas Intellectual Property Law Journal's Tenth Annual Intellectual Property Law Symposium at the University of Texas. The title of my talk is Evidence Based Prosecution: Empirical Results from the Prosecution Files of One Million Recently Issued Patents.
• March 17-19, 2009: I will be part of the IP Law Summit in Ponte Vedra, Florida at the Sawgrass Marriot.

Recent Job Postings:

• Patent Attorney - Small Corporation - Rochester, N.Y.
• Chief International Patent Counsel - Large Corporation - Madison, N.J.
• Biotech Patent Associate or Patent Agent - Law Firm - Portland, Ore.
• IP Fellowship - The George Washington University - Washington D.C.
• Patent & Trademark Associate - Law Firm - Boulder, Colo.
• Patent Agent - Law Firm - New Bern, N.C.
• Patent Litigation Attorney - Law Firm - Portland, Maine
• Paralegal - Non-Profit - Seattle, Wash.
• Patent Attorney - Law Firm - Chicago, Ill.
• Patent Prosecution - Law Firm - Los Angeles, Calif.

Recent Posts:

• Cipro Litigation: Federal Circuit Finds No Antitrust Liability for Hatch-Waxman Reverse Payment Settlements
• Rethinking the Scope of Prior Art in Obviousness Cases
• Tafas v. Dudas: Amicus Briefs at the Federal Circuit
• Paul Cole, Patentability of Computer Software As Such
• Anticipated yet Nonobvious

Federal Circuit Finds No Antitrust Liability for Hatch-Waxman Reverse Payment Settlements

In re Ciprofloxacin Hydrochloride Antitrust Litigation (Fed. Cir. 2008)

Bayer's patent on Cipro was challenged by Barr. However, the parties settled on the eve of trial. In all, Bayer paid $398 million to Barr to ensure that it didn't receive a judgment of invalidity or unenforceability. Subsequently, Bayer filed for reexam to ensure that there would not be a later inequitable conduct problem. When other companies later challenged the patent, it was repeatedly found valid.

To many, the Barr settlement looked like a way to prop-up the drug price at the expense of consumers, health insurance companies. Various groups filed suit – arguing violations of Sections 1 and 2 of the Sherman Act and violations of state antitrust and consumer protection laws.

On summary judgment, the Federal District Court in New York applied a rule of reason to find no antitrust violations as follows:

1. The relevant market is CIPRO and Bayer had market power in that market.
2. However, any "adverse effects on competition" due to the settlement could not create antitrust violations because the settlement was "within the exclusionary zone of the '444 patent."

In its holding, the district court rejected the notion that the "exclusionary zone" would be narrowed or altered by the potential invalidity of the patent. Furthermore, the district court held that unenforceability due to prosecution misconduct cannot be the subject to a Walker-Process antitrust violation – rather, the misconduct must be market-based misconduct. And, the Walker-Process argument failed because Bayer later successful litigation showed that its approach with Barr was not a 'sham.'

On appeal, the Federal Circuit affirmed the summary judgment in favor of the pharmaceutical companies.

Per Se vs Rule of Reason: Some activities are considered so pernicious that they will be considered per se violations of the Sherman Act. Most actions, however, are judged under the rule of reason to determine if the particular activities had a potentially pro competitive impact. Here, the federal circuit could find no basis for "confidently predict[ing]" that such reverse-payment settlement agreements were unlawful – and consequently should be judged under the rule of reason.

Patents and Antitrust: Patents lead to anticompetitive behavior – that is the nature of the right to exclude. A patentee will not have antitrust liability for activity within the "zone of exclusion" of its patent. On appeal, the Federal Circuit agreed that the reverse payment was within the zone of exclusion.

Reverse Payments: In patents, a reverse payment is a payment by a patentee to an accused infringer to end litigation and perhaps to keep the infringer off the market. Remember, typically, it is the patentee who is looking for damages, not seeking to pay. The plaintiffs argued that such a reverse payment could not be considered within the ordinary scope of patentee behavior. The appellate court disagreed, finding that through the payment, Bayer was protecting its market share in its patented product and thus was well within its rights.

Pursuant to the Agreements, the generic defendants agreed not to market a generic version of Cipro until the '444 patent expired and not to challenge the validity of the '444 patent, and Bayer agreed to make payments and optionally supply Cipro for resale. Thus, the essence of the Agreements was to exclude the defendants from profiting from the patented invention. This is well within Bayer's rights as the patentee. . . . A settlement is not unlawful if it serves to protect that to which the patent holder is legally entitled—a monopoly over the manufacture and distribution of the patented invention.

In addition, the court found that settlements are favored even when anti-competitive.

Furthermore, there is a long-standing policy in the law in favor of settlements, and this policy extends to patent infringement litigation. Settlement of patent claims by agreement between the parties—including exchange of consideration—rather than by litigation is not precluded by the Sherman Act even though it may have some adverse effects on competition.

And, settlements normally include a promise not to challenge validity – something allowed under antitrust laws:

Settlements in patent cases, however, frequently provide that the alleged infringer will not challenge the validity of the patent. Thus, the mere fact that the Agreements insulated Bayer from patent validity challenges by the generic defendants was not in itself an antitrust violation.

Affirmed

Notes

• On the panel were Circuit Judges Schall and Prost and Judge Ward from the Eastern District of Texas sitting by designation. The opinion was written by Judge Prost.
• Expect petitions for en banc hearing and certiorari. The reverse payment issue has been brewing for some time.
• During the post-9/11 anthrax scares, the Federal Government threatened to break the patent and begin manufacturing a generic version if sufficient supplies were not available. [Link]

Rethinking the Scope of Prior Art in Obviousness Cases

In Cohesive Technologies, the Federal Circuit issued a reminder that the novelty analysis of 35 U.S.C. §102 is separate and distinct from the nonobviousness analysis of 35 U.S.C. §103(a). The court notes that some prior art evidence – such as inherent elements of a disclosure – used for anticipation argument may not be used in obviousness analyses. That result is in tension with the traditional understanding that § 102 material may be used for §103(a) analysis.

In a recent e-mail, Professor Isaacs (NKU) saw that tension as a reason to for courts to take a fresh look at the text of §103(a). This is especially timely in light of the recent cases such as eBay, KSR, and MedImmune where the Supreme Court had no trouble altering longstanding precedent.

The most glaring problem with the current interpretation of § 103(a) involves post-invention art and secret prior art that are available as §102(b)/§103(a) and §102(e)/ §103(a) references respectively. These two allowances are contrary to the plain language of §103(a) because the statute focuses on what "would have been obvious at the time the invention was made."

35 U.S.C. 103(a) A patent may not be obtained though the invention is not identically disclosed or described as set forth in §102 of this title, if the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains. …

Under a plain reading of §103(a), post-invention references cannot negate patentability because they were not available "at the time the invention was made." Similarly, secret prior art – almost by definition – could not be known by one of ordinary skill in the art – especially under the Supreme Court's new "common sense" approach to obviousness.

Of course, these arguments have been tried before – and failed.

• In re Foster, 343 F.2d 980 (C.C.P.A. 1965) (cert denied) (creating §102(b)/§103(a) prior art)
• Hazeltine Research, Inc. v. Brenner, 382 U.S. 252 (1965) (creating §102(e)/ §103(a) prior art)

Perhaps the time is right for a challenge.

Patently-O Bits and Bytes

Researchers at the IP Research Institute of Australia (IPRIA) have a recent paper on pendency at the various patent offices. Professors Jensen, Palangkaraya and Webster looked at almost 10,000 international patent application families filed in the early 1990's and studied how they fared in the USPTO, EPO, JPO and APO. When examining the same applications, the USPTO had the shortest pendency. The study also shows that many applicants would take advantage of deferred examination if allowed in the US. [Read the Paper]

    

Top 25 referrals to Patently-O in the past month (excluding search-engines). Thanks for the links!

patenthawk.com/blog just-n-examiner investorvillage.com 271patent patentbaristas jobs.inhouseblog inventblog.com orangebookblog.com wikipedia.org blog.mises.org techdirt.com patentdocs

13.     howappealing 14.     nytimes.com 15.     abovethelaw.com 16.     iam-magazine.com 17.     ipwatchdog.com 18.     intelproplaw.com 19.     duncanbucknell.com 20.     thettablog 21.     patentlyo.org (cyber-squatter?) 22.     patentu.blogspot.com 23.     toolpat.com 24.     anticipatethis 25.     thepriorart

Tafas v. Dudas: Amicus Briefs at the Federal Circuit

In support of Tafas:

• AIPLA File Attachment: aipla.PDF (1020 KB)
• BIO File Attachment: bio.pdf (240 KB)
• Cantor Fitzgerald File Attachment: cantorfitz.pdf (376 KB) (rules improperly shift burden of proof)
• ELAN File Attachment: elan.pdf (7683 KB)
• Intellectual Ventures, et al. File Attachment: intven.pdf (936 KB)
• IPO File Attachment: ipo.pdf (1306 KB) (Undermining the principles of Knorr-Bremse, the rules force disclsoure of a “patentability opinion” in the form of an ESD)
• Lelkes, esq.  File Attachment: lelkesprose.pdf (321 KB) (discussing how the rules would violate the PCT)
• Licensing Professionals File Attachment: licensingcos.pdf (1400 KB)
• Monsanto File Attachment: monsanto.pdf (243 KB) (provides a specific example of how the final rules will impact the company’s rights)
• NYIPLA File Attachment: nyipla.pdf (3313 KB)
• PhRMA File Attachment: phrma.pdf (263 KB) (discussing the financial impact of the rule change)
• SonicWall File Attachment: sonicwall.pdf (104 KB)
• William Mitchell File Attachment: williammitchell.pdf (1145 KB)

In support of the PTO:

• Law Professors File Attachment: lemley.pdf (510 KB)
• PubPat File Attachment: pubpat.pdf (149 KB)

Federal Circuit Vacates ITC's Broadcom Order

Kyocera v. ITC (Fed. Cir. 2008) (Broadcom v. Qualcomm)

The ITC found that Qualcomm infringed Broadcom’s ‘983 patents and issued a limited exclusion order against imports by Qualcomm and its customers.

On appeal, the Federal Circuit vacated and remanded — finding that the ITC (1) did not properly find inducement of infringement and (2) lacked authority to issue a limited exclusion order against non-respondents.

Inducement Requires Specific Intent: On their own, Qualcomm’s MSM chipsets do not infringe. However, the ITC found direct infringement in handsets that use the Qualcomm chipset in conjunction with “system determination software.”  The ITC found Qualcomm liable for inducing infringement because it provided the chipsets and the system determination software along with training and customer support.

Inducement requires underlying direct infringement and that the accused infringer “knowingly induced infringement and possessed specific intent to encourage another’s infringement.” This includes an “affirmative intent to cause direct infringement.”

On appeal, the Federal Circuit found that the ITC had based its decision on a lower level of “general” intent without requiring evidence of Qualcomm’s “culpable conduct” of “encouraging another’s infringement.”

In particular, the ITC’s statement that “Qualcomm intends to induce infringement because it provides its customers with the system determination code” is insufficient.  On remand, the ITC must find specific intent.

ITC Exclusion Orders: The ITC may issue either limited exclusion orders directed toward the actions of specific companies or general exclusion orders directed broadly to an industry. In this case, the ITC issued a limited order that excluded, inter alia, downstream manufacturers who were not named parties in the litigation.

On appeal, the Federal Circuit found that limited exclusion orders may not go beyond the named parties.  A general exclusion order may be appropriate. However, additional proof of necessity are required for general orders.

Notes:

• This case involves different patents than the District Court Broadcom case [Part I][Part II]
• This case is also involves different patents from the earlier Broadcom v. ITC. In that case, the Federal Circuit also vacated an ITC holding this time in Broadcom’s favor — vacating the ITC's non-infringement finding. [LINK]

 

Shifting Burden of Production Does Not Shift Burden of Proof; PTO Deference

Technology Licensing Corp v. Videotek (Fed. Cir. 2008)

The independent inventor J. Carl Cooper invented and patented technology separating a sync signal from a video signal to better ensure vertical and horizontal hold on a video screen. Cooper assigned his rights to TLC which sued Videotek for infringement. Videotek pulled-in its supplier Gennum for indemnification. Gennum now remains as the only defendant.

Priority Date: Cooper's asserted patent claims priority to an earlier application filed in 1992. The district court found specifically that claim 33 could not claim priority all the way back because the claim included a limitation to an "other circuit" which was only disclosed in the subsequent continuation.

Burdens of Proof and Production: Although a defendant ultimately bears the burden of proving invalidity, the burden of producing evidence may shift back and forth during litigation. For instance, once a defendant provides evidence of anticipation, the patentee then has the "burden of going forward with evidence either that the prior art does not actually anticipate, or … that it is not prior art because the asserted claim is entitled to the benefit of a filing date prior to the alleged prior art." Proving priority requires evidence of the priority claim and also evidence showing that "the written description in the earlier application supports the claim." Here, the court required cooper to produce "sufficient evidence and argument to show that [the priority document] contains a written description that supports all the limitations of claim 33, the claim being asserted." Once the evidence is on the table, the claim will only be invalid if the defendant's proof remains is clear and convincing.

[B]ecause an issued patent is by statute presumed valid, a challenger has the burden of persuasion to show by clear and convincing evidence that the contrary is true. That ultimate burden never shifts, however much the burden of going forward may jump from one party to another as the issues in the case are raised and developed.

Here, the Federal Circuit agreed that the defendants had clearly proven that the original written description was insufficient – and thus that the patentee could not claim priority all the way back.

Deference To and Waiting For the PTO: The PTO issued Cooper's patent and then, through a reissue, again allowed the challenged claim to issue even after considering the same prior art (the reissue issued while the appeal was pending). On appeal, the Federal Circuit distinguished Ralston v. Far-Mar-Co (Fed. Cir. 1985). In Ralston, the court deferred to the PTO's determination of priority date. Here, however, there was no evidence that the PTO specifically considered the priority dates. However, the Federal Circuit refused to "add an additional deference-thumb to the scale, or, even more disruptive, our asking the trial court to reopen the entire invalidity question to reweigh the intangible worth of additional deference."

This is not to say that the determinations made by the corps of examiners are not important, or should not be worthy of appropriate deference to their expertise in these technical matters, especially when we have the benefit of well-reasoned explications. It is to say that when dealing with the intangible worth to be accorded an administrative agency's decision making, the judicial process cannot be held hostage to the timing of either the agency or the litigants who have invoked the agency's further review. In some circumstances a party may be able to obtain a stay from the trial court while awaiting the sought-for agency action; absent that, and absent extenuating circumstances not here present, the case must be decided on the record the litigants present for appeal.

Inequitable Conduct:

There has never been an exception [requiring submission of] anticipatory cumulative references, and we are not inclined to create one now.

Definiteness of Means Plus Function Claim: A MPF claim must be supported by structural disclosure found in the patent specification – this requirement is akin to the written description requirement and focuses on actual disclosure rather than enablement.

The question is not whether one of skill in the art would be capable of implementing a structure to perform the function, but whether that person would understand the written description itself to disclose such a structure.

In electronic circuit cases the actual circuit disclosures are not necessarily required. Rather, generic "core logic" may be sufficient. Here, the defendants were unable to provide clear and convincing evidence of a lack of structure.

Federal Circuit Agrees to Hear Interlocutory Appeal on Standing

Sky Tech v. SAP (Fed. Cir. 2008 ) (nonprecedential order)

Sky sued SAP in the Eastern District of Texas. SAP argued that Sky lacked standing because a prior assignment of patent rights had not been properly obtained. The district court found standing but gave its approval for an interlocutory appeal – noting that the issue was a close question. At the Federal Circuit, the three-judge panel agreed to hear the case and eventually to determine whether Sky has standing. The Sky patents were purchased by XACP in a foreclosure sale of Ozro's assets – the question will be whether the foreclosure sale was proper even without a written assignment agreement.

Stay pending appeal: SAP had requested a stay pending appeal. The appellate panel refused to rule on that motion – instead noting that "the better course is for the Texas district court to consider that issue in the first instance."

Tags: Standing

CAFC allows Venue Transfer to Texas

In re Volkswagen (Fed. Cir. 2008) (nonprecedential denial of mandamus)

In July 2007, MHL filed a patent infringement suit against VW in the Eastern District of Texas. Hoping to avoid that venue, the automobile company countersued in the Eastern District of Michigan. Although primarily a declaratory judgment action, VW included Michigan state law claims of unfair competition, defamation, trade disparagement, and abuse of process. In a preliminary hearing, the Michigan court declined its powers of supplemental jurisdiction over the state law claims and ordered the case be transferred to Texas. Because the transfer was not a final action, VW had no right to an appeal. Instead, it filed a writ of mandamus.

The Federal Circuit considered the writ, but ultimately declined to exercise authority over the case – finding that VW had not shown the importance of immediately deciding the issue. "A party seeking a writ bears the burden of proving that it has no other means of attaining the relief desired."

In Texas, the 5^th Circuit Court of Appeals just released its en banc opinion in another In re VW case. In that case, the 5^th Circuit held that the E.D. Texas (Marshall) court had unreasonably refused to transfer VW's case to a Northern District court in Dallas. The AIPLA filed a brief in that case, noting that the Eastern District of Texas rarely allows an out-transfer. From the AIPLA brief: "The routine filing of patent infringement complaints in the Eastern District of Texas that have essentially no connection to that district has been encouraged by the seeming reluctance of courts in that district to transfer cases under § 1404(a)." [Link]

In another venue case, Judge Patel of the Northern District of California noted that venue games are "perfectly legitimate"

"It is clear that both parties are attempting to achieve tactical advantage in the choice of a forum (which is a perfectly legitimate goal in an adversarial system of justice)."

In Sorensen v. Phillips, Judge Patel transferred the case to the Southern District of California where a parallel proceeding was already underway (and stayed pending reexamination).

Notes:

• Discussion of 5^th Circuit appeal

 

Tags: Venue, Patent

Paul Cole, Patentability of Computer Software As Such

In Symbian Limited v. Comptroller General of Patents [2008] EWCA Civ 1066, the UK Court of Appeal recently took a broader approach to patentability of software. UK patent attorney and author Paul Cole has written a short article for the Patently-O Patent Law Journal discussing the case and its impact. [Paul Cole Article]. The opinion cites John Duffy's recent "Death of Google's Patents" article also published on Patently-O.

• Paul Cole Article
• John Duffy Article
• Opinion: http://www.bailii.org/ew/cases/EWCA/Civ/2008/1066.html
• Opinion (Lower Court): Symbian v. Comptroller General of Patents
• Paul Cole's Book: Fundamentals of Patent Drafting

Anticipated yet Nonobvious

Cohesive Tech v. Water Corp (Fed. Cir. 2008)

Perhaps the most important portion of this case relates to the notion that novelty and nonobviousness are separate and distinct inquiries. And, that a patent may be found anticipated yet nonobvious.

On summary judgment, the district court Cohesive’s HPLC patent might be obvious, but certainly was not anticipated.  Water appealed — arguing that the judgment was logically incorrect if anticipation truly is the “epitome of obviousness.”  On appeal, however, the Federal Circuit confirmed that novelty and obviousness are separate and distinct — one does not necessarily follow the other.

“While it is commonly understood that prior art references that anticipate a claim will usually render that claim obvious, it is not necessarily true that a verdict of nonobviousness forecloses anticipation. The tests for anticipation and obviousness are different.

The court suggested two circumstances where an anticipated claim might still be nonobvious.  First, secondary considerations of nonobviousness may exist that are not relevant in an anticipation claim. Second, although inherent elements apply in an anticipation, inherency is generally not applicable to nonobviousness. 

“[O]bviousness requires analysis of secondary considerations of nonobviousness, while secondary considerations are not an element of a claim of anticipation. And although anticipation can be proven inherently, proof of inherent anticipation is not the same as proof of obviousness.”

The court also gives an example —

“Consider, for example, a claim directed toward a particular alloy of metal. The claimed metal alloy may have all the hallmarks of a nonobvious invention—there was a long felt but resolved need for an alloy with the properties of the claimed alloy, others may have tried and failed to produce such an alloy, and, once disclosed, the claimed alloy may have received high praise and seen commercial success. Nevertheless, there may be a centuries-old alchemy textbook that, while not describing any metal alloys, describes a method that, if practiced precisely, actually produces the claimed alloy. While the prior art alchemy textbook inherently anticipates the claim under § 102, the claim may not be said to be obvious under § 103.”

Judge Mayer dissented — arguing that anticipation is a subset of nonobviousness. “Although a claimed invention can be obvious but not anticipated, it ‘cannot have been anticipated and not have been obvious.’ In re Fracalossi, 681 F.2d 792, 794 (CCPA 1982).”

“The majority’s assertion that a claim can be anticipated but not obvious, flies in the face of a long line of precedent to the contrary. Not surprisingly, it is unable to cite a case remanding to the district court for consideration of anticipation, while at the same time sustaining a determination that claims at issue are not obvious.”

The practical impact of this case:

1. Anticipation still gets to a jury even when the defense has a credible obviousness argument.
2. The Majority’s example might be seen to narrow the scope of documents available for obviousness arguments along a temporal axis. (References from a long time ago shouldn’t be combined with more recent references.)
3. In some ways, the ‘common sense’ approach of KSR encourages this decision. While anticipation may still be a formal construct, obviousness should focus on what really would have been obvious at the time of the invention.
4. Professor Ochoa (Santa Clara) reminded me about the European rule that does not allow “secret” prior art to be used in obviousness (inventive step) analysis.  If the US so modified its rules, perhaps the distinction between obviousness and anticipation would begin to ring true.

PTO FEES

In a recent post on fee sensitivity, many readers commented that (1) applicants pay for their own examination through the examination fees; and (2) the PTO should not change fees in order to influence patent applicant behavior. [FEE SENSITVITY]. Although the PTO is fully funded by the fees it charges, a good percentage of current examination costs are paid through maintenance fees. Those fees are currently $980 at 3.5 years after issuance; $2,480 at 7.5 years; and $4,110 at 11.5 years.

 

ABC is Looking for a “Superstar Family of Inventors”

The casting producer at "Wife Swap" thought some of our readers may know some great inventors:

WIFE SWAP, ABC'S HIT PRIMETIME SHOW, SEEKS A SUPERSTAR FAMILY OF INVENTORS! The premise of Wife Swap is that one parent from each household swaps places for a week to experience how another family lives. It is an incredible family experience and opportunity to both learn and teach different family values. Wife Swap is a fascinating story of what happens when two couples see themselves and their partners in a whole new light. The New York Post says, "It should be called 'Life Swap' because it's not just the wives who learn something here. It's the families." Potential families can live anywhere in the United States, but we ask that families applying for the show consist of two parents and have at least one child, age 7 or older, living at home. Specifically, I'm looking for families who are always looking for the next big invention! To submit for the show please email a family photo and description to: gaby.wifeswap@gmail.com. Families featured on the show will receive a $20,000 honorarium. If you refer a family that is selected you receive $1,000. If you are a family unit (two parents and children between the ages of 7 and 17) who love an adventure, I would love to hear from you today! Also, please feel free to send this casting along to any families you feel would be appropriate! More information is available at: http://abc.go.com/primetime/wifeswap.

Tags: Wife+Swap

Federal Circuit Affirms $46m Default Judgment Against Bodog

1^st Technology v. Rational Ent. and Bodog (Fed. Cir. 2008)

1^st Technology won a default patent infringement judgment against the online gambling company Bodog and the Nevada district court awarded $46 million in damages plus interest. The patentee has been enforcing the judgment by attaching Bodog's US assets – including its domain names and trademark registrations. Without opinion, the Federal Circuit has affirmed that judgment.

On appeal, Bodog argued that it was not properly served notice of the litigation and that the Nevada court lacked personal jurisdiction over the company. 1^st argues that the service (to a Bodog's Costa Rica office) was proper and that by not arriving in court Bodog had waived its personal jurisdiction argument. In addition, plaintiffs cite to a 2005 Forbes article noting how "in 2005, the Bodog entities handled $7.3 billion in online wagers, 95% of which came from the United States, with sales increasing every year. [Bodog's founder] Mr. Ayre pays no United States income tax, and prides himself on the fact that he and the Bodog entities routinely evade United States law."

Links:

• Patently-O: Internet Gamer Loses Millions in Default Patent Judgment.
• Evan Brown: Court enjoins transfer of trademarks associated with domain name booty.
• Cartoon: Calvin Ayre has his own superhero cartoon: Ayre Force.

Taking Action Against the new Ex Parte Appeal Rules

On October 8, 2008, the PTO invited public comments on the potential paperwork burden caused by the new Ex parte Appeal Rules (73 Fed. Reg. 32937-32977, June 10, 2008).[Request for comment]. Economist Dr. Richard B. Belzer is working to push the Office of Management and Budget (OMB) to reject the rules – in part by arguing that they will be unduly burdensome. Any comments that come in response to this Information Collection Request (ICR) will be sent directly to the OMB.

The following comes from Dr. Belzer via David Boundy:

Laches and Equitable Estoppel

Troxler Electronic Labs v. Pine Instrument (E.D.N.C. October 6, 2008).

In 2001, Troxler filed a patent infringement action against Pine – alleging infringement of its patent covering equipment for testing the quality of asphalt. In 2002, Pine counterclaimed with its own infringement allegations against Troxler. The two companies were direct competitors in this market and together held most of the market share.

The dates are important here:

• 1996: In a letter, Pine accused Troxler of infringement (pre-issuance).
• 1997: Pine's patent Issues; In a letter, Troxler opined that Pine's patent was invalid.
• 2001: Troxler sues Pine on another patent
• 2002: Pine counterclaims alleging infringement

In the 1996-2002 interim, it was clear that "Pine had first-hand knowledge that Troxler continued to sell its gyratory compactors. . . Despite this knowledge of Troxler's allegedly infringing activities, Pine did not takeany action against Troxler to defend its patent until February 19, 2002, when it asserted its counterclaim. Nearly five years of allegedly infringing activity occurred before Pine took any legal action to defend its patent." According to deposition testimony, Pine's president explained the delay because he "didn't feel motivated to pursue [the claim]."

Laches & Equitable Estoppel: Looking at these facts, Magistrate Judge Webb found that Pine may well be barred from pursuing its infringement allegations under the doctrines of equitable estoppels and laches.

Under the defense of equitable estoppel, the accused must have relied on the patentee's assurances or non-enforcement activity in choosing to continue infringing. On summary judgment, the Magistrate recommended that the case go to trial to determine reliance:

[T]here is a material issue of fact as to whether Troxler was in fact lulled by Pine into a sense of security. Because of this material issue of fact, neither party is entitled to summary judgment on this prong Troxler's equitable estoppel defense.

Enforcement Laches does not require detrimental reliance. However, the patentee must be shown to have "unreasonably and inexcusably" delayed bringing suit and that the alleged infringer subsequently suffered material prejudice. A six year delay creates a presumption of laches. Here, the delay was only five years – calculated from the 1997 patent issuance to the 2002 counterclaims. Although no presumption exists in this case, the magistrate judge noted that Pine's excuse - lack of motivation – is insufficient.

[A] laches defense exists precisely to prevent patentees from delaying in filing suit simply because they do not feel "motivated to do so." Accordingly, the undersigned hereby finds that Pine's unjustified five year delay was unreasonable and that Troxler is entitled to summary judgment on the unreasonable delay prong of its laches defense

The harm of the delay can be shown in a variety of ways. Here, the magistrate judge focused on evidentiary harms and economic harms.

• Evidence Lost: Troxler founder and CEO died during the interim. He had directed the development of the accused product.
• Evidence Lost: Time delay has probably faded the memory of the Pine inventors.
• Evidence Lost: Many documents have been destroyed. (Troxler is a family business – "When the drawer gets full, you toss something.")
• Economic: In the interim, Troxler has invested millions of dollars in manufacturing facilities and producing the alleged product.

Based on the potential validity of some of these arguments, the magistrate judge recommended they be explored at trial.

Unclean Hands: Because laches and equitable estoppel are both judged in equity, Pine argued that Troxler's "unclean hands" should bar the company from relying upon those defenses. Particularly, Pine noted discovery shenanigans and filing suit without a good faith basis. The magistrate judge agreed that allegations of "egregious behavior" must be included in any equitable decision.

The district court will now decide whether to convert the magistrate judge's recommendations into an order.

Patently-O Bits and Bytes: Prior Art Citations

Over the past 33 years, the sheer number of prior art citations have steadily risen. In the mid 1970's less than one percent of issued patents cited more than twenty prior art references. Today, more than thirty percent of recently issued patents reach that benchmark. Although the examiner is considering more prior art, the average amount of time an examiner spends reviewing an application is about the same as it was back then.

Inventor Remuneration Around the World

Article 35 of the Japanese Patent laws provide for "reasonable remuneration" from the employer when the employer takes assignment of patent rights. In my first reading, the Japanese law does not appear to include a limit to only Japanese employers. In fact, such a limitation could arguably be a violation of the country's obligation of national treatment. Is there a definitive answer to whether the Japanese law applies to all patents filed in Japan or only those originating in Japan? Do other country inventor remuneration laws apply to US companies filing US initiated inventions in that country?

IGT Petitions for En Banc Rehearing: Asking Court to Allow Invalidity Defense for “Improper Revival”

Aristocrat v. IGT (Fed Cir. 2008 – on rehearing) ITG PETITION

IGT has petitioned the Federal Circuit for a rehearing en banc. IGT asks the court to consider which violations of the Patent Act would be sufficient to render a patent invalid during litigation.

In this case, Aristocrat filed its US national-stage application one day late. The PTO allowed the applicant to revive the application as unintentionally abandoned. In litigation, IGT argued that the patent should be held invalid as improperly revived because the statute only allows for revival of unavoidably abandoned applications in this situation.

Without reaching the merits of IGTs validity argument, the Federal Circuit summarily dismissed IGT's claim – finding that 'improper revival' is not a 'cognizable defense' because it does not fit within any of the four defenses listed in 35 U.S.C. §282 and it is not otherwise justified in equity.

This unanimous decision – signed by Judges Newman, Bryson, and Linn – has broader implications. It calls into question whether traditional invalidity defenses such as nonstatutory double patenting and improper inventorship remain. IGT provides its own list of challenges that will be barred even after PTO error. Notably the gaming company argues that under the new rule, improper revivals of any type could not be challenged nor could failure to pay the maintenance fees.

In its brief, IGT seeks to overturn the panel's narrow interpretation of a "condition for patentability." Section 282(2) allows for an invalidity defense based on failure to meet a condition for patentability. However, the appellate panel limited that section only to issues of novelty, utility, and nonobviousness.

'Section 131 supports [a] common sense reading of the statute. It states that the PTO "shall issue a patent" only if "the applicant is entitled to a patent under the law." 35 U.S.C. § 131. The plain meaning of that provision is that lawful entitlement to a patent is a condition of patentability. An applicant who abandoned its application without reviving it under the statutory mandated standard is not lawfully entitled to a patent and should have no right to enforce it. The panel's decision overthrows these common-sense principles as set forth in the Patent Act.' IGT rehearing motion.

IGT also argues that improper revival was "made a defense" by Congress when it created the law of abandonment that allows only revival for unavoidable delay in cases like these. IGT argue essentially that failure to comply with any patent statute is sufficient to render the patent invalid in litigation.

Notes:

• DDC Comment: The Case Should be Heard. The Patent Office serves as a threshold check to establish presumptive property rights. However, both the technology and the law are complicated enough to warrant a 'second look' to ensure that each legal requirement is met. It is clear that a significant number of issued patents would be found invalid if challenged. The second look could be through litigation challenges, reexamination proceedings, or some other ex post proceeding. This opinion, however, concludes that no challenge is available in a variety of potential cases. That result is wrong from a policy perspective and It appears that IGT has a strong statutory construction argument as well.
• Hat Tip: Thanks to Chico Gholz and Mark Lemley for suggesting specific implications of the panel holding.

Inventorship and Claim Scope Decisions

By Ronald A. Krasnow.

Do you fully use an inventorship determination for the benefit of your company or client?  Do you decide on claim scope in view of inventorship?

Consider the Federal Circuit's decision in Lucent v. Gateway, Dell & Microsoft (decided Sept. 25, 2008 - Fed. Cir. 2007-1546, -1580).  While this case undoubtedly demonstrates that patent legislation should not be outcome driven, it contained an interesting proposed use of inventorship determinations.  In Lucent, the Court decided that claims 1 and 3 were solely owned by Lucent (because they were invented by Lucent's employees), but that claims 2 and 4 was jointly owned by Lucent and a joint development partner under a joint development agreement.  The Court reasoned that Lucent, who was in control of prosecution, could have split up the claims into separate patents so that it solely owned the invention claimed in claims 1 and 3. (The Court unfortunately did not deal with the reality facing an attorney trying to balance patentable subject matter with inventorship and obviousness under 35 UCS 103(c).)

The Court's reasoning, created in hindsight, raises a number of practical issues.

The first is, really, how do you make an inventorship decision in view of a joint development agreement?  For example, do you draft the patent application as broadly as the prior art will allow?  Or do you draft the claims only as broad as your company's inventors contributions?  Can you realistically split up the claims along inventorship lines and still get past Section 103 on parallel applications?

Once the inventorship decision has been made, have you made full use of that decision to the benefit of your company or client.  Most patent attorneys focus on making sure that the patent application names the correct inventors or complying with the laws of the countries where the inventors reside.  But, the Lucent decision suggests that enforcement should also be considered at the time inventorship and claim scope decisions are made.

One other consideration is drafting the joint development agreement. The Lucent decision suggests that large companies with negotiating power might require joint development partners to not license others inside the field of joint research and development program.

On the policy side, the Federal Circuit's reasoning logically leads to other considerations:

1. If you draft broader claims, should there be an equitable remedy available so that the added inventor (read as joint development partner) does not gain a windfall by access to the broader claims, when it is only the narrow and more subservient claims to which it contributed? 
2. Should reissue be afforded to allow case to be divided, to shelter the contribution of the dominant technology owner?
3. Does the party prosecuting the patent applications have any "duty" to an omitted inventor?  For example, if claims to which the omitted inventor contributed are cancelled, or are disclaimed during post-issuance proceedings, does the omitted inventor have any claim for "waste"?

Note: Mr. Krasnow's new book Intellectual Property Culture (Oxford University Press) was just released [Link]

Sample Responses to Office Actions

Attorneys have always learned by following the example of their elders and peers. With that in-mind, I would like to post several exemplary responses to patent office rejections and objections. Please forward to dcrouch@patentlyo.com with a very brief explanation of the topic/technology. If you like, you may scrub the response for anonymity. Likewise, feel free to submit good ones you have found that were written by others. Potential topics:

• Arguing that combination is nonobvious (under KSR);
• Arguing secondary factors of nonobviousness;
• Swearing behind prior art;
• Arguing that prior art is not enabled;
• Disputing date of prior art;
• Arguing that prior art is not inherently anticipatory;
• Responding to obviousness type double patenting;
• Arguing utility;
• Responding to restriction;
• Arguing against indefiniteness;
• Arguing amendment is not new matter;
• Etc.

Under Construction

Please excuse the mess on the site, we are trying out some new formats.

Prior Art Must Enable a Skilled Artisan to Make the Invention without Undue Experimentation

Impax Labs v. Aventis Pharmaceuticals (Fed. Cir. 2008)

This appeal focuses on the question of when a prior art disclosure is sufficiently enabled.

An Aventis patent covers the use of RILUTEK (riluzole) to treat ALS. Impax filed an ANDA with the FDA (seeking to market a generic version of the drug). In subsequent litigation, Impax also alleged, inter alia, that the listed patent should be held invalid. In particular, Impax argued that an earlier Aventis patent (the '940 patent) anticipates the asserted Aventis patent (the '814 patent) by suggesting a class of compounds may be used to treat ALS. The district court, however found that the '940 patent "does not enable a person of ordinary skill in the art to treat ALS with riluzole and therefore does not anticipate claims 1-5 of the '814 patent."

Burden particularly heavy: A defendant who hopes to use previously considered art to invalidate a patent has a "particularly heavy" burden.

Thus, a party challenging patent validity has the burden to prove its case with clear and convincing evidence. When the examiner considered the asserted prior art and basis for the validity challenge during patent prosecution, that burden becomes particularly heavy. See Hewlett-Packard Co. v. Bausch & Lomb Inc., 909 F.2d 1464, 1467 (Fed. Cir. 1990).

In this case, the '940 patent had been considered by the examiner during prosecution of the asserted patent.

Enabled Prior Art: To anticipate, the prior art must be enabling – i.e., it must "enable one of ordinary skill in the art to make the invention without undue experimentation."  This enablement standard is different from the applicant's 112 enablement requirement which requires enablement of both making and using the invention.  That distinction becomes lost in cases like this, however, where the patent covers a method of treatment.  Here, the Federal Circuit appears to require anticipatory prior art to enable practicing the claimed method.

Enablement of prior art is a question of law, but is based on underlying factual findings. In close cases, the important factual finding is the amount of experimentation that would have been necessary. Applying Wands factors, the Federal Circuit agreed that the prior reference was not enabling.

As shown by the trial court, the [prior art] '940 patent's dosage guidelines are broad and general without sufficient direction or guidance to prescribe a treatment regimen. The alleged prior art also contains no working examples. Finally, nothing in the '940 patent would have led one of skill in the art to identify riluzole as a treatment for ALS. In sum, each component of the claimed invention—identifying riluzole as a treatment for ALS and devising dosage parameters—would require undue experimentation based on the teachings of the '940 patent.

Burden of Proving Enabled Prior Art: In judging anticipation, courts generally presume that prior art is enabled. That presumption may be overcome by a patentee by providing "persuasive evidence" of nonenablement. At that point, the ultimate burden of proof (with clear and convincing evidence) lies with the accused infringer. In this case, the district court did not explicitly follow this burden shifting framework. On appeal, the Federal Circuit held that articulation of the rule was not necessary. The burden was properly shifted because Aventis presented "sufficient evidence to overcome the presumption of enablement."

Holding: Affirmed. Validity challenge defeated because prior art was not enabled.

Notes:

• The opinion did not focus on timing: As technology develops more and more prior art references become enabled. Thus, it is important to consider at what point in time the reference must be enabling.

Disclosure: My former colleagues at MBHB represent Aventis in this case. The district court case was ongoing while I was there.

Patently-O Bits and Bytes: Judge Lourie on the Federal Circuit

• Federal Circuit Judge Lourie recently discussed the state of the court. Here are some points [LINK]:
  • 11.3 Months: Time from docketing to disposition of district court [patent] appeals in the past year.
  • 2.1 Months: Time from calendaring to disposition of the same cases.
    • Note: It is unclear from Judge Lourie's speech if the times are averages or medians. The court has made great strides in keeping the average and median pendency quite low. There are however, a group of outliers with much longer pendency. The outliers are, for the most part, associated with a couple of particular Federal Circuit judges.
  • 50-mile rule: "On this issue of district court judges sitting with us, some recent patent bills have proposed to eliminate the current statutory requirement that judges on our court live within a 50-mile radius of the district. In my view, no persuasive reason has been given for that change. I believe it would be contrary to the best interest of the court and its functioning, and hence the law"
  • PTO Discussion: "No doubt an overcrowded examination system that places quotas on examiners plays a role in our less-than-perfect examination system."
  • Pro Patent Court: "Since I have been on the court, over 18 years, not once have we [as a court] had a discussion as to what direction the law should take, whether we should be pro-patent or not. That is because we are not a policy-making body. We have just applied the law and precedent as best we could determine it to the cases that have come before us. In fact, we have been criticized for, in the view of some people, narrowing the doctrine of equivalents, emphasizing the need for a written description commensurate with the claims, and affirming summary judgments of non-infringement that in effect preclude juries from deciding these cases."
  • Appellate Advice:
    • Make sure your case is final before filing the appeal
    • Cross appeals are only for the purpose of challenging the decision (not for arguing that the decision is correct)
    • Don't allege that "every business fact is super-confidential. It makes it difficult for us to ask questions from the bench and write an opinion."
  • Limit the issues: "Having more than three issues in a brief suggests to us that you don't have a strong appeal."

No Personal Jurisdiction for Patent Case Against Sprint Nextel

Datascape v. Sprint Nextel (N.D. GA, 2008)

Datascape sued Sprint Nextel for infringement of its patents covering a system for linking non-standard devices to an open network.

In an interesting holding, the Federal district court in Georgia held it lacks personal jurisdiction over Sprint Nextel. It turns out that – despite indications from its website – Sprint Nextel is simply a holding company that holds stock in operating companies.

Based on the evidence presented in this case, the Court is unable to find that Sprint Nextel has contacts with the State of Georgia sufficient to confer either general or specific jurisdiction over Sprint Nextel. Moreover, as to the analysis for specific jurisdiction, in particular, the Court is unable to find, as required by Supreme Court and Federal Circuit law, that Sprint Nextel purposefully directed its activities at the State of Georgia or that the assertion of personal jurisdiction would be reasonable and fair. operating activity of Sprint Nextel, according to Mr. Andreasen, is a telephone refurbishing business in Kansas. Sprint Nextel denies manufacturing, using, selling, importing, and/or offering for sale products or services related to wireless products

Patently-O Bits and Bytes No. 68: People in the News

IP Law Hall of Fame New Inductees (Sponsored by IAM) [LINK]:

• Jane Ginsburg – Columbia Law Professor; written extensively on the intereconnection between copyright and trademark law.
• Francis Gurry – New Director-General of the World Intellectual Property Organisation (WIPO)
• Dolores Hanna – Retired partner from Bell Boyd & Lloyd. Former head of INTA, IPLAC, WBA of Illinois, etc.
• Michael Kirk -- Recently retired Executive Director of the American Intellectual Property Association.
• Niels Reimers – Former director of Stanford University's Office of Technology Licensing. Founder of AUTM.

New IPO Board Members:

• Wayne Sobon (Accenture)
• Roger Gobrogge (Dow Corning)
• Michelle Lee (Google)
• George Johnston (Hoffman-La Roche)

Washington University:

• Tonight WashU will host the VP debate
• On Friday, October 10, I will be speaking at WashU law school to a much smaller crowd. (3:00 – 4:00pm) The topic trademak law and the protection of designs. I believe that CLE credit is being arranged for the free event. [LINK]

Sensitivity to USPTO Fees

The graph below shows the average number of claims filed with each patent application. I used as my sample 400,000+ original published patent applications. "Original" means that these applications do not claim priority back to an earlier filing. The trend leading up to late 2004 was a very slight (but statistically significant) rise in the total number of claims being filed. Then, in late 2004, we see a sudden drop. Over a one-month time period, the average number of claims dropped from about twenty six claims per application to about twenty two claims per application.

The simple explanation for that change is that the Patent Office dramatically increased its prosecution fees. Instead of charging $18 for each additional claim (over 20), applicants who filed on or after December 8, 2004 were required to pay $50 per additional claim. At the same time, independent claim fees were also more than doubled from $86 per additional independent claim to $200. The PTO also began charging a hefty fee for patent applications that were exceedingly long. All these forces came together to give applicants a clear incentive to forgo potential claim scope in favor of reducing the up-front fees. Since January 2004, the number of claims has continued to fall slightly (but significantly).

This change is good. Applicants will tend to drop red-herring and worthless claims. That in-turn will hopefully lead to tighter prosecution times and more clarity of claim scope.

Patently-O Bits and Bytes

• Like everyone else, patent attorneys like to clean their desks for the weekend and are less productive on Mondays. The chart to the right shows the percentage of patent of patent applications filed on each day of the week. (My data is from a sample of 1.4 million published patent applications filed 1999 to 2007). With the advent of electronic filing, patent attorneys are now able to file on Sunday. For published applications filed in 2007 about 1 out of every 250 was filed on a Sunday. (0.41%).
• Patent Reform Act: Senator Kyl has introduced S.3600.
• Hal Wegner Reports:
  • No pay raise for judges this year
  • PTO Budget: $2.1 billion
  • Six supreme court petitions may be decided within a week:
    • Nuijten (patentability of a signal)
    • Translogic (constitutionality of BPAI appointments)
    • Echostar (expert issues)
    • Monsanto (patentability of seeds)
    • IR v. IXYS (timing of appeals)
    • Samsung v. Rambus (sanctions)
• Biomedical Patent Management Corp. v. California Dept. of Health Services (state immunity) is still awaiting the views of the Administration.
• Can someone explain the various curves and bumps from the graph below?

Shaping Nuanced Patent Injunctions: Broadcom v. Qualcomm

Broadcom v. Qualcomm (Fed. Cir. 2008) [Part II]

On appeal, the Federal Circuit affirmed the permanent injunction against Qualcomm – finding that the district court acted within its equitable discretion and properly followed the injunctive relief guidelines set forth by the Supreme Court in eBay v. MercExchange (2006).

Although recognizing the importance of its eventual decision, the Federal Circuit again refrained from determining whether a finding that a patent has been infringed should serve as presumptive evidence of irreparable harm.

"It remains an open question 'whether there remains a rebuttable presumption of irreparable harm following eBay.'" Quoting Amado (Fed. Cir. 2008)

Irreparable Harm: The patentee Broadcom is a non-practicing entity in the sense that it does not make or sell the invention claimed in the asserted patents. The patentee does, however, compete indirectly with Qualcomm by making an alternative chipset. Here, the Federal Circuit agreed that eBay does not allow a general rule that would prevent a non-practicing from obtaining injunctive relief and that in this Broadcom had been able to show the potential for irreparable harm.

"Broadcom provided evidence of irreparable harm, despite the fact that it does not currently practice the claimed inventions. This result is consistent with eBay, in which the Supreme Court cautioned that 'traditional equitable principles do not permit such broad classifications' as presuming that a patentee cannot establish irreparable harm based on a patentee's 'willingness to license its patents' or 'its commercial activity in practicing the patents.'"

Adequate Remedy at Law: Broadcom had licensed its patents Verizon. A license can theoretically show that monetary damages are adequate. However, the particular market situation is important for that determination. In this case the Verizon license is a vertical license while a license to Qualcomm would be a horizontal license. Thus, the court agreed that "the Verizon license has little bearing on the effect of a compulsory license to a direct competitor."

Hardships and Public Interest: The district court created the injunction order with a "sunset provision." Under the plan, Qualcomm may continue infringing for twenty-months while paying a compulsory license rate. At the end of those twenty months, the company will be enjoined from further infringement. The delayed nature of the injunction consequently removed any notion that the a balance of hardships or the public interest would favor the adjudged infringer because it gives plenty of time to redesign and redeploy to customers without any interruption of service.

This decision is insightful in how it moves the proper focus from whether an injunction should issue to the more nuanced issues of how to shape the injunction in a way that best serves the public interest while still protecting property rights. One problem with complex injunctions and ongoing compulsory licenses is that the district court must continue to monitor and make judgments on the situation. In this case the district court recently found Qualcomm in contempt for failing to pay its ongoing royalties of more than $93 million. As a sanction, the court ordered Qualcomm to pay gross profits – noting that "[w]hile an award of gross profit may overcompensate … it will do so in an amount which bears a direct relationship to the degree of infringement. The more that were sold, the greater the award."

Notes:

Read more about the case here.