Patent Law Blog (Patently-O)

Bits and Bytes: Patent Reform

• [UPDATED] Hal Wegner Reports the Following:
• • Phil Kiko of Foley Public Affairs reports that Secretary of Commerce Gary Locke has announced that he has chosen the next Under Secretary of Commerce for Intellectual Property and Director of the U.S. Patent and Trademark Office. The chosen candidate, who is being vetted, was not named.
• Congress is Moving Forward with Patent Reform:
• • April 30, 2009 hearing of the House Judiciary Committee.
  • Here are some comments on the testimony:
  • • Jack Lasersohn (venture capitalist): Venture capital requires strong and certain patents. The damage reforms create potential problems because sometimes a relatively minor product innovation will dramatically change the market position. “A new coating on a solar cell , that increases it’s conversion efficiency just a little bit, can dramatically shift the market for entire multi-billion dollar solar energy plants. A better drug on a drug eluting stent can shift the entire stent market. In either case, the question is ‘who is entitled to the profits arising from the use of the invention, the inventor or the infringer’?”
    • Dean Kamen (Inventor & Businessman): patents should be strong and policy should be directed to support small innovative organizations.
    • David Simon (Intel): patents are meant to allow manufacturing companies to fight each other – not for non-manufacturing inventors or their assigns to slow-down manufacturers. [This is a very rough paraphrase of Simon’s 13 page rant against non-practising entities.]
    • Philip Johnson (J&J) on behalf of the 21st Century Patent Reformers wants money for the PTO, international harmonization (first-to-file), expanded post-grant review (12–month window), no change to the current damages system, only a codification of Seagate, no changes to venue law.
    • Jay Thomas (Georgetown) argues that patent infringement damages are too unpredictable and that additional rules of evidence and practice can help solve the problem.
    • Mark Chandler (Cisco) supports the reforms to halt the problem of non-practising entities who demand licenses.
    • Bernard Cassidy (Tessera): Please do not change the patent law in ways that hurt small companies. The courts have already done enough through eBay, KSR, Medimmune, Microsoft v. AT&T, Seagate, Bilski, and TS Tech.
    • [WRITTEN TESTIMONY.zip (3794 KB)]
• Absent from this testimony: Any representative from the Patent Office. At least three candidates are rumored to have been interviewed for the post of PTO Director – including former PTO Director Todd Dickinson and IP Hall of Fame member Mike Kirk. [See updated news above]

Federal Circuit Revises: Amgen v. ITC

Amgen v. ITC and Roche Diagnostics (Fed. Cir. 2009).

Issues: FDA Safe Harbor; Joint Interpretation of Patent and Tariff Act; ITC Jurisdiction

Section 271(e)(1) of the Patent Act excuses would-be infringing uses of a patented invention that "reasonably relate to the development and submission of information under a Federal Rule which regulates the manufacture, use, or sale of drugs or veterinary biological products." The language of the provision is that those activities will not be considered "act[s] of infringement." In its 2005 Merck decision, the Supreme Court indicated a policy preference for broadly interpreting the exception in order to encourage drug development and FDA approval. Patent cases at the International Trade Commission (ITC) do not derive their authority from the Patent Act. Rather Section 337 of the Tariff Act (19 USC § 1337) authorizes the ITC to halt imports of articles that either (i) "infringe a valid and enforceable US patent" … or (ii) are made … by means of, a process covered by the claims of a valid and enforceable US patent."

The distinction came to light in Kinik (Fed. Cir. 2004). In that case, the Federal Circuit distinguished between the Patent Act and the Tariff Act with regard to importation of a product made by a patented process. Section 271(g) of the patent act includes the caveat such importation is not infringement if the product is "materially changed by subsequent processes." The court held that caveat did not apply to ITC cases based on the differences in the statutes and the explicit limitation in the Patent Act that the 271(g)(1) caveat applied "for the purposes of this title."

In Amgen, Roche hoped to claim immunity under Section 271(e)(1) for its research use of imported EPO. Thus, when the Amgen case arose, the Federal Circuit was forced to decide between the statutory distinctions highlighted in Kinik and the Supreme Court's broad reading of the 271(e)(1) defense. In their 2008 decision, the appellate panel (led by Judge Newman) held that the 271(e)(1) safeharbor applies to the ITC action.

Following the 2008 decision, Amgen petitioned for a rehearing en banc. After some apparent inter-chamber negotiations, the court sitting en banc has vacated the 2008 decision and the original panel has issued a revised opinion. The new opinion again confirms that the 271(e)(1) defense applies to ITC actions. Instead, the new opinion removes all discussion of whether the ITC has jurisdiction over non-sales based "imminent importations" except to note that resolution of that dispute was "not necessary … to decide this case." (Here, Amgen's allegations that Roche had imported IPO was sufficient to create subject matter jurisdiction.)

"In this case, the Commission had jurisdiction as a result of Amgen's allegation that Roche imported an article made by a process covered by the claims of a valid and enforceable United States patent. See 19 U.S.C. § 1337(a)(1)(B)(ii). The Commission therefore was correct to reach the merits of Amgen's claim. We need not and do not address whether the Commission would have had jurisdiction if Amgen had not asserted actual importation and relied instead entirely on its "imminent importation" theory."

The ITC previously held that it did not have jurisdiction without an "importation, sale for importation, or sale within the US after importation."

On remand, the ITC must determine "whether all of the EPO that Roche imported was entitled to the protection of the safe harbor."

Judge Linn's dissent remains unchanged. He argues that the plain language of 271(e)(1) cannot be read to extend to excuse imports of products made by patented process since that activity is not defined as "infringe[ment]" under Section 337.

Patently-O Bits and Bytes

• Irreparable Injury: I have written about this before, but I am still struggling with a basic question from eBay v. MercExchange: Is there any distinction between the first two elements of eBay's test for permanent injunctive relief [Irreparable injury vs. the inadequacy of available remedies at law]? Ordinarily, the first element of irreparable injury is defined as a substantial injury that cannot be fully compensated by available remedies at law (such as money damages). The ordinary test for preliminary injunctive relief collapses these and only looks at irreparable injury.
• Future Harms?: Second, what should we make the eBay's use of the present perfect tense in the irreparable injury requirement: "A plaintiff must demonstrate: (1) that it has suffered an irreparable injury." I guess that this makes sense if it is an indication that the irreparable harm must be an ongoing harm rather than a merely future harm?
• Patent Litigation Data: Professor Colleen Chien's new article uses the newly taboo troll label in its title. I report on the article here because of her data-derived conclusion that it would be improper to "blame non-practicing entities ("NPEs") for a majority of the problems with the patent system." In fact "public and large private companies" have initiated the largest share of patent litigation in the past 8 years. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1396319 .
• History: Professor Adam Mossoff is posting this week at the Volokh Conspiracy on his new article "A Stitch in Time: The Rise and Fall of the Sewing Machine Patent Thicket." The story is 150 years old, but it amazingly shows that today's arguments on patent reform are nothing more than rehash http://volokh.com/posts/1240974253.shtml .

Trademark: Mark is Geographically Deceptively Misdescriptive Only if Deception is Material to a Substantial Portion of the Intended Audience

In re Spirits International (Fed. Cir. 2009)

The Patent Office refused to register Spirits' mark "Moskavskaya” to identify the company's vodka -- concluding that they mark was "primarily geographically deceptively misdescriptive."

In Russian, Spirits' mark is translated as "of or from Moscow." Spirits' vodka is not from Moscow, nor is Spirits located in Moscow. According to the Patent Office, registration of the mark would be inappropriate because the public would likely believe the goods were from Moscow.

15 U.S.C. § 1052(e)(3) prohibits the registration of primarily geographically deceptively misdescriptive of the goods. The doctrine barring registration requires that the "mark's primary significance [ be ] a generally known geographic location"; that the relevant public would be likely to believe that the goods originate from the stated geographic location (when in fact they do not); and that the deception be "material."

The materiality requirement is new, and had not been fully interpreted by the Federal Circuit. Here, the Federal Circuit drew parallels to subsection (a) of the same statute (addressing false advertising). "Under the circumstances it is clear that section (e)(3)-- like subsection (a), the false advertising provision of the cat Lanham Act, and the common law -- requires that a significant portion of the relevant consuming public be deceived. That population is often the entire US population interested in purchasing the product or service."

Missing Link: In its decision, the Board recognized that Russian speakers would be the most likely to be deceived since the geographic description was in the Russian language. Additionally, the Board identified over 700,000 Russian speakers in the US based on the 2000 census. Of course, these facts do not prove that "a significant portion of the relevant consuming public" would be deceived by the mark. Notably, the patent office offered no proof that Russian speakers constitute a "substantial portion of the intended audience."

We note that only 0.25% of the U.S. population speaks Russian. If only one quarter of one percent of the relevant consumers was deceived, this would not be, by any measure, a substantial portion. However, it may be that Russian speakers are a greater percentage of the vodka-consuming public; that some number of non-Russian speakers would understand the mark to suggest that the vodka came from Moscow; and that these groups would together be a substantial portion of the intended audience.

Vacated and Remanded

Note:

• Some History: Spirits is a division of the SPI Group which purchased the former state-owned Russian and Baltic vodka companies. Moskavskaya brand name was introduced by the state in the 1800's and has a long history - at least in Russia - as a brand name. A private comment indicated that the history of the Moskavskaya brand is not clear-cut. "Moskovskaya was a collective mark during Soviet times as many other mass-produces products were. After the collapse, Moskovskaya was produced not only in Russia but also in Ukraine, Belarus, Moldova and Kazakhstan."
• Another Source: John Welch has written about Spirits' April 28 loss at the TTAB with the following headline: TTAB Finds "RUSSKAYA" for Vodka Abandoned, Cancels Registration.
• Significant versus Substantial: As an anonymous comment noticed - the Federal Circuit appears to have used "substantial portion " and "significant portion" interchangeably. From the case: "We hold ... that the appropriate inquiry for materiality purposes is whether a substantial portion of the relevant consumers is likely to be deceived. . . . it is clear that section (e)(3) ... requires that a significant portion of the relevant consuming public be deceived."

Assigning Patent Rights

Euclid Chemical v. Vector Corrosion (Fed. Cir. 2009) 08-1170.pdf

The district court ruled that Vector was the owner of the '742 patent based on an unambiguous assignment agreement from the inventor. On appeal, Euclid argued that the assignment was not valid and that – in fact – Euclid was the bona fide purchaser of the patent rights.

The December 2001 assignment to Vector purported to grant Vector all rights "to my US, Canadian, and European applications for patents and issued US patent" – specifically mentioning Patent No. 6,033,553 and "any and all divisional applications, continuations, and continuations in part … and any and all Letters Patent which may issue or be reissued for said invention to the full end of the term for which each said Letters Patent may by granted…"

By the time of the assignment, the '742 patent had already issued as a continuation in part of the '553 patent. The '742 patent was not expressly mentioned in the assignment.

Judge Linn found the assignment ambiguous. On one hand it discusses the inventor's "applications … and US patent" – indicated that only one patent was intended to be assigned. On the other hand, the '742 patent was a continuation in part of the patent listed in the assignment. "We therefore conclude that the Assignment is susceptible to at least two reasonable interpretations and is therefore ambiguous under Ohio law." On remand, the district court should consider relevant extrinsic evidence to interpret the assignment.

In dissent, Judge Newman argued that the assignment clearly did not include the '742 patent and thus that Vector did not own that patent.

Notes: This post was written using my new MacSpeech dictate software.

Book Review: Computer Automated Inventing

I just received a copy of Robert Plotkin's new book: The Genie in the Machine: How Computer-Automated Inventing is Revolutionizing Law and Business. The book is just out from Stanford Law Books. It is a great read for a good price ($20.00 from Amazon).

Plotkin's new book begins with the reality: many products and processes used today were created through automated software. In Plotkin's book, the automated software is akin to a genie granting the wishes demanded by software developers. The trend toward automated inventing will likely continue to grow as both computing power and the level of problem-complication increase.

Plotkin is a patent attorney and has been a leader of software law for the past decade. Most of the book is spent considering how patent law interacts (and should interact) with computer created inventions. Plotkin believes that automated computer-generated inventions should be patentable. However, he would make some changes to ensure that the computer inventions are not overbroad.

"We need . . . to reinterpret [the patent] rules in light of artificial invention technology to ensure that they continue to achieve their original goals, just as a butcher recalibrates a scale after it has been in long use . . . In particular, we need to strictly apply patent law's utility requirement and its distinction between abstract ideas and practical applications [to] protect against the worst kind of abuses"

Judge Posner at the Federal Circuit: Patent on Sex Aid is Obvious

Ritchie v. Vast Resources (AKA Topco) (Fed. Cir. 2009) 08-1528.pdf

Sitting by designation, Seventh Circuit Judge Richard Posner summarily reversed a lower court opinion - finding the asserted patent obvious. This decision offers an implicit reminder as to why the Federal Circuit was formed in the first place. Although Chief Judge Michel and Judge Bryson signed-on to the opinion – it is fairly clear that they would not have approved of the analysis if it had emerged from a district court. The problems: The opinion hardly mentions claim language - or even which claim is being challenged; the court does not construe the claims at issue; although the lower court found the patent valid, there is no mention of the presumption of validity or standards for reversing a decision on obviousness; the level of one of ordinary skill in the art is overlooked; etc. It is, however, quite reminiscent of the Supreme Court's KSR decision. Here, Judge Posner heavily quotes and loosely applies KSR to invalidate the patent.

"Among the inventions that the law deems obvious are those modest, routine, everyday, incremental improvements of an existing product or process that confer commercial value (otherwise they would not be undertaken) but do not involve sufficient inventiveness to merit patent protection. This class of inventions is well illustrated by efforts at routine experimentation with different standard grades of a material used in a product—standard in the sense that their properties, composition, and method of creation are well known, making successful results of the experimentation predictable. This is such a case."

Now, I'm not arguing that the patent is valid – only that Judge Posner's opinion gives me no confidence that the invention was obvious. Ritchie's patent covers a "sex aid," and the patent claimed a particular arrangement of a rod with knobs all made from a "lubricious glass-based material containing … an oxide of boron." The prior art here was an easy-slide thermometer made of the same material, and - according to Judge Posner's opinion, the "invention" merely takes well known sex aids and combines them with the easy-slide material.

"This case thus exemplifies the Supreme Court’s analysis in KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398 (2007). “When a work is available in one field of endeavor, design incentives and other market forces can prompt variations of it, either in the same field or a different one. If a person of ordinary skill can implement a predictable variation, § 103 likely bars its patentability. For the same reason, if a technique has been used to improve one device, and a person of ordinary skill in the art would recognize that it would improve similar devices in the same way, using the technique is obvious unless its actual application is beyond his or her skill.” Id. at 417 (emphasis added). (The last sentence describes our case to a tee.) There was, the Court continued, no need for the district court to “seek out precise teachings directed to the specific subject matter of the challenged claim, for a court can take account of the inferences and creative steps that a person of ordinary skill in the art would employ.” Id.

And if more is required to make our point, there is the venerable case of Hotchkiss v. Greenwood, 52 U.S. (11 How.) 248 (1851) ... which denied patentability to an invention consisting of the substitution of a clay or porcelain knob for a metallic or wood knob in a doorknob (the doorknob itself, as distinct from the knob on the end of it, being an assemblage of knob, shank, and spindle)."

Notes

• Patent No. Re 38,924
• This case may not have much precedential value - at least in cases where the invention involves higher level technology or where courts will laugh off the sex toy case. See Sakraida, 425 U.S. 273 (1976) ("that cow shit case ...").
• Congratulations to Michael Harris at the SoCal law group for winning the appeal. According to him, Ritchie had asked for $70+ million in damages.
• Judge Posner on Inequitable Conduct
• Judge Posner on the Paxil Patent
• Judge Posner and Professor Landes on Intellectual Property

Prescriptions for Drafting Assertable Claims

Many patent cases are won and lost on claim drafting issues. In the recent Netcraft case, for instance, the claimed included the step of "providing a communications link through equipment of the third party." In his three "Prescriptions for Drafting Assertable Claims, Ron Slusky shows how to avoid the drafting mistakes found in that claim. Ron Slusky is the author of Invention Analysis and Claiming: A Patent Lawyer's Guide (ABA). Slusky's seminars will be in seven venues this year: Chicago, Boston, Santa Clara, Philadelphia, DC, Dallas and NYC.

1. Claim the Invention in All of Its Commercially Significant Settings

An invention should be claimed in all of its commercially significant “settings” in order to prevent others from taking advantage of the inventor’s teachings while avoiding the patent.

A setting is a context in which the inventive concept is manifest—also sometimes called a “perspective” or “point of view”. For example, a cylinder lock invention may manifest itself in how the lock is constructed; in a unique type of key required to operate the lock; in the key-cutting machine that produces the unique type of key; or possibly even in the key blank. Each of these—the lock, the key, the key cutting machine and the key blank—is a separate setting in which the invention should be claimed because any given party may implement the inventive concept in only one particular setting. For example, manufacturers of key-cutting machines or key blanks will not infringe if only the lock itself was claimed. Other multiple-setting examples:

• a) Encoding a video signal (to reduce the amount of data required to represent it); b) decoding the encoded signal.

• a) Peptide; b) cell capable of producing the peptide; c) manufacturing the peptide.

A setting is not the same as a statutory class. For example, the lock invention could be defined within the key-cutting-machine setting by apparatus claims defining the structure of the machine as well as by method claims defining how the machine operates to cut the key.

2. Maintain the Integrity of the Invention Setting Boundary

Having decided to claim the invention in a particular setting, we should take care to restrict the claim to that setting. If something outside the boundary of the setting makes its way into the claim, parties whose activities would otherwise infringe the claim may no longer do so.

The following claim, for example, is intended to define a video compression invention in its encoding—e.g., integrated circuit encoder—setting.

A method comprising
generating a video signal to be encoded, and
encoding the video signal by performing the steps of …

Here the step of “generating a video signal to be encoded” is outside of the intended setting because the integrated circuit typically does not generate the video signal but, rather, receives it from somewhere else, e.g., separate scanning hardware. This is a point that integrated circuit manufacturers will lose no time in pointing out when the patent owner approaches them to take a license.

The solution is to assume that the input signal already exists at the point in time that the claimed method is carried out, thereby putting the actual generating of the input signal outside the boundaries of the claimed subject matter, and thereby restricting the claimed subject matter to the selected setting:

A method for encoding a video signal, the method comprising the steps of…

3. Draft claims that will be directly infringed by individual (as opposed to co-acting) parties

Contributory infringement, inducement and multiple-party direct infringement are all expensive and difficult to prove—and may not be able to be proved at all, even if the inventor’s teachings are being appropriated. Claims therefore should always be drafted to capture the activities of a) individual—as opposed to co-acting—parties who are b) direct infringers, if there is any way to do it (which there almost always is). That goal is largely achieved when the claims define the invention strictly within the boundaries of its various settings. However, we help ensure that our claims capture the activities of individual direct infringers by drafting and reviewing claims with such parties specifically in mind.

For example, infringement of the following internet-based claim invokes the actions of not only the desirable assertion target—the web server operator—but the individual internet user:   

A method comprising
(a) selecting an icon displayed on a screen [user],
(b) transmitting to a web server a signal indicative of the selected icon [user],
(c) receiving the signal at the web server [web server], and
(d) processing the received signal in such a way that …. [web server]

An internet user and a web server operator are unlikely to be adjudged joint direct infringers; neither controls or directs the actions of the other. (See, e.g., BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373, 84 U.S.P.Q.2d 1545 (Fed. Cir. 2007)). And without direct infringement there can be no contributory infringement or inducement. So everyone escapes liability under such a claim.

The solution is to draft a claim strictly limited to the web server setting and, in so doing, draft a claim that reads exclusively on the activities of the web server operator.

A method comprising
(a) receiving a signal indicative of a user-selected screen-displayed icon, and
(b) processing the received signal in such a way that ….

Copyright © 2007, 2009 American Bar Association. All rights reserved. Adapted with permission.

Design Patents: Sailing Through the PTO Part II

In an earlier article, I noted that only 25.6% of recently issued design patents received at least one rejection during prosecution. I wanted to develop a better understanding of the reasons for rejections, I filtered for recently issued patents that had been initially rejected during process and then pulled-up their file histories using PAIR. For this study, I looked the first non-final rejection of only 86 file wrappers, but even that small number of cases showed a dramatic result.

In my sample, the first non-final rejection came in some combination of six basic forms: anticipation; obviousness; lack of enablement or written description; indefiniteness; new matter; and double patenting.

The surprising results are that only 3.5% (3 of 86) of the rejections were prior art related rejections. In three of the cases, the examiner rejected the pending application as obvious in light of the prior art, and in one of those cases the examiner also asserted that the claimed design was anticipated by the prior art. In the remaining 83 cases, the examiner conducted prior art searches but indicated that the claimed design was patentable over the art. Combining probabilities: My data indicates that fewer than 1% of recently issued design patents ever received a novelty or anticipation rejection. (At 99%CI, this may go as high as 2.5%). In other words, design patent applications sail through the PTO.

Although design patent prosecution does not have much focus on inventiveness, examiners are keen to ensure that the scope of the patent claim (via the drawings) is well defined. The most common rejection in my sample was based on confusion created by the drawings. In a design patent application the drawings represent the majority of the specification and also define the claim scope. Thus, it makes sense that confusing or inconsistent drawings would lead to rejection based on both the first and second paragraph of 35 USC 112. In my sample, 79.1% of the rejections (68 of 86) raised a combination of both lacking enablement/description and indefiniteness.

16.2% of the rejections (14 of 86) included an obviousness-type double patenting rejection against an applicant's own previously-filed application. Those rejections are curably through a terminal disclaimer. However, some applicants prefer to argue over the rejection and save patent term. Finally, 3.5% (3 of 86) of rejections focused on new matter added during prosecution. Often, the new matter was allegedly added when the applicant submitted pen and ink drawings to substitute for photographs found in the original.

A Registration System: My data indicates that our design patent system is approaching a registration system. But, there is no problem with a system of design registration - especially if design patents continue to be narrowly construed. Europe's design registration is working well as are the US systems of trademark and copyright registration. In the US, most property rights are registered or recorded rather than thoroughly examined, and those lower-cost mechanisms should probably be the default unless we have some reason to believe that thorough examination is necessary.

Notes:

• See, Dennis Crouch, Design Patents: Sailing Through the PTO, Patently-O (April 2, 2009).
• My samples of recently issued design patents consists of design patents issued Feb-April 2009.
• As I mentioned in the earlier post, these numbers are a bit skewed because the file histories of abandoned design patent applications are kept secret by the PTO unless used as a priority document. Just under 20% of design patent applications are abandoned during prosecution, and I suspect that a greater percentage of those are rejected during prosecution. This consideration would thus skew the results for someone considering the likelihood that a pending design patent application will be rejected.
• In an upcoming paper (not yet available) I note that design patents are often used as substitutes for trade-dress protection, but that the overlapping of regimes does not create significant problems.

Lichtman on IP (with free CLE credit)

Professor Lichtman has continued his well done monthly IP Colloquium. Listen online for free CLE credit in several IP-heavy states. The latest posts include:

• Everyone hates DRM with Ed Felton and Randy Picker (Apr. 2009)
• Statutory damages for downloading music with Charlie Nesson and others (Feb. 2009)
• A conversation with Chief Judge Michel (Jan. 2009)
• Privacy in a networked world with Eric Goldman and Dan Solove (Dec. 2008)
• In re Bilski with John Duffy and Rob Merges (Nov. 2008)

Link: http://www.ipcolloquium.com.

Federal Circuit Remands Patent Pool Misuse Case: Issue of Improperly Sequestering Alternative Technology

Princo v. ITC (Fed. Cir. 2009) Read the Decision

The ITC found that the CD-R and CD-RW disks imported by Princo violate a handful of Philips patents that cover industry standard compact disk technology. On appeal, the adjudged infringer argued that the patents should be unenforceable under the equitable doctrine of patent misuse. Giving some credence to the argument, the Federal Circuit vacated-in-part and remanded for further proceedings to determine whether Philip's misused its patents by allegedly agreeing with a competitor not to license-out would-be competing technology.

Misuse is an antitrust theory that attempts to restrain a patentee from over-extending the anticompetitive strength of the patent rights in ways "contrary to public policy." In some situations the antitrust authorities allow multi-company patent pooling as a way to promote foundational development and convergence. See Herbert Hovenkamp, Mark. D. Janis & Mark A. Lemley, IP and Antitrust § 34.4, at 34-20.1 (2009) (“Typical procompetitive benefits [of patent pools] include the clearing of blocking positions, the advantages flowing from integration of complementary technologies, and the cost savings from avoiding litigation.”). These agreements may be reviewed under the rule of reason for pro-competitive benefits.

In the early 1990's Philips, Sony, and others formed a patent pool to cover CD-R and CD-RW technology and - in the process - defined the industry standard. Philips licenses the pools (but not individual patents) -- charging a per disk royalty and requiring that the licenses be used only to make CD's that comply with the defined "Orange Book compliant" standards. When Princo refused to pay the royalty, Philips sued for infringement in the ITC.

This appeal focuses on one particular patent in the pool - Sony’s U.S. Patent No. 4,942,565 ("Lagadec"). Lagadec claims a digital process for identifying the laser position. The patent pool also includes a patent covering a similar analog process for identifying the laser position developed by Philips. And, in fact, the defined standard requires that the analog process (not the digital process) be used.

Tying Non-Essential or Non-Used Patent: Princo argued that Lagadec is a non-essential patent and that Philips "improperly used its market power to force manufacturers seeking patents essential to the production of Orange Book compliant discs to also take a license to Lagadec, an allegedly-nonessential and Non-used Sony patent." The Supreme Court saw this type of tying as problematic in Zenith v. Hazeltine, 395 US 100 (1968). In Zenith, the court held that “conditioning the grant of a patent license upon payment of royalties on products which do not use the teaching of the patent [is] misuse.”

Reasonable Claim Construction: Although the final claim scope was not clear, Philips argued under a reasonable broad claim construction, the standard analog process would infringe one of the claims in the Lagadec patent -- thus making that patent "essential" to the pool and immunizing the pool from the tying challenge. Without determining the specific claim construction, the Federal Circuit agreed that misuse may be avoided if at the time of the licensing "it would have been reasonable for a manufacturer to believe a license ... was necessary."

We thus think that perfect certainty is not required to avoid a charge of misuse through unlawful tying. Rather, in this context a blocking patent is one that at the time of the license an objective manufacturer would believe reasonably might be necessary to practice the technology at issue.

The Federal Circuit's "reasonable" approach meshes with the Hovenkamp Antitrust-IP treatise which states:

Indeed, even if the patents are only arguably conflicting, there are strong reasons to permit the settlement of patent disputes by means of a cross-licensing agreement. Not only will judicial economy be served and litigation costs reduced by settling such disputes, but the delay and uncertainty associated with blocking patent disputes may prevent either party from going forward with a commercial product for years while litigation is pending. Where two or more patents are arguably blocking, therefore, settling the dispute by means of cross-licensing is likely to be procompetitive.   

Here, for instance, by licensing Lagadec, a manufacturer has more certainty that licensing the pool will avoid later allegations of infringement -- a major goal of the standard setting operation.

Cutting-off Alternatives: By including Sony's Lagadec patent in the pool but then preventing manufacturers from using the digital process, Princo argued that Philips improperly colluded to sequester the work-around technology from competitive development. In Princo's words "Philips bribed Sony not to use . . . Lagadec to compete against the [Philips dominated standard]." On appeal, the Federal Circuit agreed with Princo that such collusion could be misuse even if the patent included "essential" claims.

It is one thing to offer a pooled license to competing technologies; it is quite another to refuse to license the competing technologies on any other basis. In contrast to tying arrangements, there are no [pro competitive] benefits to be obtained from an agreement between patent holders to forego separate licensing of competing technologies, as counsel for Philips conceded at oral argument. . . . Agreements between competitors not to compete are classic antitrust violations. . . . Agreements preventing patent licensing of competing technologies also can constitute such violations.

On remand, the ITC must determine whether Princo has provided sufficient evidence to show that Sony and Philips agreed not to separately license Lagadec as competing technology and that the digital technology could have been a viable alternative.

Dissent in Part: Dissenting in part, Judge Bryson would have fully affirmed the ITC's findings.

Prior Discussion of the Case:

• Philips Infringement Case Stayed Until ITC Appeals Exhausted
• 271(d)(5) Defines A Patent Misuse Safeharbor, But Does Not Define Misuse Itself
  
• U.S. Philips CD Patent Pool Given Green Light by Court of Appeals

Bits and Bytes: Past and Future Events

In March, GW and the FCBA hosted a symposium on the Federal Circuit Court of Appeals. Video of the symposium can be seen on cSPAN:

• "The Court - Giving Texture to the Institution of the Court" Watch on C-SPAN
• "The Complexity - Views on the Circuit's Complex Subject Matter from the Solicitors General" Watch on C-SPAN

Upcoming Events:

• Patent Calendar: www.patentlyo.com/calendar
• May 1–3 – San Francisco IP Law Assn: http://www.sfipla.com/seminar.html

Top Patently-O Content for the past 12 months:

1. http://www.patentlyo.com/patent/2008/07/the-death-of-go.html
2. http://www.patentlyo.com/patent/2008/10/in-re-bilski.html
3. http://www.patentlyo.com/patent/2008/02/bilski-full-caf.html
4. http://www.patentlyo.com/patent/2008/06/supreme-court-d.html
5. http://www.patentlyo.com/patent/2008/04/ex-parte-bilski.html
6. http://www.patentlyo.com/patent/2005/04/how_should_a_fu.html
7. http://www.patentlyo.com/patent/2009/03/tafas-v-doll-some-rules-valid-others-invalid.html
8. http://www.patentlyo.com/patent/2008/07/outsourcing-of.html
9. http://www.patentlyo.com/patent/2009/03/patent-reform-act-of-2009.html
10. http://www.patentlyo.com/patent/2008/11/junk-patents.html
11. http://www.patentlyo.com/patent/2009/02/no-no-words-what-words-do-you-avoid-in-patent-applications.html
12. http://www.patentlyo.com/patent/2008/11/post-bilski-bpa.html
13. http://www.patentlyo.com/patent/2009/03/dear-patently-o-how-do-you-react-to-the-following-letter.html
14. http://www.patentlyo.com/patent/2009/01/ex-parte-marius.html
15. http://www.patentlyo.com/patent/2008/11/ex-parte-hallig.html
16. http://www.patentlyo.com/patent/2008/05/cafc-hears-en-b.html
17. http://www.patentlyo.com/patent/2008/12/cafc-affirms-pt.html

Narrowing Amendment and Prosecution History Estoppel

Felix v. American Honda (Fed. Cir. 2009)

Mr. Felix sued Honda for infringement of his patent covering a truck bed with a storage compartment underneath the bed. The Honda Ridgeline advertises a "lockable In-Bed Trunk®" that appears to serve the same overall purpose. The problem is that Felix's asserted claim is rather narrow and the district court found no literal infringement and no infringement under the doctrine of equivalents. Asserted claim 6 reads as follows:

6. In combination with a vehicle including a vehicle bed, the improvement of a storage system which includes: a) an opening formed in the vehicle bed and including an opening rim; b) a compartment with an interior; c) said compartment being mounted on said bed with said compartment interior accessible through said opening; d) a lid assembly including lid mounting means for mounting said lid in covering relation with respect to said opening; e) a channel formed at the rim of said bed opening and including an inner flange; f) a weathertight gasket mounted on said flange and engaging said lid in its closed position; and g) a plurality of drain holes formed in said channel.

In particular, the accused Honda truck bed has a "weathertight gasket" mounted on the lid rather than to the flange as claimed in the Felix patent.

On appeal, the Federal Circuit affirmed the lower court's judgment of non-infringement – finding Honda did not literally infringe and that Felix's claim under the doctrine of equivalents (DOE) was foreclosed by prosecution history estoppel. Here, I will discuss the DOE dispute.

Doctrine of Equivalents: The patent claims spell out the boundaries of an inventor's claimed invention. However, courts may extend the scope of exclusionary rights beyond the literal claim language to capture equivalent products. In recent years, the doctrine of equivalents has been limited. This case, the doctrine of prosecution history estoppel came into play because Felix had narrowed his claims prosecution. (Actually, the applicant cancelled the broad independent claims and re-wrote the dependent claims into independent form. Under Honeywell, that process has the same estoppel effect as narrowing the independent claim.)

Tangential: The presumption of estoppel can be overcome with evidence that the reason for the narrowing amendment is no more than tangentially related to the equivalent in question. The evidentiary standard for proving the "no more than tangential relationship" is quite high. Here, Felix offered a credible alternative explanation, but the Federal Circuit rejected his argument because (1) he did not prove that his alternative was "the only reason" for the amendment and (2) he did not "explain the entire amendment."

"Because we conclude that Felix is barred by the doctrine of prosecution history estoppel from relying on the doctrine of equivalents to prove that the accused In-Bed Trunk meets the gasket limitation, we also affirm the district court's summary judgment of no infringement by equivalents."

Drafting Strategies: One interesting aspect of this case is that Felix had to go through a couple of rounds of amendments. After first amending to add the gasket, Felix then had to amend again to secure allowance. Although the first amendment did not directly lead to allowance, the narrowing amendment still created a presumption of estoppel:

"The fact that the first amendment did not succeed and that a further amendment was required to place the claim in allowable form, however, is of no consequence as to the estoppel. It is the patentee's response to a rejection—not the examiner's ultimate allowance of a claim—that gives rise to prosecution history estoppel.

We therefore hold that the presumption of prosecution history estoppel attaches when a patentee cancels an independent claim and rewrites a dependent claim in independent form for reasons related to patentability, even if the amendment alone does not succeed in placing the claim in condition for allowance."

Judge Linn also pointed to an "open question" in footnote 4:

"We leave open the question of whether the presumption of surrender would have attached as to the gasket limitation if, in response to the first office action, Felix had cancelled both claim 1 and claim 7, and had rewritten claim 8 in independent form, instead of attempting to secure the broader coverage of rewritten claim 7 as an intermediate step."

[Corrected 3:40 CST]

     

Double Patenting: Proving Distinctiveness Based on Later Developed Evidence

Takeda Pharma. v. Doll (Fed. Cir. 2009)

For several decades, Hal Wegner has been the shepherd of Takeda's family of Cepham patents claiming priority back to 1974. The question on appeal in this case involves double patenting and whether post-filing developments in the art can be used to inform the question of whether two claims are "patentably distinct." Takeda's evidence that its claims were distinct was generated in this decade, but the PTO argued that double patenting must be determined based on evidence pre-dating the priority application. Takeda could file a terminal disclaimer, but that would destroy the valuable pre-GATT patent term.

Obviousness Type Double Patenting is also known as non-statutory double patenting because ... the theory is not based on any statute. Rather the doctrine is a judicially created mechanism designed to prevent a patentee from unfairly extending the term of patent rights through consecutive patents. To the extent this problem existed, much of it was eliminated in the 1995 changes that linked the patent term with the filing date rather than the issue date. Under the doctrine, separate claims with different patent terms will not both be patentable unless their subject matter is "patentably distinct." Today the double patenting issues may arise most frequently when family-member patent terms differ due to patent term adjustments based on PTO delay during prosecution.

Product and Process: Takeda's case involves a change in claim form. The PTO argued that the company's latter manufacturing process claims are not patentably distinct from its earlier product claims. Generally, a product and its manufacturing process are deemed patentably distinct when “the product as claimed can be made by another materially different process.” MPEP § 806.05. Here, the "materially different process" was not known until well-after the applications were filed.

Holding: In its holding, the Federal Circuit compromised: Evidence of distinctiveness can be post-filing, but must be prior to the filing of the secondary application because that filing "actually triggers the potential of an unjustified extension of patent term."   The case is then remanded for a determination of whether Takeda can prove distinctiveness using evidence that predates the second application (which was filed in 1990).

Judge Schall concurred in the judgment of remand, but disagreed with the rule of law that post-filing information should be available to prove distinctiveness. "I believe that tying the inquiry to the invention date is most commensurate with patent law as a whole and the policy goals relating to obviousness-type double patenting." Judge Schall noted that the double patenting doctrine is one of patentability - and thus should be judged based on the date of invention.

Comments: I do not pretend to know the correct rule. However, Judge Rader's decision looks to be incorrect. His judgment was based on the filing date of the second application as being the triggering date for the potential of an unjustified extension of patent term. Of course, the potential having double patenting problems was at least implicitly created in the original filing. If you are looking for an explicit trigger, that might not even be found in the second application as filed since claims are usually amended during prosecution. If selecting a triggering date - I would have chosen the date that the second patent issues. Until that point, there is no double patenting.

Note:

• Judge Moore joined Judge Rader's majority opinion.

Challenging the Strong Presumption of Patent Validity

One of the next major legal challenges to patent rights will be against the strong presumption of validity associated with the patent grant. Section 282 of the patent act says only that a patent and its claims "shall be presumed valid." Under longstanding doctrine, this presumption can only be overcome with clear and convincing evidence of invalidity. The challenge to this presumption is most likely on two fronts: (1) expanded post-grant review and (2) court challenges to the weight of the presumption.

Expanded Post Grant Review: The PTO uses the lower preponderance (more likely than not) standard when refusing to grant patent rights, and expanded post-grant oppositions will likely allow would-be defendants to challenge patents at the lower standard.

Challenging the Weight of the Presumption: The greater change would come, however, if the Supreme Court takes a case on point. Since the 1952 Supreme Court has not definitively weighed-in on the the level of proof necessary to overcome the statutory presumption of validity, and the Court's Radio Corp (1934) opinion arguably sums up the pre-unification state of the law: "The force of that presumption has found varying expression in this and other courts." Of course, the unified Federal Circuit cleared the air by firmly establishing the clear and convincing standard as the standard. In a 2004 article, Mark Janis reviews the history of the presumption - finding that the clear and convincing standard was already the majority rule prior to unification, but that the Federal Circuit made the standard "meaningful once again." His message: "there is no strict, inevitable correlation between the words of the evidentiary standard and the overlying message delivered by the presumption of validity."

More recently, in KSR the Supreme Court all but suggested one potential petition question: "whether the failure to disclose [relevant prior art] during prosecution ... voids the presumption of validity given to issued patents." A more likely focus may be on reducing strength of the presumption over prior art that was not considered during prosecution.

Question: How would patent practice change if the strong presumption of validity was only applicable over prior art actually considered during prosecution?

Notes:

• I do not believe that the presumption of validity should be reduced. However, I wrote this post to let folks know that it is on the horizon and that a change is somewhat likely during the life of any currently pending patent application.
• Mark Janis, Reforming Patent Validity Litigation: The "Dubious Preponderance", 19 Berkeley Tech. L.J. 923 (2004).
• This post was prompted by an e-mail amongst IP law professors with special input from Mark Lemley, Arti Rai, David Hricik, Howard Skaist, Josh Sarnoff and Tom Field. See also Mark A. Lemley and Douglas Lichtman, Rethinking Patent Law's Presumption of Validity, 60 Stanford Law Review 45 (2007)(suggesting gold-plated patents).

Patently-O Bits and Bytes: Events and Jobs

Upcoming Events:

• Apr 17 in Concord, NH: Pierce Law's IP Symposium
• May 2 - May 7 in San Antonio, TX: Patent Information User's Group Annual Conference. Very good conference for any interested in patent informatics and patent searching. The focus of this year's conference is on international patent information. I will be one of the speakers.
• May 8 in Overland Park, KS: KBA's IP Law Institute. I'm planning to be there in the audience to hear John Whealan, Chuck McManis, and Paul Fleischut.
• May 12 in Washington DC: GWU will host its Law Symposium on Intellectual Property with a focus on practical patent litigation issues.

New Source of Upcoming Events: The Patently-O Events Calendar (BETA VERSION). HTTP://www.patentyo.com/calendar. We're still working on the formatting & integration. The best way to post an event is to use create the event in your calendar (such as Outlook, Google Calendar, or iCal), and then invite patentevents@gmail.com. Be sure to include a URL in the description.

Job Postings from April 2009:

• Patent Attorney/Agent - Law Firm - Austin, Texas
• IP Associate - Law Firm - West Palm Beach, Fla.
• IP Counsel - Small Corporation - Gaithersburg, Md.
• Intellectual Asset Manager - Small Corporation - Cambridge, Mass.
• Chief IP Counsel - Brookhaven National Laboratory - Upton, N.Y.
• IP Associate - Law Firm - Washington D.C.
• Patent Attorney/Agent - Law Firm - Alexandria , Va.

Query:

• I should know this, but I don't recall the answer: Suppose a recently issued patent was filed in 2004 and claims to be a continuation-in-part of another application filed in 2000. In the new patent, some of the claims were fully described and enabled in the 2000 application while other claims in the new patent include matter only found in the 2000 application. Will the enforceable patent term differ between the two sets of claims? If so, does the PTO require a terminal disclaimer if the claims are not patentably distinct?

In re Ferguson (Answers to Frequently Asked Questions FAQ)

Scott Harris is the attorney who prosecuted, briefed, and argued in re Ferguson at the Federal Circuit. Harris is a former Fish & Richardson partner and is now in solo practice. He is also listed as a co-inventor on the patent application in dispute here as well as 40 other patents and 100+ pending applications. I asked him to provide his perspective on the case. In response, Harris provided the following FAQ.

What is Ferguson’s holding?

In order for a claim to be patentable under 35 USC 101, that claim must recite either a machine, or recite something that is tied to a machine; or the claim must transform some physical thing. The machine or the physical thing being transformed cannot be a paradigm, cannot be a corporation, and cannot be a legal obligation. 35 USC 101 requires that you must be able to “touch” the machine or the thing being transformed.

How does Ferguson differ from Bilski?

The patent application of In re Bilski, 545, F.3d 943 (Fed Cir 2008) related to an improved mathematical way in which hedged commodities were analyzed and managed. Like many of the previous “preemption” cases that had been decided by the Supreme Court and by the Federal Circuit, Bilski’s claims recited a mathematical algorithm. The Federal Circuit holding announced a new test – requiring the claim combination to be either tied to a “machine” (e.g. a computer) , or claiming a transformation of an object. Since there was no “machine” or “transformation”, the court concluded that Bilski’s claims would “preempt” one specific mathematical form of hedging, effectively stopping anyone else from using these mathematical formulas in the same way. The machine/transformation cannot be peripheral to the claim – which means that the machine or transformation cannot be related to data gathering or “mere” post solution activity.

Unlike the “preemption” cases relied on by the Bilski court, Ferguson had no mathematical calculation at all. The Federal Circuit chose to extend the Bilski test beyond the confines of “preemption” to defeat patentability of Ferguson’s pure business method. Ferguson holds that Bilski’s “machine or transformation” test is the sole and exclusive test for determining patentable subject matter, with or without a mathematical calculation.

Ferguson also held

- that the machine prong of the Bilski test must be a physical thing that one must be able to touch, and

- that the “article” to be changed into a different state or thing cannot be a legal obligation – and presumably likewise must be something that can be touched.

What was the Ferguson patent application about?

In a nutshell – software written by the little guy that was marketed and supported as though it had been written by the big guy. We believed that institutions would simply refuse to adopt or purchase any software unless it was supported by a credible company. Someone in their basement could write the best word processor or drawing program ever – but no one would ever know, because few would ever adopt it.

The patent application claimed a way to support a very small software developer or writer - who had the skills to write the software, but did not have the skills or resources to market and support the software. Ferguson claimed a shared marketing force that took a share of the income or profit from the software in return for doing this marketing and support.   

Why did you write claims to a “paradigm”?

In 1999, new forms of patents and claims were erupting. The patent office had decided to accept as statutory Beauregard claims, which recited a sequence of instructions on a readable computer media. I was excited by the prospect of writing a whole new claim form for the business method genre.

I had originally filed Ferguson’s patent application with many claims reciting a “paradigm”, a way in which a business organization would carry out a specific business task. Other claims defined a process of doing that business task. Ferguson was about selling computer software, and that was not something that would normally be carried out on a computer.   

Based on everything I knew at that time, business methods should be patentable. I wanted to see if we could get the patent office to accept a wholly new form of claim adapted to the business method. I called this a paradigm, which Kuhn, in The Structure of Scientific Revolutions defined as “an accepted model or pattern, . . . Paradigms gain their status because they are more successful than their competitors in solving a few problems that the group of practitioners has come to recognize as acute.” A paradigm in this sense, therefore, referred to the successful way in which a problem is solved.

Why did you think you get claims like this?

I believed the Supreme Court when they said that 35 USC §101 allows you to patent “anything under the sun that is made by man". Diamond v Chakrabarty, 447 US 303, 308 (1980).

I believed the Federal Circuit, when they said that "business methods" were patentable. State Street Bank and Trust v Signature Financial Group Inc., 149 F.3d 1368 (Fed Cir 1998).

I did not believe there was any prior art defeating patentability, and indeed, the patent office never found any.

Are Business Methods still patentable after Bilski/Ferguson?

Bilski expressly did not overrule the part of State Street Bank and Trust v Signature Financial Group Inc., 149 F.3d 1368 (Fed Cir 1998), which held that business methods were NOT per se unpatentable.

However, I define a business method as a novel and unobvious way that a business carries out a new business function.

The holdings in Bilski and Ferguson make any such business method unpatentable, unless tied to a machine, or operated to transform a physical object. Therefore, some ways of carrying out the business method may be patentable under Bilski / Ferguson. I do not believe any pure business method could be patented under the holdings of Bilski/Ferguson.

What’s your take away from Ferguson?

Disclose (and claim) interaction with a computer in every patent application that is not a pure mechanical device.

Don’t get your hopes up about the patent office accepting an innovative claim form.

Patents Exhausted by Sale after Covenant Not to Sue

TransCore v. Electronic Transaction Consultants (ETC) (Fed. Cir. 2009)

TransCore's patents cover automated toll collection systems. (Think E-ZPass). The company had previously settlement an infringement suit against a competitor (Mark IV) with a covenant not to sue on the patents. The present lawsuit arose when ETC began installing an automated toll collection system using Mark IV software. The district court dismissed the case – holding that Mark IV's licensed sales exhausted any patent rights. On appeal, the Federal Circuit affirmed.

In Quanta (2008), the Supreme Court re-affirmed the non-statutory doctrine of patent exhaustion. Exhaustion is triggered by an authorized sale and operates to "terminate all patent rights to that item."

Covenant versus Authorization: Here, TransCore slyly argued that its covenant not to sue could hardly be equated with an authorized sale sufficient to trigger exhaustion. Of course, a patent holder's exclusive right is only the right to sue for infringement, and a covenant not to sue gives up all patent rights that could be used in that context. In other words, in the narrow patent context, a covenant not to sue is the functional equivalent to authorizing sales. As the Federal Circuit held in the Spindelfabrik (1987) "a patent license agreement is in essence nothing more than a promise by the licensor not to sue the licensee."

Scope of Covenant: The license terms specifically focus on Mark IV as a party: "[TransCore] agrees and covenants not to bring any demand, claim, lawsuit, or action against Mark IV for future infringement." However, the one-party focus does nothing against the exhaustion doctrine because once the software is sold by Mark IV, any patent rights associated with those copies of the software are exhausted. "[T]he district court correctly found that Mark IV's sales to ISTHA were authorized and that TransCore's patent rights are exhausted."

Economic Downturn => Downturn in Patent Filings

PTO Director John Doll was kind enough to provide me with updated numbers on patent filings through March 17, 2009. The PTO's numbers tell the story that original utility application filings and continuation application filings have slowed in FY 2009 while requests for continued examination (RCE's) filings continue to rise. The Office is now faced with a serious financial crisis. Original filings (i.e., revenues) are down to FY 2004 - 2005 levels but the budget and backlog are both at all time highs. Although I the numbers are still being compiled, two of the PTO's other primary sources of revenue - maintenance fees and late fees - are also down this fiscal year.

The first chart below shows a time series for the percentage of continuation applications and RCE filings as compared to the total UPR filings (Utility, Plant, and Re-Issue applications). Remember here, that for most PTO statistics, RCE filings are counted as a utility application. According to this data, 27.6% of all of the UPR filings thus far in FY09 are RCEs - continuing a steady trend of of rising RCE filings. (Note - the RCE data also includes historical data for CPA and R129 filings).

For the next chart, I extrapolated the partial FY 09 data to the entire fiscal year to find some expectation of the total filings for the year. I also removed the RCE/CPA data because most practitioners would not consider those as separate applications. As mentioned above, both the original and continuation filings are down to around FY 04 levels. As compared to FY 08, original filings are on track to drop about 10% while continuations will likely be down over 20%. The large drop in continuation filing is likely an artifact due to the large number of continuations filed at the beginning of FY 08 in anticipation of the looming limits on continuation practice.

In the title of this post, I link the economic downturn with the downturn in patent filings. Some may also link the drop in patent filings with other recent events that may drop the allure of a patent application - namely, KSR v. Teleflex; eBay v. MercExchange; Bilski; Seagate; the prospect of further patent reform; the Second Pair of Eyes review; 750,000 backlog of unexamined patents; and the 26 month average pendency before the first OA.
> Although not in the title of the graph, the numbers do include plant patent filings which have hovered around 1,000 per year.
Of course, other factors may also

Tags: backlog, uspto

Patent Reform: First to File

Patent Reform 2009 is rolling along. The Senate Judiciary Committee has approved an amended form of S.515. Some notes on the first-to-file portion of the amended bill: S515Amended.pdf

·         First-to-File: One of the greatest changes to ordinary prosecution would be the move to a system where the effective date of invention is the filing date. This means no more swearing-behind prior art based on the date of the invention.

·         Effective Date: The language of the bill would define a the “effective filing date” of “the patent or application” as “the filing date of the patent or application for the patent containing a claim to the invention” or the earliest §§ 119, 120, 121, or 365 priority date associated with a document in which the “claimed invention is disclosed in the manner provided by the first paragraph of section 112.” (i.e., described, enabled, and best mode provided). The “claimed invention” is then described as “the subject matter defined by a claim in a patent or an application for a patent.’’ There appears to be is an important technical problem with this language because it considers the effective filing date of the patent or application as a whole. However, there are many cases where only some of the claims are fully described in priority documents. Under the language in S.515, the “effective filing date” of the patent would be the earliest priority date for any one claim in the patent. Thus, the provision would allow an applicant to reach-back to a provisional or parent document to claim an effective date for the entire patent document even if the priority document discloses information directed to only a portion of the claims.

·         Obviousness: To operate within the first-to-file schema, the obviousness provision needs to be keyed to the “effective filing date” rather than the “time the invention was made.” However, the proposed bill makes another couple of tweak to the provision. For instance, rather than looking at the “subject matter sought to be patented … as a whole,” the new provision would look to the “claimed invention as a whole.” Difference?

Bits and Bytes

• PPAC Nominations are due by May 15 – The new PTO director will presumably pick the nominee and will likely have time to suggest a nominee.
• IP Scholars Conference 2009: This annual event will be held at Cardozo Law in NYC on August 6th and 7th, 2009. This is usually a large gathering of IP focused academics and academic minded individuals presenting original works-in-progress. Deadline for submissions is April 30, 2009. Individual submissions and questions should be directed to David Morrison at dmorriso@yu.edu. For more information, visit www.ipscholars.org. Submissions include topic, abstract, author name, & academic affiliation.
• ANDA Infringement: Section 271 of the patent act provides a cause of action for patent infringement based on an unauthorized submission of an abbreviated new drug application (ANDA) for a patented drug or method. In a recent decision, the New Jersey district court found that the submission may still be an act of infringement even if the ANDA itself does not provide sufficient information to conclude that the use would be infringing. Instead, "the Court must look to the whole of the product, which means considering its ultimate useable state, as well as the ANDA-contemplated process and compound."PDL Biopharma, Inc. v. Sun Pharm. Indus. Ltd., 2-07-cv-01788 (NJD March 31, 2009).

Law Student Interns at PTO

The USPTO is maintaining its 8-week summer student internship program and is accepting applications now. The position is likely unpaid and does not provide housing or food. However, many law schools will offer credit to students for completing the internship. The Office of Patent Legal Administration (OPLA) and the central reexamination unit will both be working with summer interns.

To apply for the Summer Volunteer Program (SVP), send a cover letter, resume and transcripts via e-mail to Recruitment@uspto.gov with the subject line "Student Employment: Summer Volunteer Program."

Written Description: Pioneering Claims Require More Expansive Written Description

Ariad v. Eli Lilly (08-1248.pdf, Fed. Cir. 2009) (Judge Moore; Concurring opinion by Judge Linn)

Ariad sued Lilly for infringing its patent that claims a method of reducing NF-κB ("en eff kappa be") activity. The listed inventors of the patent include, inter alia, two Nobel Laureates, and the original assignees include Harvard, MIT, and the Whitehead Institute. A jury found that both Evista and Xigris infringe, and the judge denied Lilly's JMOL motion on invalidity. The resulting judgment was for $65 million in past damages and an ongoing royalty of 2.3% of sales.

On appeal, the Federal Circuit reversed the lower court's decision - finding the asserted claims invalid for lack of written description. The written description requirement is intended to ensure that the inventors "disclose the technologic knowledge upon which the patent is based [and] demonstrate that the patentee was in possession of the invention that is claimed." (Quoting Capon). Consequently, the disclosure in the patent document "must clearly allow persons of ordinary skill in the art to recognize that he or she invented what is claimed” and was in "possession" of the invention at the time of filing including "all elements and limitations." In other words, Ariad "must describe some way of performing the claimed methods."  The actual level of disclosure depends upon several factors such as the extent of prior art, maturity of the science, and the "predictability of the aspects at issue."

Here, it was clear that the invention was "extraordinarily creative" in a highly unpredictable field with little prior art available. Ariad's expert even testified that the invention necessitated the development of a new vocabulary. All these factors indicate that the written description bar will be set high.

Here, Ariad's description was scant on real examples

The ’516 patent discloses no working or even prophetic examples of methods that reduce NF-κB activity, and no completed syntheses of any of the molecules prophesized to be capable of reducing NF-κB activity.

Without specific examples, Ariad attempted to show that its description was sufficient by bolstering the skill of a PHOSITA. Unfortunately for the Patentee, the Jury found an early effective filing date and much of Ariad's evidence showed skill in the art after that 1989 date.

Because written description is determined as of the filing date—April 21, 1989 in this case—evidence of what one of ordinary skill in the art knew in 1990 or 1991 cannot provide substantial evidence to the jury that the asserted claims were supported by adequate written description.  

Although important, these small date issues probably made no difference because the description was so lacking and the prior art so sparse.

The state of the art at the time of filing was primitive and uncertain, leaving Ariad with an insufficient supply of prior art knowledge with which to fill the gaping holes in its disclosure.

"We therefore conclude that the jury lacked substantial evidence for its verdict that the asserted claims were supported by adequate written description, and thus hold the asserted claims invalid."

Caveat Vindicor: In its conclusion, the court noted that this result likely turned on clam construction. If Ariad had agreed to a narrower construction in litigation or narrower claim language during prosecution, then the written description requirement might have been satisfied. Of course, if it had pursued that strategy, infringement would have likely been lost.

Although Judge Linn concurred in the opinion, he wrote separately to remind readers of his belief that the written description requirement should be eliminated and enablement be allowed to do its job.

Notes:

• Pioneering inventions are less likely to be found obvious or anticipated. However, one problematic result highlighted by this decision is that those pioneer patents are more likely to be trapped by the formalities of the patent system.

In re Kubin: Federal Circuit Expands Obvious-to-Try Jurisprudence

In re Kubin (Fed. Cir. 2009), 08-1184.pdf (Opinion by Judge Rader)

In a much anticipated biotech case, the Federal Circuit has affirmed a BPAI obviousness decision and in the process expanded the court's obvious to try jurisprudence. The Kubin opinion found that the Supreme Court's KSR decision overturned In re Deuel and its admonition against an "obvious to try" test for obviousness.

To be clear, Kubin does not hold that an invention that was "obvious to try" was necessarily obvious under Section 103(a). Going forward, however, the question in this long-running debate will be "when is an invention that was obvious to try nevertheless nonobvious?" (quoting In re O’Farrell, 853 F.2d 894 (Fed. Cir. 1988).

Kubin revives the O'Farrell analysis of obvious to try and carves-out two factual situations where obvious-to-try analysis should not apply.

(1) Throwing darts versus a finite number of Identified, predictable known options:

In such circumstances, where a defendant merely throws metaphorical darts at a board filled with combinatorial prior art possibilities, courts should not succumb to hindsight claims of obviousness. The inverse of this proposition is succinctly encapsulated by the Supreme Court’s statement in KSR that where a skilled artisan merely pursues “known options” from a “finite number of identified, predictable solutions,” obviousness under § 103 arises. 550 U.S. at 421.

(2) Exploring new technology versus improving known and predictable technology:

[An] impermissible “obvious to try” situations occurs where 'what was “obvious to try” was to explore a new technology or general approach that seemed to be a promising field of experimentation, where the prior art gave only general guidance as to the particular form of the claimed invention or how to achieve it.' (Quoting O'Farrell).

Again, KSR affirmed the logical inverse of this statement by stating that § 103 bars patentability unless “the improvement is more than the predictable use of prior art elements according to their established functions.”

Application: In this case, the court finds that neither of the O'Farrell exceptions apply. The invention is old-school biotech: isolating and sequencing a human gene that encodes for a protein. People do this in high school now, and the application explicitly states that the DNA and Protein sequence may be obtained through "conventional methodologies known to one of skill in the art." Likewise, the protein in question had already been identified and the prior art suggested that the protein plays an role in human immune response.

KSR moves to Non-Predictable Arts: Biotech has traditionally been thought of as unpredictable. Here, Judge Rader may have dismantled the art-level distinction in holding that KSR applies to the unpredictable arts. The issue rather is if the particular invention in question was predictable.

Therefore this court cannot deem irrelevant the ease and predictability of cloning the gene that codes for that protein. This court cannot, in the face of KSR, cling to formalistic rules for obviousness, customize its legal tests for specific scientific fields in ways that deem entire classes of prior art teachings irrelevant, or discount the significant abilities of artisans of ordinary skill in an advanced area of art.

Affirmed.

Notes:

• Kevin Noonan provides an important critique of the case - focusing primarily on the court's mishandling of the factual issues. [Link].
• I should note here that the PTO is well ahead of the Federal Circuit. MPEP 2141 indicates that being "obvious to try" is a proper rationale to "to support a conclusion of obviousness." The big book does hint that such an application would only be proper if the "trying" means "choosing from a finite number of identified, predictable solutions, with a reasonable expectation of success."
• This case makes clear that the level of enablement of the prior art is very important to any obviousness conclusion. That result is in contrast to the recent Gleave case that found anticipation absent known utility.

Patents and the Auto Industry Bailout

In 2005, the PTO held a ceremony to commemorate the issuance of design patent number 500,000. The design patent went out to DaimlerChrysler for the design of the Chrysler Crossfire. Then Commerce Chief Gutierrez and PTO Director Dudas were on hand to note the importance of design patent design patents.

The patent has taken an interesting path – as shown by the assignment records at the PTO. Of course, DaimlerChrysler is gone, and Chrysler now owns the patent. In addition, Chrysler has given-up three separate security interests in the design patent. The first and second priority are apparently held in trust by the Wilmington Trust Company. The third priority is held by the US Department of Treasury based on a January 2009 grant and is apparently related to the company’s receipt of bailout money. [Assignment Data]. D500,000 is not the only patent implicated here – the assignment documents show that the US Treasury holds a security interest in more than 2,400 of Chrysler’s patents or pending applications. [More Assignment Data]

One important practice issue is raised: Absent a specific agreement, to what extent must the applicant consult secured creditors during the prosecution of a pending patent application?

Percentage of Patents that were Initially Rejected

This relates to my statements regarding the percentage of applications that receive at least an initial rejection. The graph below shows the percentage of patents issued (2000-2006) that were initially rejected by the PTO broken up into groups of art-units. Thus AU 1630 group actually includes AU 1630 - 1639. Close to 95% of the patents issued through the AU 1630 group during that period were initially rejected before being eventually allowed.

As with the design patent discussion yesterday, the rejection rate above is for applications that eventually issue as patents. For any given application, the effective rejection rate was likely higher because abandoned applications are probably more likely to have been rejected.

This data is now getting a bit old - but it is what it is. This data came from public PAIR before researchers were blocked from accessing it in any substantial way. Since 2006, applicants have complained of increased rejections. My perception that this change is not a shift toward more first office action rejections, but rather a shift toward sustaining more of those rejections in the second and subsequent office actions.

In re Gleave: Reference with Unknown Utility Still Anticipates

In re Gleave (Fed. Cir. 2009)

In 2008, the BPAI affirmed the examiner's rejection of Gleave's claims as anticipated. The claims focus on an antisense oligodeoxynucleotide designed to bind two different types of insulin-dependent growth factor binding protein (IGFBP). The prior art included a document that listed the genetic sequence of the complementary sense strands but did not identify any utility of the sequence.

On appeal, the Federal Circuit affirmed the anticipation rejection - basing its decision on the rule that anticipatory prior art does need to be functional, useful, or show actual reduction to practice. Rather, to be anticipatory, the prior art must enable the skilled artisan to make the claimed invention.

In the 1973 Wiggins case, the CCPA ruled that the "mere naming of a compound in a reference, without more, cannot constitute a[n anticipatory] description of the compound." The Federal Circuit here distinguished Wiggins - noting that in Gleave's case, the sequence listing was sufficient to allow a skilled artisan to "at once envision each member of this limited class."

Notes:

• A claim by Gleave with functional language might not have been anticipated by the prior disclosure of the bare sequence.
• Patent Docs review the case
• Patent Hawk has the title "useless but enabling."

Design Patents: Sailing Through the PTO

Over eighty percent of utility patent applications are initially rejected during prosecution. Some areas of technology – such as semiconductors – have a lower rejection rate while others – such as electronic commerce methods – have an even higher rejection rate.

I wanted to compare the result for utility patents with design patents. I pulled up information on 1000 of the most recently issued design patents (all issued in March, 2009) and parsed through the file histories to see how design patent prosecution compares. As the graph below shows, in my sample, only 25.6% of the recently issued patents received an initial rejection during prosecution. To be clear, this 25% rejection rate is for applications that eventually issue as patents. To get an overall picture of design patent rejections, we need to also consider the applications that are abandoned and never issue as patents. Recent PTO statistics show that a bit under 20% of design patent applications are abandoned. Because design patent file histories are kept secret unless a patent issues, we cannot know why any individual case is abandoned – However, the two most likely situations are that the applicant (a) failed to respond to a rejection or (b) failed to pay the issue fee. Even if we assume that 100% of the abandoned cases are initially rejected, that only pushes the initial rejection rate to about 40%.

As the graph below shows, of the 1000 issued design patents in my sample, only 4.1% received a final rejection during prosecution; and only 0.2% cases (2 out of 1000) included a notice of appeal. None of the 1000 cases included an appeal brief.

The design patents in the study had an average pendency of 15.3 months calculated by finding the number of months between the filing date and the issue date. As may be expected, applications that included at least one rejection took considerably longer to issue (21.5 months) as compared to those that were never rejected (13.2 months). (These means are different at 99.9 CI).

Most design patents (58%) in my sample have only one inventor. However, 69% of the inventors are listed as joint inventors. A number of the muliti-inventor patents included trans-national inventorship with inventors originating from two or more separate countries. About 1% of the applications listed at least one inventor from the US & Great Britain. Another 1% listed at least one inventor from both the US and China.

Guest Post: Ten Reasons the Supreme Court Should Take In re Bilski

Erika Arner is the co-author of the Bilski petition for certiorari challenging the Federal Circuit's limits on the patentability of method claims. She handles patent prosecution and litigation at Finnegan Henderson in DC. I asked Ms Arner to write this post.

The Time Has Come - Nearly thirty years have passed since the Supreme Court addressed patentable subject matter.  The "BFD" cases─Gottschalk v. Benson (1972), Parker v. Flook (1978), and Diamond v. Diehr (1981)─represent modern doctrine on the scope of patentable processes under 35 U.S.C. § 101.  Yet these cases were handed down before the Internet and personal computer fundamentally changed the way Americans live, work, and innovate.  In their struggle to apply the BFD cases to cutting-edge inventions, the PTO and courts have whittled away at the scope of section 101.  The time has come for the Court to reaffirm that the broad, flexible approach to section 101 set forth in the BFD cases applies with equal force in today's information age. 

Third Time's The Charm - The Supreme Court declined its last two opportunities to update its jurisprudence on section 101 and process claims.  In 1999, the Court denied cert. in State Street Bank, which applied the "useful, concrete, and tangible result" test to determine when a claim contains a patent-eligible practical application of a fundamental principle.  That same year, the Court declined to review AT&T v. Excel, but indicated that the section 101 issue had garnered at least some interest on the Court.  Justice Stevens filed a statement on the denial of cert. in AT&T v. Excel, noting that "[t]he importance of the question presented" made it appropriate to reiterate that a denial of cert. is not a ruling on the merits. 

Justice Stevens Is Not Alone - In addition to the statement filed in AT&T v. Excel, several justices have found opportunities to express interest in section 101 issues.  When the Court dismissed cert. in LabCorp v. Metabolite, Justice Breyer dissented, joined by Justices Stevens and Souter.  In the dissenting opinion, Justice Breyer called into question the "useful, concrete, and tangible result" test for patentable processes, arguing that "if taken literally" the test would conflict with Benson and Flook.  These three justices were joined by Justice Kennedy in a concurrence filed in eBay v. MercExchange(2006), criticizing the "potential vagueness and suspect validity" of business method patents.  Clearly, there is interest among at least some of the justices in the state of section 101. 

The PTO Picked Bilski - When the PTO began examining Mr. Bilski's patent application, prosecution progressed as usual.  Prior art was searched and applied, claims were amended, new prior art was cited, and several claims were allowed.  Then suddenly, the examiner changed position, withdrawing the remaining prior art rejections and the claim allowances and instead rejecting all of the claims under the now-obsolete "technological arts" test for section 101.  An expanded panel of the PTO Board affirmed the rejection in a 70-page "informative" opinion setting forth a version of the machine-or-transformation test.  The PTO seemingly chose Bilski as the vehicle to reverse its position set forth in the prior year's "precedential" decision in Ex parte Lundgren, which allowed business method claims with no tie to a computer or physical transformation. 

The Federal Circuit Picked Bilski - At the Federal Circuit, Mr. Bilski's case progressed normally at first.  Briefs were filed; oral arguments were held.  But before the panel rendered its decision, the court ordered that the appeal would be heard en banc "in a long-overdue effort to resolve primal questions on the metes and bounds of statutory subject matter" according to Judge Mayer.  In its en banc Order, the court invited briefing from the parties and the public on five questions ranging from whether Bilski's claims were patent-eligible under section 101 to what standard should govern the patent-eligibility of a process.  The court also took the extraordinary step of inviting two representatives of amicus parties to participate in the en banc oral arguments.  Clearly, the court decided that Bilski was the case to resolve the very "primal" question of when a process is patentable under section 101. 

The Patent Community Picked Bilski - When invited to file amicus curiae briefs to the en banc Federal Circuit in In re Bilski, the patent community and the public at large responded in force.  Thirty-eight briefs were filed representing wildly different points of view on the proper interpretation of section 101.  Briefs were filed by large organizations and small, by teams of academics and by individuals, by corporate patent owners and patent practitioners, and by industry groups ranging from software and biotechnology to the ACLU.  These assorted parties with their divergent points of view seem to agree on one thing: In re Bilski presents the perfect vehicle to address the proper scope of section 101. 

The En Banc Bilski Decision Is the Closest We Get to a Patent Circuit Split - Three dissents and a concurrence accompanied the 9-judge majority opinion.  Regarding the majority's machine-or-transformation test, the dissenting opinions varied just as widely as the amicus briefs had.  Judge Mayer argued that the court should go farther to restrict section 101 and overrule State Street Bank andAT&T.  At the other extreme, Judges Newman and Rader filed separate dissents arguing for a broad, flexible application of section 101 to accommodate the innovations of today's knowledge economy.  The divergence of opinions on the en banc court is akin to the "circuit split" that often signals the need for the Supreme Court to step in. 

The Issue in Bilski is Fundamental to the Patent System and the U.S. Economy - The proper scope of patentable subject matter under § 101 is not only important to the nation's economy, it is "one of the broadest, most sweeping issues in patent law," according to Judge Moore in her dissent from en banc rehearing in In re Comiskey (2009).  The importance of this issue is highlighted by the filing of nine amicus curiae briefs in support of the petition for cert.  This level of amicussupport at the cert. stage is the highest in a patent case since Festo, where nine briefs were filed at the cert. stage.  For example, only three briefs were filed in support of the petition for cert. in KSR and six were filed at the cert. stage in eBay.   

The Machine-or-Transformation Test Conflicts with Supreme Court Precedent - Although the Supreme Court has twice expressly declined to hold that the machine-or-transformation test is the "only test" for patentable processes under § 101, the Bilski court did just that.  Indeed, the court acknowledged some doubt about its interpretation of Supreme Court precedent and recognized that the Supreme Court "may ultimately decide to alter or perhaps even set aside this test to accommodate emerging technologies."  In re Bilski. 

The Supreme Court Does Not Like Rigid Tests for Patents – When the Supreme Court has set forth a flexible approach to interpreting the Patent Act, they are prone to overruling attempts to define a rigid "bright line" test.  Festo and KSR are two examples of the high Court reversing an attempt by the Federal Circuit to establish a bright line test when the flexible approach of earlier Supreme Court cases was difficult to apply.  In those cases, the Court instructed the Federal Circuit to return to the flexible, case-by-case analysis required by its precedent.  The Federal Circuit's "definitive" machine-or-transformation test should meet the same fate.