Patent Law Blog (Patently-O)

In Defense of Software Patents

Guest Post by Martin Goetz

 

This article is in response to the editorial “Abandoning Software Patents” by the Ciaran O’Riordan, Director of End Software Patents (posted on PatentlyO on November 6, 2009) which had as its premise that one is trying to protect “software ideas”.

 

I wrote this article from a unique perspective as the holder of the first Software Patent in 1968 and with a long history of involvement in the protection of software thru patenting and copyright protection. I am recognized as a pioneer in the Software Products Industry and had a successful career at Applied Data Research (ADR), the first company to market a software product. ADR and I were also directly involved in the filing of amicus briefs in the Prater & Wei, Benson, Johnson, Flook, and Diehr cases. More background information and links to my memoirs are in Wikipedia at http://en.wikipedia.org/wiki/Martin_Goetz.

 

Since the 1960s I have been a strong advocate of the patenting of inventions implemented in software and in 1968 I received the first US patent for an inventive way of sorting data on a digital computer[1]. At that time there was controversy over whether software was patentable subject matter and that controversy continues today 41 years later. Although the Supreme Court has previously stated that software is patentable subject matter[2], those rulings could be upset by today’s Supreme Court judges in the Bilski case.

 

This article does not argue for or against the patenting of BPMs. Rather, it tries to explain why inventions implemented in software are well within current US Patent Law[3] using examples and analogies that I believe are irrefutable. It also explains why software should be viewed a machine component of a general purpose computer (a machine).

 

 1. What is a Software-Related Invention? It is well recognized that whatever you can design in hardware circuitry (chips) can be developed in computer software (a computer program) to perform the same functions. Handwriting analysis, voice recognition, video frame analysis, data compression, language translations, artificial intelligence, searching techniques, network monitoring and security -- to name just a few functions -- are examples of where such implementations have been done in both hardware chips, in software, and a combination of both. The patents that have been issued in these nine areas represent inventions that are very-state-of-the art and not at all obvious. In particular, the analysis of handwriting and voice by a computer -- whether in hardware circuitry or in software -- is very complex and not at all obvious to one skilled in the art.
 
2. Hardware implementations versus software implementations. The choice of implementation for computer functions is a pure economic choice which mainly has to do with cost, speed, and flexibility. Patent applications normally show the preferred implementation and the patent must disclose the invention adequately for one skilled in the art. But the disclosure could be in the form of circuitry for a hardware implementation or a flow chart for a software implementation or a combination of both. Many professionals view software development as building a software machine. The life cycle of computer software is very similar to the life cycle of computer hardware. And its life span can be equally as long.

 

3. Software Product Companies[4] are High Technology Manufacturing Entities. In the 1980s with the advent of PCs, many new PC software companies called themselves Software Publishers. So are software companies more like publishers of books or more like manufacturers of machines? Based on my many years in the software Products Industry[5], here are my arguments why software product companies are manufacturers of high technology products. 

 

Many software products are state-of-the-art products developed in a very competitive, fast moving environment and require rapid response to meet user demand. Secondly, a great deal of capital is often required and many software companies are funded through private investments, venture capital, and through public offerings. Thirdly, there are active research and development activities within these companies. IBM, as an example has reported that it consistently spends well over one billion dollars in research and development specifically in the software area. Lastly, highly skilled personnel are employed in these companies and many have advanced Computer Science college degrees, including PhDs. And because of its complexity, many software products are built using software engineering disciplines.

 

There is six phases in the life cycle of software products: Definition, Design, Implementation, Delivery, Maintenance, and Enhancements. Let’s look a little closely at these phases and you will see how closely they resemble characteristics common to all manufacturing companies. Often, prior to the definition phase there is research as well as competitive analysis. During the definition phase software companies describe its functionality, its specifications, the environment in which it must operate, and its operating characteristics. During the design phase, it develops and defines all its interfaces, breaks down the functionality into modules, and does all the engineering so that the product can be properly implemented, maintained and enhanced during its lifecycle. During the implementation phase the software is debugged, tested, and goes thru quality assurance. During the delivery phase there is alpha and beta testing, documentation, installation, and training. Often software companies OEMs (Original Equipment Manufacturers) the product to other companies where the software becomes a component of a larger system and is re-packaged. During the maintenance phase the company warrants its workmanship, and guarantees the correction of errors and defects. Finally, during the enhancement phase the software is improved, enhanced, upgraded, and new models (releases) are announced.

 

Note these terms indicative of a manufactured product …..research, competitive analysis,  functionality, specifications, operational environment, operating characteristics, interfaces, modules, engineering, implemented, debugged, tested, quality assurance, alpha and beta testing, documentation, installation, training, OEM, component, system, re-packaged, maintenance, warrants, workmanship, guarantees, errors, defects, improved, enhanced, upgraded, and models.

 

It is obvious that software products are not “software ideas”. But is software more like publishing a book or more like manufacturing and maintaining a machine? And if it’s more like a machine how can the Supreme Court deny the patenting of inventions[6] in software?  

 

I believe the Courts should view software as a component of a general purpose computer (a machine) and that software transforms a general purpose computer into a special purpose computer (or machine).

---

[1] Patent # 3,380,029 Sorting System Issued April 23, 1968

 

[2] The Diamond vs. Diehr landmark decision by the Supreme Court in 1981 opened the door to the patenting of software when the court stated that "processes" were patentable, and that just because an invention used a formula, program, or computer, it was not necessarily unpatentable.

 

[3] The US Patent Law does not mention any industry or field of endeavor and it is generally accepted that “anything under the sun” can be patented.

 

[4]  The Software Industry is made up Software Product and Software Service companies and is recognized as one of the top three manufacturing industries in the world with 2008 revenues of over 700 Billion dollars. See http://en.wikipedia.org/wiki/Software_industry 

 

[5] My tenure in this Industry started in 1954. In 1959 I was one of its founders and spent almost 30 years at Applied Data Research (ADR), a publicly traded 200 Million software company that was acquired by Ameritech in 1986 and sold to Computer Associates (CA) in 1988. Many of ADR’s products initially developed over 30 years ago have been improved by ADR and CA and are still viable today. Today, I am a consultant and investor in software companies.

 

[6] An invention, in lay terms, can be a novel device, material, or technique which is new, inventive, and useful. It has been well established that machines, including computer hardware, contain patentable subject matter.

 

 

Patently-O Bits and Bytes No. 302

• Texas Juries: Michael Smith reviews E.D. Texas patent trial verdicts for 2009 (thus far). Depending upon how you count, the score ranges "from 8-3-1 to 6-6-1 (depend[ing] on whether you count a post-jury selection grant of summary judgment or not)." [Link]
• Judge Michel: A transcript of Chief Judge Paul Michel's recent speech to the FCBA is now available through that organization's website. [Link] In addition to announcing his retirement, Judge Michel argued strongly against a statutory right to appeal claim construction decisions. His discussion also touched on the fact that eight of the twelve Federal Circuit judging slots could open within the next 12-months. He suggests that the replacements should include (a) a district court judge and (b) a patent litigator who has extensive experience trying commercial cases in front of juries. Judge Michel suggested room for diversity on the court since all members are white and only 25% are women.
• Appointing Judges: Regarding Federal Circuit appointments. The Obama administration is already focused on ensuring that minorities and women receive their share of appointments. In the words of Judge Michel, it is the Bar's job to help "assure that the appointees to the Court are selected based on merit, on experience, on quality, on intellect, on intelligence, on energy, and not because they’re, you know, somebody’s cousin or whatever the other considerations might be."
• Concentration of Ownership: Hal Wegner and Justin Gray review the top 150 patent holders and reports on growing ownership concentration. [Link][See also Patent Prospector]
• Written Description: Amicus Briefs in Ariad v. Lilly: Patent Docs Review the Briefs. [Link]
• Presumption of Validity: Lucent v. Gateway: The Federal Circuit has denied Microsoft's petition for rehearing. Microsoft is expected to file a petition to the Supreme Court focusing on the interpretation of Section 282's "presumption of validity." Microsoft questions whether that statute is properly construed to always require clear and convincing evidence of invalidity.
• Presumption of Validity Redux: In a recent article, Scott Kieff and Henry Smith argue for a reduction in the presumption of validity. [Link]
• Reexaminations: Reexamination Statistics: Of the 734 inter partes reexaminations that have been requested in the past decade, 498 (68%) are "known to be in litigation." [Link]

Ecuador's Compulsory Licensing of Pharmaceutical Patent Rights

Under the TRIPS agreement member Nations can force compulsory patent licenses at their discretion. The 2001 Doha declaration clarifies this point: "Each member has the right to grant compulsory licences and the freedom to determine the grounds upon which such licences are granted."

In October 2009, Ecuador's president issued a decree that allows its Ministry of Public Health to issue compulsory licenses based on public interests such as access and costs. According to IP Watch, the government is now "working on a mechanism for issuing those licenses" on a case-by-case basis. [Link]

Spinning this decision, Access-to-Medicines advocate Peter Maybarduk indicated that the US is the world leader in compulsory licensing:

Many countries have used compulsory licenses to promote public interests and remedy anti-competitive practices in a variety of sectors. Today, the United States is perhaps the most frequent user of compulsory licensing; including the government use of defense technologies, and judicially-issued licenses to remedy anti-competitive practices in information technology and biotechnology, among others. Canada routinely issued compulsory licenses during the 1960s and 70s to develop its national pharmaceutical industry. In recent years, a number of countries have issued compulsory licenses to improve access to medicines, including Thailand, Malaysia, Eritrea, Mozambique and Indonesia, among others.

In 2007, Brazil issued a compulsory license for the HIV/AIDS medicine efavirenz. Brazil has provided treatment to hundreds of thousands of people living with HIV/AIDS and saved well over US$1 billion through its combined medicines strategy of domestic production, importation, negotiation and compulsory licensing. [Link]

Major pharmaceutical companies have reportedly agreed to work with the government in collecting royalty payments. [Link] The same report indicates that Ecuador plans to obtain drugs both through local manufacture and imports. Prior to TRIPS, more than four-dozen countries categorically refused to grant patent rights on pharmaceuticals.

Patently-O Bits and Bytes No. 301

Jobs Postings from the Past Week:

• Patent Portfolio Manager - Small Corporation - Mississauga, Ontario
• IP Attorney - Large Corporation - Holmdel, N.J. (Updated Link)
• Patent Agent - Large Corporation - Ardsley, N.Y.
• Patent Attorney/Agent - Small Corporation - San Diego, Calif.
• Experienced Patent Attorney - Law Firm - Flexible
• Patent Prosecutor - Law Firm - Woodbridge, N.J.
• Patent Counsel - Small Corporation - Cambridge, Mass.
• Patent Attorney (Prosecution) - Law Firm - Alexandria, Va.
• Sr. Intellectual Property Counsel - Law Firm - Boston, Mass.

Interviewing Director Kappos: Tony Mauro writes a comical story about one reporter's quest to interview David Kappos:

[W]hen ABA Journal senior writer Terry Carter got nowhere in his recent effort to reach Patent and Trademark Office director David Kappos . . . he decided on a characteristically novel approach: on Tuesday he drafted and posted a humorous patent application for a "method to get an interview with USPTO Director David Kappos." Edward Adams, editor and publisher of the ABA Journal, wrote in this story at the Journal Web site, "We figured the problem was that Carter was not speaking the agency's language." [Link][Read the Application]

Next Federal Circuit Judges and en banc petitions:

• There is currently one open slot on the Federal Circuit. In the interim, it should be statistically slightly easier to get the court to agree to an en banc rehearing. Instead of convincing seven of twelve (58%), now a successful petitioner need only convince six of eleven (55%).

Federal Circuit Chief Judge Paul Michel Announces that he is Leaving the Bench

Federal Circuit Chief Judge Paul Michel was the featured speaker at the November 20, 2009 Federal Circuit Bar Association Annual Dinner. At that dinner, Chief Judge Michel took that opportunity to announce that he will step-down as from the Bench at the end of May 2010. Although eligible for 'senior status,' Michel indicated that he plans to stop judging rather than take senior status.

The FCBA released the following statement:

The 25th Annual Federal Circuit Bar Association Dinner was a night to remember. The featured speaker, Chief Judge Paul R. Michel, announced that he would step down as Chief Judge and as a member of the judiciary, effective May 31, 2010. His moving speech rallied the community to serve and protect the Federal Circuit and the judiciary, as well as all institutions of governance. The record setting crowd included many of Chief Judge Michel's colleagues, who honored him with several standing ovations.

Chief Judge Michel has been a tireless and passionate leader of the Court, as well as a friend of the Association and the broad spectrum legal community within its jurisdiction. Those attending were heartened by the Chief's promise to continue his impressive career of public service after leaving the Court. We are confident that he will do so in new and important ways. His 21 years of service on the Court, capped by his tenure as Chief Judge, make for an enduring legacy on top of all his other accomplishments. We are proud to have shared his night with him and his wife, Brooke. We are confident of exciting new horizons for them both.

Judge Randall R. Rader, another great friend of the Circuit and its community, is next in line for Chief Judge. The Association looks forward to continuing its unwavering support for the Court and the next Chief Judge as the Circuit continues to write its history as the national court of appeals.

Federal Circuit Affirms EDTex Ruling that Iovate's Muscle Building Patents are Invalid

Iovate & University of Florida Research Foundation v. Bio-Engineered Supplements & Nutrition (BSN) (Fed. Cir. 2009) (Download 09-1018)

Iovate is the exclusive licensee of UF's patented method for "enhancing muscle performance or recovery from fatigue." Pat. No. 6,100,287. The method includes the single step of administering a coposition that contains a ketoacid and either a cationic or dibasic amino acid. Eschewing their home-state courts, the patentee filed suit in the Eastern District of Texas -- alleging that BSN was selling infringing supplements.

On summary judgment, district court judge Ron Clark held the patent invalid as anticipated under 35 U.S.C. 102(b). The most relevant prior art was a series of advertisements found in Flex Magazine.

Each ad includes a list of ingredients, directions for administering the dietary supplement orally to humans, and marketing claims and testimonials from bodybuilders extolling the virtues of the product. . . . The ad also describes how the product is made, including the four steps used to isolate the protein components from milk whey; lists a price of $24.99; states that the product is available at GNC and other health food stores or by phone; instructs the user on the amount to take; and offers a manufacturer’s rebate of $5.00 for mailing in a coupon with proof of purchase before July 31, 1996.

Judge Clark ruled that the advertising served as proof that the invention public use and on sale under § 102(b) based on the fact that the ads "show an actual product and state that it is available for purchase in health food stores, gyms, or by catalog." The district court also held that the ads explicitly disclose "all of the limitations of the asserted claims, including each of the claimed chemical components as well as the stated function of oral administration to a human to speed muscle recovery."

Under § 102(b) a patent is invalid if "the invention was patented or described in a printed publication in this or a foreign country or in public use or on sale in this country, more than one year prior to the date of the application for patent in the United States."

On appeal, the Federal Circuit affirmed, but narrowed its grounds to focus only on the prior art as a "printed publication." Writing in a concurring opinion, Judge Mayer indicated that he would have found that the ads place the products "on sale" as well.

Iovate raised two arguments regarding the prior art. First, the patentee argued that the ads did not disclose each element in the claims because the preamble included the goal of "enhancing muscle performance" and while the ad merely touted promotion of "muscle synthesis and growth." The appellate panel not only rejected that argument, but also found that it "borders on the frivolous" since the specification and Iovate's briefs at the district court suggested that muscle growth was a proxy for enhancing muscle performance.

Iovate also argued that the ad was not sufficiently enabling as prior art. In rejecting that suggestion, the appellate panel held that "all one of ordinary skill in the art would need to do to practice an embodiment of the invention is to mix together the known ingredients listed in the ad and administer the composition as taught by the ad."

Affirmed.

This case leave open the question of when an advertisement would be evidence of public use or on sale.

Nil: The Value of Patents in a Major Crisis Such as an Influenza Pandemic

I have posted a short draft essay to SSRN that is being published in the Seton Hall Law Review as part of their annual Health Law Symposium. The overall topic of the symposium is Preparing for a Pharmaceutical Response to Pandemic Influenza. My discussion focused on the value of patent law in preparing for a health care crisis. Read the paper on SSRN.

Abstract: This essay focuses on the role of patents in relation to a potential global crisis such as an influenza pandemic or other public health crisis. I argue that patent rights will be largely ignored during an epidemic and that any post-crisis compensation would likely be low when compared to traditional patent rewards or settlements entered under threat of injunctive relief. In some situations, such as use of a patented invention by a state or local government, a patentee may have no recourse. Part III of the essay raises a separate issue that stems from the relatively long time frame for obtaining patent rights as compared with the time frame of an epidemic. Patent rights are only obtained through the typically slow process of patent prosecution. Consequently, innovation triggered by the onset of an epidemic might not be protected by patent rights until well after the crisis has abated. This realization suggests that the role of patents rests with providing incentives for longer-term preparation and follow-up, rather than with protecting innovations triggered by the specific crisis itself. Certain classes of innovations may be left without effective patent protection – such as anti-viral or anti-microbial treatments that are engineered only after isolating the offensive biologic agent. Optimistically, under this same formulation, patents may provide an incentive to ensure that a crisis is never realized. Part V of the essay recognizes that innovation still takes place in the absence of enforceable patent rights. A wide variety of incentives play a role in innovation policy, and reduced patent value will not end innovation.

Notes:

• I posted some thoughts on this topic in a 2008 Patently-O post. Patently-O readers were helpful in providing guidance and suggestions based on that original post. Thank you!

Vacatur: Judge Posner Agrees to Vacate Inequitable Conduct Holding Based on Settlement Agreement

New Medium v. Barco (N.D. Ill. 2009)

Seventh Circuit Appellate Judge Richard Posner heard this case sitting by designation in the Northern District of Illinois. The final judgment is interesting in relation to the Federal Circuit's recent refusal to vacate the district court's opinion after the PTO retreated in Tafas v. Dudas.

In a 2008 decision, Judge Posner held New Medium's asserted patents unenforceable due to inequitable conduct during ex parte reexamination of the patents. Notably, Judge Posner found that the inventor/owner Carl Cooper had made false statements to the PTO regarding his association with the expert who had submitted declarations in the reexamination. Notably, in his declaration to the PTO, Mr. Cooper stated that he had "never met or talked with any of these experts" prior to contacting them to submit reports. Judge Posner found that statement "false" since Cooper had solicited and paid for a bid from one of the experts (Klughart) seven years prior. 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 [the admission] is unintended."

Following Judge Posner's decision, the parties decided to settle the case. As part of the settlement, Judge Posner issued an order vacating its prior inequitable conduct decision: "By agreement of the parties, the Court vacates its Order of October 16, 2008 (Docket 857) declaring United States Patents Nos. 5,424,780 and 6,529,637 unenforceable."

Elimination of the inequitable conduct decision allows Cooper to continue to assert the patent. Ongoing defendants include Microsoft and Vizio. (See IP Innovation LLC v. Vizio, 08-cv-00393 (N.D. Ill.))

Patent on Tax Refund System Deemed Invalid under Section 101

H&R Block v. Jackson Hewitt (E.D. Tex. 2009)

E.D. Texas Magistrate Judge Love has recommended that H&R Block's advance-tax-refund patents be held invalid for failing to claim patentable subject matter under Bilski. The claims in question are all directed toward either a "computerized system" or "computer-implemented method." Quoting Nuijten, the court first held that Bilski controls both system and method claims – since a "court should not be 'overly concerned with pigeonholing subject matter once the court assures itself that some category has been satisfied.'"

The claimed invention involves issuing a cash-advance to income tax filers and then retaining a right to receive payment from the government.

The court held that none of the claims satisfied the particular-machine-or-transformation test. The "computerized system" claims did not identify a "particular, special purpose machine" that was more than "an insignificant, extra-solution component of the claimed invention." Likewise, the transformation of "tax return data" into a "spending vehicle" is not the type of transformation required under the test.

"At all steps in the claimed processes, the manipulated data represent legal obligations and relationships. However described, the data and resulting loan represent money. Although tangible in some forms, money is simply a representation of a legal obligation or abstract concept."

Claim 1 of Patent 7,072,862 reads as follows:

1. A computerized system for distributing spending vehicles comprising:

2. • a payment due from a governmental entity;
   • an assignable right to receive said payment from said governmental entity, said assignable right held by an individual;
   • a spending vehicle offered by a third party sponsor to said individual in exchange for at least a portion of said individual's right to receive said payment due;
   • an assignment of at least a portion of said individual's right to receive said payment to said third party sponsor in exchange for said spending vehicle;
   • wherein information associating said payment with said spending vehicle from said third party sponsor is stored in and retrieved from a computer to facilitate processing of said spending vehicle and said spending vehicle is issued to said individual in an amount for spending by said individual of said at least a portion of said payment, said governmental entity is electronically notified to transfer said at least a portion of said payment to said third party sponsor, and said at least a portion of said payment is received by said third party sponsor.

Post EBay Injunctive Relief

IP Today has published an interesting report on permanent injunction decisions since the Supreme Court's 2006 decision in eBay v. MercExchange. The authors found 67 district court injunction decisions. 48 (72%) granted relief; 19 (28%) denied relief. The article highlights a number of cases where injunctive relief was denied even though the parties were market competitors. Unfortunately, the article does not indicate whether the parties were actually competing in the market influenced by the patent. (The article indicates that IMX v. LendingTree involves competitors.)

Ernest Grumbles, Rachel Hughey, and Susan Perera, The Three Year Anniversary of eBay v. MercExchange: A Statistical Analysis of Permanent Injunctions, Intellectual Property Today, November 2009 (behind a firewall).

Design Patents: Mueller & Brean

Professor Janice Mueller & Daniel Brean have posted a new working-draft article on design patent protection. The article argues "that courts and the USPTO have previously unrecognized flexibility in how they apply the nonobviousness requirement to designs." The authors recommend, inter alia, that courts (1) recognize that nonobviousness jurisprudence (e.g., KSR) has "very limited, if any, applicability to design patentability"; (2) plant patent patentability requirements serve as a better example; (3) the perspective of a non-expert ordinary observer should be used when considering nonobviousness; and (4) design anticipation should be limited to "strict identity situations."

Read the article here.

Patently-O Bits and Bytes No. 138: New Job Openings

• Patent Prosecutor - Law Firm - Woodbridge, N.J.
• Patent Counsel - Small Corporation - Cambridge, Mass.
• Patent Attorney (Prosecution) - Law Firm - Alexandria, Va.
• Sr. Intellectual Property Counsel - Law Firm - Boston, Mass.
• Patent Agent/Associate - Law Firm - Rockville, Md.
• Patently-O Jobs Sponsored by Franklin Pierce Law Center.

Centocor v. Abbott: In June 2009, Centocor won a $1.67 billion judgment against Abbott based on the jury's findings that Abbott's arthritis treatment Humira infringes Centocor's U.S. Patent No. 7,070,775. In a post-trial verdict, Judge Ward has rejected Abbott's defenses of inequitable conduct and laches. An appeal to the Federal Circuit will follow. [MCSmith][Patently-O Discussion of the Verdict].

Medela v. Kinetic Concepts: The Supreme Court has rejected Medela's petition for certiorari. The petition challenged the notion that a jury should decide the legal question of obviousness. [Supreme Court Docket]

Design Patents: Functionality and a Trade Dress Gap Filler

Bissell Homecare v. Wildwood Industries (W.D. Mich. 2009)

This case is not likely to move much beyond the pleadings because the accused infringer (Wildwood) has declared bankruptcy. Wildwood sells replacement filters for Bissell vacuums. Earlier this year, Bissell sued Wildwood for infringement of its design patent (D565818) as well as trademark infringement for advertising "Bissell style" filters. [Link]. Of course, the validity of this design patent is questionable because the shape appears to be almost completely dictated by a need for the removable filter to fit within the standard compartment. "[I]t has long been settled that when a configuration is the result of functional considerations only, the resulting design is not patentable as an ornamental design for the simple reason that it is not "ornamental" - was not created for the purpose of ornamenting. In re Carletti, 328 F.2d 1020 (C.C.P.A. 1964); Hueter v. Compco Corp., 179 F.2d 416; Best Lock Corp. v. Ilco Unican Corp., 94 F.3d 1563 (Fed. Cir. 1996); Static Control Components, Inc. v. Lexmark Int'l, Inc., 487 F. Supp. 2d 830 (E.D. Ky. 2007).

In recent years (and in the wake of Wal-Mart v. Samara), design patents have begun be more aggressively asserted by manufacturers in place of (or alongside) trade dress claims. See Coach, Inc. v. Brown Shoe Company, Inc., 09-cv-05051 (S.D.N.Y., Complaint Filed May 29, 2009) (handbag); Hubbell v. Dynamic Lighting (light fixture); Deckers v. Bon-Ton (Kona Boot); NetGear v. Tong Ho Fong (wireless router); Nufix v. Bacterin Int'l. (surgical implant); Oakley v. Pacific Trade (sunglasses); Nike v. Not for Nothi'n (Air Jordan shoes); Poof-Slinky, Inc. v. Ja-Ru, Inc. (toy rocket); Lowes Co Inc, et al v. Pelican Products Inc (flashlight); Williams-Sonoma, Inc. v. Linen Source Inc (lamp – Indian design patents asserted in US court); Olivet International, Inc. v. Skyway Luggage Company (luggage wheel rims); Cartier et al v. Egana of Switzerland (watch); Plantronics, Inc. v. Wireless Connections NY, Inc. (earloop receiver); BELL HELICOPTER TEXTRON INC. et al v. ISLAMIC REPUBLIC OF IRAN et al (helicopter design).

  

A Brief Defense of the Written Description Requirement

by Michael Risch

The Federal Circuit’s upcoming consideration of Ariad v. Lilly has generated a fair amount of buzz among those who follow patent policy. The dispute arises from the interpretation of 35 U.S.C. 112 ¶ 1, which states in relevant part:

The specification shall contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same….

All agree that this language includes an “enablement” rule, which requires that the specification enable a person having ordinary skill in the art (the PHOSITA) to make and use the invention. More controversial is the phrase, “written description of the invention,” and whether that phrase entails a separate requirement apart from enabling the PHOSITA to make and use the invention. It appears that academics are split on the question, and most practitioners appear to disfavor a separate requirement.

This essay briefly describes the dispute, and then raises an important but under-theorized argument in favor of a separate written description requirement. The essay accepts the persuasive grammatical reading of the statute proposed by opponents of a separate written description requirement. This reading suggests that a patent disclosure is sufficient so long as the PHOSITA can practice the invention.

However, while enablement is necessary to satisfy Section 112, it is not sufficient. The statutory language certainly requires that an applicant identify the invention sufficiently to allow a PHOSITA to make and use it. However, even if the specification enables a PHOSITA to practice the invention, the applicant is not relieved of the obligation to identify the invention. Instead, the specification must contain a “description of the invention” even if such description would only serve to reinforce other parts of the disclosure that enable one to make and use the invention.

This reading of the statute is consistent with the grammatical breakdown of Section 112. It is also the preferred interpretation, because a description of the invention fulfills an important purpose in the patent system. The requirement ensures that the applicant actually invented the claimed subject matter. Reading description out of the statute would allow patent applicants to claim subject matter they did not invent, and would effectively rewrite nearly 120 years of precedent about the conception of inventions.

This is certainly not the only argument in favor of a written description requirement; a strong written description requirement provides policy benefits in clarifying claim scope and policing patentable subject matter. This essay leaves such benefits to the side, and focuses only on the statutory basis for the rule.

Finally, the essay considers the Ariad case and concludes, perhaps surprisingly, that under the vision of written description presented in this essay the claims at issue may well be described.

The remainder of the essay is available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1504631.

Tafas v. Kappos: Cleaning Up

Tafas & GSK v. Kappos (Fed. Cir. 2009) (En banc order)

After a two-year battle and under the new leadership of David Kappos, the PTO recently withdrew its proposed rules package that would limit the number of continuation applications and the number of claims-per-application. The PTO also asked that the Federal Circuit dismiss the now moot appeal and also vacate the district court judgment. All parties supported the dismissal, but Tafas opposed vacatur. The district court decision included strong language limiting the scope of PTO power, and vacatur would essentially eliminate that district court decision from the books.

In an en banc order, the Federal Circuit has now granted the dismissal, but denied the motion for vacatur. Following the Supreme Court's 1994 Bancorp Mortgage decision, the Federal Circuit held that vacatur is not appropriate when the "mootness" of an appeal "is due to a voluntary act by the losing party, such as a settlement."

"[This] is a case in which the agency itself has voluntarily withdrawn the regulations and thus set the stage for a declaration of mootness. The motion's statement that an intervening regulatory change is directly analogous to an intervening statutory change is not persuasive. The agency does not control Congress; but it does control the decision to rescind the regulations. Thus, it was the USPTO (the losing party in the district court action) that acted unilaterally to render the case moot, and vacatur is not appropriate

Denial of vacatur also provides Tafas with the opportunity of demanding recoupment of its costs under Fed. R. Civ. Pro. R. 54.

Survey of the Disruptive Impact of a First-to-File Switch

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Precedential BPAI Opinion Rejects Functional Claim Elements as Indefinite and Not Enabled

Ex parte Rodriguez, 08-0693 (BPAI 2009) (Precedential) fd080693.pdf 

In its first precedential decision since February 2009, an expanded BPAI panel has applied the Federal Circuit's 2008 Aristocrat decision in rejecting applicant's means-plus-function (MPF) claims as indefinite for failing to provide any corresponding structures in the specification other than a general purpose computer. From Aristocrat:

For a patentee to claim a means for performing a particular function and then to disclose only a general purpose computer as the structure designed to perform that function amounts to pure functional claiming. Because general purpose computers can be programmed to perform very different tasks in very different ways, simply disclosing a computer as the structure designated to perform a particular function does not limit the scope of the claim to "the corresponding structure, material, or acts" that perform the function, as required by section 112 paragraph 6.

In Aristocrat, the Federal Circuit made clear that reference to "appropriate programing" was not sufficient to transform a general purpose computer into a specific structure for 112p6 purposes. Rather, the court indicated that an algorithm for operating the computer should also be provided in the specification.

Here, the Rodriguez claim 10 included several MPF elements such as "means for generating a random system configuration file." However, the specification did not include an algorithm for generating the file apart from a statement that "[a]ppropriate software coding can readily be prepared by skilled programmers." Based on that failure the claim was found invalid as indefinite.

The Appellants have failed to disclose any algorithm, and thus have failed to adequately describe sufficient structure, for performing the functions recited in the means elements contained in claim 10 so as to render the claim definite. Accordingly, claim 10 is unpatentable under 35 U.S.C. 112, second paragraph, as indefinite. Aristocrat, 521 F.3d at 1333.

The remaining claims did not use standard MPF claim language. However, the Board found that the remaining claims all included elements that were properly interpreted as MPF because they claimed functional elements without any "noun denoting structure." (Citing Lighting World & Linear Tech). The claim elements in question include a "system configuration generator," "system builder," and "simulation verification environment." (et al.). These are the same functional elements found in claim 10 - and thus were found indefinite for failing to provide any corresponding structure in the specification.

In many ways, this MPF structure requirement runs parallel to the written description doctrine. It may well be that one of ordinary skill in the art could easily generate a random system configuration file without undue experimentation. That potential fact is irrelevant for MPF definiteness analysis. Rather, the question for definiteness of a MPF claim is whether a corresponding structure is described in the specification.

The Board did also rejected the claims for lack of enablement under Miyazaki because the functional claim language was not "commensurate in scope with an enabling disclosure." As the use of MPF claims has dropped, this third portion of the opinion may be the most important.

Notes:

• The patent application is owned by LSI and entitled "Automated random verification of complex and structurally-variable systems."
• Rejected Claim 1 is listed below. 

1. 1. An apparatus comprising: a system configuration generator configured to generate a random system configuration file of a structurally variable and complex system; a system builder configured to build a system level netlist in response to said random system configuration file; and a simulation verification environment configured to verify said structurally variable and complex system in response to said system level netlist, wherein said simulation verification environment is configured to provide automatic random verification of said structurally variable and complex system in response to said random system configuration file.

Red Hat on Patents (VIDEO)

The video prominently features BU law professor and economist Michael Meurer whose book Patent Failure (with Jim Bessen) uses economic analysis to make the case that patents (particularly software patents) are a net drag on innovation.  The video is purely one-sided.

Kappos Blog & First-to-File

Director Kappos has created a new blog that is available via the PTO website. The blog (titled the "Director's Forum") looks to be an excellent avenue for the Director to stay in-touch with patent practitioners and patent applicants – both to receive input from the IP community and to serve as a pulpit for PTO proposals. The blog allows comments, although they are moderated.

The first post focuses on how the PTO is attempting to "work for independent inventors." In one portion, Kappos focuses on legislative patent reform and a move to a first-to-file system:

With regard to the patent-priority system, the bill's proposal to move to a first inventor to file system really represents only a minimal change to the process we use now. The new system would not create a situation where someone could steal an idea and win a race to the patent office. That person would not be an inventor and would not be eligible for a patent in the first place. Keep in mind that there are stiff penalties in place to protect against that. So the real issue involves the case of simultaneous non-collaborative invention that is currently resolved through the interference system.

The truth is that only .01 percent of all patent applications could be affected by a change to first inventor to file. The interference system is already biased in favor of the first inventor to file and 70 percent of the extremely small number of cases that get into the interference process are decided in favor of the first inventor to file. For more on these and other issues, I would encourage you to read the text of the speech I gave at the Conference on our Web site.

Of course, it is not true that "only 0.01 percent of all patent applications" could be impacted by a change to first-to-file. The problem is that this figure does not take into account the frequency that patent applicants rely on their invention date to avoid prior art by swearing behind a reference. My own studies find that about 1% of applicants attempt to swear-behind prior art. Applicants swear behind more often in applications that might be termed "valuable." While still small, the 1% frequency is 100 times greater than the PTO's 0.01% figure (which appears to be based on interference tallies).

The data also ignores the frequency that invention date is relied upon during litigation. My preliminary studies show that invention date is more frequently at issue in infringement litigation than at the PTO.

Notes:

• I'll have a working paper available on these issues later this month.
• Read the Director's Forum Blog.

Bilski v. Kappos: Supreme Court Arguments

Bilski v. Kappos (Supreme Court 2009) (oral arguments)

The transcript from the hour-long oral arguments are available online here. The following is the five-minute version of the questions and statements that I found most interesting. They are a bit out-of-order.

 

JUSTICE SCALIA: Well, if the government says that the -- that the term on which it hangs its hat is the term useful arts and that that meant, originally, and still means manufacturing arts, arts dealing with workmen, with -- you know, inventors, like Lorenzo Jones, not -- not somebody who writes a book on how to win friends and influence people. What is wrong with [the] analysis, that ..."useful arts" ... always was thought to deal with machines and inventions?

JUSTICE BREYER: You know, I have a great, wonderful, really original method of teaching antitrust law, and it kept 80 percent of the students awake. ... And I could probably have reduced it to a set of steps and other teachers could have followed it. That you are going to say is patentable, too?

JUSTICE SCALIA: . . . Let's take training horses. Don't you think that -- that some people, horse whisperers or others, had some, you know, some insights into the best way to train horses? And that should have been patentable on your theory.

JUSTICE SOTOMAYOR: So how do we limit it to something that is reasonable? Meaning, if we don't limit it to inventions or to technology, as some amici have, or to some tie or tether, borrowing the Solicitor General's phraseology, to the sciences, to the useful arts, then why not patent the method of speed dating?

JUSTICE SOTOMAYOR: But a patent limits the free flow of information. It requires licensing fees and other steps, legal steps. So you can't argue that your definition is improving the free flow of information.

 

MR. JAKES: . . . I think that we should go back to the first principles that were enunciated in Diehr and other cases, that abstract ideas per se are not patentable. That's my position, and what I would advocate in this case and any case...

MR. STEWART: Well, I think the Court could say -- could do essentially what was done in Benson and Flook, namely acknowledge that there had never been a case up to this point in which a process had been held patent eligible that didn't involve a machine or a transformation. It could leave open the possibility that some new and as yet unforeseen technology could necessitate the creation of an exception.

 

MR. JAKES: [L]ooking at what are useful arts, it does exclude some things. It does exclude the fine arts. Speaking, literature, poems, I think we all agree that those are not included, and there are other things as well. For example, a corporation, a human being, these are things that are not covered by the statutory categories. . . . Now, the patent on the data, that's another category that's not included in the subject matter of those four categories. The data itself is not patentable, but if it is a series of steps, it should be eligible as long as it meets the other statutory requirements as a process.

 

CHIEF JUSTICE ROBERTS: Well, but your Claim 1 it seems to me is classic commodity hedging that has been going on for centuries.

MR. JAKES: Your Honor, if that were true, then we should run afoul of the obviousness provision under section 103.

 

JUSTICE BREYER: There are actually four things in the patent law which everyone accepts. There are two that are plus and two that are minus. And the two that are plus is by giving people a monopoly, you get them to produce more. As you said, you get them to disclose. The two minuses are they charge a higher price, so people use the product less; and moreover, the act of getting permissions and having to get permission can really slow things down and destroy advance. So there is a balance. In the nineteenth century, they made it one way with respect to machines. Now you're telling us: Make it today in respect to information. And if you ask me as a person how to make that balance in respect to information, if I am honest, I have to tell you: I don't know. And I don't know whether across the board or in this area or that area patent protection will do no harm or more harm than good.

 

MR. STEWART: And you know, Justice Scalia, you mentioned how to win friends and influence people. I think at a certain level of generality you could describe both Dale Carnegie and Alexander Graham Bell as people who devised methods of communicating more effectively. The reason that Bell's method was patentable was that it operated in the realm of the physical. Bell had devised a process implemented through machines by which sound was transformed into electronic current. The current was then transmitted over a distance and transformed back into sound. Innovations as to new techniques of public speaking, new techniques of negotiations, techniques that go to the substance of what is said may be innovative. They may be valuable. They are not patent eligible because they don't deal in the realm of the physical --

 

JUSTICE SOTOMAYOR: How about if we say something as simple as patent law doesn't cover business matters

MR. STEWART: I think that would be incorrect, and it would create problems of its own. . . . So to say that business methods were ruled out would itself be a fairly sweeping holding.

JUSTICE SCALIA: Also you could say business methods apart from machines are not patentable. How about that?

MR. STEWART: If the Court said that in the limited area of business methods, if there is no machine or transformation there is no patent eligibility --

 

CHIEF JUSTICE ROBERTS: Mr. Stewart, I thought I understood your argument up until the very last footnote in your brief. And you say this is not --simply the method isn't patentable because it doesn't involve a machine. But then you say but it might be if you use a computer to identify the parties that you are setting a price between and if you used a microprocessor to calculate the price. That's like saying if you use a typewriter to type out the -- the process then it is patentable. . . . that takes away everything that you spent 53 pages establishing. . . . [I]f you look at your footnote, that involves the most tangential and insignificant use of a machine. And yet you say that might be enough to take something from patentability to not patentable.

MR. STEWART: And all we've said is that it might be enough; that is, hard questions will arise down the road as to where do you draw the line, to what extent must the machine or the transformation be central --

CHIEF JUSTICE ROBERTS: So you think it's a hard question. If you develop a process that says look to the historical averages of oil consumption over a certain period and divide it by 2, that process would not be patentable. But if you say use a calculator, then it -- then it is?

MR. STEWART: I think if it's simply using a calculator for its preexisting functionality to crunch numbers, very likely that would not be enough. But what we see in some analogous areas is that the computer will be programmed with new software, it will be given functionality it didn't have before in order to allow it to perform a series of calculations, and that gets closer to the line. . . . I guess the point I'm trying to make is simply that we don't want the Court, for instance, in the area of software innovations or medical diagnostic techniques to be trying to use this case as the vehicle for identifying the circumstances in which innovations of that sort would and would not be patent eligible, because the case really doesn't present any -- any question regarding those technologies.

 

JUSTICE KENNEDY: How would you come out in the State Street case today, if all of the arguments were made under your test?

MR. STEWART: Well, under our test, we would come out the same way because the computer would be a machine. The only question would be whether the programming of the computer with new software caused it to be a patentable different machine from the one that existed previously.

 

JUSTICE STEVENS: It's not on a computer, which the only difference from the old computer is it's using a new program. You can't say that's a new machine.

MR. STEWART: [The] PTO agrees ... that programming a computer by means of software to produce -- to perform new functions can create a novel --

JUSTICE BREYER: But then all we do is every example that I just gave, that I thought were examples that certainly would not be patented, you simply patent them. All you do is just have a set of instructions for saying how to set a computer to do it. Anyone can do that. Now, it's a machine.

MR. STEWART: ... we recognize that there are difficult problems out there in terms of patentability of software innovations and medical diagnostics.

JUSTICE KENNEDY: You thought we -- you thought we would mess it up.

MR. STEWART: We didn't think the Court would mess it up. We thought that this case would provide an unsuitable vehicle for resolving the hard questions because the case doesn't involve computer software or medical diagnostic techniques, and therefore, we thought the Court would arrive at the position that I think, at least some members are feeling that you have arrived at, that you will decide this case, and most of the hard questions remain unresolved.

Supreme Court Hears Bilski v. Kappos

As she has done with past cases, Jill Browning provides the following same-day analysis of the Supreme Court oral arguments in Bilski v. Kappos.

By Jill Browning

The Federal Circuit, sitting en banc, affirmed the Patent Office's decision that the applicant's claims directed to a method of hedging risk in the field of commodities trading did not meet the patent eligibility standard of  35 U.S.C. § 101.  The Federal Circuit found that a "process" must be tied to a particular machine or apparatus, or must transform a particular article into a different state or thing (the "machine-or-transformation" test), to be eligible for patenting under 35 U.S.C. § 101.

The Supreme Court heard oral argument on the appeal from the Federal Circuit today, wherein the central issue is whether the Federal Circuit erred by holding that a "process" must be tied to a particular machine or apparatus, or transform a particular article into a different state or thing ("machine-or-transformation" test), to be eligible for patenting under 35 U.S.C. § 101. 

Justices Sotomayor, Kennedy and Breyer were particularly active, with only slightly lesser participation by Justices Scalia and Ginsburg and Chief Justice Roberts. The Justices appeared to be struggling to come up with the "right" answer and appeared to be mindful of the potential consequences their ruling may have.

Justice Scalia initially indicated that the "useful arts" should mean the manufacturing arts, but not someone who writes a book on "how to win friends and influence people."  Justice Sotomayor followed up with a question regarding the difficulty in where to draw the line if there is no tie to science/technology, reciting the parade of horrors of potentially patentable methods for estate plans or tax avoidance.  Justice Breyer followed up with a question asking whether the framers of the Constitution intended for every  "new" method that helps the business owner to conduct business should be patentable, intimidating that the petitioner's proposed test could be too encompassing and asking for an alternative to limit it to something more reasonable, such as "useful arts."  Justice Sotomayor asked whether a method to cure someone that involves only human activity would fall within the Patent Act.  In response, Petitioner responded that yes, many of these things, if there were new and useful and met the other requirements of the Patent Act, should be patentable, giving the specific example of surgical methods.

Justice Breyer asked for a proposed "back up" principle if the Court "hypothetically" decided to reject the test that "any steps" may potentially be patentable.  Chief Justice Roberts and Justice Kennedy both followed up with comments indicating that certain "ideas" that are abstract should not be patentable, indicating that it would be difficult for him to think that the actuarial tables used in the insurance industry should have been limited to 1 person.  

Justice Ginsburg appeared to be in favor of something similar to the European system, which, she understood to require that the invention be tied to "science or technology".  The petitioner pointed out that the United States is different and that it would be difficult to define "technology based" in the United States.  Petitioner indicated that Europe defines "technology based" to exclude business methods.   Justice Scalia asked why, in a horse-based economy (in the 1800's) there were no patents directed to methods of training horses, as this would certainly have been useful at the time.

Justice Sotomayor indicated that "how" to approach a problem can't be enough to make it patentable, rather, it has to involve some transformation.  She also asked how to discern Congressional intent.  Further to the "intent" issue, Justice Stevens asked whether the original drafter of the Patent Act had any comments on this issue.

Justice Breyer indicated that there were four things to consider when making this ruling, two positive and two negative.  The two positives were the monopoly power the patent provides and the disclosure to the public.  The two negatives were the higher prices that result when a monopoly is in play and having to get a license or permission to practice a patented invention takes time and slows progress.  He indicated that in the past, we respected machines, now, this was asking to respect information, and he was grappling with whether providing patent protection would do more harm than good.

Justice Sotomayor commented that maybe it be sufficient to patent useful knowledge if it were tied to some transformation and the patenting of the Morse Code was discussed.

This concluded the Petitioner's opening argument.

The Respondent began by indicating that the Federal Circuit's test was not "inflexible," but only required some link between the method and the transformation.  At least Justice Sotomayor expressed concern regarding applying a  rigid exclusive test, in that potential patentable subject matter would be excluded from the patenting process.  Justice Ginsberg was curious regarding whether the Federal Circuit sua sponte came up with the test or whether the Government proposed the test during briefing.

The Respondent indicated a couple of different times during the argument that there would be many difficult questions to answer in the future, but that the test could accommodate the difficult questions and allow for exceptions to the machine or transformation test.

The State Street case was discussed and Justices Stevens, Scalia and Breyer wanted to know whether this case would come out the same way if the Federal Circuit's test were utilized.  The Justices appeared to expect a "no" answer, but Respondent indicated that State Street would have ended with the same result because the claims were directed to a machine (a computer).

This led to a discussion regarding the Respondent's apparent position, set forth in its last footnote on its brief, which Chief Justice Roberts was troubled about, that if the method is simply tied to a calculator or a computer, then it would be patentable, and this seemed to place form over substance.  Both Justices Kennedy and Stevens were curious with respect to what was "transformed" by the State Street computer program, indicating that it appeared to be merely a new process on an old machine.  The Respondent did not have a ready answer, deflecting the question by indicating that hardware could be present which would transform the machine.

In rebuttal, the Petitioner stressed its position against a rigid test, which could be avoided by simply looking at whether the "invention" is attempting to patent an abstract idea.

Business Method Patents: Technological Change, Not Judicial Activism

By Professor John Duffy

The last two decades have seen an extraordinary growth in the number of patent applications for business technologies and methods. Critics of business method patents tend to assign responsibility for this development to judicial activism by the judges of the Federal Circuit especially those responsible for the decision in State Street Bank & Trust Co. v. Signature Financial Group, Inc. For example, Professor Peter Menell points to the State Street decision as one of the “more notable” examples of the Federal Circuit’s “strong pro‑patent bias in the interpretation of patent law.” Professor Leo Raskind describes the State Street decision as “so sweeping a departure from precedent as to invite a search for its justification.” So too, Judge Mayer of the Federal Circuit, in his opinion dissenting from the en banc ruling in In re Bilski, argues not only that the State Street “decision to jettison the prohibition against patenting methods of doing business contravenes congressional intent,” but also that it “launched a legal tsunami, inundating the patent office with applications seeking protection for common business practices;” led to the patenting of “the somewhat ridiculous to the truly absurd;” and “generated a thundering chorus of criticism.” The activism thesis has even entered the political arena, as shown by a 2006 report issued by the Computer and Communications Industry Association (CCIA), which accuses the Federal Circuit of being an “activist court” that “summarily eliminated the judicial rule against business method patents” as a means of expanding the domain of the patent system by “judicial fiat.”

The judicial activism thesis may have a superficial appeal. State Street was a highly visible and prominent pronouncement by the federal court having nationwide jurisdiction over patent cases. It may seem reasonable to attribute tremendous implications to such a famous judicial opinion. Yet the judicial activism thesis suffers from multiple glaring problems and plainly cannot account for the timing of the rise in business method patenting, which plainly began well before State Street.  

[Read the full article: Business Method Patents_Blog.pdf]

Notes:

• Bilski v. Kappos oral arguments are set for this afternoon at the Supreme Court in Washington DC.
• In college, I earned a certificate in "engineering management systems." That program was part of the civil engineering department at Princeton and essentially focused on applying engineering techniques to solve business related problems. There was nothing "abstract" about these courses. The problems were real, and the solutions sure seemed like engineering - especially since they worked to solve the problems.

Stays Pending Appeal

Novo Nordisk v. Caraco Pharma (Fed. Cir. 2009)

Unlike most interlocutory orders, the grant or denial of preliminary injunctive relief may be immediately appealed. A district court only awards preliminary injunctive relief after determining that the moving party is likely to win on the merits and is suffering irreparable harm that can be solved by the injunction. Thus, it is no surprise that district courts are reluctant to stay injunctive relief pending appeal. Such a stay may even serve as a signal to the Federal Circuit (1) that the lower court lacks confidence in their decision and (2) that the case does not require any expedited schedule.

In Novo Nordisk v. Caraco, the E.D. Michigan court issued an injunction that would force the patentee to amend its Orange Book listings for its diabetes treatment drug Prandin. The change would make it easier for the generic manufacturer Caraco to obtain FDA approval.

Without substantive opinion, the Federal Circuit has granted a stay of this relief pending full appellate review of the injunction.

Preliminary relief and resulting stays of relief are interesting to study because of the court's willingness to engage in speculation and admit uncertainty. Preliminary relief is granted when the movant shows that it will likely win the case on the merits and that it will suffer irreparable harm if preliminary relief is not granted. Although the appellate court gives deference to a lower court's decision on preliminary relief, it takes a somewhat fresh-look at staying the preliminary relief pending outcome of an appeal. A stay is typically granted based on some evidence that the appellant will likely win the appeal as well as the harm/benefit associated with a temporary stay. To minimize the harm of a stay, the moving party often requests an expedited briefing schedule.

The leading case describing the approach is Standard Havens Prods., Inc. v. Gencor Indus., Inc., 897 F.2d 511 (Fed. Cir. 1990). In that case, the court discussed its four-factor equitable analysis modified to focus on stays pending appeal.

In deciding whether to grant this motion, we must apply the four factors that always guide our discretion to issue a stay pending appeal: (1) whether the stay applicant has made a strong showing that he is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the other parties interested in the proceeding; and (4) where the public interest lies.

(Opinion by Judge Michel)

Patent Prosecution Tips: Drafting Preambles

In a recent posting on Patently-O, I asked for advice on whether it is a better practice to use a generic preamble (e.g., "A method comprising") versus a more detailed preamble (e.g., "A method for content selection of digital media stored in a memory…., the method comprising"). Ron Slusky has provided his suggestions in this guest post. Ron's two-day seminar based on his book Invention Analysis and Claiming: A Patent Lawyer's Guide is being offered in Philadelphia on November 16-17.

By Ron Slusky

Any extra word in a claim "can and will be used against you in a court of law." Thus on the one hand, recitations in a detailed preamble may unduly limit the claim in unintended ways. By contrast, a generic preamble can never get you in trouble in that regard.

Patently-O Bits and Bytes No. 137

• Pirates: The EU Parliament now has two members from the Swedish Pirate Party. The Pirates platform is based on weakening copyright laws and eliminating patents. The first line of the party website reads: "The Pirate Party wants to fundamentally reform copyright law, get rid of the patent system, and ensure that citizens' rights to privacy are respected." [LINK]
• Billion Dollar Trade Secret Trial: The top semiconductor manufacturer in Taiwan (TSMC) sued the top mainland China semiconductor manufacturer (SMIC) for stealing its trade secrets (in state court in California). The jury sided with the plaintiff, although the damage calculation is still underway. [LINK]
• JOAO Control & Monitoring v. Playboy & Penthouse: The JOAO patent holding company has sued a dozen online pornography providers alleging patent infringement. The asserted patent claims an apparatus for transmitting audio and video information from a vehicle to a website. The inventor Ray Joao is also a patent attorney and is represented by Andrew Spangler.
• Who Owns Patents being Reexamined: The folks at Westerman Hattori have been writing about reexaminations. In a recent post, they list the top-ten patentees whose patents are undergoing reexaminations (based on reexaminations granted since January 2009). The top five include Rambus, LGE, Weatherford/Lamb, Mondis Tech, and ADC Tech. [LINK]

Abandoning software patents?

Editorial by Ciarán O'Riordan, Exective Director of End Software Patents

Scope

On Monday, November 9th, the Supreme Court will hear the case of Bilski's business method patent. Being the first review of patentable subject matter since 1981, this decision could make the rules for decades to come. The court will review the 2008 ruling of the CAFC which created the "particular machine or transformation" test. This test, depending on who's reading it, could significantly narrow the scope for patenting software ideas.

The Supreme Court isn't obliged to rule on the patentability of software ideas. Bilski's patent is a business method patent, not a software patent. So why might the court make a broad ruling which would cover software? For people who are already aware of the legal arguments, I'd like to offer a review of the socio-economic arguments for abandoning software patents.

Practitioner profile

To see how different software is from most patentable fields, you just have to look at the practitioners. There is a small number of large companies with well known products, and there is a mass of small companies. The low cost of entry to software development means the number of small companies is particularly large, but we'll leave that aside to look at a bigger difference. In most patentable fields, this pyramid of big and small companies describes how products are made. If this were true for software, then the decision of patentability would be an economic decision, and some costs might have to be reduced, but there'd be no fundamental incompatibilty. But in software, this is only half the story.

In software, unlike in other patentable fields, there are two additional categories of developers. The first is the software developers that sit in the IT departments of every medium sized company. They're the folk that keep the emails flowing, who make internal software, extend software bought by the company, and who run the website. The second group is individuals, informal groups and communities who program for their own benefit or for social reasons such as providing alternatives to software seen as overly restrictive.

The existence of these two categories changes everything because it's obviously unreasonable to require them to work within the patent system, and it's unjustly restrictive. Not only are patent incentives obviously not necessary to motivate IT departments to fix problems, the timeline and budgets are orders of magnitude out of sync with the speed and costs of writing software. When a company manager reports a website problem, they don't expect the IT department to reply about first seeking legal advice for a patent search, and they don't expect to later have a bill from a patent holder because of the way in which the IT department happened to fix the problem.

For user communities programming to suit their own needs, the costs and timeline are also unreasonable, but there is also the bigger problem that the patent holder gains veto power over the distribution of the software. If the software is written for the purpose of having a freely redistributable program, then this third-party veto spoils the developer's efforts. There will be no direct profits from which to offer royalty payments, so the result is a lose-lose situation where the developer's goal is blocked, and there's isn't even anything in it for the patent holder (although the patent will still be enforced to sink the piece of software so that computer users are pushed toward a program which will pay royalties to the patent holder).

Standards

This issue is further exasperated by a problem which applies to all types of software developer: in no other domain are modern standards as crucial as they are in software. If you want to cure rubber, there are many ways to do it. When patents block a product developer from using one method, there's the possibility of useful innovation when that developer looks for an alternative method. In software, being blocked from using an email, image, or document format equates to being prohibited from writing a functional email reader, image viewer or word processor. Can you imagine the utility of an innovative word processor that can't read any existing documents? Nobody would use this, which means any innovations therein would have been wasted effort.

For video, this problem is a reality. The MPEG-LA group claims to represent more than twenty patent holders which each have one or more essential patents for implementing the commonly used mpeg video format. There's no licence available for freely redistributable software, and even royalty payers have to agree to MPEG-LA's terms. The committee developing the next standard for webpages, HTML5, spent months searching and debating which video format they could recommend in the standard, and the final answer was that, due to software patents, there is today no format they can recommend.(ref-1)

When "user communities" grow up

Now, it's important to look at the output of the mentioned user communities. If like, say, hobbiest watchmakers, they just catered for themselves and a few friends without attracting the attention of patent holders, then this wouldn't be a big problem. The system would still be unjust, but if the injustice never manifested itself, then it would be theoretical issue.

Indeed, freely redistributable software and the work that was begun by idealists and hobbyists has now lead to the world's most used webserver, the world's second most used web browser, and the GNU/Linux operating system. Indeed, the "users" are nowadays often employees, and their collaborative development models have emerged as the primary competitors in many software domains. Blocking collaboration turns out not only to be a restriction on useful individual activities, but it also stiffles competition and the mass production of useful software.

In software, rather than supporting innovators, patents protect the old against the new.

Although large firms now contribute to these projects, many of the developers are still individuals and people who don't directly profit. The terms of distribution for this software are the same now as they always have been. It's a proven formula, and a key clause is that you can't distribute if patent royalties will be required.

Example: GNU/Linux

The kernel of the GNU/Linux operating system was examined by patent attorney Dan Ravicher, who announced on August 2, 2004, that he had found no court-validated patents to be infringed but 283 *issued patents* existed which could potentially be used to support patent claims.(ref-2) Thereafter, Microsoft in the 2007 began claiming that the kernel violates 235 of its patents - although the patents have never been specified.(ref-3) Neither could be precise, but they these give us ballpark figures.

The kernel one component, and because the human-written source code is online, we can see it contains approximately 4,000,000 lines of source code. Given that a distribution of the GNU/Linux operating system, complete with applications, can contain software with more than 225 million lines of source code, when we extrapolate from the kernel numbers, we arrive at the possibility of 13,160 or 15,848 patent infringements per complete distribution.(ref-4) All of this in something that can be distributed once or a thousand times, usually at no cost, sometimes large corporations, sometimes by individuals.

This is a degree of uncertainty that can't be fixed by changes in evaluation standards.

As for innovation, lists and lists of research suggests that patents reduce software innovation.

There was a time when if you wrote something, you owned it, you could sell it, you could give it away. It could be put in the accounts and it could be used as the base for collaboration. Now, ownership of a piece of software is hopeful speculation. There is no reliable way to have a settled expectation regarding the boundaries or the extent to which you own a piece of software. This uncertainty, and this unfair regulation is what the Supreme Court has the chance to rid us of by giving the USPTO a reliable tool for excluding software ideas from patentable subject matter.

-- Ciarán O'Riordan is Exective Director of End Software Patents

Trademark Cancellation: Presumption of Validity includes Presumption of Acquired Distinctiveness for Marks Registered under Section 2(f)

Cold War Museum v. Cold War Air Museum (Fed. Cir. 2009)

In 2004, the appellant registered the service mark THE COLD WAR MUSEUM under Section 2(f) after providing evidence that the mark had acquired distinctiveness through "substantially exclusive and continuous use in commerce for at least the previous five years."

Three years later, the Air Museum filed a cancellation proceeding. In that proceeding, the TTAB cancelled the mark based on its finding that the mark was merely descriptive of the service being provided.

On appeal, the Federal Circuit reversed TTAB and instead held that the party seeking to cancel the mark had not overcome the presumption "the registered mark has acquired distinctiveness."

A mark registered on the Principal Register is presumed to be valid. . . . [T]he presumption of validity that attaches to a Section 2(f) registration includes a presumption that the registered mark has acquired distinctiveness. To rebut this presumption, a party seeking to cancel a Section 2(f) registration must produce sufficient evidence for the Board to conclude, in view of the entire record in the cancellation proceeding, that the party has rebutted the mark's presumption of acquired distinctiveness by a preponderance of the evidence.

TTAB had refused to consider the mark-holder's originally submitted evidence of distinctiveness. On appeal, the Federal Circuit also held that evidentiary ruling to be in error.

[T]he Board acknowledged that the applicant had submitted evidence of acquired distinctiveness during prosecution. However, the Board decided that it could not consider this evidence because the Cold War Museum did not resubmit the evidence in the cancellation. This was error. The unambiguous language of 37 C.F.R. § 2.122(b) provides that the entire file of the registration at issue is automatically part of the record, without any action necessary by the parties. Therefore, the evidence of the mark's acquired distinctiveness submitted during prosecution was automatically part of the record before the Board, and the Board was required to consider this evidence in determining whether Air Museum had met its burden of proving a lack of acquired distinctiveness by a preponderance of the evidence.

rules indicate that the "evidence of record" in an opposition includes the entire registration file history .

Federal Circuit: When are Subsidiaries Covered in a License Agreement?

Imation v. Koninklijke Philips Electronics (Fed. Cir. 2009)

At its heart, this case is simply one of contract interpretation.

Philips and Imation (via 3M) had originally cross-licensed a set of patents relating to CD and DVD technology. The agreement expired in 2000, although the licenses themselves were irrevocable and continued. After 2000 several subsidiaries were formed (GDM and Memorex), and Philips argued that those companies activities were not licensed because the companies were formed after expiration of the agreement.

On appeal, the Federal Circuit held that the later-formed subsidiaries were included within the original grant of rights just like future inventions are included within properly drafted assignment agreements. In the license states that Philips “agrees to grant and does hereby grant to [Imation] and its Subsidiaries a personal, non-exclusive, indivisible, nontransferable, irrevocable, worldwide, royalty-free license.” According to the court, that grant is a " singular, present grant to a class composed of Imation and its Subsidiaries of rights to existing and future patents that fall within the definition of 'Licensed Patents.'" Philips (losing) argument was that the grant language formed "multiple licenses over time." Under that theory, no license would be granted to subsidiaries formed after 2000.

Reversed and Remanded

Notes:

• Read the Decision: 09-1208.pdf
• Oddly in July 2009, the parties announced that the litigation had been settled. Link.

Challenging the Constitutionality of Gene Patents: Ass'n for Medical Pathology v. USPTO

Association for Medical Pathology & ACLU v. USPTO & Myriad, 09-cv-4515 (S.D.N.Y. 2009)

Earlier this year, a group of organizations and individuals filed suit against the USPTO, Myriad, and individual directors of the University of Utah Research Foundation (ex parte Young action) demanding that the breast cancer gene patents (BRCA1 & BRCA2) be found invalid or unenforceable and that the PTO's policies and practices with respect to genetic patents be declared unconstitutional. The federal lawsuit argues (1) that the genes are not patentable because they are "products of nature" and (2) that the patentee's use of patent rights to limit scientific research on the genes violates constitutional First Amendment protections. The defendants moved to dismiss based on various standing and jurisdictional issues. In an 85 page opinion, Southern District of New York Judge Robert Sweet has denied all of the defendants' motions to dismiss.

Judge Sweet recognized this case as important:

This action is unique in the identity of the parties, the scope and significance of the issues presented, and the consequence of the remedy sought. . . . The challenges to the patents-in-suit raise questions of difficult legal dimensions concerning constitutional protections over the information that serves as our genetic identities and the need to adopt policies that promote scientific innovation in biomedical research.

Jurisdiction & Standing to Sue the USPTO: The court found that the overarching statutory scheme of the Patent Act did not preempt the court's jurisdiction over the PTO in this case since the Patent Act does not "provide a remedy for persons who complain about the constitutionality of patents issued by the USPTO and/or the policies and practices of the USPTO. . . . The novel circumstances presented by this action against the USPTO, the absence of any remedy provided in the Patent Act, and the important constitutional rights the Plaintiffs seek to vindicate establish subject matter jurisdiction over Plaintiffs' claim against the USPTO."

The court also found that the plaintiffs have standing to sue the USPTO for their Constitutional grievances; declaratory judgment jurisdiction over Myriad and the Directors, and personal jurisdiction over the Directors as representatives of the State of Utah.

In the final few pages, Judge Sweet outlined plaintiffs' case against the USPTO:

In this case, the Plaintiffs have pled sufficient factual allegations to satisfy the standard set forth in Iqbal. The Complaint alleges the existence of a specific, written policy for the patenting of genes and the parameters of the policy. . . . The Complaint further alleges that the information encoded in the BRCA1/2 genetic sequences, rather than being the result of an inventive process, exists in nature. . . . Based on these factual allegations, the Plaintiffs assert that the patents-in-suit grant Myriad ownership rights over products of nature, laws of nature, natural phenomena, abstract ideas, and basic human knowledge and thought in violation of the First Amendment's protections over freedom of thought. In addition, the Plaintiffs assert that Myriad's ownership of correlations between certain BRCAl/2 mutations and an increased risk of breast and/or ovarian cancer has inhibited further research on BRCA1/2 as well as genes that interact with BRCA1/2. As a result, the patents-in-suit are alleged to violate Article I, section 8, clause 8 of the Constitution which directs Congress to "promote the Progress of Science and useful Arts . . . ."

The facts alleged in the Complaint are plausible, specific, and form a sufficient basis for Plaintiff's legal arguments. Consequently, the pleading requirements as set forth in Iqbal are satisfied.

The next decision in the case is expected in January based on the Plaintiffs' motions for summary judgment.

MTD decision.pdf

Stays Pending Reexamination

The following guest post is by Matthew Smith

The grant rate of motions to stay is highly judge-dependent and (somewhat less obviously) district-dependent. The table below shows the approximate grant rate of contested motions to stay in major patent litigation districts since about the beginning of 2008. These data included around 150 motions, after excluding follow-on or duplicate motions on the same facts (e.g., in parallel cases against different defendants), stipulated motions, patent-owner-initiated motions, and motions initiated by declaratory judgment plaintiffs. The districts below are listed in order of decreasing frequency of the occurrence of such motions.

The Eastern District of Virginia, Western District of Wisconsin, and Northern and Middle Districts of Florida had relatively few orders, and were excluded.

A review of the orders confirms a relatively clean division into favorable and unfavorable judges for stays. This division is often flawlessly mirrored in the reasoning of written orders. Courts usually analyze three factors when considering stays: prejudice, timing and simplification. Where stays are disfavored, courts focus on the prejudice that delay may cause to the patent owner, find excessive delay in filing the request a few months after service of the complaint, and identify a plethora of issues that will be left unresolved by reexamination. Courts where stays are favored search in vain for particularized prejudice to the plaintiff (e.g. deteriorating evidence), find that requests submitted on the eve of trial are timely, and focus on the possibility that the claims could be canceled by the PTO when analyzing simplification.

Despite this division, some courts are breaking out of the paradigm of binary yes-or-no orders. The relatively few stays granted in East Texas pending ex parte reexamination, for example, have usually required the defendant to forego defenses on the merits of prior art considered in reexamination (see QPSX Dev. v. Ciena Corp., Case No. 2:07-CV-118-CE (E.D.Tex. Aug. 27, 2009) or submitted to reexamination unless combined with new art (see Premier Int’l Assoc. LLC v. Hewlett Packard Co., Case No. 2:07-CV-395 (DF)(E.D.Tex. May 18, 2009). One court has required non-requesting defendants to agree to be bound by inter partes estoppel (see Riparius Ventures LLC v. Skype Technologies, S.A., Case No. 07-cv-00812 (N.D.Ill. June 6, 2009). Some courts are also more flexible with timing, granting stays even prior to the PTO’s decision on the request for reexamination, (see, e.g. CTC Cable Corp. v. Mercury Cable & Energy, LLC, Case No. SACV 09-261 DOC (C.D.Cal. Aug. 3, 2009), or pending some specific event in reexamination (see, e.g. HTC Corp. v. Technology Properties Ltd., Case Nos. C 08-00882 JF and C 08-00877 JF (N.D.Cal. June 16, 2009)).

There also appears to be a recent trend favoring stays pending inter partes reexamination, as opposed to ex parte reexamination. The estoppel associated with inter partes reexamination is sometimes viewed as a simplifying factor for issues in litigation. See, e.g., Anascape Ltd. v. Microsoft Corp., Case No. 9:06-CV-158 (E.D. Tex. Feb. 23, 2007); see also Ceiva Logic Inc. v. Frame Media Inc., Case No. SACV 08-00636-JVS (C.D.Cal. June 9, 2009); Wall Corp. v. Bonddesk Group LLC, Case No. 07-844 GMS (D.Del. Feb. 24, 2009).

The data for this study were helpfully provided by the Docket Navigator.