Patent Law Blog (Patently-O)

WiAV Solutions v. Motorola: Clarifying the Meaning of "Exclusive Licensee"

By Jason Rantanen

WiAV Solutions LLC v. Motorola, Inc. (Fed. Cir. 2010)
Panel: Rader, Linn (author), Dyk

WiAV is the purported exclusive licensee of seven patents relating to aspects of signal transmission and data encoding/decoding owned by Mindspeed Technologies, Inc.  In 2009, WiAV sued a set of companies including Motorola, Inc.; Nokia Corporation; Palm, Inc.; and Sony Ericsson Mobile Communications (USA), Inc. for infringement of the Mindspeed patents.  The defendants contended, and the district court agreed, that WiAV lacked constitutional standing to assert the patents because WiAV is not an exclusive licensee of the patents under Textile Productions, Inc. v. Mead. Corp., 134 F.3d 1481 (Fed. Cir. 1998), which they argued holds that a party cannot be an exclusive licensee of a patent when a third party has the right to license the patent. 

In reversing the district court's dismissal, the CAFC rejected this argument, instead holding that "a licensee is an exclusive licensee of a patent if it holds any of the exclusionary rights that accompany a patent."  Slip. Op. at 17 (emphasis added). This decision is in the vein of the court's earlier decision this year in Alfred E. Mann Foundation For Scientific Research v. Cochlear Corp., 604 F.3d 1354, in which it concluded that a licensee is an exclusive licensee of a patent despite retaining the ability to license the patent to settle lawsuits. 

Scope of the Licensing
The licensing rights at issue were held by six third parties, and stemmed from a series of spin-offs and other agreements that occurred as the patents were transferred from company to company. For example, when Rockwell International Corporation, the original owner of the Mindspeed patents, assigned them to Conexant, the second owner, its subsidiary, Rockwell Science Center, received a limited, non-exclusive license to use the patents in connection with its business, along with the right to sublicense to Rockwell International and its "Affiliates," or to transfer the license in connection with the sale of the respective businesses to which the intellectual property rights relate.  The district court found that several of these licensees retained a limited right to license the patents in the field of wireless handsets, and concluded that under Textile Productions, WiAV could thus not be an exclusive licensee of the Mindspeed Patents.

Any Exclusionary Rights
On appeal, the CAFC rejected the argument that, under Textile Productions  "a licensee cannot be an exclusive licensee of a patent if others retain the right to license the patent."  Slip. Op. at 11.  Turning straight to the constitutional analysis, the court held that the standing determination  focuses only on whether a party has any exclusionary right in a patent:

Because the legally protected interests in a patent are the exclusionary rights created by the Patent Act, a party holding one or more of those exclusionary rights—such as an exclusive licensee—suffers a legally cognizable injury when an unauthorized party encroaches upon those rights and therefore has standing to sue. 
…
Thus, the touchstone of constitutional standing in a patent infringement suit is whether a party can establish that it has an exclusionary right in a patent that, if violated by another, would cause the party holding the exclusionary right to suffer legal injury. Contrary to the suggestion of the Defendants, neither this court’s Textile Productions nor Mars decision freed the constitutional standing inquiry from its legal injury mooring.

Slip Op. at 14-15.  Textile Productions, on the other hand, involved only the narrow question of whether a particular type of contract, a requirements contract for a patented product, automatically converts the exclusive supplier into an exclusive licensee.  "Nowhere did the Textile Productions court suggest that a party holding one or more of the exclusionary rights in a patent does not have standing to sue to protect those rights against infringement by an unauthorized third party. Nor is there any indication that the court created a bright-line rule that a party cannot be an exclusive licensee of a patent if others have the right to license the patent."  Slip. Op. at 16.

The CAFC did impose one important limitation on the broad rule for standing: "Because an exclusive licensee derives its standing from the exclusionary rights it holds, it follows that its standing will ordinarily be coterminous with those rights."  Slip Op. at 17. Thus, an exclusive licensee may have standing to sue some parties, but not others; it may also lack standing to sue a party who has the ability to obtain a license from another party with the right to grant it. 

Applying its holding, the court concluded that none of the pre-existing licenses granted the right to license the Defendants to practice the patents in WiAV's field of exclusivity, and thus WiAV possessed constitutional standing for this case. 

Note: WiAV does not disturb the requirement that "[a]n exclusive licenseee generally must join the patent owner to the suit to satisfy prudential standing constraints, i.e., the 'judicially self-imposed limits on the exercise of federal jurisdiction.'" Slip Op. at 14-15, fn. 1.  Here, WiAV had satisfied those concerns by adding Mindspeed to the suit as the "defendant patent owner." 

Judge Kathleen O'Malley Confirmed to the Federal Circuit

By Jason Rantanen

On Wednesday, the Senate confirmed Kathleen McDonald O'Malley to fill the vacancy left by Judge Schall when he took senior status.  Judge O'Malley currently serves as a U.S. District Judge for the Northern District of Ohio, and will be the only sitting Federal Circuit judge to have previously served as a district court judge.   She was nominated for her first judgeship by President Clinton in 1994, prior to which she served in government and private practice.  An earlier Patently-O discussion of Judge O'Malley is available here. 

Two vacancies on the CAFC remain unfilled and although nominees were proposed during the 111th Congress (Jimmie Reyna and Edward DuMont), those nominations were not acted on.  

Prometheus Laboratories v. Mayo: The Broad Scope of Statutory Subject Matter

By Jason Rantanen

Prometheus Laboratories, Inc. v. Mayo Collaborative Services (Fed. Cir. 2010)
Panel: Rader, Lourie (author), Bryson

Last Friday, the Federal Circuit released its second noteworthy post-Bilski decision (the first being Research Corp v. Microsoft).  The opinion, Prometheus v. Mayo, issued following a grant-vacate-remand order from the Supreme Court instructing the CAFC to revisit its original decision in light of Bilski.  Despite this procedural posture, however, the new opinion is quite similar to the old, arriving at the same conclusion through essentially the same reasoning.   

Prometheus initially came to the Federal Circuit following a district court grant of summary judgment of invalidity under § 101 (lack of patentable subject matter).  After the CAFC reversed the ruling of invalidity using its "machine-or-transformation" test, Mayo sought review by the Supreme Court.  The Court granted certiorari, vacated the CAFC decision, and remanded for consideration in light of its Bilski opinion.  Earlier Patently-O commentary includes a summary of the original Federal Circuit opinion and a discussion of the remand.

The patents-in-suit claim a method for determining whether a patient has received a therapeutically efficacious amount of drugs such as 6-mercaptopurine ("6-MP") and azthiopurine ("AZA"), which are used to treat inflammatory bowel diseases but can produce toxic side effects.  In the human body, these drugs metabolize into 6-MP metabolites, including 6-methylmercaptopurine ("6-MMP") and 6-thioguanine ("6-TG").  By administering the drug, measuring the subject's levels of 6-MMP and 6-TG and comparing them to pre-determined levels, toxicity can be minimized and efficacy maximized. 

Claim 1 of Patent No. 6,355,623 is representative:

1. A method of optimizing therapeutic efficacy for treatment of an immune-mediated gastrointestinal disorder, comprising:
    (a) administering a drug providing 6-thioguanine to a subject having said im-mune-mediated gastrointestinal disorder; and
    (b) determining the level of 6-thioguanine in said subject having said immune-mediated gastrointestinal disorder,
    wherein the level of 6-thioguanine less than about 230 pmol per 8x108 red blood cells indicates a need to increase the amount of said drug subsequently administered to said subject and
    wherein the level of 6-thioguanine greater than about 400 pmol per 8x108 red blood cells indicates a need to decrease the amount of said drug subsequently administered to said subject.

Although similar in most respects, some claims of the second patent-in-suit, No. 6,680,302, dispense with the "administering" step.

The Patents Do Not Claim a Physical Phenomena
On remand, the CAFC again rejected Mayo's argument that the '623 and '302 patents claim a "natural phenomenon."  In seeking a judgment of invalidity under Section 101, Mayo contended (and the district court agreed) that the "administering" and "determining" steps are merely necessary data-gathering steps for the use of the correlations between 6-TG and 6-MMP and therapeutic efficacy or toxicity in patients.  Because these correlations are simply natural phenomena, Mayo reasoned, they were unpatentable.

As before, the Federal Circuit disagreed, noting that Bilski provides a broad - although not unlimited - scope for patent protection, and “an application of a law of nature or mathematical formula to a known structure or process may well be deserving of patent protection.”  Slip. Op. at 12, quoting Bilski, 130 S.Ct. at 3230.  Furthermore, the court stated, neither the Supreme Court's order to vacate and remand the original Prometheus decision nor Bilski dictates a wholly different analysis or different result.  

The crux of the CAFC's determination that the asserted claims recite a patent-eligible application of naturally occurring correlations between metabolite levels and efficacy or toxicity as opposed to the natural correlation itself rests on the specific treatment steps recited by the claims: the "administering" step and the "determining" step.  "The inventive nature of the claimed methods stems not from preemption of all use of these natural processes, but from the application of a natural phenomenon in a series of steps comprising particular methods of treatment." Slip. Op. at 15-16.

In support of its conclusion, the court reiterated its earlier determination that the treatment methods in Prometheus's patents satisfy the "machine-or-transformation test.  Although this is not the exclusive test, post-Bilski, it nevertheless provides important clues to subject matter patentabilty.  In applying the machine-or-transformation framework, the court specifically rejected Mayo's argument that the disputed claims simply claim natural correlations and the associated data-gathering steps, broadly stating that the asserted claims are "claims to methods of treatment, which are always transformative when one of a defined group of drugs is administered to the body to ameliorate the effects of an undesired condition."  Slip Op. at 17.  Even leaving out the administration step does not make the claims unpatentable, as the CAFC also found the "determining" step to be transformative because it involves "[s]ome form of manipulation, such as the high pressure liquid chromatography method specified in several of the asserted dependent claims or some other modification of the substances to be measured, [which] is necessary to extract the metabolites from a bodily sample and determine their concentration."  Id. at 18.

In reaching this conclusion, however, the court was forced to distinguish its earlier decision In re Grams, 888 F.2d 835 (Fed. Cir. 1989), which similarly claimed a process that involved "(1) performing a clinical test on individuals and (2) based on the data from that test, determining if an abnormality existed and determining possible causes of any abnormality by using an algorithm."  Id. at 20.   Unlike the claims in Grams - which the CAFC found unpatentable "because the tests were just to 'obtain data'" (Slip Op. at 20) - the claims of the Prometheus patents "require the performing of clinical tests on individuals that were transformative." 

Mental Steps
In addition to its overarching analysis of the subject matter issue, the opinion also includes an interesting discussion of the use of mental steps in patent claims.  Although the CAFC agreed that the final "wherein" clauses are mental steps, "A subsequent mental step does not, by itself, negate the transformative nature of prior steps. Thus, when viewed in the proper context, the final step of providing a warning based on the results of the prior steps does not detract from the patentability of Prometheus’s claimed methods as a whole." Slip Op. at 21. Because no claim in the Prometheus patents claims only mental steps, "contrary to Mayo’s assertions, a physician who only evaluates the result of the claimed methods, without carrying out the administering and/or determining steps that are present in all the claims, cannot infringe any claim that requires such steps." Id.

Additional Commentary
In addition to an extensive discussion about the decision in response to Dennis's post on Sunday, other sites commenting on the decision include:

• Patent Docs
• patents4life
• IP Watchdog
• Chris Holman's IP Blog
• Hal Weger of Foley has suggested that another grant of certiorari may be down the road, given the opinion's refusal to discuss a three-Justice dissent from the dismissal of certiorari in Lab. Corp., 548 U.S. 124, that was cited with approval by five Justices in two concurrences in Bilski.

Akamai v. Limelight: Joint Infringement Requires an Agency Relationship or a Contractual Obligation

By Jason Rantanen and Dennis Crouch

Akamai Technologies, Inc. v. Limelight Networks, Inc. (Fed. Cir. 2010)
Panel: Rader, Linn (author), Prost

Three years ago, in BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed. Cir. 2007), the Federal Circuit sharply limited the ability of patent holders to assert claims of joint infringement.  The BMC decision was further bolstered by Muniauction, Inc. v. Thomson Corp. and I-Deal (Fed. Cir. 2008). Akamai v. Limelight expands on the "control or direct" rule announced in BMC and Muniauction, explaining that joint infringement requires an agency relationship or a contractual obligation to carry out the relevant steps. 

Akamai's Claim of Joint Infringement
In order to win a patent infringement case, a patentee must prove that a single entity practiced every element (either literally or by equivalents) of at least one valid, enforceable claim. Joint infringement issues can arise when a patent holder asserts method claims over activities whose steps are not carried out by a single party.  For example, if a patent claims a method involving performing steps A, B, and C, the patent holder may need to argue joint infringement (as opposed to straightforward direct infringement) if steps A and B are performed by one party and step C is performed by a second party. 

In Akamai, while the accused party (Limelight) performed the majority of the steps of the asserted claims, at least one of the steps of each claim was performed by its customers.  The patent, No. 6,108,703, is directed to an improved method for storing web page content.  Conventionally, the entirety of a web page, including both the page itself and embedded content (such as graphics) is stored on a single server, or mirrored in its entirety across multiple servers.  The patents-in-suit claim a new approach, which involves storing only the embedded objects on mirrored servers (called a "Content Delivery Network," or "CDN"), while having the webpage itself continue to reside on the content provider's servers.  In order to make this system work, the claims further require that the object URLs be "tagged" to resolve to the CDN. 

Daniel Lewin and his adviser Thomas Leighton devised these methods (or algorithms) while at MIT where Leighton was the head of MIT's Computer Science and Artificial Intelligence Laboratory.  The pair founded Akamai, and their invention continues to serve as a basis for the company's core business.  Lewin was killed aboard American Airlines flight 11 when it crashed into the north tower of the World Trade Center on September 11, 2001.

Limelight, Akamai's direct competitor in the CDN business, performed most of the claimed steps but had its customers (companies such as Netflix) tag the URLs.  Because some of the steps were performed by Limelight and some by its customers, Akamai relied on a theory of joint liability, arguing that Limelight controls or directs the activities of its customers.  At trial, the jury sided with Akamai and awarded over $40 million in lost-profit-damages. The district court rejected the jury verdict and supplemented its own non-infringement judgment – holding that there was "no material difference between Limelight's interaction with his customers and that of Thomson in Muniauction."

On appeal, Akamai contended that substantial evidence supported the infringement finding, arguing that Limelight "(1) creates and assigns a unique hostname for the content provider; (2) provides explicit step-by-step instructions to perform the tagging and serving claim steps; (3) offers technical assistance to help content providers with their performance of the claim step; and (4) contractually requires content providers to perform the tagging and serving claim steps if they utilize the Limelight service."  Slip Op at 11. 

Important holdings
In affirming the district court's judgment of noninfringement, the CAFC expanded on its ruling in BMC that "joint liability may be found when one party 'control[s] or direct[s]' the activities of another party."  Slip Op. at 9.  After noting the foundational nature of this standard, the Akamai panel further held that "what is essential is not merely the exercise of control or the providing of instructions, but whether the relationship between the parties is such that acts of one may be attributed to the other."   Id. at 12.  The court interpreted this as requiring either an agency relationship or a contractual obligation: "as a matter of Federal Circuit law that there can only be joint infringement when there is an agency relationship between the parties who perform the method steps or when one party is contractually obligated to the other to perform the steps."  Slip Op. at 14.

Analyzing the issue as a question of agency law, the CAFC concluded that no substantial evidence supported a finding that Limelight's customers perform any of the steps of the claimed method as agents for Limelight.  (Citing the Restatement (3rd) of Agency §1.01). The court also rejected Akamai's theory that Limelight's customers are contractually required to perform the tagging step.  Rather, the court stated, the contract does not obligate the customers to perform any of the method steps; instead, it "merely explains that the customer will have to perform the steps if it decides to take advantage of Limelight's service."  Slip Op. at 16.

Note: The court repeated the warning it set forth in BMC Resources, 498 F.3d at 1381, that concerns about the difficulty of proving infringement of claims that must be infringed by multiple parties "by proper claim drafting.  A patentee can usually structure a claim to capture infringement by a single party."  Slip. Op. at 17 (quoting BMC Resources).  Failing this, the court suggested (citing Mark Lemley's Divided Infringement article) that patentees may be able to correct a claim by seeking a reissue patent.

Claim Construction
Akamai also challenged the district court's construction of two claim terms in related patents, contending that both constructions imported limitations from the specification into the claims.  In a fact-intensive analysis, the CAFC rejected Akamai's arguments, concluding that the district court correctly interpreted the disputed terms given the treatment of the invention in the specification and the lack of any contrary evidence in the prosecution history. 

Patently-O bits and bytes in its

USPTO's Deputy Director Sharon Barner has announced her resignation. Deputy Director Barner has been Director Kappos's second-in-command since October of 2009. Prior to joining the USPTO, Barner was a senior partner at the Foley law firm in Chicago. She has not announced publicly whether she will return to private practice. Barner is leaving government service with a number of important accomplishments in-hand and without any major scandal on her tail. She remains a likely candidate for a potential nomination to the Court of Appeals for the Federal Circuit if another opening arises during President Obama's time in office. Congratulations Deputy Director Barner!

Under the law, the USPTO Director David Kappos has the power to nominate a new Deputy, but the actual appointment is done by the Secretary of Commerce (Locke). 35 U.S.C. 3 requires that "The Deputy Director shall be a citizen of the United States who has a professional background and experience in patent or trademark law." Within current PTO inner circle, Chief Communication Officer Peter Pappas has been suggested for the position as has Patent Commissioner Bob Stoll. Traditionally, the Patent Commissioner serves as interim deputy director until the office is filled. However, Director Kappos has full control over the interim organization. Peggy Focarino is currently the Deputy Commissioner of Patents.

Patenting Methods of Treatment. After deciding Bilski, the Supreme Court asked Fed. Cir. to take a fresh look at the case of Prometheus v. Mayo. In Prometheus, the patent in question is directed toward an iterative method of determining the correct dosing of a drug by injecting a quantity of the drug and then measuring the level of the drug found in the body. The Mayo Clinic and its supporters argue that the patent should be held invalid under 35 U.S.C. 101 as lacking patentable subject matter. The Federal Circuit has now released its new opinion on the case, holding once again that the claims are patentable. More to come.

Silence Implies Consent. A reader sent me a copy of the recent BPAI rehearing decision ex parte Njo involving a Pitney Bowes patent application. In the original appeal, the patent applicant had not filed a reply brief to directly contest the examiners arguments. The BPAI made clear that failure to respond should be seen as acquiescence. "This absence does, in our view, also suggest that such inaction may constitute acquiescence in the Examiner's arguments. "Silence implies assent." Harper and Row Publishers Inc. v. Nation Enters., 471 U.S. 539, 572 (1985)." Consequently, the Board refused to allow the applicant to present new counter arguments that could have been raised in the reply brief.

Hands free typing. This week I had a successful shoulder surgery. The folks at Nuance were nice enough to give me a free copy of their voice transcription software known as Dragon NaturallySpeaking 11 (legal). I am now writing the blog hands free!

The Federal Circuit's Use of Legal Scholarship

By Jason Rantanen

Professors Lee Petherbridge and David Schwartz have released a draft of their new study on the use of legal scholarship by the Federal Circuit.  In the paper, the authors question the conventional wisdom that the Federal Circuit is less likely than other circuit courts of appeals to use legal scholarship in its decision making, and conclude that this oft-repeated claim is contrary to the empirical evidence. 

Methodology and Dataset:  The authors conducted a search of all the reported opinions for the United States circuit courts of appeals for the years 1990-2008 using a mechanical approach to identify each opinion citing to legal scholarship at least once, followed by a custom-made computer program that identified individual citations to legal scholarship. 

Findings: Contrary to result expected under the conventional wisdom, the authors found that the Federal Circuit's use of legal scholarship is similar to that of the regional circuits.  Although it falls on the lower end of the spectrum of judicial citations, the overall frequency with which the CAFC cites legal scholarship is within the range expressed by the regional circuits, and the median frequency of citations per judge falls around the middle of the regional circuits.

The authors also discovered that, unlike some of the high-frequency-of-citation regional circuits, the Federal Circuit lacks any legal scholarship "super citers," such as Judges Posner, Easterbrook, Calibresi, Becker, and Kozinski, which may explain why its overall citation frequency falls on the lower end of the regional circuits.   

Implications: Based on their empirical analysis, the authors conclude that the "claim that the Federal Circuit does not use legal scholarship as much as it should because it does not use it as often as the regional circuit courts of appeals is essentially eviscerated."  Thus, the authors recommend that future scholarship should focus on the merits of the Federal Circuit's use of scholarship, asking questions about when and how the court uses legal scholarship.

The authors also suggest that adding or encouraging an existing judge to become a "super citer" might be beneficial.  They reason that having a small number of judges who regularly study and use legal scholarship allows that scholarship to make its way into the jurisprudence at a measured rate, where it can be considered by the remaining judges who rely on more traditional tools for developing the law.  This mechanism encourages jurisprudential innovation while preventing sudden dramatic shifts. 

Read the Paper: Download here.

PTO-Detroit

Commerce Secretary Gary Locke and PTO Director David Kappos will be holding a press conference later today. I expect that they will announce plans to open the first USPTO satellite office in Detroit, Michigan.

In re Vistaprint Ltd.: Venue Transfer Denied

By Jason Rantanen

In re Vistaprint Ltd. (Fed. Cir. 2010)
Panel: Gajarsa, Schall (author), and Moore

In a counterpoint to its recent decision in In re Acer, this morning the Federal Circuit denied a request for a writ of mandamus seeking transfer of venue out of the Eastern District of Texas.  The underlying action was bought by ColorQuick, LLC, which holds a patent relating to the preparation of production data for printing, against Vistaprint Limited and OfficeMax Incorporated.  As in Acer, none of the parties resided in Texas: Vistaprint, a foreign corporation, has a wholly-owned subsidiary in Massachusetts; OfficeMax is a Delaware corporation with its principal place of business in Illinois; and ColorQuick is a New Jersey corporation.  Both the panel and author in this appeal were identical to the panel and author that granted the writ in In re Acer.

In denying the request for a writ, the CAFC acknowledged the lack of residency, but ruled that the district court did not abuse its discretion in denying transfer.  The panel first noted that although a trial court has broad discretion in transfer decisions pursuant to 28 U.S.C. § 1404(a), "that is not the same as saying that it may accord weight simply as it pleases."  Slip Op. at 4.  Applying that standard, the panel concluded the district court's weighing of factors in this case did not amount to a "patently erroneous result."  Id. (quoting In re Volkswagen of Am., Inc., 545 F.3d 304, 310 (5th Cir. 2008) (en banc)). Specifically, the CAFC concluded that the district court had not abused its discretion in weighing two factors relating to judicial economy: that the trial court had gained substantial experience in construing the claims of the same patent during a prior litigation and that there was a related case currently pending before the same court.

The CAFC also rejected the petitioners' argument that it is always improper for a district court to deny transfer based on judicial economy when all of the convenience factors clearly favor transfer.  While the court noted the importance of the convenience factors, it also recognized that "§ 1404(a) commits the balancing determination to the sound discretion of the trial court based not on per se rules but rather on an 'individualized, case-by-case consideration of convenience and fairness.'"  Slip Op. at 6-7 (quoting Van Dusen v. Barrack, 376 U.S. 612, 622 (1964)).  In this specific case, the CAFC could not conclude that "the trial court's balancing was so unreasonable as to warrant the extraordinary relief of mandamus."  Id. at 8.

Note: The opinion's final footnote appears to summarize the panel's overarching view on mandamus petitions directed to the venue transfer issue.  It states:

Our holding today does not mean that, once a patent is litigated in a particular venue the patent owner will necessarily have a free pass to maintain all future litigation involving that patent in that venue. However, where, as here, the trial court performed a detailed analysis explaining that it is very familiar with the only asserted patent and the related technology, and where there is a co-pending litigation before the trial court involving the same patent-in-suit, and pertaining to the same underly-ing technology and accusing similar services, we cannot say the trial court clearly abused its discretion in denying transfer.

Old-School Submarine Patents

Old-school submarine patents were serious business. Throughout the late 20th Century, more than a handful of patent applicants kept patent applications pending for years-and-years until the claimed invention became market-ready. Once the patent issued, the patent would then be enforceable for seventeen–years from the issue date.  

Two legal changes have eliminated most of the concerning submarine issues for newly filed applications. Patents granted on applications filed after June 7, 1995 have a term of twenty-years from the priority filing date.*  In 2000, the PTO began publishing pending patent applications and now the vast majority of pending applications are published 18–months after filing.

Old patent applications, new patents: I e-mailed with a USPTO official who identified that there are about 600 still-pending patent applications that were filed before the 1995 cut-over (excluding classified applications).  These old cases are all being treated as “special” and the oldest one-hundred cases are receiving special attention.  In 2010, the USPTO issued patents on just over 60 of these old applications. The majority of the 2010 patents were granted to a company known as Personalized Media Communications (PMC). According to its website, PMC still has “over 100 pending patent applications” that were filed prior to the 1995 cut-over.  These patents and applications are all based on a pair of applications filed in 1981 and 1987 but will be in force until at least 2027 — 46 years later.

I looked through the prosecution history of PMC's recently issued patent No. 7,734,251. The final six years of prosecution involved an appeal that was fully briefed (over a 16–month period) and then returned to the examiner for re-briefing. The BPAI eventually decided the case –  affirming the rejection in-part –  then, on re-hearing reversed and agreed with PMC that all of its pending claims were patentable.  The prosecution is also notable for the handful of R.132 affidavits filed by various experts supporting patentability.  In the end, the cases were also being handled at the SPE level. PMC is represented by by Tom Scott at Goodwin Procter.

Notes:

* The twenty-year term is not triggered by priority claims to either foreign national or provisional patent applications.  Most patent terms are lengthened based on statutory patent-term-adjustment (PTA) due to unreasonable USPTO delays in issuing the patent.

Supreme Court Does not Decide Costco v. Omega Int'l Exhaustion Case

Costco v. Omega (Supreme Court 2010)

In Costco, the Supreme Court was asked to apply the first sale doctrine of copyright law in the context of international sales. Costco had purchased legitimate Omega watches abroad and then imported them into the US.  The watches included a small copyrighted design on the back surface and Omega argued that the importation and further distribution of the watches constituted copyright infringement.  Ordinarily, the purchaser of a legitimate copy of a work can lawfully resell the copy based on the first sale doctrine (also known as copyright exhaustion). The trick, however, is that copyright is territorial in nature and the first sale abroad arguably did not “exhaust” the US copyright. The 9^th  Circuit had sided with Omega — holding that the first sale doctrine did not apply to foreign manufactured copies that were purchased abroad.

Without opinion, and in a 4–4 split, the Supreme Court has affirmed the 9^th  Circuit decision. However, because of the 4–4 split, the case will not be seen as precedent-setting. Thus, as Ryan Vacca wrote in an e-mail this morning: “Our unanswered questions . . . remain unanswered.”

 

Patent Term: Comparing 17-years-from-issue to 20-years-from-filing

One of the most important attributes of a patent is its term or duration of enforceability.  In 1995, the US patent system began calculating patent term based on the priority filing date of an application rather than a patent's issue date. Under the prior rule, a patent would remain in force for 17 years from the date of issue. Under the “new” system, the term is 20–years from the priority filing date. The three extra years were intended to account for a typical prosecution delay of three years. In addition, Congress added a patent-term-adjustment (PTA) provision to lengthen the patent term in instances where the USPTO unduly delayed in issuing a patent.

Study: For this study, I wanted to consider how the change has actually impacted patent term. To do this, I created a database of 50,000 recently issued patents and calculated the term under both the old and new system.  For the calculation under the new system, I added 20–years to the earliest priority date (excluding provisional and original foreign filing dates) and then added any patent-term-adjustment.  To calculate the term under the old system, I added 17–years to the issue date unless the patent had a family member (e.g., continuation application) with an earlier issue date. In that case, I added 17–years to the issue date of the family member based on an assumption that a terminal disclaimer would have been filed in the case. Because of some potential data discrepancies, I excluded the extreme 1% of results and also patents on applications filed proir to the 1995 change-over. 

Results: Most patents (64%) have a longer term under the new system than they would have been entitled under the older system. Under the new system, the median patent has a term of about 8–months longer than if the term had been calculated under the old system. For 43% of the patent, the terms are are within 1–year of what would have been calculated in the old system; and 89% are within 2–years. Of course, there are some extremes. As you might imagine, patents that benefit most under the new system are those that have the greatest patent term adjustment (PTA).  Patents in TC 1600 (Biochemistry and Organic Chemistry) comparatively fared the worst.  Those patents on average lose 11–months of patent term in the new system as compared to the old system.

Research Corp. v. Microsoft: Section 101 and Process Claims

By Jason Rantanen

There are three articulated exceptions to the scope of patentable subject matter under 35 U.S.C. § 101: laws of nature, physical phenomena, and abstract ideas.  Research Corp. v. Microsoft places a high hurdle in front of challengers who seek to invalidate process patents on the third ground. 

Research Corp. Technologies v. Microsoft Corp. (Fed. Cir. 2010)
Panel: Rader (author), Newman, and Plager

Research Corporation ("RCT") owns several patents relating to digital image halftoning, which is the process of generating electronic display and print images using only a small number of pixel colors (ex.: red, blue and green in the case of color displays) while appearing to present many more colors and shades than were actually used.  Four related patents are relevant to this summary: Nos. 5,111,310, 5,341,228, 5,477,305, and 5,726,772.  The applications for the '310 and '228 patents (a continuation-in-part of the '310 patent) were filed before December 4, 1991; the remaining patents are continuations of the '228 patent and claim priority to the earlier filing dates. 

RCT brought an infringement action against Microsoft based on these patents; in response, Microsoft asserted, and the district court initially concluded, that the patents were unenforceable due to inequitable conduct, invalid and not infringed.  The Federal Circuit reversed that determination in 2008.  Microsoft subsequently sought summary judgment against the '310 and '228 patents on Section 101 patentable subject matter grounds, and asserted that the claims of the '772 patent were not entitled to the earlier priority date, thus rendering them anticipated.  The district court granted Microsoft's motions, and subsequently held that the only remaining claim, claim 29 of the '305 patent, also lacked entitlement to the earlier priority date.  Based on these ruling, the parties stipulated to a dismissal of the suit and RCT appealed.

Section 101 and Process Claims
In reversing the district court's ruling that the '310 and '228 patents failed to satisfy Section 101, the Federal Circuit identified a set of considerations that can be applied when assessing the question of abstractness.  Drawing upon the Supreme Court's precedent in this area, including its recent decision In re Bilski, the opinion first reiterates that there are only three articulated exceptions to subject matter eligibility: "laws of nature, physical phenomena, and abstract ideas." 

Focusing on the category of abstract ideas, the court noted the Supreme Court's admonition in Bilski not to provide a rigid formula or definition for abstractness.  Rather, "the Supreme Court invited this court to develop 'other limiting criteria that further the purpose of the Patent Act and are not inconsistent with its text.'" Slip Op. at 14.  With that guidance, the panel concluded that it perceived nothing abstract in the subject matter of the processes claimed in the '310 and '228 patents.  Specifically, the court observed that:

• "The invention presents functional and palpable applications in the field of computer technology";
• Some claims in the patents require physical components;
• "[I]nventions with specific applications or improvements to technologies in the marketplace are not likely to be so abstract that they override the statutory language and framework of the Patent Act"; and
• The incorporation of algorithms and formulas does not prevent patent eligibility.

Nevertheless, while finding these factors met in the instant case, the panel further noted that its analysis was limited to the context of Section 101, which provides only a coarse filter.  Abstractness challenges can also be brought against specific claims under Section 112 even if the requirements of Section 101 are met.

Comment: The court's discussion of Section 101 suggests that the issue of patentable subject matter should be analyzed with respect to the patent as a whole; in contrast, Section 112 challenges are analyzed on a per-claim basis.

Burden of Proof for Establishing Priority
In addressing the district court's ruling that the asserted claims of the '772 and '305 patents were not entitled to claim priority to the '310 and '228 filing dates, the opinion reinforced the court's prior ruling that the patent holder bears the burden of establishing priority.  As the court held, although a patent challenger has the burden of going forward with invalidating prior art, once it has done so the burden shifts to the patent holder.  Thus, in an instance where the patent holder attempts to defeat the assertion of invalidity by claiming priority to an earlier application, the patent holder bears the burden of proving the entitlement to priority - including that the claims of the earlier patent are supported by the written description of the earlier specification.

Note: The '772 and '305 patents shared the same specification as the earlier '305 and '228 patents.  If the relevant claims had been contained in the '305 or '228 patents, Microsoft would have had the burden of proving lack of written description, as opposed to the burden resting with RCT.  Thus, the fact that the claims were part of a continuation was highly significant with respect to the allocation of the burden.

Comment: A related issue is who bears the burden of proof in the context of claims to a pre-filing conception or reduction to practice date. Although not mandated by the text of the opinion, which specifically refers to the burden to establish "an earlier filing date," the court's analysis could be read to support the conclusion that the patent holder bears the burden of proof in this situation as well.

After dispensing with RCT's challenge to the district court's allocation of burden, the panel proceeded to address the priority claims on the merits.  With respect to the '772 claims, the panel agreed with the district court, concluding that they were unsupported by the prior disclosure.  The panel did reverse on the '305 claim, however, ruling that to satisfy the written description requirement for apparatus claims, the patent need not disclose every method of making the apparatus. 

Intellectual Ventures Takes First Overt Legal Actions to Enforce its Mammoth Patent Portfolio

By Dennis Crouch

In a bold move, the patent holding company Intellectual Ventures has filed three separate patent infringement lawsuits against major industry players.

Over the past several years, Intellectual Ventures has amassed a large patent portfolio that is held by a complex web of subsidiary companies. According to its court filings:

Intellectual Ventures has purchased more than 30,000 patents and patent applications and, in the process, has paid hundreds of millions of dollars to individual inventors for their inventions. Intellectual Ventures, in turn, has earned nearly $2 billion by licensing these patents to some of the world's most innovative and successful technology companies.

In the first suit, Intellectual Ventures sued Check Point Software, McAfee, Symantec, and Trend Micro for infringement of Patent Nos. 5,987,610, 6,073,142, 6,460,050, and 7,506,155. These patents were originally owned by Ameritech which merged with SBC. According to USPTO assignment records, SBC assigned its rights to the University of Texas which then assigned rights to Verve, an IP broker. Verve then assigned its rights to AUCTNYC8. The assignment to Intellectual Ventures itself has not been recorded. To be clear, the case caption actually states that the plaintiff is "Intellectual Ventures I LLC." The other two lawsuits involve some combination of Intellectual Ventures I, II, and III, respectively. Other defendants include Hynix Semiconductor, Elpida Memory, Altera, Lattice Semiconductor, and Microsemi (Actel). At least some of the patents being asserted against Altera and Lattice Semiconductor were originally owned by AMD, and then transferred to Legerity. At least one other patent asserted in the lawsuits was invented by noted chip designer Bob Proebsting. After his death, the patent was held by the Proebsting estate. Although Intellectual Ventures (I - III) claims ownership in their complaints, PTO records do not reflect that ownership.

In a press release, Intellectual Ventures issued a warning blow to other potential defendants:

Over the years, Intellectual Ventures has successfully negotiated license agreements with some of the top technology companies in the world. However, some companies have chosen to ignore our requests for good faith negotiations and discussions. Protecting our invention rights through these actions is the right choice for our investors, inventors and current licensees.

Intellectual Venture's chief litigation counsel is Melissa Finocchio who was previously with Micron, Orrick, and Cooley. The company's outside counsel include an all-star cast of Former Delaware Judge Joseph Farnan; John Desmarais; Jared Bobrow; and Parker Folse. All the suits have been filed in Judge Farnan's hometown District of Delaware.

Notes:

• IV Press Release
• Searchable Complaints:
• File Attachment: Intellectual-Ventures_v_Altera_Complaint.pdf (278 KB)(United States Patent Nos. 5,675,808; 6,993,669; 5,687,325; 6,260,087; and 6,272,646).
• File Attachment: Intellectual-Ventures_v_Checkpoint_Complaint.pdf (370 KB)(United States Patent Nos. 5,987,610; 6,073,142; 6,460,050; and 7,506,155).
• File Attachment: Intellectual-Ventures_v_Hynix_Complaint.pdf (539 KB)(United States Patent Nos. 6,373,753; 6,462,998; 6,455,937; 7,444,563; 5,581,513; 5,598,374; and 5,583,822).
• Others Writing on the Topic:
• WSJ Report by Don Clark
• NYTimes Report Steve Lohr

Patently-O Bits and Bytes: Getting Personal

• Injured Reserve: I've been on injured reserve for the past few weeks with both arms substantially immobilized, but I am now back (at least until my shoulder surgery next week). I am now going through a load of unread e-mails. If you sent me an e-mail or left a phone message during this time, I will respond as soon as possible. – Dennis Crouch
• Popularity Challenged: It seems that my friends Gene & Renee Quinn have even more friends: Patently-O needs your vote in the ABA popularity contest.
• A bite out of Apple: At least one analyst is suggesting that the Motorola v. Apple patent litigation could "knock 15% off" of Apple's stock price. Florian Mueller has a nice diagram of the Apple lawsuits with Motorola and HTC that are ongoing in the International Trade Commission (ITC), District of Delaware, Southern District of Florida, and the Western District of Wisconsin. Mueller writes about patent challenges to Free & Open Source Software at his FOSS Patent Blog.
• Pioneering Patents: There has been a long debate in the patent world on whether patents should focus more on pioneering patents rather than on smaller "tweaks." Professors Raustiala and Sprigman discuss the issues on the Freakonomics blog.
• Peer-to-Patent on Chemistry and Biotechnology: The Peer-to-Patent system has expanded to include the review of patent applications in areas of chemistry and biotechnology. A recent application up for review was filed by Bayer and claims a Pyrrolotriazine derivative that is apparently useful in treating cancer by inhibiting aurora kinase.  [Try your hand at evaluating patentability of the claimed invention].

Global-Tech v. SEB: Amicus Briefs

By Jason Rantanen

Several amicus briefs supporting Global-Tech/neither party were filed yesterday.  Among them is a brief by 41 Law, Economics, and Business Professors in support of the Petitioner that parallels a similar brief filed in support of the petition for certiorari.  The merits brief, coordinated by Mark Lemley, Timothy Holbrook, and Lynda Oswald, argues that the Court should reject the "deliberate indifference" standard articulated by the Federal Circuit in SEB, and instead hold that inducement require that the defendant "be aware of a patent and encourage an act that it knows or should know would infringe that patent."  In anticipation of an argument that may be made in support of the Respondent, the brief also asserts that a strict liability standard for inducement would be disastrous.  The brief can be directly downloaded here: Download 10-6, tsac, 41 Law, Economics, and Business Professors

The full set of amicus briefs is available on the American Bar Association Website.  It includes briefs from:

• The Business Software Alliance in Support of Petitioner
• Cisco Systems, Inc., Dell, Inc., and Intel Corporation in Support of Reversal
• The Clearinghouse Association and Securities Industry and Financial Markets Association in Support of Petitioner
• Comcast Corporation, Facebook, Inc., Intuit Inc., Microsoft Corporation, Netflix, Inc., Overstock.Com, Inc., and SAP America, Inc. in Support of Petitioner
• Google, Inc., in Support of Petitioner
• NewEgg, Inc., in Support of Petitioner
• The Software Freedom Law Center in Support of Petitioner
• Yahoo! Inc., Ebay Inc., Electronic Arts Inc., General Motors LLC, Hewlett Packard Company, McAfee, Inc., Red Hat, Inc., and Symantec Corporation in Support of Petitioner
• The Federal Circuit Bar Association in Support of Neither Party
• The Intellectual Property Owners Association in Support of Neither Party

Design Patents and the Fashion Industry

The chart above shows a histogram of design patent application pendency based on patents issued April-November 2010. The majority of design patents issue within one year of the application filing. When there is a delay in prosecution, it is typically due to informalities in the application submitted. In an earlier study, I found that a very low percentage of design patent applications were ever challenged on novelty or obviousness grounds. For a large entity, a design application and issue fees total to $1,320 (half that for a small-entity).

Fashion Industry: In property law, I teach the case of Cheney Bros. v. Doris Silk Corp. (2^nd Cir. 1930). In that 80-year-old case, a silk designer filed suit to stop a free-riding copycat. The appellate court rejected the plea based on the general rule that mere product imitation is not actionable at common law. Rather, a successful plaintiff must have some statutory right to protection – such as a patent or copyright – before copying can be pejorized as counterfeiting. At the time, copyright was not available for fabric designs (it is now) and patents were arguably impractical because of the prosecution cost and invention requirement. For the past eighty-years, the fashion industry has been asking for additional protections. During that time, the potential for copyright and trademark protections have been greatly expanded and enforcement of criminal counterfeiting has increased. However, there are still calls for expanded protection for fashion.

Fashion & Design Patent Rights: Some fashion industry markets have found design patents as valuable. These include eyewear, shoes, handbags, and jewelry. Despite widespread and growing use, fashion industry leaders have continued to push additional forms of protection that are easier to obtain.

The Innovative Design Protection and Piracy Prevention Act (S.3728) was recently passed through the Senate Judiciary Committee. That bill would provide protection for new fashion designs that are unique, distinguishable, non-trivial, and non-utilitarian variation over the prior art. No registration of rights would be required. Rather, protection is automatic for newly publicized clothing, footware, bags, and eyeglass frames. At trial, plaintiff would have the burden of proving rights and infringement. Under the proposed system, rights would persist for three years from the date of publication or first distribution.

In re Acer: Transfer Out of the Eastern District of Texas

By Jason Rantanen

In re Acer America Corporation (Fed. Cir. 2010)
Panel: Gajarsa, Schall (Author), and Moore

In 2008, MedioStream, a company headquartered in the Northern District of California, brought a patent infringement suit in the Eastern District of Texas against twelve hardware and software companies, five of which are also headquartered in the Northern District of California.  The defendants moved to transfer venue to the Northern District of California pursuant to 28 U.S.C. 1404(a), which authorizes transfer "[f]or the convenience of parties and witnesses, in the interest of justice."  The district court denied the motion, primarily because one of the defendants, Dell, Inc., is headquarted in Round Rock, Texas, relatively close to (albeit outside) the Eastern District of Texas. The defendants petitioned the Federal Circuit for a writ of mandamus. 

On appeal, the Federal Circuit agreed with the Petitioners, concluding in a precedential opinion that the district court abused its discretion in denying the request to transfer venue.  Particularly important in the panel's analysis was the fact that a substantial number of party witnesses reside in or near the Northern District of California, and requiring them to travel to the Eastern District of Texas would result in substantial expenses for airfare, meals, lodging, and the loss of productivity from time spent away from work, as well as the personal costs imposed on the witnesses.  While it was possible that more than one Dell employee might testify, that number was likely to be insignificant in contrast with the substantial number of party witnesses that would be required to travel to Texas.  Similarly weighing in favor of transfer to California was the venue's ability to compel testmony through subspoena power, the presence of a significant portion of the evidence in the Northern District of Caliornia (and none in the Eastern District of Texas), and the local interest of the Northern District flowing from the residence of many of the parties in that district.

Note: Last month, the court granted a temporary stay of the district court proceedings.

Global-Tech v. SEB: Petitioner's Merits Brief

By Jason Rantanen

On Monday, Petitioner Global-Tech filed its brief in the inducement of infringement case pending before the Supreme Court.  The complete brief can be downloaded from the American Bar Association's website.  The arguments are summarized below:

35 U.S.C. 271(b) Requires the State of Mind of "Purposeful, Culpable Expression and Conduct" to Encourage an Infringement.

Global-Tech takes the position that inducement of patent infringement under 271(b) requires "'purposeful, culpable expression and conduct' to encourage an infringement."  In other words, the accused party must possess the "purpose" of causing the infringement of a patent - even knowledge of infringement is insufficient.  In support of this position, Global-Tech relies heavily on MGM Studies, Inc. v. Grokster, Ltd., 545 U.S. 913 (2005), a copyright inducement case in which the Court discussed 271(b) and described the inducement rule as premising liability on "purposeful, culpable expression and conduct."  Global-Tech buttresses its argument by asserting that a lower standard would make 271(b) so broad as to render 271(c) (contributory infringement) insignificant and, furthermore, is supported by the legislative history.

Global-Tech also raises two policy considerations.  First, it delves into the issue of causation, suggesting that because 271(b) does not contain a causation requirement, Congress must have intended to for it to apply only to "morally culpable conduct" - which Global-Tech equates with purpose.  Second, it argues that (absent clear Congressional intent) there is a presumption that statutes are meant to only regulate conduct outside the United States to the extent necessary to further important U.S. interests, and that anything less than a "purposeful, culpable expression and conduct" standard is unnecessary to further U.S. interests. 

The "Deliberate Indifference" Standard is Wrong

In addition to advancing its "purposeful, culpable expression and conduct" approach to inducement, Global-Tech also argues that the Federal Circuit's "deliberate indifference to a known risk" standard is lower than knowledge, recklessness, and even negligence.  Global-Tech rests this assertion on the proposition that because the Federal Circuit's articulation of the "deliberate indifference" standard did not specify the degree of risk, it thus encompasses even minimal risks of infringement.  Global-Tech further argues that the risk in this case was of the minimal variety because it did not know about the patent and because of the uncertainties of both claim construction and infringement proceedings.

Global-Tech raises two additional arguments.  After asserting that aiding and abetting, a related tort doctrine, requires knowledge of the actor's participation in an underlying crime or tort, it then contends that the use of "actively," "induces," and "infringement" in 271(b) signals that the standard must be higher than that of aiding and abetting (i.e.: purpose).  From a policy standpoint, Global-Tech criticizes the "deliberate indifference" standard as being quite unclear - and thus placing a burden on competition and innovation.

Global-Tech concludes by asserting that if the Court holds that 271(b) requires not just purposeful, culpable conduct or knowledge, but also recklessness, it should reverse and remand.

ABA Journal Includes Patently-O in its Blawg 100

For the fourth year in a row, the ABA Journal has selected Patently-O as one of the top 100 legal blogs (Blawgs). The list offers a nice way to find out about other high quality blogs you may have missed. For the first time, the list includes a sub-category of IP-focused legal blogs. Others in the category include the TTABlog (John Welch), TechDirt (Mike Masnick), IPWatchdog (Gene Quinn), IPKat (Jeremy Phillips and team), and Copyrights & Campaigns (Ben Sheffner). Of course, there is a quite long list of very good IP-focused legal blogs that should have made the list.

The annual listing includes a popularity contest and I would appreciate your vote. (A quick registration is required to vote.)

Notes:

• Vote here. (Thanks!)