Patent Law Blog (Patently-O)

Classen Immunotherapies v. Biogen: The Broad, Broad Scope of Statutory Subject Matter

By Jason Rantanen

Classen Immunotherapies, Inc. v. Biogen Idec (Fed. Cir. 2011) Download 06-1634-1649
Panel: Rader (offering "additional views"), Newman (author), Moore (dissent)

There is no doubt that the Federal Circuit continues to struggle mightily with Section 101.  If Myriad were not enough evidence of this, Classen Immunotherapies - and Judge Rader's additional views in particular - should remove all doubt.

Classen Immunotherapies holds three patents that it contends are infringed by virtually everyone: Patent Nos. 6,638,739; 6,420,139; and 5,723,283.  According to the patents, their inventor, Dr. Classen, has discovered that "the schedule of infant immunization for infectious diseases can affect the later occurrence of chronic immune-mediated disorders...and that immunization should be conducted on the schedule that presents the lowest risk with respect to such disorders."  Slip Op. at 5. Claim 1 of the '739 patent is illustrative of Classen's broad claim scope:

1. A method of immunizing a mammalian subject which comprises:

(I) screening a plurality of immunization schedules, by

(a) identifying a first group of mammals and at least a second group of mammals, said mammals being of the same species, the first group of mammals having been immunized with one or more doses of one or more infectious disease-causing organism-associated immunogens according to a first screened immunization schedule, and the second group of mammals having been immunized with one or more doses of one or more infectious disease-causing organism-associated immunogens according to a second screened im-munization schedule, each group of mammals having been immunized according to a different immunization schedule, and

(b) comparing the effectiveness of said first and second screened immunization schedules in pro-tecting against or inducing a chronic immune-mediated disorder in said first and second groups, as a result of which one of said screened immuni-zation schedules may be identified as a lower risk screened immunization schedule and the other of said screened schedules as a higher risk screened immunization schedule with regard to the risk of developing said chronic immune mediated disorder(s),

(II) immunizing said subject according to a subject immunization schedule, according to which at least one of said infectious disease-causing organism-associated immunogens of said lower risk schedule is administered in accordance with said lower risk screened immunization schedule, which administration is associated with a lower risk of development of said chronic immune-mediated disorder(s) than when said immunogen was administered according to said higher risk screened immunization schedule.

Classen asserts that the '139 and '739 patents are infringed "when a health care provider reads the relevant literature and selects and uses an immunization schedule that is of lower risk for development of a chronic immune-mediated disorder."  Slip Op. at 7.  According to Classen, this includes "the act of reviewing the published information, whether or not any change in the immunization schedule is made upon such review."  Id. The '283 patent is similar, except that it does not include the subsequent step of selecting an immunization schedule.  Classen asserts that the '283 patent is infringed "when a person reviews relevant information, whether the person is a producer of vaccines, a health care provider, or a concerned parent."  Slip Op. at 8.  The three patents list several hundred preexisting references relating to immunization schedules, the occurrence of immune-mediated disorders, and studies and reports from the field.

The district court granted summary judgment of invalidity of the asserted claims on the ground that they claimed an abstract idea.  On initial appeal, the CAFC affirmed, with Judge Moore penning an extremely short affirmance.  Following Bilski, the Supreme Court grant-vacate-remanded the case to the Federal Circuit, where it was assigned to the panel of Rader, Newman, and Moore.

 The Majority: Writing for herself and Judge Rader, Judge Newman concluded that while the '283 patent failed to satisfy Section 101, the '139 and '739 patent did.  Although the '139/'739 patents included a mental step, "precedent has recognized that the presence of a mental step is not of itself fatal to § 101 eligibility."  Slip Op. at 15.  Because the claims of these patents include the physical step of immunization, the majority held, they were directed to a "specific, tangible application."  Slip Op. at 18.  This was sufficient to assure the majority, which declined to offer any additional reasoning, of their subject matter patentablity.    On the other hand, the majority held, the '283 patent attempted to claim an abstract idea unfettered to any physical steps.  Thus, it was invalid under Section 101.

The Dissent: Judge Moore disagreed entirely.  "While I confess the precise line to be drawn between patentable subject matter and abstract idea is quite elusive, at least for me, this case is not even close."  Dissent at 6.  All three claims simply constitute abstract subject matter: "Having discovered a principle - that changing the timing of immunization may change the incidence of chronic immune mediated disorders - Classen now seeks to keep it for himself."  Dissent at 8.  While Judge Moore reserves her harshest criticism for the '283 patent, her views on the '139/'739 reach the same conclusion.  "The immunization step of the '739 patent, like updating the alarm limit in Parker v. Flook, 437 U.S. 584 (1978), is nothing more than post-solution activity."  Id. at 9.  That post-solution activity "does not transform the unpatentable principle - that a correlation exists between vacination schedules and incidence of chronic immune disease - into a patentable process.'  Id. at 10.

Judge Rader's Additional Views:  In an unusual move, Judge Rader, joined by Judge Newman, wrote separately to express frustration with the constant use of Section 101 challenges by accused infringers. 

In the last several years, this court has confronted a rising number of challenges under 35 U.S.C. § 101. The language of § 101 is very broad. Nevertheless, litigants continue to urge this court to impose limitations not present in the statute.

For a variety of policy reasons, Judge Rader urges, "[t]his court should decline to accept invitations to restrict subject matter eligibility."  Rader additional views at 2.  Chief among these is the problem that "eligibility restrictions usually engender a health dose of claim-drafting ingenuity," evasions that "add to the cost and complexity of the patent system and may cause technology research to shift to countries where protection is not so difficult or expensive."  Id. at 3.  

Comments: I am troubled by several aspects of the court's opinions.  Particularly concerning is the majority's apparent desire to abdicate the subject matter inquiry altogether, a desire expressed both implicitly, in the majority opinion's unwillingness to offer any substantive reasoning to support its ruling on the '139/'739 patents, and explicitly in Judge Rader's policy statement.  This approach seems problematic on its own, but becomes even more so when coupled with the numerous Supreme Court opinions relating to the issue of subject matter patentability - an area of traditional significance in the patent sphere.  While the Court may have repeatedly suggested that broad categorical rules may be inpermissible, it has nowhere suggested that subject matter arguments lack merit as a class, or that subject matter arguments must fail as a matter of course.  In particular, I find it difficult to see how the '139/'739 patents possibly survive scrutiny under Parker v. Flook, 437 U.S. 584 (1978).  The mental step itself is not a patentable subject, so how can combining it with an act (or the lack of an act) that has previously been done without the mental step make it patentable?   

Nor does Section 101 seem to present such a unique problem that the Federal Circuit should adopt a policy of declining to address arguments relating to it.  Even as Judge Rader criticizes the case law limiting subject matter patentablity because it encourages costly legal design-arounds, he joins with an opinion that does precisely that by drawing the line between the two sets of claims.  Mental step claims are now clearly out; mental step plus claims are now in.  And since every process is simply a link in a longer process, claim drafters need only look one step forward to avoid the effects of the majority's ruling.  Nor should the effects of Judge Rader's parade of horribles be limited to Section 101 - they strike me as equally applicable to Section 102, Section 103, and especially Section 112. 

 

 

 

 

Obviousness in Chemical Formulations: (Unclaimed) Purpose of Limitation Leads to Nonobviousness Holding

Unigene Labs. and Upsher-Smith Labs v. Apotex (Fed. Cir. 2011)

One critical reading of this case is that the Federal Circuit intends to continue to take steps to ensure that important chemical formulation patents are considered valid. In particular, the court explicitly aligns the obviousness analysis of claims for formulations of known compounds with that of claims for novel compounds.  In doing so, the court seemingly ignores KSR’s negative outlook on combination claims.  The case is also important in the way that the (unclaimed) purpose of a particular element of a combination claim can be used to overcome an obviousness argument.

Background: Unigene's reissued patent No. RE40,812 covers its Fortical calcitonin nasal spray. Unigene developed Fortical as a bioequivalent alternative to Novartis's Miacalcin calcitonin nasal spray. Unigene relied on bioequivalence to the already approved formulation to speed its FDA approval process. The differences between the formulations are in the levels of non-pharmaceutically active components of the nasal spray.

In particular, the prior-art Miacalcin spray includes 2,200 I.U./mL of calcitonin and also sodium chloride, nitrogen, HCL, water, and benzalkonium chloride. Unigene’s Fortical contains the same amount of calcitonin, along with 20  mM  citric acid, polysorbate 80, phenylethyl alcohol and benzyl alcohol. These contents in their required ratios are claimed in Unigene's patent.

In 2006, generic manufacturer Apotex filed an abbreviated new drug agreement (ANDA) to begin importing a generic version of Unigene's Fortical nasal spray before the patent's expected expiration date. Because that filing constitutes prima facie patent infringement under 35 U.S.C. § 271(e)(2), Unigene sued for infringement.

On summary judgment, the district court dismissed Apotex’s obviousness defense — holding that, as a matter of law, the asserted claims would not have been obvious at the time of invention.  35 U.S.C. 103(a).

On appeal, the Federal Circuit affirmed and provided a further analysis of how the Supreme Court’s KSR decision applies (or does not apply) in the chemical arts.

Begin with a “lead compound” or “reference composition”: In most chemical-compound cases, the obviousness analysis begins with the closest prior art compound — termed a “lead compound.”  In this type of composition claim, an ordinary approach is to begin with a “reference composition.” Here, that reference is the Miacalcin formulation.  Here, there was a strong market demand to identify a bioequivalent composition that avoids the Miacalcin patent since a bioequivalent would have the best chance of receiving FDA approval.

Although the prior art would point one of ordinary skill in the art toward a particular starting point and provide motivation to develop a bioequivalent, these factors to not indicate which bioequivalent among an infinite number of possible formulations is the best.

Here, Unigen focused on its use of 20  mM  of citric acid as a absorption enhancer and surfactant in Fortical.  The prior art Miacalcin uses BZK for that function.  A prior art reference showed experimental data that citric acid mixed with calcitonin in tablet form increased absorption. However, the court ruled that reference “would not cause a person of ordinary skill to replace BZK in Miacalcin  with  20  mM  of  citric  acid  in  the  normal  course  of research and development[, and therefore citric acid] would not be an obvious substitute for BZK’s functions.”

Unclaimed Function, Critical Importance: In making its decision, the court makes an important leap that is critical for its decision — namely that the role or function of citric acid in the claimed invention is as an absorption enhancer and surfactant.  The claims do not require that functionality.  However, the court determined that the citric acid actually serves as a substitute for BZK and therefore its addition will only be obvious if it would have been obvious as a substitute for BZK.

Once framed as a question of substitution, the court then looked to the prior art and found that the role of citric acid in the prior art was only vaguely known and therefore could support a decision that it would have been obvious to substitute citric acid for the BZK functionality. A separate prior art reference used citric acid in a nasal compound (like Fortical), but included a statement that the citric acid was “not used as an absorption enhancing agent” but instead only as a buffer.  That reference also suggests that citric acid would not be an acceptable absorption agent. 

In addition, the prior art used different concentration levels of citric acid and only non-human mammalian tests — factors that tend to disrupt any obviousness argument.

Summary Judgment of Nonobviousness Affirmed.

Notes from around the patently-o-sphere:

• Kevin Noonan writes that “the decision provides a contrast between how the Court views chemical obviousness for pharmaceutical formulations today, and the views contained in the Court's opinion in Pfizer, Inc. v. Apotex, Inc.”
• Aaron Barkoff notes that the opinion aligns the obviousness analysis for formulation claims (for known compounds) with that of claims for novel compounds.
• Ryan Alley writes that “I get the feeling the case is pushing the boundaries of nonobviousness a little too far.”
• Patent Hawk writes that in this case, the “CAFC set its own formula for chemical obviousness”

Guest Post: An Empirical Exploration of First-to-Invent Versus First-to-File

Guest Post by Polk Wagner, Professor of Law, University of Pennsylvania Law School

One of the most-discussed and controversial provisions of the patent reform bill currently pending before Congress is the change to the United States' venerable first-to-invent patent priority rule.  Surprisingly, even as as we stand on the cusp of the broadest set of changes to the US Patent Law in two generations, virtually no empirical analysis has been conducted on the potential impact of this change, particularly on individual inventors.

In a new paper by my Penn colleague David Abrams and myself -- Priority Rules:  An Empirical Exploration of First-to-Invent versus First-to-File -- we seek to shed some light on this question by exploiting the same rule change in Canada as a natural experiment.  After collecting data on over a million patent grants in Canada and the US, we use a difference-in-difference empirical framework to estimate the impact of the priority rule change on small inventors.  Our main finding is a substantial drop in the fraction of patents granted to small inventors in Canada coincident with the implementation of first-to-file.  The overall policy implications depend on the relative value of inventions by small inventors, but the results do reveal that, contrary to the conventional wisdom, a change to first-to-file is not free — it is likely to result in reduced patenting behavior by individual inventors.

The complete paper is available on SSRN: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1919730

Flowchart Insuficient Structure to Define Sofware Means-Plus-Function Limitation

In re Aoyama (Fed. Cir. 2011)

Aoyama's pending application claims a supply chain management system with two elements: “an order controller system” and “a warehouse system.” According to the claim, the order controller generates “transfer data” using “reverse logistic means” and the warehouse receives the transfer data.  The Examiner identified U.S. Patent Application Pub. 2001/0034673 (“Yang”) as fully anticipating and that rejection was affirmed by the Board of Patent Appeals and Interferences (“Board”).

On appeal to the Court of Appeals for the Federal Circuit, a split panel agreed that the claims lacked merit but found them impermissibly indefinite rather than anticipated.

The key to the decision focuses on the means-plus-function “reverse logistic means” limitation. 

Means-plus-function (MPF) claims are deceptive. MPF claims appear to be broadly drafted and without any structural limitations. However, the patent act requires that the actual scope of MPF claims be limited to structures disclosed within their specifications. 35 U.S.C. 112 p6. The court has also repeatedly held that an MPF limitation is considered impermissibly indefinite if the specification does not contain any structure that performs the claimed function.

Here, the claimed “reverse logistic means” generate “transfer data.”  Aoyama pointed to a flow-chart (Figure 8) as providing the necessary structure.  (Shown below).   In reviewing the flow-chart, however, the Federal Circuit could not identify sufficient structure.  In particular, the court noted that the flow-chart identified a number of results, but did not identify any way that “a computer could be programmed to produce the results described in the boxes.”  Quoting both the Examiner and the Board, the Court wrote  that Figure 8 only “presents several results to be obtained, without describing how to achieve those results, and certainly not how to generate transfer data.”

Importantly, the question of means-plus-function structure is much like that of written description. It does not matter whether one skilled in the art would be able to create a structure to perform the claimed function. Rather, the focus is on whether such structures were disclosed in the specification.

Because the means-plus-function limitation lacked sufficient disclosure of an accompanying structure and are therefore unpatenable.

In dissent, Judge Newman argued (1) that the federal circuit improperly raised the issue of indefiniteness and (2) that the figure and accompanying text should be considered sufficient structural disclosure.

Genetics Institute v. Novartis Vaccines

By Jason Rantanen

Genetics Institute, LLC v. Novartis Vaccines and Diagnostics, Inc. (Fed. Cir. 2011)
Panel: Lourie (author), Plager, Dyk (dissenting in part)

The Science: In the 1980's, scientists raced to develop a truncated version of Factor VIII, an essential blood-clotting protein.  Two companies, Genetics and Novartis, successfully developed and patented truncated versions of this 2,332 amino acid protein.  Genetics' patent, with a 1985 priority date, included claims directed at a version of the protein that removed between 581 and 949 amino acids in the region between amino acid 740 and 1690, while Novartis's patents, with a 1986 priority date, retained amino acids 1 to 740 and 1649 to 2332.  The retention of amino acids 1649 to 1689 later turned out to be significant because this range binds to von Willebrand factor ("vWF"), an association that is critical for the optimal regulation of the blood coagulation.

Procedural Background: In 2008, Genetics sued Novartis to determine priority of invention under 35 U.S.C. § 291.  Novartis argued that the district court lacked subject matter jurisdiction because the PTO's extension of the patent term from 2006 to 2010 under 35 U.S.C. § 156 applied to fewer than all of the patent claims, and that there was no interference-in-fact.  The district court rejected Novartis's jurisdictional challenge but agreed there was no interference.

Appellate jurisdiction: Seeking to terminate the appeal at the outset, Novartis contended that the CAFC itself lacked subject matter jurisdiction because the Genetics patent expired three days after the district court's entry of judgment.  None of the judges were persuaded.  Distinguishing an earlier case in which the court held that it lacked subject matter jurisdiction because of a claim disclaimer, the CAFC held that the expiration of Genetics' patent "following the district court's final decision does not strip our court of jurisdiction over the present appeal." 

Section 156 extension applies to the entire patent: The panel likewise affirmed the district court's finding of subject matter jurisdiction, rejecting Novartis's argument regarding the scope of the patent term extension.  Although Section 156(b) limits the effect of the extension, it does not limit the extension to specific claims.  "A patent as a whole is extended even though its effect may be limited to certain of its claims."  Slip Op. at 17 (emphasis added).

No prima facie case of obviousness: To determine whether an interference-in-fact exists, courts apply a two-way validity test, i.e.: whether the claims of one patent invalidate the claims of the other and vice-versa.  Both directions must be established.  In this case, the court focused on whether the claims of Genetics' patent rendered obvious the claims of Novartis's patents. 

Judge Lourie, joined by Judge Plager, concluded that they did not, as the lack of any reason to create a truncated protein that incorporated the 1649-1689 region supported the district court's finding of no prima facie case of obviousness.  Any motivation, they reasoned, would have been in the opposite direction - to create a shorter protein and eliminate more amino acids, not to create a longer protein.  Nor was the mere existence of a cleavage site (a natural point for cutting proteins) sufficient to provide the requisite reason to cut the protein at that point to make the claimed truncated protein.

Judge Dyk disagreed, pointing to cases holding that structural relationships may provide the requisite reason to modify compounds and can give rise to a case of prima facie obviousness.  "[T]he truncated Factor VIII proteins of the Novartis patents are not merely homologs, analogs, or isomers - they are all variants of the exact same protein, exhibiting the exact same procoagulant functions."  Dissent at 5 (emphasis in original). 

The use of post-invention "unexpected results": The majority further supported their conclusion by citing to the unexpected result of the 1649-1689 region binding to vWF.  The problem, however, lay in the lack of appreciation of this role until well after the priority date of Novartis's patents.  Undisuaded, the majority pressed on, holding that such evidence was nonetheless relevant to nonobviousness: "[E]very property of a claimed compound need not be fully recognized as of hte filing date of a patent application to be relevant to nonobviousness."  Slip Op. at 29.  In other words, "evidence of unexpected results may be used to rebut a case of prima facie obviousness even if that evidence was obtained after the patent's filing or issue date."  Id.

Again, Judge Dyk disagreed.  "The majority's finding of nonobviousness is based entirely on hindsight and happenstance, and not on what the inventors knew at the time the Novartis patents were filed.  See 35 U.S.C. § 103(a) (stating that an invention cannot be patented if 'the subject matter as a whole would have been obvious at the time the invention was made')."  Dissent at 10 (emphasis in quotation).  In Judge Dyk's view, the "unexpected properties must either be set forth in the specification or contemporaneously known to the inventors, rather than being discovered long after the fact."  Id. at 12.

Judge Dyk's citation of Section 103 notwithstanding, it seems reasonable to look to post-filing or issuance evidence with respect to at least some secondary indicia of nonobviousness.  Commercial success, for instance, would be difficult to establish if only pre-filing evidence were able to be considered.  But I think he's right on the question of unexpected results.  In my mind, a valid distinction can be drawn between discoveries of unexpected results - which really go to the fundamental question of obviousness - and commercial success, which must necessarily rely on the invention's post-filing success in the marketplace.

Practice note: Infringement defense attorneys writing discovery requests may want to take note of the majority's holding on unexpected results to press for either post-filing/issuance discovery on this point or a stipulation that such evidence will not be relied upon by the patent holder.

  

Patently-O Bits & Bytes by Lawrence Higgins

No Software Patent When it Merely Implement's Mental Steps

• The Federal Circuit affirmed the District Court's grant of summary judgment of invalidity of software patent claims asserted in CyberSource v. Retail Decisions. In its Decision, the Federal Circuit explains that a method that can be performed purely mentally is unpatentable under 35 U.S.C. § 101, even if the claim is tied to computer hardware. [Link] This decision cited Bilski, stating that the "application of [only] human intelligence to the solution of practical problems is no more than a claim to a fundamental principle." [Decision]

Italy and Spain launches legal challenge against 25 EU member countries

• Italy applied to the European Court of Justice (ECJ) asking it to rescind an EU decision taken in March that allowed the 25 countries to press ahead with proposals to create a single mechanism for gaining patent protection across Europe. Italy claims that the agreement is unlawful and will distort competition with the EU. [Link]

100 Best Legal Blogs

• The ABA is working on their annual list of the 100 best legal blogs and they would like your advice on which blogs to include. If you would like to tell the ABA about your favorite blog or blogs they are accepting Friend-of-the-blawg briefs, which are due no later than 9/9/2011. [Link]

New Blog!

• The "Bottom-Line Business Blog" deals with intellectual property business issues as they affect the intellectual property owner. The author of the "Bottom-Line Business Blog" is San Diego IP attorney Robert Cogan. [Link]

Patent Jobs:

• The USPTO has openings for Administrative Patent Judges in several different specialties. [Link]
• Sigma-Aldrich is seeking 2 patent attorneys, 1 with a background in material science/chemistry and the other with a background in molecular biology. [Link]
• Squire, Sanders & Dempsey is seeking an experienced patent agent. [Link]
• Proteostasis is searching for a patent attorney with 5+ years of experience and a chemical or biological background. [Link]
• Pachira is looking for a principal technology advisor with at least 10 years of experience and an engineering background. [Link]
• Edwards Angell Palmer & Dodge is seeking an IP associate with 3-4 years of experience and a mechanical engineering background. [Link]
• Wenderoth, Lind & Ponack is searching for a patent attorney with at least 1 year of experience and a B.S. in chemistry. [Link]

Upcoming Events:

• The D.C., Northern Virginia and Baltimore Sections of the Institute of Electrical and Electronics Engineers (IEEE) and National Small Business Association (NSBA) will be hosting the upcoming forum on "The Overhaul of U.S. Patent Law on August 29 in Washington D.C. The Forum will offer small-business owners, entrepreneurs, technical professionals and inventors the opportunity to hear from experienced entrepreneurs, investors and experts in the patent system including Paul Michel, Chief Judge (retired) of the U.S. Court of Appeals for the Federal Circuit, Dr. Pinchus Laufer from the U.S. Patent & Trademark Office and other high-level speakers. [Link]
• Mizzou will be hosting its annual Missouri Technology Expo on September 8^th. The event is held as a way of uniting innovators with those who can advance, develop and commercialize technologies. The guest speakers include, Christopher "Kit" Bond, Gregg Scheller, Suzanne Magee and many others. Several investment groups will be on hand, such as The Incubation Factory, DFJ Mercury, Allied Minds and many others. This will be a great event for patent attorneys and many others to network and build business relationships. [Link]
• The 2^nd European Pharmaceutical Regulatory Law Forum will be held in Brussels, Belgium September 21-22^nd. The forum will focus on recent developments affecting the pharma industry in Europe and will discuss the impact of US developments on European companies. (Patently-O readers can register with code PO 10 for a 10% discount) [Link]
• American Conference Institute's Life Sciences Business Development & Acquisitions in Emerging Markets conference is scheduled for September 26-27 in New York, NY. (Patently-O readers can register with code PO 200 for a discount) [Link]
• Boston University School of Law and the Kauffman Foundation will be holding a Workshop on Innovation and Patent Harmonization at Boston University School of Management on September 30-October 1. The workshop will cover the effect of harmonization in both advanced countries, such as the US, and in developing nations, with a particular focus on China. Anyone interested in attending, please RSVP to Elizabeth Aggot at eaa@bu.edu. [Link]
• American Conference Institute's 12^th Annual Maximizing Pharmaceutical Patent Life Cycles will take place in New York on October 4^th-5^th. The conference is one of the leading sources of information and analysis on the patent life cycle management. (Patently-O readers can register with code PO 200 for a discount) [Link]
• C5 will be holding the 21^st annual Forum on Biotech Patenting in London on October 5^th-6^th. The 2011 London Biotech Patenting Forum will focus on the latest legal developments affecting biotech companies and how to implement successful methods and strategies for drafting and filing patent applications in multiple jurisdictions. (Patently-O readers can save 100 pounds by using discount code PO 100) [Link]
• American Conference Institute will be holding a FDA Boot Camp Device Edition conference on October 25^th-October 26^th in Chicago. (Patently-O readers can register with code PO 200 for a discount) [Link]
• Licensing Executives Society (LES) will be holding their annual meeting on October 16-19 at the Manchester Grand Hyatt in San Diego. Guest speakers include, Martha Riles, VP of IP Management, The Boeing Company and Barbara Dalton VP, Venture Capital, Pfizer. (Register by 8/31 to receive a $100 discount) [Link]
• IPMI is holding the IP Law & Management Institute on November 6^th – 8^th at the Rancho Las Palmas in Palm Springs, CA. Hailed as "One of the few programs geared to experienced in-house IP Counsel", the Institute is a CLE-accredited program designed to provide time-starved Heads of IP with the Opportunity to meet and network with their peers, learn from the best practices and validate solutions and services. [Link]

Contact Lawrence.Higgins@patentlyo.com with leads for future Bits and Bytes.

The APA Waives Federal Sovereign Immunity to Declaratory Judgment Challenges against Federally Owned Patents

Delano v. California Table Grape Commission and US Dep't of Agriculture (USDA) (Fed. Cir. 2011)

[This summary has been temporally edited while I think about this decision a bit more - DC]

The USDA is title holder of the three patents being litigated here.  Each patent relates to a separate variety of grape: Sweet Scarlet (U.S. Patent No. PP15,891), Scarlet Royal (U.S. Patent No. PP16,229), and Autumn King (U.S. Patent No. PP16,284).  The California Table Grape Commission is a branch of the California state government that operates with the mission of promoting the California table grape industry and is funded by a tax on grape production.  The USDA granted the Grape Commission an exclusive license to practice and sublicense the varieties. The Grape Commission then began selling plants, but only to nurseries that contractually agreed to (1) pay ongoing royalties and (2) not propagate the plants.

In 2007, a collection of nursery-licensees filed a declaratory judgment lawsuit challenging the validity of the patents and arguing that the Grape Commission's licensing activities were illegal under antitrust law.

The DJ plaintiffs quickly ran into trouble based on federal sovereign immunity claims: The USDA claimed sovereign immunity from suit in the district court.  The district court dismissed the lawsuit after concluded that the USDA was immune and (as patent holder) was also an indispensable party.

On appeal, the Federal Circuit agreed that the USDA was an indispensable party but held that the agency's sovereign immunity to a DJ invalidity and unenforceability action was waived by the Administrative Procedures Act.

Patent-Holder as Necessary Party: Normally, a patent holder is a necessary and indispensable party to a declaratory judgment lawsuit arguing that patents are invalid or unenforceable.  There is, however, a narrow exception that occurs when the patent holder has transferred “all substantial rights” to an exclusive licensee.  Here, the appellate court found that the USDA retained substantial rights because the exclusive license did not give the Grape Commission unilateral rights to enforce the patents and the USDA retained a right to practice the invention.

US Government is Not Immune from a Declaratory Judgment Patent Invalidity Lawsuit in Federal Court: As a general background rule, US government agencies are immune from suit unless that immunity has been waived. Here, the plaintiffs found such a waiver in Section 10(a) of the Administrative Procedures Act as codified in 5 U.S.C. § 702 (“Right of Review”).  That section indicates that “a person suffering legal wrong because of agency action … is entitled to judicial review thereof.”  The statute particularly authorizes a lawsuit to remedy the wrong in Federal Courts — so long as the remedy being sought is something “other than money damages.”  As interpreted by the Federal Circuit, this provision (as amended in 1976) “consists of a broad waiver of sovereign immunity for actions seeking relief other than money damages against federal agencies, officers, or employees.” 

Here, because the DJ plaintiffs are only seeking non-monetary equitable relief — a holding that the PVPA patents are invalid and unenforceable – their claim is wholly within the APA Section 10(a) waiver and wholly outside the jurisdiction of the Court of Federal Claims.

On remand, the government will now be forced to defend the validity of its patent.

Note –  Based upon assignment records, a US Government entity holds title to about 0.4% of patents issued 2005–2011.

Wonky Claim Construction; Wonky On-Sale Bar

August Technology Corp. v. CamTek Ltd. (Fed. Cir. 2011)

A Minnesota jury awarded $6.8 million in lost profit damages to August Tech – holding that the defendant CamTek's "Falcon" silicon wafer inspection device infringes claims 1 and 3 of the asserted patent and that those claims are not invalid. (See U.S. Patent No. 6,826,298).

Six Year Background: The infringement litigation was originally filed in July of 2005, a Markman hearing was held in September 2007, and a claim construction order issued in 2008. The trial concluded in 2009 and a final judgment issued in 2010. The appeal was then timely filed resulting in this 2011 opinion. On appeal, the Federal Circuit have pushed "rewind" – ordering the District Court to reverse its claim construction decision and vacating all of the subsequent decisions on infringement, validity, damages, and injunctive relief.

Can a "plurality of wafers" all come from the same wafer?: In semiconductor chip manufacturing, individual chips (AKA dies) are usually manufactured as part of a large silicon wafers that is then divided into a number of identical dies. The patent specification in this case continually refers to operation on wafers "in whole or in part." And, in construing the claim term "wafer" the district court concluded that a wafer might be only a portion of the large round so long as it contains multiple dies. The claims also include a step that involves inputting a "plurality of wafers" into the inspection device in order to train the device. Apparently the accused device is usually trained with multiple sections of a single large wafer. And therefore, the contested claim construction issue was whether the "plurality of wafers" limited could be construed to include a plurality of sections of a single wafer.

Avoiding Superfluous Terms: On appeal, the Federal Circuit (Moore, J) concluded that "most logical reading of these claim limitations" is that the claimed "wafer" is a single object and that a "plurality of wafers" must be more than one of those objects. Otherwise, the word "plurality" is "superfluous." On remand, the district court must consider whether the accused device infringes the more narrowly construed claims.

On-Sale Bar and Obviousness: Prior to the conception of its patented invention (and more than one year before its application filing date), August Tech had sold a different machine (the customized NSX-80). Apparently CamTek did not have sufficient published material regarding the prior machine, and instead argued that the on-sale bar of 102(b) treats the NSX-80 as prior art. Although not identical to the invention, CamTek posited that the patent was obvious in the face of the NSX-80 combined with other prior art available at the time of the invention. The district court rejected this argument – holding that, under Pfaff, the on-sale bar does not apply because the claimed invention was not "ready for patenting" at the point of the prior offers for sale.

In six pages of dicta, the Federal Circuit rejected a narrow view of 102(b)/103(a) prior art – writing instead that the "ready for patenting" prong of Pfaff is triggered if the invention is conceived of at least by the 102(b) critical date of one-year prior to the application filing date. For the on-sale bar to be triggered, the "offer for sale" needs to still "remain open" at the time of the conception.

While the invention need not be ready for patenting at the time of the offer, consistent with our cases, we hold that there is no offer for sale until such time as the invention is conceived. Pfaff states that the "word 'invention' in the Patent Act unquestionably refers to the inventor's conception." Therefore, we conclude that an invention cannot be offered for sale until its conception date. Hence, if an offer for sale is made and retracted prior to conception, there has been no offer for sale of the invention. In contrast, if an offer for sale is extended and remains open, a subsequent conception will cause it to become an offer for sale of the invention as of the conception date. In such a case, the seller is offering to sell the invention once he has conceived of it. Before that time, he was merely offering to sell an idea for a product.

The ruling is clearly dicta because the court held that the addition of the machine to the prior would not, as a matter of law, render the claimed invention obvious.

Finally, the court noted an additional quirk of the lower court's injunction where it enjoined the adjudged infringer "from communicating with third parties in the United States for the purpose of offering to sell accused devices for use outside the United States." That ruling may be implicated by Transocean Offshore Deepwater Drilling, Inc. v. Maersk Contractors USA, Inc., 617 F.3d 1296, 1309 (Fed. Cir. 2010).

Predicting Patent Litigation

Patent litigation is expensive.  As a result, many firms often engage in broad, costly searches in order to avoid suit.  Other firms apply the opposite strategy, ignoring patents entirely. 

In her new paper entitled Predicting Patent Litigation, Professor Colleen Chien addresses this systematic problem by examining the factors that lead patents to be litigated.  Professor Chien focuses not on patents' intrinsic characteristics, which have been previously studied, but rather on characteristics acquired after the patent is born, such as changes of ownership, continued investment in the patent, and citations to the patent. 

The results of her empirical assessment are striking: patents that end up in litigation possess markedly different acquired characteristics from patents that remain unlitigated.  Professor Chien uses these differences to offer a model for assessing which patents are more likely to end up in litigation based on the use of both intrinsic and acquired characteristics.

The complete paper is available here: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1911579. 

Recent Scholarship: Do Patents Disclose Useful Information?

By Jason Rantanen

There is a significant body of recent scholarly literature questioning whether patents are effective at disclosing technological information about new inventions.  This debate is important because one of the principal justifications for the patent system - especially as viewed by the courts - is that it encourages inventors to disclose the technological underpinnings of their inventions through the incentive of a patent.  Criticisms of the disclosure function of patents generally fall into two categories: arguments that patents are not effective mechanisms for conveying technical information and arguments that follow-on inventors do not read patents for their technical content.

In her recent article Do Patents Disclose Useful Information?, Lisa Larrimore Ouellette tackles this issue head-on, offering empirical support for the position that patents do convey useful information.  Ouellette, herself a former nanotech scientist, provides the results of a survey conducted of nanotechnology researchers that suggests that, at least in that industry, researchers look to patents for their technical teachings, and that they believe that patents provide useful information that is not available elsewhere - with one notable exception, the problem of reproducibility.  Based on these findings, Ouellete argues that we do not grant patents because of disclosure; rather, we require disclosure because we grant patents.

The complete paper is available on ssrn: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1762793.   

GametimeIP by Patrick Anderson

I just started (again) to read Patrick Anderson's great blog – GametimeIP. Anderson is president of PatentCalls, and his blog focuses on the business of patents and intellectual property management issues. Recent posts include a comparison of RPX versus ICAP's Covenant-Not-to-Sue Auction; a rip on a "patently clueless law firm"; a discussion of the most recent patent lawsuits stemming from Intellectual Ventures; and the post "Did A Banking Lobbyist Just Admit To Buying Its Own Section Of Patent Reform?"

Guest Post: Google is Packing Heat (With Sights on Apple)

By Allen Wan. Mr. Wan is a 3L at Northwestern University School of Law. Prior to law school, Wan was a patent litigation analyst at Weil, Gotshal & Manges and Fish & Richardson. I asked Wan to provide some insight on the set of 1000+ patents that Google recently purchased from IBM. He wrote this piece just as news broke regarding Google's acquisition of Motorola Mobility – DC

* * *

A wise man once said, "Don't bring a knife to a gunfight." Well, it looks like Google has been doing some shopping at the armory and it's ready to make some apple sauce at the local range.

The recently recorded assignment of 1029 patents from IBM to Google – which more than doubles the number of U.S. patents assigned to Google – has been widely viewed as an attempt by Google to bolster its patent portfolio for a potential patent war among the technology giants. A closer examination of the patents confirms this view.

A review of the patents suggests that they were carefully chosen from among IBM's tens of thousands of patents in order to be most effective in a patent fight against the other technology giants. The broad topic coverage of the patents substantially enhances Google's position against all of its potential foes. Nonetheless, the patents appear to have been chosen for one adversary in particular – Apple.

There are several characteristics of these patents that each suggest a defensive intent by Google, and together as a whole, they paint a very clear picture of what Google is trying to do. The one that stands out initially is the unusually broad topics that are covered. A quick look through the patents shows that there is no one area of focus. These patents were not merely all of the IBM patents pertaining to a particular subject matter, but instead cover huge swaths of modern technology. Additionally, this breadth is not random. The topics covered are not indicative of a random subset of IBM patents. There appears to be a tilt towards consumer and network applications and an absence of patents pertaining to the record breaking supercomputers that IBM is known for. (e.g. Watson)

The remaining terms of the patents are also indicative of a careful selection process. There appears to have been a concerted effort to choose patents with substantial life remaining in order to provide long term protection. The earliest expiration date is in late 2012 (U.S. Pat. 5,751,286) and the average patent term ends in July of 2022. The patent term distribution is actually skewed towards the longer terms with a quarter of the set expiring in 2025.

The preference for long term patents does not appear to have come at the expense of quality. Generally, the patents appear to be strong, covering topics that would be difficult to work around, and having priority dates that are at least sufficiently early so as not to be obviously invalid.

These generalized characteristics can suggest an intent on the part of Google, but the most telling aspect is the patents themselves. I estimate that three quarters could be asserted against an Apple product. All major Apple products are targeted. Moreover, the potential accused aspects are sufficiently innate to the various products that it would be challenging to design around the patents.

These patents also provide effective protection against the other technology giants. Around a quarter could be asserted against any one of the other large technology companies – offering 250+ relevant patents that available for counterclaims and countersuits. These patents provide much better protection than the existing 700 native patents that Google has, which are mostly focused on Google's search business and largely inapplicable against anyone other than Yahoo and Bing.

A significant minority of the patents pertain to IC design, structure and manufacturing. It is unsurprising that IBM would have many of these available, and the ones dealing with IC design and structure could potentially be used against any IC manufactured with a modern IC manufacturing process or containing modern design elements. The IC manufacturing patents, in contrast, seem like they would have to be asserted against an actual IC manufacturer such as Intel or Samsung. These are notable only because it suggests that some patents were chosen to specifically target companies other than Apple. In contrast, the coverage against companies like Microsoft appears to be more a result of the sheer breadth of what is covered while the coverage against Intel appears to have been a directed effort.

What is clear through this acquisition is that Google has ended its previous unilateral patent disarmament policy. Although, Google had previously shied away from building a patent arsenal, receiving orders of magnitude fewer patents than other large technology companies, it has apparently decided to abandon this policy and build a patent portfolio of its own. The number of new patents that Google is receiving each year is increasing at an exponential rate. This rapidly increasing number of native Google patents, combined with the large number of relevant technology patents that Google is acquiring from other companies, together provide a formidable arsenal for Google in this modern era of litigiousness among the technology giants. With Google's recently announced acquisition of Motorola Mobility, the potential patent duel with Apple has now inched closer. Motorola is actively engaged in several patent suits with Apple.

N.B.: Just because a patent can be asserted against a company or product does not imply that the patent is infringed by the company. Determining infringement is a complicated legal process which depends on a myriad of facts that can only be uncovered during discovery, is subject to the vagaries of claim construction, and is a question of fact ultimately answered by the jury. My use of the language that a patent could be asserted against a product should not be taken to mean anything more than it is my opinion that a suit alleging infringement of the patent against the product would likely survive a Rule 11 challenge for being frivolous.

Two-Minute Survey: The Impact of Patent Reform

Please take a couple of minutes to complete this survey on the impact of the proposed patent reform measures:

Background: Patent reform measures have been passed in both the House and Senate that would, inter alia:

• eliminate a patent applicant's ability to swear-behind prior art based upon prior invention;
• grant rights to the first-inventor-to-file a patent application;
• create an additional post-grant opposition program;
• eliminate the one-year grace period for third-party disclosures;
• provide the PTO with some additional ability to set its own fees and to spend the fees collected;
• make it easier for corporate patent owners to file applications associated with non-cooperative inventors;
• eliminate best mode failure as a litigation defense; and
• eliminate the incentive to sue for false patent marking.

Supporters of the reforms have made various announcements regarding the impact of the patent reform measure as proposed. These statements include: "Through patent reform, we can cut the red tape that stops too many inventors and entrepreneurs from quickly turning new ideas into thriving businesses." And that the reforms "are expected to create 200,000 new jobs;" "will simplify patent law;" "will streamline the patent system;" and "represent the first major overhaul of the U.S. patent system in 60 years."

Link to the Survey: http://www.surveymonkey.com/s/YGP3JR9

If the software method is not patentable, then neither is the “computer readable medium”

CyberSource Corp. v. Retail Decisions, Inc. --- F.3d --- (Fed. Cir. 2011)

In an important decision, the Court of Appeals for the Federal Circuit has rendered many broadly written software patents invalid under 35 U.S.C. § 101 as interpreted by Bilski v. Kappos, 130 S. Ct. 3218 (2010). Most patent decisions involve questions of whether an invention is obvious under 35 U.S.C. § 103(a) or sufficiently described under 35 U.S.C. § 112. Section 101 asks a slightly different question – whether the patented invention is the type of innovation that properly fits within our patent system. In language virtually unchanged for over 200 years, Section 101 indicates that a patent should be awarded to the inventor of "any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof." Over the years, courts have repeatedly held that Section 101 bars the patenting of 'laws of nature, physical phenomena, and abstract ideas.'

CyberSource's patented invention is simple: when validating online credit card purchases, use IP address information (such as IP addresses) as a check against fraud. Thus, the patented method might raise a red flag if someone attempts to make a large internet purchase through an IP address that had previously been used for a fraudulent transaction.

In the lawsuit, CyberSource only asserted two claims: Claim 3 is the method of fraud detection roughly described above and Claim 2 is directed to a "computer readable medium containing program instructions" for causing a computer to perform the method. Claim 2 is written in "Beauregard" form. See In re Beauregard, 53 F.3d 1583 (Fed. Cir. 1995).

The claimed method is written as follows:

3. A method for verifying the validity of a credit card transaction over the Internet comprising the steps of:

a) obtaining information about other transactions that have utilized an Internet address that is identified with the credit card transaction;

b) constructing a map of credit card numbers based upon the other transactions and;

c) utilizing the map of credit card numbers to determine if the credit card transaction is valid.

Machine-or-Transformation: As written, the claim does not require the use of any machine and it does not require the transformation of any article into a different state or thing. Here, the court repeated its stance that mere data gathering steps such as "obtaining information" cannot be sufficient to "make an otherwise nonstatutory claim statutory." And, although the patent is designed to facilitate transactions over the internet, nothing in the claim actually requires that the internet be used. Finally, data structures such as the claimed "information" and "map of credit card numbers" will not be considered technical because they could be simply written down using pencil and paper. Thus, at the outset the claim fails the Machine-or-Transformation test that the Supreme Court identified as an important clue of patentability under 35 U.S.C. § 101.

Because the machine-or-transformation test offers only a legal clue to patentability, the court went on to consider additional indicia that led to the conclusion that the claim does not qualify for patenting under Section 101. In particular, the court focused on prior case law holding that mental processes standing alone are not patentable. CyberSource's claimed method is such a mental process because it can be "performed … by a human using a pen and paper." Thus, the claim is invalid.

Beauregard Claims: CyberSource's claim 2 comes in a different form. However, the court interpreted it as "nothing more than a computer readable medium containing program instructions for executing the method of claim 3." The most natural implementation of the invention is using software and the claimed "computer readable medium" is the storage device that holds the software.

The claim:

2. A computer readable medium containing program instructions for detecting fraud in a credit card transaction between a consumer and a merchant over the Internet, wherein execution of the program instructions by one or more processors of a computer system causes the one or more processors to carry out the steps of:

a) obtaining credit card information relating to the transactions from the consumer; and

b) verifying the credit card information based upon values of plurality of parameters, in combination with information that identifies the consumer, and that may provide an indication whether the credit card transaction is fraudulent, wherein each value among the plurality of parameters is weighted in the verifying step according to an importance, as determined by the merchant, of that value to the credit card transaction, so as to provide the merchant with a quantifiable indication of whether the credit card transaction is fraudulent,

wherein execution of the program instructions by one or more processors of a computer system causes that one or more processors to carry out the further steps of;

[a] obtaining information about other transactions that have utilized an Internet address that is identified with the credit card transaction;

[b] constructing a map of credit card numbers based upon the other transactions; and

[c] utilizing the map of credit card numbers to determine if the credit card transaction is valid.

Claim Form Versus the Underlying Invention: CyberSource argued that the claim is patent eligible per se because it is directed to a man-made article of manufacture – "a computer readable medium." The court rejected that technical distinction. Instead, for patent eligibility purposes, the court directed focus away from the claim's literal statutory category and instead focus on the "underlying invention."

Regardless of what statutory category ("process, ma-chine, manufacture, or composition of matter," 35 U.S.C. § 101) a claim's language is crafted to literally invoke, we look to the underlying invention for patent-eligibility purposes. Here, it is clear that the invention underlying both claims 2 and 3 is a method for detecting credit card fraud, not a manufacture for storing computer-readable information. This case is thus similar to In re Abele, 684 F.2d 902 (CCPA 1982). In Abele, claim 5 of the patent at issue recited "[a] method of displaying data" comprising the steps of "calculating the difference" between two numbers and "displaying the value." Id. at 908. The court concluded that claim 5 was not directed to patent-eligible subject matter because it claimed an abstract idea. Id. However, claim 7 was argued to be different because it recited an "[a]pparatus for displaying data" comprising "means for calculating the differences" between two numbers and "means for displaying the value." Id. at 909 (emphases added). Though claim 7 literally invoked an "[a]pparatus," the court treated it as a method claim for the purpose of its § 101 analysis. Due to its "broad" and "functionally-defined" nature, the court found that treating claim 7 as an apparatus claim would "exalt form over substance since the claim is really to the method or series of functions itself." Id. (citation omitted). Accordingly, the court placed "the burden . . . on the applicant to demonstrate that the claims [were] truly drawn to [a] specific apparatus distinct from other apparatus[es] capable of performing the identical functions." Id. (citation omitted).

Here, the patentee was unable to provide suitable reasoning why the computer readable medium invention was fundamentally different from the method claim.

Pen, Paper, Computer: Following precedent set by Benson and Abele, the court here held that an unpatentable mental process remains unpatentable even when restricted to use on a computer.

Abele made clear that the basic character of a process claim drawn to an abstract idea is not changed by claiming only its performance by computers, or by claiming the process embodied in program instructions on a computer readable medium. Thus, merely claiming a software implementation of a purely mental process that could otherwise be performed without the use of a computer does not satisfy the machine prong of the machine-or-transformation test.

That purely mental processes can be unpatentable, even when performed by a computer, was precisely the holding of the Supreme Court in Gottschalk v. Benson.

Holding: Invalidity affirmed. Neither the method nor the computer readable medium qualify as patentable subject matter.

Can You Believe: U.S. Patent No. 8,000,000

Second Sight Medical Products is receiving some publicity for being awarded U.S. Patent No. 8,000,000. The patent claims a “visual prosthesis” that uses a camera that then sends a stimulating impulse to neural tissue in a subject's eye.  Although Second Sight gets the patent, the research was at least partially paid by the U.S. Government. 

Patent No. 7,000,000 issued in 2006; 6,000,000 in 1999; 5,000,000 in 1991; 4,000,000 in 1976; 3,000,000 in 1961; 2,000,000 in 1935; and 1,000,000 in 1911.

 

Recent Scholarship: Did Phillips Change Anything?

By Jason Rantanen

In a recent post discussing Retractable Technologies v. Becton, Dickinson and Company, Dennis commented that the court continues to struggle with claim construction - a seemingly surprising observation given that the Federal Circuit "clarified" its claim construction jurisprudence just over six years ago in Phillips v. AWH Corp. 

A new study by R. Polk Wagner and Lee Petherbridge confirms what many suspected: that Phillips did not lead to a new world of simple, straightforward, and predictable claim construction.  In Did Phillips Change Anything?: Empirical Analysis of the Federal Circuit’s Claim Construction Jurisprudence, Wagner and Petherbridge report the results of an empirical study that indicates that the court has made little jurisprudential progress since Phillips.  More importantly, they suggest, the same split in judicial methodological approach to claim construction that forced the Phillips opinion survived the court’s decision and likely still persists.  These findings and others lead them to their normative conclusion: that "Phillips stands forth as an unfortunate example of poor decision-making by the court, and one that negatively impacts its overall role in the patent system." Wagner and Petherbridge, abstract.

The paper is forthcoming in Intellectual Property and the Common Law (Cambridge U. Press, 2012, S. Balganesh, ed.), and a copy of the draft is available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1909028.

Google's Purchase of Motorola Mobility

Although much more than just a patent deal, Google's purchase of Motorola Mobility is also clearly driven by Google's perceived need to establish a strong portfolio of patent rights in an attempt to ward-off patent attacks by competitors in the fiercely competitive and growing smart-phone market.

Motorola Mobility was formerly the famous Mobile Devices division of Motorola, Inc. In January 2011, the company was spun-off from its parent. The company's devices have been lagging in the market, but its patent rights have always been strong and plentiful. Recently, Motorola Mobility has become deeply involved in patent infringement litigation with suits pending versus competitors such as Microsoft, Apple, and TiVo in addition to more than two-dozen pending suits as defendants against non-practising patent holders.

Motorola Mobility holds over 24,000 patents and pending patent applications worldwide. In the US market alone, the company holds around 5,000 patents and 1,500 pending patent applications. The bulk of these patents were assigned to Mobility during the split from Motorola. However, the unit has continued to apply-for and obtain patents since the split. Motorola Mobility also owns a number of subsidiary companies that also hold their own patents, such as General Instrument, Inc.

Some pending US litigation:

• Motorola Mobility v. TiVo (E.D. Tex.): Mobility asserts that TiVo is infringing a number of "fundamental" DVR patents that General Instrument obtained when it purchased Imedia. These include U.S. Patent Nos. 5,949,948, 6,304,714, and 6,356,708.
• Motorola Mobility v. Microsoft (W.D. Wisc. and ITC): In three separate lawsuits, Mobility asserts that Microsoft's XBox infringes a number of its patents, including U.S. Patents Nos. 6,980,596; 7,162,094; 5,319,712; 5,357,571; 6,686,931; 5,311,516; 6,069,896; 6,992,580; 7,106,358; 6,686,931; 7,088,220; and 5,738,583.
• Motorola Mobility v. Apple (S.D. Florida): Mobility asserts that Apple's iPhone 4 infringes a number of its wireless device and software patents, including U.S. Patents Nos. 5,710,987; 5,754,119; 5,958,006; 6,008,737; 6,101,531; 6,377,161; and 5,455,599. In a separate lawsuit, Apple accuses Mobility of infringing its patent Nos. 5,481,721; 5,566,337; 5,915,131; 5,929,852; 5,946,647; 5,969,705; 6,275,983; 6,343,263; and 6,424,354.

Interpreting the Scope of Patent Assignments Beyond Family Members

MHL TEK v. Nissan, Hyundai, KIA, Porsche, Subaru, Audi, Volkswagen and BMW (Fed. Cir. 2011)

MHL purported to obtain its patents from Animatronics and the inventors who themselves own MHL.  However, Animatronics had already assigned a number of patent rights to a third-party, McLaughlin Electronics. The basic standing question for the case is whether the McLaughlin assignment encompassed the patents-in-suit.  If so, then the later assignment to MHL was ineffective and the plaintiff had no standing to sue.

The McLaughlin assignment purported to assign “the inventions and discoveries set forth in [a different patent] application.”  The parties all admitted that the assignment language was broad enough to encompass more than just the single application listed in the assignment.  In considering the language of the assignment, the appellate court broadly held that the assignment was also not limited to “family member” applications linked by a priority claim.  Rather, the test given by the assignment is simply whether the patent “claims inventions and discoveries set forth in the [original] application.”  Here, the court focused on the claims of the patent-in-suit (the '516 patent) because “the claims of the patent define the invention” and basically conducted a written-description analysis to determine whether at least one of those claims were described in the specification of the original application.  The court considered claim 1 of the '516 patent and found that its subject matter was fully disclosed by the originally assigned patent.  Without explanation, the court then held that this single claim relationship was sufficient to render the entire patent within the assignment agreement. Thus, the functional interpretation of the assignment language was that the assignment encompassed any patent that included at least one claim that was reasonably described by the original specification.

The court also held that two continuations of the originally assigned application had also been transferred to McLaughlin through the assignment.

Finally, the court walked through a “carve-out” in the assignment that retained ownership for Animatronics for patents that “concern” certain identified “proprietary inventions.”  Taking a technical view of the carve-out provision, the Federal Circuit looked at each patent claim of the asserted patents to determine whether any patent claims covered a proprietary invention as defined in the assignment. Although the court identified some similarity, the court could not find any claims whose scope could be said to cover one of the defined proprietary inventions.  And therefore, the appellate panel affirmed that rights to those patents had been previously assigned by Animatronics and that MHL had no standing to sue on those patents.

 

Patently-O Bits & Bytes by Lawrence Higgins

Is the color red functional for shoe outsoles?

• Judge Victor Marrero recently decided the famous Louboutin red outsole trademark case and decided that the color red is functional for shoe soles. Lanham 2(e) (5) states that "no trademark…shall be refused registration…unless it-- comprises any matter that, as a whole, is functional." This was a difficult case to decide, counsel for both sides made great arguments. I think the Judge had a difficult job, and basically looked at the impact the case would have on trademark law and the market. Judge Marrero stated "if Louboutin owns Chinese Red for the outsole of that another designer high fashion women's shoes, another designer can just as well stake out a claim for exclusive use of another shade of red or even Louboutin's color, for the insole…" Judge Marrero seems to think that the flood gates would open and individuals would want to trademark a color for all types and aspects of shoes. In theory Judge Marrero is 100% correct, however, I am not sure if I agree with Judge Marrero since the trademark was granted in 2008 and I have not seen any other shoe maker using colored outsoles. I am sure Louboutin will appeal the decision to cancel the red outsole trademark if the decision is finalized on August 17, 2011. [Opinion]

Mark Cuban—My Suggestion on Patent Law

• Mark Cuban is the outspoken owner of the NBA champion Dallas Mavericks and he wanted to express his view of the patent system. Mark suggests that the solution to the patent system is to end all software patents and all process patents. He believes that software has enough protection because it is copyrightable and process patents have no purpose at all. Some benefits of eliminating process and software patents that Mark proposes are: reducing court room costs, improving the efficiency of the Patent Office, ending the current patent arms race, and creating jobs. [Link]

Will Gene Patents Impede Whole Genome Sequencing?

• Professor Chris Holman of UMKC law school and Holman's Biotech IP Blog is in the process of finalizing an article entitled "Will Gene Patents Impede Whole Genome Sequencing?: Deconstructing the Myth That 20% of the Human Genome Is Patented". In the article Professor Holman points out that many people believe that over 20% of the genome is patented and that these patents preclude researchers from studying or even looking at the patented genes. However, Holman calls this a misperception and there is no reason to believe that 20% of human genes are off-limits. Holman states that a vast majority of human gene patents were drafted in a manner that would not encompass whole genome sequencing. [Link]

Patent Jobs:

• Gifford, Krass, Anderson, Sprinkle & Citkowski is seeking a partner for its Ann Arbor, MI office. [Link]
• Morris & Kamlay is seeking a patent attorney with a technology/science background to work in their Washington, D.C. office. [Link]
• Rutan & Tucker is searching for 2 patent agents with 2-4 years of experience and a science background. [Link]
• The American Intellectual Property Law Association (AIPLA) is seeking an individual to fill its Deputy Executive Director -International & Regulatory position. [Link]
• Kraft Foods is searching for a patent attorney with a minimum 5 years of experience. [Link]
• Los Alamos National Security is seeking a patent attorney with a minimum of 8 years of experience. [Link]

Upcoming Events:

• The 2^nd European Pharmaceutical Regulatory Law Forum will be held in Brussels, Belgium September 21-22^nd. The forum will focus on recent developments affecting the pharma industry in Europe and will discuss the impact of US developments on European companies. (Patently-O readers can register with code PO 10 for a 10% discount) [Link]
• American Conference Institute's Life Sciences Business Development & Acquisitions in Emerging Markets conference is scheduled for September 26-27 in New York, NY. (Patently-O readers can register with code PO 200 for a discount) [Link]
• Boston University School of Law and the Kauffman Foundation will be holding a Workshop on Innovation and Patent Harmonization at Boston University School of Management on September 30-October 1. The workshop will cover the effect of harmonization in both advanced countries, such as the US, and in developing nations, with a particular focus on China. Anyone interested in attending, please RSVP to Elizabeth Aggot at eaa@bu.edu. [Link]
• American Conference Institute's 12^th Annual Maximizing Pharmaceutical Patent Life Cycles will take place in New York on October 4^th-5^th. The conference is one of the leading sources of information and analysis on the patent life cycle management. (Patently-O readers can register with code PO 200 for a discount) [Link]
• C5 will be holding the 21^st annual Forum on Biotech Patenting in London on October 5^th-6^th. The 2011 London Biotech Patenting Forum will focus on the latest legal developments affecting biotech companies and how to implement successful methods and strategies for drafting and filing patent applications in multiple jurisdictions. (Patently-O readers can save 100 pounds by using discount code PO 100) [Link]
• American Conference Institute will be holding a FDA Boot Camp Device Edition conference on October 25^th-October 26^th in Chicago. (Patently-O readers can register with code PO 200 for a discount) [Link]
• IPMI is holding the IP Law & Management Institute on November 6^th – 8^th at the Rancho Las Palmas in Palm Springs, CA. Hailed as "One of the few programs geared to experienced in-house IP Counsel", the Institute is a CLE-accredited program designed to provide time-starved Heads of IP with the Opportunity to meet and network with their peers, learn from the best practices and validate solutions and services. [Link]

Contact Lawrence.Higgins@patentlyo.com with leads for future Bits and Bytes.

USPTO’s Future Budget

Fee-Retention Unlikely: The Senate and House of Representatives have each passed patent reform measures, and the two bills are remarkably similar. The arguably greatest difference between the two is that the Senate Bill (S. 23) includes a substantial guarantee that the USPTO will be able to actually spend the money that it collects in user-fees. The House Bill (H.R. 1249) does not include that guarantee. At this point, it appears most likely that the House Bill will be accepted in the Senate and that the PTO will be left without any budgetary protections from the congressional appropriations process.

Revenue is Revenue: Without the statutory limit, federal appropriators do not care that the USPTO is fee-funded and not taxpayer-funded. Rather, patent office fees, corporate income taxes, capital gains taxes, and personal income taxes all go into the same category of "government revenue" that can then be allocated as Congress and the President see fit.

Prior Cuts: In April 2011, a mid-year appropriations bill stripped approximately $100 million of USPTO collected fees and diverted that money to other federal programs – an approximate 10% cut in funding for the remainder of FY2011.

More Cuts on their Way?: As FY2012 approaches, it is likely that the USPTO will again feel the pinch from the most recent debt ceiling compromise and the resulting Budget Control Act of 2011. The new statute does not identify where cuts will occur, but does indicate that $21 billion will be cut from the FY2012 budget (that begins October 1, 2011) with additional cuts coming as early as December 2011. In all likelihood, some of the cuts will come from the USPTO.

Cutting from a Larger Pie: The silver lining for the USPTO is that the FY2012 budget proposed by President Obama includes a $600 million increase in spending for the USPTO – raising the budget to $2.7 billion. A 10% cut by appropriators from the budgeted amount would still leave the PTO with a $300 million increase from FY2011. It is not clear, however, that the appropriations process will use the budget proposal as the baseline.

Spending its Fees: Although Congress does not normally allow the USPTO to spend all of the fees that it collects, the USPTO is generally bound to never spend more than it collects. In other words, the PTO's actual spending is bound by the amount that it collects in fees. The only way that the agency will be able to collect its budgeted $2.7 billion is through significant fee increases. Currently, the PTO does not generally have the authority to increase fees. However, the House Bill does provide the PTO with authority to set fees in order to meet its budgeted spending.

Correcting Patents at the District Court

CBT v. Return Path and Cisco (Fed. Cir. 2011)

CBT's Patent No 6,587,550 covers a system of charging an "advertising fee in return for allowing" e-mail from an authorized sender to pass through an ISP.  Return Path's Bonded Sender program (developed by Cisco) is very similar, except that the program has no advertising fee but rather charges an annual license fee.

On summary judgment, the N.D. Georgia District Court held the asserted claim 13 invalid as indefinite based upon what the court characterized as a "drafting error" made during prosecution.  The claim reads as follows:

13. An apparatus for determining whether a sending party sending an electronic mail communication directed to an intended receiving party is an authorized sending party, the apparatus comprising:

a computer in communication with a network, the computer being programmed to detect analyze the electronic mail communication sent by the sending party to determine whether or not the sending party is an authorized sending party or an unauthorized sending party, and

wherein authorized sending parties are parties for whom an agreement to pay an advertising fee in return for allowing an electronic mail communication sent by the sending party to be forwarded over the network to an electronic mail address associated with the intended receiving party has been made.

The claim indicates that the computer is programmed to "detect analyze the electronic mail" and the district court could not determine the meaning of "detect analyze" and therefore held the claim indefinite under 35 U.S.C. § 112.

On appeal, the Federal Circuit has reversed -- holding that there is an obvious and correctable drafting error in the claim and that the district court has the power and obligation to correct that error in the claim construction process.

Correcting Drafting Errors in Court: The common law allows district courts to correct obvious errors in patent claims. However, that correction can only apply where "the correction is not subject to reasonable debate based on consideration of the claim language and the specification and (2) the prosecution history does not suggest a different interpretation of the claims." Novo Industries L.P. v. Micro Molds Corp., 350 F.3d 1348, 1354 (Fed. Cir. 2003). Here, the court goes on to hold that this correction process must be done as part of the claim construction and must take into account how the correction impacts the scope of the claim.

As a claim construction issue, the Federal Circuit reviewed the District Court's analysis de novo and held that the error was not problematic. In particular, because "detect" and "analyze" are such synonyms in this context that the particular correction made did not make much of a difference, but that the best correction is to add an "and" between the two limiting words.

Certificates of Correction: The patentee could have corrected this by filing a request for a certificate of correction with the USPTO. The chart below shows the number of certificates of correction issued by the USPTO each year since 1995. I include an estimate for the rest of 2011.

Peripheral Disclosure

By Jason Rantanen

This week I will be attending the Intellectual Property Scholars Conference, where I will be enjoying many other IP scholars' work, some of which I will discuss in subsequent posts, and presenting my own work in progress entitled Peripheral Disclosure.  In this Essay, I argue that that the disclosure function of patents has been greatly undervalued, not because patents succeed at forcing inventors to disclose useful information about their inventions in the patent document, but because patents free inventors to voluntarily share information about their inventions in forms other than the patent itself while retaining the ability to monetize their inventions.  

The abstract is below.  For those who are interested, a copy of the paper is available on SSRN here (it's currently a relatively short piece).  As this project is very much a work in progress, all comments are appreciated.

Peripheral Disclosure

The requirement that inventors disclose their inventions in return for a patent is one of the primary justifications for the patent system. Yet that justification has been subject to substantial criticism, and with good reason. Conventional disclosure scholarship focuses on inventor’s disclosure within the patent itself, a document that often fails to provide meaningful information to others. As a result, conventional disclosure theory has largely been relegated to the category of a straw man that scholars address perfunctorily when criticizing the patent system.

This Essay rejects the idea that patents serve little to no disclosure function, not by demonstrating that patents themselves convey useful information, but by pointing to other information exchanges that would not occur but for the existence of a patent system, a concept I call "peripheral disclosure." This information plays a critical role in encouraging prospective technological invention. In essence, I argue that the greatest benefit of patents is not in the information they contain, but rather in the numerous peripheral disclosures they permit, from scientific papers about new inventions to marketing materials containing technical content to the informational benefits of self-disclosing inventions. Without patents, none of these disclosures - all of which may provide crucial information to future inventors - would be possible.

Update: DePaul law student Daniel Rogna will be live-blogging IPSC at http://ebookisms.com/category/ipsc/. This is a terrific conference to follow, as it is frequently a forum where  significant new scholarship is revealed, such as last year's Lemley, Cotropia, Sampat piece on applicant submitted prior art.

BPAI Backlog: Only Growth

As Congress considers adding additional burden to the Board of Patent Appeals, the Board’s backlog of pending cases continues its dramatic rise. The process-flow of the Board appears to be fairly steady-state.  Each month, the Board receives about 1,150 cases and disposes of (decides or remands) about half (575) of those cases. The other half goes to the backlog.

Operating at this rate, it will take 3 1/2 years for the BPAI to dispose of the cases already in its docket. Thus, assuming that the BPAI takes appeals in-turn, an appeal docketed today will not be decided until the year 2015.

A note on the data: The chart is compiled from the BPAI’s own reports that are available online. [Link]  A case is only considered part of the BPAI backlog once it receives an “appeal number.” Appeal numbers are assigned only after briefing is complete.  The large “jump” in the reported backlog in early 2009 is due largely to a clerical change that identified a large number of briefed appeals that had not been given appeal numbers.

Inquiry: Does anyone have a nice memo or chart that they use to help in choosing the best after-final practice? (dcrouch@gmail.com)

Patent Statistics [Updated]

[Updated August 09, 2011 with data from all utility applications filed in ]

I created a dataset of all 22,000 published patent applications that were filed in February 2006 (5 1/2 years ago).  Of those applications, about 54% have resulted in at least one patent being issued (either in original form or as a continuation or divisional); 29% are finally abandoned and have no pending child applications;* and the remaining 17% are still pending in some form.

Patent practitioners will be happy to note that all of the original still-pending applications have received at least one office action on the merits. In 79% of those pending applications, the patent applicants have also filed a request for continued examination (RCE).

For abandoned applications, the vast majority go through at least two rounds of prosecution on the merits.

Notes: * There are likely a small number of continuations that have been filed but that have not been made public yet and that therefore would not show up in this result.

 

Patently-O Bits & Bytes by Lawrence Higgins

Google and the smartphone war!

• Google is upset with Microsoft, Oracle, and Apple in respect to the Nortel and Novell patent purchases. Google is claiming that the companies listed above and some other companies are trying to make it more expensive for phone manufactures to license Android phones. Google claims that these companies are seeking a $15 dollar licensing fee for every Android device. With more than 550,000 Android devices activated every day; these companies receive millions of dollars in licensing fees on a daily basis. Google states that these companies do not want to compete, by building new features, but instead fight through patent litigation. [Link]

The USPTO wants your input!

• If the Leahy-Smith Act is enacted, the USPTO will need to undertake a series of rulemakings to implement the Act. Because several provisions of the Act require implementation within a period of one year from enactment, expeditious rulemaking proceedings will be required. Given this tight time frame, preliminary input from our stakeholders and the public on implementation of the key provisions would facilitate this process even before the legislation has been enacted. The USPTO has posted their views of the Act, and would like input on the following topic areas in the Act; Patents, BPAI, Fees and Budgetary Issues, Congressionally-Directed Studies and Reports, and Miscellaneous. [Link]

Is re-examination unfair?

• Former Senator Birch Bayh recently wrote an article (and a letter to Kappos) discussing his concerns with the re-examination process. Senator Bayh co-authored the U.S. Patent and Trademark Laws Act (Bayh-Dole Act) that was enacted by congress in 1990. Senator Bayh is concerned about large companies using the re-examination process as an unfounded tactic to attack smaller companies. Senator Bayh stated that "when Senator Bob Dole and I joined to pass ground-breaking legislation on patents, the U.S. Patent and Trademark Laws Act, we never intended for it to allow malicious attacks on patents or to create an incredibly uneven playing field for small inventors." Senator Bayh concern is particularly directed to the Lockwood case, in which Lockwood sued a law firm because he felt like they requested a sham re-examination. The court ruled that, the federal patent law preempted any action in state courts. [Link] [Kappos Reply] [Case summary]

Patent Jobs:

• Panduit is seeking a patent attorney with 2 years of experience and a background in electrical engineering. [Link]
• Gibson & Dernier is seeking a patent associate to work at their Woodbridge, New Jersey office. [Link]
• Choate, Hall & Stewart is looking for an attorney or patent agent with an engineering background and 2 years of experience. [Link]
• Sandia National Laboratories is searching for a patent & licensing attorney with 3-7 years of experience. [Link]
• Monsanto is seeking an assistant general counsel with 3 years of experience and a background in the life sciences. [Link]
• Verenium is searching for a patent agent with a background in life sciences and at least 5 years of experience. [Link]
• Amin Talati is seeking a patent attorney with 10+ years of experience and a background in the life sciences. [Link]
• The Marbury Law Group is searching for a patent attorney with an electrical background and 2-8 years of experience. [Link]
• Qualcomm is seeking a patent research librarian with a MLS and 3 years of experience. [Link]

Upcoming Events:

• The 2^nd European Pharmaceutical Regulatory Law Forum will be held in Brussels, Belgium September 21-22^nd. The forum will focus on recent developments affecting the pharma industry in Europe and will discuss the impact of US developments on European companies. (Patently-O readers can register with code PO 10 for a 10% discount) [Link]
• American Conference Institute's Life Sciences Business Development & Acquisitions in Emerging Markets conference is scheduled for September 26-27 in New York, NY. (Patently-O readers can register with code PO 200 for a discount) [Link]
• C5 will be holding the 21^st annual Forum on Biotech Patenting in London on October 5^th-6^th. The 2011 London Biotech Patenting Forum will focus on the latest legal developments affecting biotech companies and how to implement successful methods and strategies for drafting and filing patent applications in multiple jurisdictions. (Patently-O readers can save 100 pounds by using discount code PO 100) [Link]
• IPMI is holding the IP Law & Management Institute on November 6^th – 8^th at the Rancho Las Palmas in Palm Springs, CA. Hailed as "One of the few programs geared to experienced in-house IP Counsel", the Institute is a CLE-accredited program designed to provide time-starved Heads of IP with the Opportunity to meet and network with their peers, learn from the best practices and validate solutions and services. [Link]

Contact Lawrence.Higgins@patentlyo.com with leads for future Bits and Bytes.

Guest Post: What We Said (and Didn’t Say) in the Berkeley Patent Study

Guest Post by Robert Merges, Pam Samuelson, and Ted Sichelman

In 2008, along with Stuart Graham (now Chief Economist at the USPTO) and Robert Barr (Executive Director of the Berkeley Center for Law &Technology), we conducted the most comprehensive survey to date on startup companies and patenting in the United States. Funded by the Ewing Marion Kauffman Foundation, our survey reported results on the drivers of patenting, the role of patenting in startup financing and the innovation process, and a number of other important areas. We have described initial results from the survey (here) and in a follow-up article (here). We also posted a three-part series on Patently-O on the survey (here, here, and here).

Since the publication of our articles, a number of commentators have drawn bold—and somewhat contradictory—inferences from our results. Former Chief Judge of the Federal Circuit, Paul Michel, and CEO of Tessera, Hank Nothhaft, stated in a New York Times op-ed that, "[A]ccording to our analysis of the data in the Berkeley Patent Survey, each issued patent is associated with 3 to 10 new jobs." Yet, Harold Wegner, a patent lawyer at Foley & Lardner who authors a popular e-mail distribution, contends that the USPTO's position that "prompt patent grants will stimulate innovation" and thus "create American jobs" is "in direct conflict" with the Berkeley Patent Study. According to Mr. Wegner, "the Berkeley Study questions showed that for many high technology areas patent grants played no role or a minimal role in stimulating innovation." From this inference, he concludes, that "A fortiori, prompt patent grants would be irrelevant" to stimulating innovation and, hence, creating American jobs. And, finally, Ronald Katznelson, an independent inventor active in the patent reform debates, states bluntly: "The Berkeley study is typical of other flawed 'scholarship' on patents by academics. They ask the wrong questions of the wrong people and draw wrong and counterfactual inferences. … The question that startup CEOs should have been asked is 'who are your investors and can we interview them for their reasons to invest in your startup?'"

We're writing this post because, as authors of the study, we feel obligated to dispel these and similar misunderstandings with four basic observations:

1. Our results solely concern U.S. startups. The vast majority of patents are filed and owned by established companies. More than half of all patents are awarded to foreign companies. Because U.S. startups use and are affected by the patent system in ways quite different from established and foreign entities, it is impossible solely from our data to draw conclusions about the general role of patents on innovation or jobs.
2. Even limiting the issue of jobs to those of U.S. startups, there is no principled way to determine from our data whether or not additional patents lead to additional jobs, much less the number of jobs created by each patent. Granted, we reported the average number of employees, including the percentage of engineers, at our respondent companies. But to reason that these positions were the direct result of the respondents' patent portfolios would be to ignore a host of other potential factors (e.g., first-mover advantage, other IP protection, management team quality, etc.) leading to those jobs. And there is no sound way using our data to remove these other potential effects so as to calculate the impact of patents on jobs.
3. It is misguided to conclude from our results that "for many high technology areas [executives reported that] patent grants played no role or a minimal role in stimulating innovation," that "prompt patent grants would be irrelevant" to stimulating innovation. First, as we said earlier, our study only applies to U.S. startup companies. Second, many executives—particularly those in the biotechnology and medical device industries—reported that patents provide strong or moderate incentives to innovate. In the very least, prompt patent grants for these companies would not be "irrelevant" to stimulating innovation. Last, our responses on the role of patents in the innovation process relates to the patent system as it is currently constituted. It could very well be the case that faster patent grants would significantly increase the role patents play in promoting innovation.
4. Ron Katznelson's contention that our study is typical of "flawed" academic scholarship—namely, because we failed to ask "who are your investors and can we interview them for their reasons to invest in your startup?"—overlooks several critical aspects of the study. First, before drafting the survey questions, we interviewed a number of investors informally and asked them "for their reasons to invest" in startups. (Unfortunately, our limited funding for this study did not allow us to conduct a large-scale survey of investors, but we hope to do so in the future.) Second, our survey specifically asked executives at startups to indicate whether their potential investors considered patents important to their investments. In this regard, our advisory board for the study included prominent venture capital firm partners, who worked closely with us in formulating the survey questions. As we explained at length in one of our articles (here), startups in all sectors we surveyed reported that patents were considered important by a sizable percentage of venture capital firms and other types of investors with whom they negotiated.

In the vein of our last observation, we hope that others will indeed read our articles (here and here, plus for background on the survey, see here) in detail and only report and rely upon the conclusions we draw in those publications. To make further inferences, especially without access to the underlying data in the study—which we cannot make publicly available due to confidentiality restrictions—will almost invariably lead to conclusions that are simply not supported by our data set.

In sum, we are grateful for the extended discussion and use of our study results—but, as the researchers who conducted the study—we hope that our results will not be stretched to unsupportable ends.

Robert Merges is the Wilson Sonsini Goodrich & Rosati Professor of Law at the University of California, Berkeley, School of Law. Pamela Samuelson is the Richard M. Sherman Distinguished Professor of Law at the University of California, Berkeley, School of Law. Ted Sichelman is an Associate Professor at the University of San Diego School of Law. Neither Stuart Graham nor Robert Barr played any role in the drafting this post.

The Impact of Patent Reform on Filing Strategy (I)

The new law defining prior art would become effective 18–months from the date of enactment of H.R. 1249.  Patent applications filed after that date would be bound by the new first-to-file rules. The major exception is that old invention-date rules will also apply to any application having a claim having a proper priority filing date of prior to the change-over. 

That date will likely be a filing bonanza, much like the what occurred in the lead-up to the June 8, 1995 change in patent term as shown in the chart below.

Applicants who beat the 1995 deadline were granted given either a patent term of 17 years from issuance or else 20 years from filing, whichever was longer as calculated at issuance. In that scenario, there were very good reasons to file before the deadline.

When the new deadline comes, I suspect that the current regime will look more favorable than the new because of the new limits on swearing-behind prior art based upon a prior invention date and claiming a grace period for third-party disclosures. One reason an applicant might delay is because of the new “micro-entity” status that offers lower fees, but even then the best course of action would be to file a provisional application early followed by non-provisional at the lower fee.

Are there reasons why a patent applicant would choose to delay filing an application until after the new deadline?

Scholarship Roundup: Crouch and Merges, Operating Efficiently Post-Bilski by Ordering Patent Doctrine Decision-Making

By Jason Rantanen

Earlier this week I mentioned a recent article by Dennis Crouch and Robert P. Merges, entitled Operating Efficiently Post-Bilski by Ordering Patent Doctrine Decision-Making, 25 Berkeley Tech. L.J. 1673 (2010), as proposing that patent litigation might be streamlined by deciding cheaper and easier issues early in the litigation process.

In the article, Professors Crouch and Merges suggest that the best way to proceed post-Bilski is not to attempt to cut through its complexity, but rather to avoid it.  They propose this be done by reordering litigation so that claim validity is first tested against one of the less controversial and complex requirements for patentability before reaching the complex issue of subject matter patentability - in essence, applying a "chain theory" of patentability, where PTO and courtroom analysis should start with the easiest and cheapest links to test and terminate once a patent is held invalid.

A full copy of the article can be obtained here:  Download Crouch and Merges - Post Bilski Ordering.

 

Eon-Net v. Flagstar Bancorp: Exceptional Case after Remand

By Jason Rantanen

Eon-Net LP v. Flagstar Bancorp (Fed. Cir. 2011) Download 09-1308
Panel: Lourie (author), Mayer and O'Malley

This decision is an important opinion in the area of litigation sanctions entered against a patentee, and should be read in conjunction with two cases issued earlier this year, iLor v. Google, 631 F.3d 1372 (Fed. Cir. 2011), and Old Reliable v. Cornell, 635 F.3d 539 (Fed. Cir. 2011).  Patently-O commentary on those cases can be found here and here.

Background
Eon-Net is a patent holding company formed to enforce the three patents in suit, which it did with vigor.  While most of its lawsuits resulted in early settlements or dismissals, Eon-Net's suit against Flagstar took a different turn.  The district court initially entered summary judgment of non-infringement on the sua sponte ground "that the written description limited the claims to processing information originating from a hard copy document and Eon-Net's position that the claims covered the processing of information entered on a website was baseless," and awarded Rule 11 sanctions.  Slip Op. at 7.  However, that decision was vacated by the Federal Circuit because Eon-Net had not been given an opportunity to respond, and thus "it was impossible to determine if Eon-Net's claim construction and infringement positions were without merit."  Id. at 8.

On remand, the case was reassigned to a new judge and the parties engaged in the claim construction process, after which the court again limited the disputed elements to information originating from a hard copy document.  Eon-Net stipulated to non-infringement.  Upon motion by Flagstar, the district court found the case exceptional under 35 U.S.C. 285 and in violation of Rule 11 of the Federal Rules of Civil Procedure. On appeal, the CAFC first affirmed the district court's claim construction before turning to the exceptional case finding.

Many Varieties of Misconduct Can Support an Exceptional Case Finding
Before engaging in analysis of the specific bases for the district court's exceptional case finding, the CAFC first noted that many varieties of misconduct can support an exceptional case finding under 35 U.S.C. § 285: lodging frivolous filings, engaging in vexatious or unjustified litigation, and litigation misconduct and unprofessional behavior.  The court reiterated, however, that absent litigation misconduct or misconduct in securing the patent, "sanctions under § 285 may be imposed against the patentee only if both (1) the patentee brought the litigation in bad faith; and (2) the litigation is objectively baseless."  Slip Op. at 17.

Eon-Net Filed Objectively Baseless Litigation in Bad Faith
Affirming the district court's exceptional case finding, the Federal Circuit agreed that this lawsuit was objectively baseless, filed in bad faith and for an improper purpose.  After distinguishing iLor v. Google, in which the CAFC also addressed the issue of whether a claim construction was objectively baseless, the court turned to the question of whether Eon-Net had filed the lawsuit in bad faith and for an improper purpose, concluding that it had:

In particular, the district court found that Eon-Net’s case against Flagstar had “indicia of extortion” because it was part of Eon-Net’s history of filing nearly identical patent infringement complaints against a plethora of diverse defendants, where Eon-Net followed each filing with a demand for a quick settlement at a price far lower than the cost to defend the litigation.

Slip Op. at 22.  This strategy of exploiting the high cost to defend complex patent litigation in order to extract nuisance value settlements constituted bad faith.  The court pointed to Eon-Net's pattern of filing complaints, then demanding quick settlements at a price far lower than the cost of litigation.  Parties must either expend significant resources to defend against the suit - as Flagstar did in this case - or give in to the nuissance settlement demand.  FIling such a meritless lawsuit also is also a waste of judicial resources, as it "unnecessarily require[s] the district court to engage in excessive claim construction analysis before it is able to see the lack of merit of the patentee's infringement allegations."  Slip Op. at 23. 

Of course, patentees should be able to enforce their patent rights or offer licensing terms.  Nevertheless, "the appetite for licensing revenue cannot overpower a litigant’s and its counsel’s obligation to file cases reasonably based in law and fact and to litigate those cases in good faith."  Slip Op. at 24.

Comment: although the CAFC affirmed the district court's finding that Eon-Net had acted with an improper purpose, it did not suggest that that requirement should be grafted onto the "bad faith" element.

The CAFC also affirmed the district court's finding that Eon-Net and Zimmerman had engaged in litigation misconduct and its imposition of Rule 11 sanctions.

Patentable Subject Matter and the Supreme Court Myriad Preview

Myriad's patent claims are directed, inter alia, to several isolated human DNA molecules that represent the BRCA1 and BRCA2 genes. These gene mutations are associated with an increased risk of developing breast and/or ovarian cancer. Because women with these gene mutations are much less likely to survive into old-age, many choose to undergo extensive preventive surgery in an attempt to avoid the risk. In other words, the genetic information and testing technology is important. 

Fundamentals of Patentability: Most patentability decisions focus on either an invention's obviousness or a patent's failure to properly disclose the invention. The Myriad case looks at something more fundamental – whether isolated human DNA is, in general, the type of thing that should be patentable.

Product of Nature: In this case, all the parties agree that the claimed DNA molecules are "compositions of matter" that nominally fall within the statutory guidelines of patentable subject matter found in 35 U.S.C. § 101. The disagreement comes from the common law gloss that the Supreme Court has added to the statute. Namely, the Supreme Court has repeated stated that, regardless of the novelty of the invention, neither products of nature nor natural phenomena qualify for patenting. The big issue in this case boils down to whether the claimed molecules fall within this product of nature exception.

Human-Made Inventions: According to the Court, "human-made inventions" sit at the opposite end of the spectrum from products of nature. To be distinguishable from products of nature, a human made invention must be "markedly different" or express "distinctive" characteristics from what is found in nature.

Patenting Isolated cDNA: Myriad's patent also claim cDNA molecules that are synthesized in the lab using the naturally occurring enzymes reverse transcriptase and DNA polymerase.  cDNA differs from native DNA in that the cDNA typically (and in this case) represents only the information for a single gene and with unnecessary (intron) information removed. Native DNA is typically part of a large single molecule (a chromosome) that includes lots of genes and lots of introns intermixed between and within gene coding. The human body has a natural process for accessing and using the particular gene when it is needed. To do this, enzymes are able to create an RNA strand that mirrors the DNA information and that removes the introns. In the human, that RNA is then used to create a protein used by the body. For Myriad, the RNA is instead transcribed back into DNA (now called cDNA because it is [c]omplementary to the RNA).

To be clear, Myriad did not claim to invent any of this process or to invent cDNA in general. Rather, Myriad invention is that it created a cDNA molecule that holds the exact same information as the naturally occurring BRCA1/BRCA2 RNA.  Certainly, cDNA is chemically different from RNA -- it is preferred in the lab because it is double-stranded and typically more stable.   An additional difference here is that the claimed cDNA is isolated from the cell and the living organism so that it it can be tested and used in different ways.  

Holding: cDNA is Markedly Different from That Found in Nature: The Federal Circuit considered these arguments, but decided to take a different perspective -- focusing on differences instead of similarities. In holding the claims patentable, the court reasoned that: 

1. The claimed cDNA is a molecule that is not found in nature.
2. The claimed cDNA is quite different from a native chromosomal DNA.
3. Human intervention of cleaving and/or synthesizing is necessary to make the cDNA.
4. Because the molecule is changed, it cannot be said to be merely "purified."
5. Judge Moore goes on to explain that the cDNA sequence is "completely different than the corresponding RNA."

Insignificant Extra-Solution Modification: In a number of cases, the Supreme Court has worked to conflate the issues of patentable subject matter with issues of obviousness and novelty.  Thus, for instance, courts have repeatedly noted that insignificant extra-solution modifications of an invention cannot whitewash an otherwise unpatentable invention.   Here, potential conflation has a strong foothold because the real breakthrough at the time was discovery of the genetic sequence itself.  It took tremendous effort and ingenuity to discover that transcription map and that map was the key to their discovery as outlined in the inventors 1994 Science article.  However, in 1994 (the time of the invention) once a sequence was known, almost any trained molecular biology lab technician could manufacture the isolated cDNA with effort but without much necessary ingenuity. If the discovered map itself was unpatentable as merely information and the process to create the isolated DNA was already known, then where is the invention? This type of analysis is outside of mainstream Federal Circuit decisions, but if the Supreme Court takes the case, the interplay between what was invented and what was already known may well be an important element in to the court's discussion of patentable subject matter.  

   

   

   

Patent Reform 2011: House Bill Coming to the Senate in September

[Update 8/3/2011] In the immediate wake of the debt crisis “solution.” President Obama talked about the next steps for Congress.  High on his agenda: Patent Reform:

Through patent reform, we can cut the red tape that stops too many inventors and entrepreneurs from quickly turning new ideas into thriving businesses -- which holds our whole economy back.

Senate Majority Leader Harry Reid then announced that the patent reform bill will be the first item taken up for consideration when the Senate returns from recess. 

Parallel patent reform Bills have already passed the House and the Senate.  The Bills have a number of differences. 

Senate democrates have filed a cloture motion to end debate on patent reform and take an immediate vote on H.R. 1249 in toto once the Senate returns from vacation in early September.  Under this scenario, the legislation would not need to return to the House for any further consideration.

Joint Appendix Practice

By Jason Rantanen

ClearValue, Inc. v. Pearl River Polymers, Inc. (Fed. Cir. 2011) (nonprecedential order) Download 2011-1078.8-1-11.1

The preparation of joint appendices in connection with Federal Circuit appeals is an instance where rules and practices often collide.  Technically, parties may only include the specific record pages actually referenced in the parties' briefs.  See Federal Circuit Rule 30(a)(2)(B).  With few exceptions, no additional context pages are permitted by the rules.  For example, the joint appendix rules technically preclude the addition of the cover page of motions that contain pages being cited.  Prior art references may not be included in their entirety - only the specific pages that are referenced - unless they are a patent.  And it would be a violation of the rules to include the page before or after a cited page of a textbook or technical manual.  The main exception relates to "transcript pages," for which the rules encourage parties submit sufficient surrounding pages to provide context for a referenced excerpt.  In addition, the court's rules prohibit "indiscrininate referencing in briefs to blocks of record pages," so parties may not include large quantities of the record via broad citation.  FCR 30(a)(2)(C).

In reality, appellants and appelles sometimes disregard these strict rules, and instead make some attempt to provide enough context so that cited materials are meaningful to the court.  Parties risk incurring the court's wrath should they go too far, however, as illustrated by Judge Prost's order in ClearValue.  ClearValue did not simply attempt to provide a few context pages; rather it apparently indiscriminately cited to an entire 195-page training manual, an entire 344-page motion for summary judgment, and an entire 797-page transcript.

This practice violated Federal Circuit Rule 30, and the court ordered ClearValue to reimburse the appellant for its copying costs, to correct its briefs to cite only those pages of the documents that are relevant to the issues it raises, and to prepare a new joint appendix containing only those items cited by the parties in their briefs, along with a few pages before and after the relevant testimony paassages for context. 

While I agree with the court's response in this particular circumstance, given the quantity of likely unnecessary material that ClearValue required be included in the appendix, the court's opinion highlights the jumbled nature of the joint appendix rule.  For some materials (patents and testimony), context is allowable; for everything else, it is not.  Unless there is a good reason to draw this line, perhaps the rule should be revised to apply equally to all materials included in the appendix. 

Thanks to Hal Wegner for pointing out this nonprecedential order in his email newsletter.

The BPAI’s Precedent: Most Cited Cases by the Board

The following list provides the most-often cited cases in BPAI decisions thus-far in 2011.

The vast majority of BPAI decisions involve a patent applicant appealing an examiner's final rejection and the most common patentability issue on appeal is obviousness. Thus, it is not surprising that many of the cited cases involve obviousness and claim construction issues. These cases have influenced the court in the past and are likely to continue to do so.

1. KSR v. Teleflex, 550 U.S. 398 (2007) (Standard for obviousness);
2. In re KAHN, 441 F.3d 977 (Fed. Cir. 2006) (Reasons for obviousness determination must be articulated);
3. In re AMERICAN ACADEMY OF SCIENCE TECH CENTER., 367 F.3d 1359 (Fed. Cir. 2004) (Claims should be given their broadest reasonable interpretation);
4. In re OETIKER, 977 F.2d 1443 (Fed. Cir. 1992) (The examiner has the burden of presenting a prima facie case for rejection);
5. Graham v. John Deere, 383 U.S. 1 (1966) (Methodology for determining obviousness);
6. In re Keller, 642 F.2d 413 (C.C.P.A. 1981) (A rejection premised upon a combination of references cannot be overcome by attacking the references individually);
7. In re Morris, 127 F.3d 1048 (Fed. Cir. 1997) (Claims should be given their broadest reasonable interpretation consistent with the specification);
8. Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (ordinary meaning of claim);
9. In re Merck, 800 F.2d 1091 (Fed. Cir. 1986) (Non-obviousness cannot be established by attacking references individually where the rejection is based upon the teachings of a combination of references);
10. In re Best, 562 F.2d 1252 (C.C.P.A. 1977) (When the PTO identifies prior art that is the same or substantially the same as claimed subject matter, the burden shifts to the applicant to come forward with evidence and argument showing that the prior art products do not necessarily or inherently possess the characteristics of the claimed product);
11. In re Zletz, 893 F.2d 319 (Fed. Cir. 1989) (Claims must be interpreted as broadly as their terms reasonably allow but limitations should not be read into claims);
12. In re Schreiber, 128 F.3d 1473 (Fed. Cir. 1997) (claim structure form primary claim limitations; elements of anticipation);
13. In re Spada, 911 F.2d 705 (Fed. Cir. 1990) (process of proving anticipation);
14. In re Gurley, 27 F.3d 551 (Fed. Cir. 1994) (Teaching away; A known or obvious composition does not become patentable simply because it has been described as somewhat inferior to some other product for the same use); and
15. In re Warner, 379 F.2d 1011 (C.C.P.A. 1967) (The PTO must produce factual basis for its decisions).

To create the table, I first parsed all of the BPAI decisions that have been released thus far in 2011 in order to create a table of authority for each case. I then ranked the cited cases to find those that were most-often cited.

As an interesting tidbit, I also looked for correlation between the citation of a particular case and the outcome of the BPAI decision. As you might expect, some cases are better for patent applicants. Two examples of this are In re Warner and In re Gurley. In cases citing Warner, the examiner's rejections are affirmed less than 10% of time. On the flip side – cases citing Gurley affirm the examiner rejection in more than 80% of cases.

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Patent Jobs:

• Roberts Mlotkowski Safran & Cole is seeking a patent attorney with 2-4 years of experience and a degree in electrical engineering. [Link]
• Skiermont Puckett is searching for one or more associate attorneys with 3 or more years of patent litigation experience. [Link]
• Roberts Mlotkowski Safran & Cole is looking for a patent attorney with 2-4 years of experience and a chemical background. [Link]
• Wolf Greenfield is seeking a patent agent or technology specialist who has experience working as a patent examiner in the Biotechnology field. [Link]
• Greenberg Traurig is searching for a patent agent with 1-3 years of experience. [Link]
• Wilen Group is looking for an in-house patent attorney with an engineering background. [Link]
• Cantor Colburn is seeking an associate patent attorney with 2-5 years of experience. [Link]
• Lee & Hayes is searching for patent attorneys with at least 3 years of experience. [Link]
• Maginot, Moore & Beck is looking for a patent attorney with 1-5 years of experience and a background in electrical engineering. [Link]
• The Webb Law Firm is seeking associates with a background in metallurgical engineering. [Link]
• Thompson Hine is searching for a patent attorney with 2-3 years of experience. [Link]
• King & Spalding is looking for a patent agent with 2-4 years of experience and a background in engineering. [Link]
• Aspen Aerogels is seeking a patent agent/IP analyst with 5+ years of experience. [Link]
• Myriad Genetics is seeking a patent attorney with 2-5 years of experience and a background in molecular biology. [Link]

Recent Patent Deals:

• Microsoft/Apple/RIM have joined together to purchase 6,000 Nortel patents for $4.5 billion. Although the sale reportedly completed this week, the US Department of Justice is investigating to consider whether the collaborative purchase was done with the intent (or potential result) of limiting competition. [Background]
• In May 2011, Google acquired over 1,000 patents from IBM.  Acting strategically, Google did not record the assignment until after the Nortel deal.   The IBM patents appear to be focused on a Google core function of data storage. See, e.g., U.S. Patent No. 7,266,596.
• LSI transferred 115 patents to NetApp after an asset purchase. LSI also transferred 26 patents to INVENSAS which is a subsidiary of licensing-focused TESSERA.
• Patent enforcer Wi-LAN purchased 60 patents from Glenacre Electronics for a reported $8 million. The patents all appear to relate to wireless communications.
• NXP sold its sound solutions business to Knowles Electronics, along with a few dozen patents. The obscure "Nytell Software" obtained another few dozen NPX patents.
• Patent protector RPX purchased 28 patents from Fairchild Semiconductor and 15 patents from Celltrace.
• Small private company OnSpec transferred its 26 patents to the patent enforcer TPLGroup.
• The New Jersey company OMAHA ACQUISITION obtained a dozen or so patents related to patient beds from SANDEL MEDICAL INDUSTRIES, LLC.
• In its settlement with Walker Digital, Apple purchased the patents it had been accused of infringing.

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