Patent Law Blog (Patently-O)

Patently-O Bits & Bytes by Lawrence Higgins

Opening of Franklin Pierce Center for IP

• UNH Law is proud to announce the official opening on September 30 & October 1 of the Franklin Pierce Center for Intellectual Property with an intellectual property works-in-progress conference featuring presentations by scholars from law schools in the Northeast and alumni of UNH Law. Chief Judge Randall Rader will serve as special guest speaker. Other guest include: Jonathan Dudas, Judge Newman, and Judge Gajarsa. [Link]

Biotech in Ottawa is Booming?

• Ottawa Life Science Cluster currently home to over 90 companies focused on life science and biotechnology research and innovation. Also, there are over 50 other companies that have a secondary focus in life sciences and biotechnology. Leading the charge for commercialization is the Ottawa Centre for Research and Innovation (OCRI). With the increased commercialization in Ottawa, comes an increase in patent applications in Canada, the US, and beyond. [Link] [Link]

Great Patents!

• Great Patents: Advanced Strategies For Innovative Growth Companies, is a book that aims to inform executives on how best to use patents to improve their competitiveness. The book has a total of 12 chapters and each chapter is written by an individual in the patent world. The chapters in the book are broken into two categories: Strategies and Valuation. Companies pursue patents to make money, and this book is very useful to help companies discover what they can do with their patents that they may not have previously considered. While the book is aimed at executives and the like, it is also a useful tool for law students and others. Most law students are not familiar with the business world of patents and this book gives a perspective different than what is taught in law schools.
  • About the Author: David Orange is a patent attorney in Washington, DC. He is active in the start-up space as an investor and advisor.

Patent Jobs

• Goldberg Cohen is seeking an IP associate with 2-5 years of experience. [Link]
• Womble Carlyle Sandridge & Rice is looking for mechanical patent attorneys with at least 3 years of experience. [Link]
• Verenium is searching for a patent agent with a minimum of 5 years of experience. [Link]
• Cleveland Golf/ Srixon is seeking a Sr. patent engineer with a BSME and at least 4 years of experience. [Link]
• The Michaud-Kinney Group is looking for a legal assistant to work at their Middletown, Connecticut location. [Link]
• Qualcomm is searching for a US patent attorney or a registered India Patent Attorney/Agent with at least 5 years of experience. [Link]
• Qualcomm is looking for a patent counsel with 3+ years of patent prosecution experience. [Link]
• Steptoe & Johnson is seeking associates with a minimum of 4 years of experience in patent litigation and with a technical background. [Link]
• The Office of the Solicitor at the USPTO is searching for an experienced Patent Attorney. [Link]
• Dynamics Inc. is seeking a patent attorney with an EE degree, to work at their Pittsburgh location. [Link]

Upcoming Events:

• 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]
• Houston Intellectual Property Law Association (HIPLA) will be holding its Annual IP Institute in Galveston, Texas October 6-8. The Institute will feature topics such as: Do's and Don'ts in IP Licensing, Due Diligence and Ethics in Acquisitions, Patent Prosecution Under the New Cases and Inducement of Patent Infringement after Global Tech Appliances v. SEB. The guest speaker will be Lord Justice Robert "Robin" Jacob, Court of Appeal of England and Wales. [Link]
• The 17^th Annual Advanced ALI-ABA Course of Study for the Corporate Counsel and the Private Practitioner: Trial of a Patent Case will be held in Chicago October 13-14. Guest speakers include: Judge James Holderman, Judge Liam O'Grady, Scott Coonan, James Leeds, and many more individuals. (Patently-O readers can get 30% off with discount code CT017POB) [Link]
• The 4^th Annual Inland Empire Intellectual Property Institute (IEPI) will be held in Spokane, Washington on October 14^th. The program will cover: developments in patent prosecution, patent litigation, copyright and trademark; ethical considerations for IP attorneys; patent reform and its impact on the practicing attorney, and many more topics. Guest speakers include: David Powers, Nancy Kim, Shirley Anderson and many other individuals. [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 Ries, VP of IP Management, The Boeing Company and Barbara Dalton VP, Venture Capital, Pfizer. [Link]
• The University of Texas at Austin will hold its 16^th Annual Advanced Patent Law Institute on October 27-28. The program will cover: recent developments in claims construction and claims drafting, cost savings in litigation, inequitable conduct after Therasense, and many other topics. [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.

A Response to Professor Chiang

By Jason Rantanen

Professor Tun-Jen Chiang's post on best mode (below) argues that Congress must necessarily have intended that patent applicants would not disclose best mode, given that it was aware of the potential consequences of removing litigation enforcement.  Thus, Professor Chiang concludes, Congress not only abolished best mode, but then went about "lying" about it.  I have serious doubts about this conclusion.

Despite being styled as a reply to Professor Sheppard's description of Congressional thought about best mode, Professor Chiang misses the fundamental point of Professor Sheppard's post: that although Congress recognized that removing the litigation mechanism for enforcing best mode might result in reduced compliance, there remained alternative mechanisms - which Professor Sheppard discussed - for encouraging applicants to comply with the best mode requirement.

While I personally question the efficacy of the alternate mechanisms for enforcement - which rely primarily on criminal sanctions that, historically at least, have been rarely employed even to deal with more significant misconduct - it is clear that Congress has a higher view of these types of enforcement mechanisms than I do, especially given its treatment of inequitable conduct in the America Invents Act.  Thus, I find it difficult to accept Professor Chiang's dichotomy that either Congress must have been "dumb" or "lying," as well as his analogy to a child with matches.  This issue is far more complex than such an oversimplification allows, and it is entirely reasonable (and probably far more accurate) to recognize that Congress was attempting to balance a difficult issue: the costs of patent litigation versus the need or desire for disclosure of best mode, and elected to proceed by relying on alternative enforcement mechanisms that, while perhaps less often enforced, might potentially provide equal deterrence through more severe sanctions.  If one must use an analogy, it is more similar to giving a teenager a car, explaining that speeding might result in a criminal penalty, while nevertheless providing reassurance that you will not take away the car if he or she is caught speeding, than it is to a child with matches.

Guest Post on Best Mode by Tun-Jen Chiang

Was Congress dumb, or was it lying?--A reply to Professor Sheppard

Guest Post by Tun-Jen Chiang, Assistant Professor of Law, George Mason University School of Law

Imagine a parent who gives his child a box of matches, and tells the child not to play with the matches. The parent then assures the child that, if he does play with the matches, there will be no punishment whatsoever, and nobody will be watching him for the next hour.

Unsurprisingly, the child plays with the matches and burns the house down. When the insurance company denies the claim because of intentional arson, the parent screams: “but I told him not to play with the matches!” In this circumstance, the charitable inference is that the parent had a charmingly naïve view about the obedience of his child. The uncharitable inference is that the parent knew the child would play with the matches, and the admonition not to play with them was insincere “cover.”

What does this have to do with best mode? In her post, Professor Sheppard assures us that Congress knew precisely the consequences that would occur. Although she protests that her post was only descriptive and not a defense of the law, one cannot help but sense from her “vehement” disagreement with the critics an implication that those who think Congress didn’t know what it was doing are being unfair in some way (When someone says "You can say X is wrong. I agree X is wrong. But don't say X is dumb.", there is an implication that saying X is dumb is unfair). But the critics are not being unfair; they are being charitable.

With Professor Sheppard's assurance that Congress knew the consequences, the unavoidable conclusion is that Congress intends the probable consequence that patentees would not disclose the best mode. The reason for maintaining a best mode requirement on paper now seems to be to provide political cover to scream “but we told them to disclose the best mode!” whenever the critics talk about lax disclosure requirements. This is much worse than either abolishing best mode outright or keeping best mode with no enforcement on the misguided faith that patentees would still comply -- it is Congress abolishing best mode and then lying about it.

The Federal Circuit’s Rare Opportunity to Protect the Public from Agency Misconduct

Guest Post by Richard B. Belzer, Ph.D.

The Federal Circuit has before it an unusual petition for rehearing en banc. It involves an issue that, to my knowledge, has never before been heard by this court, and it's one that hardly anyone who practices patent law even knows about. Indeed, the reason that this issue is arising now is the U.S. Patent and Trademark Office has made an extraordinary (and heretofore successful) effort to prevent inventors and the patent bar from understanding it.

For this reason, my nonprofit organization has filed an amicus brief asking the Court to uphold statutory rights that, until recently, possibly no patent lawyer knew how to defend. If the Court acts favorably, it can undo decades of rogue agency practice at the PTO.

In In re Lovin, the key issue is whether an examiner's failure to state a prima facie case of obviousness, as required by MPEP Chapter 2100, is sufficient ground for the Board of Patent Appeals and Interferences to vacate or reverse a rejection. Lovin's brief alleges that the Board abandoned its longstanding practice of vacating rejections when the examiner had not made this case, and instead required the appellant to make a substantive showing of patentability in their appeal brief—that is, to prove a negative. The amicus brief of CFPH, LLC, a business unit of Cantor Fitzgerald, offered a complementary explanation of why the Board's interpretation of PTO Rule 41.37 was incorrect.

Regulatory Checkbook, the nonprofit I manage, seeks leave to intervene because the PTO lacked any legal authority to compel Lovin to provide this information. In fact, until December 22, 2009, the PTO had no legal authority to require any appellant to comply with any of the material information collections contained in 37 C.F.R. Part 41.

How could that be? To understand why, let's take a short trip to the Office of Management and Budget, which occupies the tall red brick building across Lafayette Park from the tall red brick building housing the Court of Appeals for the Federal Circuit.

Construing Claim Constructions

By Jason Rantanen

Cordis Corporation v. Boston Scientific Corporation (Fed. Cir. 2011) Download 10-1311 -1316-1
Panel: Bryson, Mayer, and Gajarsa (author)

Cordis v. BSC turns on an interpretation of a construction of the claim term "undulating."  In this case, Cordis obtained a jury verdict of infringement of Patent No. 5,879,370 against Boston Scientific Corporation.  Prior to trial, the district court construed the term "undulating" to mean "rising and falling in waves, thus having at least a crest and a trough."  Slip Op. at 11.  After Cordis obtained its favorable verdict, BSC renewed its motion for judgment as a matter of law on noninfringement, arguing that "Cordis inappropriately altered the parties' and the court's understanding of the term 'undulating'," and that under the "intended" construction the evidence presented at trial could not support a conclusion that this claim element was met by the accused product.    Slip Op. at 11.  The district court granted BSC's motion and Cordis appealed.

Construing Constructions: On appeal, the CAFC confirmed the propriety of BSC's argument.  "The question here is whether BSC did, in fact, seek to alter the district court’s claim construction," a construction Cordis did not challenge.  Slip Op. at 12.  It did not.  "No rule of law restricted BSC from seeking to clarify or defend the original scope of its claim construction."  Slip Op. at 12.  However, "because BSC did not object to the court’s jury instruction regarding the construction of the term “undulating,” “[t]he verdict must be tested by the charge actually given [under] the ordinary meaning of the language of the jury instruction,” Hewlett-Packard, 340 F.3d at 1321."  Id.

In deciphering the "ordinary meaning" of the district court's construction, the CAFC first turned to a general purpose dictionary definition of 'waves' to conclude that 'crest' and 'trough,' "as used in the district court's claim construction, implicate changes of direction, with the curve extending beyond the point of inflection."  Slip Op. at 13.  Although Cordis cited expert testimony and dictionary entries of its own, the CAFC was not persuaded.  The CAFC also looked to the prosecution history, which further suggested a construction of "undulating" that meant more than just a single curve. 

Applying this interpretation of the district court's claim construction, the CAFC concluded that Cordis had indeed failed to offer substantial evidence of infringement.

Inequitable conduct: This case was involved in a prior appeal, Cordis Corp. v. Boston Scientific Corp., 188 F. App’x. 984, 985 (Fed. Cir. 2006), in which the CAFC addressed a district court finding of inequitable conduct.  In that appeal, the CAFC affirmed the materiality of the conduct at issue but remanded to the district court for further findings of fact relating to intent.  On remand, the district court reached an alternate conclusion, deciding that, on reflection, the evidence of record failed to support a finding of deceptive intent under a clear and convincing standard.  On appeal, the CAFC affirmed the finding of no inequitable conduct, noting in particular the deference given to district courts on issues of credibility.

***

Interpretations of constructions raise a difficult issue for the Federal Circuit, and have implications for litigation predictability.  While the panel in this case did not directly identify the standard of review it applied to the district court's interpretation of the construction, the analytic structure of the opinion follows the same approach that the CAFC has traditionally employed when construing claims generally: look at the evidence and arrive at its own conclusion, i.e. de novo.  In this instance, the methodology used by the panel seems to harken back to the Texas Digital line of claim construction: start by determining the ordinary meaning of a word using tools such as dictionaries, then look to the intrinsic evidence to see if it compels a different result.  Perhaps this approach may be more defensible in light of the subject being interpreted, but it seems at odds with the principles announced in Phillips.

The interpretation issue in this case also raises a possible red flag against the concept of routine interlocutory review of claim constructions, a proposal frequently offered as reducing litigation costs and enhancing the predictability of litigation.  If a claim construction itself is subject to a subsequent interpretation, are efficiencies truly added by having the CAFC offer an early construction?  There is a real possibility that, if such a proposal were implemented, the result would be a rise in appeals involving not just claim constructions, but interpretations of claim constructions.

Guest Post: Because Inquiring Minds Want to Know - Best Mode - Why is it One-Sided?

(Today PatentlyO is starting a series of periodic guest posts by Professor Christal Sheppard on the underlying rationales for some of the sections of the America Invents Act.  Prior to joining the University of Nebraska Lincoln College of Law this year, Dr. Sheppard was Chief Counsel on Patents and Trademarks and Courts and Competition policy for the United States House of Representatives Commmittee on the Judiciary. - JAR)

By A. Christal Shepard

Since inquiring minds want to know, I will attempt to give, in a series of posts, insights into the underlying rationales for a few sections of the America Invents Act that are causing particular confusion among my friends and new colleagues who were fortunate to not have been as intimately involved in the machinations of the America Invents Act as I have been over the last three Congresses.  

***

I start this conversation with a blanket statement - these are my recollections of the rationales and do not represent the views of any particular member of Congress.  More importantly, do not shoot the messenger.  This blog is only intended to provide contemporaneous context, not a comprehensive analysis, before the march of time distorts memories.  I will not attempt to defend; I will merely explain.

There has been a great deal of consternation and confusion about the changes to the Best Mode requirement, Section 15 of the America Invents Act.  This section is plain on its face, and yes, it is, and was intended to be, bifurcated. The Best Mode requirement remains a requirement, unchanged, for obtaining a patent under 35 U.S.C. § 112 Paragraph 1; however, under the new law, Best Mode can no longer be used as a defense in any action involving the validity or infringement of a patent.  More specifically, a failure of an inventor to disclose their Best Mode is no longer a basis for invalidating, canceling or making a claim unenforceable even if it is later determined that the inventor unquestionably knew of a Best Mode and intentionally did not disclose it to the United States Patent and Trademark Office (USPTO) during examination.  

The bifurcated reform is a compromise that addresses the legitimate litigation concerns with the subjective nature of Best Mode without undermining the requirement for full disclosure that is the quid pro quo for the grant of a monopoly.  If Best Mode was removed completely, Congress could be seen as removing yet another obstacle to trade secret protections overlapping with monopoly rights.  

The impetus for removal of Best Mode from Section 112 of Title 35 of the U.S.C. came from several recommendations to Congress to limit the subjective portions of patent litigations.  I point to one such recommendation that was highly influential, the National Academies’ A Patent System for the 21^st Century: 

Among the factors that increase the cost and decrease the predictability of patent infringement litigation are issues unique to U.S. patent jurisprudence that depend on the assessment of a party’s state of mind at the time of the alleged infringement or the time of patent application... Because the [Best Mode] defense depends on historical facts and because the inventor’s state of mind usually can be established only by circumstantial evidence, litigation over [Best Mode]— especially pretrial discovery— can be extensive and time-consuming.[1]

Although the National Academies’ report also states that eliminating Best Mode completely could be accomplished without “substantially affecting the underlying principles that these aspects of the enforcement system were meant to promote.”[2] Their, and others’, primary objection to Best Mode was that it was an unnecessary burden for litigation, similar to inequitable conduct, often pled but rarely found.

While Best Mode may be unnecessarily burdensome for litigation, Best Mode is not a superfluous requirement.  It is intended to implement the constitutional directive of "promoting the progress of science and the useful arts"[3] by preventing an inventor from obtaining patent protection, “the embarrassment of a monopoly,”[4] while simultaneously concealing a trade secret for the preferred embodiments.  “The purpose of this requirement is to restrain inventors from applying for a patent while at the same time concealing from the public preferred embodiments which the inventor has, in fact, conceived.”[5]  There is nothing else in the patentability requirements that mandates an inventor’s disclosure of their Best Mode. 

The fault with Best Mode in litigation is not a fault of principle; it is a fault of execution - the difficulty of understanding the contents of an inventor’s mind.

If one believes in the quid pro quo of full disclosure to the public in exchange for a limited monopoly, then the disclosure of an inventor’s Best Mode is essential.  If monopoly is the carrot in exchange for divulging what otherwise would remain hidden as trade secrets then trade secrets SHOULD be divulged in order to patent.  Changing the Best Mode requirement for obtaining a patent would be a significant deviation from U.S. policy and practice that was unnecessary to correct the perceived problem. 

The law should and still does require disclosure of Best Mode, but has eliminated Best Mode from litigation.  The reform addresses the concerns without undermining the requirement for disclosure. 

Many scholars have questioned the fact that, under the new law, the day after a patent issues, the inventor could state that, yes there was a Best Mode known at the time of application that was not disclosed and yet the intentional nondisclosure would have no effect on the claims.  The claims could not be invalidated, canceled or made unenforceable.  

There has been a lot of criticism that Congress did not contemplate this result.  Nothing could be further from the truth. This result was absolutely contemplated by the decision makers.

Essentially the question was, how does one stop inventors from lying to the patent office, that the inventor has no Best Mode, when the inventor in fact has a preferred embodiment?  The more accurate question to ask is, when there are no obvious ramifications, why would an inventor divulge a Best Mode when they can keep it as a trade secret?  

Congress did take this into account but did not address it in the legislation for a variety of reasons. I present a few of the considerations that were discussed.

1. Give the USPTO authority to undertake  investigations when it is presented clear evidence from a court or third party that a Best Mode was intentionally not disclosed.  Here, the counterargument is that the USPTO is even less well situated than the courts for such a subjective determination.  Furthermore, it is not practical to move this determination from the courts to the USPTO. 
2. Present evidence of intentional concealment of Best Mode to the Office of Enrollment and Discipline (OED) at the USPTO with the deterrent being the possible loss of the ability to prosecute patents, removal from the patent bar.  This is arguably already possible under 35 U.S.C. § 32, Suspension or exclusion from practice.  The obvious flaw is the same as in the first example; the USPTO is not well situated for subjective inquiries.  Additionally, it may result in punishing the patent practitioner for situations where the inventor intentionally concealed but the patent practitioner was unaware.
3. Institute a mechanism, identical to that which ultimately ended up in Section 12 of the America Invents Act - the new Section 257(e), where evidence of material fraud on the USPTO shall be referred to the Attorney General for possible prosecution under 18 U.S.C. § 1001, a criminal statute penalizing anyone who knowingly and willfully “makes or uses any false writing or document knowing the same to contain any materially false, fictitious, or fraudulent statement or entry” on any matter within the jurisdiction of the executive, legislative, or judicial branch of the Government of the United States. Again, arguably this deterrent, which is up to a five year prison term, is already possible under 18 U.S.C. § 1001 without any change in the law.

Note that all of these resolutions are arguably already possible under existing law.

One suggestion, not put forth, for the answer to the riddle of “when there are no obvious ramifications, why would an inventor divulge a Best Mode when they can keep it as a trade secret?” is make the ramifications more obvious. The USPTO could add a check box to application forms, stating “I (we), the inventor(s) have no preferred Best Mode and are aware that failure to disclose a Best Mode can result in up to a five year jail term.” But that is a matter for the USPTO and not Congress.

Would a “check box” solve the problem?  No.  But it is an affirmative act, as opposed to an intentional omission.  This affirmative act may be useful in the exercise of 35 U.S.C. § 32 and 18 U.S.C. § 1001 should there be abuses and allows Congress to preserve the U.S.'s emphasis on full disclosure in exchange for the government grant of monopoly.

In the end, I do not disagree with the criticisms of the effect of the new law on Best Mode.  But I do vehemently disagree that the consequences were neither considered nor understood by Congress.

[1] Stephen A. Merrill et al., A Patent System for the 21st Century, no. 7, 121 (2004).

[2] See id. at 7.

[3] U.S. Const. art. I, § 8, cl. 8.

[4] Thomas Jefferson to Isaac McPherson, 13 Aug. 1813.

[5] Young Dental Mfg. Co., Inc. v. Q3 Special Products, Inc., 112 F.3d 1137, 1144 (Fed. Cir. 1997).

 A. Christal Sheppard is an Assistant Professor of Law at the University of Nebraska Lincoln College of Law and former Chief Counsel on Patents and Trademarks and Courts and Competition policy for the United States House of Representatives Committee on the Judiciary.  Look for her next PatentlyO posting on Supplemental Examination.

Chief Judge Rader: Improving Patent Litigation

Today, Chief Judge Rader delivered an important speech to a joint meeting of the Federal Circuit Bar Association and the Eastern District of Texas Bar Association. The focus was on the current and future state of patent litigation. His two word synopsis: Needs Improvement.

The Chief Judge identified what he sees as the primary, overarching problem with the US Court System: Its expense. Patent litigation is particularly expensive. Driving this is the high cost of discovery (even though fewer than 1 out of every 10,000 pages disclosed prior to trial actual result in a trial exhibit).

The Chief Judge expanded on his thoughts – listing six ways that patent litigation needs to be improved.

1. Discovery: Controlling costs through the management and control of the discovery process. In particular, the Chief Judge pointed to blanket production orders that lead to wasteful production and review. As discussed below, the Federal Circuit Advisory Council has also released a new model order relating to e-discovery issues.
2. Summary judgment. Increasing the use of summary judgment as a tool for the efficient resolution of disputes. As an alternative, summary judgment is also an efficient mechanism for narrowing disputes.
3. Transfer motions and Joinder. Both the bench and bar should work to "find venues that best suit the convenience of parties" and have a more logical distribution of cases across the country – and especially to the jurisdictions that have self-identified as having expertise in patent law. We should also move away from the trend of having an excess of parties involved in the litigation.
4. Early procedural and substantive valuation of cases. The court may want to have different procedures for billion-dollar cases as compared with thousand-dollar cases. (The UK has attempted to do this in its recent creation of a low-cost patent court designed for smaller disputes). Chief Judge Rader suggests that judges should proactively probe the parties to establish a value for the case based upon a legitimate damages model. That approach will hopefully have the beneficial effect of promoting better settlement discussions. (DDC Note: I typically begin my patent class with a discussion of remedies).
5. Rules and Practice. Courts should implement a dependable set of pre-announced rules that apply to patent cases so that the parties can understand the nature of the litigation well in advance.
6. Troll and Grasshopper Control. Chief Judge Rader's defines a problematic patent troll as someone simply seeking litigation-cost settlements, or, in other words, "any party that attempts to enforce a patent far beyond its actual value or contribution to the prior art." Chief Judge Rader also identifies problematic "Grasshoppers" who steal innovations and then "refuses to license even the strongest patent at even the most reasonable rates." The solution: Attorney Fees and Costs should be awarded in meritless cases. As the Chief Judge writes "I strongly advocate full-scale reversal of attorney fees and costs!"

Coordinated with his speech, Chief Judge Rader has worked with the Federal Circuit Advisory Council to develop a model order relating to discovery issues – with a goal of streamlining e-discovery, particularly email production, and to require litigants to focus on the proper purpose of discovery—"the gathering of material information—rather than on unlimited fishing expeditions." The core of the model rule is a cost-shifting associated with excessive production requests. General disclosures would not require e-mail disclosures unless specifically requested. And, e-mail disclosures would only be required for "specific issues" rather than general discovery associated with a product or business. The basis for the e-mail limitations comes from the FCAC's notion that:

Most discovery in patent litigation centers on what the patent states, how the accused products work, what the prior art discloses, and the proper calculation of damages. These topics are normally the most consequential in patent cases. Thus, far reaching e-discovery, such as mass email searches, is often tangential to adjudicating these issues.

The model rules are not being forced upon any court, but may well be persuasive. The potential for immediate cost shifting could certainly alter some practices.

Documents:

• Text of CJ Rader's Speech: Download RaderStateOfPatentLit
• Model Discovery Order: Download Ediscovery Model Order

Notes: Members of the team who worked on the model order include Chief Judge Rader of the Court of Appeals for the Federal Circuit, Chief Judge James Ware of the Northern District of California, Judge Virginia Kendall of the Northern District of Illinois, Magistrate Judge Chad Everingham of the Eastern District of Texas, Tina Chappell of Intel, Richard "Chip" Lutton of Apple, Joseph Re of Knobbe Martens, Edward Reines of Weil Gotshal, Steve Susman of Susman Godfrey, and John Whealan of GWU Law School.

Post Grant: Narrowing Claim Construction Argument Creates Intervening Rights for Accused Infringers

by Dennis Crouch

Marine Polymer Tech. v. Hemcon, Inc. (Fed. Cir. 2011)

It seems that most accused infringers with a credible argument on prior art also file for reexamination or else the patentee preempts with a reissue application.  These cases create parallel processes ongoing in both the district court and USPTO with both bodies making interim determinations about claim scope and, ultimately, patent validity.  The balance of power and respect between the USPTO and the courts continues to be in flux, and that flux will most certainly continue as the USPTO implements the changes to the post grant system mandated by the Leahy-Smith reforms. 

In this case, the Federal Circuit has held that a narrowing claim construction argument made by the patentee in a reexamination gives rise to absolute intervening rights for accused infringer’s products made or sold prior to the reexamination request.  The key importance is that this decision is that the reexamination is was still ongoing at the time of this Federal Circuit decision.

Although we have not directly addressed whether arguments made to the PTO during reexamination can amend the scope of claims for purposes of the intervening rights doctrine, we have consistently held that arguments made to the PTO on reexamination can create an estoppel or disavowal and thereby change the scope of claims even when the language of the claims did not change. . . .

We see no reason why this rule, giving effect to disclaimer of claim scope during reexamination or reissue, should not also apply in the context of intervening rights.  In fact, a contrary rule would allow patentees to abuse the reexamination process by changing claims through argument rather than changing the language of the claims to preserve otherwise invalid claims and, at the same time, avoid creating intervening rights as to those claims.  Therefore, if the scope of the claims actually and substantively changed because of Marine Polymer’s arguments to the PTO, the claims have been amended by disavowal or estoppel, and intervening rights apply.  This is so even though Marine Polymer did not amend the language of its claims on reexamination.

An additional twist here is that the “narrow” claim construction argued by the patentee was simply the construction decided by the by the district court.  On appeal, however, the Federal Circuit held that the construction was erroneously narrow and that, therefore, the patentee’s argument was also a narrowing  argument.

The majority opinion was written by Judge Dyk who was joined by Judge Gajarsa.  Judge Lourie filed a dissent — arguing, inter alia, that by statute, intervening rights only apply to “amended or new claims.” See 35 U.S.C. 307(b) and 316(b).

When Monsanto's Patents Expire

Monsanto Co. v. Vernon Bowman (Fed. Cir. 2011)

The Federal Circuit has again affirmed that Monsanto’s genetically modified seeds patents can be used to stop farmers from saving and replanting the GM seeds.  Here, the particular issue involved patent exhaustion, and the court ruled that the authorized purchase of seeds did not include the right to replant the second generation.  The legal theory here follows the same notion of copyright in book buying.  When someone purchases a book, they do not typically also receive a right to make further copies.  There are some debatable differences — Monsanto’s soybeans are alive and have the ability to self-replicate. However, the court previously rejected those arguments.

Monsanto’s two patents at issue in this case are U.S. Patent Nos. 5,352,605 (“’605 Patent”) and RE39,247 (“’247 Patent”). The ‘605 patent expires in October 2011, and the ‘247 patent patent expires in 2014. 

As the Bowman and Scruggs cases suggest, Monsanto has alway aggressively enforced these patent rights. However, Monsanto has announced that once the patents expire, it will no longer enforce its existing technology licenses. At that point, farmers will be free to save their GM soybean seeds and replant them at will.  In addition, the expiration of the patents also allows others to manufacture other Roundup Ready organisms.  Obviously, the point here is that the patents’ expiration will likely further expand the use of GM organisms.  Up to now, Monsanto’s profit motive has seemingly helped organic and non-GM producers in their quest to keep their seed lines separate. Patent expiration will dramatically change this status quo.

35 U.S.C. § 102 (newly amended by the Leahy-Smith America Invents Act of 2011)

As a site for referral and contemplation, I wanted to include the text of the newly drafted statute 35 U.S.C. § 102.

Sec. 102. Conditions for patentability; novelty

(a)    Novelty; Prior Art- A person shall be entitled to a patent unless—

1.    the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention; or

2.    the claimed invention was described in a patent issued under section 151, or in an application for patent published or deemed published under section 122(b), in which the patent or application, as the case may be, names another inventor and was effectively filed before the effective filing date of the claimed invention.

(b)    Exceptions-

1.    DISCLOSURES MADE 1 YEAR OR LESS BEFORE THE EFFECTIVE FILING DATE OF THE CLAIMED INVENTION- A disclosure made 1 year or less before the effective filing date of a claimed invention shall not be prior art to the claimed invention under subsection (a)(1) if—

A.    the disclosure was made by the inventor or joint inventor or by another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor; or

B.    the subject matter disclosed had, before such disclosure, been publicly disclosed by the inventor or a joint inventor or another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor.

2.    DISCLOSURES APPEARING IN APPLICATIONS AND PATENTS- A disclosure shall not be prior art to a claimed invention under subsection (a)(2) if--

A.    the subject matter disclosed was obtained directly or indirectly from the inventor or a joint inventor;

B.    the subject matter disclosed had, before such subject matter was effectively filed under subsection (a)(2), been publicly disclosed by the inventor or a joint inventor or another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor; or

C.    the subject matter disclosed and the claimed invention, not later than the effective filing date of the claimed invention, were owned by the same person or subject to an obligation of assignment to the same person.

(c)    {CREATE ACT Save for later}

(d)    Patents and Published Applications Effective as Prior Art- For purposes of determining whether a patent or application for patent is prior art to a claimed invention under subsection (a)(2), such patent or application shall be considered to have been effectively filed, with respect to any subject matter described in the patent or application—

1.    if paragraph (2) does not apply, as of the actual filing date of the patent or the application for patent; or

2.    if the patent or application for patent is entitled to claim a right of priority under section 119, 365(a), or 365(b), or to claim the benefit of an earlier filing date under section 120, 121, or 365(c), based upon 1 or more prior filed applications for patent, as of the filing date of the earliest such application that describes the subject matter.'.

 

Dissents: Judges Newman and Dyk

After considering the merits of a case, Judges Pauline Newman and Timothy Dyk often arrive at opposite conclusions. As just a sample, I thumbed through all of the precedential patent decisions that involved both judges since January 2010. Of those 25 decisions, the pair disagreed on the outcome or application of the law in 19. I.e., the two judges disagreed in more than 75% of the cases.

Dissents are now fairly common. During the past two years about 25% of precedential decisions included a dissenting opinion. Of course, in 2/3 of those cases either Judge Newman or Judge Dyk was involved in the dissent.

A note on these figures – they include en banc decisions where multiple opinions are much more likely. When restricted to three-member panels, the Newman-Dyk disagreement rate dropped to just under 60% (7/12) in precedential decisions.

Guest Post: Preclusive Inventor Disclosure Under Leahy-Smith

Guest Post by Jeffrey Lefstin, Ph.D., Professor of Law at the University of California Hastings College of the Law

Under Leahy-Smith, inventor disclosures made less than one year before filing are themselves not prior art.  But these  disclosures play two entirely new roles in the Leahy-Smith scheme.  New § 102(b)(2) provides that a disclosure is not prior art if the “subject matter disclosed” had previously been “publicly disclosed” by an inventor (or one who derived it from an inventor).  And inventor disclosure precludes the defense of prior commercial use if that use commences less than one year before the inventor's disclosure.

Patent academics and practitioners are hotly debating whether inventor “disclosures” under § 102(b) are coterminous with the events that defeat patentability under § 102(a). But this debate overlooks what may be a more difficult conceptual question:  what is the preclusive scope of a disclosure under § 102(b)?

A preliminary question is whether an inventor who has made a “disclosure” protected by § 102(b)(1)(A) has “publicly disclosed” subject matter so as to preclude prior art under § 102(b)(1)(B). Did Congress intend that some inventor disclosures do not bar patentability, but nonetheless fail to preclude subsequent prior art? And must inventor preclusive disclosures under § 102(b)(1)(B) actually be within one year of filing?

Regardless of what it means to “publicly” disclose, Leahy-Smith seems to require a qualitatively different analysis than those we are familiar with in patent law. Section 102(b)(1)(B) defines the ability of an inventor to exclude prior part not in terms of comparison between disclosure and claim, but between the inventor’s disclosure and a subsequent third-party disclosure:  the inventor must have previously disclosed the “subject matter” appearing in a later third party disclosure to exclude it as prior art. This inquiry may pose some perplexing problems. The inventor’s disclosure and the third party’s disclosure may well be of incommensurable forms. How do we compare a publication to sale, or a public use of a tangible object to a patent disclosure? Moreover, the inventor’s disclosure and the third party’s disclosure are unlikely to be at the same level of generality:  one is likely to be broader or narrower then the other.

Consider, for example, an inventor who publicly discloses a fuel consisting of 80% gasoline and 20% ethanol. Does that disclosure preclude a third-party disclosure of a 75%-25% mixture? A generic third-party disclosure of mixtures of ethanol with petroleum products? What if the inventor disclosed a mixture of gasoline and ethanol in generic terms rather than a particular composition?

Answers to these questions depend on the approach the courts take to the scope of preclusive disclosure under Leahy-Smith, and the choice of approach may have a huge impact on the inventor’s ability to preclude later prior art by disclosure. I outline two basic approaches here:  a claim-focused approach that is easier to administer and more generous to inventors, but seems less grounded in the statutory text; and a subject matter-focused approach, that is more supportable by the statutory text, but potentially less favorable to inventors and much more difficult to administer. 

Claim-Focused Approaches
The simplest approach would be that inventor disclosure immunizes any claim that encompasses the inventor’s disclosure.   Under this approach, prior art appearing subsequent to the preclusive disclosure cannot be asserted against a claim reading on the preclusive disclosure. That immunity could either be extended to dependent claims that do not themselves read on the preclusive disclosure (thereby permitting the inventor to claim species disclosed by third parties), or restricted to claims that directly read upon the preclusive disclosure (thereby prohibiting the inventor to claim species disclosed by a third party).

The claim-focused approach permits us to use our existing framework for assessing novelty under § 102, because the only inquiry would be inclusion of the preclusive disclosure in a later claim. In addition, because in the strong form of the approach preclusive scope does not depend on the content of the later third-party disclosure, it eliminates the possibility of strategic disclosures by third parties and the disputes likely to ensue over whether the third-party’s disclosure was derived from the inventor’s.

The claim-focused approach is not the most faithful to the statutory text, because new § 102(b) defines the prior art exclusion by the subject matter disclosed by the inventor, not by a claim encompassing the inventor’s disclosure. Nonetheless, this interpretation  would be attractive to a court seeking a straightforward analysis, or a court seeking to temper Leahy-Smith’s impact on the prior art regime.

Subject Matter-Focused Approaches
What if we confine preclusion to the actual “subject matter” disclosed by the inventor? We then need a methodology to define the preclusive scope of an inventor disclosure.  We might establish the broadest preclusive scope based on an inventor disclosure, and exclude from prior art all subject matter within that scope.  All things within the broadest preclusive scope of the disclosure would be claimable – including species later disclosed by third parties – although the inventor would not be immunized against disclosures lying outside the maximum preclusive scope.

Alternatively, we might define preclusive scope at a particular level of generality.  Under this variation a preclusive disclosure of a genus might not immunize a generic claim from anticipation by a third party’s disclosure of a species.

The difficulty with the subject matter-focused approaches is how to define the preclusive scope, whether it be the broadest possible or confined to a particular level of generality. The problem seems parallel to the question of support for a claim under § 112 – particularly if we regard the written description requirement as defining the level of generality or specificity at which an inventor may claim. However, a patent disclosure is drafted specifically to support claims.  How could we derive a permissible scope from a non-patent disclosure, particularly if  § 102(b) “disclosures” include non-informing public uses or sales?  In interferences, we do ask whether an inventor is entitled to make the interference count based on a non-patent disclosure, such as a documented conception or reduction to practice. But traditional interference practice awards priority of a generic count upon a showing of priority to a species, so the question of permissible scope from non-patent disclosure does not arise.

An alternative method of defining preclusive scope would rely instead on analogy to § 103:  preclusive scope might be defined by what is obvious in light of the inventor’s disclosure. An obviousness-based definition would permit us to ask whether more specific subsequent disclosures were obvious in light of the inventor’s more general earlier disclosure. But since a later-disclosed genus would always be obvious over an earlier-disclosed species, the obviousness-based definition seems to always exclude any later disclosure more generic than the inventor’s. Worse, if a third party later discloses a non-obvious species, that species would seem to count as prior art, likely anticipating any generic claim by the inventor.

The Prior User Defense
The same conceptual problems arise in applying the Leahy-Smith Act’s new expanded defense of prior commercial use.  Under new § 273(a)(2)(B), the prior commercial use defense is not available if use commenced less than 1 year before “the date on which the claimed invention was disclosed to the public in a manner that qualified for the exception from prior art under section 102(b).”

But new § 102(b) does not deal with disclosures of claimed inventions; it excepts from prior art disclosures by inventors or of the same subject matter previously disclosed by inventors. In deciding what claims are exempt from the prior use defense, we are faced with the same problem we face in interpreting the scope of preclusive disclosure.  Is any claim that would encompass a preclusive disclosure impervious against the prior use defense, or is some more complex 112- or 103-like inquiry necessary to decide which claims qualify?

The reference in § 273 to disclosure of  a “claimed invention” under § 102(b) might nonetheless provide the key to interpreting the scope of preclusive disclosure under § 102(b).  Although § 102(b) literally defines preclusive scope in terms of the subject matter actually disclosed by the inventor, if we can only harmonize § 102(b) and § 273(a)(2)(B) by defining preclusive scope in terms of a claimed invention, then the principle of in pari materia might lead a court to embrace the claim-focused approach in construing § 102(b).

Disqualifying Plaintiff’s Litigation Counsel based upon Former Joint Defense Agreement

By Dennis Crouch

In re Shared Memory Graphics LLC (Fed. Cir. 2011), Opinion by Judge Dyk, dissent by Judge Newman (Can you believe that these two would disagree?)

This case involves a disqualification motion. Nintendo (the alleged infringer) was sued for infringement by SMG. The firm of Floyd & Buss represents the plaintiffs and the firm's partnership includes Kent Cooper who is the former IP director at Advanced Micro Devices (AMD).

While Cooper was at AMD, Nintendo and AMD were co-defendants in a separate patent infringement lawsuit and part of a joint defense agreement. The JDA included a provision that the agreement would not be used to "seek to disqualify the respective counsel of such party in any future litigation." However, Nintendo argued in the JDA does not apply to Cooper because he is no longer AMD's counsel. The district court agreed with this interpretation disqualified the Floyd & Buss firm based upon the conclusive presumption that Cooper had access to Nintendo's confidential information. (The district court more broadly disqualified Floyd & Buss from representing the plaintiffs against any of the accused infringers.)

On writ of mandamus, the Federal Circuit reversed – finding that the plain language of the JDA covered Cooper even after he left his position at AMD. The court also held that such a waiver is enforceable – especially when signed by two sophisticated parties.

In dissent, Judge Newman suggested that Cooper's switching of sides and failure to maintain confidences is damning to our system of professional legal representation: "the issue is the integrity of the system of legal representation in today's world of mobile lawyers and large law firms with interacting clients. . . . [I]t appears that Cooper in his new employment is associated with issues involving his former employer, and that his former employment was at the highest level in interaction with Nintendo's legal and strategic interests. If there is doubt, it must be resolved in favor of the entity whose information is in jeopardy."

 

Implementation of the America Invents Act

New Fees – 15% increase: The USPTO has announced new fees that will become effective on September 26, 2011. These fees represent an across-the-board 15% increase for almost all PTO fees. The effective date of the fees will be applied based upon the associated underlying filing date. Thus, a new application properly filed by Express Mail on September 25, 2011 will be charged under the old regime even if it does not arrive at the USPTO until September 26. Likewise, for most other responses, the date of the certificate of mailing will be used to calculate the fees due. [Link]

New Fees – Micro Entity: A new micro entity status has been created by the AIA that provides for a 75% discount on fees for certain applicants (including universities with operating budgets of more than $1 billion). However, the USPTO has announced that the micro entity status will only become effective after it implements final regulations on the topic.

Inter Partes Reexamination: Already effective is a new standard for initiating an inter partes reexamination. The new standard requires a showing that there is a reasonable likelihood that the requester will prevail with respect to at least one of the patent claims challenged in the request. This is a stricter standard that the old requirement of a substantial new question of patentability. The standard for ex parte reexamination remains unchanged. In one year (on September 16, 2012), the USPTO will stop accepting inter partes reexamination requests and instead move to the new inter partes review procedure. The new review proceeding will be conducted before the new Patent Trial and Appeal Board rather than before an examiner. At the one-year anniversary, new post-grant review proceedings, transitional business method review proceedings, and supplemental examination proceedings will also be implemented.

Tax Strategies: As part of the AIA, all tax strategies have been deemed to be within the prior art and therefore a tax strategy cannot be used to distinguish the claimed invention from the prior art. There are some limits so that developers of certain software can still obtain patents. This provision applies to any application now pending or yet to be filed. In his memo to examiners, Robert Bahr indicated that examiners should treat tax strategy limitations in the same way that printed matter limitations are treated under MPEP 2112.01 (III).

Human Organisms: The USPTO has taken the position that the ban on the patenting of human organisms does not change its longstanding policy in any way. Thus, under the rule a claim is not patentable if, when interpreted as a whole, it "encompasses a human being."

Disclosure under the AIA: Introducing The Poor Man’s Provisional Patent Application

By Dennis Crouch

Provisional patent applications have received increasing focus as an integral element of corporate patent filing strategy. Although many patent attorneys reject this strategy, hopeful US-based patentees regularly use provisional applications as a cheap method for obtaining an early patent application priority filing date. Provisional applications have a very low filing fee and do not require the same level of formality as a true or non-provisional application. In this sense, a provisional application is thought of as a "poor man's patent application." A provisional filing allows an applicant to obtain an early filing date for a low cost and delay or avoid further prosecution costs. And, with provisional applications, patent term is not lost but simply shifted forward in time.

Delaying Decisions: In my empirical studies, I find that a substantial number of provisional patent applications are abandoned. That statistic suggests that the provisional system is working as a mechanism for delaying the decision on whether to substantially invest resources in the newly invented technology. The one-year delay can be important in providing applicants with time to determine whether the particular avenue of technology will be commercially important.

Substitute for Invention-Date Rights: In my article on invention date novelty, I argued that provisional patent applications serve as a partial substitute – or an alternative approach – for patent applicants attempting to rely upon their date of invention when proving patentability. The early provisional filing date is often a much simpler alternative than proving conception, diligence, and reduction-to-practice. In my article, I treated provisional applications as an alternative choice available to applicants who want to show an early priority date and who do not want take the steps required claim that date based upon pre-filing invention activity. The recently enacted Leahy-Smith America Invents Act (AIA) changes that alternative into something of an imperative in that the new law largely eliminates an a patent applicant's ability to rely upon anything other than a filed application in proving priority of invention. I expect that this change in the law will lead even more companies to choose provisional applications filings a core tactic in their approach to patenting.

Grace Period for Disclosure: Under the AIA, an inventor's early filing date is important because any disclosure by a third party prior to the inventor's filing date will normally be seen as prior art that can negate patentability. There are two major exceptions to this general rule: a third party disclosure within one-year of the applicant's filing date not count as prior art if either (1) the inventor had already disclosed the invention prior to the third party disclosure or (2) the third party disclosure was somehow derived from the inventor. As Professor Jason Rantanen has discussed, this provision offers an incentive to applicants to go ahead and disclose their invention as a mechanism of defeating potential prior art.

Poor Man's Provisional Application: In many ways, a pre-filing disclosure draws a line in the sands of time in much the same way that a provisional application establishes a priority date. Self-disclosure offers similar benefits to that of a provisional application in that it is cheap with few formalities and provides an additional year of delay. In fact, public disclosure should be cheaper and easier than filing a provisional application. In the same way that a provisional application is seen as a poor man's patent application, I suggest that public disclosure will be seen as a poor man's provisional application or a "really poor man's patent application." The disclosure allows an applicant to buy an additional year of delay with few capital expenditures and without losing patent term but instead merely shifting the term forward in time.

Some of the Problems with Disclosure: There are a number of problems with the pre-filing disclosure strategy. Most importantly, a pre-filing disclosure would substantially negate the potential for non-US patent rights because most other countries have a more absolute rule that pre-filing disclosures negate patentability. In addition, a public disclosure eliminates the ability of an applicant to pursue technology development in secrecy. (Provisional applications are not made public until well after their one-year expiration.) However, the new law does not require that the public disclosure identify the inventor or assignee but only that the invention be publicly disclosed. This offers potential anonymity if not absolute secrecy. Finally, the lack of formal requirements associated with the disclosure invites cost cutting and low quality, inadequate disclosures. This will scare forward looking attorneys who realize that the underlying purpose of the disclosures is as legal documents relied upon to prove priority.

Ultramercial v. Hulu: Computer Programs and Patentable Subject Matter

By Jason Rantanen

Ultramercial, LLC v. Hulu, LLC (Fed. Cir. 2011)
Panel: Rader (author), Lourie, O'Malley

The line between patentable processes and unpatentable abstract ideas continues to trouble the Federal Circuit even as the Supreme Court prepares to address the issue for the second time in four years in Mayo v. Prometheus.  In Ultramercial, the court—led in this instance by Judge Rader, whose views on patentable subject matter are clear and well known—rejected a challenge based on lack of patentable subject matter in an opinion that draws the line between steps that can be performed in the human mind or by a human using pencil and paper (unpatentable) as opposed to those that require a computer (patentable).

Patent No. 7,346,545 claims a method for distributing copyrighted products over the Internet where the consumer receives a copyrighted product for free in exchange for viewing an advertisement and the advertiser pays for the copyrighted content.  The district court granted the accused infringer's motion to dismiss on the ground that the '545 patent does not claim patentable subject matter.

Patentable application not an abstract idea
On appeal, the CAFC reversed. After noting the broadly permissive nature of Section 101, and placing the '545 invention in the "process" category, the court looked to the abstractness of the invention claimed by the '545 patent.  Eschewing the "machine or transformation test," the court focused instead on the programming complexity required to carry out the claimed elements.  The claimed invention, the court determined, constituted a patentable application rather than an unpatentable abstract idea. While "the mere idea that advertising can be used as a form of currency is abstract, just as the vague, unapplied concept of hedging proved patent-ineligible in Bilski,...the '545 patent does not simply claim the age-old idea that advertising can serve as a currency.  Instead, the '545 patent discloses a practical application of this idea."   Slip Op. at 10.  This statement is followed by identification of the specific steps for monetizing copyrighted products set out in the claims, many of which involve complex computer programming.  "Viewing the subject matter as a whole, the invention involves an extensive computer interface."  Slip Op. at 11.

Software is patentable
Layered on top of this finding is the court's rejection of the argument that software programming amounts to abstract subject matter.  "The digital computer may be considered by some the greatest invention of the twentieth century, and both this court and the Patent Office have long acknowledged that "improvements thereof" through interchangeble software or hardware enhancements deserve patent protection.  Far from abstract, advances in computer technology—both hardware and software—drive innovation in every area of scientific and technical endeavor."  Slip Op. at 12.

This holding is in tension with the Federal Circuit's recent opinion in Cyber Source Corp. v. Retail Decisions, Inc., No. 2009-1358 (Fed. Cir. Aug. 16, 2011), in which a panel consisting of Judges Bryson, Dyk and Prost concluded that a method of verifying a credit card transaction over the Internet constituted an unpatentable process.  While the panel in Ultramercial recognized this tension, it distinguished Cyber Source as an instance of "purely mental steps."  Ultramercial Slip Op. at 13 (emphasis in original).  The line, at least from the point of view of this panel, thus lies somewhere between logical steps that humans can perform without the aid of a computer versus those that require a computer to carry out.

Rush to Judgment: New Dis-Joinder Rules and Non-Practicing Entities

On Thursday, September 15, 2011, at least 54 new patent cases were filed – accusing over 800 corporate entities of patent infringement. These numbers represent an all-time-high for a single day filing. In Thursday's filings, the average complaint accused 16 entities of patent infringement. Those numbers are indicative of a trend over the past few years to accuse multiple parties of infringement within a single lawsuit.

Thursday's highs are not random. On Friday, September 16, 2011, President Obama was scheduled to, and did actually, enact a major patent reform package known as the Leahy-Smith America Invents Act (H.R. 1249). One provision of the new law strips courts of their power to join multiple defendants in a single lawsuit simply based upon the fact that the defendants are all alleged to infringe the same patent.

[A]ccused infringers may not be joined in one action as defendants or counterclaim defendants, or have their actions consolidated for trial, based solely on allegations that they each have infringed the patent or patents in suit.

Under the new law, joinder of multiple defendants is still possible, but "only if" the right to relief against all the parties (1) "aris[es] out of the same transaction, occurrence, or series of transactions or occurrences relating to the making, using, importing into the United States, offering for sale, or selling of the same accused product or process" and (2) is based on common questions of fact.

This dis-joinder provision applies to all cases filed on or after the September 16 date of enactment and it is likely that it is the dis-joinder provision that led to the massive filings. As Kyle Jensen of PriorSMArt wrote:

The uncertainty caused by patent reform produced a flood of litigation these last two weeks, which has made our alerts more voluminous than is typical. Last Thursday 54 new patent cases were opened nationwide against a total of 804 named defendants (based on cases that have hit CM/ECF, some might not have). That is an all-time record for both statistics by my count.

Plaintiffs in the most recent filings include non-practicing entities such as LVL Patent Group; GeoTag; Innovatio IP Ventures (not IntellectualVentures); InMotion Imagery; LVL purchased its patents from CyberFone – those patents had been up for auction in an Ocean Tomo auction but then privately changed hands in 2011. Likewise, InMotion's patents were purchased at an Ocean Tomo auction. Innovatio obtained its patents from Broadcom.

Using information from PACER and LEXMACHINA, I created my own chart below of the number of cases filed in July, August, and September 2011.

The bulk of these new filings are in the usual venues of E.D. Texas (15%), Delaware (13%), C.D. California (9%), N.D. Illinois (8%), and N.D. California (6%). However, there is also a surprising diversity in that in the past 80 days, thirty-three jurisdictions have seen five or more new patent complaints or transferred cases. One potential impact of the new dis-joinder rules is a greater jurisdictional diversity, however, that result is not guaranteed.

The dis-joinder provisions were put in place as a hurdle for non-practicing entities alleging infringement across an industry. However, I have spoken with a number of in-house counsel that are a bit worried about the new joinder rules. In particular, the mass-defendant-litigation provides potential cover for in-house counsel and may smooth settlement because the plaintiffs rarely want to try more than two defendants before a single jury.

 

 

No Patent for Claimed Method of Patenting

In 2000, patent attorney Jeff Grainger filed his provisional application for a "computer implemented method for securing intellectual property rights." The claimed method consisted of a system that used an electronic information disclosure form that actively prompted users to provide invention-related information and then automatically converting the information to patent application format. The dependent claims focused on specific prompts – such as "best mode" and "enablement" information.

The first rejection came in 2005, followed by a final rejection in 2006 and the BPAI appeal finally decided in 2011.

The key prior art cited by the examiner was the old ePave filing system.

In the BPAI appeal, Grainger's attorneys at the Kilpatrick Townsend firm had argued that the claimed active prompting for best mode or enablement information was a non-obvious advance over the prior art. The board rejected that argument – explaining that one of skill in the art knows the statutory requirements for a patent application and therefore "ePave's data fields for submitting the Specification, with their textual cues that the Specification is asked for" renders the claimed invention obvious.

At that point the applicant gave-in and has allowed the application to go abandoned – apparently without further continuation.

Grainger is now a partner at the early-stage start-up and investment group known as The Foundry. Back in 2000, he was a founder of First to File, Inc., which he then sold and which now holds the intellectual property rights.

Guest Post: Mark Twain’s Patent Interference

Guest Post by Ed Ergenzinger, JD, PhD, Director of Intellectual Property & Legal Affairs, Duke Human Vaccine Institute

With the conversion of the U.S. patent system from a first-to-invent regime to a first-to-file regime, interference proceedings are set to be replaced by derivation proceedings. As patent practitioners contemplate the implications of this and other changes to the law with respect to their practices, I offer the following light diversion describing an interference that involved a certain well-known author/inventor.

Many people don't know that Samuel L. Clemens, better known as Mark Twain, was also an inventor who was granted three patents during his lifetime. He was a strong believer in the value of the patent system, as evidenced by his book A Connecticut Yankee in King Arthur's Court in which the main character states, "...the very first official thing I did in my administration – and it was on the very first day of it too – was to start a patent office; for I knew that a country without a patent office and good patent laws was just a crab and couldn't travel anyway but sideways or backways."

One of Twain's inventions involved an adjustable strap for tightening clothes in order to avoid having to use uncomfortable suspenders. It was this invention that became the subject of an interference proceeding in 1871 between Twain and Henry C. Lockwood of Baltimore. As part of the proceeding, the parties had to file preliminary statements detailing the essential dates and facts relating to their respective cases.

But we're talking about Mark Twain. He couldn't just submit a dry legal document with numbered paragraphs. That wasn't his style.

No – instead he wrote a short story. It was sent from Hartford, CT to "Hon. M. D. Leggett, Com'r of Patents, Washington" and was dated Oct. 6, 1871:

Concerning Mark Twain's Elastic Strap.

The idea of contriving an improved vest strap is old with me; but the actual accomplishment of the idea is no older than the 13th of August last (to the best of my memory). This remark is added after comparing notes with my brother.

For four or five years I turned the idea of such a contrivance over in my mind at times, without a successful conclusion; but on the 13th of August last, as I lay in bed, I thought of it again, & then I said I would ease my mind and invent that strap before I got up - probably the only prophecy I ever made that was worth its face.

An elastic strap suggested itself & I got up satisfied. While I dressed, it occurred to me that in order to be efficient, the strap must be adjustable & detachable, when the wearer did not wish it to be permanent. So I devised the plan of having two or three buttonholes in each end of the strap, & buttoning it to the garment - whereby it could be shortened or removed at pleasure. So I sat down & drew the first of the accompanying diagrams (they are the original ones).

While washing (these details seem a little trivial, I grant, but they are history & therefore in some degree respect-worthy), it occurred to me that the strap would do for pantaloons also, & I drew diagram No. 2.

After breakfast I called on my brother, Orion Clemens, the editor of the 'American Publisher,' showed him my diagrams & explained them, & asked him to note the date & the circumstances in his note-book for future reference. (I shall get that note of his & enclose it, so that it may make a part of this sworn evidence.) While talking with him it occurred to me that this invention would apply to ladies' stays, & I then sketched diagram No. 3.

In succeeding days I devised the applying of the strap to shirts, drawers, &c., & when about to repair to Washington to apply for a patent, was peremptorily called home by sickness in my family. The moment I could be spared, however, I went to Washington & made application - about the 10th or 12th of September, ult., I think. I believe these comprise all the facts in the case.

Respectfully,
Saml L. Clemens

Twain won. His preliminary statement is believed to be the only one of his stories for which there is an affidavit supporting its truthfulness.

In addition to the patent he received for the elastic strap, Mark Twain was granted two other patents during his lifetime. One was for a historical trivia game, and the other was for a self-pasting scrapbook with a dried adhesive on the pages that only needed to be moistened before use (Twain was an avid scrapbooker). The scrapbook was hugely popular and sold over 25,000 copies, with one account indicating that it was his single most profitable book. And it didn't contain a single word.

Further reading:

• Federico, P.J. (1939) Facts in the Case of Mark Twain's Vest Strap, 21 J. Pat. Off. Soc'y 223. http://heinonline.org/HOL/Page?handle=hein.journals/jpatos21&div=30&g_sent=1&collection=journals.
• Mark Twain Granted His First Patent on December 19, 1871. United States Patent & Trademark Office. 18 December 2001, 01-61. http://www.uspto.gov/news/pr/2001/01-61.jsp
• The New York Times (March 12, 1939). See http://www.twainquotes.com/19390312.html.
• The St. Louis Post-Dispatch (8 June 1885). See http://etext.virginia.edu/railton/marketin/scrpbook.html.
• Mark Twain's Letters, Volume 4: 1870-1871 (1995) Edited by Victor Fischer, Michael B. Frank, and Lin Salamo.

New Patent Regime Signed into Law

This morning, President Obama signed the Leahy-Smith Patent Reform Act — enacting it into law. The provisions of the new law have a variety of effective dates.  Some changes to the law happen immediately and the increased patent office fees will be instituted on September 26, 2011.  Other changes will not be implemented until 2012 and 2013. These include the revised post-grant opposition procedures and the rewriting of the rules of novelty and nonobviousness.

Of Immediate Concern: Best Mode and Joinder

In all likelihood, President Obama will sign the Leahy-Smith America Invents Act into law on Friday, September 16, 2011. There are a few issues that folks may want to consider before-hand.

Best Mode: On the date of enactment, failure of best mode will no longer be a basis for adjudging a patent invalid or unenforceable. However, the new provision only applies to lawsuits filed on or after the enactment date. Thus, a declaratory judgment action filed today could still rely on best mode as the basis for invalidity.

Dis-Joinder: A second litigation-focused issue that goes into force on the date of enactment is the new dis-joinder provision. Section 19 of the Leahy-Smith AIA bars a plaintiff from suing multiple defendants in a single lawsuit if the only justification for the joinder is that all defendants are alleged to have infringed the same patent. The law would also bar a court from consolidating cases for the same purpose absent waiver from the multiple defendants. The idea behind the provision is simply to raise the litigation costs of non-practicing entities who allege that their patents are being infringed by a broad spectrum of corporate defendants. The law applies to all lawsuits filed on or after the bill's enactment date. Thus, if President Obama signs the bill into law on Friday, a plaintiff may still file a multi-defendant lawsuit today or tomorrow.

The Court's Future Role in the International Harmonization of Patent Laws

by Dennis Crouch

International harmonization has always been seen as a major purpose of the Leahy-Smith America Invents Act.  Every country has its own patent structure as does the European Patent Office.  Ongoing differences between the various countries add substantial transaction costs to the process of obtaining and enforcing patents.  Many US companies would like European patents, but the prospect is often cost prohibitive. 

Although disputed, most would agree that the Leahy-Smith's new filing-date focus moves the US closer an international patentability norm.   Still, a number of important differences remain between US law and the laws in other major patent centers.  As a result, the US law has not been internationally harmonized, but it has been shifted in that direction.

The Leahy-Smith AIA refers directly to harmonization only once and only in an aspirational “sense of Congress” provision that reads as follows:

Sense of Congress - It is the sense of the Congress that converting the United States patent system from ‘first to invent’ to a system of ‘first inventor to file’ will improve the United States patent system and promote harmonization of the United States patent system with the patent systems commonly used in nearly all other countries throughout the world with whom the United States conducts trade and thereby promote greater international uniformity and certainty in the procedures used for securing the exclusive rights of inventors to their discoveries.

This Congressional statement regarding promotion of international harmonization does not include any binding requirements, but will still clearly be considered "law" -- having been approved by both houses of Congress and (will be) signed into law by President Obama. See Mississippi Poultry Ass'n, Inc. v. Madigan, 31 F.3d 293 (5th Cir. 1994).

Comparative Analysis of World Patent Laws: Rather than any binding rules, the "sense of Congress" provision provides an indication of congressional intent that may be relevant to statutory construction.  Since the provision is passed by both houses and will be enacted into law, it should be much more influential that other statutory construction canons used to understand congressional intent.  This may be important as the court's struggle with the meaning of new statutory language and structures of Sections 102 and 103 of the Patent Act.  In making its determinations, must the court consider how its decision will impact the relative international harmonization of the laws? The process would seemingly involve a comparative analysis of the various patent laws to see whether the particular rule in question is governed by an international norm and, if so, the court should tend to choose an interpretation of the law that better harmonizes the US law with the international norm.

USA as World Patent Court: In Voda v. Cordis, Judge Gajarsa discussed the court's “lack of institutional competence in [various] foreign patent regimes” including “British, Canadian, European, French, and German patent claims.”  In that case, the court denied Dr. Voda's plea for supplemental jurisdiction so that a U.S. court could adjudge all of his infringement claims against Cordis in a single instance.  The sort of worldwide patent court that Voda wanted is an end goal for many involved in substantive patent harmonization.  When this case arises again, the court will need to reconsider its institutional competence in light of the newly harmonized laws and the Congressional directive in favor of harmonization?

Guest Post -- Defining Prior Art under the Leahy-Smith AIA

by Howard Skaist and Ted Karr

35 USC 102 is the statutory section that, in effect, legally defines 'prior art.' 'Prior art' is, of course, a key consideration affecting whether to file for a patent, whether a patent will ultimately be secured, and whether, if issued, the patent will be legally enforceable. Furthermore, if patent protection is ultimately sought, 'prior art' will affect how best to draft the patent claims so that all of these are more likely to be accomplished successfully.

Understanding the ins and outs of what constitutes 'prior art 'is largely the domain of the patent attorney. One might expect this term to have a common sense understanding; the reality is that it is far from common sense.

Changes that the Leahy Smith Act makes to what is considered 'prior art' will have far reaching implications. With this in mind, the following is intended as a short list of changes so that the patent practitioner is alerted to potential impact(s) on his or her practice.

Rather than totally rewrite section 102, Congress has retained some features that are well-understood under current law.

• "Invention" has been changed to "claimed invention," now defined in section 100. The new statute also refers to "the effective filing date" of the claimed invention, now defined in section 100. Also, "inventor" and "joint inventor" are now defined terms in section 100.
• The "claimed invention" is not novel if "patented," "described in a printed publication," "in public use," or "on sale." Therefore, for these events there is no grace period under the new statute – current law has a one year grace period.
• "On sale" and "in public use" activities are no longer limited to the United States – current law requires these events to be "in this country."
• If the claimed invention was "otherwise available to the public" before its effective filing date, it is not novel. However, "disclosures made one year or less before the effective filing date" appear to be intended as an exception. In summary, if one of these disclosures is made by an inventor or joint inventor or "another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor"(called "another" below), the disclosure will not be considered 'prior art.' Also, the disclosure will not be considered 'prior art,' if before it, the subject matter was publicly disclosed by an inventor, joint inventor, or "another."
• Section 102(e) type prior art is now codified as section 102(a)(2), but with different language – for example, "by another" has been changed to "names another inventor." A new subsection (d) defines the date at which "subject matter described" becomes 'prior art.' An exception, however, is referred to as "disclosures appearing in applications and patents." In summary, if the subject matter of one of these disclosures was obtained directly or indirectly from an inventor or joint inventor, then it will not be considered to be 'prior art.' Also, the disclosure will not be considered 'prior art,' if before the effective filing date of the patent or application, the subject matter was publicly disclosed by an inventor, joint inventor, or "another." Finally, if the subject matter disclosed and the claimed invention are owned by the same person (or subject to an obligation to assign to the same person), then the disclosure will not be considered 'prior art.'
• Current subsections (c), (d), and (g) no longer exist. Subsection (g) is what, in effect, made the United States a first to invent system. Therefore, removing it makes the United States, in effect, a first to file system.
• The bill is yet to be signed. However, the changes to section 102 (and section 100) go into effect 18 months after enactment, which would be the date the President signs the bill.

Howard Skaist is the founder of Berkeley Law & Technology Group, LLP (BLTG), an intellectual property law firm based in Oregon and, before that, he was the Director of Patents for Intel Corp. Ted Karr P.C. is a BLTG partner and Ted was responsible for patent licensing at Intel Corp. before joining BLTG.

Patently-O Bits & Bytes by Lawrence Higgins

Will the number of Provisional Patent Applications Filed Increase?

• The US patent system will soon become a first to file jurisdiction, switching over from the first to invent. With the switch, it would seem that the number of Provisional applications will increase significantly. Companies, Universities, and inventors will be fearful that they are not the first to file, and will want some kind of assurance that they are able to secure patent protection. The provisional application could be the assurance that applicants are looking for. Provisional applications serve several important functions, the most important being that the applicant can secure a filing date. The Provisional Application will give an applicant 12 months to further experiment, get finances in order, and decide whether or not to convert to a non-provisional application. Under the first to invent jurisdiction, an inventor could experiment and wait to file a patent application as long as he/she was the first to invent. It should be noted that, provisional applications that are abandoned or not converted are not publically disclosed and will not be considered as prior art. As a result of the change in the patent system, there will probably be a noticeable increase in the number of provisional applications filed. [Link]
  • Applicants should take caution because a Provisional application must disclose enough info that a person having ordinary skill in the art would recognize that the invention claimed in a later-filed non-provisional application is described in the provisional upon which it relies. If the provisional does not adequately describe everything that is claimed in the later-filed non-provisional application, then the material added in the non-provisional application may not rely on the provisional application filing date.

Maybe the End of Times, for False Marking Suits

• Under the America Invents Act, "Only the United States may sue for statutory damages. However, a person who has suffered a competitive injury as a result of a violation… may file a civil action in a district court of the US for recovery of damages adequate to compensate for the injury. This law applies to all cases, without exception that are pending… the date of the enactment of the America invents Act. Justin Gray, of the blog Gray on Claims, has a chart of pending false marking cases, from the looks of the chart, there are over 200 pending false marking cases. [Link]

Good bye BPAI and hello Patent Trial and Appeal Board (PTAB)

• Elimination of References to Interferences. --- (1) Sections 134, 145, 146, 154, and 305 of title 35, United States Code, are each amended by striking "Board of Patent Appeals and Interferences" each place it appears and inserting "Patent Trial and Appeal Board". Interference proceedings are out the window with the first-to-file patent system, being replaced by derivation proceedings. Derivation proceedings are essentially proceeding to determine whether the inventor named in an earlier filed application derived the claimed invention from the inventor of an application filed later. Under the new law, derivation proceeding petitions may be filed only within the 1-year period beginning on the date of the 1^st publication of a claim to an invention that is the same or substantially the same…

Patent Jobs:

• Cantor Colburn is looking for an associate patent attorney (chemistry) with at least 2 years of patent drafting experience. [Link]
• ON Semiconductor is seeking a patent administration/IP attorney with 5-7 years of experience as a patent attorney. [Link]
• Baker & Daniels is searching for an IP associate with up to 4 years of experience in prosecuting patents. [Link]
• Amin Talati is seeking a patent attorney with a science background and 10+ years of experience to work in their Chicago office. [Link]

Upcoming Events:

• The University of Dayton School of Law is holding a patent symposium entitled "Designing the Design Patent System" on September 15 in Dayton, Ohio. Professor Mark Janis will analyze the history of the U.S. patent system. The program will also include a panel of IP experts such as Tara Rosnell and Christopher V. Carani. [Link]
• The Chicago-Kent Supreme Court IP Review will be held on September 15^th at Chicago-Kent College of Law. The conference is designed to provide intellectual property practitioners, jurists, legal academics and law students with a review of IP cases from the U.S. Supreme Court's 2010 Term, a preview of cases on the docket for the 2011 Term, and a discussion of cert. petitions to watch. Guest speakers include, Judge O'Malley, Mark Lemley, David Kappos, and a number of other influential individuals in the IP field. [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]
• The Fall 2011 Meeting of the Carolina Patent, Trademark & Copyright Law Association is scheduled for September 23-24, 2011 at the Wild Dunes Resort, Isle of Palms, S.C. with 7.25 hours of CLE credit planned. The cost is $250/member and $350/non-member. Guest speakers & presenters include, Tom Irving of Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, Prof. Harold C. (Hal) Wegner of Foley & Lardner, LLP, Maury M. Tepper III of Tepper & Eyster, PLLC and current chair of the Trademark Public Advisory Committee to the U.S. Patent & Trademark Office, Prof. Timothy R. Holbrook of Emory University, Michael S. Connor of Alston & Bird, LLP, Dean Adrienne Meddock of North Carolina Central University School of Law, & Demian Barbas of Norton Rose, OR, LLP. [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]
• Houston Intellectual Property Law Association (HIPLA) will be holding its Annual IP Institute in Galveston, Texas October 6-8. The Institute will feature topics such as: Do's and Don'ts in IP Licensing, Due Diligence and Ethics in Acquisitions, Patent Prosecution Under the New Cases and Inducement of Patent Infringement after Global Tech Appliances v. SEB. The guest speaker will be Lord Justice Robert "Robin" Jacob, Court of Appeal of England and Wales. [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 Ries, VP of IP Management, The Boeing Company and Barbara Dalton VP, Venture Capital, Pfizer. (Register by 8/31 to receive a $100 discount) [Link]
• The University of Texas at Austin will hold its 16^th Annual Advanced Patent Law Institute on October 27-28. The program will cover: recent developments in claims construction and claims drafting, cost savings in litigation, inequitable conduct after Therasense, and many other topics. [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 - To Promote Progress in Science and Job Creation

By Shubha Ghosh, Vilas Research Fellow and Professor of Law at the University of Wisconsin Law School

Whether the "Leahy-Smith America Invents Act' will help to create jobs is a complicated empirical question. The logic supporting those who think it will goes something like this. The recently enacted patent reforms streamlines the prosecution process resulting in better quality patents that will allow patent owners to commercialize them more effectively to create companies that will employ people. There are several leaps in this logic. But whether the argument is true or not, the underlying emphasis on improving patent quality is the right one, whether or not another recession is avoided.

But will patent quality improve? There are some features which support that improvement. The creation of post-grant review proceedings has the potential of providing a more effective mechanism for the introduction and review of prior art to invalidate a poor quality patent than the process of litigation. Such administrative review might limit the ability of non-practicing entities to use patents of dubious value to hinder effective use of technology and innovations. Over all the new process might provide better assurance about issued patents and confidence in their durability. The expansion of the prior user right defense might also soften the effects litigation, threatened or actual, on business development. Although there is some empirical evidence from the Canadian experience that the shift to a first to file system may reduce the volume of patenting, there is some possibility that the quality of patents will improve.

The Act however could have gone further. The limitation on tax avoidance patents, implemented through a broader definition of the prior art, is a good move in reducing the number of applications for inventions that arguably provide little boon to the type of manufacturing and service industries that produce jobs. But Congress could have gone further in clarifying the Bilski v Kappos decision, which seemed to place some limits on the types of processes that could be patented. Congress could have gone one of two ways in helping to clarify Bilski. One is by clarifying the meaning of process so as to avoid the amorphous standard the Court created. The 2010 opinion speaks to "machine or transformation" as one test to determine when a process is patentable and as an important clue to what the right approach might be. Congress could have added more certainty by removing abstract processes (e.g., a method of arbitration, hedging strategies) from patentable subject matter. The goal would be to reduce the number of applications a patent examiner has to shift through and provide tools for per se rejections that do not require extensive examinations of the prior art.

Congress also missed the opportunity to clarify the standard of review for decisions of the US Patent and Trademark Office. The big question is how the Federal Circuit (and eventually the Supreme Court) will interpret the Act. Arguably, the United States Patent Office has been given new tasks and, even with the open questions about fee diversion, greater authority. But as long as decisions from the Office are subject to a de novo review by the courts, it is not clear that this greater power of the agency will actually streamline the process. Congress could have made clear some of the issues raised explicitly and implicitly in the 2011 Microsoft v i4i decision, upholding the clear and convincing evidence standard for claims of patent invalidity. The controversy at the heart of that case has to do with the deference owed to agency decisions. When patent prosecution is ex parte and the main challenge to patent validity is through the courts, the presumption of validity is troubling for the goal of assuring patent quality. Now that we have a process for post grant opposition, some of the concerns with ex parte proceedings are alleviated. But I would make the case that greater deference to decisions of the agency may be a way to lessen the impact of the courts and to assure even more certainty in the process. One possible response is to change the standard of review for claim construction by the Federal Circuit from the current de novo standard. Another would be to set a high bar for challenging agency decisions, thereby limiting the power of the judiciary to overturn agency decisions. Thirty years ago Congress established the Federal Circuit. The passage of the America Invents Act could have been a vehicle to place some limits on its power and shift authority regarding patents to the USPTO, where it belongs.

The goal of promoting progress should not be taken lightly and should not be reduced to the mantra of "jobs, jobs, jobs." Using the patent system to create jobs is in some ways a misguided one. Improving patent quality can strengthen the process of innovation which can aid the economy at a fairly high level. But a better patent system is no substitute for jobs training and an industry targeted jobs bill that creates incentives for hiring and for investment. The America Invents Act brings in many changes, but it is no giant leap for improving confidence that the patent system helps to generate quality inventions.

Law Professors and their Initial Remarks on the Leahy-Smith Patent Reforms

Certainty + More Prior Art: While I'm concerned about the effect of first-to-file on small inventors, I am pleased that the rule will expand the universe of art that might invalidate obvious patents. Too often, art found within a year of filing is rendered uncertain because the defendant does not know the date of invention. By fixing the cutoff date at filing, the universe of prior art not only grows, but the administrative cost of asserting that art is also decreased. To be sure, some of the obviousness art may come after the invention date, but I'm not so worried about that; after all, simultaneous invention is a consideration for obviousness, so close in time inventions, even if after the patentee's, do not present a great harm to a system that is supposed to reward nonobvious advances. - Professor Michael Risch, Villanova University School of Law

Impact on NPEs: Early reports say that the new law will "do nothing" to impact NPEs. They are wrong. The law will forbid the NPE tactic of naming unrelated companies in a single lawsuit, and the economies of scale it produces. Innocent early infringement done in private, under certain circumstances, won't be penalized anymore. A follow-up study on prior user rights and the impact of NPE litigation are called for. The PTO has expanded fee-setting authority, and the public, a greater right to chime in on questionable patents. As the economics of litigation change, so, necessarily, will the business models based on them. - Professor Colleen Chien, Santa Clara University School of Law

Deceptive Intent: There has been little commentary on the new law's rather quiet removal of all seven occurrences of "without deceptive intention" from the statute. These are for: Inventorship changes (Secs. 116 and 256); reissue (Sec. 251); filing a disclaimer (Sec. 253); suing on a patent containing an invalid claim (Sec. 288); and foreign filing without a license (Secs. 184, 185). It was probably not done to encourage deceptive conduct, but to limit fights over mental state in these areas. - Professor Paul M. Janicke, University of Houston Law Center

Natural Experiment: As someone who practiced patent law for over 10 years before entering academics, I am ambivalent at best about the passage of the America Invents Act.  Unfortunately, we missed an opportunity to meaningfully address fee diversion from the Patent Office, one of the most important issues facing the patent system.  With a backlog of over 700,000 applications, the Patent Office needs to retain all the fees it collects.  As an outside academic observer of the patent system, however, there is a benefit to the America Invents Act.  Changing the patent laws provides me and others the chance to empirically evaluate the effects, if any, of legal changes on the patent system. – Professor David L. Schwartz, IIT Chicago-Kent College of Law

Date of Public Disclosure: The Congressional language about "first-to-file system" is somewhat misleading. The text of the bill, and floor remarks of Sen. Kyl, make clear that the key date is either an inventor's filing date or an inventor's earlier public disclosure date, provided the disclosing inventor follows up by filing within a year of the disclosure. In the latter event, the patent would not go to the first to file, but to the first to publicly disclose. - Professor Paul M. Janicke, University of Houston Law Center

Value of Secrecy: Information about new inventions is critical to technological progress.  By increasing the value of secrecy as an option for monetizing inventions, the Leahy-Smith America Invents Act represents a step backwards in terms of information dissemination.  The prior user defense created by the Act recalibrates inventors' decision between secrecy and patenting so as to favor the choice of secrecy.  This shift has the potential to reduce the number of patents that are filed on secret inventions (and the mandatory disclosures that accompany those patents), as well to encourage inventors to direct their investments in research towards secret inventions as opposed to those that require patents to monetize. – Professor Jason Rantanen, University of Iowa College of Law

Inequitable Conduct: The doctrine of inequitable conduct exists in part to encourage patent applicants to internalize some of the costs of the patent system and ensure applicant candor.  The Federal Circuit in Therasense recently took aggressive steps to relieve patent applicants of some of these obligations.  The Leahy-Smith America Invents Act pushes in the same direction.  With two limited exceptions, it provides that "A patent shall not be held unenforceable on the basis of conduct relating to information that has not been considered, was inadequately considered, or was incorrect in a prior examination of a patent if the information was considered...during a supplemental examination of a patent."  New 35 U.S.C. § 257(c)(1).   This provision appears to effectively empower patent owners with the ability to strategically manipulate disclosures to the PTO.  – Professors Lee Petherbridge, Loyola Law School Los Angeles and Jason Rantanen, University of Iowa College of Law

Whipped Cream: There is no mistake so bad that you cannot cover it up with parsley or whipped cream. - Julia Child via Professor Yvette Liebsman, St. Louis University School of Law

 

Patents Directed to Human Organisms

A major problem with the soon-to-be-enacted patent reform act (H.R. 1249) is that its poor wording inevitably leads to uncertainty about how the law will be interpreted by the courts and by the patent office (USPTO). And, that uncertainty potentially stifles the innovation process. There are a number of examples. One examples involves Section 33 of the Bill titled "Limitation on Issuance of Patents." The amendment adds a limitation that blocks the patenting of human organisms and reads as follows:

Notwithstanding any other provision of law, no patent may issue on a claim directed to or encompassing a human organism.

The provision was originally proposed by Rep. Dave Weldon (R-FL) who was apparently motivated by his anti-abortion policy position. The apparent argument is that the statute helps preserve the sanctity of life by not allowing humans to be considered (intellectual) property.

Clearly, the statute would block the patenting that claims "a human organism" per se – and that is likely the primary intent of the provision. However, the proposal is poorly drafted because the language does not have clear limits or well defined terms. When is a patent claim "directed to . . . a human organism?"

Patently-O readers have already debated this provision in sua sponte comments.

The phrase "directed to" is not defined by the Patent Act or the USPTO Implementation Rules found at 37 C.F.R. § 1, et seq. However, the phrase often used by patent attorneys to describe the coverage of a particular claim and the statutory category. Even amongst patent attorneys, the usage is not uniform.

In my patent law course yesterday we discussed a common hypothetical claim of a method of treating a human disease. A major focus of the claim is certainly directed toward a human organism. The question for the courts and the USPTO will be whether new law the claim itself directed to a human organism? In all likelihood, the USPTO will not take an aggressive stance at implementing this particular rule – that means that any legal changes will not seen until years from now.

This general issue raises two important points that have also been discussed in the Patently-O comment section. First, although the Senate passage of H.R. 1249 likely signals the end of major congressional patent reform action for the next several years, it is likely that congress will implement a number of "technical amendments" that fix problematic language in the bill. As you may expect, the technical amendments often have major substantive impact. Second, this bill provides additional rulemaking and fee setting authority to the USPTO (and in-fact requires that the USPTO use its newfound power). These sources of future changes to the patent practice continue to require input from the practicing bar.

[Addendum - Sept 10, 2011] A few years ago, I likely would have not seen the same problematic ambiguity with the provision. As long as the claim was not formally claiming a "human organism" then the Federal Circuit would have no problem.   A handful of cases - with Myriad at the center - have begun to shift the legal view of the patenting of inventions that are directly tied to human activity. An important element of Myriad is the Obama Administration's support for the public interest plaintiffs through the Department of Justice. In addition, a growing line of cases have begun to disregard claim formalism as a distinguishing factor.   

Used with permission. © Josué Pereira.

Smith-Leahy America Invents Act to Become Law - Senate Passes H.R. 1249 Without Amendment

In a bipartisan 89–9 vote, the Senate has passed H.R. 1249 without amendment.  The Smith-Leahy America Invents Act will become law once signed by President Obama within the next week or so.

Read the Bill: PatentReformBillAsPassed.pdf (405 KB).

Senator Maria Cantwell: "This is not a patent reform bill. This is a big corporation patent give away that tramples on the rights of small inventors."

Patent Reform –Amendments Fail

Senator Sessions' amendment has failed. 47-51. The Sen. Session's amendment had proposed an amendment stripping a provision from the Bill that would retroactively lengthen the deadline for applying for a patent term extension. This particular provision of the reform has no other real purpose other than to reinstate The Medicine Company's (MDCO's) patent covering its Angiomax drug. The law firm WilmerHale is on the hook for substantial malpractice damages due to the filing debacle. These two firms have spent around $20 million lobbying Congress on this issue.

Sen. Cantwell's proposed amendments have failed. The amendments would have eliminated the business method patent 'transitional program.' Failing that, a separate amendment would have limited the scope of the program only to "patents claiming abstract business methods" and not to patents covering "technological" or "nonfinancial" inventions.

Sen. Colburn's proposed an amendment has failed. 48-50. The amendment would have ensured that the USPTO will be able to spend the fees it collects and end "fee diversion."

The Senate will likely complete its vote on the entire reform measure by 5:45 pm ET today.     

The Effects of the America Invents Act on Technological Disclosure

By Jason Rantanen

(Note: Given the almost certain passage of H.R. 1249 by the Senate, this analysis refers to that version of the pending patent legislation.  It is available here.).

The principal justification for the impending changes to patent law is that they will promote technological progress in the United States (and thus create jobs).  The questions relating to whether this intended result will be realized are numerous, and in this analysis I focus on just one important issue: the effects the America Invents Act may have on the disclosure of technological information.  I conclude that while the new patent laws have the potential to encourage at least one category of disclosures, they may also negatively impact other types of information disclosures.

At least three aspects of the Act are likely to impact the quantity and quality of disclosures: the changes to the novelty rules of 35. U.S.C. § 102, the creation of a prior user defense, and the effective elimination of the best mode requirement.  Changes to the effectiveness of the inequitable conduct doctrine are also likely to have an impact, perhaps good, perhaps bad, an issue I will discuss at a later time.  Below, I offer a preliminary analysis of the effects of these changes with respect to two categories of disclosures: (1) the mandatory disclosures in the patent document itself, and (2) peripheral disclosures, which I define as the dissemination of information that would not occur but for the existence of a patent system.

Changes to Novelty Rules: The shift to a first to file system is central to the America Invents Act.  Along with that change comes a revamped set of novelty rules - a complete rewrite of Section 102.  Gone is 102(a), and the concept that prior art must precede the date of invention.  Gone too is 102(b) and the one-year statutory bar.  Instead, we will soon (i.e.: in eighteen months) have a new 102(a) under which a variety of things (i.e.: patents, printed publications, public uses, invention being on sale, etc.) that predate the patent's effective filing date constitute prior art, a much more potent statutory bar than presently exists.

This new rule comes with a major exception, however: prior art does not include disclosures (which I interpret as referring to any of the categories of prior art discussed in the new 102(a)) made within one year of filing if "the subject matter disclosed had, before such disclosure, been publicly disclosed by the inventor or another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor." (proposed language of 102(b)(1)(B))  (The section also contains an exception for disclosures by the inventor or another who obtained the subject matter from the inventor). In other words, inventors will have the ability to negate any prior art from the one-year period prior to filing by engaging in public disclosure. 

This provision has the potential to encourage early disclosures of information by the inventor.  Although on the surface it seems to provide no more ability for inventors to engage in disclosures than the existing one-year statutory bar, under which an inventor was free to disclose whatever it wanted for the one-year period prior to filing, it perhaps may result in more disclosures than under the present structure.  A disclosure race may be encouraged.  If, as Gideon Parchomovsky has suggested, inventors involved in a patent race sometimes engage in strategic disclosures to stymie their competitors, the new 102(b)(1)(B) has the potential to fuel this behavior.  Through early disclosure, inventors who are racing to develop a new technology can not only block their rivals from obtaining a patent—because the disclosure would operate as prior art against the rival's patenting attempts—but can also negate any subsequent attempt by the rival to disclose patent-blocking information of equivalent content.  Rather than a race to invent, perhaps this will produce a race to engage in early public disclosures.  Unfortunately, any such effects are likely to be largely limited to inventors who desire to only file in the United States due to the lack of a self-disclosure exception in many countries. 

Creation of a Prior User Defense: Even as the changes to the novelty rules seem to encourage early peripheral disclosures of technological information, at least for US-only inventors, the creation of a prior user defense pushes towards less disclosure, albeit through different mechanisms.  I see the creation of a prior user defense in Section 5 of H.R. 1249 as impacting the disclosure of technological information in two ways: it may reduce the quantity of patent applications filed, and thus the number of mandatory disclosures that accompany those applications, and it has the potential to shift investment in invention away from self-disclosing inventions to those that can be protected through secrecy mechanisms.

The types of inventions that the prior user defense most applies to are those with the capability of being protected through secrecy.  A prior user defense is less important for inventions whose workings are readily understandable once they are placed on the market because these products already represent potentially invalidating prior art; thus, this type of defense has most relevance for non-self disclosing inventions, a category that includes many processes.  Under the current law, inventors who develop non-self disclosing inventions are faced with a difficult choice: maintain the process as a trade secret, and run the risk of being blocked later by an inventor who obtains a patent, or file for a patent and disclose the process to the public.  Both options have significant costs associated with their selection but the patent and disclose option is hardly foreclosed.

A prior user defense reweights this decision in favor of maintaining secrecy because it reduces the risk of being blocked by a later inventor.  The directional effect of this change is to reduce the number of patents that are filed on secret inventions, and thus reduce the number of mandatory disclosures that accompany those patents.

Of course, not everyone accepts that these mandatory disclosures provide useful technological information.  Consider, however, the effects on peripheral disclosures - specifically, the impact on investment in self-disclosing inventions.  The creation of a prior user defense re-calibrates the scale as between secret inventions and self-disclosing inventions.  By making secrecy a more valuable protection strategy for inventors to pursue, inventors are likely to focus their efforts towards the creation of such inventions as opposed to self-disclosing inventions, at least when the social utility that the inventor can monetize is otherwise equal.  But self-disclosing inventions are inherently valuable for the information that they provide to the public and future inventors - a spillover that inventors cannot fully capture.  The directional result may be the creation of fewer of these valuable inventions.

Elimination of Best Most Requirement: Section 15 of H.R. 1249 effectively eliminates the best mode requirement by amending the list of invalidity defense to exclude best mode  While the best mode requirement remains in 35. U.S.C. 112, and thus theoretically could be used by a patent examiner to reject an application, failure to disclose best mode may also not be a basis for holding a patent unenforceable - i.e.: no inequitable conduct on this ground. 

Although the best mode requirement has been subjected to substantial criticism on the grounds that it represents a trap for the unwary independent inventor while being wholly ineffective for disclosure purposes, the actual impact of the abolition of this requirement may be far broader than expected.  From a directional standpoint, the only effect of this change is to weaken the mandatory disclosure obligations imposed on the applicant, and thus a decrease in the quality of individual disclosures should be predicted.  How great a decrease, and whether the elimination of this requirement will result in more disclosure-providing applications being filed, will be an area to monitor.

 

First Change: 15% Fee Increase

Most of the provisions of the Leahy-Smith Act will take some time to be effective. Thus, for instance, the first-to-file regime will only apply to patent applications with an "effective filing date" that is 18-months from enactment.

One provision that will have an almost immediate effect is the 15% surcharge on USPTO fees as does the new $4,800 option for prioritized examination. Those provisions state that they "shall take effect on the date that is 10 days after the date of the enactment of this Act." The new micro entity status (75% reduction in fees) appears to be poised to begin upon enactment.

Patent Reform Passage Likely Today

The Senate has scheduled to vote on final passage of H.R. 1249 for 4 p.m. (ET) today.

A handful of amendments to the bill have been proposed. However, none of them are likely to be approved. President Obama will be speaking to a joint session of Congress later this evening.

Sen. Coburn has proposed an amendment to absolutely prohibit fee diversion — allowing the USPTO to spend the fees it collects.

H.R. 1249 includes a provision that would retroactively lengthen the deadline for applying for a patent term extension.  Sen. Sessions has proposed an amendment stripping that provision from the bill. This particular provision of the reform has no other purpose than to reinstate the The Medicine Company’s (MDCO’s) patent covering its Angiomax drug.  The law firm WilmerHale is on the hook for substantial malpractice damages due to the filing debacle. These two firms have spent around $20 million lobbying Congress on this issue.

Sen. Cantwell has proposed separate amendments — The first would eliminate the the business method patent ‘transitional program.’  Failing that, a separate amendment would limit the scope of the program only to “patents claiming abstract business methods” and not to patents covering “technological” or “nonfinancial” inventions.

Sen. Paul has proposed an amendment to include the statement that “It is the sense of Congress that Secretary of the Treasury Timothy Geithner no longer holds the confidence of Congress or of the people of the United States.”

Sen. Johnson proposed an amendment to limit all regulatory action by any federal agency until the US unemployment rate drops to 7.7%.  

Patently-O Bits & Bytes by Lawrence Higgins

U.S. IP Brokers: No Ethical Regulations and No Standards

• In a blog post by Raymond Millien of the Washington D.C. Intellectual Property Attorney Blog, he poses the question, What professional and ethical regulations govern the conduct of these IP middlemen? In the post Millien discusses that Individual inventors and corporate IP owners are used to dealing with Accountants, Lawyers and Investment Advisors – all professionals who are governed by federal and/or state professional regulations, as well as national association guidelines. However, Millien suggest that less than 20% of IP middlemen are attorneys, which suggest that they are not governed by any ethical regulations. Therefore, the answer to the question that Millien poses is "none". Millien further notes that, earlier this year, the British Standards Institution (BSI) – the UK's National Standards Body – released standard BS 8538:2011, entitled "Specification For The Provision Of Services Relating to the Commercialization of Intellectual Property Rights. The British Standard specifies middlemen ethical behavior principles relating to: integrity and competence; transparency regarding fees, costs and finances; confidentiality and the disclosure of information; the declaration of conflicts of interest; and complaint handling, among other things. [Link]

Will Research In Motion (RIM) Sell Its Patents?

• Jaguar Financial Corp. told RIM, the maker of the BlackBerry, that it should consider selling itself or spinning off its patents to boost investor returns after a slump in its stock price. Vic Alboini, CEO of Jaguar stated that RIM should create a committee of 4 or 5 independent directors to study the options to sell itself or its patents. RIM has been losing its stronghold on the smartphone market in recent years, with the introduction of Apple's IPhone and Google's Android phones. If RIM does decides to sell its patents or itself it could be another billion dollar deal. Google recently bought Motorola Mobility and for over 12 billion dollars. It seems like this 2011 is the year of big patent sales. [Link]

Paul Graham's Patent Pledge

• Graham proposes patent reform without the government. Graham states that, "one way of using patents that clearly does not encourage innovation is when established companies with bad products use patents to suppress small competitors with good products." Graham suggest that a way to decrease this kind of abuse is to get the companies that are above pulling this sort of trick to pledge publicly not to. The Pledge that Graham proposes is very simply written:

  No first use of software patents against companies with less than 25 people.

  Is this a good idea and could it possibly work? [Link]

Patent Jobs:

• Lee & Hayes is seeking Patent Attorneys with at least 3 years of experience and a (EE) or Computer Engineering background. [Link]
• The Bill and Melinda Gates Foundation is searching for an Associate General Counsel, with a minimum of 10 years of experience. [Link]
• The Bill and Melinda Gates Foundation is looking for 2 IP Attorneys with a minimum of 3 years of experience. [Link]
• Katten Muchin Rosesman is seeking a patent agent with a background in the electrical arts. [Link]

Upcoming Events:

• The Chicago-Kent Supreme Court IP Review will be held on September 15^th at Chicago-Kent College of Law. The conference is designed to provide intellectual property practitioners, jurists, legal academics and law students with a review of IP cases from the U.S. Supreme Court's 2010 Term, a preview of cases on the docket for the 2011 Term, and a discussion of cert. petitions to watch. Guest speakers include, Judge O'Malley, Mark Lemley, David Kappos, and a number of other influential individuals in the IP field. [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]
• The Fall 2011 Meeting of the Carolina Patent, Trademark & Copyright Law Association is scheduled for September 23-24, 2011 at the Wild Dunes Resort, Isle of Palms, S.C. with 7.25 hours of CLE credit planned. The cost is $250/member and $350/non-member. Guest speakers & presenters include, Tom Irving of Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, Prof. Harold C. (Hal) Wegner of Foley & Lardner, LLP, Maury M. Tepper III of Tepper & Eyster, PLLC and current chair of the Trademark Public Advisory Committee to the U.S. Patent & Trademark Office, Prof. Timothy R. Holbrook of Emory University, Michael S. Connor of Alston & Bird, LLP, Dean Adrienne Meddock of North Carolina Central University School of Law, & Demian Barbas of Norton Rose, OR, LLP. [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]
• Houston Intellectual Property Law Association (HIPLA) will be holding its Annual IP Institute in Galveston, Texas October 6-8. The Institute will feature topics such as: Do's and Don'ts in IP Licensing, Due Diligence and Ethics in Acquisitions, Patent Prosecution Under the New Cases and Inducement of Patent Infringement after Global Tech Appliances v. SEB. The guest speaker will be Lord Justice Robert "Robin" Jacob, Court of Appeal of England and Wales. [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 Ries, VP of IP Management, The Boeing Company and Barbara Dalton VP, Venture Capital, Pfizer. (Register by 8/31 to receive a $100 discount) [Link]
• The University of Texas at Austin will hold its 16^th Annual Advanced Patent Law Institute on October 27-28. The program will cover: recent developments in claims construction and claims drafting, cost savings in litigation, inequitable conduct after Therasense, and many other topics. [Link]

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

Some Hope for the Patent Reforms

by Dennis Crouch

Patent Law Persists: At this point, it appears very likely that the Leahy-Smith America Invents Act (H.R. 1249) will become law later this month. In my patent law course yesterday, we discussed some details of the proposal and ultimately concluded that patent law will be roughly the same under the new law.  To be patentable, an invention must still be new, useful, and fit within one of the statutory classifications.  The primary difference on that front will be that the inventor’s pre-filing activity becomes even less important and third-party activity just prior to the filing date becomes more important.  Innovative companies will need to rethink filing strategies to fit the new rules, but this will not normally be CEO level strategic rethinking - but instead general counsel and chief patent counsel planning. The law of patentability will be more complicated and unstable for the next decade as we go through the transition, but the dust will settle and the patent system will remain.

The Great Unaddressed Problem: For many, the greatest problem with the major reform measure is that it does nothing to directly assist the US Patent Office (USPTO) with issuing patents in (1) a timely manner; (2) for only deserving inventions; and (3) that concretely and understandably define the scope of the patent right. 

The USPTO, under the leadership of Director David Kappos, strongly supports the legislation for two primary reasons: (1) funding and (2) international harmonization.  Under the new law, the USPTO is very likely to be able to spend more money on much needed programs that address my administrative concerns listed above.  With harmonization, the USPTO has the potential of working more closely with worldwide patent agencies to improve the patent prosecution process.  In this sense, the hope is that the law may indirectly address my concerns.  

Funding – Increased Revenue: The USPTO has (almost) always been fully “fee funded” in that the office never spends more than it collects in fees from patent applicants and patentees. The new law will likely lead to fee increases based upon two primary provisions. First, the Bill provides for an immediate 15% surcharge on essentially all fees being charged. Second, the Bill allows the USPTO to adjust its fees in order to “recover the aggregate estimated cost . . . relating to patents . . . including administrative costs of the Office.”  This office-level aggregate largely frees the USPTO to set particular fees as it wishes so long as it estimates that the spending and revenue match.  Although not explicit, this law may also provide the USPTO with authority to adjust its fees in ways that intentionally shift applicant behavior (such as by increasing the filing fee for continuation applications in order to discourage those filings).

Funding – Fee Diversion:  Although the USPTO will likely be collecting more revenue, the Office is often not authorized to spend all of its fees collected. Over the past 20 years, almost $1 billion in USPTO user fees have been spent on other non-patent-related government programs.

More Funding – Despite Fee Diversion: Although new law does not prevent fee diversion, the USPTO still believes that it will be allowed to increase its spending because fee diversion is normally closely tied to the amount collected.  Even with fee diversion, a 15% increase in revenue will still likely result in at least 10% increase in allowed spending. Further, several members of the House of Representatives appropriations committee have offered their non-binding commitment to fully-fund the USPTO.

Harmonization: Many patent office leaders around the world believe that international cooperation in the patent prosecution process is a critical element of dramatically improving the patent prosecution process.  Many patent applications are independently and redundantly examined in patent offices around the world.  That scenario appears ripe for some level of cooperation and coordination that could seemingly reduce delay and costs while improving quality.  One (of many) stumbling blocks in this process has been the international perception that the US’s first-to-invent patent system is dramatically different from the rest-of-the-world — and therefore that separate examination is necessary because of the differences in the laws.  Although the new laws of patentability would not exactly match the laws of any other country, the worldwide perception is that the US is joining the world with a first-to-file regime that will now allow for greater cooperation.

Debate on H.R.1249 in Senate

[Update] In a 93–5 vote, the Senate has voted to invoke cloture.

Debate on H.R. 1249 is ongoing in the Senate as we sit here today. Watch it live on CSPAN-2.

http://www.c-span.org/Live-Video/C-SPAN2/

 

 

Patently-O Bits and Bytes by Dennis Crouch

My Upcoming Events: I am not travelling much this fall, but I will be speaking at two upcoming events:

• September 15-17, 2011: MarcusEvans IP Law Summit in Las Vegas, Nevada (Red Rock Casino). Speakers include Robert Bahr (USPTO Commissioner); Ankur D. Shah (AGC for Freddie Mac); Mallory Levitt (AGC for CBS); etc.
• October 6-8, 2011: 27th Annual Institute on Intellectual Property hosted by Houston Intellectual Property Law Association and the University of Houston Law Center. The Institute has an excellent lineup of speakers, including Russ Levine (my former boss at Kirkland & Ellis); David Healey (PatentMath); Hal Wegner; Professor Nancy Rappaport (Las Vegas); Lord Justice Robin Jacob (Court of Appeal of England and Wales); Professor Paul Janicke (Houston Law Center); Michael Smith (E.D.Tex. Blog); Professor Phillip Page (South Texas); etc. Registration is around $600.

FUNDRAISER: My son started preschool today at the Waldorf-inspired Garden Gate school. We're helping with the school fundraiser – a national flower bulb sale. Plant the bulbs this fall – when they come up in the spring you will hopefully pause to realize that the Leahy-Smith Act was just a bad dream. (Mail delivery; the school keeps 50% of revenue). Thank you – Dennis.

Patent Reform 2011 Survey Results

Congress is poised to pass a patent reform measure that would make a number of dramatic changes. This post describes the results of a recent Patently-O survey on the impact of the reforms.

Survey Background: Over a seven day period beginning on August 18, 2011, 1226 responses were submitted to an online survey on patent reform. I filtered those results to include only responses coming from intellectual property professionals and excluded individuals with no experience in the field -- leaving 1161 completed responses. Responses came from professionals working in all major areas of technology, including electrical engineering, mechanical engineering, biotechnology, software, chemical engineering, medical devices, pharmaceuticals, telecommunications, energy, semiconductor fabrication, etc. The majority of responses indicated 11+ years of experience working with intellectual property law issues.

Support for Patent Reform: The survey asked "Do you support passage of the patent reforms in H.R. 1249?" Although some responses showed support for the legislation, the weight of responses opposed the reforms, and the median response opposed the Bill.

Intellectual property professionals working in the areas of chemistry and pharmaceuticals tended to support the proposed reforms at a greater level than those working in electrical engineering, software, and medical devices. Self-described Democrats tended to support the proposed reforms more than either Republicans or Independents. Likewise, USPTO patent examiners tend to support the reforms more than the median.

Jobs: Many of the questions from the survey were intended to test sound-bites regarding the potential impact of patent reform. One of the most consistent arguments for patent reform is that the reform measures will lead to the creation of jobs for Americans. Senator Leahy, one of the Bill's primary sponsor's recently stated his belief that passage of H.R. 1249 would lead to 200,000 new jobs.

The survey asked "Do you agree that the proposed patent reforms ... can be expected to create 200,000 new jobs?" The response to that question was clear disagreement.

Red Tape: In a recent speech, President Obama was quoted saying that the reform proposals "will cut the red tape that stops too many inventors and entrepreneurs from quickly turning new ideas into thriving businesses." The survey asked whether the proposed patent reforms will indeed cut the red tape. The response to that question was clear disagreement.

Although the majority still disagreed, the responses showed more support for the ideas that the reform measures will simplify patent law and streamline the patents system.

At this point, a reader may be asking whether the patent reform proposals actually do anything. According to the patent law professionals surveyed, the proposed reforms do indeed represent a major overhaul -- the first in 60 years.

In an open-ended question, the survey asked "If passed, what will be the impact of the reforms?" Responses that supported patent reform tended to indicate a seeming positive impact such as harmonization of the US patent system with the rest of the world and an improved opposition system. Negative responses are too numerous to mention.

The full survey responses can be downloaded here http://www.patentlyo.com/PatentReformSurvey2011.xlsx.

Guest Post: Patent Troll Myths

(Professor Michael Risch of the Villanova University School of Law is a prolific scholar who is fascinated by patent trolls.  Given his interest in this subject, I invited him to write a short post on his current project examining conventional beliefs about patent trolls. - JAR) 

Guest Post by Michael Risch

Few players in the patent system (maybe none) are more hated than patent trolls. There is a lot of debate about what it means to be a patent troll, but the commonly accepted definition is a plaintiff that asserts patents (usually acquired ones) but makes no product. More accurate terms are non-practicing entities (NPEs) or patent assertion entities (PAEs), but I’ll keep using trolls here if only to be mainstream.

Commentators (including me) have intuitions about the types of patents that trolls assert; the media is filled with claims. The problem with these intuitions is that they are all anecdotal – we think we know what we know from the limited reporting we see about cases that hit the news. But trolls have been around for a long time (two of the entities I studied brought their first suit in 1986) and they file a lot of lawsuits.

I wanted more evidence to support my intuitions, so I set out to comprehensively study a group of trolls – namely the ten most litigious trolls. I don’t have space here to discuss why I chose this group, but the paper discusses my reasons as well as why I believe that the findings here apply to less litigious trolls. In all, I studied 10 trolls, about 1000 cases, and about 350 patents over a 23 year period. The full paper examines the type of patents, case outcomes, patent quality, venture funding, and other aspects of the cases and patents.

It turns out that most of what I thought about trolls – good or bad – was wrong.  But first, one area that fits conventional wisdom: the moniker “troll” is accurate to the extent that it means waiting before asserting a patent. The patents I studied were asserted for the first time on average more than seven years after issuance. That’s a lot of time for an industry to develop. That said, delay decreased as issue dates increased. In other words, older patents sat on the shelf much longer than new patents. Patents issuing in 2006 were asserted on average within 2 years. This could mean that trolls are acting more quickly, or it could be what we call a “selection effect” – only some recent patents were asserted early and there is a large group of patents yet to be asserted; 15 years from now, it may be that the average delay for patents issuing in 2006 is seven years, though I doubt it.

Perhaps the biggest surprise in the study was the provenance of patents. I thought most patents came from failed startups. While such patents were represented (about 14% of initial assignees were defunct), most came from companies still in business in 2010. Indeed, more than a third of the initial assignees were publicly traded, a subsidiary of a public company, or venture capital recipients. Only 21% were patent assertion entities at the time the patent issued, and many of those were inventor owned companies (like Katz) rather than acquisition entities (like Acacia). Further, about 26% of the patents were inventor owned, and a comparison with the percentage of individual inventors represented in litigation generally shows that trolls serve an important role in enforcing individual inventor patents. Of course, if you think individuals have no place in the patent system, this is not a good thing.

Another area of surprise was patent quality. While trolls almost never won their cases if they went to judgment (only three cases led to an infringement finding on the merits), the percentage of patents invalidated on the merits was lower than I expected. A total of 43 patents had validity adjudicated on the merits. Only 4 were found completely valid. Another 23 were held completely invalid, and the rest were partially valid. Thus, just over half were invalidated. This sounds high, and it is—but consider that most of these cases involve a group of related patents that stand or fall together. When viewed on a case by case basis, as most other studies do, 13 cases out of 46 cases that reached a final judgment (28%) fully invalidated a patent. Compare this with a study of all patent cases filed in 1995, 1997 and 2000, which found that 118 out of 584 summary judgment or trial rulings (20%) invalidated a patent. Viewed this way, the invalidation rate for patent troll cases is not that much higher than patent cases in general. The quality is worse, but not that much worse (and as discussed in the paper, methodology differences may mean that the difference is smaller than 8%). Of course, it is more costly to defend against multiple related patents, so litigation strategies still have a social cost.

These are just a few of the findings. A full draft of the paper, called Patent Troll Myths, is available on SSRN  and will be published next year in the Seton Hall Law Review. I am also planning a followup that looks more closely at outcomes and patent quality over time. Comments are appreciated.

Patent Reform 2011: Vote Scheduled At the Conclusion of Labor Day

As you enjoy the holiday weekend, keep in mind that next week we will likely see final passage of the Patent Reform Act of 2011 (a.k.a. the Leahy-Smith America Invents Act). The President would then sign the Bill into law a few days later.

Particulars:

• The House and Senate have each already overwhelmingly passed parallel patent reform legislation. H.R. 1249 and S. 23.  The two bills have some minor differences — the primary difference probably being that the Senate version does a better job of solidifying PTO funding.
• Rather than negotiate a compromise bill in conference, Senate leadership has decided instead to scrap S. 23 and bring the House bill to the floor for a vote (and potential amendment).
• On Tuesday, September 6, 2011 in the evening at 5:30 pm (Eastern) the Senate is scheduled to vote to invoke Cloture on H.R. 1249.
• Once Cloture has been invoked, there can be no more than 30 hours of debate on the bill and only amendments that have been filed before the cloture vote may be considered once cloture is invoked. Finally, according to Senate rules, once cloture is invoked the Senate may not consider any other matters until the matter is disposed-of.
• If amendments are approved prior to passage, the bill would return for to the House for approval. As of September 2, 2011, no amendments to H.R. 1249 have been filed in the Senate.  (According to the Library of Congress Bill Summary).
• Despite a lack of clear funding requirements, the USPTO fully supports H.R. 1249 and believes that the bill will allow the agency to collect and spend at a much higher rate than today.  USPTO Director Kappos has argued that  the additional funding “will give [the PTO] the ability to examine work given to us by U.S. innovators much more effectively, so they can produce products and services and economic opportunity much more quickly. . . . "What we'll see is a job-creation engine turned loose."
• Sen. Leahy and Reid argue that the reforms will lead to 200,000 American jobs. [Upcoming Link: Patent Attorneys Call BS]

Patently-O Bits & Bytes by Lawrence Higgins

Google's Executive Chairman Eric Schmidt Opinions about the Patent System

• Schmidt suggested that the problem with the current patent system is that; in the early 90s and 2000s there were a lot of patents issued that were very broad, and that patent clerks are now spending a lot of time combing through and invalidating these older patents. Schmidt's suggest that the best way to address the problem is to take the patents as they're published and crowdsource them. Further Schmidt states that "the best way to potentially curb these patent wars, then, would be to publish the patents publicly and allow everyone to comment to see if there's any prior art." Schmidt is worried that "overbroad patents will somehow slow" the progress of the software industry down. [Link]

Applications to Law Schools Decline

• Many students in the past couple of years came to the conclusion that law school was not for them. This year applications to law schools nationwide are down by almost 10 percent. It seems like potential students are being scared off by the recent legal job market for graduating law students. In 2010, only 87.4 percent of the graduating class had a job 9 months after graduation, which was a 15 year low. While many areas of the legal industry have suffered in the past several years, it seems that the patent law sector is still going strong. There has been an increase in patent lawsuits, as well as patent applications for many consecutive years. The patent industry is somewhat different from other practices of law; an individual that prosecutes patents must have a science, engineering, or computer background to be eligible to take the patent bar. While an individual does not need a technical background to practice the other areas in the patent field, (litigation or licensing) most practicing legal professionals have the technical background anyway. There will probably be no decline in law students who would like to practice patent law; there might even be an increase in future years. [Link]

A New Way to Win Patent Claim Construction

• In a recent article I read by patent attorney David Orange, he discusses negative claim construction. David states that a classic example of negative claim construction is prosecution history estoppel, which requires the disavowal of claim scope "to be both clear and unmistakable." The article also discusses how to successfully defend against concerns of infringement. David states that, "we routinely look for definitional statements in patents and their prosecution histories… but finding positive definitions is hard because patent prosecutors are raised to never refer to "the invention" and speak only in nonlimiting examples." The article suggest that we should also look for negative statements, such as declaratory statements… [Link]

What Will Kodak Patents Sell for?

• Kodak has announced that it is willing to sell 10% (1,100) of its patent portfolio, which could help raise a significant amount of money for the company. The sale will be handled by the investment bank Lazard. Lazard recently brokered 2 of the biggest patent deals ever, Google's purchase of the Motorola patents and the purchase of the Nortel patents. It has been reported that the Kodak patents will sell for at least 3 billion, which is a large amount for only 1,100 patents. Nortel sold over 6,000 patents for 4 billion dollars and Google purchased over 17,000 patents for around 12.5 billion. So, is 3 billion dollars for 1,100 of Kodak patents a reasonable or realistic amount, I would say probably no in this situation. Kodak has over 10,000 patents in its portfolio and they are selling 1,100 of them. This could mean the ones they are selling probably are not that important, since they have not decided to sell the total portfolio. Also, Kodak doesn't have that much room to negotiate, over the past several years Kodak has been struggling to stay above water and therefore, the potential purchasers would have more power in the negotiations. [Link] [Link]

Patent Jobs:

• Thompson Hine is seeking an IP associate with 4-6 years of patent and trademark experience. [Link]
• Roberts Mlotkowski Safran & Cole is searching for a patent attorney with 2-4 years of experience and an electrical engineering background. [Link]
• Roberts Mlotkowski Safran & Cole is searching for a patent attorney with 2-4 years of experience and a chemical background. [Link]
• Maginot, Moore & Beck is looking for a patent attorney with 1-5 years of experience and an electrical engineering background. [Link]
• Cooley is searching for a patent attorney with 2-3 years of experience. [Link]
• Meyertons, Hood, Klivin & Goetzel is seeking patent attorneys/agents and software computer engineers. [Link]

Upcoming Events:

• 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 Intellectual Property Owners Association (IPO) will be holding its annual meeting in Los Angeles September 11-13^th. Guest Speakers include CEO Chad Deaton (Baker Hughes) and Deputy Director James Pooley (WIPO). [Link]
• IPO will be holding a conference in Los Angeles on September 14. The conference will discuss "Compulsory Licensing as an Emerging Global IP Issue". [Link]
• The Chicago-Kent Supreme Court IP Review will be held on September 15^th at Chicago-Kent College of Law. The conference is designed to provide intellectual property practitioners, jurists, legal academics and law students with a review of IP cases from the U.S. Supreme Court's 2010 Term, a preview of cases on the docket for the 2011 Term, and a discussion of cert. petitions to watch. Guest speakers include, Judge O'Malley, Mark Lemley, David Kappos, and a number of other influential individuals in the IP field. [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 Ries, 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.