Patent Law Blog (Patently-O)

Punishing Prometheus: Part IV - Machine or Transformation, We Hardly Knew Thee…

Guest Post by Robert R. Sachs of Fenwick & West LLP
Read Part I; Part II; and Part III. 

It seems like only yesterday the Court told us that the “machine or transformation” test was “a useful and important clue, an investigative tool, for determining whether some claimed inventions are processes under § 101.” The Court’s reasoning suggested that while passing MoT was not necessary, it was still a sufficient condition for patent eligibility, and if nothing else indicated that the invention was not an abstract idea, law of nature, or natural phenomena.

Now, less than two years later, the Court diminishes the test further: “we have neither said nor implied that the [machine-or-transformation] test trumps the ‘law of nature’ exclusion.” What this means in practice is that even if a claim satisfies the MoT test, it could still be deemed unpatentable subject matter, especially by a fact which follows this Court’s method of a) stripping claims down to ”instruction manual” glosses, and b) finding the presence of “natural relations” to be dispositive evidence of a “natural law” in the claim.

In short, before Prometheus, you could assert that your claim was patentable subject matter because it satisfied MoT.  Now MoT does you little if any good—it’s gone from a sufficient condition to a mildly interesting one.

Standing Up for the Patent Bar

For some reason the Court seems to delight in denigrating the role of patent counsel in drafting claims, treating patent attorneys as either mere scriveners or crafty manipulators of words and phrases, clauses and conjunctions. “Those cases warn us against interpreting patent statutes in ways that make patent eligibility depend simply on the draftsman’s art.”  Indeed, in calling patent attorneys draftmen, apparently the Court believes that all we do is make fancy pictures.   Name me another legal discipline in which there is a special bar exam, not to mention to a requirement of an engineering or science degree.  What is it about patent law that makes the Court think we’re not lawyers? 

Second, I ask you: what’s wrong with making patent eligibility depend on our skill?  The patent is a contract, a quid quo pro:  disclose the invention and in exchange obtain the exclusive right.  The patent act requires patents to recite claims that define the invention, the USPTO examines the claims, and infringement is based on the claims. The validity of every other legal document depends on the “draftsman’s art,” upon the skill of the lawyer—just ask any licensing attorney, securities lawyer, or trusts and estate attorney.  Why are patent attorneys somehow not given the same level of recognition by the Court, that what we do is a legal activity, that claims are first and foremost legal definitions? That we are charged not just with describing the implementation of an invention to meet the legal test of an enabling disclosure—but with defining by way of a claim the “metes and bounds” of the invention.  We are trusted with carefully carving out a space for the broadest yet most precise statement of the invention, surrounded on all sides by the prior art, using nothing more than a single sentence.  Where other legal writers suffer no consequence for employing laundry lists of verbs, nouns, adjectives—to throw in the kitchen sink of do not fold, spindle, mutilate, tear, shred, distort, etc.—we are compelled by case law to consider every word as critical.  A misplaced comma, the use of “the” instead of “a,” “at least one” instead of “each,” can spell the difference between a patent worth millions and patent worth less than wallpaper.  The California Civil Code includes a section of codified Maxims of Jurisprudence; my favorite is “Superfluidity does not vitiate.”  True for every attorney but patent attorneys.  Show me another area of legal drafting that is as highly constrained in both form and substance as patent claim writing.

The Court also seems to think that inventors arrive at the patent attorney’s door step with their inventions fully formed, fully understood, and fully explained and explainable. In some cases, in some fields, that may be true—say for those funny hats with fans, beer cans, and scrolling LEDs. But for the majority of technologies, the patent attorney is an active and necessary participant in the creation of the patent and its value. Many inventors simply do not know what they have invented, they lack the framework for understanding their inventions, first in the context of the prior art, and second in the context of how the USPTO and the courts analyze inventions under the law.  Senior patent attorneys often have significantly more exposure and breadth of experience in their particularly technology areas than the inventors that they advise. They combine their understanding of the patent law, the technology, and the business goals of the inventor to create something that did not previously exist: an intellectual property right. This is no mere scrivener’s recording, from the inventor’s lips to the patent examiner’s ear to the court’s gavel.  This is legal counseling and crafting at its best. 

3M v. Avery: Walking the Line of Declaratory Judgment Jurisdiction

By Jason Rantanen

3M Company v. Avery Dennison Corporation (Fed. Cir. 2012) Download 11-1339
Panel: Rader, Lourie (author), Linn

There's a fine (and perhaps rather fuzzy) line between engaging in patent licensing discussions that are sufficient to trigger declaratory judgment jurisdiction and those that are not.  In 3M v. Avery, the court perhaps made that line a bit clearer for those trying to stay on one side of it.

According to 3M's declaratory judgment complaint, in March 2009 Avery's Chief IP Counsel called 3M's Chief IP Counsel to tell him that a new 3M product "may infringe" two of Avery's patents and "licenses are available."  3M subsequently rejected Avery's licensing offer, and in the course of that discussion was told that Avery had performed an analysis of 3M's product in connection with the two patents and that Avery would send claim charts.  No claim charts were ever sent.

Over a year later, 3M filed an action seeking a declaratory judgment of noninfringement, invalidity, and intervening rights as to the two Avery patents.  The district court dismissed the action, concluding that "'even accepting the facts as set forth by 3M,' subject matter jurisdiction did not exist at the time 3M filed its declaratory judgment complaint."  Slip Op. at 5.  In response to 3M's appeal, the Federal Circuit vacated and remanded for factual determinations.

Defining the line: In general, establishing the existence of a case or controversy for purposes of declaratory judgment jurisdiction requires something more than just "a communication from a patent owner to another party, merely identifying its patent and the other party's product line."  Slip Op. at 11 (citing Hewlett-Packard Co. v. Acceleron LLC, 587 F.3d 1358, 1362 (Fed. Cir. 2009)).  How much more is determined "on a case-by-case basis,"  Slip Op. at 11, although 3M v. Avery provides an important data point for identifying behavior that goes too far. 

In vacating the district court's dismissal, the CAFC concluded that the facts alleged by 3M in this case amounted to Avery "effectively charg[ing] 3M with infringement of [the patents-in-suit]."  Id.  That Avery's counsel (who initiated the communication) said "may infringe" rather than "does infringe" was immaterial in light of the license offer, the representation that Avery had analyzed 3M's product, and the statement that claim charts would be forthcoming. Especially in light of the facets of the case that the court held to be immaterial discussed below, the opinion suggests that there is a narrow gap indeed between the non-case or controversy creating communication discussed in Hewlett Packard and communications sufficient to establish jurisdiction.

Immaterial Facts: The CAFC considered several other facts in reaching its ultimate decision to vacate, but concluded that all were immaterial or equivocal. Two related to time: Avery had not provided a deadline for responding to its licensing offer and 3M's declaratory judgment action was filed more than a year after the parties' discussions.  Neither fact significantly favored the conclusion that a case or controversy was lacking.  "[W]e note that, as part of a pre-filing investigation, it takes time to review a set of asserted patents, the record generated before the PTO, and the accused products before a potential infringer can make an informed decision to file a declaratory judgment complaint."  Slip Op. at 15. 

On the other side of the equation, neither the history of litigation between the parties nor the fact that Avery had initiated reissue proceedings for the patents weighed strongly in favor of a finding a case or controversy.  Here, while there was much prior litigation between the parties, it involved different products and patents, and thus was not the type of pattern of litigation leading to the reasonable assumption that the patentee will bring suit based on the patents in suit.  Similiarly, as to the reissue proceedings, the court commented that "[t]he purpose of reissue proceedings is to correct errors in an issued patent...and, in this case, even with the unrelated litigation between the parties, there is no evidence that an objective observer in 3M's position would conclude that Avery initiated reissue proceedings for the purpose of bringing a lawsuit against 3M accusing [its product] of infringement."  Slip Op. at 14. 

Remand for factfinding: Because the district court concluded that 3M failed to allege a justiciable controversy on the fact of its complaint, it had not resolved two key factual disputes: the actual content of the statements made by Avery's counsel and whether the parties' discussions were covered by a confidentiality agreement that precluded their use to establish jurisdiction.  Given the disputed nature of these facts, the CAFC remanded to the district court for resolution.

District Court Concludes Therasense Patent Unenforceable On Remand

By Jason Rantanen

Therasense, Inc. v. Becton, Dickinson and Company (N.D. Cal. 2012) Download 2012-03-28 Therasense v Becton Dickinson

Following the Federal Circuit's remand in Therasense v. Becton Dickinson, the district court has concluded that Patent No. 5,820,551 is unenforceable due to inequitable conduct under the higher standards for intent and materiality articulated by the en banc court.  Specifically, the judge found that the withheld briefs were material under the "but for" test for materaliality, that the Abbot attorney and scientist knew of that but-for materiality, and that they possessed specific intent to deceive the patent office. 

While all of the district judge's intepretations of Therasense are worth discussing, I find the characterization of Therasense as a whole to be the most interesting:

"Under the new standard, therefore, an applicant or attorney may knowingly and deliberately withhold from the PTO any reference known to be inconsistent with a position takeny by him or her before the PTO so long as the withholder does not know that the reference itself would lead to a rejection.  It would not be enough to prove that the applicant or attorney expected that the concealment would help win an allowance or expected that, if revealed to the examiner, the reference would cause the examiner to merely question patentability.  Rather, the applicant or attorney must know - and it must be later proven that he or she knew, that the item, if revealed, would lead to a rejection."

Slip Op. at 3. 

 

Punishing Prometheus: Part III - Conclusions Masquerading as Analysis

Guest Post by Robert R. Sachs of Fenwick & West LLP; Read Part I and Part II. 

Patent attorneys are trained to draft claims using clear and precise language, and in particular to not rely upon relative terminology to define an invention--terms like “about,” “substantially,” “superior,” “better,” “good,” “sufficient” etc.  See, Manual of Patent Examination Procedure (MPEP), § 2173. After all, claims are definitions and indefiniteness is fatal.

So when the Court articulates expresses what is ostensibly a rule of analysis—a definition of what is patentable—patent attorneys naturally look for precision and clarity. Alas, we find a jumble of relative terminology and conclusory statements masquerading as legal reasoning. Consider the following samples:

The question before us is whether the claims do significantly more than simply describe these natural relations. To put the matter more precisely, do the patent claims add enough to their statements of the correlations to allow the processes they describe to qualify as patent-eligible processes that apply natural laws? We believe that the answer to this question is no.

[T]hose steps, when viewed as a whole, add nothing significant beyond the sum of their parts taken separately. For these reasons we believe that the steps are not sufficient to transform unpatentable natural correlations into patentable applications of those regularities.

The Court has repeatedly emphasized this last mentioned concern, a concern that patent law not inhibit further discovery by improperly tying up the future use of laws of nature.

What is “significant” or “enough” or “sufficient?” What would be “properly tying” up future uses? It is “not enough” to say that what’s in Prometheus’s claim is “not enough,” especially when, at the same time, the Court makes sweeping statements that the presence of “entirely natural processes” indicate that the patent recites a “natural law.”  These various statements or criteria are not functional tests—they are conclusions and nothing else.  This leads us to the next problem.

So Long Technology, Hello Business Methods!

The Court pays lip service to the principle that “all inventions at some level embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas.”  Indeed, any invention in the “hard sciences” of electronics, physics, chemistry, biology, engineering, etc. would perforce comply with the laws—or more properly—descriptive paradigms of the domain. An invention for a new electronic circuit clearly operates according to Maxwell’s equations. An invention for a new way of making a chemical compound necessarily recites steps that in essence are nothing more than chemical reactions—laws of nature in the Court’s book.

Let’s take a look the core of the Court’s analysis of the Prometheus claim and see what happens when we transport it to the domain of electronics, to a simple device such as loudspeaker:

Prometheus

While it takes a human action (the administration of a thiopurine drug) to trigger a manifestation of this relation in a particular person, the relation itself exists in principle apart from any human action. The relation is a consequence of the ways in which thiopurine compounds are metabolized by the body—entirely natural processes. And so a patent that simply describes that relation sets forth a natural law.

A loudspeaker

While it takes a human action (the activation of the amplifier) to trigger the output of the sound from the loudspeaker in response to an electrical signal, the relation itself exists in principle apart from any human action. The relation is a consequence of the ways in which electrical impulses are converted to mechanical movement—entirely natural processes. And so a patent that simply describes that relation sets forth a natural law.

There are—or should I say, were—by my estimate, approximately 10,000 patents on various types of loudspeakers. This is only one example, and a trivial one at that. A similar example could be constructed in any field of technology. And if that is the case, then no patent is immune from this line of attack. Well, no patent except one for a business method.

Business methods, being entirely the province of arbitrary human behavior such as advertising, finance and the like, are the one class of inventions clearly not based upon or using laws of nature and natural phenomenon. Yes, all inventions comply with the law of thermodynamics, etc., and perhaps all human behavior could be explained if we truly could model the regularities that govern the behavior of all fundamental particles, and as result we divorced ourselves from a persistent macro-phenomenon as free will and consciousness.   If we get that far, then we will have a more difficult problem on our hands, whether we can patent non-obvious applications of those laws.   Whether these methods are “abstract ideas” is another matter—but as should be clear from the above, it is my view that a method used in a business is not an abstract idea. If you can sell it, it’s patent-eligible. 

 

Punishing Prometheus: Part II - What is a Claim?

Guest Post by Robert R. Sachs of Fenwick & West LLP; Read Part I

Yes, I said that: the Court does not understand the nature of patent law—more precisely, it does not understand what claims do. Reading the Court’s treatment of Prometheus’ claim, one would think that claims are some type of qualitative instruction manual, a recipe that speaks to “audiences” such as doctors, about which things are “relevant to their decision making.” Claims are no such thing: they are definitions that articulate a specific combination of steps or structures. They are objective in form and design, not subjective or advisory. The notion that the claims here “trust” doctors to “use those laws” is at best silly, and at worst badly misguided. Reducing the claim to this “instruction manual” allows the Court to analogize the claim to Einstein “telling linear accelerator operators about his basic law”—a low point in modern legal reasoning.

In this decision, as well as in Bilski, Benson, and Flook, the Court simply does not “get” what claims are about. The entire preemption analysis, born of a conflation of “algorithms” with “scientific truths” in Benson, is based on this misunderstanding. By definition claims preempt, that is what they are designed to do: to preclude one from making, using, selling, etc., the invention. A broadly drafted claim preempts broadly. And it is this further confusion—between “breadth” or “abstraction” and “abstract ideas”—that is the second damaging mistake the Court made (and continues to make).

Gene Patents: AMP v. Myriad Genetics

The Supreme Court today vacated the Federal Circuit's decision in AMP v. Myriad Genetics and has ordered the appellate court to reconsider the case in light of the recent Supreme Court decision in Mayo v. Prometheus. To be clear, the Supreme Court's move here is not a ruling on the merits but rather merely a recognition that the validity of Myriad's human gene patents may be impacted by the Mayo decision.

I previously wrote that one reasoned result of the Mayo decision is that Myriad's claims directed toward isolated human DNA are now invalid.

Following Mayo, the court could logically find that the information in the DNA represents a law of nature, that the DNA itself is a natural phenomenon, that the isolation of the DNA simply employs an isolation process already well known and expected at the time of the invention, and ultimately that the isolated DNA is unpatentable because it effectively claims a law of nature or natural phenomenon. One distinguishing point is that Prometheus claimed a process while Myriad claims a composition of matter. As we have seen in recent cases, the Federal Circuit already largely rejects formalistic distinctions between process and composition claims. Here, that distinction is further minimized by the reality that the claimed DNA is functionally characterized by the already well known process of isolating human DNA.

 

Supreme Court: Solving Claim Construction?

by Dennis Crouch

Retractable Techs., Inc. v. Becton, Dickinson & Co. (on petition for certiorari 2012)

As its company name suggests, Retractable Technologies makes safety syringes that retract after completing a drug injection. Retractable sued BD for patent infringement and won $5 million in damages and permanent injunctive relief. This was the second time that Retractable had filed a lawsuit to enforce its patent. In both cases, the district court interpreted the claim term syringe "body" as encompassing a body "composed of one or multiple pieces." (In the first case, the accused infringer agreed to stop making its product and to pay a $1 million settlement).

On appeal here, BD was able to convince a two-member majority of its Federal Circuit panel to modify the claim construction in a way that limits the "body" element to a "one-piece body." (Majority opinion by Judges Lourie and Plager). The appellate panel narrowly construed the term based upon its reading of the patent specification and the notion that the claims should be limited to what "the inventor actually invented." In dissent, Chief Judge Rader argued that the majority had improperly confined claim scope to the specific embodiments of the invention." Chief Judge Rader also argued in favor of giving more weight to the doctrine of claim differentiation. Here, some of the non-asserted claims in the patent included an explicit "one-piece body" limitation – suggesting that the asserted claim without the "one-piece" limitation must be broader.

After losing the appeal, Retractable filed a petition for rehearing and rehearing en banc. The petition was denied, but Judges Moore and O'Malley each filed dissents.

Supreme Court Petition: Retractable has now filed a petition for writ of certiorari to the United States Supreme Court. The petition raises two questions:

1. Whether a court may depart from the plain and ordinary meaning of a term in a patent claim based on language in the patent specification, where the patentee has neither expressly disavowed the plain meaning of the claim term nor expressly defined the term in a way that differs from its plain meaning.

2. Whether claim construction, including underlying factual issues that are integral to claim construction, is a purely legal question subject to de novo review on appeal.

First Question Goes Nowhere: In my view, the first question presented is not well stated. Of course a court can use context to provide meaning to claim language. A formalistic and restrictive view of patent doctrine was rejected by the Supreme Court in virtually every recent decision, including Mayo, Bilski, KSR, eBay, and MedImmune. Further, many members of the Supreme Court have identified a problem with vague and over-broad claim limitations, and the majority opinion here provides a simple tool for limiting scope: interpret the claims within the context of what was demonstrably understood by the inventor and the examiner and by what would have been known by a reasonably skilled artisan.

Use Specification to Narrow (or Broaden): There are times when the context of the specification is used to broaden the scope of a claim term beyond its ordinary meaning. However, the Federal Circuit judges appear to believe that greater reliance on the specification will usually result in a narrowing of claim scope. Thus, the debate on the role of the specification in claim construction is at least partially a proxy for the debate on whether patents should be given a broad scope or narrow scope. I would again criticize the petition – this time for wholly agreeing that reliance on the specification results in a narrowed scope. Retractable frames the debate on trying to understand "the circumstances in which the language of the specification should narrow the plain meaning of a claim term."

The Second Question is more well framed, although I would have tweaked it slightly to ask: "Whether claim construction, including underlying factual issues that are integral to claim construction, is a purely legal question [that is therefore] subject to de novo review on appeal." The tweak here is important because Retractable is not challenging the Supreme Court's Markman decision but rather challenging the Federal Circuit's Cybor decision. In Markman, the Supreme Court recognized the reality that claim construction includes a number of factual determinations – calling the process a "mongrel" of fact and law. However, the court ruled that claim construction should be treated as an issue of law to be decided by a judge. In Cybor, the Federal Circuit applied its usual formalistic if-then approach to rule that appellate review must be de novo because claim construction is an issue of law. From the petition:

In Markman, this Court held that, for purposes of the Seventh Amendment, the task of construing patent claims falls to trial judges rather than juries. Markman did not decide the standard of review that an appellate court should apply to a district court's claim construction. The Court noted, however, that the process of construing a claim is a "mongrel practice," that "falls somewhere between a pristine legal standard and a simple historical fact." In holding that trial judges are "better suited" for this task than juries, the Court recognized that claim construction requires trial judges to exercise a "trained ability to evaluate the testimony in relation to the overall structure of the patent." Accordingly, the Court held that "there is sufficient reason to treat construction of terms of art like many other responsibilities that we cede to a judge in the normal course of trial, notwithstanding its evidentiary underpinnings." Thus, Markman recognized that claim construction involves underlying factual questions, and said nothing to indicate that the Federal Circuit should displace the district court's resolution of those questions.

There are lots of doctrines that receive de novo review that do not have a reversal rate anywhere near that of claim construction. I think that everyone agrees that claim construction is inherently difficult. Claim construction rulings do not provide a yes-no answer like you might find in an obviousness judgment. Rather, a judge is required to identify the best interpretation of all possible interpretations of each contested claim term. And, unlike statutory interpretation, we do not have the benefit of the scope being developed over time through a series of cases. Rather, in most instances, a court's construction is in the first instance. In addition to the inherent difficulty, claim construction is made more difficult because of the open panel dependence of claim construction decisions. For many years the Federal Circuit refused to admit any panel dependence in its decision making, that has changed.

Where to Focus Assurances?: District court judges complain about claim construction because of the high likelihood that their decisions will be reversed on appeal. Giving deference to district court judgments would likely mean fewer reversals. This approach gives us certainty earlier in the process, but only once the district court issues a final claim construction. That date still seems very late. The scope of patent claims is of critical importance to almost all patent monetization transactions. However, very few of those transactions take place in conjunction with a district court claim construction decision. We need a process for substantially understanding claim scope at a much earlier stage and without relying on a federal court.

One answer for an early understanding of claim scope: Define terms during prosecution. If applicants fail to define terms, examiners should provide their own definitions as part of the office action. In the short-term, the focus should be on terms that are (1) frequently debated in court (such as "server" or "coupled to"; (2) used in the specification in a way that is in tension with the ordinary meaning of a term; or (3) inherently imprecise (such as "about").

Notes: 

• Download the Retractable Cert Petition.
• Amicus briefs in support will be due at the Supreme Court by April 23. 

Punishing Prometheus: The Supreme Court’s Blunders in Mayo v. Prometheus

Guest Post by Robert R. Sachs of Fenwick & West LLP

“Not even wrong.” So said Wolfgang Pauli about a proposed analysis by a young physicist, meaning that the arguments were not subject to falsification, the basic tool of scientific analysis. So too it can be said about the Supreme Court’s decision in Mayo v. Prometheus. The Court’s analysis creates a framework for patent eligibility in which almost any method claim can be invalidated. Like so many pseudo-sciences in which every phenomenon can be rationalized and in which there is no test that can show the theory to be incorrect, under Prometheus seemingly anything can be “explained” as being unpatentable subject matter.

Let me say at the outset that I’ve been a student of patent law, and patent eligibility in particular, since 1993. My clients have frequently been those whose inventions bumped up against the boundaries of patentable subject matter—in software, e-commerce, finance, business operations, user interfaces, and bio-informatics to name a few—so I have become intimately acquainted with both the legal and practical implications of this question. As such my personal reaction to this decision is very strong, and I will be quite blunt in what follows.

Over the next several days I will address just some of the logical and legal errors in the Court’s decision.

What’s a Law of Nature?

The first critical mistake is the Court’s assumption that Prometheus’ claims recited a “law of nature:” “The claims purport to apply natural laws describing the relationships between the concentration in the blood of certain thiopurine metabolites and the likelihood that the drug dosage will be ineffective or induce harmful side-effects.” The facile assumption that this relationship is a “law of nature” is incorrect, and potentially the most damaging misstep by the Court.

First, let us assume for the moment that there are in fact such things as “laws of nature.” What would their characteristics be? A first approximation would suggest that a law of nature is immutable and universal, that it is not subject to change, and it applies in all circumstances. See, Evidence Based Science. Thus, gravity and the speed light apply to you and me equally, and under all conditions. (I’m purposely using these two examples, for reasons that will become clear.)  However, this is not the case with the toxicity of any drug, including thiopurines, as acknowledged by the Court: the amount of a toxic dose varies between individuals for two reasons. First, different people metabolize at different rates, thereby producing different metabolite levels for a given dose. Second, individuals have differential responses to a given amount of the metabolites; a given level of the metabolites may be toxic in one person and not toxic in another. Thus, while the patent sets forth metabolite levels for toxicity and effectiveness, these levels are necessarily probabilistic, as some patients could experience toxicity at levels below or above those specified in the patent claims. This is inherent in the way toxicity is determined using a median lethal dose, LD₅₀. This is exactly the same reason that one person can be drop dead drunk after five drinks and another can be stone cold sober at the same level. Indeed, Mayo’s test used a higher threshold for toxicity—evidence that there is no “law of nature” as to what is a toxic dose of thiopurine in all humans.

The “natural relation” that Prometheus claims is, itself, not immutable in an even deeper sense. This relationship is a byproduct of human (or perhaps more generally mammalian) biology, which from a logical point of view is a contingent relationship that could have been otherwise: we could have evolved in such a way that the toxicity range was higher or lower, or the drug was entirely ineffective. That is, it’s an arbitrary and contingent fact that humans evolved so that thiopurine drugs were effective at all for treating immune-mediated gastrointestinal disorders, or that we metabolize them in a manner that makes them toxic at specific dosing ranges. Indeed, given that humans are not exposed to thiopurine in nature, it is hard to understand how it can even be argued that it is a “natural law” that these drugs have a specific range of toxic or effective dosages at all. That these drugs are effective (or toxic) is a classic discovery in the truest sense of the term.

At best, the relationship between the dosage and toxicity level may be a “natural phenomenon.” Let us assume that is the case. Natural phenomena are a different class of things than laws of nature. Lightning, mirages, tornadoes, superconductivity, rainbows, these are natural phenomena: events that take place in nature (or in the lab) under specific and contingent conditions. While these events are of course dependent on the laws of nature, they are different from them in kind. The prohibition of patent claims in this regard is for claims on the phenomenon itself, not on the specific application of a phenomenon. Indeed, most patents in the chemical, biological, and electrical arts are based precisely on this distinction, being able to induce, apply, or control a natural phenomenon for a particular purpose. For example, there are thousands of patents that expressly claim a particular use of the Hall effect, natural phenomena discovered in 1879. The Court’s failure to appreciate this distinction puts many patents that harness natural phenomena at risk.

In short, the relationship of thiopurine dosage to toxicity is a contingent, empirical fact and subject to discovery. Like other empirical facts, it is precisely the type of subject matter that has been patented in this country since the very first patent issued by the USPTO: Samuel Hopkins’ patent on an improved method for making potash, based on the discovery that burning the raw ashes a second time increased their carbonate production. Hopkins’ discovery is no different in kind from Prometheus’ discovery: in both cases empirical “scientific” facts about the world.

But let us return to the core assumption: that there are laws of nature in the first instance. The Court makes the obvious reference to Einstein’s E=mc² equation as an example. But the great scientist would have readily dismissed this appellation, knowing full well that what he set forth was a theory, a model, a description that was subject to falsification. Indeed, Einstein’s work has been criticized as being incomplete, or valid only in limited circumstances.

The view that there are laws of nature reflects an 18^th century view of the world, based no doubt upon the classical, Newtonian view of a reality of absolute space and time governed by the three “laws of motion”—laws that were thought to be immutable and universal—and which Einstein among others showed not to be “laws” at all.

Most modern scientists do not view reality as defined by “laws”—indeed, the very idea that we could “know” what the “laws” are itself begs the very questions that philosophers since Plato have struggled with, the questions of epistemology (what is knowledge, what can we know) and ontology (what exists).

In several places, the Court lumps laws of nature together with “abstract ideas,” for example by leaning on the analysis in Bilski and Benson. But again, this is a category error: abstract ideas are very different from laws of nature, and must be treated separately. “Ideas,” classically speaking, are the “impressions in your head” when you think about something—the thing you think about is a “concept.” When you think about concepts that have instances in the world—cats, dogs, and thiopurine—you are thinking of “concrete” concepts, and your ideas are “concrete.”  Even when you think of a unicorn or a flying purple people eater, you are thinking of a concrete concept because it could have an instance in the world. However, when you think about concepts that do not (or could not) have instances in the world—justice, eternity, infinitesimal, invisible green four sided triangles—or metaphors—All the world's a stage, and all the men and women merely players—the “idea” in your head is “abstract.” (Of course, I know that this is (1) a gloss, and (2) subject to debate as much as anything else in philosophy. Arguably, there are no “abstract” concepts at all. I’ll leave that debate for another day).

To wit: the abstract idea of say, immortality, is clearly not a “law of nature,” describing something that by definition cannot have examples in the world, since nothing can be immortal (there could be unicorns however, thus the concept of “unicorn” is concrete). Conversely, Ohm’s Law—that the current through a conductor between two points is directly proportional to the potential difference across the two points—describes something inherently and entirely physical and real. Ohm’s Law is a description of the world (and it turns out, not always correct). That the Court attempts to put these two square pegs in the same round hole reveals just how little the Court understands the nuances of science, philosophy and language—let alone the patent law itself.

Tomorrow:  What’s a Claim? and Patent-Eligibility vs. Patentability

 

 

USPTO Is Hiring

The USPTO is on a new hiring initiative. The office is looking for engineers, scientists, and intellectual property attorneys for its DC area office and for its soon-to-open Detroit office.

• www.usptocareers.gov
• Kappos Blog Post
• Watch this video for more info on what the USPTO does: https://uspto.connectsolutions.com/patentexaminfosession/

Video Reaction to Mayo v. Prometheus

http://www.youtube.com/watch?v=MYi5SQ0sEfw

Examining Subject Matter Eligibility under Mayo v. Prometheus

By Dennis Crouch

In the wake of the Supreme Court's decision in Mayo v. Prometheus, the US Patent & Trademark Office has distributed a short memorandum to examiners providing additional guidance. One problem with the Prometheus decision is that it does not appear to consider administrative practicality and there be an ongoing open question as to whether the USPTO will be able to successfully implement the proffered rule of subject matter eligibility. Regardless, the USPTO must follow the law to the best of its abilities and that means that it must examine patents using the Mayo standards.

In the three page "preliminary" document sent to the examining corps, the PTO's chief examination policy guru Drew Hirshfeld described the USPTO's conservative new approach:

As part of a complete analysis under 35 U.S.C. § 101, examiners should continue to examine patent applications for compliance with section 101 using the existing Interim Bilski Guidance issued July 27, 2010, factoring in the additional considerations below. The Interim Bilski Guidance directs examiners to weigh factors in favor of and against eligibility and reminds examiners that, while the machine-or-transformation test is an investigative tool , it is not the sole or a determinative test for deciding whether an invention is patent-eligible.

Examiners must continue to ensure that claims, particularly process claims, are not directed to an exception to eligibility such that the claim amounts to a monopoly on the law of nature, natural phenomenon, or abstract idea itself. In addition, to be patent-eligible, a claim that includes an exception should include other elements or combination of elements such that, in practice, the claimed product or process amounts to significantly more than a law of nature, a natural phenomenon, or an abstract idea with conventional steps specified at a high level of generality appended thereto.    

If a claim is effectively directed to the exception itself (a law of nature, a natural phenomenon, or an abstract idea) and therefore does not meet the eligibility requirements, the examiner should reject the claim under section 101 as being directed to non-statutory subject matter. If a claim is rejected under section 101 on the basis that it is drawn to an exception, the applicant then has the opportunity to explain why the claim is not drawn solely to the exception and point to limitations in the claim that apply the law of nature, natural phenomena or abstract idea.

The USPTO is continuing to study the decision in Mayo and the body of case law that has evolved since Bilski and is developing further detailed guidance on patent subject matter eligibility under 35 U.S.C. § 101.

The document describes the Mayo decision as follows:

The Supreme Court found that because the laws of nature recited by the patent claims – the relationships between concentrations of certain metabolites in the blood and the likelihood that a thiopurine drug dosage will prove ineffective or cause harm - are not themselves patent eligible, the claimed processes are likewise not patent-eligible unless they have additional features that provide practical assurance that the processes are genuine applications of those laws rather than drafting efforts designed to monopolize the correlations. The additional steps in the claimed processes here are not themselves natural laws, but neither are they sufficient to transform the nature of the claims.

In this case, the claims inform a relevant audience about certain laws of nature. Any additional steps consist of well-understood, routine, conventional activity already engaged in by the scientific community. Those steps, when viewed as a whole, add nothing significant beyond the sum of their parts taken separately. The Court has made clear that to transform an unpatentable law of nature into a patent-eligible application of such a law, one must do more than simply state the law of nature while adding the words "apply it." Essentially, appending conventional steps, specified at a high level of generality, to laws of nature, natural phenomena, and abstract ideas cannot make those laws, phenomena, and ideas patent-eligible.

… A claim that recites a law of nature or natural correlation, with additional steps that involve well-understood, routine, conventional activity previously engaged in by researchers in the field is not patent-eligible, regardless of whether the steps result in a transformation. On the other hand, reaching back to Neilson, the Court pointed to an eligible process that included not only a law of nature (hot air promotes ignition) but also several unconventional steps (involving a blast furnace) that confined the claims to a particular, useful application of the principle.

The document does not address whether examiners should use the same analysis when considering claims that include an "abstract idea" such as a mathematical algorithm (i.e., software).

I suspect that the USPTO will wait for additional movement on the Myriad case before releasing a full set of new guidelines to examiners.

Read the memo: http://www.uspto.gov/patents/law/exam/mayo_prelim_guidance.pdf

Non-Practicing Entities at the USITC

By Dennis Crouch

RPX today published a study of the increase in non-practicing entity (NPE) activity at the United States International Trade Commission (ITC). The charts above (that come from the RPX article) show annual numbers for ITC investigations on behalf of NPE patent holders and the cumulative number of respondents (i.e., number of defendants). Both figures show a major increase in NPE activity at the ITC. In its study, RPX points-out that "[f]ully 25% of ITC Investigations in 2011 were filed by an NPE and 51% of respondents hauled into the ITC were in response to an NPE complaint."

The ITC is an agency of the US Government not an Article III court. However, its administrative law judges conduct hearings that look an awful-lot like bench trials. I don't have the data here, but the number of "investigations" is typically a subset of the total number of complaints filed. It takes votes from three of the six ITC Commissioners to begin an official investigation.

Why the new demand?: (1) In 2010, the ITC generously interpreted the "domestic industry" requirement and ruled that NPEs will ordinarily have standing to pursue a complaint. (2) Although the ITC does not award money damages, the ITC does typically issue injunctive relief since the agency is not bound by eBay v. MercExchange; (3) The ITC is not bound by the new joinder rules that limit the number of accused infringers per action; and (4) The ITC tends to move much more quickly than ordinary patent litigation.

Injunction for an NPE?: In the vast majority of NPE cases, the patent holder is actually seeking money and would receive no direct benefit from the accused infringer ceasing operations. However, despite being of no direct value to an NPE, injunctive relief is a major bargaining chip because of its value to the accused infringer. The ITC's injunctions are only directed at imports, but most high-tech consumer products are imported and therefore qualify.

Money Damages: Money damages are not available at the ITC for either past or ongoing infringement. However, pursuing an action at the ITC does not foreclose an NPE patent holder from also filing a complaint in a federal district court seeking monetary damages. In this sense, ITC litigation should likely be seen as an additional potential battle-front that may be fought in conjunction with district court litigation; reexamination (and future review) processes at the USPTO; and non-US patent litigation as well.

RPX: I should note here the source of this data is RPX – a company that has built its business on making NPEs appear to be the "bad guys." RPX is currently defending its market-shaping activities in an antitrust lawsuit filed earlier this month. Although I believe the data presented here is correct, an anti-NPE bent is apparent from the text of the study.

Notes

• Read the Study: http://www.rpxcorp.com/index.cfm?pageid=14&itemid=20.
• Mark Lemley and Colleen Chien wrote on this topic in a 2011 NYTimes Editorial: http://www.nytimes.com/2011/12/13/opinion/patents-smartphones-and-the-public-interest.html

   

 

A New Record Number of Patents

This week the USPTO issued a record number 4,976 utility patent — setting an all time single-week high. As it turns out, the top-ten single week issuance numbers all come from fiscal year 2012. (The top seven come from calendar year 2012 even though we are only 13-weeks into the year).  As the PTO continues to ramp-up examination throughput, we can expect these numbers to continue to rise.  The PTO does not regularly release information regarding the number of abandoned cases and so I have been unable to confirm whether those numbers have risen in parallel.

Top Grant Dates	Count
3/20/2012	4,976
3/6/2012	4,880
1/10/2012	4,834
1/31/2012	4,831
2/14/2012	4,826
2/21/2012	4,825
2/28/2012	4,818
11/22/2011	4,778
11/15/2011	4,777
12/6/2011	4,777

The newest group of patents include No. 8,141,114 issued to Microsoft.The '114 patent is directed to a "content rating and recommendation system." I wonder whether the claim should be considered dead-on-arrival based upon its failure to claim patent eligible subject matter under 35 U.S.C. 101.  The examiner had initially rejected the claims as subject matter ineligible in a 2008 office action rejection. That rejection was withdrawn after Microsoft amended the claim preambles to include the phrase "computer-readable medium" in the system claims and "implemented using a processor" in the method claims.

The system claim:

1. A content ratings and recommendation system implemented using a computer-readable medium, comprising:

a ratings service configured to compile ratings of programs for a rating system that is associated with a group of viewers where at least one viewer of the group of viewers establishes the rating system including at least one standard of the rating system, and where at least some viewers of the group of viewers use the rating system to rate the programs for the group of viewers, wherein the rating system represents flexible characterization of the media content of the programs based on at least one of any possible descriptive aspect of the program;

a recommendation service configured to provide program recommendations to the viewers of the group of viewers based on the rating system, the recommendation further being configured to monitor viewing selections of a viewer that is not a member of the group of viewers, and to offer a membership into the rating system to the viewer based on the viewing selections of the viewer and the at least one standard of the rating system; and

a rater monitoring service configured to receive a rating of a particular viewer who used the rating system to rate a particular program and to provide the rating of the particular viewer to the viewers of the group of viewers, the rating of the particular viewer relating to a reliability or credibility of the ratings made by the particular viewer.

The patent application was originally filed six years ago in 2006.  The examiner issued a non-final rejection followed by a final rejection. At that point, Microsoft filed a first request for continued examination (RCE) and the examiner issued a non-final rejection followed by another final rejection.  At that point, Microsoft filed a second RCE and the examiner issued two more rejections. The examiner then considered Microsoft's amendment-after-final and allowed the case.  During this time, Microsoft amended the claims six different times before eventually finding a set of claims that the examiner found allowable. During this time, the examiner stuck with the same prior art rejections that were found in the original rejection with the caveat that the examiner added one additional reference to the fifth office action.

It is interesting (at least to me) that none of the three listed inventors work at Microsoft any longer.

Survey on USPTO Fees and the Backlog

The following four question survey should take less than 1 minute to complete.
Thanks! Dennis Crouch, dcrouch@gmail.com

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USPTO Director Kappos on Increased USPTO Fees

Oh his blog, USPTO Director Dave Kappos has written an important defense of proposed USPTO fee increases and his rejection of the normal Washington DC approach of including improbable efficiency gains as major budget elements. I have excerpted a portion of the Kappos post that he titles “Increased Fees v. Operational Efficiencies”:

[S]ome stakeholders have taken the view—to caricature it slightly—that the USPTO does not need to increase fees; it needs to get more efficient.

We could not agree more on the importance of improving efficiency at the USPTO. . . . But attempting to draw a corollary between fee-setting and speculation about the possible impact of potential future efficiency gains is difficult without the benefit of hindsight. As we have outlined in our fee proposal, our fees must be set in a manner that enables us to continue investing in reducing the backlog and improving all other areas of our agency. Our experience also reminds us that implementing improvements frequently causes short term disruptions, and likely won't immediately translate into efficiencies. Anyone who runs a business will tell you that productivity investments often take years to pay off.

Moreover, my judgment as the steward of this agency is that I cannot proceed with a funding model that assumes further efficiency gains, especially if we have not yet achieved them. It places our agency at risk, and is just not right for our employees or for our stakeholders.

The responsible approach is to rely on our experience and current cost model, factoring in the efficiency gains we have achieved to date, but not speculating about possible future gains. This approach of using current costs as a basis for setting prices is the common practice among businesses, and follows the sound advice of the accounting, finance, and economics professions.

Then the question becomes the one asked in our fee proposal: does the U.S. innovation community want us to continue investing to quickly reduce the backlog and fully capture the promise of the AIA, or does it want us to back off a bit and accept a longer trajectory to reducing the backlog, and a higher level of risk relative to future funding downturns? The answer will ultimately have consequences for the kinds of efficiencies the agency is able to realize in the future, and what level of services the USPTO can deliver in years to come.

Read the full post here.

 

Scholarship Cited by the Supreme Court in Mayo v. Prometheus

• C. Bohannan & H. Hovenkamp, Creation without Restraint: Promoting Liberty and Rivalry in Innovation 112 (2012) ("One problem with [process] patents is that the more abstractly their claims are stated, the more difficult it is to determine precisely what they cover. They risk being applied to a wide range of situations that were not anticipated by the patentee").
• W. Landes & R. Posner, The Economic Structure of Intellectual Property Law 305–306 (2003) (The exclusion from patent law of basic truths reflects "both . . .the enormous potential for rent seeking that would be created if property rights could be obtained in them and. . . the enormous transaction costs that would be imposed on would-be users [of those truths]").
• Eisenberg, Wisdom of the Ages or Dead-Hand Control? Patentable Subject Matter for Diagnostic Methods After In re Bilski, 3 Case W. Res. J. L. Tech. & Internet 1, ___ (forthcoming, 2012) (manuscript, at 85–86, online at http://www.patentlyo.com/files/eisenberg.wisdomordeadhand.patentlyo.pdf).
• 2 D. Chisum, Patents §5.03[3] (2005).
• Lemley, Risch, Sichelman, & Wagner, Life After Bilski, 63 Stan. L. Rev. 1315 (2011)(arguing that patents on laws of nature would inhibit future innovations premised upon the law).
• Risch, Everything is Patentable, 75 Tenn. L. Rev. 591 (2008) (defending a minimalist approach to §101) (the Court found that by 2011, Risch had changed his viewpoint as evidenced by the Lemley article).

Mayo v. Prometheus: Natural Process + Known Elements = Normally No Patent

by Dennis Crouch

Mayo Collaborative Services v. Prometheus Labs., Inc. (Supreme Court 2012)

A unanimous (9–0) Supreme Court has held that the personalized medicine dosing process invented by Prometheus is not eligible for patent protection because the process is effectively an unpatentable law of nature. This decision reverses the Court of Appeals for the Federal Circuit's holding that the claims were patentable because they included substantial physical limitations.

The Prometheus invention identifies a “relationships between concentrations of certain metabolites in the blood and the likelihood that a dosage of a thiopurine drug will prove [either] ineffective or cause harm. Claim 1, for example, states that if the levels of 6–TG in the blood (of a patient who has taken a dose of a thiopurine drug) exceed about 400 pmol per 8x10(8) red blood cells, then the administered dose is likely to produce toxic side effects.”  In addition to claiming the boundaries between over and under dosage of thiopurine based upon measuring 6–TG in the blood, some of the Prometheus claims include additional limitations such as (1) administering thiopurine to a patient and (2) determining the blood level of 6–TG.

Law of Nature: In its decision, the Supreme Court first identified the correlation between 6–TG blood levels and over/under thiopurine dosage as an unpatentable law of nature.

The relation is a consequence of the ways in which thiopurine compounds are metabolized by the body—entirely natural processes. And so a patent that simply describes that relation sets forth a natural law.

As is usual in these cases, the Court referenced the groundbreaking discoveries by Einstein and Newton and noted that neither “E=mc²” nor the “law of gravity” would have been subject matter eligible.  Taking that as a premise, the court jumped to the conclusion that, therefore, the discovery that the blood level of 6–TG in a human correlates with either an overdose or underdose of thiopurine is also subject matter ineligible.

Additional Elements: The Supreme Court then considered the additional limitations and held them insufficient to transform the identified natural law into a patentable process.  The opinion repeatedly and favorably cites Parker v. Flook, 437 U. S. 584 (1978) in finding that the physical and transformative elements of the invention were not “genuine applications of those laws[, but] rather .. drafting efforts designed to monopolize the correlations.”  As to the claimed application of the law of nature, court here found it relevant and important that the additional steps were already known in the art.

Because methods for making such determinations were well known in the art, this step simply tells doctors to engage in well-understood, routine, conventional activity previously engaged in by scientists in the field. Such activity is normally not sufficient to transform an unpatentable law of nature into a patent-eligible application of such a law.

The conclusion here is that (1) a newly discovered law of nature is itself unpatentable and (2) the application of that newly discovered law is also normally unpatentable if the application merely relies upon elements already known in the art.  To be clear, the court still maintains the law of Diehr that “an application of a law of nature or mathematical formula to a known structure or process may well be deserving of patent protection.”  On the other hand, the “application” must be “significant,” not “too broadly preempt” use of the law, and include other elements that constitute an “inventive concept” that is significant and separate from the natural law itself.  Of note, it is likely important that in this decision the court unfavorably cites the limitation of Flook found in Diehr that eligibility under §  101 “must be” based on claims “considered as a whole.”

Process and Presumption: In addition to the legal elements, the decision can be read to create a process for determining patent eligibility for patent claims that include a law of nature.  The court wrote that the “additional features” that show an application of the law must “provide practical assurance that the [claimed] process is more than a drafting effort.”  This language suggests that the burden will be on the patentee to prove that its limitations are more than patent attorney tricks. 

Whither Myriad: Although no action has been taken yet, I presume that the Supreme Court will now vacate and remand the pending Myriad case with instructions to the Federal Circuit to reconsider its holding that isolated human DNA is patentable.  Following Mayo, the court could logically find that the information in the DNA represents a law of nature, that the DNA itself is a natural phenomenon,  that the isolation of the DNA simply employs an isolation process already well known and expected at the time of the invention, and ultimately that the isolated DNA is unpatentable because it effectively claims a law of nature or natural phenomenon.  One distinguishing point is that Prometheus claimed a process while Myriad claims a composition of matter.  As we have seen in recent cases, the Federal Circuit already largely rejects formalistic distinctions between process and composition claims. Here, that distinction is further minimized by the reality that the claimed DNA is functionally characterized by the already well known process of isolating human DNA.

Read the opinion by Justice Breyer here: LINK.

The following is the text of the now invalidated Claim 1 of the Prometheus U.S. Patent No. 6,355,623.

A method of optimizing therapeutic efficacy for treatment of an immune-mediated gastrointestinal disorder, comprising:

(a) administering a drug providing 6-thioguanine to a subject having said immune-mediated gastrointesti­nal disorder; and

(b) determining the level of 6-thioguanine in said subject having said immune-mediated gastrointesti­nal disorder,

wherein the level of 6-thioguanine less than about 230 pmol per 8×108 red blood cells indicates a need to increase the amount of said drug subsequently admin­istered to said subject and

wherein the level of 6-thioguanine greater than about 400 pmol per 8×108 red blood cells indicates a need to decrease the amount of said drug subsequently ad­ ministered to said subject.

AIA Changes The Role of the Eastern District of Texas

Jim Pistorino has updated his annual BNA report on patent lawsuit case filings. His biggest finding is that the new joinder provisions of the America Invents Act (AIA) appear to have had a major impact on the distribution of new lawsuit filings.

The new joinder rules became effective for all patent lawsuits filed on or after September 16, 2011 [updated to fix typo] and limit the ability of a plaintiff to join multiple unrelated defendants in a single action.  In addition to potential cost savings of a single-suit, the joining of geographically diverse defendants in a single suit is thought to make it more difficult for one of the defendants to force a transfer of venue. Thus, the idea behind limiting the joinder of unrelated defendants is that it may allow courts to more easily transfer venue and thus shift filing focus away from the Eastern District of Texas.

The punch line here from the preliminary data through December 2011 is that (1) post-AIA filings have dropped in the Eastern District of Texas and risen in other districts, namely Delaware; (2) more cases are now being filed in Delaware than any other district; (3) more defendants are being sued in Delaware than any other district. Prior to AIA, E.D. Texas was the clear leader in these categories; and (4) overall the number of defendants being sued has decreased.

Read the article: 2011 Trends in Patent Case Filings by James C. Pistorino and Susan Crane.

BPAI Ex Parte Results

by Dennis Crouch

Because of the availability of settlement, percentage win-rate is often given little policy consideration.  Ex parte appeals are no different.  Before reaching a BPAI decision, examiners can "settle" by withdrawing their pending rejection and then either allowing the patent to issue or else prepare a new and different rejection of the pending application.  Patent applicants can also settle cases by abandoning the case or else by filing an amendment and a request for continued examination (RCE). 

The chart above shows percentage win-rate for BPAI appeals in ex parte cases. In an earlier study, I showed that the vast majority of these decisions are on obviousness grounds. Note – I only considered appeals decided on the merits and excluded those remanded or dismissed on other grounds.

Old/Old Patent Applications

I received a note from a patent examiner regarding my estimate that there are now around 400 pre-URAA applications still pending at the USPTO.  According to the examiner, the actual number of still-pending applications is 216 (excluding applications being held under a secrecy order).  All of these applications have been pending since 1995 and, upon issue, will still have 17–years of patent term remaining.

This is now a miniscule number compared with the 1.2 million applications pending at the USPTO.  On the other hand, all of these applications are likely quite valuable.

See “New/Old Patents”

 

Total Patent Application Pendency

Most coherent discussions of patent statistics need to consider patent families rather than only individual patents. In an earlier posts, I wrote about the reality that most US patents claim priority to a previously filed patent document — e.g., a prior US patent application, a prior provisional patent application, a foreign patent application filing, or a PCT application filing. 

One way to consider these layers of filings is to look at the “total pendency” of an application. Here, I calculate total pendency as the time period beginning with the earliest priority date claimed and ending with issuance.  The histogram below shows the total pendency for patents issued in 2011 and through March 14, 2012.  The average and median total pendency is just under five years. I.e., the average recently issued patents is based upon a patent application filed about five years ago. If we look at application-by-application pendency without considering priority claims then the average is about 3.4 years. The USPTO reports an average pendency of 2.8 years by (1) ignoring priority claims and (2) counting the RCEs as new application filings.

An important caveat here is that a significant portion of the average five-year delay is due to delays by the patent applicant rather than the USPTO.  Applicants have a significant amount of control in determining where their particular patent falls within the histogram. 

 

Prosecution Timing

After a number of years on the rise, the average pre-issuance patent application pendency began to drop in 2010. The PTO hopes that its renewed effort on hiring examiners and addressing prosecution bottlenecks can force this pendency even lower.

For the chart below, I built a database of all utility patents issued since January 2005 and calculated the average number of days in prosecution for each US patent, grouped by patent issue date.  Thus, the chart includes patents issuing from original applications and continuation filings as well as US national-stage filings based upon foreign and PCT priority.  For my calculations, I did not consider provisional application filings and I did not use the filing of an RCE to cut-short the application pendency.

Some applicants like to see the odds that a patent will issue within a given timeline. The chart below groups patents by issue date and then reports the percent of patents that issued within a given period relative to the application date. In particular, the chart shows the percent of patents that issue within two years, three years, four years, and five years from application.

Looking at chart –  the lowest series shows the percent of the issued patents that issued within two years of the application. Back in 2005, about one-third issued within two years, that percentage dropped steadily until 2010 when the USPTO began increasing the speed of throughput.  In 2010, the two-year series began to drop again — likely because the USPTO began its initiative of Clearing the Oldest Patent Applications (COPA).

Federal Circuit Limits Intervening Rights to Cases involving Textual Claim Amendments

By Dennis Crouch

Marine Polymer Tech. v. Hemcon (Fed. Cir. 2012) (en banc)

In a fractured en banc decision, the Federal Circuit has held that statutory the intervening rights defense only arises when the text of claims are amended or new claims added during a post grant proceeding. In this case, the claim scope had been arguably changed under Phillips v. AWH based upon arguments made during a reexamination, but the text of the claims had not been amended. Following this decision, the accused infringers cannot claim intervening rights in this situation.

[T]he plain directive of the governing statute before us does not permit HemCon to invoke intervening rights against claims that the PTO confirmed on reexamination to be patentable as originally issued. To be sure, patent applicants' actions and arguments during prosecution, including prosecution in a reexamination proceeding, can affect the proper interpretation and effective scope of their claims. But in rejecting HemCon's request for intervening rights, we are not here interpreting claims. Rather, we are interpreting a statute that provides for intervening rights following reexamination only as to "amended or new" claims. The asserted claims of the '245 patent are neither.

As part of its ruling, the court noted its perspective that the PTO on reexamination is unlikely to consider a patent claim to be narrowed simply based arguments made by the patentee:

If, in reexamination, an examiner determines that particular claims are invalid and need amendment to be allowable, one would expect an examiner to require amendment rather than accept argument alone.

The doctrine of intervening rights is derived from the Patent Act, which indicates that, following a reexamination, a patentee cannot claim damages for pre-reexamination infringement if the resulting claims were in "amended form" and not "substantially identical" to the original claims. 35 U.S.C. §§ 252 and 307(b).

The dissent argued that any change to the scope of a claim during prosecution should be interpreted as an amendment and that, therefore, arguments and statements by the patentee that would result in a modified claim construction

Split Decision: Only ten of the Federal Circuit judges participated in the decision. Thus, a majority needed at least six votes. As it turns out, only a portion of the majority opinion received six votes. The entire majority opinion was written by Judge Lourie and joined by four other judges: Chief Judge Rader and Judges Newman, Bryson, and Prost. The first half of the majority opinion discussed claim construction issues and the second part discussed the intervening rights defense. Judge Linn brought the final vote for the majority, but Judge Linn only agreed to the portion of the opinion focusing on intervening rights. Judge Dyk wrote in dissent and the entire opinion was joined by Judges Gajarsa, Reyna, and Wallach. In parallel fashion, the dissent first discussed claim construction and then discussed intervening rights. Judge Linn joined the claim construction portion of the dissent but not the intervening rights portion. Thus, in the final tally, claim construction was split 5-5 and intervening rights issues was divided 6-4.

Notes:

• Read the Decision
• More on the case

Kimberly-Clark v. Naty: Did Reexamination Clean the Diaper?

by Dennis Crouch

Kimberly-Clark v. Naty (E.D. Wisc. 2012)

Twenty years ago, Kimberly-Clark scientists had the idea of creating a diaper with an "elastomeric ear" having non-parallel edges. The patent (No. 5,496,298) issued in 1996 (sixteen years ago). In the side figure, I have circled this novel feature of the design. The curved edge and stretchiness make the diaper more comfortable. The patent itself does not claim comfort or curvedness. Rather, the claim simply spells out the physical elements of the diaper design.

In 2010, an ex parte reexamination was begun and KC cancelled all 30 issued claims but then added an additional four claims. I have reproduced the broadest claim below with the new limitations in italics. As you can see, the new limitation is related to the shape of the curved edge of the elastomeric ear – labeled as 40 in the circled portion of the diagram. The newly added limitations that were apparently novel in 1993 are that a portion of the curved edge is "generally parallel" to the top edge (labeled 38) and another portion of the curved edge is not parallel to the top edge.

The new claim:

31. A disposable absorbent article, said article defining a front portion, a rear portion, and a crotch portion connecting the front and rear portions; said article comprising:
    an outer cover;
    a liquid-pervious bodyside liner;
    an absorbent material located between said cover and said bodyside liner; a pair of elastomeric ears attached to said rear portion, said ears having a proximal edge, a distal edge, a first connecting edge, and a second connecting edge, said first and second connecting edges connecting said proximal and distal edges, said second connecting edge being non-parallel to said first connecting edge and said proximal edge being longer than said distal edge;
    a fastener joined to said elastomeric ears for attaching said elastomeric ears to said front portion in an overlapping relationship; wherein, when in use, said second connecting edge defines at least a portion of a leg opening,
    wherein the second connecting edge comprises a first segment and a second segment, the first segment extending outward from the proximal edge and being generally parallel to the first connecting edge, the second segment extending between the first segment and the distal edge and being non-parallel to said first connecting edge.

In a recent action, KC has sued Naty Babycare for infringement of the '298 patent. Naty is a Swedish company that claims to be making all natural and largely eco-friendly diapers. Unfortunately for Naty, the '298 patent still has one year on its term and the patent seemingly covers eco and non-eco products alike. The drawing below from Naty's website shows the diaper in cartoon form.

KC has asked for injunctive relief. Of course, the patent will be expired before trial. However, KC may also request preliminary injunctive relief. I wonder how the upcoming expiry date should impact the eBay inquiry.

New/Old Patents

So far this year, the USPTO has issued only nine patents with filing dates of before June 8, 1995. That date represents an important turning point in patent law. Patents filed before that date have a term of 17–years from the issuance date. Later filed patents have a term of 20–years from the filing date.

Of the seven recent patents based upon old applications.  Barring a terminal disclaimer or failure to pay a maintenance fee, all of these will be in force until 2029 and all are based on a filing date of 1995 or before. 

More info:

• Secrecy Orders: Pat. Nos. 8,119,959 (Flight control of missiles); 8,132,494 (Ballistic resistant composite article having improved matrix system); 8,111,581 (Monitoring system for a ship's radiated noise) and 8,111,584 (method of detecting a submerged vessel in or near the wake of a ship).
• Delay in considering whether to institute an interference: Pat. Nos. 8,102,419 (film-to-digital scanning algorithm) and 8,099,154 (therapeutic acoustic pressure wave generator).
• Prosecution suspended while re-examining a family member application: Pat. No. 8,112,782 (based upon Personalized Media Communications family of patents).
• Abandonment + Revival and examination of several hundred claims through including multiple amendments: Pat. No. 8,097,405 (Enzo Biochem patent).
• Eight rejections + claim amendments: Pat. No. 8,101,149 (Claim 1 in full: “Purified cage molecules consisting of carbon atoms.” Owned by Mitsubishi). 

Note – I updated this on 3/15/2012 to correct for an error in my database that was identified by a US Patent Examiner.

Apart from those held under secrecy order, I suspect that there are now around 400 pre-URAA applications still pending at the USPTO.

Importing Drugs from Canada for Personal Use?

Can someone point me to resources for determining whether and when a US resident can legally purchase prescription drugs over the internet from a Canadian distributor for personal use within the US? Does it matter whether the drug is patented in the US, but not patented in Canada? And, if illegal or a violation of patent rights, has there been any enforcement against US individuals or Canadian distributors? Finally, is there a list available of prescription drugs that are patented in the US, but available in generic form in Canada or other countries with well regulated* pharmaceutical industries?

Thanks, Dennis
dcrouch@gmail.com

Patent Infringement Litigation: Filings on the Rise

Terry Ludlow of ChipWorks recently created a time-series chart showing the number of US patent lawsuits per quarter. I have reproduced the chart with permission. [LINK]

The headline here: More patent lawsuits are being filed now than ever – even more than in the heyday of the false-marking litigation. Just as a caution – the recent rise in the number of lawsuits does not actually mean that there is more patent litigation going one. Rather, a substantial portion of the increase in Q4 2011 is due to the new joinder rules that force a patent holder to file separate lawsuits against similar defendants rather than bundle them all into a single action.

Thus, as an example, last week the patent holding company NovelPoint Security filed 30+ separate patent infringement lawsuits in the Eastern District of Texas. In the past, NovelPoint might have instead pursued all of those actions within a single complaint.

* * * * *

The NovelPoint Security patents both include David C. Reardon of Springfield Illinois as the sole inventor. See U.S. Patents 6,212,635 and 5,434,562. Neither patent is listed as assigned within the USPTO assignment database. Reardon is an interesting character – he is an electrical engineer but is much better known as a pro-life / anti-abortion advocate. Reardon runs the Eliot Institute that he founded. The patents themselves focus on computer security systems using public/private key encryption and claim a 1997 priority date based upon a provisional patent application filed

BPAI: First Decide Indefiniteness, then Subject Matter Eligibility

Ex parte Adelman, Appeal 2010-011767 (BPAI 2012)

As part of what seems a sign of change, the BPAI in recently refused to decide a patent appeal on statutory subject matter grounds and instead found Adelman’s claims invalid under a new grounds of rejection — indefinite under 35 U.S.C. § 112, 2nd paragraph.  The Board noted that the indefiniteness of the claims meant that the subject matter eligibility question could not be “reasonably understood without resort to speculation.”

The patent application is owned by Go Daddy Group and claims a “system for designating membership in an online business community.”  Claim 1 includes two elements, both written in means-plus-function (MPF) language.  The first element is a “means for designating a plurality of Members…” and the second is a “means for providing … a membership designator.”  In reading the specification, the Board concluded that the claimed functions lacked any corresponding structures in the specificication.  “The Specification therefore fails to disclose an algorithm corresponding to the recited function at issue in independent claim 1, such that one of ordinary skill in the art could determine the scope of independent claim 1.”

In several cases, courts have designated subject matter eligibility as a “threshold” concern.  Here, however, the Board held that they were compelled to first consider indefiniteness — citing In re Steele, 305 F.2d 859, 862 (CCPA 1962) (A prior art rejection cannot be sustained if the hypothetical person of ordinary skill in the art would have to make speculative assumptions concerning the meaning of claim language.) and In re Wilson, 424 F.2d 1382, 1385 (CCPA 1970) (“If no reasonably definite meaning can be ascribed to certain terms in the claim, the subject matter does not become obvious-the claim becomes indefinite.”).

RPX: Patent Aggregator and Alleged Antitrust Conspirator

Cascades Computer Innovation v. RPX, HTC, LG, Motorola, Dell, Samsung (N.D. Cal. 2012)

In a bold move, non-practicing patent holder CCI has sued a group of tech companies and the patent aggregator RPX for price fixing and conspiring to restrain trade in violation of the Clayton and Sherman Acts as well as under California state antitrust law. The allegation is that RPX and its members decided as a group to boycott negotiations with Cascades except through their aggregator RPX.

Defendants HTC, LG, Motorola, Samsung and Dell sell more than 95 percent of all mobile phones and tablets that use the Android operating systems in the United States and are an important part of the Android market, and related, relevant sub-markets (including products that require a license from Cascades under its patented technology). The manufacturing defendants constitute nearly the total demand for the licensing of Cascades' patented technology and collectively enjoy substantial market power in that market and, together with others in the industry, have exercised their power to control the acceptance and terms and conditions of licenses from Cascades. The power is augmented by the willingness and agreement of the manufacturing defendants to infringe Cascades' patents until such time as Cascades capitulates by either going out of business, declining to enforce the patents or offering defendants patent license terms below fair market value."

The complaint is well written and worth a read. Nick McCain at Courthouse News has more: http://www.courthousenews.com/2012/03/09/44560.htm.

Patently-O Bits & Bytes by Lawrence Higgins

Is There a Trend Towards IP Litigation Boutiques?

• On February 29th of this year Renee Quinn of IPWatchdog wrote a post titled, Boutique Rising: A Conversation with Winthrop & Weinstine, in which she discusses the increase in IP litigation boutiques. [Link] I recently spoke with attorney Jason Mudd of the newly formed IP law firm Erise IP (www.eriseip.com) about the trend towards IP litigation boutiques. Jason recently left a large Kansas City law firm, along with partners Eric Buresh and Adam Seitz, to start Erise IP with a team of attorneys from their prior firm. Erise IP brought along several large clients, including Garmin, Sony, Ubisoft, Ford, and Mazda, to name a few. Jason believes their new firm is consistent with a trend of IP litigation groups departing large law firms to form boutique firms that are able to provide clients with greater flexibility demanded by the rapidly changing IP litigation landscape. While the numbers are not out yet, there could possibly be a recent trend towards IP litigation boutiques.

Copyright Infringement

• Last week while I was in copyright class, Professor Crouch brought up the Lexis-Nexis and Westlaw class action copyright infringement case. The plaintiffs in the case claim that the defendants (Lexis and Westlaw) copied thousands of copyright-protected works created by, and owned by, the attorneys and law firms who authored them. So, this case got me thinking, do companies like Google Patents infringe patent lawyers and patent firms copyrights? Similar to Westlaw and Lexis, Google downloads thousands of patent applications to store in their database. While there is not a clear answer on whether patent applications are copyrightable or not, it seems that patent applications can have parts covered by copyright –drawings for example, even if the entire patent application is not copyrightable. In Rozenblat v. Sandia Corp. 69 USPQ2d 1474 (7^th Cir 2003), the 7^th Circuit recognized the copyrightability of an inventor's patent drawings. Does, this case alone indicate that Google and others may be guilty of copyright infringement for downloading patent applications? [Link]
• It should be noted that Google is distinguishable from Lexis and Westlaw because Google does not charge users directly, and this fact adds weight to their fair use argument.

Patent Searching Tool

• ArchPatent, a free-to-use patent search resource which provides novel ways to search, sort, and view patent information, has launched a revamped website this week. The revamp drew its inspiration from beta feedback over the last five months from individuals within the IP industry. ArchPatent Founder Brad Chassee indicates that the objective with the revamp is to focus the site on providing the simplest, most intuitive USPTO search tool - one which experts enjoy using and one which those new to patent searching would actually be able to navigate. ArchPatent wants everyone to be able to "slice and dice" patent search results quickly and efficiently, which should drastically reduce search times and simplify complex search tasks. The site is now ad free with some additional functionality being developed as part of a soon-to-be-released premium offering. The site has a useful filtering tool and filter types include: classification, assignee, examiner, agent, applicant and most referenced. The site now provides access to searchable USPTO data back to 1920 and pdfs back to 1790. [Link]

Patent Jobs:

• Buchanan Ingersoll & Rooney is seeking an Electrical patent agent with a minimum of 3 years of experience and a degree in EE, CS or Computer engineering to work in their Alexandria, VA office. [Link]
• Stoel Rives is searching for a patent attorney with 3-5 years of experience drafting electrical-related patent applications to work in their Portland or Seattle office. [Link]
• Buchanan Ingersoll & Rooney is seeking an Electrical patent associate with a minimum of 3 years of experience and a degree in EE, CS or Computer engineering to work in their Alexandria, VA office. [Link]
• SAS is looking for a patent counsel with 3 years of patent prep and prosecution experience in the software field and a degree in EE or CS to work at their Cary, NC location. [Link]
• Sterne, Kessler, Goldstein & Fox is seeking chemist patent attorneys with at least a master's degree in organic or medicinal chemistry to work in their DC office. [Link]
• Sterne, Kessler, Goldstein & Fox is searching for a chemical or biochemical IP attorney with a degree in CE, BM, or ME and 1-3 years of experience to work in their DC office. [Link]
• Millennium Inorganic Chemicals is looking for corporate counsel with a degree in chemistry or chemical engineering and 7+ years of experience to work at their Glen Burnie, MD location. [Link]
• Rutan & Tucker is seeking a trademark clerk with a minimum of 1 year of IP docket & filing experience to work at their Costa Mesa, CA office. [Link]
• Westerman, Hattori, Daniels & Adrian is searching for a chemical IP attorney/agent with a 3 years or less of experience to work at their DC office. [Link]
• Cantor Colburn is looking for an associate patent attorney with a chemical engineering degree and 2-5 years of experience to work in one of their offices. [Link]
• Roberts Mlotkowski Safran & Cole is seeking a patent attorney with 2-4 years of experience and a degree in EE to work in their McLean, VA office. [Link]

Upcoming Events:

• LES (USA & Canada) 2012 Winter Meeting will be held March 12-14 in Anaheim, CA. The meeting will focus on cutting-edge issues in the high tech space with overlapping content in related industries, including clean tech, nanotech, and medical devices. Featured speakers include Honorable Randall Rader, Chief Judge, U.S. Court of Appeals for the Federal Circuit; Catherine Casserly, CEO, Creative Commons; and Patrick Ennis, Head of Global Technology, Intellectual Ventures. Patently-O readers save $100 with code PO1. [Link]
• The New Jersey Intellectual Property Law Association will hold a half-day Patent Litigation Seminar on Wednesday, March 14, 2012 11:45 am to 5:45 pm. Guest speakers include: Paul Berghoff, Kara Stoll, William McElwain, Richard Bress, Barbara Fiacco, and Lewis Ho. [Link]
• C5's 22 Forum on Biotech Patenting conference will take place March 14-15 in Munich, Germany. The conference brings together experienced in-house counsel from both innovator and generic pharma and biotech companies and their expert legal advisors from various jurisdictions across the globe. Session will cover the patentability of gene sequence patents in Europe and the US, current developments on biotech products and patent considerations for bio-deposits, and many other sessions. (Patently-O readers register with PO 10 for a discount). [Link]
• The 14^th Annual Richard C. Sughrue Symposium on IP Law and Policy will be held March 19^th at The University of Akron Law School. The program will include a review of recent developments in patent, trademark, and copyright law, as well as a panel discussion on international IP. David Kappos will be the featured speaker and he will discuss the USPTO's implementation of the American Invents Act. Other guest speakers include: Timothy Holbrook, Mark Janis, former chief judge Paul Michel, Samuel Oddi, Ryan Vacca, Susan Pan, Harold Wegner, and many others.
• American Conference Institute's FDA Boot Camp conference is scheduled for March 20-21 in New York, NY. ACI's FDA Boot Camp has been designed to give products or patent litigators, as well as patent prosecutors, industry in-house counsel, and life sciences investment and securities experts, a strong working knowledge of core FDA competencies. (Patently-O readers register with PO 200 for a discount). [Link]
• Fitch, Even, Tabin & Flannery LLP will present a free one-hour CLE webinar, "Provisional Patent Applications: Making Substance in a Land Without Form," on March 21, 2012 at 12 noon EST. The first-to-invent impact of the America Invents Act requires a serious reevaluation of the use and content of provisional patent applications. Stephen G. Parmelee will address approaches to leveraging the provisional patent application opportunity by encouraging the inclusion of substantive content while taking economic advantage of the stylistic freedom that provisional filings permit. [Link]
• The University of Pittsburgh School of Law will have their annual Innovation Law Lecture on March 22, 2012, 4-5PM. This year's guest speaker will be Professor Rochelle Dreyfuss from NYU School of Law and her talk is entitled "Are Patents Good for Science?" The event is open to the general public and one (1) CLE credit has been requested for the lecture. [Link] [Link]
• American Conference Institute's PTO Procedures Under the America Invents Act conference is scheduled for March 26-27 in New York, NY. This conference will serve as a practical and tactical guide for PTO practice post-Patent Reform. (Patently-O readers register with PO 200 for a discount). [Link]
• Managing Intellectual Property is holdings its US Patent Reform Forum conference March 27, 2012 in Washington D.C. The forum will bring together top officials, leading counsel at US corporations and their private practice advisers for a number of lively and informative sessions looking at the strategic implications of US Patent Reform. Speakers include: David Kappos, Judge Paul Michel, Gene Quinn, Robert Armitage, Phil Johnson, and many others. (Patently-O readers will receive a discount and in-house IP counsel from large corporations and research institutes attend free of charge.) [Link]
• The ABA Section of IP Law will hold its 27^th Annual IP Law Conference March 28-30 in Arlington, VA. The conference is recognized for its national and international scope and preeminent programming. It attracts IP practitioners from across the nation and around the world. Speakers and moderators include: Sharon Marsh, Keisha Hylton-Rodic, Alexander Wilson, Steven Emmert, Teresa Rea, James Bikoff, David Kappos, and many others. The discounted early registration deadline is March 14. [Link] [Link]
• AIPLA and The University of San Diego School of Law will host the 2012 Electronic & Computer Patent Law Summit on April 2^nd. The summit will include in-house counsel from Qualcomm, Apple, SAP, Covidien, ViaSat, Google, and Cisco, among others, as well as a distinguished panel of US District Court judges. Topics will include the new First to File system, an update on divided infringement, how the patent portfolio use and acquisition landscape is changing, and a discussion of the patent pilot program. [Link]
• On April 10^th join the United States Patent and Trademark Office Managers, Design Examiners, Design Patent Practitioners and Industrial Designers from across the country in a lively and thought-provoking discussion at the USPTO. They will discuss rules and techniques relating to proper graphic descriptions of design patent claims, confer on best practices aimed at the broadest protection of industrial designs in the United States, and hear from members of the design community on the importance of strong industrial design protection in an increasingly design-conscious world. [Link]
• The IP Section of the Atlanta Bar Association and Georgia State University Law School will hold its 8^th annual SpringPosium at the Barnsley Gardens resort on April 13 &14. Some example seminars will include: the new America Invents Act, Federal Court best practices, IP law and life practice management, and recent developments in damages law. Guest speakers include: Clerk of Court and Chief Deputy Clerk of the US Court of Appeals for the Federal Circuit, Jan Horbaly and Pamela Twiford and Clerk of Court of the US District Court for the North District of Georgia, James Hatten.
• The European Generic Medicines Association is hosting the 10th EGA International Symposium regarding Biosimilar Medicines on April 19-20 in London. Greenblum & Bernstein is providing a pre-symposium workshop on April 19, 2012 titled: Biosimilars In America: IP Strategy and Due Diligence. The workshop will explore the mechanics of the Biologics Act with an emphasis on how the Act relates to the involved intellectual property and how the intellectual property may impact the biosimilar applicant's strategy for entering the market. [Link]
• ACI will hold its 6^th Annual Paragraph IV Disputes conference on April 24-25 in New York City. The conference will cover topics such as: the impact of the AIA on Hatch-Waxman litigation, claim construction, prior art obviousness and obvious-type double patenting, and many other topics. (Patently-O readers register with PO 200 for a discount). [Link]
• The World Research Group is holding its 4th Annual Corporate IP Counsel Forum on May 16-17 in NYC. The Corporate IP Counsel Forum will address key issues and uncover latest developments related to IP in the form of case studies and panel discussions. Some of the topics include, but are not limited to: The America Invents Act and its impact on patent litigation and prosecution, IP monetization strategies for small and mid-size companies, Patent valuation, The top 10 most influential court cases in IP this year, Patent eligibility, Invention mining, Divided infringement, Best practices for combating non-practicing entities, Appeals to the U.S. Court of Appeals for the Federal Circuit, Copyright infringement. [Link]
• The Annual DRI Business Litigation and Intellectual Property Seminar will be held May 16-18, 2012, in New York City. Attendees will learn trial and appellate advocacy skills in business litigation get up-to-date on the last trends in intellectual property and business litigation, and network with in-house counsel, business and intellectual property trial lawyers and experts from across the country. Speakers include: Former ABA President, Dennis W. Archer, Dennis Archer PLLC, and David Leitch, VP and General Counsel of Ford Motor Company. [Link]
• The San Francisco Intellectual Property Law Association is hosting its annual seminar in Healdsburg, the center of one of California's best wine regions, from June 1-3. Speakers include Hon. Margaret A. (Peggy) Focarino, USPTO Commissioner of Patents, Hon. Robert Stoll, former USPTO Commissioner of Patents, Hon. Gerard F. Rogers, Chief Administrative Trademark Judge of the TTAB, Hon. Randy R. Rader, Chief Judge of Federal Circuit, Hon. Susan Illston, Judge of N.D.CA, Hon. Edward J. Davila, Judge of N.D.CA, as well as professors and leading practitioners. [Link]

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

Disavowal of Claim Scope and Beauregard Method Claims

by Dennis Crouch

Digital-Vending Services International, LLC v. The University of Phoenix, Inc. (Fed. Cir. 2012)

In a split decision, the Federal Circuit has reversed the lower court's claim construction and vacated the summary judgment of non-infringement with respect to impacted claims. On remand, the district court will be required to reconsider whether whether Digital-Vending's patents covering aspects of internet-based content delivery are valid and infringed. Chief Judge Rader penned the opinion and was joined by Judge Linn and joined-in-part by Judge Moore. In her partial dissent, Judge Moore focused on the doctrine of disavowal of claim scope  – arguing that the "exacting" standard for disavowal of claim scope was met in this case and therefore takes precedence over other canons of construction in the analysis of claim scope. 

Method Claim Written as an Apparatus: Before getting to the heart of the claim construction debate, it is important to mention the court's recognition here that a Beauregard claim should properly be interpreted as a method claim rather than an apparatus or composition of matter claim. In some instances, patent law treats method claims differently than it treats apparatus claims. Because of this distinction, many patent attorneys choose to include both method and apparatus claims within the same patent whenever possible. In discussing the asserted claims, the Federal Circuit opines that claims 1-22 of asserted Patent No. 6,282,573 are all "method claims" despite the fact that claims 13-22 expressly claim "a computer storage medium" containing data and instructions for causing a computer to perform a particular method. Noting this potential discrepancy, the court wrote that these Beauregard claims are "functionally-defined claims" that "should be treated as method claims to avoid exalting form over substance." Quoting CyberSource Corp. v. Retail Decisions, Inc., 654 F.3d 1366, 1374 (Fed. Cir. 2011). The court also noted that independent claim 23 - directed to a "computer architecture" with various interconnected servers should be treated as a system rather than a method. (Note – Judge Moore did not dissent from this portion of the opinion).

How Prosecution History Impacts Claim Scope: In many patent cases, the most hotly contested legal issue is claim construction and the resulting claim scope. Broadly construed claims cast a wider net over potential infringers, but are also more likely to be held invalid than those that are more narrowly construed. There a variety of thoughts on how the specification and prosecution history should impact claim construction. Strongly-held maxims include the notion that claims should be interpreted in light of the specification, but limitations found in the specification should not be automatically added as implicit limitations of claim scope. In Phillips, we learned that the specification should be given greater consideration. Phillips also gave credence to arguments associated with claim differentiation. Thus, in that case, the fact that a claim referred to "steel baffles … strongly implie[d] that the term 'baffles' does not inherently mean objects made of steel." (quoting Phillips).   An additional and important claim construction canon involves the limitation of claim scope that has been the subject of clear disavowal.  A problem with canons of construction is that they often conflict and the difficulty for courts comes in deciding which of the many canons to give precedence. Here, there is no question on the law that a clear disavowal of claim scope takes precedence over other canons of construction.  The dispute in the case is on whether a disavowal occurred.  

In this case, some of the patented claims refer to a "registration server being further characterized in that it is free of content managed by the architecture" and others refer to the "registration server," standing alone.  This difference between the claims provides a strong suggestion that athe bare "registration server" limitation does not require that the server be free of managed content.  In its analysis, the majority court noted that the patentee repeatedly referred to the registration server as being free of managed content, but also that the patent attorney had been "careful" to "avoid any hint [in the specification] that the inventors clearly disavowed claim scope with respect to the method claims."  Thus, the court allowed a broad interpretation of the "registration server" term.

The dissent disagreed with this analysis and instead argued that the majority opinion "allows the patent owner to reclaim surrendered claim scope, thus subverting the public notice function of patents."  Here, the dissent focused on the patentees "repeated statements in the specification" indicating that "each" of the registration servers are separated from any managed content and that such an architecture is a "requirement" not to be "violated."  For Judge Moore, those statements lead her to the conclusion that "[i]t is difficult to imagine a clearer case of disavowal."

On remand, the lower court will be asked to determine whether the defendants infringe the asserted claims under the broader claim interpretation put forth by the majority. 

USPTO Patent Grants Continue to Rise

by Dennis Crouch

The expected number of grants for 2012 is based upon a straight extrapolation from the number of patents granted thus far in 2012.

Obviousness as a Question of Law

by Dennis Crouch

In re PepperBall Tech. (Fed. Cir. 2012) (non-precedential opinion)

In a non-precedential opinion, the Federal Circuit has affirmed a BPAI reexamination determination that PepperBall's patents are invalid as obvious.  In reading the opinion, Hal Wegner wrote that the case serves as a "good teaching example of what will often be a futile appeal in future Inter Partes Review proceedings under the 'substantial evidence' standard of review."  I agree with Hal that the low substantial evidence threshold required to sustain BPAI factual findings will make those difficult to overturn on appeal. However, as I discuss below, this case fails to be a good teaching example becaues it conflates review of the Board's factual findings with what should be de novo review of the ultimate question of obviousness.

The conclusion of obviousness (or non-obviousness) is a question of law that is reviewed de novo on appeal. However, substantial deference is given to the underlying factual determinations made by the Board. Those factual determinations will be upheld on appeal so long as supported by "substantial evidence." Thus, even if the appellate panel does not agree with the Board's factual finding, it can (and must) uphold the Board's factual finding so long as there is "more than a scintilla" of evidence in support. Although the Federal Circuit correctly recited the doctrine, my reading of the decision is that the court improperly applied the law and instead gave deference to the Board's legal conclusion of obviousness. In the end this may well be harmless error so long as the ultimate conclusion of obviousness is actually correct.

PepperBall Tech's invention relates to paintballs filled with peppery powder. A key feature of some claims was that the paintballs are only partially filled – 60% to 95% full. When stuffed over 95%, the powder clumps up and does not form a nice cloud around the victim's eyes. One prior art reference suggested adding weight to paintballs to optimize flight path. The Board held that the prior art's weight agent "was similar to PepperBall's modifying the fill percentage [and therefore] that it would have been obvious to modify the fill levels in a projectile within the recited range..."

On appeal, the Federal Circuit voiced some reticence with the Board's analysis – writing that "[t]his court in the first instance might not have reached the same conclusion as the Board on the similarity of PepperBall's differing fill levels and [the prior art's] weighting agent" because of the differing purposes explained above. The court went on to state that it, nevertheless, "does find substantial evidence to support the Board's finding of obviousness." That conclusion was based upon the court's own separate factual finding that the claimed range of 60% to 95% was "so broad in this context that a person of ordinary skill in the art likely would have tried fill levels within this range during routine experimentation."

The problem here, is that the Board's finding of obviousness is not supposed to be reviewed for substantial evidence, but instead reconsidered de novo on appeal. In the appeal, factual findings such as the similarity between the invention and the prior art need merely be supported by substantial evidence, but the appellate court must apply the much higher de novo standard when looking at the ultimate question of whether the invention obviousness. In reality, I have little faith in the current structure for determining obviousness. However, we do at least have a defined structure and procedure that the appellate court should follow.

What Judges Think of IP Litigators

In an article published last year, Judge Richard Posner and Professor Albert Yoon surveyed about 200 federal district court judges on various issues, including the judges overall impression of the quality of legal representation, by civil practice area. The study specifically compared lawyers in cases involving civil rights, commercial litigation, family law, immigration, intellectual property, personal injury/malpractice, and tax/trusts & estates. Amongst these groups, the judges identified intellectual property litigators as the giving the highest impression of quality. In addition, the judges noted their impression that there is not typically any significant disparity in the quality of representation between the intellectual property litigators on any given case.

Read it here: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1668783

Addressing the USPTO Backlog

By Dennis Crouch

USPTO's Patent Commissioner Peggy Focarino has continued on the path of her predecessor Bob Stoll in focus on reducing the backlog of unexamined patent cases at the USPTO. (Stoll is now a partner at Drinker Biddle in DC). Here, the Office typically defines unexamined cases as those that have not yet received a first action on the merits (FAOM).

In the past year, the number of unexamined applications has dropped by about 10% and is in steady decline. We have not yet seen any measurable decline in the time-to-first-action. However, that is a lagging indicator.  In its forward looking estimates, the USPTO predicts that applications filed today will receive an action within 17 months as opposed to today's average of 23 months. 

The Office is hitting the backlog on multiple fronts, perhaps the two biggest shifts are (1) an increased spending on examination (more examining hours means more new cases being examined) with money coming from AIA fee increases and (2) shifting resources to examining new cases. One such shift has been in reducing the priority level of applications associated with a request for continued examination (RCE). The result has been a steady increase in the backlog of cases that are awaiting examination following an RCE. During the two year time-period shown in my charts, the decrease in the backlog of unexamined cases (82,000 cases) is almost entirely balanced by the combined increase in cases awaiting examination following an RCE (60,000) and cases awaiting decision by the BPAI (11,000).

While I agree that the USPTO should focus attention on the backlog, I don't believe that the backlog should be the most pressing concern of the Office.  This is especially true since the passage of the AIA and the resulting creation of a fee-based prioritized examination program.  For a $4,800 fee (reduced for small entities), the USPTO will place an application on a fast track examination schedule.  The new reality is that any applicant who cares about fast prosecution can get fast prosecution for a relatively small fee. 

focusing on the backlog 

Recording Assignments and Security Interests in Patents: Australia’s new Personal Property Securities Register

Guest Post by Andrew McRobert and Kate Mullarkey of Norton Rose Australia

In her recent guest post for Patently-O, Susan Glovsky lamented the inadequate system for recording assignments of, and security interests over, patents in the United States and called for the introduction of a national system for recordation of patent rights. This post gives a brief account of Australia's recent experience in this area.

The Australian patents legislation (the Patents Act 1990 (Cth)) requires assignments of patents to be in writing signed on behalf of the assignor and assignee (§14). If the particulars of an assignment are not entered on the Patents Register, the document is not admissible as evidence of the assignee's interest unless the proceedings fall within one of a number of limited exceptions (for e.g., if a Court otherwise directs or to enforce equities). The enforcement of equities in relation to patents and patent licenses has changed with the introduction of the Personal Property Securities Act 2009 (Cth) (PPSA).

The PPSA brings significant reform to the law in relation to security interests in personal property - which includes registered and unregistered intellectual property. One of the most important aspects of the PPSA is the implementation of a new public-access PPS register which has been promoted as a simple and inexpensive single repository for the registration of security interests. That register went live on 30 January 2012. The PPS register can be viewed at http://www.ppsr.gov.au.

A key driver for the establishment of the PPSA register was to harmonise the over 70 separate Acts that regulated security in personal property. The PPSA establishes a complete set of rules for determining priority between security interests and also for determining under what circumstances a purchaser of collateral will take the collateral free of the security interests in it. The old common law and equitable principles have been replaced.

Under the PPSA, "personal property" is any form of property other than land and certain statutory licences. It includes IP and IP licences. The definition of IP under the PPSA includes: "the right to exploit or work an invention, or to authorise another person to exploit or work an invention, for which a patent is in effect under the Patents Act 1990". A "security interest", for the purposes of the PPSA, is defined broadly as an interest in personal property provided for by a transaction that, in substance, secures a payment or the performance of an obligation.

Under the PPSA, protection of a security interest involves three steps: attachment, enforcement and perfection. Perfection is particularly important because, in the event of the insolvency of a grantor, any unperfected security interests that exist in relation to the grantor's assets are vested in the grantor, and a secured party that has not perfected its rights loses that security interest. Once a security interest is perfected, there are two general rules that apply: first, perfected interests take priority over unperfected interests; second, perfected interests take priority in the order of perfection. Although there are exceptions to these rules, including (importantly) under the transitional provisions, all the applicable rules are contained within the PPSA.

The PPSA contains numerous provisions that particularly affect intellectual property rights holders. For example, it provides that a registered security interest over an IP license continues to exist when the underlying licensed IP is transferred by its owner (§ 106). Unless the parties have contracted out of §106, a licensee will be able to grant security interests in an IP license in favor of a third party whose security interest can then be registered by that third party.

The PPSA also contains provisions relevant to security interests in intellectual property in overseas jurisdictions, such as foreign patents. Where the grantor of the security interest is located overseas, the security interest is generally governed by the law of the grantor's jurisdiction, and not by the PPSA.

Two surveys on international IP law and IP Transactions

• [COMPLETE THE FIRST SURVEY] Professor Elisa Ughetto of the Politecnico di Torino and the IP Finance Institute is surveying the IP community on the dynamics of patent transactions. I would suggest that folks in law firms answer the questions as if they were in the shoes of their clients. Spend eight minutes on the survey here:
  https://dispea.eu.qualtrics.com/SE/?SID=SV_79urn4t8GFwtMUI.
  (Prof. Ughetto has promised that individual answers will be kept anonymous; that individualized data will not be transferred to third parties; and that results of the survey will be sent to all respondents.)
• [COMPLETE THE SECOND SURVEY] Professor Jean-Frederic Morin of the Université libre de Bruxelles is surveying the IP community on normative and causal beliefs regarding international IP laws and policies. Spend five minutes on the survey here: http://www.surveymonkey.com/s/IP_Community.
  (Professor Morin's survey does not collect contact information.)

Guest Post: Checking the “Staats” – in Broadening Reissue Practice, We Are Stuck in the “Doll”-drums

By David M. Longo, Ph.D. of Finnegan LLP¹

This post addresses the Federal Circuit's March 5, 2012, precedential opinion In re Staats, Appeal No. 2010-1443, in which Judge Dyk writes for the majority. In short, the Federal Circuit holds that it is bound by In re Doll, 419 F.2d 925 (CCPA 1970), and that both 35 U.S.C. § 251 and Doll permit the filing of a continuing reissue application to broaden patented claims beyond the statutory two-year period—even when the continuation claims are broadened—in a manner unrelated to any broadening aspect identified within the two-year period. For a more in-depth discussion of 140 years of reissue case law, legislative history, and statutory shaping pertaining to broadening reissue practice, including an analysis of the facts and oral arguments in Staats leading up to the opinion, please see the author's publication Checking the Staats: How Long is Too Long to Give Adequate Public Notice in Broadening Reissue Patent Applications?, 2011 Duke L. & Tech. Rev. 009 available at http://www.law.duke.edu/journals/dltr/articles/2011dltr009.

One of the most straightforward ways patent owners can expand the limited monopoly of a patent is by seeking increased claim scope by one or more broadening reissue patent applications. While patent owners may narrow the scope of patent claims at any time during the life of the patent, they may only broaden claim scope for a limited period of time after issuance of the patent. See MPEP § 1412.03, discussing implementation of 35 U.S.C. § 251. Despite this relatively clear statutory provision in § 251, however, an expansive body of case law has construed the provision, dating back well over a century.

The Staats opinion had the potential to become the most definitive statement in broadening reissue practice in almost twenty years. Passing on such a wonderful opportunity, the CAFC instead blandly upheld Doll and bluntly invited the USPTO to seek en banc review. In fact, Judge Dyk's majority opinion states, "If the PTO believes we should overrule Doll, that is a matter that must be presented to the en banc court." Slip Op. at 11. Judge O'Malley's concurring opinion, which concurs in the opinion's judgment but not its reasoning, states, "To the extent the majority opinion is no more than a begrudging nod to Doll's precedential effect with an invitation to reconsider that decision, the majority opinion is wrong." Slip Op. at 12 (concurrence at 1).

The Staats case presents a collision between two robust statutory interpretations and two equally weighty sets of policy considerations. On the one hand, the public-notice function cited by both the USPTO and the Board—and regarded as a hallmark of the protections in § 251—is crucial. The public has the right to know what is claimed and disclaimed in a patent, and one could argue that patentees should not be permitted to reshape their inventions throughout the life of the patent simply by lodging a "placeholder" broadening reissue application within two years of patent issuance, from which any number of potentially disparate continuing reissue applications could be filed. Allowing such activity without adequate safeguards could result in a scenario in which a competitor could potentially spend an obscene amount of money based on the perceived bounds of the limited monopoly granted by a particular patent, only to face an infringement action years later after the boundaries of the limited monopoly have shifted. Likewise, such activity may make it difficult for a competitor to assess whether it has freedom to operate in a particular technology—again because of shifting boundaries of the limited monopoly. Consistent with this perspective, the USPTO's position in Staats held firm against effectively giving an applicant a license to unforeseeably shift from one invention to another through reissue well beyond the two-year statutory period. See Ex parte Staats, No. 2009-007162, 2010 WL 1725728, at *9 (BPAI Apr. 26, 2010).

On the other hand, as argued by Apple in the Staats appeal to the Board, the CCPA in Doll held that the intervening rights provided by 35 U.S.C. § 252 are potentially sufficient to counterbalance damage to public notice done by broadening reissues. Having initial public notice within two years of patent issuance should adequately balance the needs of patentees and the public. See Brief of Appellant-Petitioner, In re Staats, No. 2010-1443 (Fed. Cir. Dec. 16, 2010), 2010 U.S. Fed. Cir. Briefs LEXIS 1111, at *9–11. That is, there is a clear quid pro quo—in exchange for a reissued patent, the patentee must "surrender" the original patent. Furthermore, given the recent transparency in publication and prosecution practice for pending applications and reissue applications at the USPTO, applicants already surrender a great deal of secrecy before issuance of a patent or reissue patent. Any broadening reissue patent claims would, of course, require support by the patent specification or other claims, which could have effectively been part of public knowledge for years before the broadening. Therefore, one can argue that nothing would serve to hamper a competitor from developing a competing and noninfringing product with improvements in the years it would undoubtedly take for the USPTO to wade through applications, reissues, and continuations of those reissues.

Thus, a classic property-rights question looms large in the field of patent law: where do the rights of inventors end and the rights of the public begin? The rights of inventors to modify the scope of their claimed inventions, even after the patent issues, can directly conflict with the concepts of public notice and the public domain. The Patent Act currently permits broadening of claims so long as a reissue application showing intent to broaden is filed within two years of the original patent issue. Over the years, however, this relatively straightforward statutory provision has sparked a spate of disputes over its meaning and application.

Despite these disputes, the CAFC reaffirmed Doll, and Judge O'Malley's concurrence expanded on its reasoning:

The MPEP and PTO Rule 175 are, moreover, consistent with all relevant case law interpreting § 251. As the majority notes, Doll concluded that § 251's time limits are applicable only to the first broadening reissue application and do not, accordingly, bar further broadening changes thereafter. [In re Doll] 419 F.2d. at 928. This court has twice reaffirmed that reading of § 251, moreover. See In re Graff, 111 F.3d 874, 877 (Fed. Cir. 1997) ("The court in Doll simply held that the reissue applicant, in the course of prosecution of the reissue application, was not barred from making further broadening changes in the claims."); In re Fotland, 779 F.2d 31, 34 (Fed. Cir. 1985) ("In Doll the Court of Customs and Patent Appeals held that when a broadening reissue application was on file within the two year period, the claims could be further broadened after the two year period."). As the majority opinion makes clear, the PTO's efforts to distinguish those cases so as to avoid the need to comply with their holdings stretch credulity. (Slip. Op. at 15, concurrence at 4.)

Even with the benefit of the last forty years of reissue case law—including Doll, In re Fotland (779 F.2d 31 (Fed. Cir. 1985)), Buell v. Beckestrom (22 USPQ2d 1128 (BPAI 1992)), In re Graff (111 F.3d 874 (Fed. Cir. 1997)), and now Staats—broadening reissue practice will likely remain a headache for patent attorneys. For the time being, though, we have a pill for that headache. Without any changes from a possible en banc review, broadening reissue patent practice permits a scenario where, as Apple argued, the possible or eventual scope of the initial broadening need not be fully laid out in the first reissue application filed within the two-year statutory window, as long as the initial intent to broaden appears within that window. See Ex parte Staats, No. 2009-007162, 2010 WL 1725728, at *2 (BPAI Apr. 26, 2010). Tipping the scales slightly away from robust public notice, Staats (vis-à-vis Doll) essentially tells us that "any intent" to broaden within two years of patent issuance permits any broadening in a later—and properly filed—continuation or divisional reissue application. Whether this is the best remedy for a fairly persistent headache remains to be seen.

¹ This post represents the thoughts and opinions of the author alone and not those of Finnegan LLP. It is intended to convey general information only and should not be construed as a legal opinion or as legal advice.

Federal Circuit Continues Split on Patentable Subject Matter

by Dennis Crouch

Myspace, Inc. v. GraphOn Corp. (Fed. Cir. 2012)

In yet another case, the Court of Appeals for the Federal Circuit has identified the wide chasm separating members of the court on issues involving patentable subject matter under 35 U.S.C. § 101. The majority opinion here - penned by Judge Plager and joined by Judge Newman - argues that courts should avoid the metaphysical question of whether an invention is unpatentably abstract whenever possible and instead focus on the conditions of patentability found in §§ 102, 103, and 112 of the patent act.

Judge Plager writes:

[C]ourts could avoid the swamp of verbiage that is § 101 by exercising their inherent power to control the processes of litigation, Chambers v. NASCO, Inc., 501 U.S. 32, 43 (1991), and insist that litigants initially address patent invalidity issues in terms of the conditions of patentability defenses as the statute provides, specifically §§ 102, 103, and 112. If that were done in the typical patent case, litigation over the question of validity of the patent would be concluded under these provisions, and it would be unnecessary to enter the murky morass that is § 101 jurisprudence. This would make patent litigation more efficient, conserve judicial resources, and bring a degree of certainty to the interests of both patentees and their competitors in the marketplace.

Judge Plager goes on to adopt the analogy to the Constitutional Avoidance Doctrine that Rob Merges and I suggested in our 2010 article titled Operating Efficiently Post-Bilski by Ordering Patent Doctrine Decision-Making.

In a sense, § 101 of the Patent Act can be thought of as the patent law analogy to the Bill of Rights of the Constitution. The latter sets in the broadest terms ("due process," "equal protection") the fundamental parameters of the citizenry's legal right. In the context of patent law, § 101 similarly describes in the broadest terms the legally-protected subject matter an inventor can seek to patent: a "process, machine, manufacture, or composition of matter . . . ." The Supreme Court has wisely adopted a policy of not deciding cases on broad constitutional grounds when they can be decided on narrower, typically statutorily limited, grounds. Following the Supreme Court's lead, courts should avoid reaching for interpretations of broad provisions, such as § 101, when more specific statutes, such as §§ 102, 103, and 112, can decide the case.

On the merits of the decision, the majority affirmed a lower court summary judgment holding that the asserted claims are invalid as anticipated and obvious under §§ 102 and 103(a) respectively.

In this case, the lower court never ruled on the question of patentable subject matter and none of the party briefs refer to Section 101, unpatentable abstract ideas, or Bilski v. Kappos. However, the majority felt compelled to discuss Section 101 based upon the dissenting opinion by Judge Mayer who opined that the patent intrinsically raises a threshold question of patentable subject matter that must be addressed.

Judge Mayer writes in dissent:

The issue of whether a claimed method meets the subject matter eligibility requirements contained in 35 U.S.C. § 101 is an "antecedent question" that must be addressed before this court can consider whether particular claims are invalid as obvious or anticipated. In re Comiskey, 554 F.3d 967, 975 n.7 (Fed. Cir. 2009). GraphOn Corporation ("GraphOn") owns four patents, U.S. Patent Nos. 6,324,538 (the "'538 patent"), 6,850,940, 7,028,034, and 7,269,591, which contain exceedingly broad claims to a system that allows users to exert control over the content of their online communications. This court must first resolve the issue of whether the GraphOn patents are directed to an unpatentable "abstract idea" before proceeding to consider subordinate issues related to obviousness and anticipation. See Bilski v. Kappos, 130 S. Ct. 3218, 3225 (2010) (noting that whether claims are directed to statutory subject matter is a "threshold test"); Parker v. Flook, 437 U.S. 584, 593 (1978) ("Flook") (emphasizing that "[t]he obligation to determine what type of discovery is sought to be patented" so as to determine whether it falls within the ambit of section 101 "must precede the determination of whether that discovery is, in fact, new or obvious"); Comiskey, 554 F.3d at 973 ("Only if the requirements of § 101 are satisfied is the inventor allowed to pass through to the other requirements for patentability, such as novelty under § 102 and . . . non-obviousness under § 103." (citations and internal quotation marks omitted)). I therefore respectfully dissent from the court's judgment.

The dissent agrees with the majority (and our) suggestion that § 101 be treated as analogous to the US Constitution – but argues that the statute "is the standard expressed in the Constitution and it may not be ignored." Rather, the dissent writes "a robust application of section 101 is required to ensure that the patent laws comport with their constitutionally-defined objective."

Below, I have excerpted claim 1 of the patentee’s U.S. Patent No. 6,324,538 with a 1995 priority filing date:

1. A method of publishing information on a computer network comprising the steps of: creating a database entry containing information recieved from a user of the computer network, wherein the information includes data representing text, a universal resource locator, an image, and a user-selected category; generating a transaction ID corresponding to the database entry; password protecting the entries; displaying the entries in accordance with the user-selected category; presenting the information to a user in hyper text markup language in response to a user's request.

The dissent is correct that the invention as claimed is incredibly broad.  However, this is the exact type of case that is just as easily eliminated on grounds of anticipation or obviousness.

Note for a later post — the majority opinion is also important for its statement on the theory and practice of claim construction.

Guest Post: The February of FRAND

Guest Post by Professor Jorge L. Contreras. 

For those of us who have been following the telecom patent battles, something remarkable happened a couple of weeks ago.  On February 7, the Wall St. Journal reported that, back in November, Apple sent a letter[1] to the European Telecommunications Standards Institute (ETSI) setting forth Apple’s position regarding its commitment to license patents essential to ETSI standards.  In particular, Apple’s letter clarified its interpretation of the so-called “FRAND” (fair, reasonable and non-discriminatory) licensing terms that ETSI participants are required to use when licensing standards-essential patents.  As one might imagine, the actual scope and contours of FRAND licenses have puzzled lawyers, regulators and courts for years, and past efforts at clarification have never been very successful.  The next day, on February 8, Google released a letter[2] that it sent to the Institute for Electrical and Electronics Engineers (IEEE), ETSI and several other standards organizations.  Like Apple, Google sought to clarify its position on FRAND licensing.  And just hours after Google’s announcement, Microsoft posted a statement of “Support for Industry Standards”[3] on its web site, laying out its own gloss on FRAND licensing.  For those who were left wondering what instigated this flurry of corporate “clarification”, the answer arrived a few days later when, on February 13, the Antitrust Division of the U.S. Department of Justice (DOJ) released its decision[4] to close the investigation of three significant patent-based transactions:  the acquisition of Motorola Mobility by Google, the acquisition of a large patent portfolio formerly held by Nortel Networks by “Rockstar Bidco” (a group including Microsoft, Apple, RIM and others), and the acquisition by Apple of certain Linux-related patents formerly held by Novell.  In its decision, the DOJ noted with approval the public statements by Apple and Microsoft, while expressing some concern with Google’s FRAND approach.  The European Commission approved Google’s acquisition of Motorola Mobility on the same day.

To understand the significance of the Apple, Microsoft and Google FRAND statements, some background is in order.  The technical standards that enable our computers, mobile phones and home entertainment gear to communicate and interoperate are developed by corps of “volunteers” who get together in person and virtually under the auspices of standards-development organizations (SDOs).  These SDOs include large, international bodies such as ETSI and IEEE, as well as smaller consortia and interest groups.  The engineers who do the bulk of the work, however, are not employees of the SDOs (which are usually thinly-staffed non-profits), but of the companies who plan to sell products that implement the standards: the Apples, Googles, Motorolas and Microsofts of the world.  Should such a company obtain a patent covering the implementation of a standard, it would be able to exert significant leverage over the market for products that implemented the standard.  In particular, if a patent holder were to obtain, or even threaten to obtain, an injunction against manufacturers of competing standards-compliant products, either the standard would become far less useful, or the market would experience significant unanticipated costs.  This phenomenon is what commentators have come to call “patent hold-up”.  Due to the possibility of hold-up, most SDOs today require that participants in the standards-development process disclose their patents that are necessary to implement the standard and/or commit to license those patents on FRAND terms. 

On its face, it is easy to see why a FRAND commitment might reassure implementers of a standard.  If a patent is essential to the standard, the patent holder must license the patent on terms that are fair, reasonable and non-discriminatory.  Unfortunately, the devil has proven to be in the details of FRAND, and no two companies seem to have the same view of what constitutes fair, reasonable or non-discriminatory licensing terms.  This lack of agreement has troubled regulators for some time and has led to an increasing number of litigation claims alleging that one party or another to a standards effort has failed to comply with its FRAND obligations. 

The February FRAND statements by Apple, Microsoft and Google are thus informative and potentially of great importance.  To understand the statements, and why the DOJ viewed them differently, it is helpful to compare them side-by-side.  The following table summarizes what Apple, Microsoft and Google said FRAND means to them.

	Apple (relating to cellular telephony standards)	Microsoft	Google (limited to Motorola Mobility patents)
1. Prior Commitments. Will the patent holder honor FRAND obligations of prior patent owners?	A party acquiring patents from someone who made FRAND commitments must abide by those commitments	n/a	G will honor Motorola’s existing FRAND commitments
2.  Onward Transfer. Will the patent holder require future owners of the patent to comply with its FRAND obligations?	n/a	M will require transferees to abide by its FRAND commitments	G will use “best efforts” to ensure that transferees abide by its FRAND commitments
3. Reciprocity. Will the patent holder require that the licensee grant a license back to the licensor?	n/a	M will only require a grant-back of the licensee’s patents that are essential to the same standard	G will only require a grant-back of the licensee’s patents that are essential to the same standard
4.  Royalty Rate. Will the patent holder commit to a maximum royalty rate?	Standards-essential patents should be licensed at an “appropriate” royalty rate reflective of the licensor’s share of the overall number of patents essential to the standard	n/a	Maximum per-unit royalty of 2.25% of product net selling price
5. Injunctive Relief. Will the patent holder seek injunctive relief against unlicensed implementers of the standard?	A party making a FRAND commitment must not seek injunctive relief on patents subject to the commitment	M will not seek an injunction … on the basis of [standards-] essential patents	G will not seek an injunction on the basis of standards-essential patents, during a reasonable negotiation period and if the other party makes a similar commitment

 

Despite their differences, the three FRAND statements exhibit some important similarities.  All three, for example, support the notion that FRAND commitments should “travel with the patent”.  This is an important acknowledgement, as such commitments typically lack the necessary elements of a bilateral contractual arrangement, and have been questioned in both corporate acquisitions and bankruptcy proceedings (see In re Nortel Networks Inc., Order - Case No. 09-10138(KG) (Bankruptcy Ct. D.Del., Jul. 11, 2011)).

The three statements also address the question of injunctive relief.  Numerous commentators have questioned whether injunctive relief is an appropriate remedy for holders of standards-essential patents, particularly in view of the Supreme Court’s four-part analysis under eBay v. MercExchange LLC, 547 U.S. 388 (2006). In 2011, the Federal Trade Commission suggested that injunctive relief might not be justified in the standards context, writing that “[a] prior [F]RAND commitment can provide strong evidence that denial of the injunction and ongoing royalties will not irreparably harm the patentee.”  Federal Trade Comm’n, The Evolving IP Marketplace – Aligning Patent Notice and Remedies with Competition 235 (2011).  In their February FRAND statements, Apple and Microsoft each commit not to seek injunctions on the basis of their standards-essential patents.  Google makes a similar commitment, but qualifies it in typically lawyerly fashion (Google’s letter is more than 3 single-spaced pages in length, while Microsoft’s simple statement occupies about a quarter of a page).  In this case, Google’s careful qualifications (injunctive relief might be possible if the potential licensee does not itself agree to refrain from seeking an injunction, if licensing negotiations extended beyond a reasonable period, and the like) worked against it.  While the DOJ applauds Apple’s and Microsoft’s statements “that they will not seek to prevent or exclude rivals’ products form the market”, it views Google’s commitments as “less clear”.  The DOJ thus “continues to have concerns about the potential inappropriate use of [standards-essential patents] to disrupt competition”. 

It is not clear whether the DOJ’s criticism of Google’s stance on injunctive relief, or its endorsement of Apple’s and Microsoft’s positions, is warranted.  After all, none of the February FRAND statements was made directly to the DOJ, formed part of a consent order, or even rose to the level of a contractual commitment.  But whatever their actual legal effect, it is certainly preferable to have such statements than not, and perhaps this recent wave of “clarifications” will help courts to interpret the array of FRAND-based claims that will inevitably be brought over the next several years.

Mr. Contreras is a Visiting Associate Professor at American University - Washington College of Law and will join the faculty as an Associate Professor this summer.  His research focuses on the impact of intellectual property rules on scientific and technological development, including in the area of technical standard-setting.  He is the editor of the ABA's Standards Development Patent Policy Manual and has written numerous articles and book chapters relating to intellectual property and standards.

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[1] http://www.scribd.com/doc/80899178/11-11-11-Apple-Letter-to-ETSI-on-FRAND

[2] http://www.scribd.com/doc/80976133/12-02-08-Google-to-IEEE-on-MMI-Patents

[3] http://www.microsoft.com/about/legal/en/us/IntellectualProperty/iplicensing/ip2.aspx

[4] http://www.justice.gov/opa/pr/2012/February/12-at-210.html

 

Guest Post: It's Time for a Reliable System to Determine Who Owns a U.S. Patent

by Susan G. L. Glovsky of Hamilton Brooks Smith Reynolds

Patents are far more valuable than they ever have been. Yet, unlike real property, it can be difficult to determine patent ownership or accurately identify encumbrances even though patent value can exceed the value of a home or even an office building. Rights in real property are determined by legislation in each state, which provides for recordation of written transfers and security interests in real property. Legislation related to real property recordation provides a level of certainty in determining the true owner, provides protection for bona fide purchasers, and permits recordation of liens to satisfy debts owed by real estate owners.

This is not the case with patents. Because of an inadequate system for recordation, prospective purchasers, licensees, lenders, and even defendants in a lawsuit may have to take it on faith that the seller, licensor, borrower, or plaintiff truly owns, and has not previously encumbered, these patent rights.

Unless assigned, patent applications are owned by the inventor or inventors named in the application. The inventor(s) can assign ownership to another person or to a company. Thereafter, the assignee can further assign the application or, once issued, the patent. Any assignment must be in writing, and the assignment can be recorded with the United States Patent and Trademark Office. Recordation is voluntary. In the event of conflicting transfers of title to the same patent or application, the Patent Act gives the first purchaser a three month window in which to record, which takes priority over a subsequent purchase during the three month period, even though there was no constructive (through recordation) or actual notice of the assignment at the time the subsequent purchase was made. As a result, potential transfers that might have occurred in the three month period preceding an assignment that could trump that assignment may be unavailable when conducting any title search, leaving a potential purchaser with uncertainty and unacceptable risk.

Security interests in patents are to be recorded where UCC filings are made, based on state law. Unlike real estate, it is not always easy to determine the state in which a security interest in a patent has to be recorded. Once the state is determined, it is necessary to determine, under that state's law, whether recordation is made at the state or local level in order to search for any security interest that may be recorded. Lack of certainty concerning security interests can discourage lenders from providing needed loans.

The time has come to enact national legislation that provides clear record title to patent applications and patents. The value of patents is too great to continue with the present system. Moreover, patents are a federal right and should be addressed at a federal level. A national system would harmonize U.S. law with those of other countries, which generally have a national system for recordation of patent rights. Recently, the Patent Office proposed rules that would require disclosure of any assignee of patent rights. But these rules simply do not go far enough. Legislation is necessary in order to provide a comprehensive internationally recognized system that assures the recordation of patent title, security interests, and other encumbrances through filings solely in the Patent Office.

Taking the best from state systems for recording interests in real estate, at a minimum any legislation needs to:

• Provide for recordation in the United States Patent and Trademark Office of transfers, security interests, exclusive licenses, corporate mergers, and liens that relate to rights in patent applications and patents as the sole location for recording those interests
• Provide that a transfer is only effective against a bona fide purchaser once it is recorded
• Determine priority among holders of transfers and security interests that are not recorded, including whether notice of unrecorded transfers is considered in determining priority
• Provide a mechanism in Federal Court to remove a cloud on title to patent assets
• Provide a mechanism (such as a lis pendens) that prevents transfer of the patent asset while a court action to determine rights in the patent asset is pending
• Allow for dismissal of any lawsuit filed to enforce a patent, unless the record owner or record exclusive licensee is a party

The new rules proposed by the Patent Office have succeeded in focusing attention on recordation of patent rights, but the proposed rules do not go far enough. In order to provide a comprehensive system that addresses all the issues, Congress needs to enact legislation that solves all the problems in the current system.

Notes:

• Read the Patently-O Prior Discussion on this topic.

Microsoft and Nokia sue Apple for Patent Infringement (via a Holding Company)

by Dennis Crouch

Luxembourg based Core Wireless Licensing S.a.r.l. has sued Apple for patent infringement in the Eastern District of Texas. The recently filed complaint alleges that Apple’s communication devices such as iPads and iPhones infringe eight different Core Wireless patents.  The Core Wireless family of patents focus primarily on communication protocols and the patent owner claims that the patents are infringed by any device that communicates using 2G, 3G, or 4G standards.

Core Wireless obtained its portfolio of 2,000 patents and pending applications from Nokia and (apparently) Microsoft. In 2011, the patent licensing entity MOSAID purchased Core Wireless.  MOSAID itself is owned by the US private equity firm Sterling Partners.

The reported purchase price for Core Wireless (including its patents) was just under $20,000 — seemingly a very low price.  However, there is a kicker, the sale requires that the new owner enforce the patents and 2/3 of any licensing revenue must be sent to Microsoft and Nokia. Further, the patent ownership rights are subject to a condition subsequent — if Core Wireless fails to meet minimum performance thresholds then the patent rights revert to the grantors (Nokia and Microsoft). The following comes from a 2011 press release by MOSAID:

Core Wireless will retain approximately one-third of gross royalties from future licensing and enforcement of the patents and will bear all of the costs associated with their administration, licensing, enforcement and monetization. Core Wireless’ ongoing ownership of the portfolio is subject to minimum future royalty milestones. The remaining 2/3 of gross royalties will be paid to Nokia and Microsoft Corporation (NASDAQ: MSFT).

One way to look at this is that MOSAID is essentially working as on a property management contract. With patents, title must shift in order to facilitate the necessary lawsuits. The complaint lists the following patents as infringed: 6,792,277, 7,606,910, 6,697,347, 7,447,181, 6,788,959, 7,529,271, 6,266,321, 6,978,143.

This case is also interesting in the context of Professor Schwartz’s article on Contingent Fee Patent Litigation.  In a round-about way, Nokia and Microsoft have hired MOSAID on contingency fee to enforce their patent rights.  The complaint itself was filed by Henry Bunsow of Dewey Leboeuf in San Francisco with Johnny Ward Jr. serving as local counsel in E.D. Texas. True to its role as hopeful licensor, the plaintiff has only asked for money damages and not injunctive relief to stop ongoing infringement.

Google Buys More Patents: Last fall, MOSAID sold a set of 18 patents and patent applications to Google for a reported $11 million. Recently, the pair recorded a new transaction of about 200 patents and applications from MOSAID to Google.  Those patents were previously owned by the Italian tire manufacturer Pirelli and a spinoff company PGT-Photonics.  Google also recently purchased one eCommerce patent from the tiny firm Alpine-in-Motion.

Contingent Fee Patent Litigation

Review by Dennis Crouch

Dave Schwartz is a law professor these days. However, before joining Chicago-Kent he was litigator for more than a decade. Schwartz's most recent article is interesting study of the practice of contingent fee patent litigation. And, the article is appropriately named "Contingent Fee Patent Litigation." [Download the Article from SSRN] The meat of the article is based on Schwartz's interviews with a set of forty litigators who work on contingency fee basis and a privately collected set of contingency fee agreements.

From the abstract:

Drawing upon several sources of data, including in-depth interviews with over forty lawyers involved in contingent representation in patent litigation and examination of over forty contingent fee agreements, this Article provides the first comprehensive analysis of the rapid evolution of contingent representation in patent law. The development of contingent representation includes top-tier litigation firms recently transitioning to taking on high value contingent cases, small entrants representing plaintiffs in lower value cases, and numerous general practice firms experimenting with contingent patent litigation. These diverse players each select and litigate cases using varied methods, resulting in different levels of risk and reward. The Article uses the study of these players to discuss how and why attorney-client contingent relationships established in the nascent marketplace of patent contingent litigation differ from other types of contingent litigation, and what patent law can teach about contingent representation in general.

Schwartz particularly rejects the conclusions drawn by Texas Professors Ronen Avraham and John Golden that former medical malpractice and mass tort lawyers have moved into the contingency fee patent law arena. Rather, Schwartz concludes that "most lawyers whose practice consists of substantially all patent contingent litigation are primarily and historically patent litigators. They are not former medical malpractice, personal injury, or other tort lawyers."

I might quibble a bit with Schwartz's prognostication that the America Invents Act (AIA) is likely to reduce the filing of weak patent claims where the patentees are hoping to settle for the cost of defense. The basis for this is the AIA's new anti-joinder rule that "joining multiple defendants in many circumstances." Schwartz correctly writes that "this means that the practice of suing multiple unrelated defendants in one cause of action is prohibited going forward." However, in my own experience filing patent complaints, it is not much more difficult to file 20 separate actions as it is to file one action against 20 defendants. The primary difference is the $350 federal court filing fee and perhaps a need for a slightly better system of managing multiple cases. However, those fees are still small when compared with settlement figures.

One topic fascinating to me that is only lightly discussed by Schwartz is financing for the lawyers themselves and the rise of Wall Street hedge fund and bank financed patent litigation. Those underlying financing issues almost certainly drive elements of contingent fee patent litigation.

Download the Article from SSRN

Copyright: Lawfirms Sued for Submitting Prior Art to the USPTO

• John Wiley & Sons and American Institute of Physics v. McDonnell Boehnen Hulbert & Berghoff (MBHB) (N.D. Ill.) (Complaint)
• American Institute of Physics and John Wiley & Sons v. Schwegman Ludberg (D.Minn) (Complaint)

The Hoboken publishing company (John Wiley) and the non-profit American Institute of Physics have continued their quest to pursue copyright infringement charges against US patent attorneys who submit copies of journal articles to the US Patent Office during the patent application process. The submission of those documents is required by law and attorneys who fail to submit known and relevant prior art can be subject to ethics charges and the associated patents held unenforceable. Earlier this year, the US Patent Office issued a memo indicating its belief that copying and submitting copyrighted documents should be considered a non-actionable fair use.  Firms already pay for access to the articles and the USPTO also has its own access to most of the articles. The issue is whether the patent applicants must pay an additional fee for making a copy for the USPTO and an additional copy for the in-house file.

The first two law suits were filed yesterday. The first against my former law firm MBHB LLP in Chicago and the second against the Schwegman firm in Minnesota.  These two firms are known for the high level of scientific and technical expertise of their attorneys.  (Full Disclosure – MBHB is the primary advertiser on Patently-O)

The complaints allege two particular infringing acts:

14. In connection with researching, filing and prosecuting certain patent applications, McDonnell made and/or distributed to the United States Patent and Trademark Office ("PTO"), and perhaps others, unauthorized copies of copyrighted articles from plaintiffs' journals … Such unauthorized copies were used for the commercial benefit of defendants and their clients.

15. Upon information and belief, defendants made (a) additional copies of the copyrighted works that defendants included or cited in their patent applications to the PTO, including those identified on Schedule A, and (b) copies of plaintiffs' copyrighted works that defendants considered in connection with those applications, but did not ultimately cite or provide to the PTO. Plaintiffs cannot know the full extent of defendants' copying without discovery. Apart from the copying of plaintiffs' works accompanying the patent filings described above, this internal copying infringes plaintiffs' copyrights.

In his article for PaidContent, Jeff Roberts sees these two as "a test-run. . . . If the firms fold their cards and settle, John Wiley and the physicists may be emboldened." (See also Zach Winnick at Law360).

In the complaint, Wiley identifies two articles that MBHB allegedly submitted to the USPTO:

• Raznikov, V., et al., "A new approach to data reduction and evaluation in highresolution time-of-flight mass spectrometry using a time-to-digital convertor datarecording system," Rapid Communications in Mass Spectrometry, vol. 15, No. 8, pp. 570-578 (2001); and
• Erchak, A., et al., "Enhanced coupling to vertical radiation using a twodimensional photonic crystal in a semiconductor light-emitting diode," Applied Physics Letters, vol. 78, No. 5, pp. 563-565 (2001).

The complaint in the Schwegman case are based upon these two articles:

• McDonald S., et al., "Photoconductivity from PbS- nanocrystal/ semiconducting polymer composites for solution-processible, quantum-size tunable infrared photodetectors," Applied Physics Letters, vol. 85, No. 11, XP012062554, ISSN: 0003-6951, pp. 2089-2091, (Sep. 13, 2004); and
• Greenwald, et al., "Polymer-Polymer Rectifying Heterojunction Based on Poly(3,4-dicyanothiophene) and MEH-PPV," J. Polym. Sci. A: Polym. Chem., vol. 36:17, pp. 3115-3120, (1998).

I have contacted the authors of each of these articles, but have not yet received any response. MBHB's managing partner Marcus Thymian released a statement referring to the USPTO's position on fair use. "We note that the United States Patent and Trademark Office has released its position -- that it is a fair use for a patent applicant to submit a copy of non-patent art to the patent office to fulfill the disclosure requirement imposed by the patent regulations."  It will also be easy for the law firms to obtain an opinion that internal copying also qualifies as a fair use under Section 107 of the Copyright Act. 

In a statement to Law360, the plaintiffs attorney Bill Dunnegan appears ready to admit - despite language in the complaint – that submissions to the USPTO are not actionable.  He is quoted as saying "The crux of what our case deals with is the internal copying by the law firms after they have one copy in their hand. . . . Those copies are not licensed, and the patent office didn't take a position on whether or not fair use would apply to those copies."  The copy-for-file issue seems to fall in line with the Supreme Court's analysis in Sony v. Universal (1984). In that case, the court held that it was a fair use for home consumers to record television broadcasts so the consumers could view the shows at a later time. 

Notes:

• Submitting Citations: Several years ago, the USPTO realized that it already had copies of all issued US patents within its in house databases and asked patent practitioners to stop sending-in copies of patents. Rather, the patent attorneys were asked to simply submit a list of US patent documents that materially related to the patent being examined.  To the extent that the USPTO already has access to many of the publications in question here, a similar solution could work that allows patent practitioners to simply submit the citation to articles within the USPTO databases.
• Open Access: Depending upon pricing structure, access to a journal such as the Journal of Applied Physics costs as much as $15k per year.  Academic authors generally receive no compensation for publication and there is a growing movement amongst academia toward open access journals.  Almost all law reviews make their works freely available online.  This enforcement project may push the sciences in that direction as well.

GE Wins Wind Turbine Patent Appeal – USITC Must Now Determine Whether to Block Mitsubishi Wind Turbine Imports

GE v.USITC and Mitsubishi (Fed. Cir. 2012)

Wind turbine technology is coming into its own. GE and Mitsubishi are both global leaders. Mitsubishi imports wind turbines into the US, and GE filed a complaint with the US International Trade Commission (USITC) alleging infringement of three patents. Patent Nos. 7,321,221, 6,921,985, and 5,083,039. The '039 patent expired in 2011 and, because the USITC's only remedy is injunctive relief to stop ongoing and future infringement, the court has dismissed all charges associated with that expired patent.

During its proceedings, the USITC Administrative Law Judge found the GE patents infringed, enforceable, and "not invalid." However, patents are only enforceable at the USITC if there is a "domestic industry" for the claimed invention. 19 U.S.C. § 1337(a). The statute specifically requires a US industry that can show "with respect to articles protected by the patent" significant investment in plant and equipment; employment; or investment in exploitation, "including engineering, research and development, or licensing." The ALJ found a domestic industry, but the full Commission rejected that finding and additionally held that Mitsubishi did not infringe the '221 patent.

Win for GE: In a decision penned by Judge Newman and joined by Chief Judge Rader and Judge Linn, the Federal Circuit has affirmed-in-part, vacated-in-part, reversed-in-part, and remanded. Overall, this is a win for GE because the appellate court ruled that a domestic industry exists in relation to the '985 patent and it appears that the USITC already agrees that the '985 patent is valid and infringed.

USITC Domestic industry jurisprudence is a mess. Here, the basic question boiled down to whether there is at least one claim - GE's wind turbines are would infringe the claims in its asserted patents. That decision obviously turned on claim construction and particularly whether GE's domestic turbines included a "converter controller coupled with the inverter … to shunt current from the inverter." The problem with GE's domestic turbines is that its controller is within the inverter and the Commission held that it could not therefore be "coupled to" or shunt current "from" the inverter. On appeal, the court rejected that analysis and instead held that the claim does not require that the controller be separate from the inverter.

A similar argument was rejected in NTP, Inc. v. Research in Motion, Ltd., 418 F.3d 1282 (Fed. Cir. 2005), where some of the claims recited a receiver "connected to" or "coupled to" a processor or that the receiver "transfers" information to the processor. The accused infringer in NTP had argued that "connected to," "coupled to," and "transfer from" each requires the receiver and the processor to be separate, but the court concluded that "the two components could be connected, joined, or linked together by wires or other electrical conductors and still be located in the same housing or even on the same circuit board." 418 F.3d at 1310-11. The court also held that the function that information is transferred between two entities does not require physical separation of the entities. Id. at 1310.

Based upon its corrected claim construction, the Federal Circuit was able to conclude that claim 15 of the '985 patent "covers the domestic industry turbines" and that GE therefore has a right to bring an action on the patent in the ITC.

Notes:

• GE filed a parallel lawsuit requesting damages and injunctive relief against Mitsubishi in the Southern District of Texas That case has been stayed pending the outcome of the ITC action. In a separate case, GE is fighting with one of its former employees -- Thomas Wilkins who is claiming joint inventorship rights to the patents. Wilkins has apparently assigned his rights to Mistubishi.

Richard Taranto: Next Federal Circuit Judge

In his blog, Bill Vobach reports on the recent Senate Judiciary Committee hearing on Federal Circuit nominee Richard Taranto. Vobach reports:

It appeared that the hearing was only attended by three senators — Senator Franken (Minnesota), Senator Grassley (Iowa), and Senator Lee (Utah). Questions were asked by all three senators. Senator Franken asked Mr. Taranto about his clerking for Justice Sandra Day O'Connor. Senator Grassley asked Mr. Taranto about the Defense of Marriage Act. Senator Lee questioned Mr. Taranto about judicial philosophy. No material, if any, questions were asked about patent law.

There do not appear to be any roadblocks in the way of Mr. Taranto's confirmation and we can expect that he will be joining Chief Judge Rader and his colleagues in short order.

Mr. Taranto is an appellate and Supreme Court litigator at the small but well established DC firm of Farr & Taranto. He has participated in dozens of Federal Circuit patent appeals, including several Rambus cases, Verizon v. Cox, Lucent v. Gateway, Syngenta v. Monsanto, and others. Mr. Taranto has argued three IP cases before the U.S. Supreme Court: MGM v. Grokster (contributory copyright infringement), Warner Jenkinson v. Hilton Davis (patent law doctrine of equivalents), and Two Pesos v. Taco Cabana (trade dress infringement). He has taught a variety of classes as an adjunct professor, including patent law at Harvard in 2002. Taranto graduated from Yale Law School in 1981. He clerked for Judge Abraham Sofaer on the Southern District of New York; Judge Robert Bork on the D.C. Circuit; and Justice Sandra Day O'Connor on the Supreme Court.

During his discussion Mr. Taranto noted that both of his grandmothers are 100-years-old and still living. I suspect that actuaries would agree that this gives Mr. Taranto a good chance of living a long time as well. He is current 54 years old.

Taranto's favorite non-living Supreme Court justice: Justice Harlan.

Taranto was nominated in November 2011.

* * * * *

The appellate court now consists of eleven circuit judges: Chief Judge Rader along with Judges Newman, Lourie, Bryson, Linn, Dyk, Prost, Moore, O'Malley, Reyna, and Wallach. Mr. Taranto will fill the bench as number twelve. Judges Mayer, Plager, Clevenger, Gajarsa and Schall all sit on the bench with senior status. Judges Newman, Lourie, Bryson, and Dyk are all eligible to elect senior status and Judge Linn will be eligible in April of this year. It is likely that at least two positions will open-up during the next year.

IBM's Patent Abandonment Strategy

by Dennis Crouch

It is well known that IBM receives more US patents than any other company. The company also abandons more patents than any other company.   Once a patent issues, the patent holder must pay maintenance fees in order to avoid abandonment.  Fees are due at 3½, 7½, and 11½ years after issuance and each subsequent fee is substantially higher. Thus, under the current schedule, the first fee is $1,130, the second fee is $2,850, and the third fee is $4,730.  In recent years, IBM has abandoned thousands of patents for failure to pay the fee due at 3½ years from issuance.  IBM’s rate of abandonment is more than double that of other major patent holders. 

The chart below shows the percent of IBM-assigned patents that that were abandoned withn 4–years of issuance for failiure to pay the maintenance fee due.  The most recent available annual information is for patents issued in 2007. (Maintenance fees for patents issued in 2008 are due in the upcoming months).

A company like Apple is on the other extreme regarding payment of these renewal fees. Based on my records, Apple has not abandoned a single application issued in the past ten years based upon failure to pay the first fee. Canon rivals IBM in terms of sheer number of patents but typically abandons fewer than 1% of its issued patents at the four-year mark.

What’s going on here? Apple and Canon are certainly paying maintenance fees on patents that would be found invalid on reexamination and not-infringed in court. On the other side, IBM could have predicted at the time of issuance that it wouldn’t pay the maintenance fee — so why did it pay the $1,000 issue fee?

Patently-O in the Courts: Tropp v. Conair Corporation

By Dennis Crouch

Tropp v. Conair Corporation (E.D.N.Y. February 28, 2012) Download TroppConair

A federal court in the Eastern District of New York recently justified its holding in a patent case based at least partially on a 2010 Patently-O posting. David Tropp's patent claim against Conair and others was denied based upon the joint patent infringement doctrines outlined in BMC Inc. v. Paymentech, 498 F.3d 1373, 1378 (Fed. Cir 2007) and Muniauction, Inc. v. Thompson Corp., 532 F.3d 1318, 1329 (Fed. Cir. 2008).

Conair then asked that the case be ruled "exceptional" to justify an award of attorney fees. In rejecting that claim, the court cited Patently-O for the proposition that the line of cases on joint infringement left some amount of wiggle room for courts to find joint infringement absent facts sufficient to support traditional vicarious liability. Based upon potential ambiguity in the law, the court found that the plaintiff's theory of the case had not been improperly pursued, even if ultimately unsuccessful.

Muniauction did not indisputably hold that vicarious liability is the only way to satisfy the control or direction standard. It only made clear that (I) mere "arms-length cooperation" is not sufficient; and (2) vicarious liability, if established, is sufficient. Muniauction, 532 F.3d at 1329-30. At the least, such a reading of BMC and Muniauction is not objectively baseless. See Global Patent Holdings, LLC v. Panthers BRHC LLC, 586 F. Supp.2d 133 I, I 334-35 (S.D. Fla. 2008) (finding it "appears that" vicarious liability is required to satisfy the direction or control test, while also acknowledging that the "Federal Circuit did not explain with any specificity what it meant by 'direction or control'"); Dennis Crouch, MUNIAUCTION: Joint Infringement Requires Mastermind, Patently-O (July 15, 2008) http://www.patentlyo.com/patent/2008/07 /muniauction-joi.html (opining that Muniauction "left some wiggle room," open space to be further developed by ligation, such that a "later case could still hold that it is not necessary to show facts sufficient to support traditional vicarious liability"). Accordingly, this argument in particular, and defendants' motion in general, depends on an exaggerated view of the certainty and static determinism of the law of divided infringement.

I communicated with Tropp's attorney (and fellow blogger and Princeton alum) Ron Coleman who noted that an appeal on the merits of the case has already been filed.

Of course, the joint infringement (aka divided infringement) issue is being discussed in the halls of Madison Place in the pending en banc case of Akamai Tech v Limelight Networks.