Patent Law Blog (Patently-O)

Supreme Court Asked to Expand Defenses to Patent Infringement

IGT v. Aristocrat Tech of Australia (on petition for certiorari)

Every year, the PTO revives hundreds of unintentionally abandoned patent applications, and about half of those eventually issue as patents (not counting continuations and other descendants).

In the IGT case, the gaming-manufacturer was sued for allegedly infringing two of Aristrocrat's slot-machine patents. The first patent stemmed from an Australian provisional application that was followed by an international PCT filing. At the national stage in the US, the applicant missed the filing deadline but was able to convince the PTO to revive the application as unintentionally abandoned. The second patent is a continuation from the first.

In court, IGT has argued the revival was improper and thus, that the patents are invalid. IGT reasoned (and the district court agreed) that the revival was improper because the PTO lacked authority to revive national stage applications that were unintentionally filed late. Rather, the statute arguably only allows revival of applications upon proof that the tardiness was unavoidable.

Without determining the proper scope of the PTO's revival authority, the Federal Circuit rejected IGT's argument - holding that improper revival is not a "cognizable defense" to patent infringement and reminding defendants that a patent is not invalid simply because the PTO erred in issuing the patent.

Enumerated Defenses in Litigation: Section 282 of the Patent Act defines the defenses available against charges of patent infringement. These enumerated defenses include:

1. Noninfringement …,
2. Invalidity of the patent or any claim in suit on any ground specified in part II of this title as a condition for patentability,
3. Invalidity of the patent or any claim in suit for failure to comply with any requirement of sections 112 or 251 of this title.
4. Any other fact or act made a defense by this title.

In its analysis, the Federal Circuit found that improper revival did not fall within any of the four categories of defenses - and thus cannot be raised as a litigation defense. The case implicitly calls into question other traditional defenses such as nonstatutory double patenting, improper inventorship. IGT argues that the decision also implies that a defendant could not challenge a patent based on its expiration due to failure to pay maintenance fees. Of course, a defendant should have some mechanism for challenging an improperly revived patent - either through the courts or a post-grant procedure at the PTO. Under the Federal Circuit's rule, however, a typical defendant would have no recourse. (Two potential avenues could be (1) inequitable conduct in the revival and (2) trigger an interference.)

Leaving the PTO's revival grant's unchallengeable is particularly troublesome because of the serious lack of transparency in the petitions office. Pre-grant revivals are tucked away in individual prosecution file wrappers and cannot be searched in any public database. Thus, the public is left without any check on the system at either the micro or macro level.

Petition for Certiorari: IGT has petitioned the Supreme Court for a writ of certiorari and has garnered the support of the group of usual defendants (Cisco, Dell, Google, Microsoft, etc.) with the simple question:

Whether a patent infringement defendant may assert as a defense the fact that the patent resulted from an abandoned application that was not revived according to the requirements prescribed by Congress.

In several ways, this cases parallels the other recent Supreme Court patent cases such as KSR, eBay, and MedImmune. At least as history tells the story, each of those cases began with a rigid rule created by the Federal Circuit to favor patent holders. In each case, the Supreme Court softened the rule to add flexibility in a way that favors the defendants. In KSR, the rigid TSM test for applying multiple references during obviousness analysis was relaxed. In eBay, the rule strongly favoring injunctive relief was relaxed. And, in MedImmune, the rule setting a reasonable apprehension of a lawsuit as a condition precedent to a declaratory judgment action was also relaxed. In the IGT case at hand, the Supreme Court has the opportunity to tear down another rigid application of the law and open a new avenue for defendants to challenge a patent holder's rights.

Invalidity of the patent or any claim: Although slightly off-topic, I am intrigued by the wording of Section 282, which creates the defense of "invalidity of the patent or any claim." (Emphasis added). Ordinary validity issues focus on individual claims. Is the claim anticipated or obvious? Is the claim definite, fully described, and enabled, and does it properly claim patentable subject matter? The general focus on the validity of claims begs the question of what we mean by "invalidity of the patent." IGT's theory of invalidity based on improper revival is bolstered here because it would breathe meaning into the statutory invalid "patent."

Aristocrat's opposition and any amici in opposition are due April 22.

Briefs:

• IGTSupremeCt.pdf
• IGTamicus.pdf

Related Posts:

• Dennis Crouch, Erroneous Revival by PTO is not a Cognizable Defense in an Infringement Action, Patently-O (Sept. 22, 2008)
• Dennis Crouch, CAFC to Decide Important Revival Case: Aristocrat v. IGT, Patently-O (Dec. 12, 2007)
• Dennis Crouch, No Revival For "Unintentional" Missed National Stage Filing Date (Delay Must Be Unavoidable), Patently-O (Jul. 26, 2007)
• Dennis Crouch, Reviving Unintentionally Abandoned Patent Applications, Patently-O (Feb. 26, 2008)
• Dennis Crouch, IGT Petitions for En Banc Rehearing: Asking Court to Allow Invalidity Defense for “Improper Revival”, Patently-O (Oct. 7, 2008)
• Dennis Crouch, Reinstating Patents After Failure to Pay Maintenance Fee, Patently-O (Feb. 26, 2009)
• I mentioned above that improper revival could be challenged in the course of an interference. Chico Gholz pointed me to his 2009 IP Today article addressing the issue: Aristocrat V. IGT: Another Reason Why Provoking An Interference May Be Preferable To Defending An Infringement Action. Of course, as one comment already indicates, interferences are severely time-limited.
  

Reinstating Patents After Failure to Pay Maintenance Fee

In a prior post, I discussed payment of maintenance fees. Ordinarily, three post-issuance maintenance fees must be paid in order to keep the patent in force for its entire term. A large entity pays $980 3.5 years after issuance; $2,480 7.5 years after issuance; and $4,110 11.5 after issuance. If the fee is not paid then the patent will expire at the next 4, 8, or 12 year mark. In that 6-month interim (e.g., between the 3.5 year due date and the 4 year expiration date), the fee can still be paid with a $130 surcharge. Once the patent expires, it can still be reinstated if the fee is paid along with an additional surcharge for either unavoidable failure to pay the fee ($700) or unintentional failure to pay the fee ($1,640). In addition, the Patent Office (PTO) must accept your explanation for the delay. Under 35 U.S.C. 41(c), revival for unintentional expiry is only available within two years of the expiration date. Later revival requires proof that the failure to pay the fee was unavoidable - a difficult standard to meet.

The PTO publishes reinstated patents each week in the Official Gazette. Using those publications, I compiled the following table showing the number of patents being reinstated each year. As the chart show, the number of reinstated patents has risen over time. The absolute number of issued patents is also rising, but at a slower rate. Thinking about this as an applicant's 'error rate' - for the past decade, about 2.5 percent of patents that expire due to non-payment of maintenance fees are later reinstated. This is an incredibly high error rate for a purely ministerial function of paying a fee.

I pulled Patent No. 6,798,824 from the list of reinstated patents that was published in the February 24, 2009 Official Gazette. That patent originally was assigned to InterDigital and is directed to a particular type of spread spectrum communications device. The patent issued on September 28, 2004 and expired four yeas later due to failure to pay the maintenance fees. Realizing its problem, the patent holder filed a petition to accept late payment of maintenance fees on December 19, 2008 and the petition was granted on January 30, 2009. (Note - the petition is not available in PAIR).

Note:

• Cite, Dennis Crouch, Reinstating Patents After Failure to Pay Maintenance Fee, Patently-O, http://www.patentlyo.com/patent/2009/02/reinstating-pat.html (Feb. 26, 2009). See also, Dennis Crouch, USPTO Maintenance Fees, Patently-O, http://www.patentlyo.com/patent/2009/02/uspto-maintenance-fees.html (Feb. 23, 2009); Dennis Crouch, Formalism at the Federal Circuit: Equitable Plea for Revival is Rejected, Patently-O, http://www.patentlyo.com/patent/2008/06/formalism-at-th.html (June 10, 2008) (discussing the Federal Circuit's decision in Burandt v. Dudas); Dennis Crouch, Unavoidable Delay: Ignorance as an Excuse?, Patently-O, http://www.patentlyo.com/patent/2007/08/unavoidable-del.html (Aug. 15, 2007) (discussing the FemSpec case where the DC district court refused to revive a patent - holding that the unavoidable delay standard has a due care element).

USPTO Maintenance Fees

A large portion of PTO revenue comes through applicant’s payment of maintenance fees. Under the current fee structure, three post-grant maintenance fees must be paid in order to keep a patent from prematurely expiring. A large entity pays $980 3.5 years after issuance; $2,480 7.5 years after issuance; and $4,110 11.5 after issuance. If the fee is not paid then the patent will expire at the next 4, 8, or 12 year mark. In FY08, the PTO reported over $500 million in revenue from maintenance fees.

I wanted to look at how maintenance fees are being paid, so I downloaded the past decade of OG Notices and parsed-out notices of patent expiration. The chart below shows some results.

The chart shows survival rates for the four (red), eight (blue), and twelve (green) year marks. Each datapoint represents the average survival rate for patents that would have expired on that date. For instance, of the 2229 utility patents that issued on December 31, 1996, the first fee was paid for 84% of the patents, the first two fees were paid for 63% of the patents, and all three fees were paied for 49% of the patents. (Note – I did not yet add-back cases that were revived due to unintentional abandonment.)

The median patent has an ordinary enforceable term of about 17 years. This is based on the twenty year term which begins at filing of the non-provisional application minus three years of prosecution. If prosecution takes longer than three years, then the term will likely be extended under the PTA provisions.

However, this data shows that the median patent term is actually cut short by about five years because applicants decide not to pay the large final fee.

A third feature to recognize from this chart is that the percentage of patents whose fees are being paid is increasing over time. However, the PTO has indicated that it expects a drop in maintenance fee payments due to the economic slump.

Judge Moore looked at expiration data for patents issued in 1991 in her paper on “Worthless Patents.” Her result is that patents were more likely to “survive” (i.e., have their maintenance fees paid) when they have more claims, more art cited, more related applications, and longer prosecution times. US corporate owners were more likely to pay the fees than individual or foreign owners. She also found that Semiconductor and Optics patents were the most likely to survive. Amusement patents were unlikely to survive.

Six Easy Suggestions for Improving Patent Office Transparency

For a government agency, the USPTO (PTO) is fairly transparent to non-parties hoping to learn about the patent system and about specific patent cases. The PTO website receives millions of visits to access patents, published patent applications documents, and prosecution history files. In promoting the new rule changes, the PTO also offered up a number of metrics to prove its case. While that information was useful, its reliability was generally impossible to independently verify because the underlying data was not publicly available. The truth is that the PTO still has a long way to go before we can consider it a transparent operation.

Why this is important: Part of the need for more information involves public accountability so that we can ensure that the PTO is efficiently and accurately carrying out its role in the patent system. Independent verification is especially important now when various factions (including the PTO's own lobbying arms) are calling for various reforms of patent laws and the rules of patent procedure. However, the call for transparency at the PTO is at least equally focused on the business need of understanding how the patent system works and how competitors are using the patent system.

I have created a short list of "easy" suggestions for improving transparency at the Patent Office. I call it an easy list, because these steps really just involve taking information that is already at the fingertips of PTO insiders and making the information accessible to those on the outside. Following these steps may be a quick and easy way for career office officials to quickly win favor with the new Obama administration.

1. Make petitions decisions available. Challenges to certain decisions by patent examiners and PTO officers go through a petition process to the Commissioner of Patents rather than through the Board of Patent Appeals and Interferences (BPAI). These cases include disputes involving revival, patent term extension, patent term adjustment, patent term restoration, reexamination petitions, petitions involving filing dates, petitions involving disclaimer of scope, refund petitions. Since January 1, 2005, the PTO has not posted any petitions decisions to its website. Thus - unless a party knows the specific case number and obtains it through the Image File Wrapper in the Patent Application Information Retrieval (PAIR) system - the petitions are inaccessible. Conventional wisdom is that petitions practice can be something of a black hole -- unless the PTO decides to act quickly. This is only conventional wisdom, because the actual practice of the office is hidden. It would be an easy change to start publishing all petitions decisions as they are released in once convenient location on the PTO website.
2. Make public PAIR information available for automated download -- either through the PTO website or through a third party willing to make the information publicly available. The PAIR system is amazing in the information that it provides. However, it is clunky and wastes a tremendous amount of time to access each individual case. File history information is important because claim construction decisions now rely on that information in interpreting the claims. In addition, file histories are an important source of prior art - especially in the way that the documents can provide contextual information on how different elements may fit together. Yet, PAIR is not generally searchable and data cannot be obtained in any bulk way. This must change. I will be more than willing to work with PTO to and others to create a system that works. Although I am not wedded to this approach, I would favor a system that embraces the possibility that individuals and companies will take-hold of the data stream and use it in creative ways.
3. Publish the standard metrics used by PTO executives to measure the process flow and quality. Of course, this should be done in a way that maintains some semblance of privacy for PTO employees, but I doubt that the executive-level charts include specific names of the 6,000 examiners. Of course, I don't know because these items are not publicly available.
4. Allow search engines to crawl through the PTO web-servers. Matt Buchanan wrote an interesting post on President Obama's new ROBOT.TXT file for the whitehouse.gov website. [LINK] Obama has apparently opened the site to allow it to be crawled by any search engine. The PTO should follow suit so that documents posted to the website can be found through Google, Yahoo, CURL, Alexa, etc. Remember, the touchstone of publication is whether it is accessible to the public. Many documents on the USPTO.gov website are worthless because they are too difficult to find through the locked-down search procedures available on the current website. This is an extremely easy change. It took the White House a few minutes to make the change, the PTO could be done in the same way. Kudos to the PTO -- After I wrote a first post on this issue, two PTO officials contacted me to indicate that they were working on resolving the issue.
5. Use PDF format to allow download of patents and patent applications in their "Standard" form. This would be a bonus, but it is not required since there are low coast ways to obtain this result through an outside vendor. One problem with using an outside source, however, is the possibility that search information may be stored and used against the searcher at some point.
6. Openly respond and post all responses to freedom of information act (FOIA) requests on the PTO website. The PTO has created a FOIA website that is hardly searchable. And, most FOIA documents are not placed on the FOIA website. Any response to a FOIA request should be automatically and immediately uploaded to the FOIA website so that it is accessible to the public at large rather than to only the one person who requested the information. As a teacher, I have learned that if one person asks a question, it is likely that other folks had the same question. In most cases, the PTO could upload the documents and save mailing costs by simply providing a link. President Obama has ordered all executive agencies to "adopt a presumption in favor" of FOIA requests, and this change would fall in line with the spirit of that request.

I have eliminated other potential projects and changes that might be considered "hard" for the PTO to complete. These are easy and should be done. This is a draft of ideas -- add yours below. Also, please let me know if there is already a good way to access the information that I discussed above.

Formalism at the CAFC: Equitable Plea for Revival is Rejected

Burandt v. Dudas (Fed. Cir. 2008)

Burandt’s patent expired in 1994 for failure to pay the maintenance fee. His former employer held legal title to the patent — although Bruandt arguably held an equitable interest in the title.  At that time, Bruandt was also mentally disabled. It was not until December 2001 (seven years later) that Bruandt learned of the expiration.

Burandt took several years to obtain legal title to the patent and then file a petition asking the PTO to accept an unavoidably delayed payment of the maintenance fee. (37 C.F.R. 1.378(b)). The PTO rejected his plea as did the U.S. District Court. Burandt argues that the PTO’s refusal to revive the patent was “arbitrary, capricicious, [and] an abuse of discretion” and consequently, a violation of the Administrative Procedures Act (APA). 

On appeal, the CAFC panel sided with the PTO — finding that the Patent Act (Section 41(c)(1)) gives the PTO director discretion to accept late maintenance fees “if the delay is shown to the satisfaction of the Director to have been unavoidable.”

“While it may well have been the intent of Congress to permit patentees to avoid the inequitable loss of patent rights, Congress gave the Director the responsibility of determining the circumstances under which a late payment may be waived.”

In this caes, Burandt’s former employer – as legal title holder – was responsible for taking reasonable care to pay the maintenance fees. Here, the court distinquished between the legal title holder and an equitable title holder:

“[I]t is the actions of the party responsible for making payments of the maintenance fees, the legal title owner, that must be considered when evaluating unavoidable delay under 35 U.S.C. § 41(c).”

In the court’s view, the legal owner is the “owner of record.” Thus, because the former employer was still “the owner of record [it had] the legal responsibility of paying the maintenance fees.”

In the somewhat similar case of Futures Technology v. Quigg (E.D.Va 1988), the district court allowed an equitable title holder to revive an application that had been abandoned by the owner of record. The CAFC formally distinguished this case as (1) not binding precedent and (2) dealing with a pending application rather than an issued patent. In addition, the court noted that in Futures Technology, the equitable title holder had asked the owner of record about the patent application on a more regular basis and the legal title holder had made misrepresentations to the equitable owner.

Expired patent remains expired.

Notes:

• Hunton & Williams apparently handled the case pro bono on Burandt’s behalf.