Patent Law Blog (Patently-O)

Slow and Steady: PTAB Continuing to Address Backlog of Ex Parte Appeals

By Dennis Crouch

The Patent Trial and Appeal Board (PTAB) is turning a corner in terms of its backlog of pending ex parte appeals with a significant drop in the backlog in March 2013. Still, there are more than 25,000 appeals pending decision by the board of administrative patent judges.

[Updated] I collected a small large sample of file histories (here, only 21 500+ file histories) for ex parte PTAB appeals decided in April 2013 to find an estimate of the current timeline for appeal decisions. The chart below shows a histogram of the decision timing based on the number of years from applicant's filing of an appeal brief until the PTAB's decision on the merits of the case. The median and average appeal pendency under this calculation is just over three years.

Guest Post: Nine Reasons why the Supreme Court Should Side with Myriad and Affirm the Patenting of Isolated Human Genes

Guest Post by Benjamin Jackson, Senior Director of Legal Affairs at Myriad Genetics, Inc.

The Myriad Case: A Golden Opportunity to Bring Clarity and Fairness to Subject-Matter Eligibility

Two weeks ago the US Supreme Court heard oral argument in the landmark case of AMP v. Myriad Genetics. The Justices appeared engaged in the argument and seemed to be genuinely seeking understanding of the science and the potential impact of any decision they might take. Several specific points emerged from the argument that warrant further discussion:

1. What Does "Isolation" Really Mean? Some Justices seemed to struggle with what is involved in "isolation" under the patents. This is the most critical issue in the case as a correct understanding of this word leads to the inescapable conclusion that the claims are directed to human-made inventions rather than what exists in nature. Regardless of any meaning used in the Petitioner's arguments and those of prominent amici such as Dr. Lander, "isolation" as defined by the patents requires that a new chemical entity be created either synthetically from scratch or by chemically/structurally modifying an existing molecule. The patents explicitly define "isolated" DNA as removed from its natural environment, whether that environment be in the nucleus or, as the Lander brief emphasizes, floating around outside the cell in someone's blood. But isolation under the patents is not just "snipping" molecules as they sit in their natural environment. Isolation under the patents also requires purification (i.e., concentration) of the newly created molecule out of the interfering milieu.

What is ignored in ACLU's arguments is that purification is a critical element of what it means to "isolate" something under the patents. The Lander brief calls purification of DNA routine, but only in the context of randomly purifying all nucleic acids out of a sample. "Isolation" under the patents requires specific, targeted purification/enrichment of BRCA1- or BRCA2-related molecules, which was not routine or even possible before Myriad's invention. Under this proper understanding of everything that "isolation" under the patent requires, ACLU made Myriad's case by conceding in their reply brief and in oral argument that purification to yield a significant new utility is sufficient to warrant a patent. Some Justices seemed to agree: A molecule sitting in a leaf of an Amazonian plant is not "new" or patent-eligible, but it becomes both once it is purified and concentrated into a useful form. Similarly, DNA in its natural environment, whether whole in the cell or fragmented in the blood, is neither new nor patent-eligible, while a DNA molecule chemically modified and purified by man is both.

2. Splitting the Baby Doesn't Work Out Well for the Baby. Some see patent-eligibility for cDNA and not isolated genomic DNA, advocated by the Department of Justice, as a compromise position that the Court is seriously considering. I am hopeful that instead the Court has merely recognized that cDNA is so clearly patent-eligible that it needs no serious discussion and has efficiently moved on to the marginally closer question of isolated genomic DNA. While this may superficially seem like a nice, neat compromise, it quickly falls apart under scrutiny. In the area where the Myriad case has the most potential impact, because new isolated DNA patents are common and thus incentivizing new discoveries is most important today, there is no distinction between genomic DNA and cDNA. Bacteria, for example, have no introns, which means the reverse transcription product of mRNA (i.e., what you might call a cDNA) has a sequence identical to genomic DNA. In essence, there is no such thing as cDNA in bacteria. DOJ's position would make all isolated DNA claims patent-ineligible in any organism without introns. The wisdom of Solomon was not in splitting the baby, but in finding a course that meant he didn't need to.

3. Methods v. Compositions. Much of the Myriad oral argument centered on whether method of use claims would be enough to incentivize innovation in the life sciences. Some Justices seemed to be trying to weigh whether an entire category of composition claims could be invalidated without negative effect on innovation because method of use claims would remain. With respect, the Court is not the body that can or should attempt these kinds of determinations where in-depth investigation and careful balancing of competing interests is needed to strike the right balance between what is or is not needed for innovation. For example, the Court is not well-positioned to survey in detail the international legal landscape to, e.g., evaluate statements such as those from DOJ on DNA use versus composition patents in Europe. Congress, not the Court, is practically equipped and Constitutionally-tasked with precisely this type of determination.

4. Analogies. The Court seemed to grapple with several analogies in trying to probe the outer reaches of patent-eligibility. Any analogy that overly simplifies complex science falls apart under close scrutiny. But more importantly, the Court need not agonize over patenting livers cut out of bodies or whole plants uprooted from the Amazon. The patented molecules in Myriad are far closer and vastly more analogous to the chemical compound purified and concentrated from the Amazonian plant than the uprooted whole plant. Indeed, Myriad's claims present an even stronger case because there has been a modification of the chemical structure in addition to the purification. We must not confuse the analogy for the thing actually at issue or let hypothetical future implications of questionable likelihood cloud what was actually patented in this case. Concerns over allowing patenting of extracted livers should not distract the Court from the simple fact that what is before it in Myriad is neither an extracted liver nor an uprooted plant, but instead a highly useful, purified and chemically modified compound that never existed in nature until Myriad created it. If someone ever tries to patent an extracted liver, the Court can address any problems then. It would be tragic, however, to let the "tail" of that remote future possibility wag the "dog" of patent-eligibility for biotech inventions today.

5. Innovation. Some Justices appeared anxious incentivizing innovation without inhibiting it, with Justice Breyer noting "uncomfortable compromises" in patent law. The Myriad patents specifically and gene patents generally require no such discomfort. First, ACLU's argument that the claims preclude any study of the BRCA genes is simply wrong. Untargeted sequencing and analysis of the genes would not infringe claims to isolated BRCA DNA because it does not involve purification (thus no "isolation") of the BRCA genes out of the genomic milieu. Second, putting ACLU's anecdotes aside, all available systematic evidence shows that gene patents do not inhibit but instead spur innovation. ACLU's imaginative assertions about what the claimed molecules can be used for are a red herring; the Petitioners in Myriad clearly stated in their declarations that they want to use the claimed molecules not for DNA-based computers or developing new drugs, but instead to replicate Myriad's test.

6. Every Chemical Invention Is Possible in Nature. Justice Alito made an insightful comment about a branch washing up on shore looking like a baseball bat. This shows the legal irrelevance of the Lander amicus brief, which figured somewhat prominently in the oral argument. That randomly fragmented DNA floating around in someone's blood might at some point comprise the BRCA1 gene is irrelevant to the question whether what Myriad claimed was produced by human ingenuity rather than by nature. The relevant question is whether the inventor merely found something unmodified in nature and staked claim to it, or instead created something by her own ingenuity. To ask whether a claimed chemical composition could conceivably ever exist in nature is an unhelpful question of probability because, given enough time, any arrangement of atoms is inevitable. See, Dan L. Burk, Anticipating Patentable Subject Matter, 65 STAN. L. REV. ONLINE 109, 114 (2013). For example, it was irrelevant to the decision in Chakrabarty that Dr. Chakrabarty assisted the natural process bacterial "breeding" that, given enough time, could certainly have yielded the claimed bacterium naturally.

7. Subtraction v. Addition. Many easily accept that combining two chemical entities creates a man-made, patentable invention, but become instantly skeptical if a single molecule is separated into two parts that do not exist in nature. This surfaced in the Myriad argument as well, but from a chemical, biological, genetic, and even legal perspective there is no defensible distinction between addition and subtraction. A molecule created by removing parts that interfered with its new utility is just as much a product of human ingenuity, and can have just as important a new utility, as a molecule created by addition.

8. Short DNA Molecules. Justice Sotomayor asked about claims directed to short DNA molecules of 15 or more nucleotides. She appeared to rely on ACLU's arguments, based on an article published after Myriad filed its merits brief, about these claims covering the entire genome. Certainly as to Claim 6 of the '282 patent, this is clearly wrong. Claim 2 is directed to a molecule with the cDNA sequence of SEQ ID NO:1 (whose patent-eligibility the Court seemed pretty comfortable with) and Claim 6 is merely directed to fragments of that molecule. If the larger molecule is a product of human ingenuity, then human-made fragments of it must also be. Regardless, ACLU's unproven allegations on this point are irrelevant from a practical perspective. Anything as small as 15 nucleotides would only be used as part of a primer pair and, when used this way, the molecules would be 100% specific for BRCA1.

9. Myriad: A Unique Chance to Return Clarity and Fairness to Patent-Eligibility by Returning to the Statute and Chakrabarty. There is currently great confusion amongst courts, the patent office, patentees and the public about patent-eligibility under section 101 of the Patent Act. While the spirit behind the judicial exclusions for patentability is correct, decisions applying them can often be, in the words of Justice Frankfurter, "infected with too much ambiguity and equivocation" due to "vague and malleable terms" such as "the work of nature" and the "laws of nature." But the language of section 101 itself and the Court's seminal decision in Diamond v. Chakrabarty provide the Court with a framework for a long overdue recalibration and clarification of patent-eligibility in the Myriad case.

Section 101 requires that a claimed composition of matter be both new and useful, thus encompassing the judicial exclusions and giving courts the tools to resolve difficult questions of patent-eligibility. The claimed chemical composition must have some structural, physical or chemical change from the natural starting materials used by the inventor in order to be new under section 101. Limiting patent-eligibility to structurally, physically, or chemically "new" things addresses the judicial concern over patentees removing from the public domain that which exists in nature because there must be a modification of the natural thing. It further addresses the Mayo Court's concern over section 101 becoming a dead letter. Section 101 fills the gap in sections 102 and 103 by excluding anything the inventor found in nature but that was not previously known to others (which could not be anticipated or obvious under section 102 or 103, but which we don't want to award a patent for).

Merely being new is not enough under section 101; the claimed invention must also be useful. This is where the statute really does its work and gives courts an objective yet flexible framework for giving proper force to the legislature's intent. Not just any utility will do. The claimed composition must have one or more significant new utilities and these new utilities must directly result from the structural, physical or chemical changes made by the inventor. Courts can exert substantial discretion in determining whether the new utilities are "significant" under section 101. Courts can weigh the structural changes (how new the composition is) with the new utilities (how significant they are) to decide whether the invention is patent-eligible. If the utility is relatively minor, more of a structural change may be required. If the utility is groundbreaking, very minor structural changes may be sufficient. For example, purification of a molecule from its natural surroundings, without any change in the chemical structure, is a relatively minor structural/physical change from the natural state of things. Nevertheless, this may be patentable if the highly purified composition has significant new (e.g., therapeutic, diagnostic) uses. Importantly, these uses must be assessed from the perspective of human endeavors. The purified molecule always has some or all of the same chemical properties (e.g., polarity, electronegativity, etc.) as it did in nature, but its purification has opened up a world of human uses that take advantage of those properties.

The Court's decision in Chakrabarty, the definitive statement of patentable subject matter for compositions of matter, epitomizes the judicial exclusions and the statute working at their harmonious best. Chakrabarty cited to many of the early cases that established the judicial exclusions from patent-eligibility, then clarified that the dispositive question for patent-eligibility is whether what is claimed is a product of nature or a product of human ingenuity. The Court's analysis paralleled section 101's text, emphasizing that the claimed bacterium was different from what existed in nature (i.e., it was new) and had "significant utility" (i.e., it was useful).

In a great insight into what it means for something to be "new" under section 101, the Court made clear that it is the differences between what is claimed and what exists in nature, not the similarities, that make all the difference in patent-eligibility. Dr. Chakrabarty manipulated bacterial breeding to give one bacterium the natural ability of other bacteria to eat oil. As Dr. Chakrabarty himself noted in his amicus brief in support of Myriad, "the genetically-engineered bacterium that I created and sought to patent in Chakrabarty had a quite similar structure to what existed in nature. It shared the same genome and internal structure as naturally occurring Pseudomonas bacteria and differed only by a few pieces of DNA."

But these elegant changes resulted in "significant utility" such that the Court declared that these modest modifications yielded a product that was "markedly different." The vast similarities were irrelevant; they did not negate the fact Dr. Chakrabarty's human ingenuity brought about something that never existed before with "a distinctive name, character and use." As the Chakrabarty Court noted, legislative history makes clear that what is not eligible for patenting is that which is "created wholly by nature unassisted by man" while anything that "is unique, isolated, and is not repeated by nature, nor can it be reproduced by nature unaided by man" is eligible. The modified bacterium gained significant utility from the donor bacteria and could now be put to many important new uses (e.g., cleaning up oil spills). Again, a relatively minor structural change can be enough if the gained utility is significant.

In Myriad, the Court can readily apply this framework to find that the claimed compositions are new and useful and thus patent-eligible. The isolated DNA molecules are new because they are not found in nature by definition. As shown in point # 1 above, "isolation" under the patents requires a brand new chemical composition with significant structural changes that has been purified and concentrated out of the milieu that previously prevented its new uses. Chromosomal DNA in its natural environment, whether whole in the cell or fragmented in the blood, is neither new nor patent-eligible, while the molecule chemically modified and purified by man is both.

The new molecules have gained significant new utilities. They can be used as laboratory tools for targeted sequencing of the BRCA genes of patients, which is not just transfer of an existing utility to a new product as in Chakrabarty, but an entirely new utility never possible before. ACLU makes much of the fact that these utilities largely depend on properties shared with the natural DNA. This is true but irrelevant. The new molecules share some useful properties with the natural source material (why else would we have sought them out?), but the breakthrough new utilities were impossible before the inventors' modifications. This is precisely what the patent system was designed to incentivize.

Upholding the Myriad patents does a lot more than affirm patent protection of a deserving invention of human-made molecules with significant societal value. In Myriad the Court can honor the language and intent of the statute passed by Congress and bring the objectivity, clarity and predictability that patentees and alleged infringers alike yearn for, all while advancing the policy goals of the judicially-created patent-eligibility exclusions.

Lazare Kaplan v. Photoscribe: Make Sure to Always File a Cross-Appeal (Except When You Shouldn't)

By Jason Rantanen

Lazare Kaplan Int'l. v. Photoscribe Technologies, Inc. (Fed. Cir. 2013) Download Lazare Kaplan v Photoscribe
Panel: Lourie (author), Dyk (dissent), Reyna

Deciding which issues to appeal can sometimes be a challenging process.  One quirky rule of appealing patent judgments is that when a district court has entered a judgment of invalidity on all asserted claims, it is improper to file a cross-appeal based on either (1) additional claims for invalidity or (2) claims of noninfringement, and doing so can potentially subject the cross-appellant to sanctions.  As Lazare Kaplan illustrates, however, when a district court has entered a judgment that the claims are not infringed and not invalid and the patent holder appeals noninfringement, the patent challenger must file a cross-appeal challenging the no invalidity judgment.  Failing to do so in this situation terminates the patent challenger's ability to raise invalidity arguments, even on remand following a broadening claim construction by the Federal Circuit. 

Background: Lazare Kaplan is the owner of Patent No. 6,476,351.  In 2006, Lazare Kaplan sued Photoscribe for infringement of the '351 patent; Photoscribe responded by filing invalidity counterclaims.  After the district court construed a key claim term, Photoscribe obtained summary judgment of no literal infringement and prevailed at jury trial on the doctrine of equivalents.  The jury also found that the claims were not invalid under the court's construction. The district court entered judgment that the claims were not infringed and not invalid. Lazare Kaplan appealed the judgment of noninfringement but Photoscribe did not appeal the judgment that the claims were not invalid.  On appeal, the Federal Circuit broadened the district court's construction and remanded for further proceedings on infringement.

Following remand, the district court agreed with Photoscribe that both infringement and validity should be retried "because the validity decision of the jury in the first trial was on the basis for a claim construction which the Court of Appeals has reversed."  Slip Op. at 4 (quoting district court).  The district court granted Photoscribe's motion for relief from the prior judgment under Rule 60(b) and its motion for summary judgment of invalidity. Lazare Kaplan appealed. 

Rule 60(b) relief:  While the majority's analysis technically involves determining whether the district court abused its discretion in granting Photoscribe's Rule 60(b) motion, because the majority concludes that the issue before it is unique to patent law, it reviews that decision without deference to either the district court or the law of the regional circuit in which the district court sits (although it does find Second Circuit decisions to be persuasive).  To the majority, the issue is simply "whether, on remand, a district court may reopen a prior final judgment as to patent validity, not appealed by either party, based on a claim construction modified by" the Federal Circuit, a pure question of patent law.  Slip Op. at 6. Framed in those terms, the majority concludes that the answer is no.

Judgment of Validity Must Be Appealed: "It is well-settled that a party must file a cross-appeal if, although successful in the overall outcome in the district court, the party seeks, on appeal, to lessen the rights of its adversary or to enlarge its own rights."  Slip Op. at 6.  An offshoot of this requirement is that "“[A] party will not be permitted to argue before us an issue on which it has lost and on which it has not appealed, where the result of acceptance of its argument would be reversal or modification of the judgment rather than affirmance.”  Id., quoting Radio Steel & Manufacturing Co. v. MTD Products, Inc., 731 F.2d 840, 844 (Fed. Cir. 1984).  In  Odetics, Inc. v. Storage Technology Corp., 185 F.3d 1259 (Fed. Cir. 1999), the Federal Circuit drew on this foundation to affirm a district court's decision that the challenger's invalidity arguments were barred in procedural circumstances similar to here.

Lazare Kaplan goes a step further, holding that a district court cannot address validity on remand where the challenger failed to appeal the judgment that the claims were not invalid, irrespective of the modified claim construction.  In reaching this conclusion, the majority expressly rejects the argument that separate appeal of validity and infringement was not necessary because the issues of validity and infringement were closely interrelated.  "Whether or not the concepts of invalidity and infringement are “closely interrelated” is irrelevant; the relevant issue is whether a ruling reversing the validity holding would expand Photoscribe’s rights or lessen Lazare Kaplan’s rights."  Slip Op. at 9.  Ultimately, regardless of the district court's view that it "makes no sense" not to entertain validity challenge on remand following a new claim construction that potentially raises new validity issues, "rules are rules, and the cross-appeal rule is firmly established in our law."  Id. at 14. 

Judge Dyk: Judge Dyk's dissent criticizes the majority for failing to adhere to the fundamental principle of patent law that “claims must be interpreted and given the same meaning for purposes of both validity and infringement analyses.”  Slip Op. at 17, quoting Amazon.com, Inc. v. Barnesandnoble.com, Inc., 239 F.3d 1343, 1351 (Fed. Cir. 2001).  Here, the district court attempted to eliminate the inconsistency of allowing the patent holder "to assert infringement on a broad claim construction while permitting it to defend against invalidity using a different and far narrower claim construction" by applying Rule 60(b)(5).  Slip Op. at 17-18. 

Judge Dyk's argument focuses on the majority's lack of any support for its conclusion that "failure to file a contingent cross-appeal bars Rule 60(b) relief." Id. at 20.  This is "not a situation governed by the traditional “cross-appeal rule”—that is, the rule that “a party must file a cross-appeal if . . . [it] seeks, on appeal, to lessen the rights of its adversary or to enlarge its own rights.” Maj. Op. 6 (citing El Paso Natural Gas Co. v. Neztsosie, 526 U.S. 473, 479 (1999)) (emphasis added). Here, Photoscribe sought on appeal not to modify the rights established by the district court judgment but to preserve them."  Id.

UK Moving on Design Patent Rights

By Dennis Crouch

UK has an Intellectual Property Office (UKIPO) that is the go-to-agency when considering policy implications of potential changes to the laws. One recent focus of the UKIPO has been industrial design rights and "the extent to which the design industry is properly supported by the Intellectual Property Framework." In a new whitepaper, the agency has released a proposal for amending the law and procedures of UK design rights. The agency takes the following positions:

1. Retain Unregistered UK Design Rights (for up to 15 years), however, the unregistered right will be limited to protect only against commercial copying of unique and major elements of a company's product.
2. Extend the ownership limitations of Unregistered UK Design Rights to include anyone who carries out business in the EU or markets articles made to the design in the EU. The initial owner of design rights will be the designer – rather than the person who commissioned the design.
3. Allow for a 30-month delay in publishing registered design rights.
4. Align UK Copyright and Design Rights so that a company with permission to use a UK or EU design right implicitly has permission to use the equivalent UK Copyright.
5. Create criminal sanctions for deliberate copying of registered UK designs.

More available here: http://www.ipo.gov.uk/response-2012-designs.pdf

In the US, unregistered design rights are also protectable, but they have to be fit either the Lanham Act, the Copyright Act, or some state law regime (such as Trade Secret or Unfair Competition).

Biogen v. Glaxosmithkline: Prosecution History Disclaimer and Claim Construction

By Jason Rantanen

Biogen Idec, Inc. v. Glxosmithkline (Fed. Cir. 2013) Download Biogen v GSK
Panel: Dyk, Plager (dissenting), Reyna (author)

By the mid-1990's, it was well known that rituximab, an anti-CD20 antibody, could be used to treat certain cancers of the lymph nodes such as non-Hodgkins lymphoma.  The anti-CD20 antibody binds to a portion of the CD20 antigen protein exposed on the cell surface and destroys the cell.  Scientists from Biogen discovered that patients with another type of cancer, Chronic Lymphocytic Leukemia (CLL), could also be treated using anti-CD20 antibodies.  Based on this discovery, Biogen obtained Patent No. 7,682,612.  Claim 1 of the '612 patent reads:

1. A method of treating chronic lymphocytic leukemia in a human patient, comprising administering an anti-CD20 antibody to the patient in an amount effective to treat the chronic lymphocytic leukemia, wherein the method does not include treatment with a radiolabeled anti-CD20 antibody.

Biogen filed the application leading to the '612 patent in the late 1990s.  At the time, scientists believed that only one large loop, or epitope, of the CD20 antigen was exposed on the cancerous cell's surface and that this was the only site that for an anti-CD20 antigen to bind to.  Rituximab binds to this epitope. After Biogen filed its application, other scientists discovered that the CD20 antigen had a second small loop (originally thought to be hidden inside the cell) to which other, different anti-CD20 antibodies could bind.  In 2002, Glaxosmithkline (GSK) developed a new anti-CD20 antigen that binds to the small loop.  Because it binds to a different epitope, GSK's anti-CD20 antibody has different specificity and affinity characteristics than rituximab. 

Biogen sued GSK for infringement of the '612 patent in 2010.  The district court construed anti-CD20 antibody to mean "rituximab and antibodies that bind to the same epitope of the CD20 antigen with similar affinity and specificity as rituximab."  Based on this construction, Biogen stiplated to noninfringement and appealed. 

Prosecution History Disclaimer: The issue on appeal involved the the doctrine of prosecution history disclaimer.  Prosecution history disclaimer applies when a "patentee unequivocally and unambiguously disavows a certain meaning to obtain a patent."  Slip Op. at 8.  In this circumstance, the doctrine "narrows the meaning of the claim consistent with the scope of the claim being surrendered," id. overcoming even the term's ordinary and customary meaning.  Application of the doctrine helps serve a public notice function by allowing the public and competitors rely on definitive statements made during prosecution when launching a new product or designing-around a patented invention.

During an early stage of the prosecution of the '612 patent, the examiner rejected the presented claims on enablement grounds:

Claims 1 and 12 are broadly drawn to ‘. . . an anti-CD20 antibody or fragment thereof’. This is
broadly interpreted for examination purposes to be any and all anti-CD20 antibodies, no matter
the specificity or affinity for the specific epitope on the circulating tumor cells. While the specification is enabling for the application of RITUXAN®, RITUXIMAB® and 2B8-MX-DTPA in the treatment of hematologic malignancies, the specification is not enabling in the application of all other anti-CD20 antibodies, which may have different structural and functional properties.

In response, the applicant wrote:

Applicants respectfully submit that even though antibodies directed to the same antigen might have different affinities and functional characteristics, one of skill in the art could readily identify an antibody that binds to CD20 with similar affinity and specificity as does RITUXAN® using techniques that are well known in the art. . . . With that knowledge in hand, the skilled artisan could readily produce anti-CD20 antibodies using similar techniques, and screen such antibodies for those having an affinity and functional activity similar to Rituxan®

Based on this exchange in the context of the prosecution history read as a whole, the majority agreed with the district court that prosecution disclaimer applied to limit the scope of "anti-CD20 antibody."  "[R]ather than challenging the examiner’s understanding of the crucial terms, the applicants argued that the specification was enabling for anti-CD20 antibodies with similar affinity and specificity as Rituxan®."  Slip Op. at 10.  Nor was exact recitation of the examiner's own words necessary: "While disavowing statements must be “so clear as to show reasonable clarity and deliberateness,” Omega, 334 F.3d at 1325, this requirement does not require the applicant to parrot back language used by the examiner when clearly and deliberately responding to a particular grounds for rejection. If an applicant chooses, she can challenge an examiner’s characterization in order to avoid any chance for disclaimer, but the applicants in this case did not directly challenge the examiner’s characterization."  Slip Op. at 11. 

Hierarchy of canons of claim construction: In the hierarchy of canons of claim construction, prosecution history disclaimer trumps the presumption of claim differentiation: "Our cases make clear [] that where found, prosecution history disclaimer can overcome the presumption of claim differentiation."  Id. at 12 (note that the court said "can overcome," leaving open a door for cirucumstances in which it might not). 

Dissent: Writing in dissent, Judge Plager disagreed that this was an instance of prosecution history disclaimer.  "[T]he give-and-take that is often part of the process of negotiation between an examiner and an applicant may result in less-than-clear understandings, as happened here. Making too much of such ambiguous statements 'does not advance the patent’s notice function or justify public reliance.'"  Slip Op. at 16.  For Judge Plager, the question is thus "whether the prosecution history makes it clear that using RITUXAN® [Biogen's branded version of rituximab]-like antibodies is the only way to practice the claimed invention, and that no other antibodies can be used."  Id.  In his view, the above quoted statements fail to meet the "clear and unmistakable" standard required for prosecution history estoppel.  

The avoided question: By affirming the district court's claim construction, the CAFC avoided a battle over an extremely challenging issue: enablement in the context of after arising technologies and knowledge.  Biogen's proposed construction was "an antibody that binds to a cell surface CD20 antigen."  This construction would presumably encompass methods using antibodies that bind to the larger epitope (which Biogen discovered) as well as antibodies that bind to the smaller epitope (which Biogen did not).  Since enablement is determined as of the filing date, this presents the classic patent law hypothetical: Inventor X invents one way of curing a type of cancer and then claims simply "a cure for cancer."  Should inventor X be entitled to the claim?  She's cured cancer, after all.    

Patently-O Wordle

FCBA and Santa Clara Program on Advanced Complex Litigation

By Jason Rantanen

This year, the Federal Circuit Bar Asociation is sponsoring a series of programs on Advanced Complex Litigation. Next Friday, May 3, the FCBA and Santa Clara Law School's High Tech Law Institute will co-host the next segment of the series. Speakers and panelists include: Chief Judge Rader, Judges Whyte and Koh, Magistrate Judge Grewal, Erich Spangenberg (IP Nav), Alan Schoenbaum (Rackspace), Mary Coyne (Verizon), Courtland Reichmann (McKool) and others. In addition, professor Colleen Chien will present the
interim results of an on-going survey of in-house counsel.

Topics include:

• Discovery
• Case Management
• Focusing Disputes
• Multiple Party Litigation

Further details are available here: http://law.scu.edu/hightech/2013-advanced-complex-litigation-series.cfm . The last program of the series will take place in Newark on May 30. Details on the entire series are available here: http://www.fedcirbar.org/olc/pub/LVFC/cpages/misc/acl_series.jsp .

SO THAT’S WHAT “RAND” MEANS?: A Brief Report on the Findings of Fact and Conclusions of Law in Microsoft v. Motorola

Guest Post By Jorge L. Contreras, Associate Professor of Law, American University Washington College of Law

In a meticulous 207-page opinion released on April 25, Judge James Robart in the Western District of Washington has crafted the first-ever judicial determination of a "reasonable and nondiscriminatory" (RAND) royalty rate for patents essential to industry standards. To some observers, the dense opinion (captioned "Findings of Fact and Conclusion of Law") may be nothing more than another bit of procedural arcana in the interminable litigation over smart phone patents (summarized here), this time in the battle between Microsoft and Motorola (now owned by Google). But for followers of industry standards, Judge Robart's opinion was a highly-anticipated and desperately-needed attempt to establish basic guidelines for the interpretation of the RAND licensing commitments that pervade industry standardization bodies.

Patents and RAND Licensing

As I discussed here last year, so-called "interoperability standards" enable products and services offered by different vendors to work together invisibly to the consumer (e.g., WiFi, USB, and the pervasive 3G and 4G telecommunications standards). Once standards are broadly adopted, markets can become "locked-in" and switching to a different technology can be prohibitively costly. Because patent holders have the potential to block others from deploying technology covered by their patents after lock-in occurs, the industry associations that develop standards ("standards development organizations" or "SDOs") often require that companies participating in standards-development license patents that are essential to the standard to others on terms that are "reasonable and non-discriminatory" (RAND, also known as "FRAND" when the equally ambiguous term "fair" is added to the mix).

Microsoft, Motorola and the RAND Wars

The current litigation between Microsoft and Motorola relates to two common industry standards, the H.264 video coding standard developed at the International Telecommunications Union (ITU) and the 802.11 "Wi-Fi" standard developed at the IEEE Standards Association (IEEE). These standards are used in thousands of products on the market today, including Microsoft's popular X-Box 360 game consoles, personal computers running the Windows operating system and a variety of smart phones. According to the pleadings, in 2010 Motorola offered to license Microsoft its patents essential to the implementation of these standards. A disagreement arose, however, over the royalty calculation that Motorola proposed. Under the rules of ITU and IEEE, royalties for patents covering H.264 and 802.11 must comply with RAND requirements. According to Microsoft, however, Motorola's initial royalty demands were anything but "reasonable" and would have resulted in royalty payments in excess of $4 billion per year. Microsoft responded by suing Motorola for breach of contract in the Western District of Washington. The crux of Microsoft's complaint is that Motorola reneged on its RAND commitments by offering a royalty rate that was manifestly unreasonable. Last October, Judge Robart ruled in the case that the applicable RAND royalty rate must be determined before a finding can be made regarding Motorola's alleged breach of contract. A bench trial was held in November, 2012, and Judge Robart's Findings of Fact and Conclusions of Law were released on April 25, 2013.

Defining RAND

Judge Robart's opinion is important, not only because it resolves several highly contentious issues between Microsoft and Motorola, but because if provides a more general framework for analyzing RAND disputes in the future. At its heart, the bulk of Judge Robart's opinion is a fairly conventional Georgia-Pacific analysis of the "reasonable royalty" rates applicable to Motorola's patents. He spends a considerable amount of time analyzing comparable licensing transactions and determining their applicability to a hypothetical licensing negotiation between the parties. But Judge Robart makes significant modifications to the traditional Georgia-Pacific analysis in order to adapt it to the assessment of RAND royalty rates (which are related to, but different than, the "reasonable royalties" that serve as a measure of damages in patent infringement suits) (Para. 87). Here are some of the important observations that Judge Robart makes in this regard:

1.    Broad Industry Benefits from Standardization – Judge Robarts is explicit about the potential benefits that standards can confer on the overall economy through increased production and price competition (Para. 12). He observes that a primary goal of SDOs is the widespread adoption of standards "because the interoperability benefits of standards depend on broad implementation" (Para. 13). Likewise, RAND commitments are intended to "encourage widespread adoption" of standards (Para. 51, 70). Judge Robart recognizes the public benefit of standards and the public interest in ensuring that royalty rates for standardized technology enable broad implementation. Thus, unlike most patent licensing negotiations, the licensing of standards-essential patents takes on a public character. It is not merely a closed-door negotiation between two private parties. It must be conducted, and reviewed, with these public benefits in mind.

2.    Royalty Stacking – For years, commentators have observed that the aggregation of royalty demands by multiple patent holders can result in significant and unsupportable royalty burdens on standardized products. This is the problem of "royalty stacking", which is very real in the case of H.264 (2,500 essential patents held by 35 U.S. entities, plus 19 entities with unknown numbers of patents) and 802.11 (developed by more than 1,000 companies). Throughout his opinion Judge Robart notes the threat of royalty stacking, and insists that any RAND royalty payable to Motorola must take into account royalties payable to other holders of patents covering the standards in question (Paras. 72, 92, 112, 456). This observation is significant, as it confirms that RAND royalties cannot be computed "in a vacuum" on the basis of isolated bilateral negotiations between licensor and licensee, without regard to the broader industry context in which such negotiations take place.

3.    Relative Value of Patented Technology – Judge Robart confirms yet another point that has been advanced by commentators for years: that the royalty associated with a particular patented technology should be commensurate with the actual value that technology adds to the overall standard and to the product in which it is implemented (Paras. 80, 104). Undertaking this lengthy and complex analysis, he determines that, by and large, Motorola's patented technology added relatively little to either the H.264 or 802.11 standards or to Microsoft's products (e.g., Paras. 289, 299, 384, 394, 457, etc.)

RAND-arithmetic

The bulk of Judge Robart's opinion is devoted to a detailed, patent-by-patent, standard-by-standard analysis of the relative contribution made by Motorola's technology, followed by an equally detailed Georgia-Pacific style analysis of licensing "comparables" a derivation of the RAND royalty rates for each standard. In the case of H.264, the primary comparable is the MPEG-LA H.264 patent pool. Judge Robart constructs a hypothetical negotiation between Microsoft and Motorola, assuming that Motorola's patents are included in the pool and then calculating the royalties that Motorola would have earned from Microsoft as a result (¢0.185/unit). He then doubles this figure and adds it to the royalty base to account for the hypothetical license benefit that Motorola would have gained from being a member of the pool, yielding a RAND royalty rate for Motorola's H.264 patents of ¢0.555/unit. In the case of 802.11, Judge Robarts finds the Via Licensing 802.11 pool to be a less relevant comparable than the MPEG-LA H.264 pool. He thus uses as his primary 802.11 comparable a royalty rate determined in 2003 by industry analyst InteCap, which he then divides by 25 to reflect the small value actually attributable to Motorola's patented technology. The RAND royalty rate for Motorola's 802.11 patents is thus set at ¢3.471/unit.

Both of these rates are significantly lower than the ones Motorola urged. As reported in the press, Microsoft calculates that on the basis of these rates, it would owe Motorola approximately $1.8 million per year, as opposed to Motorola's original 2010 demand of approximately $4 billion, or the annual amount it requested at trial, which was approximately $400 million.

Judge Robart also calculated "ranges" of RAND royalties for Motorola's patented contributions to each standard, presumably to help establish whether Motorola's initial offers to Microsoft constituted "good faith" offers for purposes of Microsoft's breach of contract claims. In both cases, the computed RAND royalties fall at or near the low end of these ranges (¢0.555 to ¢16.389 for H.264 and ¢0.8 to ¢19.5 for 802.11).

Significance and What the Future Holds

Judge Robart's April 25 opinion is important to the standards world primarily because it sets out, for the first time, a logical and consistent methodology for computing a RAND royalty. This methodology is based on a conventional Georgia-Pacific patent royalty analysis, as modified to give substantial weight to royalty stacking, relative value and public interest considerations. The opinion will thus be useful not only to other courts considering RAND issues, but also, and perhaps more importantly, to arbitrators, mediators and private parties seeking to adjudicate RAND disputes before litigation commences. Given the likely increase in arbitration of standards-essential patent disputes (prompted by the recent nudge in this direction by the FTC's Consent Order with Google), such guidance can only be helpful for the industry.

This being said, it is not clear that Judge Robart's methodology offers the optimal means for resolving disputes over RAND royalties. It is, at best, complex and time consuming. At worst, it may be criticized as somewhat arbitrary. It may also be less useful for standards that are less broadly-adopted than H.264 and 802.11. With these standards, Judge Robart was able to choose from several different "comparables" to develop RAND royalty rates and ranges. Most importantly, he found comparables that were not merely bilaterally negotiated licenses between private parties, which he acknowledges result in royalty rates higher than those of patent pools. Most other standards do not have so many non-bilateral comparables from which to choose, if they have any at all. Thus, RAND rates may not universally drop, as they did in this case. Finally, it may be quite difficult to assess the "value" of particular patented technology in a standard if it is not functionally discrete, as Motorola's contributions to H.264 and 802.11 seem to have been (e.g., Motorola's contribution to H.264 appears to have consisted primarily of "interlaced video" technology that is now relatively obsolete).

For these reasons, other proposals regarding the determination of RAND royalty rates may still be worth considering, particularly as this latest decision in Microsoft v. Motorola begins what is likely to be a lengthy and interesting appeals process.

Don’t Write This Letter to the Patent Office

by Dennis Crouch

We all get frustrated. After an examiner rejected his client's application for a telescoping tripod sprinkler, patent attorney Andrew Schroeder could no longer resist and filed the following remarks:

REMARKS: Are you drunk? No, seriously…are you drinking scotch and whiskey with a side of crack cocaine while you "examine" patent applications? (Heavy emphasis on the quotes.) Do you just mail merge rejection letters from your home? Is that what taxpayers are getting in exchange for your services? Have you even read the patent application? I'm curious. Because you either haven't read the patent application or are… (I don't want to say the "R" word) "Special."

Numerous examples abound in terms of this particular Examiner not following the law. Clearly, the combination of references would render the final product to be inoperable for its intended use. However, for this Special Needs Examiner, logic just doesn't cut it. It is manifestly clear that this Examiner has a huge financial incentive to reject patent applications so he gets a nice Christmas bonus at the end of the year. When in doubt, reject right?

Since when did the USPTO become a post World War II jobs program? What's the point of hiring 2,000 additional examiners when 2,000 rubber stamps would suffice just fine? So, tell me something Corky…what would it take for a patent application to be approved? Do we have to write patent applications in crayon? Does a patent application have to come with some sort of pop-up book? Do you have to be a family member or some big law firm who incentivizes you with some other special deal? What does it take Corky?

Perhaps you might want to take your job seriously and actually give a sh.t! What's the point in having to deal with you Special Olympics rejects when we should just go straight to Appeals? While you idiots sit around in bathtubs farting and picking your noses, you should know that there are people out here who actually give a sh.t about their careers, their work, and their dreams.

Your job is not a joke, but you are turning it into a regular three ring circus. If you can't motivate yourself to take your job seriously, then you need to quit and let someone else take over what that actually wants to do the job right.

See U.S. Patent Application No. 13/068530 (PAIR). [Update: It appears that the PTO has now removed the letter from the file history.] Perhaps we should have a contest to rewrite this letter to get the same substantive points across without violating any rules of professional conduct.

The pending claims are listed as follows:

1. A Telescoping Tripod Sprinkler Cart comprising

a tripod junction unit, a plurality of support members, a sprinkler support assembly, and a telescoping assembly;

the tripod junction unit comprises a first leg, a second leg, and a hose conduit;

the plurality of support members are sized to mate with the legs;

the legs comprise a detent orifice sized to mate with a detent on a support member;

the support members comprise a detent for the purpose of fastening the support member to the tripod junction; and

the sprinkler support assembly is connected with the hose conduit of the tripod junction.

2. The Telescoping Tripod Sprinkler Cart of claim 1 further comprising a carriage assembly; the carriage assembly comprises an axle, an axle housing, a pair of wheels, and a pair of struts.

In the final rejection, the examiner found the claim 1 unpatentable over Richey (U.S. Patent No. 2,694,600) in view of Nies (U.S. Pub. No. 2009/0230206) and in further view of Harward (U.S. Patent No. 4,824,020) and claim 2 unpatentable in further view of Ward (U.S. Patent No. 5,484,154).

   

Tidbit: About 3% of recently issued US patents are following an interesting path that begins with the filing of a US provisional patent application followed one-year later with an international application (PCT) and then eventually followed-up with a US non-provisional application based on the PCT. The delay in filing the non-provisional application means that, on average, these patents issued more than six years after the priority filing date. Most of the patents come from TC1600 (Biotechnology and Organic Chemistry), but the most frequent users of this approach are actually foreign hard-tech companies such as LG and Philips. -- Dennis    

Issue Preclusion in Repeat Patent Cases

Blonder-Tongue Labs., Inc. v. Univ. of Ill. Found., 402 U.S. 313 (1971) involves a case where the patentee (University of Illinois) had first asserted its patent against Winegard and lost a bench trial on obviousness grounds. Later, the University sued Blonder, but the Supreme Court found the University's case barred by collateral estoppel (AKA issue preclusion). Prior to this case the general rule was that collateral estoppel did not apply non-mutually – i.e., where the defendant in the second case was not part of the first case.

What should happen in the following situation?:

1. Assume that a patentee believes its rights are being infringed by a number of companies.

2. Patentee sues D1 for infringement; D1 raises prior art and challenges the patent as obvious; but Patentee wins, including a holding that confirms patent validity.

3. Patentee sues D2 for infringement; D2 raises the same prior art and obviousness argument; but Patentee wins, including a holding that confirms patent validity.

4. Patentee sues D3 for infringement; D3 raises the same prior art and obviousness argument; but Patentee wins, including a holding that confirms patent validity.

5. Next, Patentee sues D4 for infringement; D4 raises the same prior art and obviousness argument; However this time the patentee loses and the court holds the patent invalid as obvious.

6. Finally, Patentee sues D5 for infringement.

Question – Does D5 have the right to win the case on collateral estoppel grounds?

= = = =

[More Context]

I started thinking about this issue when reading the Restatement of the Law 2d – Judgments. Section 29 considers non-mutual issue preclusion and indicates that "other circumstances [may] justify affording [a would-be precluded party] an opportunity to relitigate the issue. The circumstances to which considerations should be given include those enumerated in § 28 and also whether . . . (4) The determination relied on as preclusive was itself inconsistent with another determination of the same issue." The notes following §29 suggest two prior inconsistent outcomes "may have been based on equally reasonable resolutions of doubt as to the probative strength of the evidence or the appropriate application of a legal rule to the evidence. That such a doubtful determination has been given effect in the action in which it was reached does not require that it be given effect against the party in litigation against another adversary."

Don Chisum emailed with two particular patent cases on point from his treatise. Mississippi Chem. Corp. v. Swift Agricultural Chem. Corp., 717 F.2d 1374 (Fed. Cir. 1983) and Stevenson v. Sears, Roebuck & Co., 713 F.2d 705 (Fed. Cir. 1983). In Mississippi Chem, the Federal Circuit held that prior inconsistent judgments serve as a "red flag warning" for the court to more carefully consider whether the patentee had a full and fair opportunity to litigate the issue in the case that resulted a finding of invalidity. The idea of this red-flag warning comes from a pre-Federal Circuit decision by the Fifth Circuit. Blumcraft of Pittsburgh v. Kawneer Co., 482 F.2d 542 (5th Cir.1973). In Blumcraft, the court wrote (in dicta) that "under our ruling today it would be technically possible to apply collateral estoppel where a prior finding of invalidity was preceded by several rather than by just one finding of validity."

In such instances there would be a red flag warning a court to apply the full and fair criteria very carefully to determine if the court finding the patent invalid had adequately comprehended and applied the appropriate substantive standards.

In Blumcraft, the court described the Blonder-Tongue ruling as follows: "Blonder-Tongue did not throw merely a jab at the multiplicity of patent litigation; rather, it intended a knockout blow through the doctrine of collateral estoppel so that any time a patent was found invalid in a fair fight with a knowledgeable referee, the courts could count ten and the patent holder could no longer maintain that he was champion." As it did in Mississippi Chem., the Federal Circuit followed this same approach in Stevenson.

Federal Circuit Supports Bare-Bones Patent Complaints

By Dennis Crouch

K-Tech Telecommunications v. Time Warner (Fed. Cir.2013)

The district court dismissed K-Tech's infringement lawsuit on a FRCP R. 12(b)(6) motion for failure to state a claim upon which relief can be granted. Following the Supreme Court decisions of Twombly and Iqbal, federal courts have generally required plaintiffs to add more particularity and factual allegations into their complaint and the district court's decision in this case follows that trend. The Federal Circuit, however, has resisted with respect to patent infringement allegations. And here, the court reverses and remands.

K-Tech's complaint alleges that the company owns several patents and that Time-Warner is infringing particular claims of those patents by transforming the digital-broadcast-signal sub-channels into a new numbering system for cable transmission. See U.S. Patent Nos. 6,785,903 (claim 24); 7,485,533 (claim 13); 7,761,893 (claims 1 and 9); 7,984,469 (claims 1, 5, 9, 12, and 15).

Citing Twombly, the district court dismissed the complaint,

Plaintiff [complaint] seems to suggest that Defendant must operate some product or process in a manner that infringes some of the Asserted Patents, because Defendant is able to achieve the same end-result as that contemplated by the Asserted Patents. Although Plaintiff strongly believes that Defendant "must" be infringing the Asserted Patents, Plaintiff fails to explain the basis of this belief. Plaintiff does not explain why it believes that Defendant is utilizing the methods and products protected by the Asserted Patents to update the digital signals it receives rather than using other noninfringing methods and products.

. . . . Plaintiff has failed to allege facts sufficient to state a plausible claim for patent infringement under the standards articulated in Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) and Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009).

On appeal, however, the Federal Circuit has reversed – holding that patent cases are special because the Federal Rules of Civil Procedure include a proposed form complaint for patent infringement (Form 18) and "proper use of a form contained in the Appendix of Forms effectively immunizes a claimant from attack regarding the sufficiency of the pleading."

The patent infringement form (Form 18) is incredibly bare-bones and requires only the following:

Form 18

1.     <Statement of Federal Jurisdiction>

2.    On <Date>, United States Letters Patent No. <__________________> were issued to the plaintiff for an invention in an electric motor. The plaintiff owned the patent throughout the period of the defendant's infringing acts and still owns the patent.

3.    The defendant has infringed and is still infringing the Letters Patent by making, selling, and using electric motors that embody the patented invention, and the defendant will continue to do so unless enjoined by this court.

4.    The plaintiff has complied with the statutory requirement of placing a notice of the Letters Patent on all electric motors it manufactures and sells and has given the defendant written notice of the infringement.

Therefore, the plaintiff demands:

(a)    a preliminary and final injunction against the continuing infringement;

(b)    an accounting for damages; and

(c)    interest and costs.

According to the court when an approved form complaint is available, a plaintiff satisfies the pleading requirements of Rule 8 by either conforming to the provided form complaint or by conforming to the requirements of Twombly.

In considering whether the complaint here met the requirements of Form 18, the appellate panel concluded that there is no requirement that the complaint name the accused product or service by name. "That K-Tech cannot point to the specific device or product within TWC's or DirecTV's systems that translates the digital television signals each receives—especially when the operation of those systems is not ascertainable without discovery—should not bar K-Tech's filing of a complaint."

The touchstones of an appropriate analysis under Form 18 are notice and facial plausibility. While these requirements serve as a bar against frivolous pleading, it is not an extraordinarily high one.

This decision adds additional context to the Federal Circuit 2012 decision In re Bill of Lading, No. 2010-1493 (Fed. Cir. 2012). In that case, the court also affirmed the power of Form 18 as an approved model complaint but also indicated that the form only applies to allegations of direct infringement and not infringement by inducement.

Writing in concurrence, Judge Wallach disagreed with the majority's conclusion that Form 18 controls over Twombly. Rather, Judge Wallach argues that the two must be reconciled:

The question presented in this case is whether KTech's allegations are adequate under Rule 8(a). If so, they survive a Rule 12(b)(6) motion; if not, the complaints must be dismissed. The Supreme Court has interpreted Rule 8(a) to require "sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). This standard "governs the pleading standard 'in all civil actions and proceedings in the United States district courts.'" Id. (quoting Rule 1) (emphasis added). Form 18 provides a sample complaint for patent infringement, and Rule 84 "makes clear that a proper use of [Form 18] . . . effectively immunizes a claimant from attack regarding the sufficiency of the pleading." Majority Op. at 9–10 (emphasis added). As the majority rightly points out, Rule 84 is binding on this court to the same extent as Rule 8(a). . . . Thus, this court is bound by Iqbal and Twombly … and by Rule 84. To the extent possible, these standards must be harmonized.

For his part, Wallach suggested that the complaint submitted by the plaintiff here satisfied both standards.

= = = = = =

One odd element of the decision is that the court indicated that the judgment on whether claims had been sufficiently pled is not a patent specific matter. The consequence of that is that Federal Circuit follows the lead of the appropriate regional circuit court of appeal. "Because it raises a purely procedural issue, an appeal from an order granting a motion to dismiss for failure to state a claim upon which relief can be granted is reviewed under the applicable law of the regional circuit." However, following that humble claim, the court went on to repeatedly cite its own decisions and not those of the Ninth Circuit. Responding to that issue in a footnote, the court noted any difference between regional circuits on this issue would be improper because the result is dictated by Supreme Court precedent. Thus, the court's "analysis is no different where the case comes to us from the Ninth Circuit [or the Sixth Circuit]. Form 18 is a national form, and any argument that we should interpret it differently here than we did in R+L Carriers is without merit. One trick here is that we ordinarily do not apply common law interpretation to the Federal Rules of Civil Procedure – meaning that precedential decisions of the regional circuits have less weight in this area than in other areas of law.

Patent-Conscious Preparation for a Summer at the Beach

Guest Post by Marketa Trimble

As the America Invents Act slowly fades as a cocktail party topic, your conversation might gravitate to your upcoming summer vacation at the beach. Don't worry, this conversation will present opportunities for patent-spirited discussions as well.

Last month, while preparing a presentation on U.S. IP law for a class of fashion design and communications students in Milan, Italy, I came across a patent that changed my perspective on a summer beach vacation. U.S. patent 8,371,043, applied for on August 1, 2008 (two provisional applications were filed earlier), and issued on February 12, 2013, concerns "a molded shoe featuring a 3 dimensional figure (e.g., an animal or character)" that is perfect footwear for any child's day of fun at the beach.

I wanted to include a utility patent in a series of examples of how individual types of IP rights under U.S. law, which is often presented as deficient in its limited protection of fashion, might provide some protection to some aspects of fashion. However, this particular utility patent was not a good introduction to U.S. patent law for the students – it certainly was not suitable to explain the "law on the books," although it was appropriate to illustrate the "law in action." By the point in the semester when I spoke to the class, the students had a pretty good idea of IP law as it exists in European countries, and they seemed to be eager to learn about U.S. IP law. They took copious notes when I talked about section 101 and the conditions for patentability under U.S. law. But when I showed the slide with the molded shoe patent the pens went down and the eyebrows went up.

U.S. patent 8,371,043 covers a shoe that

"has a sole having a bottom surface that comprises a series of projections and recesses that form a print for an animal or character, to thereby obtain an imprinting surface; and an upper, attached to the sole, having an outer surface that comprises a series of projections and recesses that form a three dimensional figure (e.g., an animal figure or a character figure). The sole and upper are substantially formed from molded plastic; the projections and recesses of the animal imprinting surface allow one wearing the shoe to make imprints on a soft surface, and the three dimensional figure on the outer surface of the upper relates to the print of the imprinting surface." (Abstract that substantially tracks Claim 1)

It was telling that the students, on seeing the drawings of the invention, almost uniformly exclaimed: "Crocs!" Indeed, to an average consumer the shoe in the drawings might resemble Crocs, which have been on the market since about 2002, and it might surprise the public that the assignee of the patent is not Crocs, Inc., but Polliwalks, Inc. The idea of putting the face of an animal or a character on the tip of a shoe and a corresponding surface print on the bottom of the shoe might have been non-obvious to a PHOSITA but did not seem non-obvious to the students, who knew of various fabric shoes featuring animals and characters – shoes that very likely had preceded the invention in the patent. Nor did having a sole that makes an imprint corresponding to the shape of the sole impress the students as non-obvious. In the end the class agreed that issues of patentability are complex and that the students were not likely to be in a position to second-guess a complicated assessment of non-obviousness.

What was perhaps more troublesome about the patent, though, was that it extends to "[a] method of making an animal imprint on a surface with a molded shoe" (Claim 11). If you have any doubts about the link to a day at the beach you should know that the surface in the patent is identified as "a soft surface that includes dirt, mud, sand or clay" (Claim 12). With the exception of sale representatives and designers of competitor-infringers who might engage in making imprints with patent infringing products, the only other people likely to infringe the method claims appear to be consumers using patent infringing products – children who, as the patent applicant assures us, "enjoy exploring and learning about new things" (as written in the Background of the Invention). Apparently, these "things" will now include patent infringement.

Of course, your children will not infringe the method claims if you purchase a pair of the shoes that are sold by the patent owner or with the patent owner's consent – we know that the patent owner's right to control the disposition of the shoe is exhausted upon the first authorized sale of the shoe, and that the patent owner's right to control the use of the patented method that is substantially embodied in the product will be exhausted upon the first authorized sale of the product as well. But if you purchase "knock-offs" of the shoes or other shoes that infringe the patent, your child might end up being a patent infringer.

The Milan students wondered about the utility of patenting a method that is likely to be infringed primarily – if not only – by consumers. Does the patent owner really plan to sue consumers for patent infringement when consumers walk on U.S. beaches? Is that an ideal public relations strategy? Are the method claims really just hooks for potential indirect infringement claims? Or did the applicant simply apply for whatever protection that was available?

U.S. patent 8,371,043 was certainly issued in time to be a conversation topic before the upcoming summer at the beach. It provides excellent material for a discussion of U.S. IP protection for fashion and the value of U.S. patents. It also allows you to revive the America Invents Act as cocktail party conversation and point out that the AIA, while making some revolutionary changes to U.S. patent law, certainly does not solve all of the issues of the U.S. patent system.

Patent Pendency and the PPH

By Dennis Crouch

You can get this from the chart, but the median pendency is under three years when considering all issued utility patents. The long tail increases the average pendency to a bit over three years.

Many of the fastest patent issuances are coming from the Patent Prosecution Highway (PPH). See, for example, U.S. Patent No. 8,406,758. In that case, the EPO issued its search report indicating that all of the claims included an inventive step. US patent attorney Stephen Chen then filed the US national stage application along with a request to participate in the PCT-PPH program. Four months later, the considered the application and issued a notice of allowance.

Unfair Competition Book Raises Unfair Competition Claims Against Kenyon

By Dennis Crouch

Duvall v. Kenyon & Kenyon (D.D.C. 2013)

In 1990, ITC Chief Judge Donald Duvall published his treatise titled Unfair Competition and the ITC: Actions Before the International Trade Commission under Section 337 of the Tariff Act of 1930. [correction] He retained ownership of the assigned legal title to the copyright to Clark Boardman Pub. (later purchased by Thompson Reuters) and continued to update the treatise on an annual basis. Judge Duvall died in 1999 and his right to royalty (beneficial title) passed to his widow, Kathryn Duvall.

Attorneys at Kenyon & Kenyon took over the annual updates and, as part of a royalty agreement, Ms. Duvall continued to receive annual royalties on sales of new versions of the book. Each edition listed Judge Duvall as the original author as well as the new authors. In 2012, however, Judge Duvall's name was removed from the publication and the publisher ceased making any royalty payments to Ms. Duvall. After consulting with the Kenyon attorneys, the publisher wrote to Ms. Duvall:

[A]fter careful determination as to source of the [W]ork's content, the substantial revision of that content by the current authors, and the many years since Judge Duvall had contributed material to the publication, we were forced to conclude that attributing the work to Judge Duvall no longer provided readers with an accurate statement of authorship.

Ms. Duval has now sued Kenyon & Kenyon and the newly listed authors – alleging copyright infringement, declaratory judgment of authorship, illegal contract (between Kenyon & the publisher), breach of contract, breach of implied duty of good faith and fair dealings, civil conspiracy, interference with contract, and accounting for past royalties.

The complaint provides something of a tour-de-force as it lists page after page of the treatise where Judge Duvall's original writing is virtually unchanged. According to the allegation, for example, the page shown below compares Judge Duvall's version with the newest version of the treatise with changes in redline.

The point here is that large portions of the treatise are virtually unchanged and that fact likely leads to the conclusion that Judge Duvall's copyright continues to provide exclusive rights to the work. The unfortunate aspect of this case is that Kenyon continues to publish the work in the USA. If it had contracted with a foreign publisher then Duvall could have brought the action in the USITC. 

Read the complaint: https://docs.google.com/file/d/0B_b15LgT1GHYUGd6YnYxS1RWNjQ/edit?usp=sharing

Patent Term Adjustment

Patent Grant Update

USPTO Budget Cuts

By Dennis Crouch

Although unwilling to confirm that the PTO will be cutting its budget, a Commerce Department spokesperson has told me that: "The [USPTO] is continuing its efforts to develop a sequestration plan—this plan is a work in progress and details are still forthcoming." Reading between the lines, the answer is: yes, the PTO will be cutting its spending and turning-over user-fees to the treasury rather than using that money to examine patents or trademarks.

Update – Following the comments from the Commerce Department, PTO Director Rea distributed a message to employees that the agency is facing "substantial budgetary uncertainty" and is "working to identify potential savings and projects that could be deferred in a way that minimizes the impact to our mission and our employees."

In her email, Director Rea makes clear that the under sequestration, the PTO will be unable to use a "significant" amount of user fees and those fees will instead be returned to the US treasury. In the past, this has been known as "fee diversion."

The action plan is to first cut all non-examination related spending and then determine whether further spending cuts are necessary.

In light of these factors and the substantial budgetary uncertainty the agency now faces, it is essential that we act now to further reduce spending. I have thus asked the management team to come together to identify immediate and significant spending reductions for the remainder of FY 2013 with a focus on minimizing the impact to our mission and our employees. The management team is taking immediate measures to limit all expenditures, including but not restricted to most hiring, travel, training, and IT modernization projects. (Your managers may even be reaching out to you for ideas on cost savings measures.)

One thing to remember in all of this is that the USPTO budget has increased sharply over the past three years. FY2010 budget was two billion dollars while the FY2013 budget was almost three billion dollars. The sequester reduction is rather minuscule compared to the size of this increase.

Facts and Trends of USITC Litigation

By Dennis Crouch

The United States International Trade Commission (USITC) is a US-based agency tasked with the goal of protecting US domestic industry against improper foreign competition. The law provides that one form of improper foreign competition is the unauthorized importation of patented goods. See 19 U.S.C. 1337 ("Section 337"). A patentee has the power to separately allege patent infringement at the USITC or in Federal Court. There is also no prohibition against both actions being brought at once. One distinction is that the only remedy available from the USITC is blocking importation of infringing goods. However, the USITC is not bound by eBay v. MercExchange, and thus, the likelihood of a winning patentee being awarded injunctive relief is much greater.

Some commentators have argued that the USITC is improperly supporting the activities of patent licensing companies. However, in a recent four-page report, the USITC has offered a defense against those accusations. The agency notes that, since eBay v. MercExchange, the about 20% of the instituted investigations are associated with patent licensing companies who do not themselves practice the invention. That figure is well below the numbers seen in federal district courts. Further, in that same time period, only four patent licensing companies have obtained exclusion orders (injunctive relief).

USITC: FACTS AND TRENDS REGARDING USITC SECTION 337 INVESTIGATIONS

In general, the number USITC 337 investigations is on the rise. However, the number of patent licensing company (NPE) lawsuits has remained relatively small.

Game Theory: Patent licensing companies generally make money when others use the patented technology – that is where the licensing royalties come into play. And, apart from artificially shifting supply, licensing companies do not make money by excluding others. Thus, one question that arises is why a patent licensing company would file suit in the USITC since the only result is injunctive relief? One solution is to change the law the USITC has the power to award ongoing royalties when a patentee is willing to license the asserted patent rights.

 

Welcome Back Fee Diversion: USPTO Likely to Begin Sending Collected Fees back to Treasury

By Dennis Crouch

Many agencies within the Federal Government are suffering under sequestration that effectively cuts budgets by about 5% for the rest of the fiscal year. In March, I reported that the USPTO would not be forced to cut its spending because the collected fee revenues were already under budget. It seems that result is not sitting well with other federal agencies who would prefer to see more equal suffering. Under orders from the White House, it appears that the USPTO will now be forced to reduce its spending – essentially using fee revenues as the base from which to cut.

Robert Budens sent around an email raising some alarm regarding USPTO funding. Budens heads the USPTO employee union POPA. Budens writes:

About a week or so ago POPA started hearing rumors that the White House Office of Management and Budget (OMB) was attempting to mess with USPTO funding by requiring that our sequestration hit be taken off of our fee income rather than our appropriated budget level. I also heard that USPTO management had been put under a "gag order" not to discuss these changes until approved by OMB and Commerce. The rumors also suggested that the sequestered fees would not go into our AIA reserve fund for later availability, but would in fact, not be available for USPTO use, i.e., our fees are going to be diverted once again, barely a month after full implementation of the AIA that was supposed to prevent fee diversion!

In discussions with AIPLA, IPO and others, I learned that they had also heard such rumors and that none of us were getting any information out of USPTO management. To date and despite numerous inquiries from POPA, USPTO management has still not discussed this issue, all but confirming the gag order.

I believe other recent developments have all but confirmed those rumors and I wanted to update you because OMB's interpretation of the impact of sequestration on the USPTO will have significant impacts.

Today, the OCIO notified its staff of an $80M cut to the OCIO budget. [DDC Note: Office of the Chief Information Officer] This will result in layoffs of a number of USPTO contractors and significant delays in the development of the Patents-End-To-End project (PE2E) and upgrades to PALM — both critical IT projects. Obviously this is not good news, but I suspect it is evidence that OMB's sequestration decision is being implemented. And yesterday, you all should have seen the Memorandum from the ADCs regarding changes to overtime in the Examining Corps. Again, more evidence that the rumors are true.

The USPTO's fee income is currently below projected levels. In other words, we are already operating in a sequester environment by virtue of our reduced fee income. It is incomprehensible to me why the White House would then pile on us by taking such a negative interpretation of sequester on the USPTO. This is about as short sighted as anything I can think of. Our fee income represents filed patent applications that will need to be examined. To now take away those fees while leaving the USPTO with the work to do is counterproductive.

In his letter, Budens mentions the AIA reserve fund that is now codified in 35 U.S.C. § 42. The law establishes a "Patent and Trademark Fee Reserve Fund" within the US Treasury.

If fee collections by the Patent and Trademark Office for a fiscal year exceed the amount appropriated to the Office for that fiscal year, fees collected in excess of the appropriated amount shall be deposited in the Patent and Trademark Fee Reserve Fund. To the extent and in the amounts provided in appropriations Acts, amounts in the Fund shall be made available until expended only for obligation and expenditure by the Office in accordance with paragraph.

As Budens suggests, it does not appear that this provision would be effective against the budget cuts outlined above because they are coming from either executive fiat or the cap set in the Budget Resolution – neither of which changes the amount appropriated.

Depending upon how it is calculated, the USPTO may be facing about $140 million in cuts for the remaining 5½ months of FY2013.

Survey: Abstract Ideas and Natural Phenomena as Prior Art

polls

If you don't see the survey, click here.

Guest Post by Prof. Michael Risch: The Securitization of Patents

Guest post by Michael Risch, Associate Professor of Law, Villanova University School of Law.

My forthcoming article in Duke Law Journal, The Securitization of Patents, argues that the best way to create patent markets might be to start treating portfolios as securities. A full draft is accessible at this SSRN page. The article makes four basic points:

1. Aggregation and trading is not limited to non-practicing entities – everyone is doing it.
2. Companies are trading aggregated patent portfolios as they do other patent instruments, either through sale or licensing.
3. Aggregation is beneficial, even critical, for efficiency; this is directly contrary to the conventional wisdom.
4. Based on the above, markets might be improved by applying securities treatment to patent portfolios.

[NB: I focus on portfolios, not individual patents. I also focus on sale and licensing of patents, not the initial patent grant. The paper explains why in more space than I have here.]

When I first wrote Patent Troll Myths, there was very little empirical data about NPEs. Since then, such research has exploded, with new data every week seemingly counting the number of NPEs and their cases. This data, though helpful, leaves a lot to be desired, I think. First, there is a rarely a real apples-to-apples comparison with the activity of product companies (and when there is, the comparison is not very granular). To that end, I’ve been developing a matched data set for my Patent Troll Myths data so we can test what real differences in quality and quantity, if any, exist. Second, the data largely ignores licensing practices, which can be quite similar. To be fair, licensing data is difficult to come by, but without it, normative determinations are difficult. Third, studies like mine, which look at the provenance of NPE patents, are rare.

These issues lead to my first point: aggregation is not just for trolls anymore, if it ever was. The public is becoming a bit more aware of this with new focus on privateering, the outsourcing of patent enforcement by product companies to licensing and assertion specialists. The idea that aggregation is just fine when a product company does it, but suddenly evil when those same patents transferred to a third party has never sat well with me. And regardless of moral considerations, the fact of the matter is that patent aggregation is everywhere.

My second point follows from the first: aggregated portfolios are being used as assets, and traded as such by all sorts of companies. This is nothing new; people have been writing about patents as a new asset classes for a while now. Transactions are getting bigger, however, and they are hitting the news. Perhaps no transaction better illustrates my point than the recent Kodak patent auction. First, Kodak offered its patents for sale as a financing strategy in bankruptcy. Second, the eventual buyer was a consortium including, among others, Microsoft (a product company); Intellectual Ventures (a licensing company, but also one that litigates, but also one that aggregates defensively; and RPX (a defensive aggregator). This one transaction is my argument in a nutshell: everyone is aggregating, and they are doing so in buy/sell type transactions for financial purposes.

My third point is that such aggregation is not always (or necessarily often) a bad thing. This is decidedly against the conventional wisdom. Companies with large portfolios surely have the ability to cause “royalty stacking,” but in practice this is less likely than if many separate parties enforced those same patents. Litigation looks much the same; regardless of the size of the portfolio, courts are just not going to hear a case asserting 1000 patents. Only a few (at most 5 or 10) patents will be at issue, and then the aggregator looks like anyone else. Similarly, in negotiations, the parties usually haggle over a few “lead” patents. This is little different than negotiation with the owner of few patents – with one big exception. When you come to terms with the aggregator, you can settle and license hundreds or maybe thousands of patents at once. Not so with single-patent owners. These folks line up one after another, asserting a few patents at a time. The biggest NPEs will often assert patents obtained by individual inventors; would product makers really rather that the inventors assert their own patents separately? Maybe, before a time when people figured out a viable mechanism for funding patent assertion, but now that individuals might seek funding for enforcing their own patents, a single aggregator must surely be a better option than many inventor plaintiffs.

There is one difference with aggregated portfolios, of course. When the parties are done haggling over the lead patents, the portfolio owner always has more to discuss while the small patent holder has none. But rather than being the greatest cost of the portfolio, a seemingly bottomless portfolio is its greatest benefit.

And that is my fourth point: when parties are trading portfolios, the haggling should be over price instead of quality and infringement. In a large enough portfolio holding patents directly related to a particular product, there will surely be some number of patents that are both valid and infringed. The question is how many, and how much it will cost to find them.  A central thesis of my article is that treating portfolios as securities will help lower transactions costs in a variety of ways by limiting the litigation costs of finding those infringing patents and instead better pricing patents in the market.  For you legal sticklers, I didn’t just make this up: the paper looks at portfolios under the Supreme Court’s famous Howey test and concludes that such treatment is at least plausible under the law.

How might securities laws benefit markets? Not in the traditional “public offering” way. I suspect that most transactions would be excluded from the registration requirements. However, such transactions might be regulated as dark pools, and require clearinghouse treatment that makes such transactions public. Further, stock fraud laws might require the disclosure of information that might affect portfolio value. For example, patent holders who know of anticipatory prior art might be required to disclose it rather than keep it secret. Perhaps most important, accepting that portfolios are simply financial transactions might drive efforts to develop objective portfolio pricing. The goal of such pricing schemes is to determine a portfolio’s price even though the parties cannot agree on the price of any of the particular patent in the portfolio.  I examine several pricing strategies that might work (and several destined to fail) in the paper.

There is obviously much more in this paper than I can write here. I detail my arguments in the full paper.

AMP v. Myriad Gene Patenting Oral Arguments

By Dennis Crouch

Association for Molecular Pathology v. Myriad Genetics, 12-398 (Supreme Court 2013) oral argument transcript.

The Supreme Court held oral arguments today in the much watched Gene patent case pending before the US Supreme Court. Myriad Genetics and the University of Utah own several patents covering particular isolated human genes, seemingly man-made complementary DNA that mimics the natural DNA sequence, methods for obtaining the DNA, and methods for using the DNA to test for disease. The major breakthrough made by the Myriad Scientists was to discover the naturally occurring sequence of DNA that codes for early-onset breast cancer. These are the so-called BRCA1 and BRCA2 genes. This was a huge breakthrough and has been applied to save many lives. However, historic patent law is clear that the mere information discovered is not patentable. That information could be classified as both a natural phenomenon and an abstract idea—both of which lack patent eligibility. So, instead of patenting the information, the researchers applied molecular biology tools (conventional at the time) to isolate the DNA, and create cDNA. It was those structures and methods that Myriad patented, although the innovative heart of each patent claim remained the particular unpatentable genetic sequence. A group of public-minded researchers and groups challenged the patents. Arguing on their behalf is Chris Hansen of the ACLU. Myriad called patent law expert Greg Castanias for its arguments. And, acting as amicus curae, Donald Verrilli argued on behalf of the US Government.

My take is that the court is likely to find cDNA patentable because of the man-made nature of the molecule and hold that purely isolated molecules will only be patentable if their function is significantly altered because of the isolation. This result depends upon the court buying Myriad's argument that cDNA is the equivalent of recombinant DNA whose sequence is designed by the inventors. One risk of the decision for patentees is that the court appears poised to place additional weight on the obviousness analysis. Here, it is also clear that the court does not trust the USPTO to make these determinations. As Justice Kagan mentioned "the PTO seems very patent happy".

AMP's attorney Chris Hansen began his argument with the strongest possible approach – arguing that Myriad's recognition that the BRCA genes "correlate with an increased risk of breast or ovarian cancer . . . [was] made by nature . . . [and] Myriad does not deserve a patent for it." Mr. Castanias disagreed – "What Myriad inventors created in this circumstance was a new molecule that had never before been known to the world."

A first focus of the argument was on whether the isolated DNA has a new function – different from that found in the human body.

JUSTICE ALITO: Isolated DNA has a very different function from the DNA as it exists in nature. And although the chemical composition may not be different, it -- it certainly is in a different form. So what is the distinction?

MR. HANSEN: Well, I don't think it has a new function, Your Honor, with respect. I believe that what -- Myriad has proffered essentially three functions for the DNA outside the body as opposed to inside the body. The first is we can look at it. And that's true, but that's not really a new function. That's simply the nature of when you extract something you can look at it better.

The second two rationales that Myriad has proffered are that it can be used as probes and primers. Three of the lower court judges found that full-length DNA, which all of these patent claims include, cannot be used as probes and primers. But more important, finding a new use for a product of nature, if you don't change the product of nature, is not patentable. If I find a new way of taking gold and making earrings out of it, that doesn't entitle me to a patent on gold. If I find a new way of using lead, it doesn't entitle me to a patent on lead.

As I mentioned, everyone recognizes that Myriad made a major advance in our understanding of human genetics. The focused then turned to how Myriad should be rewarded.

JUSTICE KAGAN: Mr. Hansen, could you tell me what you think the incentives are for a company to do what Myriad did? If you assume that it takes a lot of work and takes a lot of investment to identify this gene, but the gene is not changed in composition, and what you just said is that discovering uses for that gene would not be patentable even if those new -- even if those uses are new, what does Myriad get out of this deal? Why shouldn't we worry that Myriad or companies like it will just say, well, you know, we're not going to do this work anymore?

MR. HANSEN: Well, we know that would not have happened in this particular case, Your Honor. We know that there were other labs looking for the BRCA genes and they had announced that they would not patent them if they were the first to find it. We also know that prior to the patent actually being issued, there were other labs doing BRCA testing and Myriad shut all that testing down. So we know in this particular case that problem would not have arisen.

But the point of the whole -- the whole point of the product of nature doctrine is that when you lock up a product of nature, it prevents industry from innovating and -- and making new discoveries. That's the reason we have the product of nature doctrine, is because there may be a million things you can do with the BRCA gene, but nobody but Myriad is allowed to look at it and that is impeding science rather than advancing it.

MR. HANSEN: [Further], taxpayers paid for much of the investment in Myriad's work. I [also] think you get enormous recognition.

SCALIA: Well, that's lovely.

MR. HANSEN: But I think that we know that that's sufficient. We know it's sufficient with respect to these two genes. We also know it's sufficient with respect to the human genome.

JUSTICE KENNEDY: But I just don't think we can decide the case on the ground, oh, don't worry about investment, it'll come. I just don't think we can do that.

The patented cDNA is not found in the human body, but instead was manufactured by the researchers by using a discovered enzyme to convert mRNA created in the body back in to the more stable DNA form.

JUSTICE SOTOMAYOR: [cDNA] is artificially created in the laboratory, so it's not bound in nature. It's not taking a gene and snipping something that's in nature. And yet you claim that can't be patented. The introns are taken out, the exons are left in, and they're sequenced together. Give me your brief argument on that. I read your brief, but it is not a product of nature; it's a product of human invention.

MR. HANSEN: There are two big differences between cDNA and DNA. The first is exactly the one Your Honor just discussed, which is that the introns, the noncoding regions, have been removed. That is done in the body, by the body. That's done in the process of DNA going to mRNA. What the scientist does who's creating the cDNA is they take the mRNA out of the body and then they simply have the natural nature-driven nucleotide binding processes complement the mRNA. So that if the mRNA has a C, the scientist just puts the corresponding nucleotide in there and nature causes them to bind up. The scientist does not decide -­

JUSTICE BREYER: I know, but I don't see the answer, because I gather, if I -- if I've read it correctly, that when you have an R -- the messenger RNA does not have the same base pairs. There's a U or something instead of an A or whatever it is.

MR. HANSEN: Yes.

JUSTICE BREYER: So when you actually look, if you could get a super-microscope and look at what they have with the cDNA, with their cDNA, you would discover something with an A, not a U. Is it AU? Is that the one?

MR. HANSEN: Yes.

JUSTICE BREYER: Okay. Okay. So -- so you would discover something with an A there, you see, and you wouldn't discover something with a U there. And there is no such thing in nature as the no-introns AGG, whatever, okay? It's not there. That's not truly isolated DNA. But you can go look up the Amazon, wherever you want. Hence the question. Now, on that one, how? How is that found in nature? The answer is it isn't.

MR. HANSEN: Well, but I would suggest, Your Honor, that the question is not whether it is identical to something in nature. The question is whether there was a human invention involved, whether it is markedly different from what is found in nature.

JUSTICE SOTOMAYOR: But that goes to obviousness. That does not in my mind go to the issue of whether it's patent eligible. You may have a very strong argument on obviousness, but why does it not -­it's creating something that's not found in nature at all.

. . . CHIEF JUSTICE ROBERTS: But I -- I thought the basic general approach here was we have a very expansive view of what is patent eligible and then we narrow things through things -- issues like obviousness and so on. Why -- wouldn't it make more sense to address the questions at issue here in the obviousness realm?

. . . . JUSTICE ALITO: This case has been structured in an effort to get us to decide this on the broadest possible ground . . . it's just about 101, it's not about any other provision of the Patent Act. Why should we do that?

. . . . JUSTICE BREYER: Ah. Then -- then watch what you're doing. That's very, very interesting, because, really, we are reducing, then, 101 to anything under the sun, and -- and that, it seems to me, we've rejected more often than we've followed it.

As it should, the discussion eventually worked its way to the patenting of ideas.

JUSTICE SOTOMAYOR: That's a failure of the patent law. It doesn't patent ideas.

MR. HANSEN: And it shouldn't patent ideas, and -- but it also makes the point that isolated gene and the gene in the body are the same.

. . .

GENERAL VERRILLI: The claim that isolated DNA is a human invention rests entirely on the fact that it is no longer connected at the molecular level to what surrounded it in the body. But allowing a patent on that basis would effectively preempt anyone else from using the gene itself for any medical or scientific purpose. That is not true about a patent on cDNA. A patent on cDNA leaves the isolated DNA available for other scientists and other -- and others in the medical profession to try to generate new uses. . . . [T]he position of the United States is that [as a conceptual matter] cDNA is patent eligible.

. . .

JUSTICE KAGAN: The first person who found a chromosome and isolated it, I think we can all say that that was a very useful discovery. And the question is, can you then -- can the person who found that chromosome and isolated it from the body, could they have gone to the PTO?

A decision in the case is expected in June.

Responding to USPTO's new Maintenance Fee Regime

On March 19, 2013, the USPTO's new fees became effective. The most notable changes were the maintenance fees due at three intervals: 3½, 7½ and 11½ years after patent issuance. At each interval, the fees increase with the new top-fee set at $7,400 -- a 50% increase over the old fee.

With the major fee increase, it is no surprise that savvy patent owners took advantage of the opportunity of paying the renewal fees early. The USPTO allows patentees to pay the fees due up to six-months early or, with a $160 fee, up to six months late.

 

Recent Patent Assignments

Recent Patent Deals from the USPTO Assignment Records:

• Ericsson transferred over 820 patent families to the publicly traded company known as Unwired Planet, Inc. (UPIP). Ericsson will receive a percentage of any revenue generated from the patents. (20% of first $100m; 50% up to $500m; and 70% of any additional revenue). Unwired has lawsuits pending against both Apple and Google.
• A new company known as BRIGHT SUN TECHNOLOGIES, seemingly headquartered at the offices of Fenwick & West, has purchased 100+ patents from Marathon Solutions. Those patents previously belonged to AOL. See Patent No. 8,335,834.
• The transfer of patents from EASTMAN KODAK to INTELLECTUAL VENTURES have begun to show up in the assignment records. See Patent No. 6,804,407. Apple also recorded a block of Kodak patents
• Frank Bisignano (JPMorgan COO) obtained another two dozen patents from Inselberg Interactive.
• Nokia transferred about thirty patents to a new Las Vegas entity known as MEMORY TECHNOLOGIES LLC. See Patent No. 7,172,454.
• Bankrupt ORMET CORPORATION has transferred its patents to the WAYZATA INVESTMENT PARTNERS as part of a restructuring process - apparently as collateral.
• As part of a deal with Sanofi, COVIS PHARMA has received the patent rights for a set of Sanofi drugs. See Patent No. 6,297,254.
• A new company founded by Heidi Zak and Dave Specter - MeCommerce - has obtained a set of patents covering methods of custom fitting and ordering clothing. Although the patents look interesting, they have already bounced through three other companies. See Patent No. 6,711,455
• And last but not least, the OPEN INVENTION NETWORK added a few more patents to its portfolio.

Top Phrases by the Federal Circuit

By Dennis Crouch

Google's ngram viewer shows that the phrase "ordinary skill in the art" took-off shortly before implementation of the 1952 patent act that includes the identical wording.

From the corpus of all Federal Circuit decisions, I looked for all the five-word phrases found in those decisions. The following list are phrases that are most regularly emerging from the judicial pen.

1. As_a_matter_of_law    
2. ordinary_skill_in_the_art    
3. Under_the_doctrine_of_equivalents    
4. The_district_court_erred_in
5. Judgment_as_a_Matter_of
6. by_clear_and_convincing_evidence
7. Genuine_Issue_of_Material_Fact
8. The_Patent_and_Trademark_Office
9. is_a_question_of_law
10. agree_with_the_district_court
11. We_affirm_the_district_court
12. did_not_abuse_its_discretion
13. The_scope_of_the_claims
14. likelihood_of_success_on_the
15. law_of_the_regional_circuit
16. and_remand_for_further_proceedings

PatCon 3: Posner/Epstein Debate on the Patent System

Continuing to liveblog from PatCon 3.  I'll continue updating this post throughout the debate. 

A Debate About the Patent System

The Honorable Judge Richard Posner of the United States Court of Appeals for the Seventh Circuit
Professor Richard Epstein, Laurence A. Tisch Professor of Law, New York University School of Law, and James Parker Hall Distinguished Service Professor Emeritus of Law and Senior Lecturer, University of Chicago Law School

Moderated by Olivia Luk of Niro, Haller & Niro

For another perspective on this debate, check out Lisa Larrimore Ouellette's post over at Written Description.

PatCon 3: Plenary Session

By Jason Rantanen

I'm continuing to blog the presentations at PatCon 3.

Mark Lemley (Stanford)
James Malackowski (Ocean Tomo, LLC)
David Abrams (Penn)

Liveblogging PatCon 3: A Conversation with Industry

By Jason Rantanen

Today I'll be liveblogging from PatCon 3.  For those who are interested, the substance will be after the break.  I'm told that video recordings will be available for the plenary presentations.

A conversation with industry

Jim Trusell - Chief IP counsel at BP
Karen Nelson - attorney at AbbVie 
Jon Wood - Chief IP Counsel at Bridgestone
Paul Rodriguez - Chief IP Counsel at RR Donnelly
Stephen Auten - Cozen O'Conner (moderator)

Stent Patent Cannot Heal Divided Claim Construction: Four Judges = Four Different Claim Constructions

By Dennis Crouch

Bruce Saffran v. Johnson & Johnson (Fed. Cir. 2013)

Claim construction has become the most highly contentious issue in patent litigation.  A difficulty with claim construction is that the question does not involve a yes/no answer.  Rather there are a wide variety of possible constructions for any claim element.  Thus, the likelihood of a court randomly picking the correct construction is quite low. And, as it turns out under the rules of de novo review, even when the lower court applies reason and evidence to the problem it it often arrives at the wrong answer. That wrong answer leads to a reversal of the claim construction on appeal.  To be clear, claim construction falls in line with the normal plaintiff/defendant divide. Plaintiffs (patentees) tend to prefer no construction and just let the jury figure out whether the claims are infringed.  Defendants (accused infringers) see claim construction as a mechanism for removing the case from the jury based on the technicality.  Thus, most serious claim construction arguments are designed around the prospect that a favorable decision will lead to summary judgment for the defendant.  Although we often hear of "overly broad" patent claims, the reality is that some defendants ask for a narrow construction in order to build their non-infringement argument while other defendants ask for a broad construction in order to build their invalidity argument.  Of course, the high burden associated with proving invalidity tends to make the first approach a better strategy. In addition to the myriad potential constructions for each term, a typical patent claim has dozens of potentially disputed claims – making the combinatory possibilities quite large.

Background: This case involves Dr. Bruce Saffran's U.S. Patent No. 5,653,760 that claims the treatment of damaged living tissue by covering the tissue with a selectively permeable barrier that could be wholly introduced or applied as a spray. As designed, the device could then allow for the release of a treatment drug that would be able to pass through the membrane while larger molecules would be blocked. The specification explains that the selectively permeable membrane would be useful in the stent market in order to protect blood vessel cells as they regenerate. Saffran previously settled with Boston Scientific for $50 million. In this case he won a $500 million verdict (plus interest) against J&J for its infringing stents.

In a divided opinion, the Federal Circuit has flipped the verdict — finding that the lower court had erred in claim construction and that under the proper construction J&J's stents do not infringe.

The decision is interesting because it includes three opinions that all agree in the judgment reversal, but each disagrees as to the correct construction. In all, four judges have considered the claim construction and have come out with four different claim constructions. The basic dispute is over two claim terms:

• "Device": Whether that term should be interpreted to require a sheet.
• "Means for release of … treating material": Whether the means can generally include chemical bonds and linkages or only hydrolyzable bonds.

The four judges outcome on these two questions is shown in the two-by-two table below.

	Claimed means limited to hydrolyzable bonds	Claimed means includes chemical bonds and linkages
"Device" requires sheet	Judge Lourie - No Infringement	Judge Moore - No Infringement
"Device" does not require sheet	Judge O'Malley - No Infringement	Judge Ward - Infringement

Whither Cybor: The Federal Circuit is currently reconsidering whether Cybor was correctly decided – i.e., whether deference should be given to the lower court claim construction ruling. If deference had been given, it may well be that Judge Ward's opinion would have carried the day – with the resulting conclusion that the $500m verdict should be upheld. As others have written, that result does not actually solve real problems -- only masks them.

Although “without tact”, Micron’s retaliatory decision to stop hiring University of Illinois Graduates is not Illegal

By Dennis Crouch

I have a policy that I don't hire anyone who sues me. I think would actually take that personally. So does Micron. In a letter to University of Illinois engineering professors, Micron's hiring coordinator wrote the following:

Because Micron remains a defendant in a patent infringement lawsuit that UIUC filed against Micron in Federal court in Illinois on December 5, 2011, effective immediately, Micron will no longer recruit UIUC students for open positions at any of Micron's world-wide facilities.

. . . . [T]he Micron Foundation has endowed chairs at the College of Engineering and has sponsored student scholarship and professor research. However, because UIUC's suit imposes costs and risks on Micron that are inconsistent with collaborative relationships among Micron, UIUC, and its students, Micron must regrettably indefinitely suspend its recruitment of UIUC students and likewise suspend participation in other joint activities.

In the patent litigation, UIUC has alleged that Micron infringes three of its patents. U.S. Patent Nos. 5,872,387; 6,444,533; and 6,888,204 – all invented by Drs. Joseph W. Lyding and Karl Hess.

In a motion for temporary injunctive relief, the University has alleged that the email demand involved both "coercion" and "duress."

Coercion" under Illinois law consists of overpowering another's free will by imposition, oppression, or undue influence. In re Marriage of Flynn, 232 Ill. App. 3d 394, 401, 597 N.E.2d 709, 713, 173 Ill. Dec. 735 (1992). A demand constitutes duress when it is, inter alia, morally wrongful. Carlile v. Snap-on Tools, 271 Ill. App. 3d 833, 840, 648 N.E.2d 317, 322, 207 Ill. Dec. 861 (1995). Micron may, of course, choose not to hire the University's students, and may choose to withhold funding from the University. However, Micron may not convey those choices to University personnel, who have nothing to do with this matter, in an obvious effort to pressure the University into dismissing the instant action.

. . . . Here, the harm in question, the pressure Micron has placed, and is likely to place, on the University, warrants redress. Such redress should take the form of an injunction that prohibits Micron from sending similarly coercive correspondence to the University.

In response to the motion, Judge Sara Darrow has denied the University's motion for injunctive relief has a vague restraint on future speech. Citing Alexander v. United States, 509 U.S. 544 (1993) ("Temporary restraining orders and permanent injunctions—i.e., court orders that actually forbid speech activities—are classic examples of prior restraints."). Further the University failed to show irreparable harm as required for injunctive relief under eBay.

Although the court denied the University's motion, it did note that "Micron's decision to shun the University's students is without tact."

Note here to Micron (and others), if you are ready to fund the University of Missouri Law School's new innovation center, we are willing to work out a covenant not to sue.

= = = = =

The letter, with highlights from UIUC's counsel.

Loyola Law Journal - Panel #2: Shortcomings in the Patent System

By Jason Rantanen

Timothy Holbrook, Michael Meurer and Ted Sichelman, and Oscar Liivak, moderated by Atanu Das.

Loyola Law Journal - Chief Judge Holderman on innovations in jury trials

By Jason Rantanen

Chief Judge Holderman: Innovations to Improve Juror Understanding in Patent Jury Trials.  (My notes from the first panel are too much of a mess to be worth posting).

Talking about how can we get rights enforced in a way that will work effectively for both the owner of the rights and the people who believe that there are other rights that the owners don't own.

Liveblogging from the Loyola Law Journal Conference on Patents, Innovation & Freedom to Use Ideas

By Jason Rantanen

Today I'll be liveblogging from the Loyola Law Journal Conference on Patents, Innovation & Freedom to Use Ideas. I'll be posting the full text of my entries below the break for those who are interested. Note that I don't necessarily agree with the views of all the speakers (some of whom are close to diametrically opposite).  Also, keep in mind that this is very rough blogging.  Don't expect elegant writing.

Keynote speaker: Dr. Richard Stallman.  Speaking about patents and software. 

Awaiting the Outcome of CLS Bank v. Alice Corp.

by Dennis Crouch

Pollin Patent Licensing v. Commerce Bancshares (E.D.Mo 2013)

The following is a recent Court Order from Judge Audrey Fleissig.

IT IS HEREBY ORDERED that this matter shall be stayed pending the decision of the Federal Circuit in CLS Bank Intl v. Alice Corp., 685 F.3d 1341, 1356 (Fed. Cir. 2012), vacated, rehg granted, 2012 WL 4784336 (Fed. Cir. Oct. 9, 2012).

In the lawsuit, Pollin is asserting U.S. Patent No. 7,117,171.  Although the company has asserted the patent in at least 17 different lawsuits, it does not appear that any of the accused infringers has filed a request for rexamination or inter partes review. Instead almost all of the cases have ended in settlement.

Pollin’s invention claims priority back to a 1992 application. That means that the patent is now expired. However, Pollin may still be able to collect substantial back damages – so long as the patent is not renedered invalid by CLS Bank.  The 1992 invention focused being able to use a checking account to pay for a service without actually writing a check. The claims are broadly written to encompass the operation via the internet (without actually using those words).

Interestingly, it was Pollin who asked for the stay in this case. 

= = = = =

Pollin’s Claim 1 is as follows:

1. A system for generating authorized payments from financial accounts belonging to a plurality of payers, in payment of debts to a payee, comprising:

input means for performing an electronic information input process wherein a system operator contemporaneously enters information sufficient to identify a new payer previously unknown to the system and information specifying a payment to be generated from an account of that payer,

said information including a financial institution identification number, payer account identifier, and an amount to be paid from said payer's account to said payee;

an institutional database comprising financial institution identification information;

institution verification means associated with said input means for receiving said financial institution identification number and comparing said financial institution identification number to entries in said institutional database,

wherein when said financial institution is found in the institutional database, the institution verification means retrieves identifying information about the institution and verifies the accuracy of said financial institution identification number, and

wherein when said financial institution is not found in the institutional database, an error indication is generated; and

output means connected to said input means for receiving said information specifying a payment and generating in electronic information form instructions for said payment to said payee.

Sony v. Red Digital (red.com): Brewing Battle

by Dennis Crouch

Sony of Japan v. Red Digital Cinema (C.D. Cal. 2013)

Jim Jannard founded RED Digital Camera a decade ago and the company sells professional digital video cameras for tens of thousands of dollars each. Jannard is also the founder of Oakley. As you might imagine, these cameras both work well and have style.

Sony also makes digital video cameras and has now sued Red for patent infringement. The complaint alleges infringement of seven different patents. U.S. Patent No. 5,442,718, 5,523,795, 5,999,213, 6,009,233, 6,423,993, 7,138,617, and 7,304,287. These patents all claim priority back to original applications filed in Japan.

Now, it turns out that Sony's complaint is retaliatory. In February, Red Digital served Sony with its papers alleging infringement of two patents. U.S. Patent Nos. 8,358,357 and 8,174,560. That case is ongoing in the Southern District of California. So far, neither party has filed a request for inter partes review.

In the past, Red sued Wooden Camera for infringing a design patent and trade-dress associated with knock-off accessories and 24P for a declaratory judgment of non-infringement of its Patent No. 5,334,013. Those cases both settled.

It appears that the Sony/Red litigation is currently focused in the US. However, Sony is in a position to push this dispute to a more global scale. For his part, Jannard is intimately familiar with the patent system through the hundreds of lawsuits filed by Oakley against knockoff competitors.

Do I qualify for Micro-Entity-Status at the Patent Office?

By Dennis Crouch

As per their usual, the folks at Brown & Michaels have provided a concise write-up to help inventors and small companies understand whether they qualify for Micro-Entity-Status and the resulting fee reduction. http://www.bpmlegal.com/howsmall.html

The basic questions are:

1. Does the applicant qualify as a small entity? (If no, then no micro-entity)
2. Has the applicant or any joint inventor filed more than four US non-provisional patent applications? (If yes, then no micro-entity, unless those applications were from a prior employment and assigned to the prior employer)
3. Did the applicant or any listed inventor have an income for the past year that was greater than $150,000? (If yes, then no micro-entity). This number will change annually based upon median US household income.
4. Have rights in the application been promised or licensed to a non-micro-entity? (If yes, then no micro-entity)

In addition to the Brown & Michaels site above, the next stop for further reading is the USPTO's final rules published in the Federal Register at 77 Fed. Reg. 75019.

The big deal here is that micro-entities receive a 75% reduction in USPTO fees.

Two-Way Media & the Doctrine of Equivalents

Two-Way Media v. AT&T, SA-09-c-476 (W.D. Tx. 2013)

Interesting jury verdict for Two-Way Media where a jury found that that AT&T infringes a total of seven claims coming from two different patents owned by the plaintiff and awarded $27 million in damages. U.S. Patent Nos. 5,778,187 and 5,983,005. The jury found no literal infringement but only infringement under the doctrine of equivalents.

The patents are part of a family of patents claiming a method of multicast-streaming. Infringed claim 1 is broadly written and listed below:

1. A method for transmitting message packets over a communications network comprising the steps of:

converting a plurality of streams of audio and/or visual information into a plurality of streams of addressed digital packets complying with the specifications of a network communication protocol,

for each stream, routing such stream to one or more users,

controlling the routing of the stream of packets in response to selection signals received from the users, and

monitoring the reception of packets by the users and accumulating records that indicate which streams of packets were received by which users, wherein at least one stream of packets comprises an audio and/or visual selection and the records that are accumulated indicate the time that a user starts receiving the audio and/or visual selection and the time that the user stops receiving the audio and/or visual selection.

The patent itself was subject to a third-party requested reexamination and the USPTO confirmed that all claims were patentable without amendment.

The patents themselves were originally owned by Netcast Communications. That company was founded by Jim Butterworth with the help of Antonio Monteiro. The pair received a number of patents covering various aspects of streaming technology. When Netcast closed operations, Butterworth founded Two-Way Media as the new patent holder and still runs the company. As streaming technology moved forward, these patents have become more valuable and the company has sued several others for infringement, including Akamai, Limelight, and AOL. Those cases all settled.

Among the motions in limine granted before trial, Judge Garcia ordered AT&T's attorneys to (1) not mention the contingency fee arrangement between Two-Way and its attorneys at Susman Godfrey and (2) not use any language that would denigrate the patent system.

I suspect that we'll have an appeal in this case that will focus on the doctrine of equivalents.

Multiplicity of Design Patent Rights

By Dennis Crouch

The number of design patent applications continues to rise. At least a portion of that rise is explained by an increase in the sophistication of design patent applicants. Rather than filing a single design patent that covers a new product release, the experts file a group of design patent applications that each claim a small portion of the overall design. Because a design patent claim is defined by the submitted drawings, each patent application will have slightly different figures. Often, the only change needed is to change portions of the drawing to either solid lines (claimed) or dashed-lines (unclaimed). This strategy has two beneficial results for the patentee: (1) competitors who copy only a portion of the product (suggestive free-riding) will still infringe; and (2) a patentees product design will still be covered by patent rights even after making small changes to the design. A second somewhat less common approach is to also file design patents on features that are closely-related but different from the patentee's actual product design. The intent is to create additional market distance for the patentee and is most effective in markets where direct knockoffs are common.

The images below come from six Gillette design patents all filed on the same day in 2012. The first drawing looks particularly at one of the designs – can see the solid lines that represent the claimed portion?

 

Gillette patents

D0674142

D0674141

D0674140

D0674139

D0674138

D0673730

   

Volunteer Opportunities for IP Professionals

Guest Post by Tasha Francis, PhD. Tasha is a law student at the University of Michigan expecting to graduate with a J.D. later this spring.

One common way in which lawyers give back to their community is via pro bono work. In the pro bono world, a transactional lawyer typically has a general skillset allowing him or her to cover a variety of general corporate areas for a pro bono client even if the specific question at hand does not fall directly in the lawyer's field of practice. Similarly, litigators, who have experience in the courtroom, are equipped to handle a variety of cases brought by pro bono clients, such as small-claims court matters, housing, harassment, or immigration issues. However, patent prosecutors and in-house counsel who might specialize in interacting with the United States Patent and Trademark Office (USPTO), may not feel equipped to meet in the more common litigation or transactional needs of typical pro bono clients. Thus, it may not seem obvious to these attorneys how they can use their skill set to give back to the community. This article identifies a few ways in which intellectual property professionals can use their abilities to enhance their community.

Pro-bono opportunities

The Model Rules of the American Bar Association request lawyers to perform fifty hours of pro bono work per year. Lawyers can fulfill this responsibility by providing free legal services to persons of limited means or charitable, religious, civic, community, governmental and educational organizations.

One way in which intellectual property (IP) lawyers can fulfill their pro bono hours is by getting involved with local charities and helping them with their IP needs- for example, assisting them with the filing of a trademark for their organization. As patent prosecutors have familiarity with the USPTO, this would be an ideal way to help the community. Alternatively, IP lawyers can volunteer for organizations like Lawyers for the Creative Arts or Springboard for the Arts, which provide pro bono legal assistance to clients working in the areas of art, culture, media, and entertainment, including the visual, literary, and performing arts. Example projects include working with artists on copyright, trademark, or general contract issues.

For those IP lawyers interested in writing patents for under-resourced inventors and small businesses pro bono, the USPTO launched a pilot program in Minnesota last year to provide legal services to help such individuals and businesses obtain solid patent protection.  Based on the success of the Minnesota program, the USPTO has instituted five new regional pro bono programs in Denver, California, Texas, Washington D.C. and New York City. 

Other volunteer opportunities that qualify for pro-bono hours, include serving on bar association committees or on boards of pro-bono or legal services programs, taking part in Law Day activities, acting as a mediator or arbitrator, and engaging in legislative lobbying to improve the law. Additionally, pro-bono hours can be accrued by acting as a continuing legal education instructor. Now is an excellent time to teach your colleagues about the changes to the patent laws that recently occurred with the America Invents Act, for example.

Finally, there are a number of pro-bono intellectual property clinics emerging in law schools around the country, such as the Entrepreneurship Clinic at the University of Michigan Law School. Lawyers can serve as mentors to students participating in these programs and simultaneously fulfill their pro-bono goals.

Other ways to give back to the community

Aside from those pro-bono activities, there are other ways in which IP professionals can give back to members of the community.

For example, IP professionals interested in sharing their skills with children can team up with an elementary school class and help students gain exposure to intellectual property by helping the class enter the Intellectual Property Owner's Education Foundation video contest, which is a contest meant to teach children about the US patent system. Students submit video essays about why the patent system is important. Alternatively, the USPTO recently collaborated with the Girl Scouts to introduce a new intellectual property badge to educate Girl Scouts about inventorship and intellectual property. The USPTO and Girl Scouts are actively seeking intellectual property professionals to assist local troops in obtaining this badge.

IP professionals interested in working with older students can offer to speak with Ph.D. candidates in the science and engineering fields and explain the basics of patent law to them, so that if and when they invent something during their Ph.D. program they have an understanding of how the process works.

Furthermore, it is important to realize that knowledge about intellectual property is valuable outside of the classroom as well. For example, IP professionals could make themselves available to local inventors at forums in which they usually congregate. Examples include the local community wood and metal shop, or community meetings, such as The Ann Arbor New Tech Meetup, where entrepreneurs pitch their new business ideas. Forums such as these often contain many community members who would value basic information regarding intellectual property. (And you never know- one of those people sitting in the audience may eventually come to you with work in the future).

So even though it might not be obvious how your skills as an intellectual property professional are valuable to your local community, the above mentioned should serve as a spring board for ways in which you can give back to your community.

Double Patenting Problems when Inventors Move to a New Employer

By Dennis Crouch

In re Hubbell (Fed. Cir. 2013)

Hubbell is the third element of a trio of recent decisions that remind-us that conception and inventorship will remain critically important even after the US patent system fully-shifts to the first-to-file regime. See Dawson v. Dawson and Rubin v. General Hospital Corp. In thinking about these cases, innovative companies may want to consider their employment agreements and their rights to patents associated with post-employment developments.

US Patent law has always recognized inventors as the original patent owners. Conception of the invention imbues the inventor with an inchoate patent right that can then be fully realized by successfully completing the patenting process. As Judge Reyna writes "Inventorship is perhaps the most fundamental question in patent law. The instant an inventor conceives her invention is the moment in which vests her right to a patent, thus perfecting her constitutional right to exclude." (Judge Reyna in Dawson writing in dissent). Ownership of that inchoate right is usually transferred to the inventor's employer as required by the individual employment contract. Without such a contract, the inventor retains ownership rights. Although the America Invents Act shifts some weight away from the primacy-of-invention, it does nothing to change this fundamental precept that rights are created at conception and held by the inventor until transferred.

As was the case in Dawson, Hubbell involves a situation where the inventor moved from one employer (Caltech) to another (ETH Zürich). His first-filed patent application (as a joint-inventor) is owned by Caltech and the second-filed application (as a joint-inventor with different joint inventors) is owned by ETH Zürich. It turns out that ETH Zürich did a better job of getting a patent and that patent issued in 2002. The Caltech patent application is still pending and is the subject of this appeal.

Of the two applications, the Caltech application was both the first invented and first filed. That means that the later ETH Zürich cannot serve as prior art. However, the PTO rejected the Caltech application under the doctrine of obviousness-type double patenting. The doctrine of obviousness-type double patenting is not statutory but instead a judicially created equitable doctrine Normally, this type of rejection is not fatal because the patentee can file a paper known as a terminal disclaimer that both (1) disclaims any term of enforcement that extends beyond the other patent and (2) agrees to that both patents will be co-owned throughout their lifespan. The problem here is that the patents are not co-owned and Caltech cannot make that promise.

Caltech argued that the double patenting rejection should not apply because the two applications have different owners and different inventors. As an alternative, the university argued that the equitable solution is to allow it to file the terminal disclaimer without the co-ownership promise.

On appeal, however, the Federal Circuit affirmed the PTO's decision – holding that obviousness type double patenting applies and that Caltech cannot receive its patent without linking ownership. Writing for the 2-1 majority, Judge O'Malley highlighted multiple-suit harassment problem that served as the originating policy concerns for the limiting doctrine – writing that "the MPEP standard is consistent with the rationale we have used to support application of obviousness-type double patenting rejections."

Judge Newman dissented – arguing that obviousness type double patenting is not available when a patent has different owners, different inventorship, and no joint development agreement. And here, Newman argues, that we have different inventorship because the lists of joint inventors are not identical.

The court today not only finds "double patenting" when there is neither common inventorship nor common ownership, but having so found withholds the standard remedy of the terminal disclaimer, and simply denies the application. This novel ruling is contrary to statute and precedent, with no policy justification for changing the law.

Under Judge Newman's theory the patent should issue on its merits or perhaps be subject to an interference or derivation proceeding.

= = = = =

The panel notes that the reason Caltech's application took so because the university was playing games with continuation practice and claims that are almost identical to those at issue now were allowed back in 2003. Instead of taking that patent, Caltech filed a continuation and abandoned that allowed application.

= = = = =

We do have a (slightly) open question moving forward as to whether obviousness type double patenting remains as a viable doctrine following the AIA.

Dawson v. Dawson: Suing Yourself for a Patent

By Dennis Crouch

Dawson v. Dawson (Fed. Cir. 2013)

It's a fairly rare case where you sue yourself – especially when that occurs after your death. Dr. Chandler Dawson, now deceased, was a leading eye specialist and is the named inventor of the patent applications at suit in this case. While an employee at UCSF, Dawson began working on a topical azithromycin treatment for trachoma – some of Dawson's notes from UCSF include a statement that 0.5% solution might help overcome low-solubility problems. During the process Dawson sought help from folks at InSite Vision to actually make and test the treatment. And, very quickly, Dawson left UCSF and joined InSite. Later, InSite filed two patent applications naming Dawson as a co-inventor for the use of 0.1 to 1% azythromicin to treat the eye. The InSite applications were filed in 1999 and issued in 2001 and 2003 respectively. In 2007, UCSF filed two applications in Dawson's name (without Dawson's cooperation) claiming priority back to the 1999 (InSite) application date. The PTO then declared two interferences. There is a fairly substantial amount of money at stake because the patents are listed in the Orange Book as covering ophthalmic drops known as AzaSite. An infringement lawsuit is pending between InSite and Sandoz. See InSite Vision Inc. v. Sandoz, Inc., Civil Action 17 3:11-cv-03080-MLC-LHG (Complaint filed: 26 May 2011).

So, this case is largely a battle over patent ownership and that ownership depends upon whether Dawson's conception of the invention occurred early (while an employee at UCSF) or later (while an employee at InSite). The doctrine of conception has remained fairly steady for the past 120+ years requires proof of the "formation in the mind of the inventor, of a definite and permanent idea of the complete and operative invention, as it is hereafter to be applied in practice." Hybritech Inc. v. Monoclonal Antibodies, Inc., 802 F.2d 1367 (Fed. Cir. 1986) (quoting Robinson on Patents (1890)).

UCSF as Junior Party: In interference cases (and in future derivation cases) the most important factor is often designation of the "senior" and "junior" parties. Normally, the Senior Party is the party with the earliest effective filing date and the interference (derivation) begins with a presumption that the senior party wins unless unseated by the junior party. Here, we have a filing-date tie because applicants claim priority to the 1999 application date. However, the PTO has a longstanding practice of breaking that tie by saying that the junior party is the one with the latest filing date for its involved application. The UCSF actual application was not filed until 2007 and is thus the junior party.

In the interference, the PTO Board concluded that UCSF had failed to prove Dawson's conception while at UCSF. In particular, the Board held that Dawson "did not fully appreciate how [his] idea was to be implemented in actual practice. . . . What emerges from the facts of this case is that [while at UCSF] inventor Dawson had a general idea for a future research plan to come up with a composition for topical azithromycin to be applied to the eye to treat infection."

On appeal, a divided Federal Circuit has affirmed – holding that substantial evidence supports the Board's conclusion that the invention claimed was not conceived by Dawson as of that early date. The court did suggest that Dawson's lack of testimony in favor of UCSF was a critical factor in its decision.

No Patent Rights to Pre-Conception Innovations: An important take-away from the decision is that the prior employer has no patent rights associated with ideas and innovations that fail to rise to the level of inventive conception. Although this could likely be cured through particular contract language regarding ownership of further developments stemming from work began at the prior employer. This case puts power in the hands of entrepreneurial employees who are not bound by strong contractual limitations on their post-employment activities or patenting.

Writing in dissent, Judge Reyna argued that Dawson's conception occurred while at UCSF. In particular, Reyna walked through the evidence showing that Dawson had conceived of the a process for applying an effective amount of azithromycin to an eye to treat infection in a way that fit the interference count.

Inventorship is perhaps the most fundamental question in patent law. The instant an inventor conceives her invention is the moment in which vests her right to a patent, thus perfecting her constitutional right to exclude. . . .

The majority discounts Dr. Dawson's work at UCSF as failing to achieve a fully developed idea of the invention. This conclusion reflects a misapplication of the law of conception to the facts of this case. To demonstrate conception, the law does not require that Dr. Dawson develop a working physical embodiment of his innovative idea. Indeed,

Invention is not the work of the hands, but of the brain. The man that first conceived the complete idea by representing it on paper, or by clear and undisputed oral explanation, is the first inventor, and to avail himself of the rights or priority the law only requires that he shall use due diligence in embodying his idea in a practical working machine. The sketch need not be a "working drawing." The conception may be complete, while further investigation, and perhaps experiment, may be necessary in order to embody the idea in a useful physical form.

Edison v. Foote, 1871 C.D. 80 (Comm'r Pat. 1871). While conception thus requires "the formation, in the mind of the inventor, of a definite and permanent idea of the complete and operative invention," Mergenthaler v. Scudder, 11 App. D.C. 264 (D.C. Cir. 1897), it does not require reduction to practice. The point of time at which an invention merits protection under the patent law is neither when the first thought occurs, nor when a practical working embodiment is completed. Rather, conception occurs

when the 'embryo' has taken some definite form in mind and seeks deliverance, and when this is evidenced by such description or illustration as to demonstrate its completeness. It may still need much patience and mechanical skill, and perhaps a long series of experiments, to give the conception birth in a useful, working form. The true date of invention is at the point where the work of the inventor ceases and the work of the mechanic begins.

Cameron & Everett v. Brick, 1871 C.D. 89 (Comm'r Pat. 1871). Here, Dr. Dawson's WHO presentation manifested an inventive embryo which thereafter sought deliverance. In his presentation, he provided a description sufficient to illustrate the completeness of his invention. All that was left was the work of the mechanic—that is, reduction to practice. This Dr. Dawson was not required to do.

Responding to the dissent, the majority suggested that the outcome turns on the standard of review since the Board's factual determinations are affirmed based upon the very low standard of substantial evidence. See In re Gartside, 203 F.3d 1305, 1311-15 (Fed. Cir. 2000). The appellate panel does not deal with the reality that conception is a question of law presumably reviewed de novo on appeal other than its fully unsatisfying statement that "UCSF failed to meet its burden of proof as to the legal issue of conception." I ask the court – What is the burden of proof for questions of law?

Do the Wright Brothers Deserve a Patent for their Flying Machine?: Why Eliminating Software Inventions from the Patent System Makes No Sense.

Guest Post by Martin Goetz

Imagine that the digital computer and the stored computer program (software) existed in the late 1800's. If so, there is a high probability that the Wright Brothers would have used a computer program to control the three-axis control system in their 1903 Flying Machine patent application. If they did, we would call the patent they received in 1906 a software patent. Further imagine that today's anti-patent zealots who preach that all software consists of abstract ideas, mental processes or mathematics were thrown back in time to the late 1800's. And finally imagine that they were successful in their stated goal to eliminate all software patents through an act of Congress. Had that really happened, the Wright Brothers would not have received a patent for what is recognized as one of the greatest inventions of the 20th century.

Think of all the great inventions in the 20^th century. Many would have used a software program as they implemented and disclosed their inventions. Would we be better off today if there was no patent protection for those software inventions?

For the last 50 plus years, the nature of software and of software products has been significantly distorted by opponents of software patents. But their argument to eliminate all software patents makes no sense unless their goal is to eliminate the entire patent system.

Here's why it makes no sense….

Article 29 of the TRIPS guidelines covering "Disclosure Obligations" states "…An applicant for an invention shall disclose the invention in a manner sufficiently clear and complete for the invention to be carried out by a person skilled in the art and may require the applicant to indicate the best mode for carrying out the invention…." If the best mode includes software (a computer program), then that disclosure would describe the software through diagrams, flow charts, and descriptive text.

According to Wikipedia "there is no legal definition of a software patent". Let's look at two possible definitions.

Definition 1: If the definition of a software patent is that, if in the Disclosure of the invention, there is a description of a computer program (in whole, or in part) then the patent would be called "software patent". A "Software patent", under this definition, would be found in many industries, e.g., Software, Telecommunications, Manufacturing, Transportation, Appliances, Medical, Robotics—to name a few.

Said another way… In many industries inventions contain software programs as part of their disclosures. Take the Robotics/Medical Devices sector, where very sophisticated computer programs can control an artificial limb. How the artificial limbs are designed and constructed may be the invention. Or the invention may be how the computer program(s) interacts with the artificial limb. Or the invention may be a combination of both elements.

A more recent real life invention is the artificial retina, a robotics/medical device which offers partial vision for the blind. It's described as a camera, transmitter, and cable to video processor (software) connected to the brain.

So those that want to eliminate software patents, by design or by ignorance, would eliminate all robotic/medical device inventions where the disclosure includes a computer program.

Definition 2: Anti-Software patent zealots might argue that the definition of a "software patent" is when the disclosure of the invention only describes a computer program and a computer. And then their goal would be to have Congress change the Patent System to eliminate the issuance of "software only patents". But that would be catastrophic for the Software Industry, where many of their inventions are software only. This industry is made up of thousands of companies and is recognized as one of the top three manufacturing industries in the world .With annual worldwide revenues well over $ 300 Billion this industry needs (and wants) just as much patent protection as other industries.

Many software product companies can be thought of as high-technology manufacturing entities. Many of their products are state of the art, developed in a competitive, fast-moving environment that requires rapid response to meet user demand. Some of their products can be all software i.e., Google's search program or they could be a combination of software and hardware circuitry and/or devices i.e., Google's driverless car or the 3-D printer.

If the patent application contains a true invention it should be irrelevant whether or not the invention is disclosed as a "software only" implementation. The following are two examples of inventions from the Software Industry to illustrate my point of view

Back in November 2012 Microsoft stated in a press release "Microsoft researchers have demonstrated software that translates spoken English into spoken Chinese almost instantly, while preserving the unique cadence of the speaker's voice—a trick that could make conversation more effective and personal." Certainly the way Microsoft's researchers accomplished this complex translation is not obvious. And I have is little doubt that Microsoft will try to protect its research investment with a patent application. But its patent claims could not be that it invented "speech recognition" or "language translation", or even "voice to voice translations". Patents for Voice and Speech Recognition patents go back well over 30 years with IBM having over 200 speech recognition patents. And there have been language translation patents for many years But Microsoft could invent a new way to do voice recognition and language translations and at the same time retain the cadence of the speaker's voice. And, let's imagine, the invention would use a standard headphone and the headphone would not be part of the disclosure. Such a patent on that invention would be software only (and a computer) in its disclosure. But what if the invention needed a special set of headphones (a device), was integral to the invention, and was part of the disclosure? Is a speech recognition/translation/cadence and special headphone invention any more innovative than a "speech recognition/translation/cadence" software only invention?

In 2000, a renowned inventor, Ray Kurzweil received a patent named Reading System which Reads Aloud from an Image Representation of a Document. The patent disclosure shows a diagram of a monitor, scanner, speakers, and a PC computer composed of a processor, storage and a keyboard. The essence of the disclosure and the invention is a logic chart describing a machine system which interacts with a speech synchronizer and the various devices.

The first sentence of the abstract in the patent stated "a reading system includes a computer and a mass storage device including software comprising instructions for causing a computer to accept an image file generated from optically scanning an image of a document."

At that time, Ray Kurzweil's company, Kurzweil Educational Systems marketed a special purpose hardware/software system called the Kurzweil 3000 Reading Machine which was marketed to the blind and poor readers. They received a patent on this invention in 2000. Today the company sells a software only system called Kurzweil 3000 and continues to have the protection of the patent system through his original 2000 patent and with additional patents e.g., Reducing processing latency in optical character recognition for portable reading machine --- another software only patent.

Few would argue that the Kurzweil 3000 Reading Machine was not an invention and not deserving of a patent.

What these zealots should be arguing is that many software patents issued by the US Patent Office, including most business-method patents, should never have been issued because of their obviousness. With that I heartily agree. To their credit, the Patent Office and the Courts are today grappling with how to recognize obviousness in a patent application. A very difficult challenge, to say the least.

But let's stop calling a true invention that includes a computer program in its disclosure a software patent. In fact, let's eliminate the phrase "a software patent" from our vocabulary.

END

Guest Post: New USPTO Professional Conduct Rules Will Take Effect on May 3

Guest Post by Lisa Dolak, Angela S. Cooney Professor of Law at Syracuse University College of Law. Professor Dolak has written extensively on professional responsibility issues in the patent law context.

Effective May 3, 2013, the USPTO has adopted new professional conduct rules and has modified some existing rules governing the conduct of disciplinary investigations. The Final Rule is published in today's Federal Register. See Changes to Representation of Others Before The United States Patent and Trademark Office, 78 Fed. Reg. 20179 (April 3, 2013). As discussed in my previous post relating to the corresponding Notice of Proposed Rulemaking, the new professional conduct rules will replace the current ABA Model Code-based USPTO ethics rules with a version of the ABA Model Rules, versions of which have been adopted in 50 jurisdictions (49 states and the District of Columbia).

According to the USPTO, its goal is to "bring standards of ethical practice before the Office into closer conformity with the professional responsibility rules adopted by nearly all States and the District of Columbia, while addressing circumstances particular to practice before the Office." In addition to greater harmonization with state ethics rules, the USPTO indicates that practitioners will benefit from being able to reference interpretive sources applying the corresponding Model Rules, such as the Comments to the Model Rules and state bar opinions and disciplinary decisions (although it notes that "[s]uch decisions and opinions are not binding precedent relative to USPTO rules").

The USPTO reports that it received 19 responses commenting on the October 18, 2012 Notice of Proposed Rulemaking (some of which did not relate to the proposed changes), including "[m]any" that "supported the new rules and their alignment with State bar standards." Several comments related to new USPTO Rule 11.106(c), which expressly reinforces a practitioner's duty of disclosure, notwithstanding his or her confidentiality obligations ("A practitioner shall disclose to the Office information necessary to comply with applicable duty of disclosure provisions."). In particular, according to the Final Rule, "the comments raised concerns about the balance between the practitioner's duty to disclose information to the Office and the duty to protect confidential information of third parties, including that of other clients."

In response, the USPTO noted that ABA Model Rule 1.6 cmt. 12 (2012) states that "If. . . other law supersedes this Rule and requires disclosure, [Rule 1.6](b)(6) permits the lawyer to make such disclosures as are necessary to comply with the law." (Note, though, that the Comment also acknowledges that "[w]hether such [other] law supersedes Rule 1.6 is a question of law beyond the scope of these Rules."). The implication is that the applicable "other law" here is the practitioner's duty of disclosure. By analogy, the USPTO also cites to a North Carolina Ethics Opinion (N.C. Ethics Op. 2005-9 (2006)) for the proposition that a "lawyer for [a] public company may reveal confidential information about corporate misconduct to [the] SEC under [a] permissive-disclosure regulation authorized by [the] Sarbanes-Oxley Act, even if disclosure would otherwise be prohibited by [a] state's ethics rules." The USPTO also emphasizes that the primacy of the practitioner's disclosure obligation is "not a new requirement" (citing current 37 C.F.R. § 10.23(c)(10) and Manual of Examining Procedure, 8^th Ed., Rev. 9 (Aug. 2012) Ch. 2000), and states that the express inclusion in new Rule 11.106(c) of the practitioner's obligation to comply with his or her disclosure obligations notwithstanding the duty of confidentiality "may be helpful in responding to any allegation of an ethical violation before a State bar in a situation where the practitioner engaged in particular conduct to comply with this USPTO Rule."

Regarding the possibility that the potential conflict between the duties of confidentiality and disclosure could lead to a prohibited "direct adversity" client conflict, the USPTO cited the client conflicts rules, which, it noted, "would generally prevent a practitioner from accepting clients who may have potentially adverse interests." Finally, it pointed to withdrawal as the ultimate solution ("[i]n certain situations a practitioner may seek to withdraw from representation under § 11.116 to avoid a conflict of interest"). Notably, the Final Rule includes this additional statement on withdrawal as a solution to the potential disclosure-confidentiality conflict:

Solely for the purposes of enforcement under 37 C.F.R. Part 11 (Representation of Others Before The United States Patent and Trademark Office), if a practitioner has a conflict of interest in a given matter, arising from a different client, timely withdrawal by the practitioner from the given matter would generally result in OED not seeking discipline for conflicts of interest under Part 11.

In response to other comments, the USPTO:

• Declined to institute a mandatory CLE reporting requirement, notwithstanding the fact that patent agents are not subject to state bar CLE requirements.
• Declined to designate a "default jurisdiction" that would provide a single body of case law for guidance, since the USPTO "is its own jurisdiction", and noted (again) that "State case law and opinions are not binding precedent on the" USPTO.
• Declined to adopt ABA Model Rule 6.1 (Voluntary Pro Bono Publico Service) and ABA Model Rule 6.5 (Nonprofit and Court Annexed Limited Legal Services Program), citing the USPTO's Patent Ombudsman Program, its cooperation with local bar associations to develop a pro bono services "clearinghouse" operated by the Federal Circuit Bar Association, and the USPTO Law School Clinic Certification Pilot Program as examples of the USPTO's "broad[] support[] and encourage[ment of] pro bono services."
• Adopted the suggestion that new Rule 11.108(e) be revised to include "proceedings before the Office" (and not just "pending or contemplated litigation"), "ensur[ing] that a practitioner may advance fees to prevent or remedy abandonment attributable to the practitioner."
• Adopted the suggestion that proposed § 11.108(i)(3) (authorizing a practitioner to take an interest in a patent as part or all of his or her fee) be expanded to include an express authorization to (as part or all of a practitioner's fee) take an interest in a "patent or patent application."
• Noted that although "a practitioner is prohibited from representing a client if the representation will be materially limited by the practitioner's own interests, unless the practitioner reasonably believes that the representation will not be adversely affected and the client provides informed consent," owning shares in "a diversified mutual fund [which includes stock in a company that competes with the practitioner's client] would ordinarily not be considered [taking] an interest adverse to a client under the USPTO Rules."
• Adopted a suggestion that § 11.201, like ABA Model Rule 2.1, authorize a practitioner to "refer not only to law but to other considerations such as moral, economic, social and political factors that may be relevant to the client's situation" "[i]n rendering advice."
• Clarified that § 11.305 (relating to prohibited ex parte communications with, e.g., judges, administrative patent and trademark judges, and "employee[s] or officer[s] of the Office") does not "prevent ex parte communication that is authorized by law, rule or court order, in an ex parte proceeding."
• Adopted ABA Model Rule 3.6 as § 11.306 relating to trial publicity (except for the provisions relating to criminal cases).
• Emphasized that the "duty to cooperate with the Office of Enrollment and Discipline" pursuant to § 11.801(b) (which does not appear in the Model Rules) is not a new requirement (having previously been housed in 37 C.F.R. § 10.131), and noted that "there are at least seven jurisdictions that adopted the ABA Model Rules and that have ethics rules regarding cooperating with the respective jurisdiction's disciplinary authority."
• Affirmed its power to pursue reciprocal discipline against practitioners.

Note that the numbering of the new USPTO rules generally tracks the numbering of the corresponding ABA Model Rules. For example, USPTO Rule 11.107 parallels Model Rule 1.7, USPTO Rule 11.201 parallels ABA Model Rule 2.1, etc. The Final Rule notes that the USPTO has (thus far) decided not to adopt the substantive changes made to the ABA Model Rules in the latest (August 2012) ABA revision, as "most States have not yet done so," but that it "will continue to evaluate the ABA Model Rule changes and adopt them as appropriate."

Timing of First Actions on the Merits

By Dennis Crouch

The chart below is a bit confusing, but I think that it presents some interesting data. The chart generally shows the timing of first actions on the merits (FAOMs). Most commonly a FAOM is either a non-final rejection or else a notice-of-allowance. The number of applications awaiting FAOM is typically referred to as the backlog of unexamined cases. The PTO has been focusing attention on reducing that backlog as well the timing from filing to FAOM. In addition to calculating the timing of FAOM, the PTO also offers a forward-looking prediction to applicants that estimates how long the wait will be. The chart shows both the average actual timing (red) and predicted timing (blue) of FAOMs. I can only report the predicted timing for recently filed applications (since we don't know how long it will actually take). By late 2015, we could see the backlog reduced to 12-months.

Predicting Patent Issuance

By Dennis Crouch

One of my patent law students (Marriam Lin) is working on a project that divides patent applications into two sets: (1) Those that are patented and (2) those that are abandoned without being patented. We're looking to see whether we can identify objective factors found in the original application filing (or at least by the time of publication) correlate with the application being patented or not. This project falls in line with the papers on Valuable Patents and Worthless Patents, but focuses only on pre-issuance issues. We have a few simple measures such as the assignee, type of technology, number of inventors, size of application and claim set, and priority claims. Obviously, our result will have only a limited value since many important factors will elude our measurement. However, I have been surprised at the explanatory power of the model even in our limited approach. If you picked up a patent application, what factors would you think might help predict whether that application will eventually issue as a patent? Is there a way to objectively measure those factors?

Guest Post: The Patent Failure of Novartis with Gleevec

Guest Post by Srividhya Ragavan (Professor of Law, University of Oklahoma College of Law)

The Indian Supreme Court's verdict on the Novartis patent application has garnered a lot of attention as having set a stringent standard of nonobviousness for patents. In India, this litigation is pitched as a battle between big pharma and health aid groups.

This recent saga at the Supreme Court relates to a patent application that was originally filed in 1998 for a cancer drug named Gleevec (or Glivec, in Europe). Gleevec is the beta crystalline form of imatinib mesylate, which is the salt form of the free base and is used to treat chronic myeloid leukemia, a form of cancer. This application in India claimed priority from an earlier application filed in July 1997 in Switzerland. The application was opposed in India on the basis that imatinib mesylate was anticipated by the earlier Novartis US patent No. 5521184. As a side note, Novartis's US application for the free base of Imatinib -which was the crystalline form —issued as a patent in the United States in 1996 owing to a 1993 filing date. When after losing the mail-box dispute, India opened its doors to a transitional mail-box application facility, Novartis filed a patent application in India in 1996. Overall, Novartis had over 35 patents over this polymorphic form of Gleevec in different countries. The application was reviewed in India in 2006 once India fully transitioned into a patent regime as required under the TRIPS agreement. Notably, even before the application was taken up by the patent office there were 5 pre-grant oppositions filed against the application!

In gist, the argument against Gleevec in India was that this application related to new form of a known substance. In pharmaceutical chemistry, a different crystalline form of the same chemical substance is called a polymorph, the patenting of which is specifically prohibited under § 3(d) in India unless it also results in enhanced efficacy. Now, § 3(d) of the Indian patent statute, the operative section reads as follows:

3. What are not inventions. - The following are not inventions within the meaning of this Act,

…

(d). the mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance or the mere discovery of any new property or new use for a known substance or of the mere use of a known process, machine or apparatus unless such known process results in a new product or employs at least one new reactant.

Explanation.—For the purposes of this clause, salts, esters, ethers, polymorphs, metabolites, pure form, particle size, isomers, mixtures of isomers, complexes, combinations and other derivatives of known substance shall be considered to be the same substance, unless they differ significantly in properties with regard to efficacy;

In gist, India does not allow the patenting of new forms of known substances unless it also results in enhanced efficacy. The assertion in India was that the salt form for which the patent application was filed inherently existed in the original crystalline form. Considering the US patent as a prior art, the Patent Controller concluded that the application was obvious for covering a new form of a known substance under § 3(d) of the Patents (Amendment) Act of 2005.

Soon Novartis pursued an appeal to the High Court of Chennai on the grounds that § 3(d) was unconstitutional and in violation of India's obligations under TRIPS. The Chennai High Court established that § 3(d) was indeed Constitutional and within the scope of the TRIPS agreement based on the fact that the section deals with all technologies and does not limit itself to pharmaceutical innovations. The explanation to the section becomes applicable to pharmacology inventions and works to strengthen the understanding of the overarching test. The test, the court explained cast a duty on the patent applicant to prove that the discovery had resulted "enhancement of a known efficacy of that substance." The court added that the explanation creates a "deeming fiction that all derivatives of a known substance would be deemed to be the same substance unless it differs significantly in properties with regard to efficacy." Thus, was born the higher standard of nonobviousness that India has embraced with such vigor. In its opinion, the Chennai High Court agreed with the patent office that Gleevec was an obvious improvement and that the applicant should prove enhanced efficacy by showing enhanced therapeutic efficacy in order to get a patent. Interestingly, Novartis filed another patent application for the alpha version of the same compound; that application was also denied.

It was during this time that the government of India issued a notification constituting the Intellectual Property Appellate Board (IPAB), which is a tribunal with judicial powers under which all patent appeals were transferred. It is important though to understand that, despite being a tribunal, the IPAB's judicial pronouncements have gained in reputation and stature over the years. Eventually, the Novartis patent application, like the other patent appeals, landed in the hands of the newly constituted IPAB on transfer from the High Court. The IPAB alluded to the original 1993 Zimmerman Patent facilitated the formation of imatinib mesylate salt by reaction with "aliphatic sulfonic acids, such as methane -,ethane - or - 2-hydroxy ethane -sulfonic acid." Interestingly, the IPAB clarified when nonobviousness is evaluated for a pharmaceutically active substance, in particular, the application material would finally have to be evaluated to determine whether the compositions fall within the category of "not an invention under § 3(d) of the Act." This evaluation determined whether the new form/derivative of a known substance displayed significant enhancement in properties with regard to efficacy. Thus, the IPAB gave the impression that the § 3(d) analysis is tied to nonobviousness and not patent eligibility. In considering Gleevec, the IPAB held that the increased bioavailability of the salt of imatinib (application material) and the increased solubility did not result in increased efficacy.

Novartis preferred an appeal to the Supreme Court in 2009, the same year that the IPAB upheld the rejection of Gleevec by the Controller. The Supreme Court considered whether an invention that clears all of the requirements for an invention can be denied on the ground that § 3(d) puts it out of the category of "invention"? The manner of phrasing the question in itself suggests that § 3 is not a threshold question in India. That is, one gets the feeling that whether an application material falls within the category excluded under § 3 is determined only for inventions that cross the § 2 requirements of utility, novelty and nonobviousness. This view is further bolstered by the statement elsewhere by the Supreme Court that "in case of chemicals and especially pharmaceuticals … [of] a new form of a known substance with known efficacy, [] the subject product must pass, in addition to clauses (j) and (ja) of section 2(1), the test of enhanced efficacy as provided in section 3(d) read with its explanation." That said, elsewhere the court, in denying that § 3 is not a provision ex majore cautela, adds that the vital distinction is between the concepts of invention and patentability. So, the conclusion perhaps is that § 3 is akin to patentability question although in practice in India, it is tagged with the nonobviousness question.

As for the specific constituents of the § 3(d) requirements, the Supreme Court clarified that the term efficacy relates to "therapeutic efficacy." The court then went on to discuss the test or parameters for providing such efficacy noting that such proof shall be weighed on strict and narrow standards. In the case of pharmaceutical compounds, the Court noted external and internal factors should clearly demonstrate therapeutic efficacy and it should be specifically claimed and established by research data. Thus, "the mere change of form with properties inherent to that form would not qualify as "enhancement of efficacy" of a known substance."

As for the patent itself, the court adopted a stance similar to the Controller of patents and the IPAB to hold that imatinib mesylate is represented entirely by the Zimmermann patent. It added that after the Zimmermann patent issued, Novartis applied for, and obtained patents on different forms of the substance. But, no application was made on imatinib mesylate on the non-crystalline form. The court concluded that it is because imatinib mesylate is fully a part of the Zimmermann patent and does not call for a separate patent and thus, denied the patent.

Notably, the interest and role of non-governmental organizations in India in access issues as far as intellectual property is concerned is remarkable and distinguished. Further, the country's interest in hearing and dispensing intellectual property issues has also become notable. The Novartis litigation has showcased India's interest and ability as far as pharmaceutical patents are concerned. This case reinforces the suspicions for the need of a higher bar to get a patent issued in India. It also proves that the power of lobby groups notwithstanding, businesses needs a dose of local reality especially in countries in India. It must take exceptionally bad market assessment to sell a drug for approximately $ 2400 for a month's supply (against a cost of $ 160 for the same from a generic manufacturer) in a country where the per capita income is estimated at a low $ 1 to $ 10 per month for a vast majority of the population. To give a perspective, an Indian employee who earns $ 2400 per month would consider himself very well-employed. In fact, in the lower middle class (forming about 300 to 400 million people), one would be considered agreeably employed if they earned $ 2400 in a year. And, big pharma cannot hope to erase away this ground reality with its lobby power.

Excluding Others in the Market for Ranking Lawyers

Thomson Reuters has a new patent – U.S. Patent No. 8,412,564 entitled System and method for identifying excellence within a profession. The patent was originally filed by the folks at Key Professional Media who later sold their "Super Lawyers" business to Thomson. The basic idea behind the patent is that – using a computer – you do a peer survey to identify a pool of candidates, then evaluate individuals within that pool based upon various objective factors (and store the information in a "data storage device"); next conduct another peer-evaluation of the select group; and finally ranking the professionals.

 

 

 

 

Claim 1 of the patent (prosecuted by) reads like a bear.

1. A method on a processing device for identifying excellent performance of candidates within a profession group, the processing device comprising a processor, a user interface device, and a data storage device, the method comprising: creating a candidate pool by selecting individuals from a profession group, including: receiving and processing a survey of peer professionals working within the profession group, wherein the peer professionals nominate other individuals within the profession group, wherein a minimum set of qualifications exist for each of the peer professionals to provide nominations; performing independent research to identify individuals, the independent research comprising data mining to identify the individuals who satisfy predefined criteria for outstanding performance within the profession group, wherein the data mining includes querying electronic data sources containing relevant biographical information for the individuals within the profession group; and selecting candidates for the candidate pool based on a combination of the results produced by the survey of peer professionals and the independent research, wherein the combination is performed using a computer operation which removes duplicate candidates; wherein biographical information about individuals identified via the survey and the independent research is compiled for each individual within the candidate pool and stored in the data storage device; evaluating the candidates individuals within the candidate pool, including: performing, by the processor, independent research to evaluate performance of the candidates, the independent research comprising retrieval of performance information for the candidates relevant to objective criteria specific to the profession group, wherein the retrieval of performance information is performed independent of input from the individuals in the profession group and the peer professionals, and wherein the performance information is compiled for each candidate in the candidate pool and added to the information compiled for each candidate stored within the data storage device; for each candidate within the candidate pool, storing in the data storage device a score for each objective criterion based on the performance information of each candidate stored in the data storage device; for each candidate within the candidate pool, compiling with the processor a point total from the scores of each objective criterion; and identifying candidates with point totals in a first predetermined top percentage of candidates in the candidate pool; conducting peer evaluations of only the candidates with point totals in the first predetermined top percentage of candidates in the candidate pool, including: selecting peer evaluators from among the candidates having point totals in the first predetermined top percentage of candidates in the candidate pool; obtaining, from the user interface device, peer evaluation scores from the selected peer evaluators; and producing, with the processor, an averaged peer evaluation score for each candidate in the first predetermined top percentage; and identifying, with the processor, candidates in a second predetermined top percentage of candidates in the candidate pool based on a function of the point totals compiled from the scores of each objective criterion and the peer evaluation scores obtained from the selected peer evaluators.

 

The patent includes several technology-focused limitations such as a processor, a user interface device, and a data storage device. Without those limitations, the method could be performed in a room of professionals with nothing other than pencil and paper. So the question is whether this patent is subject matter eligible. Does it matter that the originally filed claim was functionally the same but did not include the tech-specific limitations? Some of these questions will be answered by CLS Bank.

Via Bob Ambrogi

Joint Inventorship

survey hosting

The Federal Circuit Table of Authorities

By Dennis Crouch

For the following list I parsed through all precedential patent related opinions at the Federal Circuit for the past three years. The resulting list are the fifteen most frequently cited cases in Federal Circuit patent decisions:

1. Phillips v. AWH, 415 F.3d 1303 (Fed. Cir. 2005) (en banc)
2. Cybor Corp. v. FAS Technologies, Inc., 138 F.3d 1448 (Fed. Cir. 1998) (en banc)
3. KSR Intern. Co. v. Teleflex Inc., 550 U.S. 398 (2007)
4. Graham v. John Deere Co. of Kansas City, 383 U.S. 1 (1966)
5. Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986)
6. Vitronics Corp. v. Conceptronic, Inc., 90 F.3d 1576 (Fed. Cir. 1996)
7. Ariad Pharmaceuticals, Inc. v. Eli Lilly and Co., 598 F.3d 1336 (Fed. Cir. 2010) (en banc)
8. Lucent Technologies, Inc. v. Gateway, Inc., 580 F.3d 1301 (Fed. Cir. 2009)
9. Markman v. Westview Instruments, Inc., 52 F.3d 967 (Fed. Cir. 1995) (en banc)
10. ICU Medical, Inc. v. Alaris Medical Systems, Inc., 558 F.3d 1368 (Fed. Cir. 2009)
11. Bilski v. Kappos, 130 S.Ct. 3218 (2010)
12. In re Gartside, 203 F.3d 1305 (Fed. Cir. 2000)
13. MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007)
14. In re Seagate Technology, LLC, 497 F.3d 1360 (Fed. Cir. 2007) (en banc)
15. Star Scientific, Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357 (Fed. Cir. 2008)

For cases decided within the past year, the only new entrant on the list is Microsoft Corp. v. i4i Ltd. Partnership, 131 S.Ct. 2238 (2011)