Patent Law Blog (Patently-O)

References Cited Per Patent

In the US patent applicants and patent attorneys operate under a duty to disclose to the USPTO "all information known to that individual to be material to patentability." 37 C.F.R. 1.56. Here, material to patentability is defined as non-cumulative information that either (1) "establishes, by itself or in combination with other information, a prima facie case of unpatentability of a claim" or (2) is inconsistent with a position taken by the applicant before the USPTO. Id. Typically, the duty of disclosure is fulfilled through the process of submitting information disclosure statements (IDSs) to the USPTO along with copies of the actual material information (such as prior art references).

Over the past 13 years, the number of references cited per patent has grown dramatically as shown in the chart below that shows the average number of references cited both by Applicants and Examiners as seen on the face of issued patents.

Test Post

This is a Test Post

What does it mean for a device to be "configured to" perform a particular function?

By Dennis Crouch

Chief Judge Rader recently argued that no patentable weight should be given to claim terms focusing on how a device is "configured to" perform a particular task. See Superior Industries v. Masaba (Fed. Cir. 2014) (concurring opinion). The Chief writes:

A system claim generally covers what the system is, not what the system does. Hewlett–Packard Co. v. Bausch & Lomb Inc., 909 F.2d 1464 (Fed.Cir.1990). Thus, it is usually improper to construe non-functional claim terms in system claims in a way that makes infringement or validity turn on their function. Paragon Solutions, LLC v. Timex Corp., 566 F.3d 1075 (Fed. Cir. 2009).

In Superior Industries, the patentee had claimed a dump truck with a "support frame . . . configured to support an end of an earthen ramp." On remand, the district court will need to determine again whether that language should be interpreted as a positive claim limitation.

One problem with Judge Rader's opinion is that other judges do not uniformly agree with his perspective. The diversity of court opinion compounds an already difficult process of understanding what potential structures are covered by function-focused claim terms. A third compounding difficulty is the rapid rise in the use of functional claim terms.

The Patent Act expressly provides for the use of functional claim language -- written in means-plus-function format. 35 U.S.C. §112(f). The statutory requirements of §112(f) began being more strictly enforced in the mid-1990s and, as a consequence, means-plus-function limitations have fallen from favor. Meanwhile, patentees have caught-on to using "configured to" language as a rough equivalent of a means-plus-function claim term but carefully drafted in order to avoid actually falling under the ambit of that provision. The benefit then for patentees is that the functional language is broad and not limited to particular structural embodiments.

The chart below shows the percentage of issued patents that include at least one "configured to" claim limitation within an independent claim. This dramatic transformation of claiming strategy raises the importance of cases such as Nautilus v. Biosig Instruments (pending Supreme Court case on the proper standard for indefiniteness) and Lighting Ballast (pending en banc decision on claim construction deference with a focus on functional claim terms should be interpreted as falling within 112(f)).

In Ex Parte Miyazaki, 89 USPQ2d 1207 (B.P.A.I. 2008), the Board of Patent Appeals revived the old precedent of Halliburton Oil Well Cementing Co. v. Walker, 329 U.S. 1 (1946) in holding that purely functional claim language is not allowable unless done within the scope of 112(f).

This general prohibition against the use of "purely functional claim language" (and the more specific Halliburton rule) has not been completely eliminated. Rather, "purely functional claim language" is now permissible but only under the conditions of 35 U.S.C. § 112, sixth paragraph, i.e., if its scope is limited to the corresponding structure, material, or act disclosed in the specification and equivalents thereof.

In Miyazaki, the problematic claim language was "a sheet feeding area operable to feed at least one roll of paper, at least one sheet of paper and at least one stiff carton toward a printing unit." In Halliburton, the problematic claim language was "a tuned acoustical means which performs the functions of a sound filter." In each case, the claims were found indefinite.

Infringement vs. Trespass

Chart from Google books ngram viewer.

Link.

Jumbo Patents of 2013

by Dennis Crouch

The following is a list of the patents issued in 2013 with the most claims.

1. 8,401,902: 404 claims covering a "method for using computers to facilitate and control the creating of a plurality of functions;" invented by Lucinda Stone and Michael Dean of Tyler Texas see Function Media LLC. (Family claims priority back to 2000, prosecuted by Grant Rodolph at Conley Rose).
2. 8,404,693: 372 claims covering a set of compounds that impact human opioid receptors; Owned by Adolor Corporation (now owned by Cubist Pharma) (Prosecuted by Walter Frank).
3. 8,437,669: 322 claims covering a toner cartridge; Owned by Canon. (Prosected by Donald Heckenberg)
4. 8,562,424: 319 claims directed to a portable online gambling device; Invented by Jay Walker and now owned by IGT.
5. 8,585,593: 243 claims directed to diabetes monitoring software owned by the University of Virginia.
6. 8,389,958: 223 claims covering a physical mechanism using nanoparticles to alter the wavelength of light emissions; Owned by Duke University and Immunolight.
7. 8,599,764: 222 claims directed to the use of "overhead information" transmissions as to help remote devices keep track of multiple data streams on multiple data channels; Owned by Qualcomm.
8. 8,598,516: 220 claims directed to a new method of mass-spectrometry seemingly owned by the father-son Sapargaliyev team from Kazakhstan. (Prosecuted by Michael Feigin).
9. 8,355,982: 220 claims covering a token-transaction system ownedy by VeriFone. (Prosecuted by Daniel Yannuzzi).
10. 8,538,123: 213 claims covering a system of imaging check and cash deposits and associating those with the customer making the deposit; patent owned by Cummins-Allison Corp. File wrapper is so clean — first action allowance.
11. 8,520,023: 209 claims covering an image transformation method that improves image color and lighting; owned by EEColor. (Prosecuted by John Hammond)
12. 8,467,354: 203 claims covering some aspect of VoIP software (claim 1 spans 80+ lines in the patent); owned by Boris Jerkunia’s company Vocalocity. (Prosecuted by John Harris)

Federal Circuit: Claim Construction Should be Avoided Unless Associated with a Recognized Meaningful Case Outcome

by Dennis Crouch

Superior Industries v. Masaba (Fed. Cir. 2014)

Superior Indus. is an interesting short non-precedential opinion from the Federal Circuit. Judge Clevenger wrote the opinion whose holding is simply a remand for clarification. However, the case raises important constitutional questions of justiciability and advisory opinions.

At the lower court, the parties argued over construction of the terms "channel beam," "C-shaped channel beam," and "elongate opening." After district court Judge Donovan Frank construed those terms, the patentee (Superior) admitted that it could not prove infringement. Judge Frank then awarded summary judgment of non-infringement without substantive opinion other than noting Superior's admission of liability.

On appeal, Superior challenged the claim construction of those disputed terms, but the Federal Circuit has refused to hear the case because it the record was unclear as to whether a modified claim construction would change the outcome.

It is impossible for us to determine from this opinion which of the thirteen contested claim constructions would "actually affect" the infringement analysis. This poses a risk that our review of at least some of the constructions would amount to an advisory opinion.

The implicit logic here begins with the reality that the dispute is over infringement and validity and the only reason to construe claim terms is when the asked-for construction impacts those dispute end-points. Claim construction decisions that do not impact the final outcome are then advisory opinions barred by both judicial practice and the US Constitution. Often courts must be their own counsel on justiciability questions such as these because they are not waivable even when agreed-to by both parties.

Wither Early Claim Construction?: If we take this logic back to the district court level, the opinion offers important prerequisite to a district court's claim construction – namely that no claim terms should be construed unless & until the district court determines that the construction is meaningful to the outcome of the case at hand. This plays-out with the pending patent reform bills as well that call for early claim construction. To the extent that those bills would force courts to make advisory opinions, they are unconstitutional. See Hayburn's Case, 2 U.S. 408 (1792) "neither the legislative nor the executive branches can constitutionally assign to the judicial branch any duties but such as are properly judicial, to be performed in a judicial manner."

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Judge Rader wrote a short concurring opinion tied to Superior's claim in question. Here, Superior's patent claims a dump truck that has a support frame that is "configured to support an end of an earthen ramp." The term is relevant because at least some of Masaba's accused products are not really designed to work on earthen ramps.

Judge Rader writes:

I agree with, and join in, the majority opinion. However, in reviewing the claim constructions articulated by the district court, I observe that it read a great deal into the claims in the process of construing them. Thus, I write separately to articulate a couple claim construction principles that may assist the district court on remand when it revisits its constructions. First, in claim construction, one must not import limitations from the specification that are not part of the claim. Deere & Co. v. Bush Hog, LLC, 703 F.3d 1349, 1354 (Fed.Cir.2012). Indeed, claims generally are not limited to any particular embodiment disclosed in the specification, even where only a single embodiment is disclosed. Innova/Pure Water, Inc. v. Safari Water Filtration Sys., Inc., 381 F.3d 1111, 1117 (Fed.Cir.2004). Second, and relevant to this case, a system claim generally covers what the system is, not what the system does. Hewlett–Packard Co. v. Bausch & Lomb Inc., 909 F.2d 1464, 1468 (Fed.Cir.1990); see also Roberts v. Ryer, 91 U.S. 150, 157 (1875) ("The inventor of a machine is entitled to the benefit of all the uses to which it can be put, no matter whether he had conceived the idea of the use or not."). Thus, it is usually improper to construe non-functional claim terms in system claims in a way that makes infringement or validity turn on their function. Paragon Solutions, LLC v. Timex Corp., 566 F.3d 1075, 1091 (Fed .Cir.2009).

This framework is an important addition to the ongoing debate over functional claim language.

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More information on the Novartis v. Lee Change in Patent Term Adjustment

By Dennis Crouch

The outcome of the Novartis v. Lee case is that the vast majority of recently issued patents that include an RCE in the file history are due additional patent term adjustment (PTA). For most cases, the additional term adjustment will simply be the number of days between the notice of allowance and the issue date. I pulled up the file histories for about 1,000 patents issued in early 2014 in order to create the following histogram that shows the number of months between the Notice of Allowance and the Patent Issuance. The chart shows that the vast majority of cases issue within 3-4 months of the NOA -- an average of 120 days.

The decision is unclear about how multiple NOAs will be treated. For the chart above, I used only the date of the final notice of allowance preceding patent issuance.

Under USPTO regulations recently, a request for reconsideration must be filed within two months after a patent is granted. 37 CFR § 1.705(b).

Jury Trials in Patent Cases

In his recent work-in-progress article, Professor Mark Lemley focuses on the question of whether the Seventh Amendment protects the right to a jury determination of invalidity. His answer (and I paraphrase): Its complicated, but there is probably not a constitutional right to a jury trial on patent invalidity. In particular, Professor Lemley writes that the Supreme Court "is unlikely to find such a right [to a jury trial] to exist in the broad form lawyers and judges currently assume, though how the Court will rule may depend on the lens it uses to think about the Seventh Amendment." Mark A. Lemley, Why Do Juries Decide if Patents Are Valid?, available at http://ssrn.com/abstract=2306152.

Lemley writes:

Curiously, while the right to a jury trial on patent validity issues is widely assumed, there is in fact no solid support in modern case law for such a right. The one case to hold that there was such a right, the Federal Circuit panel opinion in In re Lockwood, drew a sharp dissent from three members of the appellate court, was taken on certiorari by the Supreme Court, and was then vacated by that Court after the patentee withdrew its jury trial demand rather than face Supreme Court review. Nonetheless, both courts and lawyers have based two decades of practice on that uncertain foundation. The resulting practice is a hybrid one that is hard to link to any historical practice.

Lemley's article provides the following chart showing how the rate of jury trials (as compared with bench trials) has changed so dramatically over the past several decades.

Rise of Patent Jury Trials

Old Applications; New Patents

By Dennis Crouch

Patent applications filed on or after June 8, 1995 have a term of twenty years from the date of application filing. The prior rule offered a term of seventeen years from the issue date. This change was part of the Uruguay Round Agreements Act (URAA) that harmonized US law with that of other countries and also helped to substantially move away from the problem of patent application sandbagging / submarining where patent applicants intentionally delayed prosecution in order to accrue additional end-stage patent term. That problem has arisen again, although to a lesser extent, with the generous patent term adjustment offered for delays in prosecution.

Although the change-over was almost twenty-years ago, there are still a number of pre-URAA patents pending at the PTO. When they issue, these patents have the benefit of having 17-more years of patent term remaining. For some fundamental technologies whose market has blossomed over the past two decades, that potential value is enormous. According to the PTO, there are now 450 of these old applications still pending at the USPTO. That is down from about 600 three years ago.

The chart below shows the number of pre-URAA patents issued each year for the past decade.

The twenty pre-URAA patents issued in 2013 are owned by only seven different entities, and twelve of them are owned by Personalized Media Communications.

• BAE Systems: 8,576,108 (active expendable decoy to fool enemy missiles);
• Children's Medical Center: 8,597,910 (DNA encoding Von Willebrand Factor Proteins);
• Colgate-Palmolive: 8,535,730 (tarter control toothpaste);
• Genentech, Inc.: 8,357,513; 8,399,250; 8,557,768 (genes and methods relating to the human mpl ligand polypeptide);
• Institut Pasteur: 8,507,196 (A kit for determining the absence of HIV-1 RNA in a biological sample);
• Personalized Media Communications: 8,395,707; 8,558,950; 8,572,671; 8,584,162; 8,587,720; 8,607,296; 8,559,635; 8,566,868; 8,601,528; 8,555,310; 8,613,034; 8,621,547 (programmable TV remote control);
• ZymoGenetrics: 8,603,777 (Genetically modified cells that produce human Factor IX).

 I recently wrote about the Gil Hyatt case that involves several patent applications filed in the 1970s and an additional handful of applications pending since the mid 1990s. The PTO has not issued a Hyatt patent since 1997. 

Sedona Conference Webinar - Patent Litigation Best Practices

By Jason Rantanen

As I mentioned a few weeks ago, next week The Sedona Conference will be presenting a major webinar entitled Patent Litigation Best Practices: A Matter for Congress or for Bench and Bar?  This webinar will discuss discuss patent law legislation that is currently pending before Congress and the Patent Pilot Program launched two years ago as part of the AIA’s reform of U.S. patent law.  Faculty include former Chief Judge Paul R. Michel and Judge Kathleen O’Malley of the Federal Circuit, Tina Chappell of Intel Corporation, Philip S. Johnson of Johnson & Johnson, and Alexander Rogers of Qualcomm Incorporated.

This webinar is being developed in conjunction with an introductory chapter for a Patent Litigation Best Practices document.  This document has the potential to impact judicial decisionmaking at the trial and appellate levels (Judge Taranto referenced The Sedona Conference Glossary: E-Discovery & Digital Information Management (3rd ed. 2010) numerous times in the CBT Flint Partners, LLC v. Return Path, Inc. opinion), and the panel will take questions by text and telephone during the program.

For information on how to register, click here, or copy and paste the following link into a web browser: https://thesedonaconference.org/VD012214.  Free registrations are available to courts, government agencies, and law schools on a first-come, first-serve basis.  To receive a discount code, email [email protected].

By Dennis Crouch

Edwards Lifesciences v. Medtronic (D. Delaware, 2014)

A Delaware jury has awarded Edwards Lifesciences almost $400 million in lost profit damages for patent infringement and has also determined that the infringement was willful – opening the door to an award of both treble damages and attorney fees.

The patents adjudged to be infringed and not-invalid are both related to prosthetic aortic valve stents. U.S. Patent Nos. 8,002,825 and 7,892,281. Edwards obtained the patent rights as part of a $125 million purchase of Percutaneous Valve Technologies. Judge Sleet has not yet determined whether to issue an injunction as well.

Related articles

Edwards Lifesciences (EW) Plans to Seek Injunction on Medtronic CoreValve (MDT)

Jury says Medtronic infringed on rival's patent, should pay $393M

USPTOs Budget to Rise Significantly

By Dennis Crouch

H.R.3547 - Consolidated Appropriations Act, 2014 will soon become law, only 3 ½ months into the fiscal year being budgeted. The new compromise budget offers $3,024,000,000 (three billion dollars) to the USPTO for FY2014 (that started October 2013) and that will "remain available until expended" provided that the USPTO cannot spend more than it collects in user fees and surcharges. In addition the PTO will be allowed to keep and later spend any receipts over the $3 billion mark. The inspector general gets $2 million to investigate and audit the agency.

If I understand the math correctly, this total figure is a significant increase over the $2.5 billion spent by the PTO in FY2013. The chart below shows the USPTO's annual spending with the budgeted figure for FY2014 in place. The PTO handles both patent and trademark operations, although the bulk of the money is spent on patents.

The question: Will Director Lee be able to use this money to get us better examination, patents with clearer boundaries, and a significant reduction in the backlog?

Jumbo Patents on the Decline.

Over the past decade, we have seen a steep decline in "jumbo" patents. In my estimation, this is largely due to fee increases instituted in 2004 that make it cost prohibitive to file a large number of claims. Many applicants find it more economical to file two patents each with fewer claims rather than a single patent with more claims. In addition, the PTO continues to have an active restriction practice.

Nazomi v. Nokia

By Jason Rantanen

Nazomi Communications, Inc. v. Nokia Corp. (Fed. Cir. 2014) Download 13-1165.Opinion.1-8-2014.1
Panel: Lourie (concurring), Dyk (author), Wallach

Nazomi is a small software and semiconductor development company that sued a set of large technology companies for patent infringement in a series of lawsuits.  This appeal involved the district court's initial claim construction order in one of these suits and its grant of summary judgment of noninfringement in favor of Western Digital and Sling Media. 

Two of Nazomi's patents were at issue in this appeal: Nos. 7,225,436 and 7,080,362.  During the district court proceeding, the defendants moved for a "preliminary" construction of the asserted claims, arguing that all the claims "require that the processor of the claimed apparatus, when operated, will perform the recited functions related to the processing of stack-based instructions without modification."  The court analyzed the issue in the context of representative claim 48 of the '362 patent

48. A central processing unit (CPU) capable of executing a plurality of instruction sets comprising:

an execution unit and associated register file, the execution unit to execute instructions of a plurality of instruction sets, including a stack based and a register-based instruction set;

a mechanism to maintain at least some data for the plurality of instruction sets in the register file, including maintaining an operand stack for the stack-based instructions in the register file and an indication of a depth of the operand stack;

a stack control mechanism that includes at least one of an overflow and underflow mechanism, wherein at least some of the operands are moved between the register file and memory; and

a mechanism to generate an exception in respect of selected stack-based instructions.

Nazomi contended that the claim required only hardware that was capable of performing the claimed functionalities (here, indicated by italics). The district court concluded, however, that the asserted claims required a combination of hardware and software capable of performing the functional limitations.

To understand why this distinction matters, some background in the defendants' products is useful.  Western Digital and Sling Media use a processor designed by another company, ARM.  In 2000, ARM developed a design involving a hardware component called "Jazelle."  However, recognizing that not every product would use every circuitry feature in its processors, ARM also designed its processors so that unused functionality would remain dormant unless activated (and thus not unnecessarily drain resources).  In order to activate the Jazelle circuitry, it is necessary to first install a software package called "JTEK."  In both the accused Western Digital and Sling Media products, Jazelle is dormant and there was no evidence that any end user had installed JTEK.  Nazomi's argument, however, was that Jazelle's presence in the accused products was sufficient sufficient for a finding of infringement (i.e.: hardware "capable").

On appeal, the Federal Circuit agreed with the district court's construction as requiring both hardware and software.  It reasoned that because hardware cannot meet the functional limitations in the absence of enabling software, "the claims are properly construed as claiming an apparatus comprising a combination of hardware and software capable of practicing the claim limitations."  (my emphasis).  In reaching this conclusion, it distinguished cases involving "programmable" language, such as Intel Corporation v. U.S. International Trade Commission, 946 F.2d 821, 832 (Fed. Cir. 1991).  Here, the claims did not merely cover hardware that could be programmed to perform the claimed functionality; they required that the processor be capable of executing the stated instruction sets.  Since hardware alone cannot do that in the absence of enabling software, the only possibility was that the claims required both hardware and software.  

The panel also affirmed the district court's grant of summary judgment of noninfringement (Judge Lourie agreed with outcome, but did not join as to the bulk of the court's reasoning), drawing on precedent that "“an apparatus claim directed to a computer that is claimed in functional terms is nonetheless infringed so long as the product is designed in such a way as to enable the user of that [product] to utilize the function without having to modify the product.”  Silicon Graphics, Inc. v. ATI Technologies, Inc., 607 F.3d 784, 794 (Fed. Cir. 2010).  The critical issue was thus whether the installation of the JTEK software would constitute a "modification" of the accused product. 

The Federal Circuit concluded that installation of the software would constitute a modification because in the asserted claims the software is part of the claimed structure.  In other words, this is not a case where the software component already resided on the hardware and could be unlocked by using a key, or where the claims recited programable software that also resided on the hardware.  Rather, the software was a necessary structural component of the claimed invention and its addition would constitute the addition of functionality that is not currently present.

Hyatt v. USPTO: Three generations of poor examination are enough.

By Dennis Crouch

Gilbert Hyatt v. USPTO (D. Nevada 2014)  (Download Hyatt v USPTO Complaint)

Inventor Gilbert Hyatt recently filed a lawsuit against the USPTO in his home state of Nevada asking that the USPTO be ordered to go ahead and examine his applications already. The complaint focuses primarily on two applications that have been pending "since the early 1970s – over 40 years." Hyatt's patents cover early microchip technology and have proven extremely valuable because of the ongoing explosion in that marketplace. Because these applications were filed prior June of 1995, they will have a patent term of 17 years from the issue date (assuming they eventually issue and their term not disclaimed). Hyatt keeps his pending applications secret and so we do not know which applications are at stake here, or the actual content of the file histories.

In the lawsuit, Hyatt alleges that these two applications have been pending before the USPTO Board of Appeals for a very long time (one more than twenty years):

In these two appealed patent applications – referred to herein as patent application Docket Nos. 104 and 112 – the PTO's patent examiners issued rejections of Mr. Hyatt's patent applications, which Mr. Hyatt timely appealed to the PTO's Board of Patent Appeals and Interferences, now known as the Patent Trial and Appeal Board ("Appeal Board"). In both cases, the PTO failed to file any response. Rather than decide the appeals, the PTO has left them undecided for more than 20 years (in the case of patent application Docket No. 104) and for more than five years (in the case of patent application Docket No. 112). Each of these two patent applications has been pending before the PTO for more than forty years. . . .

Mr. Hyatt filed his patent applications and has prosecuted them in good faith and in accordance with PTO rules. Whether out of animus toward Mr. Hyatt or for other reasons, the PTO has demonstrated its determination not to allow Mr. Hyatt to obtain patents for his inventions. This Court's intervention is required to ensure that the PTO complies with the law.

Hyatt then asks the court to place strict deadlines on the PTO to decide his cases.

Hyatt makes the almost believable allegation that: "Several years ago, the PTO apparently determined that it would refuse to grant Mr. Hyatt any further patents, irrespective of the merits of his patent applications."

The complaint also highlights several other Hyatt applications where the PTO has "suspended examination" for very long periods of time:

At some point, rather than subject its decisions to review, the PTO apparently embraced a strategy of denying Mr. Hyatt any reviewable adjudication of his patent applications. Mr. Hyatt consequently has a large number of patent applications that have languished for years in various states of procedural limbo without an action on the merits or a decision on appeal.

In many cases, the PTO has simply ceased examination of Mr. Hyatt's patent applications on the merits. In many other cases, the PTO has refused to allow Mr. Hyatt's patent appeals to go to the Appeal Board for decisions.

For example, in seven cases that Mr. Hyatt filed in 1995, the patent examiners issued first office actions in 1995 or 1996, and Mr. Hyatt responded, yet the PTO has not issued an action on the merits in more than 17 years. Instead, the PTO repeatedly suspended action on these patent applications. Mr. Hyatt filed numerous "Petition[s] For An Action On The Merits" in these patent applications, but the PTO summarily dismissed those petitions.

For another set of applications, Hyatt walks through the PTO churning that involves repeated withdrawal of final rejections following appeal-brief filings by Hyatt.

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For the past 40+ years, the PTO has seen Hyatt as something of a pesky thorn in its side. The "problem" is that Hyatt takes full advantage of the law, hires excellent lawyers, and does not give-up. It turns out that it is the PTO's job to deal with Hyatt and to issue him the patents that he deserves.

Readjusting Patent Term Adjustment

By Dennis Crouch

Novartis v. Lee (Fed. Cir. 2014); Exelixis v. Lee (Fed. Cir. 2014)

This case results in a minor shift in patent term adjustment (PTA) for patents whose prosecution included an RCE filing. The basic change is exemplified with the diagram above. Up-to-now, the USPTO has only looked at the Pre-RCE Period when determining the amount of PTA to award associated with the 3-year examination guarantee. Following this decision, the USPTO must add together both the Pre-RCE Period and the Post-Allowance Period. The law has strict 180 day post-issuance time-limit for filing a civil action for a PTA modification.

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A patent's term generally begins at the date of patent issuance and continues 20 years from the date that the application was filed. As a practical matter, the time between filing and issuance is lost to the applicant because the patent is not enforceable during that time. Because of the very real patent office delays, Congress created a system of Patent Term Adjustment (PTA) that adds additional time to the patent term based upon unreasonable delays in issuing the patent rights that would have otherwise shortened the effective patent term. PTA is defined in Section 154(b) of the Patent Act. Unfortunately, that provision is poorly drafted and subject to potential alternative interpretations.

PTA typically falls into three "patent term guarantees":

1. Prompt responses from the PTO;
2. No more than 3-year application pendency; and
3. Compensation for delays due to appeals, secrecy orders and derivation proceedings.

35 U.S.C. §154(b)(1)(A)-(C).

The appeal here focuses on part (B) that guarantees "no more than 3-year application pendency." The three-year guarantee further states that it does not include: "(i) any time consumed by continued examination of the application requested by the applicant under section 132(b)." Here, the continued examination is prompted by a request for continuation (RCE).

The PTO and Novartis propose two different interpretations of the provision. The PTO argues that no part-B term adjustment should be awarded following the filing of an RCE. On the other hand, Novartis argues that the RCE cutoff only applies if the RCE is filed prior to the three year deadline.

In the appeal, the Federal Circuit has sided largely with the PTO (with slight modification):

The provision indicates that the "3 years" (the goal for issuance) does "not includ[e]" time identified in three enumerated categories. . . .

The better reading of the language is that the patent term adjustment time should be calculated by determining the length of the time between application and patent issuance, then subtracting any continued examination time (and other time identified in (i), (ii), and (iii) of (b)(1)(B)) and determining the extent to which the result exceeds three years. Such a reading ensures that applicants recover for any "delay[s] due to the failure of the [PTO]," without allowing the applicant to recover for "any time consumed by continued examination," as the statute requires. Id. § 154(b)(1)(B)(i).

The slight modification to the PTO's position is the Court's finding that the period between allowance and issuance should not be counted as being consumed by the continued examination and thus counts "toward the PTO's three-year allotment."

The end result here is that there will be a few weeks of PTA added to tens of thousands of patents and pending applications. Anyone with a recently issued patent or soon-to-issue patent should take immediate steps to make take advantage of this change.

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You may note the case caption: Novartis v. Lee, indicating that Michelle K. Lee is now deputy director of the PTO and Acting-as-Director until President Obama nominates a replacement for David Kappos and that nomination is confirmed by the Senate. 

Patent Trolls Storm the FTC

By Dennis Crouch

MPHJ Technology v. Federal Trade Commission (W.D. Texas 2014)

In a bold lawsuit, patent owner MPHJ has sued the Federal Trade Commission and the Individual FTC Commissioners for "the unlawful interference and threats by the FTC against MPHJ and its counsel directed at stopping or impeding the lawful, proper, and constitutionally protected efforts by MPHJ to identify and seek redress for infringement of its US patents."

MPHJ has been publicly accused by a number of private and governmental entities of "shaking down small businesses" by alleging infringement of the company's patents that apparently cover a scan-to-email system. See US Patent 6,185,590; 6,771,381; 7,477,410; 7,986,426; and 8,488,173.

The basic push-back has been (1) that MPHJ has been going after small companies for infringement and (2) that its demand letters have been sent-out without the proper due diligence to ensure that the receiving entity is actually infringing. In its complaint, MPHJ alleges that:

The FTC's threatened suit is principally based upon the FTC's contention that if any U.S. patent owner threatens suit for infringement, even against a single infringer, and then fails promptly to bring suit for infringement, then that U.S. patent owner has committed an unfair trade practice under Section 5 of the FTC Act unless the patent owner bears the burden and can prove that at the time the threat was made, it intended to bring suit. Here, the FTC contends that MPHJ did not intend to bring suit at the time it allegedly threatened suit, and that such conduct is a violation of Section 5 of the FTC Act unless MPHJ can prove otherwise. Setting aside that the FTC's factual premise is false, and that MPHJ can show that it did intend to bring suit at the time the alleged threats were made, the FTC's legal premise is flawed on multiple grounds.

In the complaint, MPHJ walks through the steps that it took in preparing its demand letters. Basically, MPHJ "concluded that businesses having at least 20 employees would be very likely to have an infringing networked scanning system if they were in certain types of businesses, such as professional services" MPHJ then purchased "the best available commercial databases" of such companies and sent out close to 20,000 demand letters to businesses with fewer than 100 employees across the country and then followed those demand letters with second and third letters.

Following that mass enforcement campaign, the FTC got involved and threatened to sue MPHJ for unfair competition. "As a result, to secure its rights under the U.S. Constitution and federal law, and to stop the improper and ultra vires interference with and impingement of MPHJ's lawful and constitutionally protected patent enforcement rights, MPHJ is forced to file the present suit."

http://ia600804.us.archive.org/28/items/gov.uscourts.txwd.669787/gov.uscourts.txwd.669787.1.0.pdf

European Patent Notes on Divisional Applications

European Patent Update from Gwilym Roberts

 EP divisional practice – Back to the Past

Attorneys will be aware that the European Patent Office announced a few months ago that it is reverting to its practice predating the controversial law change in 2010. That change, which effectively put in place a two year window on divisional application filings, and was almost universally unpopular, disappears as of 1st April 2014. From that date it will be possible to file divisional patent applications from any pending European patent application whether or not the two year window has closed. The EPO has now announced the final piece of information, namely the costs to be applied. In particular, to reduce the perceived risk of abuse of the system by users filing multiple generations of divisionals, the EPO has confirmed a fee regime where surcharges going up in €210 steps are applied for second and successive generations. In other words, if a first divisional is filed and then another application is filed as a divisional of it, a €210 surcharge will be applied to the first, €420 for the grandchild and so on.

Take Homes

From 1st April 2014 you will be able to file divisionals from any pending European patent application. That means that if you have a case which is near grant and you can get extensions on deadlines you should if a divisional is wanted. This applies equally to cases where the previous two year window had already closed. Although surcharges are now being applied for second and subsequent generation divisionals, they are not high and are likely to be inconsequential against the back renewal fees due on divisionals anyway.

Any queries please contact groberts@kilburn&strode.com.

Acquired Patent Licensing: Guest Post by Prof. Risch

By: Michael Risch, Professor of Law, Villanova University School of Law

Read the whole draft here, forthcoming in the George Mason L. Rev. It is about half the length of a typical law review article, so I call it an essay.

Back in October, I presented at the Center for the Protection of Intellectual Property Conference on The Commercial Function of Patents in Today’s Innovation Economy. I spoke on a panel entitled “Patent Licensing: New Business Models and New Opportunities.” I decided to focus on the commercialization benefits of licensing patents purchased from another – thus, my highly creative title: Licensing Acquired Patents.

This was actually a tall order. On the one side, licensing has been around for 150 or more years, so arguing that licensing acquired patents is a new opportunity took some work. On the other side, economic theory holds that late stage licensing (that is, ex post licensing) offers the least commercialization benefits, so convincing skeptics (read: licensees) that there are commercial benefits to the practice was also no easy task. This is why acquisition is important. Original owners usually have a chance at early stage licensing. Acquirers almost never do.

I begin the essay with a short section on the stages of patent licensing, but I’ll start here with the historic part. There’s no real dispute that there has long been licensing, sale, and other secondary market activity for patents, dating into the early 1800’s. Economic historians have done a great job of tracing this history, and I cite several articles and books in my essay. But a sustained business model of acquiring patents and licensing them was not really common. For the most part, secondary markets involved inventors attempting to sell or license patents to those who would practice the invention, not to those who would – in turn – license others.

Of course, there were exceptions, and I focus on them in the essay. The big ones were railroad, agriculture, and dental patents. In each case, there were a few higher profile non-producer patent buyers who attempted to license others (and sued those that refused). While there is a smattering of other activity, licensors aren’t discussed by name in the press and they did not buy and license more than two or three patents each. In the essay, I discuss what we might learn from the rise and fall of these patent “sharks,” which appeared to thrive only in limited industries at a very particular time in our patent history. Both laws and producer behavior were part of the equation.

Following the history discussion, I turn to commercialization benefits of licensing. I make some key assumptions in the paper about such licensing – most primarily that pricing is negotiated in good faith. In other words, if a patent owner refuses to acknowledge low quality patents and insists on too high prices, then commercial benefits are unlikely. Similarly, if manufacturers refuse to acknowledge high quality patents and insist on too low prices, then commercial benefits are unlikely. And finally, I note that there may be private commercial benefits that are not socially beneficial (that is, they enhance private but not total welfare).

I discuss several commercialization benefits. The first is a signaling benefit. There are a lot of patents, and even if a company attempted to find all of them associated with a complex product (which often doesn’t happen), it likely will not. But owners know what patents they have. Thus, owners are the least cost information producers, and informing manufacturers of relevant patents can have some commercialization benefits. Even if the patents are of low quality, the manufacturer is in a better information position than before; it can buy, license, or challenge the patents.

This signaling leads to a second benefit: some freedom to operate that was unavailable before, assuming a reasonable license is entered. At least one study shows that litigation costs more than simply “litigation costs.” Litigation can also hamper investment in the product itself. This is not surprising, of course: litigation is a drag, literally and figuratively. So avoiding litigation can enhance commercialization of the accused product.  I acknowledge that investment would be really enhanced if nobody enforced their patents, but that’s an unlikely scenario and this is an essay about licensing.

I make a few other suggestions of commercialization benefits, and finally discuss how licensing acquired patents may help drive licensing toward the earlier, more beneficial stages of licensing – where technology licenses predate investments in products, even if it winds up cutting out the acquirers. I give a few examples of how this might happen and how the process has already begun.

There is more in the essay than I can write about here. If you are interested, please take a look at the full version.

Guest Post on Pacific Coast Marine by Prof. Sarah Burstein

By Sarah Burstein, Associate Professor of Law at the University of Oklahoma College of Law

Pacific Coast Marine Windshields, Ltd. v. Malibu Boats, LLC (Fed. Cir. 2014)
Panel:  Dyk (author), Chen, Mayer

In this case, the Federal Circuit determined—as a matter of first impression—that “the principles of prosecution history estoppel apply to design patents.” This case has a number of implications for design patent application strategy, including for applications filed under the Hague System.

Pacific Coast Marine Windshields Limited (“PCMW”) accused Malibu Boats (“Malibu”) of infringing U.S. Patent No. D555,070 (the “D’070 patent”). Here is a comparison of the patent drawings and the accused design, as shown in PCMW’s opening appellate brief:

 

As can be seen from this illustration, a major difference between these two designs is that the patented design features four circular vent holes while the accused design has three roughly rectangular-shaped holes.

The D’070 patent matured from a patent application filed (apparently pro se) by PCMW’s owner and CEO, Darren Bach. In the original design patent application, Bach claimed an “ornamental design of a marine windshield with a frame, a tapered corner post with vent holes and without said vent holes, and with a hatch and without said hatch, as shown and described.” The submitted figures included the following:

A design patent may contain only one claim. It is possible to claim multiple embodiments—but only if those embodiments involve the same inventive concept. The question of whether a claimed embodiment satisfies this standard is left largely to the examiner’s discretion.

In this case, the examiner decided that Bach’s application included five “patentably distinct groups of designs” and issued a restriction requirement. Bach did not challenge the restriction requirement. He elected to prosecute the design shown in Figure 1 above—i.e., the version with “four circular holes and a hatch.” He also amended the claim language, deleting the reference to any hole and hatch variations. So when the D’070 patent issued, it simply claimed “[t]he ornamental design for a marine windshield, as shown and described.” Bach later filed a divisional application for the no-holes-with-hatch variant, which matured into U.S. Pat. No. D569,782. But he did not pursue design patents for any of the other variations, including the two-hole variation shown above.

Malibu moved for partial summary judgment, arguing that PCMW’s infringement claim was barred by prosecution history estoppel. Malibu argued that PCMW surrendered the two-hole design during prosecution and that the accused three-hole design fell within the territory surrendered “between the original claim and the amended claim.” The district court agreed and entered judgment of noninfringement based on prosecution history estoppel.

On appeal, PCMW argued that the principles of prosecution history estoppel should not apply to design patents at all. It argued, among other things, that there was no good policy reason to extend the doctrine to design patents. The Federal Circuit did not agree, noting that “[t]he same principles of public notice that underlie prosecution history estoppel apply to design patents as well as utility patents.”

The Federal Circuit then considered whether prosecution history estoppel barred PCMW’s infringement claim. That issue “turn[ed] on the answers to three questions: (1) whether there was a surrender; (2) whether it was for reasons of patentability; and (3) whether the accused design is within the scope of the surrender.” The court concluded Bach did surrender the cancelled figures and that the surrender was done for reasons of patentability. In doing so, the Federal Circuit rejected PCMW’s argument that the restriction requirement was merely “administrative” or “procedural.” The court concluded “that, in the design patent context, the surrender resulting from a restriction requirement invokes prosecution history estoppel if the surrender was necessary . . . ‘to secure the patent.’”

However, the Federal Circuit decided that the accused design was not within the scope of the surrender. It rejected Malibu’s argument that “by abandoning a

design with two holes and obtaining patents on designs with four holes and no holes, the applicant abandoned the range between four and zero.” The court noted that “[c]laiming different designs does not necessarily suggest that the territory between those designs is also claimed.” Moreover, according to the Federal Circuit, neither party claimed that the three-hole design was a colorable imitation of the surrendered two-hole design. (The Federal Circuit expressly avoided answering “whether the scope of surrender is measured by the colorable imitation standard”—an interesting issue for another day.) Therefore, prosecution history estoppel did not bar PCMW’s claim.

On remand, it will be interesting to see how PCMW argues its infringement case. It seems difficult to argue that the accused three-rectangular-hole design is not a colorable imitation of the surrendered two-rectangular-hole design but that it is a colorable imitation of the claimed four-round-hole design.

This decision also has important implications for other cases. Design patent applicants often claim multiple embodiments. If the examiner approves those embodiments, the resulting patent will be (at least arguably) stronger and more flexible. Following Pacific Coast Marine, however, this is a riskier—or, at least, potentially more expensive—strategy. If an applicant claims multiple variations on a design and the examiner decides they are patentably distinct, the applicant must file divisional applications for the unelected variants to avoid prosecution history estoppel. And more applications means more fees.

This case also will be important when the United States becomes a party to the Hague System for the International Registration of Industrial Designs. The Hague System allows applicants to file up to 100 designs in a single registration, as long as the designs are all in the same Locarno class. But the PTO has indicated that it will apply its single-invention rule to any applications it receives via the Hague System. So applicants who include multiple designs in their Hague applications should expect restriction requirements, with all the attendant estoppel risks.