Myriad Patents Now Challenged at the PTO

Myriad v. Gene Dx, Inc.

In 2013, the US Supreme Court invalidated Myriad’s patent claims covering isolated DNA coding for the cancer causing BRCA1/BRCA2 by ruling that those isolated genes were unpatentable products of nature. However, the Supreme Court also ruled that the ‘created’ cDNA versions of the genes were patent eligible – or at least not excluded by the product-of-nature exception to subject matter eligibility.

Following that decision, a number of companies indicated that they would enter the market and begin BRCA1/BRCA2 diagnostic genetic testing in violation of the patents. Myriad responded aggressively by filing lawsuits against several companies, including Gene Dx for patent infringement. The case against Gene DX alleges infringement of sixteen different Myriad patents and is still pending in Federal Court in Utah where the parties have jointly agreed that settlement prospects are “low.” The case has been centralized before a multidistrict panel that is handling parallel cases against Gene DX, Quest Diagnostics, Ambry, and Counsyl.

In a bold move, Gene DX has now filed a set of inter partes review (IPR) requests – challenging 11 of the Myriad (or Myriad Licensed) patents. I should note, these challenged patents are different from the ones ruled-upon by the Supreme Court. In the IPR regime, patents can only be challenged on prior art grounds. Here, each of these patents have been challenged on either 103 (obviousness) or 102 (novelty) grounds.

USPTO RCE Backlog Coming Down

In its most recent annual report, the USPTO indicated that 560,000 non-provisional utility patent applications were filed during the fiscal year. (FY2013). The report fails to mention that 30% of those “new” filings were not actually new, but rather were merely Requests for Continued Examination (RCEs) filed by applicants in already pending cases. For many patent applicants, RCEs have become an expected element of the prosecution process in order to provide for a third-round of communication with the examiner.

Over the years, the USPTO has vacillated on its view of applicant Requests for Continued Examination (RCEs). In 2009, the office began a program to delay further consideration of RCE’d applications. That action resulted the rapid growth of a backlog of RCE filings awaiting examination. The USPTO is now addressing that backlog and appears to have it largely under control.

As part of its program to reduce RCE filing, the USPTO is pushing several of its initiatives including Quick Path Information Disclosure Statement (QPIDS) and After Final Consideration Pilot (AFCP 2.0).

Upcoming Events

By Dennis Crouch

I’m looking forward to a few upcoming events for patent law professionals:

  • September 7-9, 2014, the Intellectual Property Owners Association (IPO) will hold its annual meeting in beautiful Vancouver BC. I’ll be there joining a panel discussing the impact of recent US Supreme Court patent cases. [LINK]. The IPO event again has a great line-up, including Professor Hricik, Nathan Myhrvold, and many more.
  • On the evening of November 5, 2014, I will be delivering the University of Houston’s IP IL Annual Fall Lecture at the Four Seasons Hotel in Houston (Sponsored by the Katz Foundation). My talk will be on incentives (current and future) for patent clarity. [LINK]. Thank you to the University of Houston Law Center for hosting this event.
  • November 6-7, 2014, I will be down in Austin Texas participating in the annual Advanced Patent Law Institute with a talk titled Evidence Based Patent Law: Trends and Statistics, and What they Mean for Your Practice and your Patent Portfolio. [LINK]. Other speakers include Professors Golden (UT Austin), Lemley (Stanford), Wegner (formerly with GWU), and Hricik (Mercer); the Hon. Terry Rea and Randy Rader; Rob Sterne, et al.
  • January 7-11, 2015, I will be in Vail, Colorado talking about patent law as part of the 32nd National CLE Confrence where they also happen to have “amazing skiing.” Conference co-chairs are Scott Alter (Baker Daniels) and David Bernstein (Debevoise & Plimpton ). [LINK]
  • February 7-10, 2015: Hal Wegner’s annual Patent Experts Conference in Naples (FL) at the Naples Beach Hotel.

I look forward to seeing you in person.

Judge Mayer Raises 101 When Not In Issue: Other Panelists Don’t

I am sure Dennis will do his usual full and grand treatment, but this one is sort of the counter-punch to Ultramercial. In I/P Engine, Inc. v. AOL Inc. (Fed. Cir. Aug. 15, 2014) (per curiam), the court split on whether the claims were properly found by the jury to have been not obvious, with Judge Chen dissenting on that point and the per curiam opinion reversing the finding of no invalidity. (The other panel members were Judge Wallach and Judge Mayer).

Recall that in Ultramercial the court emphasized that 101 was seemingly a defense, and so evidence was needed and the usual presumption of validity applied, and so on.  Here, Judge Mayer seemed to take precisely the opposite tact, though it’s not quite clear.  In addition to writing at length about what he perceives the “technological arts” test to mean and require, he wrote:

The Supreme Court has dictated that the subject mat- ter eligibility analysis must precede the obviousness inquiry. Flook, 437 U.S. at 593 (“The obligation to determine what type of discovery is sought to be patented” so as to determine whether it falls within the ambit of sec- tion 101 “must precede the determination of whether that discovery is, in fact, new or obvious.”); Bilski, 130 S. Ct. at 3225 (explaining that the issue of whether claims are directed to statutory subject matter is “a threshold test”); see also In re Comiskey, 554 F.3d 967, 973 (Fed. Cir. 2009) (“Only if the requirements of § 101 are satisfied is the inventor allowed to pass through to the other requirements for patentability, such as novelty under § 102 and . . . non-obviousness under § 103.” (citations and internal quotation marks omitted)). To fail to address at the very outset whether claims meet the strictures of section 101 is to put the cart before the horse. Until it is determined that claimed subject matter is even eligible for patent protection, a court has no warrant to consider subordinate validity issues such as non-obviousness under 35 U.S.C. § 103 or adequate written description under 35 U.S.C. § 112.

From a practical perspective, there are clear advantages to addressing section 101’s requirements at the outset of litigation. Patent eligibility issues can often be resolved without lengthy claim construction, and an early determination that the subject matter of asserted claims is patent ineligible can spare both litigants and courts years of needless litigation. To the extent that certain classes of claims—such as claims on methods of doing business—are deemed presumptively patent ineligible, moreover, the United States Patent and Trademark Office will have more resources to devote to expeditiously processing applications which disclose truly important advances in science and technology.

Even more fundamentally, the power to issue patents is not unbounded. To the contrary, the constitutional grant of authority “[t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries,” U.S. Const. art. I, § 8, cl. 8, “is both a grant of power and a limitation,” Graham v. John Deere Co., 383 U.S. 1, 5 (1966); see Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 146 (1989). Section 101’s vital role—a role that sections 103 and 112 “are not equipped” to take on, Mayo, 132 S. Ct. at 1304— is to insure that patent protection promotes, rather than impedes, scientific progress and technological innovation. A robust application of section 101 ensures that the nation’s patent laws remain tethered to their constitutional moorings.

I am guessing we’ll see another en banc case soon…

Non-Patent Friday

By Dennis Crouch

UChicago Law Professors Adam Chilton and Eric Posner have a new article out that looks at political bias in legal scholarship. The basic finding is a correlation between a professor’s donation to a political party (Republican or Democratic) and that professor’s “scholarship ideology” (conservative or liberal).

We find that, at a statistically significant level, law professors at elite law schools who make donations to Democratic political candidates write liberal scholarship, and law professors who make donations to Republican political candidates write conservative scholarship. These findings raise questions about standards of objectivity in legal scholarship.

http://ssrn.com/abstract=2478908.

Areas of Disuniformity in US Inventorship

By Dennis Crouch

The chart below uses the breakdown of patent documents into their various workgroups. As shown here, the workgroups are basically an intermediary classification that falls between the micro-art-units and the macro technology centers. Dividing into workgroups is especially useful for looking at Technology Center 3600 because that center examines perhaps the widest variety of technologies. For the chart below, I collected inventor information on all U.S. patents issued from January 2010 – August 2014 and simply displayed the percent of patents whose first-listed inventor claimed a U.S. residence in the application documents.

Today, just about half of newly issued patents are non-US originated. That datum is dramatically different from historical figures where U.S. inventors dominated the U.S. patent rolls. I have written before that this change likely signals a future shift in U.S. policy as the population is less likely to support foreign-owned patent rights blocking access or raising prices for goods and services. To the extent policymakers are relying upon this concern, the chart provides some additional insight because it points to areas of technology where U.S. inventors continue to dominate in the U.S. Patent market.

Intel Successfully Defends its Patent Case but Owes its Own Attorneys $9 Million for the Defense.

By Dennis Crouch

Stragent, LLC v. Intel Corp., 11-cv-0421 (E.D. Texas). JudgeDykOpinion

Federal Circuit Appellate Judge Timothy Dyk has been sitting by designation as the trial judge in this patent infringement lawsuit over video compression technology. (U.S. Patent No. 7,302,102). A jury found Stragent’s two asserted patent claims both invalid and not infringed. And, apparently, Strategent chose not to appeal that determination.

The final issue left for Judge Dyk to decide then was attorney fees and the court has now denied Intel’s motion for fees.

The ordinary rule in American law is that each side pays its own attorney fees. For a successful defendant such as Intel here, the outcome of the lawsuit is likely still a seven-figure payout to its defense team (paid by the winning defendant). As an exception to the usual rule, the Patent Act provides that a district court judge may award attorney fees to the prevailing party in “exceptional cases.” Recently in Octane Fitness, the Supreme Court rejected the Federal Circuit’s prior strict standard and high-bar for exceptional case awards and instead put the determination within the discretion of district court judges.

Under Octane Fitness,

[An exceptional case] is simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated . . . considering the totality of the circumstances . . . [and excising the court's] equitable discretion.

Octane Fitness, LLC v. Icon Health & Fitness, Inc., 134 S. Ct. 1749 (2014). Despite the seeming wide decision making discretion, the Supreme Court also recognized that exceptional case awards should be “rare” and “uncommon.”

Although having a losing party is a prerequisite to an exceptional case finding, Judge Dyk here found that “the mere fact that the losing party made a losing argument is not [otherwise] a relevant consideration.” Rather, according to the opinion here focus should be on whether the arguments were “frivolous or made in bad faith.” That said, Octane does not expressly require bad faith or frivolous arguments, and that decision makes clear that exceptional case awards may be available at times when the losing parties actions are not sufficiently bad to warrant Rule 11 sanctions. A second point with regard to Rule 11 sanctions is that those sanctions tend to be focused on individualized frivolous or bad faith arguments made by parties while §285 fees are awarded with reference to the case “as a whole” and in considering “a totality of the circumstances . . . includ[ing] the conduct of the winning party.”

In considering the case at hand, Judge Dyk noted that Intel’s motion for fees “is primarily based on the fact that Stragent made losing arguments.” Although Judge Dyk agreed that Stragent’s case was “certainly a weak one,” he also noted that Intel failed to even move for summary judgment:

Stragent’s argument was certainly a weak one, but despite the alleged implausibility of Stragent’s position, Intel never sought summary judgment of non-infringement on the basis of the limitation at issue. This suggests that Intel did not always view Stragent’s infringement position as frivolous. There is little injustice in forcing Intel to bear its own attorney’s fees for defending a claim it did not challenge on summary judgment. Disposing of a frivolous claim on summary judgment would avoid a trial and have the effect of saving both parties a substantial portion of their litigation costs.

Motion for fees denied. Intel is unlikely to overturn this on appeal.

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An interesting tidbit from the Intel’s briefs: “Intel spent approximately $9 million in legal costs.” Wow! How on earth do you spend $9 million defending a three-patent case asking only for a reasonable royalty. (By trial, the case had been narrowed to only be challenging two claims found in one of the patents.) I would really love to see the accounting for that $9 million. Of course the docket does list 17 attorneys on Intel’s side. . .

 

State of Vermont’s Demand Letter Case against MPHJ Continues

State of Vermont v. MPHJ Technology (Fed. Cir. 2014)

MPHJ has become the poster-child for bad patent trolling behavior and has been the subject of unfair-trade-practice action in several states. The basic idea is that MPHJ has mailed out more than 15,000 demand letters to small businesses who use scan-to-email technology. The set of five patents have a 1997 priority date. See patent, No. 8,488,173.

Vermont’s attorney general Bill Sorrell has been active in pushing against patent trolls and MPHJ in particular. In May 2013, Vermont sued MPHJ in State Court alleging that the company was engaging in unfair and deceptive trade practices under Vermont law and that the letters “contained threatening, false, and misleading statements.”

Up to now, the case has been in civil-procedure limbo. A major issue to be decided in the state-enforcement actions is the extent that state powers are preempted by the federal patent laws. MPHJ believes that preemption is more likely to be found if the case is decided by a federal court rather than a state court. As such, the patentee removed the case from state court to federal court on grounds of diversity and federal question. However, the federal district court remanded the case back to state court. In its recent decision, the Federal Circuit has tacitly affirmed the remand – finding that it lacks appellate jurisdiction over any appeal. In particular, the Supreme Court has held that there may be no appeal of a Federal District Court’s decision to remand under 28 U.S.C. § 1447(d).

The Vermont State Court will now handle the case and determine the extent that MPHJ’s actions violate the law.

IP Journalist Joe Mullin has written on MPHJ in several posts at ArsTechnica.

Update on Patent Grant Rates

I have updated my grant-rate chart from a prior post. For these figures, I obtained a set of 15,900 published patent applications and categorized each application according to its area of technology and also as either patented, abandoned, or still pending. The chart below shows both the grant rate (percentage of applications that have been patented) and also the still in-process rate (percentage of applications that are still in-process).

My sample of applications are a random set of published applications with filing years of 2004 through 2010. About 94% of these cases have been concluded (either patented or abandoned) and my original chart did not include the in-process numbers which, for most areas-of-technology are fairly minimal. However, on reflection, I went back and looked at these figures and found that they are important.

Notably, the eCommerce arts appear to have a low grant rate. However, a substantial percentage of applications in that area are still pending. It is almost certain that some of those still-pending applications will issue as patents and the final grant rate for the area will be higher than originally predicted.

GrantRateUpdate

Senators to Pritzker: Patent System Needs More Clarity and Transparency

In a letter last week to Secretary Pritzker (DOC), a group of five Democratic Senators have urged for administrative patent reforms to “prevent[] low-quality, vague patents from entering the market.” The group include Senators Jeff Merkley, Tom Udall, Martin Heinrich, Mark Begich and Mark Warner.

Although the letter does not provide direct policy plans, it does provide a set of guidance that should be well taken by the Patent Office:

(1) Take steps to incentivize examination quality over quantity.

(2) Direct Examiners to ensure that the patent file history is complete and resolves any ambiguities with clarified patent terms prior to issuance.

(3) Assess whether the PTO’s steps to “address functional claiming concerns . . . are sufficient to address concerns that functional claiming provides a loophole from definite, precise claims.”

(4) Expand crowdsourcing and public data analysis as a mechanism to identify problematic patents and categories of patents — then target those areas for more thorough examination.

(5) Ensure public access to information about patents and the file histories.

Read the Letter

The suggestions by the Senators are all helpful and are directed to an area of patent law ripe for reform. Lets hope that the USPTO can take these suggestions and create sensible policy.

Patent Grant Rate by Technology Area

By Dennis Crouch

The chart below shows the grant rate of US patent applications grouped by technology center sub-groups (technology area). The numbers come from a random set of 10,000 published patent applications that were filed between 2003 and 2010. Later-filed applications cannot be readily used for this exercise because most of them are still pending. The grant rate is calculated simply by counting the percentage of applications that have as patents. The areas of technology are shown with a representative technology-center (or art unit). Overall the grant rate in this population was 60%. I have also added error-bars showing the 95% CI for each group.

GrantRate

 

Telework: How much did you work? Nobody Knows!

By Dennis Crouch

In another seeming bombshell for the Patent Office, the Washington Post has published a 2012 internal USPTO memorandum on telework fraud. Lisa Rein from the post writes:

Some of the 8,300 patent examiners, about half of whom work from home full time, repeatedly lied about the hours they were putting in, and many were receiving bonuses for work they didn’t do. And when supervisors had evidence of fraud and asked to have the employee’s computer records pulled, they were rebuffed by top agency officials, ensuring that few cheaters were disciplined, investigators found.

Oversight of the telework program — and of examiners based at the Alexandria headquarters — was “completely ineffective,” investigators concluded.

Further, the report indicates that “USPTO management demonstrates reluctance to take decisive action when the misconduct is egregious and the evidence is compelling.” At the time, the USPTO was led by Director Kappos.

The original report was then substantially tamed-down (with the most damning elements removed) before it was provided to the DOC Office of the Inspector General. Based on the evidence found in the secret original document, the OIG has indicated that it will now launch a probe of the USPTO’s workforce quality control.

Production versus Hours: The facts here are disturbing. However, one underlying assumption of the report is that we should be looking to the hours-worked by examiners rather than focusing on whether the work is completed (i.e., production).  Examiner production is closely monitored and measured on a bi-weekly basis and there is no sense in the industry that examiners can avoid those production quotas without major repercussions.

 

White House Seeks Input on Innovation Strategies

A request for input was published on July 29, and is available here.  The summary states:

The Office of Science and Technology Policy and the National Economic Council request public comments to provide input into an upcoming update of the Strategy for American Innovation, which helps to guide the Administration’s efforts to promote lasting economic growth and competitiveness through policies that support transformative American innovation in products, processes, and services and spur new fundamental discoveries that in the long run lead to growing economic prosperity and rising living standards. These efforts include policies to promote critical components of the American innovation ecosystem, including scientific research and development (R&D), technical workforce, entrepreneurship, technology commercialization, advanced manufacturing, and others. The strategy also provides an important framework to channel these Federal investments in innovation capacity towards innovative activity for specific national priorities. The public input provided through this notice will inform the deliberations of the National Economic Council and the Office of Science and Technology Policy, which are together responsible for publishing an updated Strategy for American Innovation.

USPTO Continues to Reduce Patent Term Adjustments

By Dennis Crouch

Although the Patent Act provides for a 20-year patent term, that term can be extended in a few ways. The most common avenue is through Patent Term Adjustment that is automatically awarded to patentees if the USPTO fails to meet its guarantee of timely examination. As the backlog of pending cases grew, so has the average patent term adjustment. More recently, however, the USPTO has moved to reduce the backlog and average pendency – that result is that PTA has also been significantly reduced — for the first time in several years, the average PTA is below 1-year. The time series below shows the average PTA for all utility patents granted since January 2005. The jump in PTA seen in 2009 was due to a legal change in how the term is interpreted. The second chart shows the percentage of patents that are awarded PTA – that figure is also trending down, but is still a troubling 70%.

Specification describes machine with sensors – Can you omit the sensor limitation in the claims?

By Dennis Crouch

ScriptPro v. Innovation Associates (Fed. Cir. 2014)

Kansas district court Judge Carlos Murguia found ScriptPro’s patent claims invalid under 35 U.S.C. §112 for lacking written description. See U.S. Patent No. 6,910,601. That holding has been reversed by a unanimous Federal Circuit panel that included Judges Taranto (Author), Bryson, and Hughes.

Although the technology at issue here is largely mechanical (a pill collating machine), the case is akin to a genus-species debate and also relates closely to the ‘essential element‘ pseudo-doctrine of Gentry Gallery.

Here, all of the examples of the patented collating machine include a set of sensors used to determine whether a particular holding area is full. Further, the specification suggests that – even at its broadest – the invention includes the sensors: “[T]he present invention broadly includes . . . a plurality of sensors.” However, the claims do not include sensor limitations – with the result being that machines both with and without the sensors could be seen as infringing. Seeing that discrepancy between the specification and the claims, the district court ruled that the original written description does not show that the inventor possessed a collating machine that operated without the sensors and thus that the claims covering machines sans sensors fail the written description test. Judge Murguia wrote:

Based on the record before it, the court concludes that no reasonable jury could find that the inventors were in possession of a collating unit that operated without sensors. Innovation is therefore entitled to summary judgment on its claim of invalidity as to all challenged claims.

On appeal, the Federal Circuit has reversed – finding that summary judgment was improper.

It is common, and often permissible, for particular claims to pick out a subset of the full range of described features, omitting others. A specification can adequately communicate to a skilled artisan that the patentee invented not just the combination of all identified features but combinations of only some of those features (subcombinations)—which may achieve stated purposes even without omitted features.

. . . There is no sufficiently clear language in the specification that limits the invention to a collating unit with the (slotchecking) sensors. And considering what the specification does say, and what ScriptPro highlights as a central purpose of the claimed advance in technology [keeping track of open slots – a function that does not require the sensors], it cannot be said as a matter of law that claims 1, 2, 4, and 8 have a scope incommensurate with what is described as the invention. . . . The term “broadly” qualifies the assertion of inclusion [and] suggests that exceptions are allowed to the assertion of what occurs most (perhaps even almost all) of the time.

Readers will note that, while the court begins with a suggestion that written description requires that the patent document affirmatively convey invention of sub-combination, the actual approach looks more to whether the patent document affirmatively denies the subcombinations.

Here, the court thought it important – although not determinative – that the original application as filed included the non-sensor claims. Thus, this is not an example of an ex post attempt to expand scope that is most common in written description cases.

When a specification is ambiguous about which of several features are stand-alone inventions, the original claims can help resolve the ambiguity, though even original claims may be insufficient as descriptions or be insufficiently supported by the rest of the specification.

The notion is that original claims are part of the specification and thus relevant. However, they are also potentially inadequate (as we learned in Ariad and LizardTech).

Not a Summary Judgment Question: One lens for considering this case by recognizing that the failure of written description is a factual question to be decided by a jury. Although it may not ultimately win on the issue, the patentee presented a factual argument supported by expert testimony regarding what a person of skill in the art would have recognized based upon reading the specification. What the court here ruled is that that presentation of evidence by the patentee was sufficient to defeat the defendant’s summary judgment motion of invalidity. We may eventually see a jury verdict in this case — ~10 years after the lawsuit was originally filed.

Update on USPTO’s Implementation of ‘Alice v. CLS Bank’

The following guest post comes from USPTO Commissioner for Patents Peggy Focarino and is a re-publication of what Commissioner Focarino published on the USPTO Director’s Blog.

Today I would like to address our ongoing implementation of the June 19, 2014, unanimous Supreme Court decision in Alice Corporation Pty. Ltd. v. CLS Bank International, et al. (Alice Corp.). In the decision, the court held claims to a computerized scheme for mitigating settlement risk patent-ineligible because they are drawn to an abstract idea. I want to share with you the steps we’re taking to implement the decision.

First, on June 25th, we issued preliminary examination instructions to assist examiners when evaluating subject matter eligibility of claims involving abstract ideas, particularly computer-implemented abstract ideas, in view of Alice Corp.

Second, the USPTO has applications that were indicated as allowable prior to Alice Corp., but that have not yet issued as patents. Given our duty to issue patents in compliance with existing case law, we have taken steps to avoid granting patents on those applications containing patent ineligible claims in view of Alice Corp. To this end, our primary examiners and supervisory patent examiners (SPEs) promptly reviewed the small group of such applications that were most likely to be affected by the Alice Corp. ruling.

We withdrew notice of allowances for some of these applications due to the presence of at least one claim having an abstract idea and no more than a generic computer to perform generic computer functions. After withdrawal, the applications were returned to the originally assigned examiner for further prosecution. Over the past several days, our examiners have proactively notified those applicants whose applications were withdrawn. (Applicants who had already paid the issue fee for applications withdrawn from allowance may request a refund, a credit to a deposit account, or reapplication of the fee if the applications return to allowed status.)

This limited action was closely-tailored and taken specifically in reaction to the Alice Corp. decision. We do not anticipate further review of any applications indicated as allowable under this process, as examiners are currently following the Alice Corp. preliminary instructions during examination (i.e., prior to allowance).

Third, as we continue to study Alice Corp. in the context of existing and developing precedent, public feedback will assist us in formulating further guidance for our examiners. On June 30th, a Federal Register Notice was published to solicit written comments from the public on the preliminary examination instructions. The period for submitting those comments ended July 31, 2014. We appreciate the comments we have received to date. All input will be carefully considered as we work to develop further examination guidance, which we anticipate issuing this coming fall.

We look forward to working with our stakeholders in refining our examination guidance, and will continue to seek feedback as we implement changes as the laws evolve.

A Few Problems at the PTAB

By Dennis Crouch

Over the past decade, I have repeatedly written about the serious backlog problem facing the USPTO’s Board of Patent Trials and Appeals (Formerly BPAI, now PTAB). In 2006, there were fewer than 1,000 pending ex parte appeals at any given time. That figure steadily and rapidly ballooned to a seeming high-point of over 25,000 pending ex parte appeals. The PTAB has taken several steps address the backlog. The most important of these is its efforts in hiring a host of new administrative patent judges to decide cases. Although not conclusive, it also appears that the Board has also taken streamlining steps such as discouraging dissents and reducing opinion size. Despite those efforts, the backlog remains over 25,000 with the result that appeals are unduly delayed for years. The chart below comes from the files of 95 recently decided ex parte appeals – the median ex parte appeal now takes more than 3-years to decide.

Bombshell Report: Administration inspectors general have increasingly been embarrassing the Obama administration. The USPTO is no exception to this trend. Todd Zinser, Inspector General of the Department of Commerce has released a new report titled: Waste and Mismanagement at the Patent Trial and Appeal Board. The inspector general report highlights the tremendous rise in the backlog, the PTO’s failure to adjust its workforce to focus on the concern, and, most damning, the “misuse of federal resources totaling more than $5 million.” The Inspector General writes:

Our investigation uncovered waste in the PTAB that persisted for more than four years (2009-13) and resulted in the misuse of federal resources totaling more than $5 million. The bulk of the wasted resources related to PTAB’s paralegals, who had insufficient workloads and considerable idle time during those years. Paralegals told the OIG that they engaged in a variety of personal activities including watching television; surfing the internet; using Facebook and other social media; washing laundry and cleaning dishes; and shopping online while in an official pay status. PTAB managers, including its senior-most personnel, were aware of this problem but took little action to prevent such waste because they believed the problem would disappear once PTAB hired additional judges. We found that, by failing to report the significant waste incurred by the PTAB when Paralegal Specialists were being paid to not work, numerous PTAB employees appear to have violated certain regulations and Department of Commerce policies.

The report states that the abusive-practice began with former Chief Judge Mike Fleming (who left the PTO in 2010), but continued under current Chief Judge James Smith through 2013. Of course, the loose-telework options available to PTO employees also permit this activity to persist.

As an interesting back-story, Professor John Duffy is also a but-for cause of the problem. In particular back in 2008-2009, Chief Judge Fleming had the plan to hire a set of new administrative patent judges and support paralegals to address the growing backlog of cases. The year before, Professor Duffy had written his Patently-O essay outlining how the PTO’s practice of internally hiring Patent Judges was improper and that the U.S. Constitution required them to be appointed by the Secretary of Commerce (or the President). Following that article, the PTO changed its practice to require that the Patent Judges receive their commission from the Secretary of Commerce. The result was that paralegals became much easier to hire than judges and the agency was only able to hire the paralegals before the PTO instituted its hiring freeze. The OIG report states:

When asked why Paralegal Specialists had so much Other Time, Paralegal Specialists and their supervisors stated to the OIG that there was not enough work for the Paralegal Specialists. The evidence showed that, although Chief Judge [Fleming] hired 19 additional Paralegal Specialists in 2009, the PTAB was not able to hire the amount of judges desired before the hiring freeze was instituted that year. . . . Patent Specialists could not create their own work – they relied on others, and judges’ opinions were one main source of work. Paralegal Specialists completed the work that they were given, and then waited for their next assignments.

The practice of approving hours for non-working paralegals (“Other” time) continued after Judge Fleming retired and into the tenure of Chief Judge Smith.

Chief Judge [Smith] originally stated that he recalled having “discussions about other time and paralegal use of it” in 2013. Later in his interview, he stated that he first looked at Other Time when a Senior Manager informed him of some of the individuals’ or teams’ Other Time sometime between mid-2012 and when the OIG sent the PTAB the complaints in early 2013. However, e-mail evidence showed that he learned of the Other Time problem at least as early as September 15, 2011.

The law provides that the USPTO Director, Deputy Director, and Commissioner are all members of the PTAB. 35 U.S.C. § 6. However, the OIG found no evidence that those PTAB “outsiders” had any knowledge of the problem.

The particular issues here have seemingly been dealt with and are unlikely to occur within the PTAB – especially since the paralegals now have judge’s to provide work. However, the incident here is an important reminder of the importance of agency transparency.

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The Commerce OIG has several additional PTO reports, including:

A ray of hope for embryonic stem cell patents in Europe; and the 4 things you need to know

Guest Post by Thomas Leonard of Kilburn & Strode LLP, London

The Advocate General of the Court of Justice of the European Union (CJEU) has issued his opinion in C-364/131, and in doing so has provided hope for the patentability of embryonic stem cells in Europe.

The Background

International Stem Cell Corporation (ISCC) is the applicant for two UK patent applications (GB0621068.6 and GB0621069.4) relating to stem cells derived from unfertilised human ova that have been parthenogenetically activated to stimulate cell division (“parthenotes”). The UK Intellectual Property Office (UK IPO) refused the applications on the basis that, given the CJEU’s earlier judgment in Brüstle2, the claimed subject matter related to the use of human embryos for industrial or commercial purposes and was therefore not patentable.

The Court in Brüstle was concerned with the definition of the term “human embryo” within the meaning of Article 6(2)(c) of Directive 98/44/EC (the “Biotech Directive”), which states that inventions shall be considered unpatentable where they relate to uses of human embryos for industrial or commercial purposes. The Court in Brüstle ruled that the term “human embryo” included unfertilised human ova whose division and further development have been stimulated by parthenogenesis (i.e. parthenotes).

Following the UK IPO’s decision to refuse the applications, the matter was appealed to the High Court. At request of the parties, a question was referred to the CJEU seeking clarification on whether parthenotes can correctly be considered “human embryos” considering they die at the blastoma stage, unable to undergo further division and development, and are thus not capable of developing into a human being. The question referred in this case was exactly the same as one asked in Brüstle but for the additional specification that parthenotes “in contrast to fertilised ova, contain only pluripotent cells and are incapable of developing into human beings”.

The Advocate General Opinion in C-364/13

The new Opinion includes a detailed analysis of the relevant law and background, as well as the submissions of the parties (not only those of the applicant and the UK, but also written observations by France, Poland, Portugal, Sweden and the European Commission).

Among the submissions included evidence suggesting it is possible to produce live-born parthenogenetic mice that have been genetically manipulated to surmount the “genetic imprinting” that usually prevents a parthenote from continuing development past the blastoma stage. ISCC had already amended their claims before the UK IPO to exclude the possibility of extensive genetic manipulation beyond parthenogenesis (by including the word “pluripotent” before “human stem cell line” and referring to a lack of “paternal imprinting”).

The Advocate General in principle agrees with ISCC and has come to the conclusion that unfertilised human ova whose division and further development have been stimulated by parthenogenesis are not included in the term ‘human embryos’ as long as they are not capable of developing into a human being and have not been genetically manipulated to acquire such a capacity.

The 4 things you need to know

1.    This is good news for applicants in the stem cell field. Any judgments that limit the impact of Brüstle will be a welcome development.

2.    The Opinion is not legally binding – yet. For the most part, subsequent CJEU judgments do come to the same result as the preceding Opinion (although perhaps for different reasons), but we need to wait for the final judgment of the CJEU before this will become law.

3.    The ray of hope only applies to stem cells derived from parthenotes that are explicitly not able to continue the developmental process to form a human being. When drafting applications in this field, practitioners should include language that supports an amendment to exclude the possibility of further genetic manipulation, bearing in mind of course the EPO’s strict rules with respect to amendments.

4.    Remember, in contrast to the US following the judgment in Myriad, it is enshrined in European law that elements isolated from the human body or otherwise produced by means of a technical process, including the sequence or partial sequence of a gene, may constitute a patentable invention, even if the structure of that element is identical to that of a natural element (Article 5(2) of the Biotech Directive).

Kilburn & Strode partner Nick Bassil is part of the team handling the UK patent applications on behalf of ISCC before the UK IPO. ISCC was represented before the UK High Court and CJEU by Piers Acland, QC on instructions from DLA Piper LLP.

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1 Opinion of Advocate General Cruz Villalón in International Stem Cell Corporation, delivered on 17 July 2014, C-364/13, ECLI:EU:C:2014:2104 (here)

2 Judgment in Brüstle v Greenpeace eV, C-34/10, EU:C:2011:669 (here)

Pendency from Filing to First Action

One common complaint of the U.S. patent system is delay. Most patents take over three years to issue. Adding in priority claims moves-out the average timeline (original priority filing date to issuance) to over five years. [Link]. One way that the PTO is addressing that concern is to focus on reducing the backlog of unexamined applications – those that have been filed but that have not yet received a first action on the merits (FAOM). Under Director David Kappos, the goal was to reduce the FAOM timeline to < 10 months – that goal appeared quite amazing at the time, but is now somewhat into focus.

In its Official Gazette, the USPTO occasionally reports average filing-date for recently issued FAOMs. I used those reports to create the above chart considers the timeline for receiving first-actions across the various technology centers within the USPTO. Two salient points appear from the chart. First, the average pendency of unexamined applications has dropped significantly since 2011 and all technology centers are under two-years pendency. Second, the variance between the technology centers has been significantly reduced. This second result has come about based upon efforts at the PTO to move examining resources to areas that are suffering the most from the backlog. Although still the shortest pendency, design patents (TC2900) have come roughly in-line with the rest of the technology areas.

As an interim marker, the time-to-first-action is fairly meaningless. However, the PTO hopes that its reduction will result in an overall reduction in pendency. Time will tell whether that hope is realized. For patentees, the timing can be eliminated by requesting accelerated examination ($4,000 fee).

As suggested by the above discussion, the USPTO patent examination corps is divided into a number of technology centers, and each technology center is sub-divided into one or more art units. The technology focus of each tech center is listed below.

  • 1600 – Biotechnology and Organic Chemistry
  • 1700 – Chemical and Materials Engineering
  • 2100 – Computer Architecture, Software, and Information Security
  • 2400 – Computer Networks, Multiplex communication, Video Distribution, and Security
  • 2600 – Communications
  • 2800 – Semiconductors, Electrical and Optical Systems and Components
  • 2900 – Designs
  • 3600 – Transportation, Construction, Electronic Commerce, Agriculture, National Security and License & Review
  • 3700 – Mechanical Engineering, Manufacturing, Products