What to do About All These Invalid Patents?

By Dennis Crouch

The recorder-of-deeds here in Boone County Missouri is pretty good at her job. Although there is an occasional error in the records, those errors are quickly remedied once found.  The property records are regularly relied upon and their correctness is important to ensure smooth operation of the real property marketplace.

Over the past few years, the Supreme Court has uncovered a few glaring errors in the patent records.  Namely – hundreds of thousands of patent claims have issued that are – in fact – not patentable.  These problematic claims either lack eligible subject matter under the patent common law and 35 U.S.C. § 101; are indefinite under 35 U.S.C. § 112; or are obvious under 35 U.S.C. § 103.  This results is prompted by the recent decisions in Supreme Court cases such as Alice Corp. v.. CLS Bank International, 134 S.Ct. 2347 (2014); Nautilus, Inc. v. Biosig Instruments, Inc., 134 S.Ct. 2120 (2014); Association for Molecular Pathology v. Myriad Genetics, Inc., 133 S.Ct. 2107 (2013); Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S.Ct. 1289 (2012); and KSR Intern. Co. v. Teleflex Inc., 550 U.S. 398 (2007).

Prior to these decisions, the USPTO had been issuing patents under more lenient standards. See, e.g. State Street Bank (Fed. Cir. 1998). For its part, the USPTO has quickly modified its approach effectuate the new precedent that offers more stringent tests of patent eligibility and patentability. The result is not necessarily fewer issued patents or a lower grant rate, but instead perhaps a modification (narrowing) of claim scope.

These decisions are all naturally retroactive in that they apply fully to the aforementioned problematic claims found in already issued patents.  However, the general approach thus far has been to leave those patents and their problematic claims on the patent rolls as if nothing had happened unless and until a third-party challenges their validity or the patentee abandons the protection.  Q: Is this a problem? A: Yes.

Next time: A few ideas for moving forward.

Alice Corp. and Patent Claiming: A Simple Example

By Howard Skaist[1]

In the wake of Alice Corp (“Alice”), many practitioners, including myself, are thinking about its implications, in particular, with respect to drafting patent claims. Of note, especially, is the Court’s statement, recited more than once in Alice, that “this Court has long “warn[ed] …. against” interpreting section 101 “in ways that make patent eligibility ‘depend simply on the draftsman’s art.’”  See 573 U.S. ____ (2014); slip opinion at 16. I would like to test that notion and, potentially, its general boundaries with a simple example.

Let’s consider, as an example, the early days of computers and the creation of VisiCalc.  If today’s law applied then, e.g., Alice, would a patent claim covering VisiCalc have been statutory? I would be inclined to say, even today, that it depends a lot on the particular claim, but we also have the Supreme Court’s position on the matter, mentioned above. So, to what extent does the answer depend on the particular claim?

Here is one possible claim to VisiCalc:

  1.  A method comprising:  implementing a spreadsheet on a computer.

One issue worthy of mention here is that cases getting to the Court are ones in which the claims do not appear on their face to appropriately flush out the subject matter considered innovative, at least if we can rely on the opinions without taking the trouble to look at other claims of the particular patents.   However, most skilled practitioners tend to make sure that a spectrum of claims are included, at least for considerations related to section 103.  As shall be seen, this may also be the best practice for addressing 101 issues.

The claim above, thus, is in line with claims previously adjudicated before the Court.  That is, the claim on its face does not appear to communicate details about the innovation itself. Rather, this claim would likely be held non-statutory under the approach in Alice.  Applying the analysis, spreadsheets constitute a way to organize human activity that is of longstanding use.  Thus, it would seem that, following Bilski and Alice, a spreadsheet may potentially be deemed an abstract idea or a fundamental concept.  Thus, it is, if anything, a building block for human ingenuity and, on policy grounds, section 101 exceptions to statutory subject matter are potentially implicated.

Again, then, following the approach in Alice, the aspect of the claim calling out implementation on a computer likewise does not constitute a sufficiently meaningful addition, whether analyzed element by element or as a whole.  It might be argued that computer implementation is faster than performing spreadsheet calculations on paper, but merely being faster is not sufficient, generally, to pass muster here.

It is important to realize, however, that when technology is implemented, rarely does it just result in being faster and nothing more.  Usually, the implementation provides other advantages.  Here, referring to this simple example as an illustration, VisiCalc made a type of functionality possible that had not existed before.  Therefore, if that aspect were particularly claimed, perhaps such a claim would be deemed statutory under the analysis in Alice.

For example, consider the following two claims, recognizing that this example is not intended to illustrate the best claims possible, but is just a simple example to test the Court’s recent pronouncement.

  1.  A method comprising:

generating and displaying a matrix of cells comprising an electronic spreadsheet on a computer, said electronic spreadsheet to implement on said computer one or more user-specified mathematical operations in which one or more operands for said one or more user-specified mathematical operations are to be entered in particular cells of said matrix and results of performing said one or more user-specified mathematical operations on said one or more operands are to be displayed in other particular cells of said matrix; and

displaying on said computer, in said particular cells and in said particular other cells, after said one or more operands are entered, said one or more operands and said results of performing said one or more user-specified mathematical operations on said one or more operands, respectively.

  1. The method of claim 1, wherein said results of performing said one or more user-specified mathematical operations on said one or more operands comprise one or more operands of one or more other user-specified mathematical operations either with or without displaying said one or more operands of said one or more other user-specified mathematical operations in cells of said matrix.

Several arguments are available that one, if not both, of these claims is statutory.  To turn the issue around, we should, perhaps, ask the following:  If we ignore the conventional hardware elements of the claim, is the implementation, as claimed, more than merely conventional?

This question, of course, as framed, clearly is not the same question presented under section 103. Thus, while the Court may be criticized for making considerations under 101 more similar to considerations under 103 than had previously been the case, the analysis is still different.

To be even more explicit, we may ask:  is an innovation being claimed (even if it may in light of prior art later be determined to be an obvious one)? 

Here, the answer is quite arguably, yes!

Most everyone is familiar with the functioning of VisiCalc and Excel.  Certainly, at the time Apple introduced VisiCalc, it was an innovation over what had been done previously with conventional spreadsheets of the time.

Perhaps I am overly optimistic and not everyone will agree that claim 2 at least is statutory.  However, these claims call out an improvement over existing processes involving spreadsheets. See 573 U.S. ____ (2014); slip opinion at 13 (discussing that the claims in Diehr improved on an existing process).  A user is able to link together in a spreadsheet format, complex calculations and display the results in a manner so that any change in “operands” is able to be rippled across the spreadsheet and displayed immediately.  This is an improvement over use of a paper spreadsheet and provides a new functionality that previously did not exist.  I am not arguing that this is necessarily patentable, since that is judged relative to particular prior art, only that it is at least statutory because it is not merely conventional.

If it were generally agreed that the first example is likely non-statutory under the Court’s recent pronouncement and the second example is likely statutory[2], then what does that tell us in terms of claim drafting? One thing it demonstrates is that including limitations directed to innovative aspects of particular implementations may provide a claim drafting safe harbor, so to speak, for this area. Where this is done correctly, it would seem that claims of value to a client should ultimately stand up as statutory.  As was mentioned, most practitioners tend to make sure that a spectrum of claims are included.  This is good practice, now, to address, not just 102 and 103, but also 101.

If we compare the two example claims above, what is the difference?  Why, from a policy perspective should one be statutory and the other not, since they are both directed to what is meant to be the same core subject matter?  It appears that section 101 imposes a statutory requirement of proper form.  That is, from a formal perspective, it is necessary that innovative aspects of the invention, as implemented or intended to be implemented, be on the face of the claim for the claim to be statutory.[3]

Recall that we started with the notion that “this Court has long “warn[ed] …. against” interpreting section 101 “in ways that make patent eligibility ‘depend simply on the draftsman’s art.’”  The ironic twist here seems to be that, if section 101 imposes a statutory requirement of proper form, then the prevailing situation would seem quite the opposite of the Court’s stated view.  That is, that patent eligibility indeed depends on the draftsman’s art and our example appears to confirm as much.

Several points are therefore addressed with this example.

  1. Take care when evaluating inventions for meeting statutory subject matter – rarely are things as simple as they look.
  2. Great care is needed in drafting claims in general but particularly in this area because otherwise there may have been a statutory invention inadvertently left unclaimed.
  3. The policy view that patent-eligibility should not turn on the draftsman’s art is not the full story.

[1] Howard Skaist founded Berkeley Law & Technology Group (BLTG) in 2003 after having been employed as the Director of Patents for Intel Corp.  BLTG has a total of twelve patent lawyers and handles all aspects of intellectual property law practice, including patent law.  Mr. Skaist has also been an adjunct professor at Boalt Hall Law School in Berkeley, CA, at Willamette School of Law in Salem, OR, at Lewis and Clark Law School in Portland, OR, and at Albany Law School.

[2] A separate twist is raised by Sotomayor’s concurrence (also expressly by Judge Mayer recently in I/P Engine v. AOL). Would the second example get over those hurdles?  I would say probably not.  It appears difficult here to argue that the problem solved is technical in nature rather than being directed to organizing human activity.  Thus, three justices would probably say that the second example is also non-statutory.

[3] Of course, one would expect that this would also be true to meet section 103.  However, perhaps a difference is that, for purposes of section 103, dissection is not permitted, at least not yet.  While Alice looks at the claim as a whole as well as the claim elements, it was clear as far back as Flook, that some amount of dissection was permissible.  Alice has made that even clearer, following Mayo, by permitting an element by element analysis.

Federal Circuit: Bingo Gaming Software Improperly Encompasses the “Basic Tools of Scientific and Technological Work”

by Dennis Crouch

Planet Bingo v. VKGS (Fed. Cir. 2014)

In a non-precedential decision earlier this week, the Federal Circuit found Planet Bingo’s patents invalid as lacking eligible subject matter under 35 U.S.C. 101.  The court’s opinion self-identifies as a “straightforward application of the Supreme Court’s recent holding in Alice Corp. v. CLS Bank International.”

The patent claims a computerized method for managing a game of Bingo – yes, the multi-billion dollar industry of Bingo. The basic idea of the invention is that some folks want to play ‘their numbers’ each week.  The computerized system lets individuals pre-select their numbers and also helps the Bingo-hall to track sales, verify winners, and avoid tampering.  VKGS and Planet Bingo compete in the marketplace for bingo equipment.

Claim 1 of U.S. Patent No. 6,398,646 recites typical computer hardware including a computer with a CPU, memory device, a printer, input and output terminal, and also a computer program with particular features.  As is typical with software related inventions, the only novel features of the invention stem from software-related functionality. Here, the program is configured to allow input and storage of the pre-selected Bingo numbers in files associated with the players. A player with stored numbers can then retrieve them to play Bingo. At that point, a control number is also associated with the numbers that can later be used to verify winnings.  The patents also include method claims that basically step through the program steps outlined above.

Although I am no Bingo expert, nothing here appears amazingly inventive. Of course, the challenge to the patent is not on grounds of obviousness or anticipation. Rather, the challenge is on subject matter eligiblity grounds – that the patent unduly encompasses an “abstract idea” and therefore unduly limits “the basic tools of scientific and technological work.”

The Patent Act is broadly written so as to allow the patenting of “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.” 35 U.S.C. 101.  In addition to the text of the statute, the Supreme Court has further restricted the patenting of “laws of nature, natural phenomena, and abstract ideas.”  According to the court, these exceptions to patentability are necessary to protect “the basic tools of scientific and technological work.”  In Alice Corp, the Supreme Court explained:

“[M]onopolization of those tools through the grant of a patent might tend to impede innovation more than it would tend to promote it,” thereby thwarting the primary object of the patent laws. Mayo. We have “repeatedly emphasized this . . . concern that patent law not inhibit further discovery by improperly tying up the future use of ” these building blocks of human ingenuity. Mayo (citing Morse).

Here, the Federal Court found that – yes – those building blocks of scientific inquiry are being inhibited by Planet Bingo’s bingo software patent.  To reach this result, the court began by recognizing that the method and system claims are basically the same and thus should rise-and-fall with the same analysis.  The court then analyzed the case through the lens of the method claims as ineligiblity tends to be easier to show for method claims.

Following the process outlined in Alice Corp., the Federal Circuit first identified the abstract idea as the steps of selecting, storing, and retrieving the bingo numbers, assigning the control number, and checking to see whether the set of numbers is a winner. These steps are collectively an abstract because they are “mental steps which can be carried out by a human using pen and paper.”  Particularly, none of these steps require new technology but rather may be “carried out in existing computers long in use.” (quoting Benson).  Further, the Federal Circuit was unable to find an “inventive concept” in the rest of the claimed subject matter sufficient to transform these abstract ideas into a patent eligible invention. The court writes:

Apart from managing a game of bingo, the claims at issue also require “a computer with a central processing unit,” “a memory,” “an input and output terminal,” “a printer,” in some cases “a video screen,” and “a program
. . . enabling” the steps of managing a game of bingo. These elements, in turn, select, store, and retrieve two sets of numbers, assign a player identifier and a control number, and then
compare a winning set of bingo numbers with a selected set of bingo numbers.

Here, however, the claims recite merely a generic computer and instructions that simply implement the abstract idea discussed above.

Patent Invalid.

Ready to Nationalize Trade Secret Law?

By Dennis Crouch

On the Congressional tees this fall sit a pair of trade secret reform bills with the joint purpose of creating a private cause of action at the federal level for trade secret misappropriation.

  • The Defend Trade Secrets Act of 2014 and
  • The Trade Secrets Protection Act of 2014

Unlike other major branches of intellectual property law, US trade secret rights are predominantly state-based. Thus, my trade secret rights here in Columbia, Missouri depend upon the trade secret law enacted by the Missouri legislature.  Thus, a cause of action for trade secret misappropriation within the state of Missouri would also be brought in a Missouri state court. To be clear, there is substantial uniformity amongst the states based upon the popularity of the Uniform Trade Secret Act (the law in Missouri) as well as cross-pollination of common law principles.

At the national level, we currently have the Economic Espionage Act of 1996 (EEA) that criminalized trade secret misappropriation (as well as conspiracy) that was either (1) done with knowledge or intent to benefit a foreign power (18 U.S.C. § 1831) or (2) related to interstate or international commerce and done with knowledge or intent to harm the trade secret owner. (18 U.S.C. § 1832).

To be clear, the current federal law is a criminal law and, as such, action may only be taken by the federal government (acting through the department of justice).

The proposed modification would largely reboot trade secret enforcement practice with the following addition to the EEA:

An owner of a trade secret may bring a civil action under this subsection if the person is aggrieved by a misappropriation of a trade secret that is related to a product or service used in, or intended for use in, interstate or foreign commerce.

The result of this addition is that essentially every trade secret misappropriation action will be enforceable by the injured party under federal trade secret law.

The proposals do not appear to create any preemption – thus, the federal causes of action would parallel the state-rights in much the same way as trademark and unfair competition laws.

In his testimony before Congress on the issue, Doug Norman explained that the variety of state laws overly confusing for multi-national powers such as his employer Eli Lilly.  David Kappos has also called for the nationalized trade secret enforcement – noting that “the lack of [federal] protection has led to a host of problems that threaten U.S. companies’ competitiveness at home and abroad.

A group of 31 law professors (who teach trade secret law) led by Professors Sharon Sandeen (Hamline) and David Levine (Elon) have countered with a letter explaining that adding this additional layer of potential civil action would be harmful to the balance inherent in the current state-based system. They write:

This deep body of state law creates its own benefits; as the general principles of US trade secret law are well-established and substantially uniform, there is a high level of predictability by and for US businesses and their attorneys. But because the Acts cannot entirely preempt state trade secret law … they will result in confusion, as well as less uniformity and predictability. As a result, the business community will suffer from decreased predictability in the law with … no corresponding benefits.

To be clear, the professors are not against trade secret protection, but instead recognize that the proposal will unsettle the law and may lead to overzealous protection in federal courts.

Further, the professors do not appear to be strongly against nationalized trade secret protection. And, that solution may well be a positive approach. In his essay on the topic earlier this year, David Almeling saw this progression as following a natural order:

Trade secrets are the only major type of intellectual property (i.e., copyrights, patents, trademarks, and trade secrets) not governed primarily by a federal statute. Copyrights and patents got theirs in the 1700s. Trademark got its in the 1800s. Now that we’re firmly in the information age, it’s time for trade secrets to join their peers.

So, the particular major issues here with the proposed law is that it is entirely lacking in details – what is meant in the Bill by the key terms “trade secret” and “misappropriation.”   The lack of details are problematic when coupled with the Supremacy Clause of the US Constitution.  Most trade-secret cases are linked to other state-law issues such as employment and contract law.  The new nationalized trade secret law would reign supreme over these other areas that have up-to-now been given equal weight.

Federal Circuit Reminds Courts of Discretion on Fee Awards

By Jason Rantanen

Icon Health & Fitness, Inc. v. Octane Fitness, LLC (Fed. Cir. 2014) (nonprecedential) Octane Fitness Remand
Panel: Newman, Mayer, and Lourie

In Octane Fitness v. Icon the Supreme Court rejected the “objectively baseless” legal standard that the Federal Circuit had been applying in exceptional case determinations.  Procedurally, the appeal was of the district court’s ruling that this case was not exceptional under 35 U.S.C. § 285, which the Federal Circuit had affirmed under its then-authoritative standard.  Following remand by the Supreme Court, the Federal Circuit has itself now remanded the case back to the district court for further proceedings consistent with the new legal standard.

Most of the nonprecedential opinion involves a straightforward recitation of portions of the Court’s holding:

The Supreme Court abrogated both the clear and convincing evidence standard and the two-part test for objective baselessness and subjective bad faith of Brooks Furniture. Octane, 134 S. Ct. at 1757–58. The Court held that within the context of § 285 “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.” Id. at 1756. The Court further concluded that “[d]istrict courts may determine whether a case is ‘exceptional’ in the case-by-case exercise of their discretion, considering the totality of the circumstances.” Id. The Court explained that there is no precise rule or formula for making those determinations and noted that district courts should exercise “equitable discretion” in considering a nonexclusive list of factors that could include “‘frivolousness, motivation, objective unreasonableness (both in the factual and legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence.’” Id. at 1756 n.6 (quoting Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 n.19 (1994)). The Supreme Court also observed that “a case presenting either subjective bad faith or exceptionally meritless claims may sufficiently set itself apart from mine-run cases to warrant a fee award.” Id. at 1757.

Slip Op. at 5-6. However, the Federal Circuit also took the opportunity to remind district court judges that the inquiry does not end with the exceptional case determination.  Specifically, under earlier Federal Circuit precedent, the court held that district courts can continue to apply their discretion even after a case is determined to be exceptional:

The Supreme Court’s decision in Octane did not, however, revoke the discretion of a district court to deny fee awards even in exceptional cases. Long before Brooks Furniture, we held that “an exceptional case does not require in all circumstances the award of attorney fees.” S.C. Johnson & Son, Inc. v. Carter-Wallace, Inc., 781 F.2d 198, 201 (Fed. Cir. 1986); see also Gardco Mfg., Inc. v.
Herst Lighting Co., 820 F.2d 1209, 1215 (Fed. Cir. 1987) (“After the district court determines that a case is exceptional, there remains in every case its freedom to exercise its discretion informed by the court’s familiarity with the matter in the litigation and the interest of justice.” (internal quotations omitted)). Indeed, in the companion case Highmark, the Court held that “[b]ecause § 285 commits
the determination whether a case is ‘exceptional’ to the discretion of the district court, that decision is to be reviewed on appeal for abuse of discretion” and that
district courts should have discretion in “all aspects of [the] § 285 determination.” Highmark, 134 S. Ct. at 1748–49.

Slip Op. at 6.  The court goes on to remand the whole mess back to the district court to apply its discretion under the new standard (and presumably, to also apply its discretion to the award of fees).

What I find particularly fascinating about this whole area of law is that there is a substantial line of intertwined Section 284 and 285 cases that deal with the district court’s discretion on fee awards after a finding of willful infringement or that a case is exceptional.  These cases (which often involve an analysis under the factors set out in Read Corp. v. Portec, Inc., 970 F.2d 816, 826–27 (Fed.Cir.1992) are essentially a totality of the circumstances analysis.  This produces two interesting results.  First, although I haven’t fully thought through whether two issues are sufficiently parallel, it seems that there’s a relevant body of law on totality of the circumstances analyses in this context that already exists that courts will be able to draw upon when applying the Court’s new standard for exceptional case determinations.  Second, how should the analysis play out if both the exceptional case determination and the decision to award fees (and how much those fees should be) involve essentially the same totality of the circumstances inquiry?  Does it make sense to retain a formal distinction between the exceptional case determination and the amount of the fee award?  My sense is that the answer is yes, particularly since there will inevitably be factors in the amount-of-fee determination that are not relevant in the is-the-case-exceptional determination (for example, I have seen a district judge apportion fees based on what happened with which patents, with fees being granted for attorney activity in connection with one patent but not when the activity was solely related to other patents involved in the litigation).

Guest Post by Prof. Risch: A Generation of Patent Litigation: Outcomes and Patent Quality

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

Full article available here.

Almost three years ago, I guest posted here about Patent Troll Myths, my study of the ten most litigious NPEs at that time. One of my great regrets in that study was that I did not have a control set—a randomly matched sample to compare against the studied NPEs. Thus, in that paper, I tried to compare with other people’s outcome data. In the years since much has happened. First, most of the cases I studied came to resolution. Second, I collected data on nonNPE litigation to compare with my NPE litigation. I gathered data on 1313 cases distributed over a 25 year period in roughly the same proportion as the 917 cases filed by NPEs over that time. The numbers grow substantially starting in 2004. This led to 792 nonNPE patents versus 352 NPE patents, which indicates that the NPEs asserted the same patents in more cases.

The result is my new paper, A Generation of Patent Litigation: Outcomes and Patent Quality, which is forthcoming in San Diego Law Review. This is the first of at least two papers; the next one will focus on innovation and markets. The paper is full of comparative data about number of defendants, number of patents, choice of districts, complexity of litigation, etc. I don’t have enough room here to describe all of it, so I want to point out some of the key takeaways.

First, the data confirms the conventional wisdom: that NPEs prefer to settle earlier. There were more settlements among NPEs, many fewer trials, and durations were shorter even when holding things that lengthen cases constant, like appeals, merits rulings, and stays. There was one effect that bears further mention, though: NPEs filed more cases that were transferred or consolidated, and transfer/consolidation tended to lengthen cases.

Percentage of Cases Transferred or consoldiated

Even this, however, was not enough to make NPE cases longer. First, NPE transferred cases were shorter than nonNPE transferred cases (some might argue because NPEs dropped many cases if they were transferred, but the data doesn’t show that either way). Second, NPE cases were so much shorter that the average NPE case – including all those that were transferred or consolidated—was only 20 days longer than the average nonNPE case – excluding transferred cases. Once the transferred cases were added back to the nonNPE total, the average difference grew much longer. Full regressions are presented in the paper.

Second, when adjudicated on the merits, NPE patents were invalidated about 3 times as often as nonNPE patents. However, this was only about 12% of all the patents asserted by NPEs. Furthermore, this 12% was invalidated in less than 3% of the cases. For nonNPEs, it was about 4% of the patents in about 1.8% of the cases.

Percentage of cases adjudicated on invalidity merits, NonNPE v. NPE

Percentage of cases adjudicated on invalidity merits, NonNPE v. NPE

That is, of the patents asserted by NPEs, 88% were never tested on the merits, and 97% of the cases did not involve a patent invalidation. Most studies only report invalidity rates once a patent is adjudicated (and it’s bad for NPEs, like 91% of adjudicated patents because patents are only validated after trial, and NPEs never go to trial). This study asks what about the other 97% that are never adjudicated? I suspect the answer will vary depending on who you talk to, though I give some clues based on procedural dismissals, etc. The full paper includes reexamination results as well. Interestingly, reexaminationrs were only lightly correlated with litigation results.

Third, because I had data about all of the cases involving each of the patents, as well as the outcomes in each of those cases, I was in a unique position to test something I don’t think anyone else has been able to test: what causes a patent to by invalidated? The problem with just focusing on those patents that are adjudicated is that you lose most of the data in the set – data about the very same patents asserted by the same parties against potentially similar parties. The question is why does a patent eventually get invalidated?

It turns out that there is nothing on the face of the patent that will tell you. All of the traditional patent metrics, like future citations, number of claims, continuations, etc. are not statistically significant. (It turns out that this is true even if you look at adjudicated patents). Instead, aside from unobserved features of the patent (perhaps it’s “true” quality) and technology (which will be addressed in a later paper), the factors that most correlate with invalidation in court are those that relate to whether the defendant is more likely to challenge the patent in the first place. Thus, the number of defendants, number of times the patent has been asserted, the number of reexaminations (but, interestingly, not the results of the reexaminations), etc., are most predictive of invalidation. Now, to be sure, the NPEs in the study were more likely to do these things, but once the regression corrected for these choices and other selection variables, the NPE dummy variable added zero explanatory power in the model. Invalidation was a function of suing too often, suing the wrong parties, suing too many parties, or suing on too many patents at once, regardless of NPE status.

There was one further surprising result in all of this. Backward citations, or the number of other references cited in the patent, had a significant effect on invalidity. But the sign was wrong! The more citations, the more likely a patent is invalid. This is contrary to the conventional wisdom that “gold plating” with more references can help the patent. My interpretation is that more references means that the patent was one more likely to be asserted in a high impact way (thus, reexamined, etc.), and that backward citations is merely another variable that identifies likelihood of a challenge. I do not think it is about crowded art, because forward citations do not have the same result, which you would expect in a crowded art.

That’s all I can write in a guest post, but there is much more in the paper, including examination of infringement, reexamination outcomes (and their correlation to litigation outcomes), choice of district over time, etc. This is prepublication, so comments appreciated.

Giving Effect to the Order of Steps in a Method Claim

Mformation Tech v. Research-in-Motion (Fed. Cir. 2014)

Although several important patent litigation procedure issues are embedded here, the most important legal outcome of this case is the Court’s construction of the method claim to require a particular stepwise order – even though the order is not express in the claim itself.

Mformation’s Patent No. 6,970,917 claims a client-server method for managing a wireless device’s mailbox. The steps include:

transmitting registration information relating to the wireless device from the wireless device to the server;

verifying the registration information at the server; and

without a request from the wireless device, performing the steps of:

establishing a mailbox for the wireless device at the server,

placing a command for the wireless device in the mailbox at the server,

delivering the command from the mailbox at the server to the wireless device by establishing a connection between the wireless device and the server, transmitting the contents of the mailbox from the server to the wireless device, and accepting the contents of the mailbox at the wireless device, and

executing the command at the wireless device;

wherein the connection is established based on a threshold condition.

After for years of litigation, the jury found that BlackBerry infringes ($200 million verdict), but the federal district court rejected the people’s verdict on motion for JMOL.

The basic question at issue is claim construction – and whether the step of “establishing a connection between the wireless device and the server” must occur prior to the step of “transmitting the contents of the mailbox from the server to the wireless device.”  Apparently, in the blackberry device, a connection to the mobile device is established contemporaneously with the transmission of contents.

In finding a required order of operations, the Federal Circuit writes:

We agree … that claim 1 requires that a connection be established before transmission. We are persuaded … that the separate sub-step for establishing a connection would become “superfluous” if we concluded that a connection did not have to be established (completed) before transmission. That is because, under such construction of the claim, establishing a connection is necessarily encompassed in transmitting a command.

Further, we note that other sub-steps in claim 1 inherently require an order-of-steps. . . . And while it is true that “we have expressly rejected the contention that if a patent describes only a single embodiment, the claims of the patent must be construed as being limited to that embodiment,” Phillips v. AWH, we do note that our conclusion is consistent with the sole embodiment in the specification.

Thus, the basic idea here is not that the listing of steps in a particular order necessarily means that the claims require that particular order.  What is implicit here, however, is that the listing order is important and will be given limiting effect when additional factors corroborate that result.

= = = = =

An odd element of the case is that the district court’s JMOL determination (rejecting the jury verdict) was based upon its post-verdict “clarification” of the claim construction. There is some prior precedent barring district courts from altering claim construction post-verdict. Thus, here it was important that the Federal Circuit found that the claim meaning had only been “clarified” rather than substantively modified.

During the trial, the patentee’s infringement testimony and evidence relied upon the original claim construction that did not expressly require the stepwise ordering. Thus, it is not surprising that evidence presented fails to prove infringement under the new construction.  What is surprising, however, is that the Federal Circuit did not order a new trial based upon the modification.

Guest Post: Publishing Design Patent Applications: Time to Act

Gary L. Griswold

Mr. Griswold is a Consultant residing in Hudson, WI and was formerly President and Chief Intellectual Property Counsel for 3M Innovative Properties Company. The essay reflects the views of the author. He wishes to thank Bob Armitage and Mike Kirk for their excellent contributions to the essay.

Overview

Design patenting has come of age. According to a recent World Intellectual Property Organization (WIPO) study, the filing of design patent applications more than doubled between 2004 and 2011.[1] The stakes in design patent litigation today can be enormous. One commentator on the recent Apple-Samsung iPhone IP wars noted, “After operating in the intellectual property backwaters for years, design patents took center stage in the epic battle.”[2]

Enterprises of all sizes have come to recognize the value to be had from securing patents on their innovative designs. This also means that more businesses now need to consider whether design patents of others might impair their freedom to operate when placing a new product on the market.

Unlike conventional (“utility”) patent applications, design patent applications are not subject to the “publication” provisions that were placed in the U.S. patent law in 1999 with the enactment of the American Inventors Protection Act (AIPA). Utility patent applications, with a few exceptions, must all be published and made publicly available within 18 months after filing.[3]   However, all design patent applications are required to be kept in secret in the United States Patent and Trademark Office (USPTO) until the patent issues on the application.

Today this secrecy can have significant and negative consequences – for the design’s creator and for those who commit resources to manufacture a similar product before the issuance of the design patent. Unlike most utility patents today, the first inkling that a patent is being sought on a new product’s design may come with grant of a design patent, in other words come at the end of the examination process in the USPTO.

The growing importance of design patents suggests that this exclusion from publication with respect to design patent application publication should be rectified by Congress. This can best be done by requiring that all pending design patent applications be made available to the public by publishing these applications at 6 months after the date that they were originally filed.

Doing so would put the public on notice, shortly after the design patent application is filed, that a new product’s design may be protected. The growing prominence of design patenting, as well as other developments in the law since 1999, now make it timely for Congress to act.

Background

Two major pieces of patent legislation over the past 15 years have worked to make the U.S. patent law operate with vastly greater transparency, predictability and simplicity. The AIPA, with its requirement that most new non-design patent filings must be published at 18-months after their original filing dates was followed by a host of even more significant patent reforms. These were contained in the Leahy-Smith America Invents Act (AIA) of 2011.[4]

Key provisions of the AIA were designed to allow inventors to accurately assess whether they could secure – or had secured – a valid patent. For utility patents, access to earlier-filed patent applications comes though the AIPA’s publication provisions. Clearly, since some patents can take years to issue, holding earlier-filed patent applications in secrecy in the United States Patent and Trademark Office (USPTO) until a patent issued meant that an inventor might mistakenly invest based on the apparent validity of a patent that might then evaporate upon the issuance of a patent on a never-published, earlier-filed patent application.

The AIA also sought to assure that members of the public could more effectively participate in the patenting process. It allowed members of the public to be involved in the determination of whether a claimed invention in a patent application can be validly issued as a patent, both before the patent issues and after the patent issuance.

If action is taken promptly after a pending patent application is published, the AIA permits a member of the public to make a “pre-grant submission” of relevant prior art that the patent examiner handling the patent application must consider in deciding whether a patent should issue on the application.[5] These submissions, most notably include the earlier-sought patent applications of other inventors that have been published under the AIPA’s provisions.

In addition, the new “post-grant review” or “PGR” provisions of the AIA permit a member of the public to raise in a USPTO proceeding any issue of a patent’s validity that could be raised in court by someone accused of infringing the patent. However, these PGR provisions, like the pre-grant submission provisions, require that an individual act promptly. In this case, the PGR petition must be filed within nine months of the issue date of the patent that is being opposed.

Given the formidable requirements for requesting a PGR, most individuals making a PGR request will benefit from advance notice that a patent is about to issue. This notice, of course, is automatic when the patent application has been published under the AIPA’s provisions.

The manner in which the AIA built upon the AIPA’s provisions, both with pre-grant submissions and with post-grant review, work to benefit patent owners and their potential competitors alike. However, while these new pre-grant and post-grant provisions technically apply both to design and utility patents, the lack of any “publication provision” for design patents means that these provisions are now significantly less effective for designs.

The Rationale for Excluding Design Patents from the AIPA Publication Provisions No Longer Makes Sense

When the AIPA was enacted, there were two significant exceptions to the rule that pending applications for patent would be published and made publicly accessible. First, these provisions allowed inventors seeking only U.S. patents to opt-out of the publication requirement. This was done for inventors interested in patent protection only for the U.S. market on the assumption that at least some of them might not want their inventions publicly disclosed if they were ultimately not going to be able to receive a valid patent. However, for almost all such inventions, marketing the invention necessarily discloses to the public what the invention is and, in fact, discloses much more about the invention to the public than would normally be found in an inventor’s patent application if published.

Thus, this rationale, particularly today, makes little sense. The inventor can be “protected” from public disclosure by opting-out of the publication provisions of the AIPA only in the situation where the invention is never commercialized and essentially has no economic value, or in the limited situations where the invention can be effectively practiced as a trade secret. Consequently, it is a protection that seldom affords any economic value to the inventor.

Under the AIA, the publication of an invention in a pending patent application provides an inventor with a guarantee that no one else will be able to successfully secure a patent on the same or a similar invention based on an application filed after the inventor’s patent filing. Where someone subsequently files for a patent, the earlier-filed application limits the later-filing inventor to validly patenting only subject matter both novel and non-obvious over what was disclosed in the earlier-filed application.

Design patents were totally excluded from the 18-month publication provisions. The rationale for the design patent exclusion can be found in the legislative history of the AIPA: “Since design applications do not disclose technology, inventors do not have a particular interest in having them published.” That statement, whatever its validity then, was made before design patenting came of age and has little relevance today, as evidenced by the litigation between Apple and Samsung.

Another reason given for the design exception was that “The Hague Agreement Concerning the International Registration of Industrial Designs” was being revised and that any change to the design patent law should await the outcome of that exercise. That outcome is now clear; Congress has acted to remove the exception for design patents filed under The Hague Agreement.[6]

Yet another reason that design patents may have been left out of the mix when the publication provisions of the AIPA were being drafted was the short pendency of a design patent application. “Pendency” is the time taken by a patent examiner between filing and issuance of the design patent. With pre-grant submissions of prior art and post-grant review under the AIA now in place, that relatively shorter pendency before the Patent Office for design applications versus utility applications makes it much more important to have design applications not only published, but published quite promptly, i.e., at six months from the patent filing.[7]

The last reason Congress may have excepted design patents from publication is that some manufacturers may not have wanted the designs for new products to be prematurely disclosed, prior to market introduction.[8] Under the AIA, however, the filing of a design patent application assures that no similar designs can be patented based upon a later-filed design patent application. In addition, early publication puts competitors on notice that there is a “patent pending” on the design so that they dare not copy the design without the risk of infringing a subsequently issued design patent. Instead of a problem for manufacturers, pre-grant publication carries with it undeniably important benefits.

In addition to the “notice” function that arises from publishing a design patent application, inventors whose design patent applications publish secure yet another benefit under the AIPA. They can qualify for “provisional rights” – that is the right to collect reasonable royalty damages from anyone who uses the design during the period from the date the user received notice of the published design application until issuance of the patent on the design.[9] This again reflects the upsides of publication, much potential gain with a negligible prospect of incurring any pain.

Conclusions

The AIA increased the openness and transparency of the patent system by providing for pre-grant submissions and post- grant review. These provisions work to protect the public against patents that lack valid claims – and similarly protect the inventor from making investments in reliance on patents that could never be successfully enforced. Those aspects of the AIA are premised in part on the publication of pending patent applications.   Whatever reasons can be cited for excluding design patent applications from these important provisions of the AIPA, such reasons now have only historic significance. Today, all design patent inventors deserve equal treatment. The availability of the benefits of publishing pending design patent applications should not depend on where a design patent inventor seeks patent protection.

In sum, the agreement to allow publication of design patent applications filed by U.S. inventors under The Hague Agreement represents a significant step by the United States toward achieving the open, transparent 21st century patent system contemplated by the AIPA and AIA. The increase in design patent application activity – and the prominence of design patent enforcement efforts – renders this a perfect time to remove the exclusion from publication of those design patent applications filed only in the United States.

 

[1] According to WIPO, in 2012, “the 1.22 million industrial designs contained in applications grew by 17%—the highest growth on record.” http://www.wipo.int/export/sites/www/freepublications/en/statistics/943/wipo_pub_943_2013.pdf, at p. 4.

[2] See http://designpatentattorney.com/wp-content/uploads/2013/01/Carani-Lanslide-Article-Design-Patents-Take-Center-Stage-Jan-Feb-2013.pdf.

[3] Most utility patent applications must be published under the AIPA’s publication provisions. The time period set for publishing utility patents is 18 months after the initial patent filing date. 35 U.S.C. § 122(b).

[4] The United States adopted a so-called first-inventor-to-file system as the principle for determining what subject matter can represent “prior art” to a claimed invention. Also, a number of subjective and non-transparent aspects of the rules on patenting were removed.

[5] Because prior art can be submitted to the USPTO anonymously, members of the public and competitors of the applicant are normally comfortable in making such submissions. Since the processing time is shorter for design patent applications than that of utility patent applications, a narrower time window (e.g., before the earlier of a notice of allowance and the later of (1) the first rejection or (2) 2 months after publication) would be necessary for submitting third party submissions.

[6] The implementing legislation for the Geneva Act of The Hague Agreement has been enacted by the United States and rules for its implementation are being finalized by the USPTO. Once the rules are completed, the formal process for membership will be initiated and completed. The Common Regulations Under the 1999 [Geneva] Act and the 1960 Act of The Hague Agreement provide for publication of international applications six months after the date of the international Registration (which occurs upon receipt by WIPO of the international application). This publication of the international application will be considered a publication in the U.S. under 35 USC 390. The U.S. will not allow deferral of publication. Thus, any concerns related to the early publication of design patent applications as a policy matter have already been decided by Congress in favor of publication.

[7] As with utility patent applications, the public may well be aware of better prior art for design patent applications than the USPTO. If design patent applications were published, interested members of the public could submit prior art to the USPTO with the result that any issuing design patents would have been more thoroughly examined, benefiting both the applicant and public.

[8] Because of the speed of issuance, design applications filed only in the U.S. would need to be published 6 months after their U.S. filing date. Any concern with timing of publication relative to commercialization would seem to be handled by a 6 month period between filing and publication, which mirrors The Hague Agreement, and the relatively rapid grant (typically 15 months) of design patents.

[9] By providing that publication under The Hague Agreement will be deemed a publication under 35 USC 122(b), the implementing legislation (35 U.S.C. 390) makes such design patent applications eligible for provisional rights under 35 USC 154(d).

Accelerating ex parte PTAB Appeals: For a Fee

By Dennis Crouch

The Patent Trial and Appeal Board (PTAB) is burdened with a statutory mandate to quickly reach final determination in its post-issuance review trials. To meet that requirement, the PTAB has put tremendous resources into its trial teams to ensure sufficient bandwidth to handle the hundreds of inter partes trials. At the same time, a 25,000 case backlog of pending ex parte appeals persists at the Patent Trial and Appeal Board.  Those cases do not have as clear of a statutory-mandate for rapid processing and, as a result, have clearly languished as the Board developed its post-issuance review trial program with most cases now waiting more than three years for a decision from the Board. (Notice-of-Appeal to Board Decision).  Rather than dealing with its poor statistics, the PTAB appears to have simply stopped publishing them.

For many patent applicants (though certainly not all), the appeal delay is costly because it extends a period of ambiguity and it delays issuance of the patent rights.  Certainly, the vast majority of long-pendency patent applications (those that issue more than 7 years after filing) spent considerable time in the appeal queue awaiting a reversal of an examiner rejection. Those late-issued patents have the potentially of being disruptive to marketplaces that have developed and grown in the absence of an issued patent.

A few months ago, I conducted what I called a “10-second”survey on Patently-O regarding the potential market for accelerated PTAB decisions in ex parte cases.  I asked:

Would you pay an extra $5,000 for accelerated PTAB decisions in ex parte cases that issue[] within nine months rather than waiting the standard 2 1/2 years?

I should note that the 2 ½ year figure had increased. The results are instructive and somewhat fit the model seen with the $4,000 fee for prioritized “track one” examination, although the market for accelerated appeals seems somewhat greater.  The vast majority of the 614 responses indicated that they would use the fast track in at least some cases – with most indicating that the fast track would be used in >5% of cases.

AcceleratedAppeals

Although not any final word on the market for accelerated appeals, the chart is indicative of a demand for accelerated appeals.  And, although not a solution to the docket problem, acceleration of a subset of appeals offers the potential of alieviating the most some of the more pointed needs.

I should note here that a subset of accelerated examination cases (“made special”) are also accelerated when pending before the PTAB. However, those do not include prioritized examination cases under the pay-for-speed program.  I do not have any statistics on how that acceleration impacts the timing of appeals.

Court Finds Patent Invalid; Then Orders Defendant to Stop Infringing

By Dennis Crouch

Following the Supreme Court’s equitable relief decision in eBay, many patentees have found it difficult to obtain injunctive relief to stop ongoing infringement – even after final judgment that the patent is both valid and infringed.

In a recent decision, the District Court Judge Blake (D.Md.) seemingly flipped eBay on its head by enjoining TWi Pharma from making or selling a generic version of Par’s patented Megace ES formulary. The upside-down element of the decision is that the order granting the injunction issued only after the court found the patent claims invalid as obvious. Par Pharma v. TWi Pharma, 1-11-cv-02466 (MDD August 12, 2014, Order). To be clear, the order here is not for permanent relief, but only relates to injunction pending appeal.

The doctrine involving the grant of equitable relief pending appeal is a bit squirrelly – especially at the district court level because the general setup involves the court deciding that its decisions are likely wrong. Recognizing that, the law does not require the moving party to show that its case is a likely winner but only a substantial likelihood that the requested equitable relief will be entered as a result of the appeal. Applying this standard, the district court writes:

Par claims that it will succeed on the merits because this court erred in its application of the law with respect to motivations to combine the prior art and inherency. Although the court stands by its judgment, it recognizes that the case presents a close call. Further, the Federal Circuit will conduct a de novo review of whether the ’576 patent is obvious, including whether this court properly interpreted the law regarding motivation and inherency. . . . The court is not persuaded Par has demonstrated a “strong” likelihood of success on appeal—especially given that most of its dispute with this court’s earlier decision is only rehashing the legal arguments it has already made. Par has, however, made a showing of a substantial case.

The district court joined this “substantial case” on appeal with strong evidence of irreparable harm absent relief in its decision to grant the injunction pendente lite.

Regarding the ‘public interest’ element of equitable relief, the court found that element neutral.

The court recognizes that the public is served by the availability of low-cost generic medications, especially where an invalid patent has previously barred their entry into the market. On the other hand, the public also has an interest in the protection of valid patents because it promotes innovation. This factor, therefore, is neutral.

An interesting and problematic element of the court’s decision here is that the doctrinal approach makes it easier for a patentee to obtain temporary relief following an adverse final judgment (of invalidity) than prior to such a judgment. The doctrinal difference highlighted by the court between preliminary injunctive relief pending final judgment and post-decision relief pending appeal is simply that the proof of likelihood-of-success is reduced for relief pending appeal. This is obviously problematic because in the second case, the court will have already reached a final judgment that the patentee loses.

In making its decision, the district court applied Federal Circuit precedent regarding relief pending appeal. However, those cases relate generally to the asymmetrical situation of staying-injunctive relief pending appeal rather than, as here, granting injunctive relief pending appeal.

There is a better approach that still recognizes the potential need for injunctive relief pending appeal and that is simply requiring a greater showing of need for relief (irreparable harm; balance of hardships; public interest) when the likelihood-of-success element is reduced.

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.

= = = = =

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.