The Concentrated Market of Patent Jurisdictions

The chart below shows the relative distribution of new patent lawsuit filings (complaints) over the past decade.  I included the top four most popular jurisdictions (E.D.Tex., D.Del., C.D.Cal., and N.D.Cal.) and also a catch-all category for the sum of the other 90 or so districts in the country.  LawsuitDistribution

You’ll note that E.D.Tex. has been the leading district almost every year for the past decade, but that growth has increased since the AIA (2011) and even further increased in 2014 and 2015.  Part of ramp-up comes from the fact that the E.D.Tex. cases already had more defendants-per-patent and the joinder provisions of the AIA could be seen as a natural expression of that phenomenon.  However, the rise in 2015 can’t be so easily explained.

If you calculate the HHI, this now looks like a very concentrated market.

Trans Pacific Partnership

The Trans-Pacific-Partnership is now much closer to reality with substantive agreement between the 12 member nations that include the US, Canada, Mexico, Japan, Australia, et al. (but not China).  The new multilateral trade agreement has not been made public, but reportedly includes a number of intellectual property elements with special protections against copyright theft for the US entertainment industry and generic competition for the branded pharmaceuticals.  Congress will need to approve the agreement to make it effective in the US, but is likely to do so if Republicans get their act together.

A final version of the text should be available in November.

Patentlyo Bits and Bytes by Anthony McCain

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Cuozzo Takes IPR Challenge to the Supreme Court

Cuozzo Speed Tech v. Lee (Supreme Court 2015)

Cuozzo lost its petition for en banc rehearing in a 6-5 split of Federal Circuit judges.  Now, the patentee has raised is challenge to the IPR process to the Supreme Court – asking two questions:

  1. Whether the [Federal Circuit] erred in holding that, in IPR proceedings, the Board may construe claims in an issued patent according to their broadest reasonable interpretation rather than their plain and ordinary meaning.
  2. Whether the [Federal Circuit] erred in holding that, even if the Board exceeds its statutory authority in instituting an IPR proceeding, the Board’s decision whether to institute an IPR proceeding is judicially unreviewable.

Answers to these questions will fundamentally alter the inter partes review system. The petition does a good job of walking through the importance of the case and then separately explaining their legal argument.

I’m sure that we’ll cover this case more as the briefing moves forward – amici have 30 days to file.  Meanwhile, read the petition here: Cuozzo Speed Technologies LLC v Michelle K Lee Petition for a Writ of Certiorari

The Cuozzo petition was filed by a rising star in Supreme Court practice – Jeffrey Wall, who is partner at Sullivan & Cromwell.  Wall was a clerk for Justice Thomas and was an Assistant to the Solicitor General for five years. He also has the distinguishing mark of being my law school classmate (as well as Prof. Rantanen).


Guest Post: The Blurring Of §§ 101 and 103—A Double-Edged Sword that Cuts the Other Way

Guest post by Ben Roxborough.  Mr. Roxborough is one of a few dual citizens who have completed federal court clerkships in both the United States and Australia. He has clerked in the U.S. for three years and practiced in Australia for five years, writing articles on how Australian courts developed a workable doctrine for patentable subject matter. He earned an LL.M. degree at Stanford Law School, specializing in intellectual property. This is not legal advice, and he welcomes any comments or criticisms:

To say that the sands have been shifting with respect to Section 101 jurisprudence would severely understate the seismic change that it has experienced in recent years; ever more so in recent months. The consequence is that the lines between sections 101, 102 and 103 have been blurred. This consequence appears to stem from statements in Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289, 1304 (2012), where Justice Breyer suggested that the inquiries “overlap.” Indeed, three years later, the Federal Circuit panel in Internet Patents Corp. v. Active Network, Inc., 790 F.3d 1343, 1347 (2015), went as far as saying that a “pragmatic analysis of § 101 is facilitated by considerations analogous to those of §§ 102 and 103.”

Because the lines have blurred, defendants have been able to rely on 102/103 arguments to invalidate patents on 101 grounds. These arguments, which defendants tend to advance at the second step of the Mayo/Alice framework, generally state that the additional steps—beyond the putative ineligible subject matter—are conventional because they can be found in the specification or are so ubiquitous that the court can treat them as routine and well understood by those in the scientific community. In Mayo, 132 S. Ct. at 1298, for example, Justice Breyer cited admissions in the specification that the processes for determining the level of metabolites in a patient’s blood were “well known in the art.” The patent lacked inventive concept because of this. Relying on Mayo, among other cases, defendants now make a simple argument. The argument may be summed up as: “Your Honor, if you combine what’s described in the specification and prior art with the ineligible subject matter, you’ll find that the patent claims are routine and conventional and do not meet the 101 threshold.”

In effect, the 101 ineligibility defense has become a de facto 103 defense, targeting primarily combination patents. But putting aside the fact that this de facto argument reflects a conclusion (rather than any real analysis), the argument is extraordinary because prior art in the specification is used against the patentee. No evidence other than the specification is being proffered to support the defendant’s position (which may mean that the prior art in the specification is an admission, but no patentee would say that the combination of the prior art elements were well known in the art at the time of the invention). And although some district courts have acknowledged this paradox, the argument tends to be successful as it was in McRO, Inc. v. Namco Bandai Games Am., Inc., No. CV 12-10327-GW, 2014 WL 4749601, at *11 (C.D. Cal. Sept. 22, 2014).

But it doesn’t end there: the patentee’s perilous position is only compounded further when the defendant seeks dismissal of the claim pursuant to Federal Rule of Civil Procedure 12(b)(6) because the patentee generally cannot proffer evidence outside the four corners of the complaint (and patent) that could undercut the defendant’s position. This seems unfair from not only a procedural perspective, but also a substantive one. When looking at a combination patent, what courts most want to know (or should want to know) is: “Who would have thought to combine the elements of the invention in the first place, and why?”

These basic concerns are central in the 103 context. But they should be equally relevant in the 101 context. Defendants have had a field day eviscerating patent after patent since Alice using ‘obviousness-like’ arguments to show that the patent lacks inventive concept. What is required in response to these developments is judicial recognition of ‘obviousness-like’ arguments that cut the other way. The article I am writing seeks to develop these themes, so to place plaintiffs and defendants on equal footing under Section 101. They are summarized here (and, admittedly, are far from fully developed):

  1. THE SKILLED ARTISAN: To provide the 101 analysis with an objective baseline, courts need to define who the skilled artisan is—and what she knew at the time of the invention. Sometimes a plaintiff is precluded from presenting such evidence because courts now decide a significant number of 101 cases at the Rule 12(b)(6) stage. To guard against early Rule 12(b)(6) motions, the skilled artisan’s background should be described in the complaint (or even the patent itself). Or, the Defendant should be required to show ineligibility within the confines of Rule 12(b)(6). This is less of a problem at the Rule 56(a) stage because the patentee has a chance to present skilled artisan’s common general knowledge. Critically, however, in those cases now on appeal—where the district court has not properly articulated the skilled artisan’s background—the Federal Circuit should be remanding such decisions for further factual development of the record. Placing greater emphasis on the skilled artisan can only make the 101 analysis a more balanced one.
  1. SOLVE THE PROBLEM: Defendants are using the specification against the patentee. But what is referenced in the specification can actually help the patentee demonstrate that the additional steps beyond the ineligible subject matter constitute inventive concept. Specifically, plaintiffs should turn the tables and point to the specification to demonstrate the problems faced by those in the field—and why the invention provides a “new and useful” solution. 35 U.S.C. § 101. Taking a problem-solution approach to define what is “new and useful” is precisely the type of analysis that Judge Chen applied in DDR Holdings, LLC v., L.P., 773 F.3d 1245 (Fed. Cir. 2014), though it has its roots in Diamond v. Diehr, 450 U.S. 175, 188 (1981) and the Supreme Court’s more recent holding in Alice also reflects this approach.
  1. TEACHING AWAY: This analysis typically applies in the 103 context. But what stops it from being relevant in the 101 context? To this point, the recent BRCA1 decision has opened the door for its application. In re BRCA1- & BRCA2-Based Hereditary Cancer Test Patent Litig., 774 F.3d 755, 764 (Fed. Cir. 2014). Just as Justice Breyer tethered the notion of what was “well known in the art” by referring to the specification for 101 purposes, the Federal Circuit in BRCA1 has tethered that same notion to “techniques that a scientist would have thought” to use when deciding to engage in experiments that were directed to the invention. But if inventors engage in activities that run counter to scientific thought, those activities can hardly be considered routine and conventional in a 101 sense, correct? While some may say that teaching away analysis should be reserved for § 103 (and to do so would otherwise conflate § 101 with §103), several reasons militate against this position. First, as stated above, the Supreme Court and Federal Circuit have said that § 101 is facilitated by considerations analogous to those of § 103. Second, teaching away analysis should not be monopolized by § 103. In fact, evidence that teaches away is already relevant to enablement (§ 112) to show that “a significant amount of experimentation would have been necessary to practice the claimed invention.” Liebel-Flarsheim Co. v. Medrad, Inc., 481 F.3d 1371, 1379-79 (Fed. Cir. 2007). Because teaching away analysis is transferable between different sections in the statute, there would seem no reason why it could not be extended to § 101 to determine whether a combination of steps is routine and conventional.
  1. HINDSIGHT: Given that Alice requires that courts look at patented elements as a whole, the concern of hindsight bias should have as much relevance to a § 101 challenge as it does a § 103 challenge. For when each of the elements of a claimed invention do not exist in the prior art, or even the ordered combination, how can a defendant rationally argue that the combination is routine and conventional without some degree of hindsight bias kicking in? Princeton Biochemicals, Inc. v. Beckman Coulter, Inc., 411 F.3d 1332, 1337 (2005). Indeed, in Mayo, 132 S. Ct. at 1298-99, Justice Breyer explained that the invention in Diehr was patentable because the “ordered combination” of the steps of the claimed invention as a whole were “nowhere suggested” to be “in context obvious, already in use, or purely conventional.” And while the Supreme Court made no express mention of hindsight in its 101 holdings, it was, at the very least, an underlying rationale in Diehr. Footnote 12 of that opinion is exemplary. Alice, too, reinforces this point when it spoke of looking at combination patents as “whole.”
  1. PREEMPTION & PIONEER PATENTS: Plaintiffs do appear to be pressing preemption arguments more heavily in recent months. The Sequenom case illustrates this: Ariosa Diagnostics, Inc. v. Sequenom, Inc., 788 F.3d 1371 (2015) But, sadly, the Federal Circuit panel got it wrong when it was not prepared to consider evidence that demonstrated that the invention did not foreclose the use of the discovery. The saying what’s good for the goose is good for the gander seems apt. Because of this, it will be left to the Federal Circuit en banc, or other panels to address how preemption should factor into the 101 calculus. In any case, those decisions should take a liberal approach to Mayo’s dicta and allow preemption to play a tie-breaking fact role in close cases—e., a role similar to that of secondary indicia in the 103 calculus as evidence providing a tipping point in favor of a non-obviousness determination. To this end, and in the preemption context, the patentee should be entitled to show that there are different ways of achieving the goal to which the patent is directed—not just one (preemptive) way.

In addition, the Mayo decision also spoke of “how much future innovation is foreclosed relative to the contribution of the inventor.” Mayo, 132 S. Ct. at 1303. Does this mean that a pioneer patent should be given more latitude in a 101 context than a patent that provides a mere incremental improvement? I think it does. But a workable doctrine must emerge—much like one emerged with respect to the doctrine of equivalents in the infringement context. The article will address this.

  1. DRAFT JURY 101 INSTRUCTION: Given that some 101 cases are predicated on underlying factual findings, much like 103, the article will conclude with an appendix that includes a draft jury instruction. That will be addressed in more detail later.

Australia Rejects Isolated-DNA Patents

Australian_Coat_of_Arms[1]D’Arcy v. Myriad, [2015] HCA 35

The High Court of Australia (HCA) has determined that Myriad’s claims to isolated DNA are not patent eligible — finding that the creation of this category of important rights is best left to “legislative determination.”

Australia’ patent statute is still keyed to the 1624 English Statute of Monopolies that allows for patents on “any manner of new Manufactures.”  Australia takes those “ancient” words and then applies a common law approach to determine its scope.  In general, Australian patent rights can only be granted on “something brought about by human action.”

The court here writes:

Although it may be said in a formal sense that the invention as claimed, referring to isolated nucleic acids, embodies a product created by human action, that is not sufficient to support its characterisation as a manner of manufacture. The substance of the invention as claimed and the considerations flowing from its substance militate against that characterisation. To include it within the scope of a “manner of manufacture” involves an extension of that concept, which is not appropriate for judicial determination. Further, to include this class of claim within that concept would not contribute to coherence in the law. . . Nor do Australia’s international obligations and the differently framed patent laws of other jurisdictions, which were referred to earlier in these reasons, support the conclusion that this class of claim should fall within the concept.

In reaching its decision, the court reviewed US, UK, Korean, Japanese, and Chinese patent law to consider where beneficial harmonization may occur.

D’Arcy v Myriad Genetics Inc (S28-2015) [2015] HCA 35.

No Motivation to Make a Worse Product – Therefore Patentable?

by Dennis Crouch

Spectrum Pharma and the University of Strathclyde v. Sandoz Inc. (Fed. Cir. 2015)

In this case the Federal Circuit shoots down two fairly silly arguments, but not without first giving them full credence and consideration.  Although the patentee lost here, the Federal Circuit appears to agree with the patentee that its less-pure compound could have been patentable over a purer version identified in the prior art even though the added impurities provided no benefit, functionality, or synergy — PHOSITA simply would not have been motivated to make the less-pure version.

Background: The ANDA lawsuit here centers around Strathclyde’s patent (licensed to Spectrum) covering the the drug Fusilev aka l-leucovorin and Sandoz’s related generic drug application.  The drug leucovorin was found to be effective at treating iron deficiency that can occur with 5-FU cancer treatment. Later, researchers discovered that it was actually one isomer of leucovorin (6S) that was effective and the other isomer (6R) was just along for the ride. The patentee here substantially purified the 6S isomer and attempted to patent it as part of a therapeutic composition.  Claim 1 requires “a mixture of (6S) and (6R) diastereoisomers and consists of at least 92% by weight of the (6S) diastereoisomer, the balance of said compound consisting of the (6R) diastereoisomer.”  It turns out that years earlier a researcher had manufactured a pure form of the 6S isomers and the 50/50 mixture of 6S/6R isomers was known as well. By the time of the invention in question here it was also known that the 6S isomer was the effective one. Later studies proved that the substantially pure form was clinically no better than the 50/50 mixture having the same effective amount of  the 6S isomer.


A patent claim is invalid as obvious if an alleged infringer proves that the differences between the claims and the prior art are such that “the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art.” 35 U.S.C. § 103(a) (2006) (pre-AIA). Obviousness is ultimately a conclusion of law premised on underlying findings of fact, including the scope and content of the prior art, the differences between the claimed invention and the prior art, and the level of ordinary skill in the pertinent art. KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398 (2007); Graham v. John Deere Co., 383 U.S. 1 (1966). “The presence or absence of a motivation to combine references in an obviousness determination is a pure question of fact.” Alza Corp. v. Mylan Labs., 464 F.3d 1286 (Fed. Cir. 2006). In addition to common knowledge or teachings in the prior art itself, a “design need or market pressure or other motivation” may provide a suggestion or motivation to combine prior art elements in the manner claimed. Rolls Royce, PLC v. United Techs. Corp., 603 F.3d 1325 (Fed. Cir. 2010);

Here, the patented mixture could be made by simply mixing the known pure 6S isomer with the 50/50 mixture so as to reach the claimed 92% ratio.  The patentee argued that there would have been no motivation to combine these references — going from a pure substance to a less-pure substance. The Federal Circuit sees merit in that argument:

[I]f the pure material is known, no reason has been shown why one would want to have an impure material. Although one may not be motivated to obtain an impure material and, in effect, it therefore can be argued to have been nonobvious—which is Spectrum’s position here, that the 92–95% pure material was nonobvious over the known pure material.



The Federal Circuit ultimately rejected that argument “despite its superficial appeal” by looking at the patent from the starting point of a 50/50 mixture – and finding that there would have been a motivation to improve its purity.  The court also noted that the new mixture offered no “unexpected advantages over the prior art pure material, the less-than-pure material, and any others of similar concentration.”  In essence, this case is can be seen as very much parallel to KSR – where a combination of two known elements, with each element being used as expected, is unlikely to be patentable absent some unexpected results or synergy.

Objective Post-Invention Evidence Showing Obviousness: Of interest, the Federal Circuit approved of two additional bits of evidence that occurred post-invention that helped prove obviousness. The first was evidence that several other researchers were able to obtain the 92% isomer concentration shortly after the patentee obtained its results — that appears have provided some evidence of obviousness.  Secondly, the court relied upon post-invention studies showing no benefit of the pure drug to negate any synergy  argument.

Infringement by Importation: A second set of claims included a limitation that the composition was provided in “a quantity at least sufficient to provide multiple doses of said mixture of (6S) and (6R) diastereoisomers in an amount of 2000 mg per dose.”  Although Sandoz was planning to sell drug in single-use vials of ~200 mg per dose, the patentee argued that Sandoz did plan to import the drug in larger shipments and, at that importation would be infringing.  The Federal Circuit rejected that argument – finding that the ANDA infringement inquiry under 271(e)(2) “focuses on a comparison of the asserted patent claims against the ANDA product that is likely to be sold following FDA approval.” Thus, the fact that Sandoz plans bulk-imports does not create liability.

On this front, it seems that the Federal Circuit may have left open the possibility that Sandoz imports may still infringe under 271(a) once the generic maker begins imports.

Doctrine of Equivalents: The patentee had argued for infringement under the DOE even though it had narrowed the very amount element during prosecution.  Its argument was that the amendment should not count as narrowing because other claims in the patent were still broader.  That argument fell on deaf ears:

[B]y claim amendments and distinguishing statements on the prior art during prosecution, Spectrum is now estopped from invoking the doctrine of equivalents to prove infringement. When submitting an amendment with the application claims that eventually issued as claims 5–9, the applicants asserted that the newly added claims “include specific limitations as to quantities of materials,” and distinguished the prior art by pointing to the “quantities of these specific mixtures specified in the claims.” Those claims were also added following an office action rejecting the previous original claims as obvious in view of Rees. The applicants again explicitly highlighted the significance of the dosage limitation during an appeal to the Board, their brief stating that the claims “require a minimum of four grams,” the “quantity limitations set forth in the claims” which “define an aspect of the invention that is of great practical significance.” The applicants unequivocally argued that Rees, which allegedly only produced experimental quantities, “do[es] not teach, suggest, or otherwise render obvious the claimed compositions in the quantity specified” in the application claims that became claims 5–9. Those statements are clear and unmistakable expressions of the applicants’ intent to surrender coverage of quantities of the compound in lower doses.

Thus, Sandoz wins here on all fronts.


Patent Market Tracker

John Martin and his team at Innography have released their bi-annual update on the patent market. LINK. Their primary finding: Alice v. CLS Bank “hasn’t affected the volume of US patent sales, which continues its roughly 10% per year increase over the last several years.”  The short report hits a number of highlights, including recent deals by Porsche, Google, LinkedIn, and others. Although the report does delve into particularly technological issues, its tracking remains in terms of quantities rather than valuation.

Patent Trolls and Great Inventors


The announcement to my upcoming Mizzou event with Prof Holte is exciting, but so is our topic.  Discussion will center around Holte’s case-study article: Trolls or Great Inventors: Case Studies of Patent Assertion Entities.

Holte’s abstract:

There has been much debate about the economic harms caused by patent infringement lawsuits filed by patent holders who do not make or sell products covered by their own patents — entities pejoratively referred to as “patent trolls.” This debate has thus far been largely theoretical or based on broad industry-wide data. The purpose of this Article is to present a focused empirical report that has previously been lacking — detailed information regarding the inventors themselves, the patent assertion entities (PAEs) that represent them, and the stories behind their patents. The research for this Article centers on two instructive case studies: (1) MercExchange, L.L.C., the prominent PAE whose seminal patent infringement action against eBay continued to the Supreme Court in eBay Inc. v. MercExchange, L.L.C., 547
U.S. 388 (2006); and (2) Capital Security Systems, Inc., a lesser-known PAE that has sued some of the largest banks in the world on its patented electronic check processing technology. This Article explores the stories behind the inventors, the patented inventions, and the entities asserting the patents in order to develop a more complete contextualized picture of PAEs and their economic impact. Based on this more complete picture, the Article then assesses whether these patent holders warrant the “patent troll” moniker, lurking under the bridge of innovation waiting to harass and extort innovators attempting to pass, or whether they instead resemble the great American vision of a Horatio Alger novel protagonist, laboring to build that bridge of innovation brick-by-brick and eventually reaping a reward for their hard effort. The Article concludes that, while additional studies are needed, the two PAEs studied herein fall squarely into the latter honest laborer category.


Shukh v. Seagate: Fired Inventors and their Former Employers

Alexander Shukh v. Seagate (Fed. Cir. 2015)

Mr. Shukh sued his former employer Seagate asking for a correction of inventorship under 35 U.S.C. § 256 as well as breach of contract and discrimination associated with his firing.

Because Shukh had already assigned-away his ownership rights to the patents, the District Court ruled that the Shukh’s standing for the inventorship claim hung on his alleged reputational harm due Seagate’s failure to list him as a co-inventor on six different patents. The district court also dismissed the state law allegations for failure to state a claim. At the close of discovery, the district court then dismissed the case on summary judgment – finding that Shukh had not produced evidence to prove the reputational harm.

On appeal, the Federal Circuit has vacated the lower court’s summary judgment –

Today, we hold that concrete and particularized reputational injury can give rise to Article III standing. As we noted in Chou, “being considered an inventor of important subject matter is a mark of success in one’s field, comparable to being an author of an important scientific paper.” 254 F.3d at 1359. We reasoned that “[p]ecuniary consequences may well flow from being designated as an inventor.” Id. This is particularly true when the claimed inventor is employed or seeks to be employed in the field of his or her claimed invention. For example, if the claimed inventor can show that being named as an inventor on a patent would affect his employment, the alleged reputational injury likely has an economic component sufficient to demonstrate Article III standing.

We find that there is a question of material fact as to whether Dr. Shukh’s omission as a named inventor on the disputed patents caused him reputational injury. Dr. Shukh presented evidence such that a trier of fact could conclude that this omission injured his reputation in at least two ways: first, it harmed his reputation as an inventor in the field of semiconductor physics, and second, it contributed to his reputation for poor teamwork due in part to his accusations that others were stealing his work. Moreover, Dr. Shukh presented evidence from which a trier of fact could conclude that these reputational harms had economic consequences—namely, that Dr. Shukh was unable to find employment after he was terminated from Seagate.

This case highlights a troubling issue for inventors. The difficulty for inventors is that an inventor does not automatically have standing to sue for being improperly excluded from being listed as an inventor. Rather, the inventor must be able to allege additional cognizable harm before the court will hear the case.

Hereby Assign: Shukh’s employment contract with Seagate included a statement that he “hereby assign[s]” his future invention rights to Seagate. Although these contracts are generally interpreted by state-law, the Federal Circuit issued a 1991 patent-specific ruling that this clause results in an automatic assignment of rights. Filmtec Corp. v. Allied-Signal, Inc., 939 F.2d 1568 (Fed. Cir. 1991). The Filmtec outcome should be contrasted with agreements where employees “agree to assign.” In the agreement-to-assign case, legal title does not shift until the inventor actually does assign after inventing. In his appeal, Shukh asked the Federal Circuit to overrule Filmtec – which it refused to do here on stare decisis grounds. “[W]e cannot overrule that holding without en banc action.”

The suggestion for en banc action has some strong backers. In his dissenting opinion in Stanford v. Roche, Justice Breyer challenged the Federal Circuit rule. Relying upon history and tradition, Justice Breyer wrote that the initial “hereby-assign” employment contract as creating equitable title in the invention whose legal title does not automatically transfer.

Given what seem only slight linguistic differences in the contractual language, this reasoning seems to make too much of too little. Dr. Holodniy executed his agreement with Stanford in 1988. At that time, patent law appears to have long specified that a present assignment of future inventions (as in both contracts here) conveyed equitable, but not legal, title. See, e.g., G. Curtis, A Treatise on the Law of Patents for Useful Inventions §170, p. 155 (3d ed. 1867) (“A contract to convey a future invention . . . cannot alone authorize a patent to be taken by the party in whose favor such a contract was intended to operate”); Comment, Contract Rights as Commercial Security: Present and Future Intangibles, 67 Yale L. J. 847, 854, n. 27 (1958) (“The rule generally applicable grants equitable enforcement to an assignment of an expectancy but demands a further act, either reduction to possession or further assignment of the right when it comes into existence”).

Under this rule, both the initial Stanford and later Cetus agreements could have given rise only to equitable interests in Dr. Holodniy’s invention. And as between these two claims in equity, the facts that Stanford’s contract came first and that Stanford subsequently obtained a postinvention assignment as well should have meant that Stanford, not Cetus, would receive the rights its contract conveyed.

In 1991, however, the Federal Circuit, in FilmTec, adopted the new rule quoted above—a rule that distinguishes between these equitable claims and, in effect, says that Cetus must win. The Federal Circuit provided no explanation for what seems a significant change in the law. Nor did it give any explanation for that change in its opinion in this case. The Federal Circuit’s FilmTec rule undercuts the objectives of the Bayh-Dole Act. While the cognoscenti may be able to meet the FilmTec rule in future contracts simply by copying the precise words blessed by the Federal Circuit, the rule nonetheless remains a technical drafting trap for the unwary. It is unclear to me why, where the Bayh-Dole Act is at issue, we should prefer the Federal Circuit’s FilmTec rule to the rule, of apparently much longer vintage, that would treat both agreements in this case as creating merely equitable rights.

The majority in Stanford v. Roche did not particularly address the issue.

Non-Transitory Patent Claims

by Dennis Crouch

I was surprised when I ran these numbers and found that 4% of recently issued patents include a non-transitory claim limitation. (95% of these are in what I term computer-related arts).  For the most part, these are software patent claims.  However, because “software” per se is usually not considered patent eligible, patent attorneys moved toward claiming a computer-readable-medium having the software instructions stored therein.  More recently, the PTO concluded that those claims – when broadly interpreted – would encompass transitory signals which are not patent eligible under Section 101.  The PTO suggested that applicants amend their claims “by adding the limitation ‘non-transitory’ to the claims.”


Open question – how many of these cases have written description support for the new non-transitory limitation?

Will the Federal Circuit Recognize the U.S.–Foreign Tradeoff in Friday’s Lexmark Argument?

Guest post by Daniel Hemel, Assistant Professor at the University of Chicago Law School, and Lisa Larrimore Ouellette, Assistant Professor at Stanford Law School.

On Friday, the en banc Federal Circuit will hear argument in Lexmark v. Impression Products, the printer cartridge resale case that will determine the fate of two key patent exhaustion precedents, including the current Jazz Photo rule that foreign sales do not exhaust U.S. patent rights. Despite extensive briefing (including over thirty amicus briefs), we argue in a new Essay that the key distributive tradeoffs between U.S. and foreign interests remain ignored (or misunderstood).

Both sides in Lexmark argue that their proposed rule would be more efficient. Those advocating broader exhaustion rules (including Google, Costco, EFF, and a group of IP professors) argue that the current regime is complex and uncertain. Those favoring the status quo (including PhRMA, BIO, and IPO) point to the aggregate welfare gains from geographic price discrimination. While it is possible to construct models to support both views, we argue that the efficiency question cannot be answered without first making a choice about whose welfare is aggregated.

As explained in more detail in our Essay, Trade and Tradeoffs: The Case of International Patent Exhaustion, the U.S. rule on international patent exhaustion implicates at least two tradeoffs between U.S. and foreign interests:

First, there is a tradeoff between U.S. and foreign consumers. A U.S. rule of international exhaustion would cause prices of patented products in low-income countries to increase and prices of those same products in the United States to fall. It is thus surprising to see groups focused on global access to medicines such as Public Citizen advocating for this change; we are not aware of any study suggesting that a U.S. rule of international exhaustion would decrease prices in the developing world. As counterintuitive as it may be for developing countries and global access-to-medicines proponents to take the side of pharmaceutical companies, we think that their interests are in fact aligned on this issue. Developing-world consumers and pharmaceutical companies would both be better off if the Federal Circuit sticks with its Jazz Photo rule.

Second, a U.S. rule of international patent exhaustion would make it more difficult for foreign countries to allocate access to patented goods using non-market mechanisms. Some national governments subsidize their citizens’ consumption of patented products; examples range from the UK National Health Service’s provision of pharmaceuticals to Uruguay’s one-laptop-per-child program. As we explain in our Essay, such subsidies could end up being transferred to U.S. consumers via arbitrage if the Federal Circuit overrules Jazz Photo. At the very least, the decision to overrule Jazz Photo would make it more difficult for foreign governments to subsidize access to patented goods.

We argue that one cannot answer the policy question at the heart of Lexmark without taking a position on these distributive questions. If one assigns zero value to the interests of foreigners, then the United States might well be better off if it adopted a rule of international patent exhaustion. (While international patent exhaustion would also reduce profits for U.S. patent holders, a majority of U.S. patents are issued to foreigners; if one adopts a purely nationalistic approach, the interests of most patent holders wouldn’t count in the welfare analysis.) If one assigns a high value to the interests outside the United States, particularly those in developing countries, then one should almost certainly come down against a U.S. rule of international exhaustion. (If one assigns equal weight to the interests of all individuals regardless of nationality, then the question is somewhat closer.) How much the Federal Circuit should care about foreign consumers is a question that defies easy answer, but we hope that our Essay at least brings these tradeoffs into clearer focus. We also offer some tentative suggestions as to how U.S. courts might approach questions of global distributive justice.

Patent Grants Per Fiscal Year (USPTO)

As expected, the USPTO has posted its first reduction in patent grants of the Kappos-Lee era.  In Fiscal Year 2015, the PTO issued 296k utility patents. That is a 3% drop from the record high of 304k patents issued in FY2014.  Although a modest reduction in the absolute number of patents granted, FY2015’s numbers still represent the second-highest number of patents granted in the PTO’s 200+ year history. FiscalYearPatentGrants

Design Patent Damages

By Dennis Crouch

Nordock v. Systems Inc (PowerAmp) (Fed. Cir. 2015)

Nordock’s asserted design patent covers the ornamental design of a lip and hinge plate for a dock leveler. (U.S. Patent No. D579,754). The lever is designed to be attached to a truck loading and can then be adjusted to provide a smoother linkage between the dock and the truck being loaded/unloaded. As a design patent, the patentee does not claim a new and useful invention, but rather the “ornamental design” as shown in the figure below.

Disgorging all of the infringer’s profits: A jury sided with the patentee on infringement and validity, but awarded only $46,000 in reasonable royalty damages. On appeal, the Federal Circuit vacated – finding that the district court had improperly calculated the profit-disgorgement damages.

A design patent holder may seek damages under the standard patent damages statute 35 U.S.C. 284 that sets a floor for damages as “a reasonable royalty for the use made of the invention by the infringer.” As an alternative, the patentee can collect damages under the design-patent-damages provision codified in 35 U.S.C. 289. Under Section 289, an infringer is “be liable to the owner to the extent of his total profit, but not less than $250.” To be clear, when the statute speaks of “his total profits” – that refers to the total profits of the infringer. Opining on the statute, the Federal Circuit has written that § 289 requires “the disgorgement of the infringers’ profits to the patent holder, such that the infringers retain no profit from their wrong.” Nike Inc. v. Wal-Mart Stores, Inc., 138 F.3d 1437 (Fed. Cir. 1998). The Federal Circuit has ruled that a patentee can collect either of these damages theories, but not both. Catalina Lighting, Inc. v. Lamps Plus, Inc., 295 F.3d 1277 (Fed. Cir. 2002). That result is also demanded by the statutory language that “[n]othing in this section shall prevent, lessen, or impeach any other remedy which an owner of an infringed patent has under the provisions of this title, but he shall not twice recover the profit made from the infringement.”

At trial, the district court forced an apportionment of profits – requiring a calculation the infringer’s profits associated with the lip and hinge plate even though the infringer sold the dock leveler with the plate as an entire unit. As it recently did in Apple, the Federal Circuit here rejects that approach:

[W]e recently reiterated that apportioning profits in the context of design patent infringement is not appropriate, and that “Section 289 explicitly authorizes the award of total profit from the article of manufacture bearing the patented design.” Apple Inc. v. Samsung Elecs. Co., 786 F.3d 983 (Fed. Cir. 2015) (rejecting Samsung’s attempt to limit the profits awarded to the “portion of the product as sold that incorporates or embodies the subject matter of the patent”); see also Nike, (discussing the legislative history of § 289 and Congress’s decision to remove “the need to apportion the infringer’s profits between the patented design and the article bearing the design”).

Here, the dock is welded-to and sold as a unit with the dock leveler and – as such – the calculated profits must be associated with the entire dock leveler being sold. This result should boost the patentee’s damages up to at least $600,000, which represents the infringer’s total profits associated with the infringing sales.

Based upon this error, the Federal Circuit ordered a new trial on damages.

Is it Functional? Preserving the Appeal: There is no question that the design patent here covers a functional invention. The question raised by the infringer’s cross-appeal is whether it is impermissibly functional such that the design patent is invalid. However, in the appeal, the Federal Circuit ruled that argument to be waived because Systems’ counsel “failed to renew the motion for JMOL as to validity with sufficient particularity.” Here, defendant’s counsel gave a general motion following the verdict stating that “as a routine matter whatever motions we made during the trial, JMOL and so forth, we would renew those motions to the extent that they are necessary. . . . Everything we made we renew. I’m not sure what that is, but just for the record whatever we said before.” The patentee did not file any further particular post-verdict motions with respect to validity and – as such – the Federal Circuit ruled that the general post-verdict motion was insufficient to preserve the infringer’s rights.

Is it Functional? The Test: As an alternative judgment, the court also ruled the jury had been presented with sufficient evidence to support a not-impermissibly-functional verdict.

A design patent will be deemed invalid if the claimed design “as a whole, is dictated by functionality.” Factors often considered in the functionality analysis include:

  • Whether the protected design represents the best design;
  • Whether alternative designs would adversely affect the utility of the specified article;
  • Whether there are any concomitant utility patents;
  • Whether the advertising touts particular features of the design as having specific utility; and
  • Whether there are any elements in the design or an overall appearance clearly not dictated by function.

High Point Design LLC v. Buyers Direct, Inc., 730 F.3d 1301 (Fed. Cir. 2013) (these factors “may help”). At trial, the jury heard testimony from the patentee indicating that the design was intended to be distinctive and ornamental, that the claimed plate is not necessary to perform the dock leveling function, and that other designs are available to achieve the same utilitarian purpose. “On this record, there was substantial evidence from which a jury could conclude that the claimed design is not dictated by function.”

= = = = =

There has been some outcry regarding the relatively large disgorgement profits without any proof of an innovative leap or a business impact of the design. However, up to now there have been no congressional proposals on point.  In 1946, Congress eliminated equitable disgorgement from utility patent doctrine. (as interpreted by Aro II (1964)).

The pending design patent legislation would excuse spare-auto-parts manufacturers and sellers from liability.

Method Patent Claims

by Dennis Crouch

The Patent Act opens the door to patenting of “any new and useful process, machine, manufacture, or composition of matter.” In recent years, the patenting of processes in particular (or at least process claims) has risen sharply. The chart below shows the percentage of patents with at least one independent method or process claim, grouped by issue year.* Over the past 30 years, the percentage of method patents has risen from around 30% of patents to almost 60% today.

* For this data, I parsed each independent claim of each issued patent for the past 30 years and tallied the number of patents that included the word “method” or “process” within the claim (excluding processor, etc.).

Some of these claimed method are new uses of known products as well as new processes for manufacturing a known product. It may be difficult to even draft an apparatus claim in those cases (other than product-by-process) when the invention does not involve the creation of any new device or system. These new-use claims are expressly authorized by Section 100(b) of the Patent Act that defines a process as including “a new use of a known process, machine, manufacture, composition of matter, or material.”  (cf Alice Corp.).

On the other hand, the majority of method claims are tied to some form of new apparatus/software.  In that situation, it is legally appropriate and often good strategy to protect the apparatus as well as methods performed by the apparatus, methods of using the apparatus, and/or methods of manufacturing the apparatus.  

By adding the method steps, a patentee is able to include fewer structural limitations and still obtain protection.  It is perhaps that potential of altered scope – more than anything else – that gives method claims their power.

Of course, most patents still also include non-method claims too.  The chart below splits these into three categories and displays.


Federal Circuit Sends Bad-Faith-Patent-Assertion Case back to State Court

Vermont v. MPHJ Tech (Fed. Cir. 2015)

In an interesting opinion, the Federal Circuit has rejected MPHJ’s plea to get into Federal Court. The State of Vermont sued the patent holder for violations of Vermont Consumer Protection Act (VCPA) stemming from MPHJ’s patent enforcement campaign. The letter campaign had three stages:

  1. Letter from the shell company stating that “we have identified your company as one that appears to be using the patented [scanner-to-email] technology” suggesting that “you should enter into a license agreement with us at this time.”
  2. Follow-up letter a few weeks later from the Farney Daniels firm stating that a prior-non response is considered “an admission of infringement” and implying that litigation would commence if the recipient did not enter into a license agreement.
  3. A third follow up following the pattern of the second.

These actions prompted the Vermont Attorney General to sue under the VCPA – alleging unfair and deceptive trade practices based upon MPHJ’s “threating litigation even though litigation was unlikely, targeting small businesses, placing the burden on the recipient to do the investigation, using shell corporations to minimize liability; and stating in its letters that it would bring suit immediately absent a license, the licensing program was successful with many businesses taking part, and the average license was $1000/employee.” The state demanded a permanent injunction requiring that MPHJ comply with state law.

After VT filed its original complaint (but before it filed its amended complaint), the state enacted the “Vermont Bad Faith Assertions of Patent Infringement Act” (BFAPIA) that creates a new Vermont cause of action for “bad faith assertion of patent infringement” based upon factors such as “the contents of the demand letter, the extent of any pre-assertion investigation, demands for payment of a license fee in an unreasonably short time, and deceptive assertions of infringement.”

MPHJ alleges that the proposed injunction would force it to comply with BFAPIA, but that law is preempted by the US patent laws and – as such – that the case should be removed to Federal Court.

The Federal District Court denied MPHJ’s first removal request (based upon the first complaint) and second removal request (based upon the VT amended complaint).  It is that second denial that was appealed and the Federal Circuit here has affirmed the denial – limiting the appeal question to the BFAPIA issue and finding that the VT injunction does not raise the BFAPIA enforcement issue – especially since Vermont stipulated during oral arguments that they were not seeking an injunction that would require compliance with that statute.

Federal Circuit Jurisdiction: The most interesting aspect of the decision is Judge O’Malley’s discussion of Federal Circuit jurisdiction post-AIA and post-Gunn.

The America Invents Act amended Title 28 to now grant Federal Circuit appellate jurisdiction “in any civil action arising under, or in any civil action in which a party has asserted a compulsory counterclaim arising under, any Act of Congress relating to patents.” 28 U.S.C. § 1295(a)(1). This change extends the Federal Circuit’s jurisdiction to include cases where the patent issues arise only in a compulsory counterclaim (formerly, the focus was only on the complaint). The new statute also added additional language that “no state court shall have jurisdiction over any claim for relief arising under any Act of Congress relating to patents,” 28 U.S.C. § 1338(a), and a new removal statute indicating that “a civil action in which any party asserts a claim for relief arising under any Act of Congress relating to patents . . . may be removed to [federal] district court . . . .” 28 U.S.C. § 1454.

At the same time, in Gunn (2013) the Supreme Court contracted Federal Circuit jurisdiction to cases where (1) federal patent law creates the cause of action or (2) where, although the claim arises under state law, that a federal patent law issue is: (a) necessarily raised, (b) actually disputed, (c) substantial, and (d) capable of resolution in federal court without disrupting the federal-state balance approved by Congress. Gunn (interpreting pre-AIA law).

Here, MPHJ asserts that the Federal Circuit has jurisdiction over the appeal because its Counterclaim (No. 5) raises a patent law issue. In particular, MPHJ asked for “a declaratory judgment that the VCPA is invalid or preempted by the First, Fifth, and Fourteenth Amendments, the Supremacy and Patent Clauses, and Title 35 of the U.S. Code.”

Walking through this morass, the Federal Circuit first ruled that the counterclaim is a compulsory counterclaim because of its close factual and logical relationship with the main claim found in the complaint. The next question under Section 1295(a)(1) then, also answered affirmatively here, is whether the counterclaim “arises under” federal patent law. Although not a cause of action, the federal circuit found that the preemption defense is an important and necessary federal patent question whose resolution will have a broad impact on the federal patent system as a whole.

Whether federal patent laws preempt or invalidate the VCPA as applied has considerable significance beyond the current case. A hypothetical finding that the VCPA is not invalid or preempted in state court would affect the development of a uniform body of patent law, as such a decision would be binding in Vermont, but would not be in other states with similar laws or in federal court. The facts of this case are fundamentally unlike Gunn, in which the Court recognized that the federal issue was a “backward-looking . . . legal malpractice claim” that would be unlikely to have any “preclusive effect” on future patent litigation and was, therefore, not substantial. As an “as applied” challenge, counterclaim 5 depends to a certain extent on the specific facts of this case, but the resolution of this case would assist in delineating the metes and bounds of patent law and clarifying the rights and privileges afforded to patentees in pursuing patent infringement claims.

With that, the Federal Circuit found that it does indeed have appellate jurisdiction to hear the appeal.

At this point, you may be seeing a disconnect between the ultimate holding that I first described (effectively denying removal) and the new statute permitting removal of cases “in which any party asserts a claim for relief arising under any Act of Congress relating to patents” (§ 1454) – especially since the court just decided that the court here decided that MPHJ had indeed asserted a claim for relief arising under federal patent law. The resolution of that seeming conflict is procedural – “MPHJ has not appealed the district court’s ruling pursuant to 28 U.S.C. § 1454 [and thus] we have no occasion to address … how that newly enacted provision should be interpreted.”

The complicating factor is that it looks like the State court will now need to dismiss MPHJ’s preemption counterclaim because it arises under the patent law. 1338(a) and, at that point, MPHJ would seemingly have standing to file a federal declaratory judgment action raising preemption.

Fractures, Fault Lines, and the MPEP

By Jason Rantanen

As part of my standard preparation for teaching a given doctrine in my patent law class, I like to review the relevant section of the Manual of Patent Examination and Procedure (MPEP).  The MPEP typically offers a relatively well-organized description of the doctrine, with critical cases referenced.  But my review leaves me frustrated almost every time.

The reason for my frustration is that the MPEP, while doing a terrific job with legal issues on which there is clear precedent, frequently elides over the doctrinal fractures and fault lines that are at the heart of contemporary patent law disputes.  Or worse, it simply does not acknowledge their existence at all.  The result is a resource that, in presenting patent law as clear and determinate on its face, masks the existence of  sharp tensions and breakpoints in patent law.

For example, today I’ll be covering § 102 “public use” and “on sale.”   A glance through the MPEP’s sections on public use under the First-to-File regieme reveals a landscape that seems dry and barren, with the only major feature being the question of whether pre- or post-AIA § 102 applies.  From reading MPEP § 2152, one gets the sense that post-AIA, the only issue once the question of regime is resolved is whether the activity was “accessible to the public.”  Secret sales or offers for sale, for example, do not place the invention “on sale”:

“AIA 35 U.S.C. 102(a)(1) does not cover secret sales does not cover secret sales or offers for sale. For example, an activity (such as a sale, offer for sale, or other commercial activity) is secret (non-public) if it is among individuals having an obligation of confidentiality to the inventor.”

MPEP § 2152.02(d).  Experimental use has been entirely dropped from the MPEP’s discussions of post-AIA public uses and sales.  It’s as if it never existed.

Yet, these are far from resolved issues.  There are plausible arguments that Congress legislatively changed the meaning of “public use” through the AIA; there are at least equally plausible arguments that Congress did not.  The PTO’s position on secret commercial activity is on even weaker footing.  Inevitably, the Federal Circuit, and likely the Supreme Court, will weigh in on this issue of statutory construction.  But the MPEP’s characterization of this issue as settled hides a very real tension in patent law, one that will really matter to inventors and patent attorneys.  It’s not difficult to imagine a hypothetical situation in which someone relies on the MPEP’s language about secret commercial activity not constituting sales for purposes of § 102(a)(1), only to be placed in a very bad position should the Federal Circuit or Supreme Court conclude otherwise.

These issues are only the most obvious fault lines hidden under the MPEP’s seemingly solid description of patent law doctrine.  But there are others, and creative, knowledgeable attorneys likely know many of them already.  One that has always fascinated me is the question of what constitutes a “use” for purposes of § 102 “public use.”  The casebook I use for patent law, Craig Nard’s The Law of Patents, does a good job of setting up this issue through Motionless Keyboard Co. v. Microsoft Corp., 486 F.3d 1376 (Fed. Cir. 2007).  The issue is whether just showing, or perhaps even demonstrating, an embodiment of the invention constitutes a public use.  Motionless Keyboard suggests that sometimes not, at least if the invention is not used for its intended purpose.  But in other cases, the Federal Circuit brushes aside the “intended purpose” language of Motionless Keyboard.  See, e.g. Pronova Biopharma Norge AS v. Teva Pharmaceuticals USA, Inc., 549 Fed. Appx. 934, 939-943 (Fed. Cir. 2013) (nonprecedential).  This question of what constitutes a use is a substantial fracture point where the law is indeterminate, but one gets no hint of this potential tension from the MPEP.  See § 2133, 2152.  Other fracture points and fault lines are apparent if one digs into the recent cases: the question of what constitutes an offer for sale versus an assignment or license is another fracture point within the § 102 space on which disputes ultimately get resolved,  See, e.g. Elan Corp. v. Andrx Pharmaceuticals, Inc., 366 F.3d 1336 (Fed. Cir. 2004), but which one gets no hint of from the MPEP.  Likewise, while there is an extensive discussion in the MPEP of whether an invention is “ready for patenting,” see § 2133.03(c),  there is no discussion about a fundamental important question: what is the invention for purposes of a product claim? Is it just an embodiment of the invention or is it the technical know-how (i.e.: what we usually think of as “the invention” when talking about patents)?

My point is not that the MPEP should definitely include extensive discussions of fault lines and fracture points within the caselaw.  Indeed, the MPEP isn’t much worse than most treatises, which similarly elide or ignore all but the most well-recognized tension points in the law.  And “on sale” and “public use” issues, which typically involve information within the inventors’ own possession rather than information that is easily found by the examiner, are perhaps not the most efficient places for the MPEP to offer substantial guidance.  Whether or not the MPEP would benefit from greater detail is a normative question that I’d be curious to hear folks’ thoughts on.  I do note, though, that on some issues, such as experimental use prior to the AIA, the MPEP goes into substantial detail already, so it’s treatment is more inconsistent than uniformly thin.

My point is simply that the MPEP’s presentation of patent law doctrine inherently implies a patent law that is far more determinate and clear than it really is.  There are hard questions in patent law, but reading the MPEP gives the impression that they are just complicated questions with definite answers.  The caselaw suggests otherwise.

Guest Post: To File a CON? Empirical Popularity and Prosecution Outcomes

Guest Post by Kate S. Gaudry, Ph.D and Thomas D. Franklin, Kilpatrick Townsend & Stockton LLP.  The opinions expressed in this article are those of the authors and do not necessarily reflect the views of Kilpatrick Townsend & Stockton LLP or its clients. This article is not intended to be and should not be viewed as legal advice.

An increasing number of statistics are available on trends in patent application filings and prosecution outcomes. However, it is uncommon to see the data segregated based on type of application. Specifically, how frequently are continuation applications filed? And does previous prosecution experience with a parent application result in favorable prosecution outcomes?

Answers to these questions may be pertinent when developing strategies as to whether to file a continuation application. Frequent continuation filings may indicate that competitors consider it important to have the claiming flexibility of keeping a family alive or a trend toward filing omnibus applications (disclosing multiple ideas or idea aspects per specification). Meanwhile, any advantage of a continuation must be considered in view of its cost, which depend in part on prosecution expectations.

Accordingly, we requested data from the USPTO that identified, for each fiscal year and technology center (TC), the number of new applications filed (excluding RCEs) that were: (1) a continuation application; (2) a divisional application; (3) a continuation-in-part application; or (4) none of the above. Further, we requested, for each of these application types: (1) the number of patents issued and number of abandonments between July 1, 2014 and July 8, 2015 (to generate a final-disposal allowance rate for this time period); and (2) the average number of office actions issued for each application that received a notice of allowance during this time.

Continuation Applications: Increasingly Common

Overall, in fiscal year 2015, 20% of the filed applications were continuation applications. Divisionals comprised 6% of the data set, and continuation-in-part applications accounted for 3% of the applications. The remaining 72% lacked a priority claim to another non-provisional U.S. application. (FIG. 1)

FIG. 1

FIG. 1

FIGs. 2A and 2B respectively show the unnormalized and normalized distributions of filing types per fiscal year. The percentage of applications that were continuations doubled from 9% in 2005 to 18% in 2015.

Patently-O App-Type FIG 2

FIG. 2

The increased popularity of continuation applications is observed across all TCs. (FIG. 3.) The most substantial increases is observed in TCs 2100 (Computer Architecture, Software, and Information Security) and 2600 (Communications), where the contribution of continuation applications to total filings increased by 142% and 132%, respectively, between 2005 and 2015.

Patently-O App-Type FIG 3

FIG. 3

Continuation applications were most common in TCs 1600 (Biotechnology and Organic Chemistry), 2100 (Computer Architecture, Software, and Information Security) and 2400 (Computer Networks, Multiplex Communication, Video Distribution and Security), where continuation applications accounted for 29%, 28% and 30% of the applications, respectively. Continuation applications were least common in TC 3600 (Transportation, Construction, Electronic Commerce, Agriculture, National Security and License & Review), accounting for only 14% of the applications. The infrequency of TC 3600 continuation applications may be due, in part, to the rarity of allowances in the business-method art units.[1]

Continuation and Original Applications have Similar Prosecution Statistics

Potentially, experience with a parent application (and, typically, a same examiner) may guide claiming strategy for a continuation. Thus, perhaps, continuations represent a two-fold cost-savings opportunity: a savings in drafting and in prosecution costs. Assessing the latter potential savings requires evaluating allowance rates and office-action counts of continuation applications. Accordingly, we evaluated prosecution statistics from a recent time period (July 2014-July 2015) for each of the application types.

Overall, the final-disposal allowance rate for continuations is slightly higher than that for original applications (80% versus 74%). (FIG. 4A.) The average office-action count per patent is slightly lower for continuation applications (1.85 versus 1.96). (FIG. 4B.)

FIG. 44

FIG. 4

Discussion: Why and How to File Continuations

Continuation applications provide a variety of advantages, including an opportunity to seek a new scope of protection in view of business priorities and to strategically draft claims in view of ongoing or threatened challenges to a patent. This latter upside is becoming increasingly significant as the number of post-grant challenges continues to grow.

Should an applicant decide that the advantages of keeping a family alive are sufficiently important, claiming strategy for the child application must then be identified. Slightly tweaking an allowed claim may result in minimal prosecution costs. However, a fast allowance will lead to an overall cost of the family exploding (assuming repeated continuation filings). Seeking substantially broader protection, meanwhile, may lead to extended and frustrating prosecution. Our data showing that continuation and original applications have similar prosecution statistics suggest that applicants are not consistently choosing an easy or hard continuation-claiming path, though it may be explained by split uses of these types of claim-drafting techniques.

Another approach to continuations is to seek protection of a completely different idea in the specification. This could allow a resulting patent family to provide diverse protections towards different elements of an applicant’s technology. However, a new focus requires that the new idea be supported and enabled by the original specification. In an era where flat fees and legal bidding wars are common, it is our hypothesis that few applicants are willing to pay the higher drafting fees for preparation of such enhanced applications. However, we believe that this is a strategic approach and should be more frequently used.

Consider a case where an applicant is seeking patent protection of two ideas. A traditional approach is that separate patent applications be drafted for each idea. Another approach is to draft a single “omnibus” patent application that describes both ideas. One idea can be the focus of an original filing, and another the focus of a continuation filing. Then, by investing in keeping a single family alive (via the original and continuation filings and/or additional continuation applications), claiming flexibility for each idea is preserved. Further, if ideas within an omnibus application are related, drafting fees may be less than preparing two independent applications. The application may also illuminate synergies and interactions between the ideas, which may further expand claiming possibilities.

Concluding Thoughts

Our data shows that continuation-application filings are becoming increasingly common. Filing continuation applications offers many advantages, particularly now that patents are frequently challenged. However, blindly filing continuation applications will lead to an explosion in costs. Strategic filing of omnibus continuation applications, however, will offer long-term cost savings and prosecution advantages. Therefore, applicants should consider intelligently identifying and organizing sets of ideas into omnibus applications.

[1] Gaudry KS. 2015. Post-Alice, Allowances are a Rare Sighting in Business-Method Art Units. IPWatchDog. <>

The Lost ‘Art’ of the Patent System

by Dennis Crouch

Sean O’Connor has released a draft version of his new article titled The Lost ‘Art’ of the Patent System.  O’Connor builds on his earlier UChicago Article on the meaning of Discovery, now focusing on the term useful arts.

I contend that the shift from ‘‘art’’ to ‘‘technology’’(and, even worse, ‘‘science’’) loses sight of critical parts of a well functioning patent system and blurs boundaries than can result in both a temptation for problematic ‘‘upstream’’ patenting of basic science research results and an improper bias against ‘‘nonscientific’’ artisanal innovation. Instead, I argue for a system that focuses once again on advances in the ‘‘useful arts.”

Read it here: