Guest Counterpoint by Prof. Sichelman: The Innovation Act’s Fee-Shifting is Biased against Patent Holders and Will Likely Increase PAE Activity

Ted Sichelman is a Professor of Law and Director of the Technology Entrepreneurship and Intellectual Proerty Clinic and Center for Intellectual Property Law & Markets at the University of San Diego School of Law. 

Representative Bob Goodlatte’s bill, HR 9 (the “Innovation Act”), has been receiving much attention in the press and on the Hill. The Innovation Act is largely identical to the one (HR 3309) that passed the full House in late 2013, so of all the pending patent reform bills, it is likely to receive the most play in Congress this term.

The Innovation Act includes what seems to be a neutral fee-shifting provision. Specifically, it would require a court to “award, to a prevailing party, reasonable fees and other expenses … unless the court finds that the position and conduct of the nonprevailing party or parties were reasonably justified in law and fact or that special circumstances (such as severe economic hardship to a named inventor) make an award unjust.”

Unfortunately, many commentators have focused the issue of whether this provision creates a presumption in favor of fee-shifting without carefully considering the many affiliated provisions in the bill. These additional provisions are particularly important because—contrary to the language quoted above—they significantly skew the effects of fee-shifting against patent holders. Given this lopsided effect, the fee-shifting provisions would probably increase patent assertion entity (PAE) activity. As I explain further below, this is because the provisions would most likely substantially reduce PAEs’ costs of acquiring patents.

A close reading of these additional fee-shifting provisions makes their skewed nature readily apparent. Take, for instance, the provision for “interested” third-party liability. It essentially makes those with a “direct financial interest in the patent . . . damages [award] or . . . licensing revenue” liable in the event a losing patent holder cannot pay a fee award (subject to certain exclusions). By its terms, the third-party liability provision only benefits “a prevailing party defending against an allegation of infringement of a patent claim” (emphasis added). So while third-party liability is quite expansive for those affiliated with losing patent holders, it is nonexistent for those affiliated with losing accused infringers.

Beyond discriminating against patent holders, the third-party liability provision further discriminates against non-practicing patent holders. Third-parties may only be joined in the event that the “prevailing party shows that the nonprevailing party has no substantial interest in the subject matter at issue other than asserting such patent claim in litigation.” This limitation would clearly capture non-practicing entities (NPEs), at least those who do not perform any R&D—although whether and when R&D is sufficient to meet the “substantial interest” threshold is undefined in the statute and thus unclear. If fee-shifting is truly designed to reduce low-quality suits, there is little basis to limit third-party liability only to NPEs. Anyone who has litigated knows that practicing entities, like NPEs, bring both strong and weak suits. There is a substantial economic interest in preventing frivolous suits regardless of the plaintiff’s business model.

Another example of the skewed nature of HR 9 is that settlement counts as a win for the accused infringer when the patentee “unilaterally extends to [the accused infringer] a covenant not to sue for infringement,” unless the patentee could have voluntarily dismissed the action without a court order. My understanding from experienced litigators is that these unilateral covenants tend to occur when the patent holder simply runs out of money and cannot continue to litigate. In this case, courts will often force the patent holder to provide a covenant not to sue in exchange for allowing it to drop the action. Presumably a patent holder providing such a covenant would sometimes not be able pay a fee award, which—if the patent holder is non-practicing—would allow the court to impose judgment on qualifying “interested” third-parties. On the other hand, if an accused infringer goes bankrupt, leading to a default judgment, the patent holder cannot join interested third-parties of the accused infringer when attorneys’ fees are owed.

The upshot of these provisions is to massively skew fee-shifting against the interests of patent holders, leading to an asymmetric risk that would very likely cause risk-averse inventors and assignees to avoid directly enforcing their patents, sometimes even strong ones. This is especially so because patent litigation is highly uncertain and costly, and the relevant test in the provision is the fairly open-ended “reasonably justified in law and fact” standard. Indeed, “reasonable fees and other expenses” in patent cases can be quite high—in large cases, well over $5 million—which would generally be a huge sticker shock to small companies and individual inventors with limited resources. Even a small percentage chance of a paying these fees could deter risk-averse inventors and assignees. In my personal experience running and dealing with many startups and individual inventors, they often are very risk averse when it simply comes to paying their own litigation expenses, much less the opposing party’s fees.

Oddly, the asymmetric nature of the Innovation Act’s fee-shifting provision may have the very opposite effect of what it purports to achieve by reducing so-called “patent troll” suits. As others have argued, the reason is straightforward: PAEs can more easily absorb the risk of bringing suit in the face of potential fee-shifting than startups and individuals. As I already pointed out, startups, individual inventors, and small companies are generally highly risk-averse patent holders. They would therefore fear liability being imposed on them for the direct enforcement of their patents (or if they simply retained an “interest” in a patent that was enforced by a third-party). As such, they would be more likely to sell their patents outright to PAEs instead of retaining a percentage in the litigation (as is standard today).

In fact, PAEs and their funders have already become savvy in this regard and often use single-purpose litigation entities with passive equity investors who cannot “influence, direct, or control” the litigation, removing these investors from liability under the Innovation Act. This approach makes the risk that the plaintiff would not be able to pay fee awards even more acute, leaving the original inventors on the hook if they retain a percentage stake of the proceeds (or probably even an equity stake in the single-purpose entity, because arguably the inventors can “influence” the litigation via their direct involvement). Indeed, even large companies and universities that monetize their patents via PAEs may decide to sell their patents outright to these PAEs, rather than retain a percentage stake, because of the unnecessary risk of placing their assets on the line. (Although the Innovation Act contains an escape valve whereby third parties can renounce all interest in the patents and avoid liability, it must be done very soon after a complaint is filed, which makes it of little use in a typical PAE deal.)

This shift from percentage deals to outright purchases would likely substantially drive down PAE patent acquisition costs. Because independent inventors and startups are risk averse—and some larger companies and universities likely are as well—these entities would expand the number of patents available for direct purchase by PAEs. This would likely push costs low enough that PAEs could afford to acquire much larger pools of patents, thereby increasing PAE assertions and reducing funds remitted back to original inventors and assignees.

Conversely, even though the Innovation Act is highly biased in favor of accused infringers, a risk-neutral PAE or large practicing patentee may be able to extract greater settlements from risk-averse accused infringers, such as startups and small companies, by credibly threatening to take a strong case to trial. This is contrary to the poorly reasoned analysis by organizations such as the Electronic Frontier Foundation, which wrongly assumes that PAEs are “patent trolls” that file “weak” suits and also seemingly forgets small companies are regularly sued by larger competitors. Thus, the Innovation Act’s fee-shifting provisions could very well hurt small companies and startups that are defendants accused of infringement.

In sum, the gains from the Innovation Act’s fee-shifting provision, may simply go to large, risk-neutral companies, regardless of whether they are the Intellectual Ventures or Ciscos of the world, just as scholarly analysis has shown how fee-shifting operates in other areas of the law. Perhaps that is why it is not a coincidence that the Intellectual Property Owners Association , which is dominated by large companies, does not oppose it, while the National Venture Capital Association effectively does oppose it. Like the America Invents Act, the Innovation Act’s fee-shifting provisions would probably shift today’s innovation footprint away from the radical and disruptive (associated more with startups and individuals) towards the incremental (associated more with large, established companies).

There is no solid evidence that the potential benefits of the Innovation Act’s biased fee-shifting provision would outweigh its likely substantial costs. These costs could be so large that that even if we include the touted benefits from all of the other provisions in the Innovation Act, some of which could prove useful, I doubt the Act is worth it. In the very least, we should not impose radical and potentially very costly changes in the patent system without very good evidence. As such, anyone who cares about innovation as a whole should oppose the Innovation Act as it stands.

Patently-O Bits and Bytes

Information and events.

New Jobs Posted in Patently-O Jobs. Target your hiring with Patently-O.

The Strong Patent Act of 2015 from Senator Coons

by Dennis Crouch

Senator Coons is expected to introduce his competing patent reform bill into the Senate this week under the title Strong Patents Act.  As the name suggests, these provisions here tend to strongly favor patent holders.  With his usual understated tone, Herb Wamsley writes that Coons’ bill “will differ substantially from Rep. GOODLATTE’s bill H.R. 9.”  In the current political state, this provision has no hope of being enacted. However, I suspect that supporters of provision see it as having strong gridlock-creating potential.

The following is a fairly high-level review of the particular proposals as well as a link to the text of the bill.

[STRONG Patents Act of 2015]

Provisions related to PGR/IPR/Reexams: 

Claim Construction during Post-Issuance Review Proceedings shall be according to the “ordinary and customary meaning” and in the same way that a court would construe the claim in an action to invalidate a patent.  This provision would have the beneficial impact of better-linking the parallel court and PTO proceedings.  The provision would also make it more difficult for the PTAB to invalidate patents because the claims would no longer be given their broadest reasonable interpretation.

Amendments to the Claims during Post-Issuance Review Proceedings will be allowed if “reasonable.”

Presumption of Validity will Apply to patents being challenged in post-issuance review proceedings such that unpatentability of a previously issued claim would require clear and convincing evidence.

Standing to File Post-Issuance Review Proceedings will be limited to only entities charged with infringement.

In Response to a Post-Issuance Review Petition, the patentee will be allowed to submit supporting evidence.

Separating the Two Steps of Post-Issuance Review Proceedings: Under the proposed law, a PTAB judge who participates in the decision to grant a PGR/IPR petition will not then be allowed to decide the merits of the case.

Blocking Anonymous Petitions: The proposed law would allow the patentee to discover the real party in interest associated with the filing of either a reexamination or an PGR/IPR petition.

A One Year Deadline will be instituted for filing requests for ex part reexamination triggered by service of a complaint alleging infringement.

Civil Procedure:

Form 18 is to be eliminated.

USPTO Funding:

Fees collected by the USPTO will be made available to the Director until expended including past each fiscal year.

Infringement:

The Punitive Damages Provision would be amended to allow the court “in its discretion” to treble damages “upon determining, by a preponderance of the evidence, that the infringement was willful or in bad faith.”

Inducement of Infringement becomes a cause of action as outlined by the Federal Circuit in Akamai. This would effectively overrule the Supreme Court’s decision in the case.

Universities:

The provision would fix a seeming gap in the current micro-entity status requirements that don’t actually allow universities to claim micro-entity status (for a 75% fee reduction) but instead only those with a duty to assign rights to the university.

Rogue and Opaque Demand Letters:

The new law would specify that certain bad-faith demand letters are unlawful under the FTC Act and the FTC would have power to enforce the law with a maximum penalty of $5 million.

= = = = =

 

The Rewards From Effective Reform Could Be Great

A group of 51 intellectual property scholars have submitted the following letter to Congress with the conclusion that “a large body of evidence . . . indicates that the net effect of patent litigation is to raise the cost of innovation and inhibit technological progress.” – Dennis

= = = = =

To Members of the United States Congress:

We, the undersigned, are economics and legal scholars who study innovation, intellectual property law, and policy. We write to respond to lobbyists and others who claim there is little empirical evidence available to assess the performance of the American patent system. In fact, a large and increasing body of evidence indicates that the net effect of patent litigation is to raise the cost of innovation and inhibit technological progress, subverting the very purpose of the patent system. As members of Congress debate reforms to improve the patent system we hope they appreciate the failings of the current system, and implement salutary reforms.

Over the last five years, academic researchers have published over two dozen empirical studies on patent litigation and its economic impacts (see the attached bibliography for a selection). These studies have been conducted by researchers with diverse views and using different methodologies.

The preponderant economic picture these studies present is that patent litigation now imposes substantial costs, particularly on small and innovative firms, and that these costs have tended overall to reduce R&D, venture capital investment, and firm startups. Not one study of the economic impact of current patent litigation concludes that the effects are negligible.

The number of defendants in patent lawsuits filed in 2009 was five times the annual number during the 1980s. By most tallies, the majority of lawsuits are now filed by so-called “patent assertion entities” (PAEs), popularly known as patent trolls. Estimates based on surveys, on firm 10-K filings, and on stock prices suggest that PAE litigation has been costing firms tens of billions of dollars per year since 2007. Startups and venture-backed firms, especially, report significant operational impacts from PAE lawsuits in survey-based studies. An econometric analysis finds that the more R&D a firm performs, the more likely it is to be hit with a patent lawsuit, all else equal. Another study associates lawsuits from PAEs with a decline of billions of dollars of venture capital investment; another found that extensive lawsuits caused small firms to sharply reduce R&D spending; and yet another 2 found that costly lawsuits caused publicly listed defendant firms to substantially curtail R&D spending.

Although each of these studies has limitations and none is conclusive by itself, a consistent picture emerges: the patent system provides strong protection without excessive litigation in some sectors such as pharmaceuticals, but substantial evidence highlights serious problems with patent litigation in many other industries. Even if the patent system on the whole promotes innovation, it does so despite the social costs that result from this litigation, not because of it.

Congress, the courts, and the Patent and Trademark Office have all made changes in recent years that help mitigate this problem. The Inter Partes Review and Covered Business Method proceedings established by the America Invents Act of 2011 have helped remove hundreds of invalid patents, many already involved in litigation. Supreme Court decisions have strengthened patentability standards and have somewhat lowered the hurdles to feeshifting in patent cases. Perhaps as a result, patent lawsuit filings declined modestly last year from the record setting level of 2013. While month-to-month comparisons are variable, 18% fewer patent lawsuits were filed last year than in 2013.

Nevertheless, patent litigation rates remain at detrimentally high levels. Indeed, much of the empirical research mentioned above covers periods prior to the last several recordbreaking years for patent litigation. That is, the research demonstrates that patent lawsuits were already harming innovation when litigation rates were significantly below current levels. In this light we are not surprised that a growing chorus of high-tech entrepreneurs and state attorneys general has stepped forward to urge that the patent system should work for innovators and not against them. Though we understand that crafting and implementing effective reform will be difficult, we write to emphasize the rewards from effective reform could be great.

Sincerely,

Clark Asay (BYU); Carliss Baldwin (Harvard Business); James Bessen (BU); Jeremy Bock (Memphis); Michele Boldrin (Wash U Econ); Michael Burstein (Yeshiva); Andrew Chin (UNC); Lauren Cohen (Harvard Business); Wesley Cohen (Duke Business); Kevin Collins (Wash U); Jorge Contreras (Utah); Robert Cook-Deegan (Duke Public Policy); Ben Depoorter (Hastings); Samuel Ernst (Chapman); Robin Feldman (Hastings); Lee Fleming (Berkeley); Roger Ford (UNH); Brian Frye (Kentucky); William Gallagher (Golden Gate); Shubha Ghosh (Wisconsin); Eric Goldman (SCU); Umit Gurun (UT Dallas Business); Bronwyn Hall (Berkeley Econ); Christian Helmers (SCU Business); Joachim Henkel (Technische Business); Cynthia Ho (Loyola Chicago); Herbert Hovenkamp (Iowa); Ben Klemens (U.S. Census); Scott Kominers (Harvard Fellow); Amy Landers (Drexel); Mark Lemley (Stanford); David Levine (Wash U Econ); Yvette Liebesman (SLU); Brian Love (SCU); Phil Malone (Stanford); Michael Meurer (BU); Joseph Miller (Georgia); Ira Nathenson (St. Thomas); Jacob Rooksby (Duquesne); Pamela Samuelson (Berkeley); Sharon Sandeen (Hamline); F.M. Scherer (Harvard Gov’t); Roger Smeets (Rutgers Business); Talha Syed (Berkeley); Alexander Tabarrok (George Mason Econ); Toshiko Takenaka (UWash); John Turner (Georgia Econ); Ryan Vacca (Akron); Eric von Hippel (MIT Management); Jonathan Williams (Georgia Econ). 

Apple-Samsung Lawsuit Raises Important Questions about Scope of Injunctions

Guest Post by Professor Daryl Lim (John Marshall Law School)

Apple and Samsung will once again lock horns at an appeals court. Apple is seeking a permanent sales ban on patented features contained in Samsung’s Galaxy S3 smartphone and nine other older smartphone models. The U.S Court of Appeals for the Federal Circuit, which will hear the oral arguments on March 4, had earlier ruled that those seeking injunctive relief must show a “causal nexus” between the infringement and the asserted “irreparable” harm.

The patents cover user-interface designs for software covering the “autocorrect,” “slide to unlock,” and “quick link” features. A lower court ruled (ruling here) that Apple had failed in carrying its burden to show the infringed features drove consumer demand for Samsung’s products. It also rejected Apple’s argument that its reputation had suffered “irreparable” harm.

 

1. Feature-Based Injunctions

Apple has argued that the narrow ban it sought covering the infringing features should have been granted. A ban focusing on infringing features rather than whole products has much to commend itself. It better tailors the remedy to address the harm and comports with the equitable basis of injunctive relief. The need for proportionality also manifests itself in the requirement that courts weigh the relative hardships to the parties in deciding whether to grant or deny an injunction, as well as in deciding whether the injunction is in the public’s interest.

At the same time, Apple’s view that a nexus “necessarily” exists because its injunction is narrowly tailored leans too far in the other direction. That kind of categorical thinking was rejected by the Supreme Court in its seminal eBay decision, which required courts to undertake an approach that emphasizes a careful balancing of the effects of granting the request for an injunction. Google, LG and others also cautioned against it, warning that it would breed patent hold-ups, with smartphones typically containing 250,000 patents. Rather than devoting time and resources to develop new products or improving existing ones, companies could be consumed with waves of vexatious litigation by patentees seeking feature-specific injunctions.\

On the other hand, Nokia warned that the value of exclusive licenses turns on robust exclusion rights, and their absence “would devalue those patent rights and stifle incentives for further innovation.”  However, the Supreme Court has repeatedly held that the exclusive rights are a means to furthering the public interest by facilitating the dissemination of new and useful technology.  The proper remedy for infringement is monetary compensation; unless eBay standards are met. Sales bans are the exceptions to that norm.

 

2. Reputation as a Proxy for “Irreparable Harm”

Apple also sought to show that infringement by a rival would harm its reputation. According to Apple, this qualifies for “irreparable harm,” warranting an injunction. As with all cases for injunctive relief, the facts are crucial in providing the proper context for delineating the scope of its applicability.

Apple relied principally on Douglas Dynamics, where the Federal Circuit held that the patentee’s reputation as an innovator would be damaged if customers found the same features in snowplows sold by its rivals. The owner promoted this “easy on, easy off” feature in its advertising, and the infringer had marketed itself as the patentee at “half the price.”

Apple argues that Douglas Dynamics did not require patent-specific proof in finding reputational harm. But it cannot have it both ways. If Apple seeks a feature-specific injunction to remedy a specific harm, then it must also accept that the harm to reputation must be similarly linked to the patented feature. Injunctions are a response to threats of imminent harm. It will be difficult for Apple to show this nexus.

First, during the relevant period Samsung launched nine flagship devices containing features Apple did not offer, such as near field communications technology. The lower court found its products independently reputable.

Second, consumers are unlikely to link the patented features with Apple. In the same way an infringing cooling fan in a computer does not harm the innovator’s reputation as a computer maker, features such “quick link”, “slide to unlock” and “autocorrect” do not harm Apple’s reputation for making smartphones.    Moreover, Apple’s latest operating system, iOS7 has already abandoned features like the spot-specific “slide to unlock” feature.

Third, few would have missed Apple’s muscular pursuit of patent litigation. Its reputation cuts against the conclusion that “irreparable” harm has resulted from the infringement.

 

Fourth, its reputation as an innovator remains stellar. At $700 billion, Apple is the world’s largest company by market capitalization.

 

Fifth, if Apple is truly concerned about Samsung misappropriating its goodwill or consumer confusion, it is barking up the wrong tree. Trademark law, not patent law is Apple’s remedy to protecting its reputation.

 

This case represents one of the last in Apple-Samsung global litigation. Many in the tech world will watch with great interest where the Federal Circuit stands on both issues. Its pronouncements will define the final contours of the end-game.

 

Daryl Lim is an Assistant Professor at The John Marshall Law School where he teaches courses in intellectual property law as well as antitrust law.  In 2014, he was nominated “Professor of the Year”, and was one of 24 law professors worldwide nominated for a list of top 10 antitrust/competition law professors under 40 on the Antitrust & Competition Policy Blog. His latest article “Standard Essential Patents, Trolls, and the Smartphone Wars: Triangulating the End Game” may be found here.

 

 

USPTO Cancels Sensitive Application Warning System (SAWS)

by Dennis Crouch

USPTO management has announced the cancellation of its Sensitive Application Warning System (SAWS).  Writing in an internal email, Commissioner Focarino indicated that “the USPTO has decided to retire this program.”  This announcement is effective immediately and “applications currently in this program will now proceed through prosecution absent any additional SAWS-related processing.”

Focarino also promised that any future quality-enhancing initiatives on par with SAWS “will be disclosed to the public before implementation.”

As I wrote earlier, some ideas behind the SAWS Program offer potential benefits of better focusing resources. However, the downfall of the program was the lack of public accountability.  Congratulations to the USPTO for recognizing this issue and promising a more transparent future.

Focarino’s email alludes to the fact that the SAWS program began in 1994 – a time when pending applications were still kept secret.  “Today, unlike when the SAWS program was created, most applications are published eighteen months after submission, exposing them to public scrutiny and the potential for third-party submissions of prior art.”  Likewise, the public access has also pushed the USPTO further towards accountability in its operations.

[Update: Information has now been added to the USPTO website]

Trademark: Registration Void if Completed Prior to Actually Rendering Services in Commerce

by Dennis Crouch

David Couture v. Playdom (Fed. Cir. 2015)

In what may become an important trademark decision, the Federal Circuit has ruled that trademark registration requires actual use in commerce. 15 U.S.C. 1051.  For goods, this means that the goods must actually be sold or transported in commerce. For services, this means that services must actually be rendered in commerce.

Here, Couture’s PLAYDOM mark is being challenged by Playdom, Inc.  Couture’s commercial use of the mark including registration of the domain [www.playdominc.com] in a way that includes the offer of writing and video production services and a contact address. Couture did eventually provide services, but only well after the mark was actually registered.

Because no services had been provided as of the registration application date, the mark was deemed void ab initio and therefore cancelled

Intent to use: Trademark attorneys know that applications can be filed prior to use under the provisions allowing for an “application for a bona fide intention to use [ITU] trademark.”  The statute has particular provisions for that approach, including a timeline for proving actual use.  15 U.S.C. § 1051(b)(1).  Here, Courture failed to follow that approach and the Federal Circuit here affirmed the Federal Circuit rule barring substitution of an ITU application after registration.

= = = = =

One of the traditional benefits of trademark law is that it has fewer disastrous pitfalls for the uninformed (as compared with patent law).  This case here will catch some unwary in its net.

Smartflash v. Apple: Is the Invention an Abstract Idea?


Apple-logo[1]by Dennis Crouch

In the upcoming $500 million Apple v. Smartflash appeal, a central question will be whether the Smartflash patents properly claim eligible subject matter under 35 U.S.C. 101 as interpreted by Alice v. CLS Bank (2014).  (These issues will first arise in post-verdict motions before the district court).  If these claims are patent eligible, then Alice will ultimately have only a minor shift in the law.

Although there may be factual underpinnings, patent eligibility is generally thought to be a question of law that is decided by a judge rather than jury.  In this case, Apple motioned for summary judgment of ineligibility under the Alice standard.  That motion was first considered and rejected by Magistrate Judge Nicole Mitchell and then confirmed without opinion by Judge Rodney Gilstrap.

Lets look at the Smartflash claims. Claim 32 of U.S. Patent No. 8,118,221 is fairly indicative and claims a data access terminal that is designed to take-in data from a supplier and provides the data to a carrier.  The arguably novel features of the apparatus is found in the claimed software code that (1) receives payment data and payment validation; and (2) once payment is made then retrieving data and a “condition for accessing the data” from the supplier and send it to the carrier. The claim further points out that the condition is “dependent upon the amount of payment.” [Text of the claim is at the bottom].  That condition might, for instance, be that the data file (i.e.,  movie) is permanently accessible based upon a larger payment, but only available for a seven days based upon a smaller payment. The eligibility question will be whether this claim is effectively directed to an unpatentable abstract idea.

In Alice Corp., the Supreme Court explained a two step process for its abstract idea analysis. In step one, the court asks whether the claim is directed to or encompasses an abstract idea. For some, it appears that this approach involves considering the gist of the invention as claimed.  Thus, in Alice Corp., the Supreme Court saw that the claimed invention was directed toward the general idea of “mitigating settlement risk” even though the particular claim at issue involved more particularized elements. In step two, the court asks whether any of the specifically claimed elements or combination of elements in the claim are sufficient to ensure that the claim amounts to significantly more than the abstract idea itself.  Here, the question could be restated as to whether the claim in question includes an innovative or otherwise sufficient practical application of the aforementioned abstract idea.

In thinking through the claims at issue in Smartflash, the district court (through the magistrate judge) followed the two-step approach of Alice to ultimately find the claims patent eligible.

In step one, the district court sided with Apple – finding that the patent claims do recite abstract ideas. In particular, the court found that “the asserted claims recite methods and systems for controlling access to content data … and receiving and validating payment data” with the state purpose of “reduc[ing] the risk of unauthorized access to content data.” Generalizing further upon these notions, the court found that the general purpose of the claim to be “conditioning and controlling access to data based on payment” and concluded that to be an “abstract and a fundamental building block of the economy in the digital age.”  In considering this approach, the district court interpreted Alice step one as focused on the “general purpose” of the invention and that Alice only “considers specific limitations at step two.”

In step two, the district court ruled against Apple — finding that the specific limitations found in the claims were sufficient to transform the abstract purpose to a patent eligible invention. “The asserted claims contain meaningful limitations that transform the abstract idea of the general purpose of the claims into a patent-eligible invention.” Here, the court pointed to the recited limitations such as “status data”, “use rules”, and “content memory.” Although those none of those individual limitations may be substantial enough, the court found them indicative of the reality that the “claimed solution is necessarily rooted in computer technology in order to overcome a problem specifically arising in the realm of computer networks.”  Finally, to drive-home this point, the court attempted to draw an analogy to pre-internet days and found that the solutions offered here is fundamentally different from prior solutions of the general abstract problem in pre-internet days.

In its step-two analysis, the district court attempted to hone its decision closely to Judge Chen’s decision in DDR Holdings.

[Read the Magistrate Judge opinion adopted by the District Court: 6-13-cv-00447-JRG-KNM-423-PRIMARY DOCUMENT]

In the same way that the Supreme Court’s Alice Corp analysis is deeply unsatisfying, the district court’s analysis here is also fails to be compelling.  In each case, application of the legal rule to the particular facts is done in merely a conclusory way without support of either facts or substantial analysis.

= = = = = =

 

Claim 32.
A data access terminal for retrieving data from a data supplier and providing the retrieved data to a data carrier, the terminal comprising:
a first interface for communicating with the data supplier;
a data carrier interface for interfacing with the data carrier;
a program store storing code; and

a processor coupled to the first interface, the data carrier interface, and the program store for implementing the stored code, the code comprising:

code to read payment data from the data carrier and to forward the payment data to a payment validation system;
code to receive payment validation data from the payment validation system;
code responsive to the payment validation data to retrieve data from the data supplier and to write the retrieved data into the data carrier;
code responsive to the payment validation data to receive at least one access rule from the data supplier and to write the at least one access rule into the data carrier, the at least one access rule specifying at least one condition for accessing the retrieved data written into the data carrier, the at least one condition being dependent upon the amount of payment associated with the payment data forwarded to the payment validation system; and
code to retrieve from the data supplier and output to a user-stored data identifier data and associated value data and use rule data for a data item available from the data supplier.

 

 

 

 

 

Current U.S. Patent Practitioner Trends

Guest Post by Zachary Kinnaird, Patent Attorney with International IP Law Group

We are currently in the midst of a noticeable downward trend in the number of new patent practitioners each year.  As recently at 2009, nearly 2,000 new patent attorney and agents earned registration numbers, however this has fallen more than 40% in just five years.  Based on registrations from this January, only 1,000 new patent practitioners are projected to register in 2015.

Registration timing data also shows:

  • A weak correlation between law school enrollees and new patent practitioners
  • A third of current patent attorneys were previously patent agents
  • The average time to convert from agent to attorney is slightly less than 3 years
  • Dramatic shifts in registration frequency around changes in the law and USPTO policy

Fig1

In addition to the current downward trend, other interesting points include the roughly 55% decrease in registration numbers earned from 2003 to 2004.  Also notable is the doubling of new registration numbers earned from 1997 to 1998.  However, as noted in the methodology below, any data prior to 1998 may not be consistent with more recent data due to USPTO surveys and database updates.  Accordingly, fewer conclusions and points of interest can be identified for these earlier years.

January 2015 Below Average, Projecting Only ~1,000 New 2015 Practitioners

Fig2

In the chart above, the averages for each month from 2005 – 2014 are shown with error bars showing the standard error for the number of new practitioners in the past 9 years.  Based on data pulled from the month of January 2015, a prediction can be made about this year’s total new practitioners.  As no satisfactory correlation is currently found between the number of new practitioners and any other identified factor, these predictions are made only by comparison to averages over similar time periods.

A simple proportion is used as follows:

Fig3

This is of course a very loose estimation.  Based on the standard error of January months used in the average, it would not be surprising to see up to 1,112 or as low as only 787 new US patent practitioners in 2015.  These lower projections fit the recent downward trend seen year to year since 2009.  If this downward trend continues, I am interested to see its effect on the employment market for patent attorneys, patent firms, and patent educators.

Weak Correlation between Law School Enrollees and New Patent Practitioners

Fig4

In this graph, the number of newly enrolled 1L law students as reported by The Wall Street Journal is compared to the number of new registration numbers earned each year.  Although at times there appears to be a weak correlation, overall there does not appear to be any correlation between the number of students attending law school and the number of new patent practitioners each year.  Indeed, the correlation coefficient in excel for these two trends was 0.066.

From the lack of a strong correlation presented by these values, one conclusion to draw is that the factors that convince a person to enter law school are different or are weighed differently than the factors that convince a person to pursue a career as a patent practitioner.

1/3 of Patent Attorneys were Agents First, Usually Converted in 3 Years or Less

With date of registration data, it is possible to find the number of patent attorneys who were previously agents.  Of the 43,064 practitioners listed, 13,232 were listed as a patent agent first.  This represents approximately 31% of the listed practitioners.

It is also possible to find the average time between these practitioners’ registration as agents and their later registrations as attorneys.  On average, the conversion time was 1039 days, or roughly 2 years and 10 months.  Since the primary requirement to convert a registration status from agent to attorney is passing a state bar, it is reasonable to conclude that this number is close to 3 years because of the typical three year duration of law school in the United States.

However, more interesting is the fact that this average value is just below 3 years.  One interpretation is that this figure suggests the group of practitioners who change from patent agent to patent attorney, on average, decided to pursue work as a patent practitioner only after entering law school.  Otherwise, this average might be longer than the average duration of law school, not shorter.

 Month To Month Registration Frequency Shifts with Changes in Patent Law

Fig5 Since the start of online testing, registrations are more evenly spread through the year.  However there are still outlier months, and recently these outlier months correspond almost perfectly to follow the timing of the phases of AIA changes were set to be added the patent bar.  The slight delay from implementation month is likely explained by processing times at the USPTO of registration paperwork after passing the patent bar.  Unsurprisingly, the months immediately following the large increases show dramatic drops in the number of freshly registered practitioners.

Further, these outlier months make sense both theoretically and personally.  I myself was part of the May 2013 outlier month, and scheduled my exam towards the end of the month in March 2013 – the final month before the third phase of AIA changes were to be tested.  After passing the exam, my paperwork and processing time at the USPTO resulted in a first registration date of 5/20/2013.  It appears I was not alone in strategically scheduling my exam to avoid the uncertainty of being tested on new law.

Dramatic Shift in Registration Timing after USPTO Shift to Year Round Testing

Fig6

The above chart shows the number of new registration numbers earned every month from January 2002 to December 2007.  This range was chosen to highlight the effect of the USPTO switching from administering the patent bar twice a year to the year round method used today.

Methodology

The USPTO provides both a database for practitioner information as well as a zip file of this data in spreadsheet form that is updated daily.  However, the spreadsheet provided by the USPTO does not include the dates of registration as an attorney or agent.  Accordingly, the process of retrieving the registration date information from the online database was automated to yield the data that is analyzed in this post.  As many practitioners have been registered as both patent agents and as patent attorneys, only the date an individual first received a registration number was used for this analysis.

Unfortunately, it is unclear how accurately the USPTO database reflects active U.S. Patent practitioners.  Dennis Crouch wrote about this issue in 2012 and also covered one of the Patent Office’s attempts to refresh its database to reflect a more accurate count of current practitioners.  In fact, as recently as October 2014, the Office of Enrollment and Discipline (OED) has conducted another survey for registration numbers 35,000-39,999 to update the information in its database.  For the curious, these most recently identified registration numbers correspond to practitioners who first registered between August 1991 and February 1996.  Due to these surveys, and the lack of more complete data, the following graphs and charts only represent the USPTO attorney and agent database as of January 31, 2015.

Future Analysis

In the future, I will take a look at the ratio of agents to attorneys on from year to year to see if the relative percentage of patent agents is increasing, decreasing, or does not follow a trend.  I also plan to flesh out the historical parts of this data by calculating yearly values of registration numbers from earlier years to compensate for the data removed by the USPTO through OED surveys.

“Late” IDS Filing Limits Patent Term Adjustment (PTA)

by Dennis Crouch

Prior to 1995, the U.S. measured patent term very simply – a patent was in force for 17 years after issuance so long as the appropriate maintenance fees were paid.  Now, the U.S. has transitioned to a base term of 20-years from the filing date. With an average application pendency of about three-years, that transition has been seen as largely term-neutral.  However, Congress also created the patent term adjustment (PTA) system to increase the post-issuance term where USPTO delays have eaten-up too much of the 20-years. A major problem with the PTA statute is that it is poorly drafted – leading to major gaps and ambiguities.

For most patentees, an extra month added to a patent set to expire 15 years from now is relatively worthless.  However, there exists a subset of patentees that have good reasons to believe that the extra month may be worth millions of dollars (typically pharma).

In Gilead v. Michelle Lee (Fed. Cir. 2015), the fight focused on whether a “late” submission of an information disclosure statement (IDS) should count against the applicant’s PTA.  In its unanimous decision, the Federal Circuit affirmed the lower court holding that the PTO’s interpretation of the statute was reasonable and thus enforceable.

The relevant timeline in the case is as follows:

  • February 22 2008: Gilead files its application.
  • November 18 2009: USPTO mails a restriction requirement.
  • February 18 2010: Gilead files a responsive election.
  • April 16 2010: 57-days later, Gilead files a supplemental IDS.
  • July 29 2011: USPTO mails its notice of allowance.
  • April 3, 2012: Application issues as U.S. Patent No. 8,148,374.

The particular fight is whether that 57-days between its responsive-election and IDS filing should be counted against Gilead.

35 U.S.C. § 154(b)(2)(C) indicates that “the period of adjustment . . . shall be reduced by a period equal to the period of time during which the applicant failed to engage in reasonable efforts to conclude prosecution of the application.” The statute also gives the USPTO authority to “prescribe regulations establishing the circumstances that constitute a failure of an applicant to engage in reasonable efforts to conclude processing or examination of an application.”  Taking on that role, the USPTO created did establish a rule that such a failure includes the “submission of a supplemental reply or other paper, other than a supplemental reply or other paper expressly requested by the examiner, after a reply has been filed.” 37 C.F.R. § 1.704(c)(8)

The IDS filing appears to squarely fall within the rule as written by the USPTO and Gilead’s challenge here is that the rule itself invalid as arbitrary and capricious.  In particular, Gilead argues that there is no indication whatsoever that the IDS filing led to any delays in prosecution.

In rejecting Gilead’s appeal, the Federal Circuit found: (1) the statute does not particularly address the IDS question but does give the USPTO authority to fill-the-gaps; and (2) the USPTO’s approach of creating an across-the-board rule is reasonable and certainly not arbitrary-and-capricious even though an applicant’s action may not have caused delay in the particular case at issue.   In this second-step of the analysis, the USPTO’s decision-making is given wide deference so that courts regularly affirm the applicability of rules that – in the view of the court – are sub-optimal.

Holding: Gilead does not get its extra 57 days of patent term.

Practice Tip: Before filing an office action (OA) response, take a few minutes to consider whether there are any supplemental IDS filings that should be included. Otherwise, you may lose patent term.

= = = = =

I should note that I avoided the genuine complexity of the PTA statute in the post above. If you really want to understand the statute then you’ll need at least an hour and several pieces of scratch paper.

Hyatt’s Family Tree

by Dennis Crouch

In the ongoing saga between the USPTO and Hyatt, the USPTO recently submitted an interesting family tree of related applications filed by Gilbert Hyatt.  Nice redaction.

It is unclear to me why the entire block is redacted since some of the Hyatt patents have issued and therefore are public as is the application of any unpublished application whose filing-date benefit is claimed by one of issued patents.

HyattLawsuit

Status of USPTO’s Withdrawn Abstract Idea Patents

by Dennis Crouch

In the Summer of 2014, the U.S. Supreme Court decided the seminal case of Alice Corp v. CLS Bank that pushed further against the patenting of abstract ideas or their non-inventive applications. As part of its implementation procedures, the USPTO quickly began examining applications under the new standards and – as an immediate response – withdrew the allowance of a number of applications that had been determined to be patentable prior to the Alice decision.  Through a FOIA request, Charles Duan and Tristan Gray-Le Coz of Public Knowledge were able to obtain a list of those several hundred withdrawn applications and reported their results on Patently-O in November 2014.

I wanted to follow up on those applications to how they have fared in the seven months since the USPTO’s July 2014 action. These cases are interesting because they were ready for issuance and the only extra issue is eligibility under Section 101.  Thus, this setup offers a nice natural experiment to consider cases where Section 101 is of direct importance.

Using PAIR, I pulled up pendency information for each of these applications and the chart below shows the results:

PendingAliceAppsBasically, 93% of the applications are still pending. Most of these have been initially rejected under Section 101 and now are on to a second-round final. 7% though are either patented or have received a notice of allowance. Only 1% of the applications have been abandoned.  Because these applicants had – at one point – a genuine expectation of issuance that may be hard eliminate.

Of these issued patents, I think that the response filed in Application No. 13/076,216 is interesting. In that case, the applicant essentially argued that the USPTO had failed to provide evidence that the idea of data collection and analysis was an abstract idea and failed to provide evidence that the computer-implemented limitations failed to provide sufficient practical grounding in order to avoid the eligibility ax. The ‘216 application has matured into U.S. Patent No. 8,965,784.

Over the next year, we should begin to get a good picture of how the USPTO will be working with the framework laid out by the courts.

FTC’s Power to Investigate Settlements

by Dennis Crouch

The Federal Trade Commission (FTC) monitors litigation settlements for their potentially anti-competitive results.  Most settlements are kept confidential by the parties, but certain settlements are automatically required to be submitted for review and, in any event, the FTC has subpoena power.

When the German pharmaceutical company Boehringer Ingelheim settled with generic manufacturer Barr, the FTC opened an investigation looking at the settlement document and also subpoenaed further documents relating to the settlement.  In particular, the FTC demanded the financial analyses used to evaluate the potential settlement terms. Boehringer has begrudgingly turned over 270,000 pages of documents prepared in the ordinary course of business, but refused to turn-over those that were prepared as part of the litigation and settlement.  Those documents are obviously relevant to whether there was any anticompetitive intent, but Boehringer has argued that they are protected by both attorney-client privilege and the attorney work-product doctrines.

One problem with discovery-disclosure fights is that the legal ruling typically depends upon the document contents, but the content cannot be judged or argued-about without its disclosure.  Further, modern litigation typically involves an overwhelming number of documents – making their review logistically difficult.  Here, the district court solution was to select a small sample of contested documents and then review them in camera. The district court found that the vast majority of the sample documents were properly withheld.

On appeal, the DC Circuit has reversed in-part — finding that the district court overly protected documented “facts” that were sufficient distinct from the type of attorney-opinion protected under the attorney work-product doctrine.

[W]here a document contains both opinion and fact work product, the court must examine whether the factual matter may be disclosed without revealing the attorney’s opinions. . . . Much of what the FTC seeks is factual information produced by non-lawyers that, while … attorneys, does not reveal any insight into counsel’s legal impressions or their views of the case.

Here, the requested information was simply “the sort of financial analyses one would expect a company exercising due diligence to prepare when contemplating settlement options” and thus not protectable as attorney work-product.

[Read the decision].

 

Supreme Court Denies Appeal on Constitutionality of First-to-File Patent System

by Dennis Crouch

The Supreme Court has denied MadStad Engineering’s petition for writ of certiorari in its case arguing that the first-to-file patent system is unconstitutional because the new law awards rights for the filing of a patent application and no longer requires invention.

Rather than reaching the merits, the district court found that MadStad lacked standing to file the lawsuit because the plaintiff could not prove any particular injury due to the law’s enactment. That decision was then affirmed by the Federal Circuit.  The denial of certiorari here appears to end this particular lawsuit. However, I expect that another party – perhaps one whose patent application has been rejected under the new law – will take-up the mantle and force a court to address the real issue.

Getting SAWS Data from the USPTO

DoubleSecretProbationThe USPTO operates a Sensitive Application Warning System (SAWS) that internally flags pending applications that include “highly controversial” claims or that might create “unwanted media coverage” for the USPTO or the Administration.  Those flagged applications are apparently tiered and then, before allowance, must be approved by either a technology center director or upper PTO management.

In general, I agree with the USPTO’s policy of attempting to apply more examination firepower in areas where it is needed, either because of the difficulty of examination or a likelihood that issued patents will be highly disruptive to settled expectations.  However, I have concerns as to how the policy is being carried-out here, in the SAWS program. And, because the USPTO is ordinarily very forthcoming with its examination process and results, its attempts to hide its actions here tend to suggest that it has reasons to hide.

In January 2015, the USPTO denied my request for a list of all published patent applications that had been flagged for the SAWS program (as well as reasons for the flag), and whether USPTO political-appointees were reviewing particular applications.  I then appealed that decision internally to the USPTO general counsel’s office and that appeal has now been denied. [FOIA Appeal Denial A-15-00008].

The Freedom of Information Act requires Federal Agencies to, “upon any request for records … shall make the records promptly available to any person.”  5 U.S.C. 552(a)(3).   However, the law also includes a set of exceptions. Notably, the statute indicates that the agency is not required to disclose “(5) intra-agency memorandums or letters which would not be available by law to a party other than an agency in litigation with the agency.”  5 U.S.C. 552(b)(5).  The statutory exception is a bit oblique, but has been interpreted as a sort of privilege for executive agencies.  

Citing Exception 5, the USPTO has rejected my appeal – arguing that the requested list of applications is protected by both “quasi-judicial privilege” and “deliberative process privilege.”  [FOIA Appeal Denial A-15-00008]. In general, I do not believe that the USPTO’s list of SAWS applications fits into these definitions of privilege as defined by the case law.

The next step is to file a civil action, although I have not yet decided upon that course.

A Patent on the Internet

Guest Post by Professor Marketa Trimble (UNLV). 

Imagine that someone had a patent on the internet and only those who had a license from the patent holder could, for example, do business on the internet. This internet patent would not need to concern the internet protocol, the domain name system, or any other technical features of the network; the patent could, in fact, cover something else – a technology that everyone, or almost everyone, who wants to do business on the internet needs, a technology that is not, however, a technical standard. There might be one such patent application – the patent application discussed below – that could be approaching this scenario.

We must accept, however reluctantly, that activities on the internet will not be governed by a single internet-specific legal regime or by the legal regime of a single country. Although countries might agree on an internet-specific regime for the technical features of the internet, and might even adopt some uniform laws, countries want to maintain some of their country-specific national laws. People and nations around the world are different, and they will always have diverse views on a variety of matters – for example, online gambling. Online gambling might be completely acceptable in some countries, completely unacceptable in others, or somewhere in between; likewise, countries have different understandings of privacy and requirements for the protection of personal data. Therefore, countries now have and likely always will have different national laws on online gambling and different national laws on privacy and personal data protection. Compliance with multiple countries’ laws regarding the internet is nonnegotiable, certainly for those private parties who wish to conduct their activities on the internet transnationally and legally. Nevertheless, in practice and for some matters, the number of countries whose laws are likely to be raised against an actor on the internet may be limited, as I discussed recently.

For some time the major excuse for noncompliance with the laws of multiple countries on the internet was the ubiquitousness of the network. The network’s technical characteristics seemed to make it impossible for actors to both limit their activity on the internet territorially, and also to identify with a sufficient degree of reliability the location of parties and events on the internet, such as customers and their place of consumption. However, as geolocation and geoblocking tools developed, location identification and territorial limitation of access became feasible. Of course the increase in the use of geolocation tools generated more interest in the evasion of geolocation, and increased evasion has prompted even further improvements of the tools. The argument that we cannot limit or target our activity territorially because we don’t know where our content is accessed or consumed no longer seems valid. (Also – at least in some countries – courts and agencies have permitted internet actors to employ low-tech solutions as sufficient territorial barriers, for example, disclaimers and specific language versions.)

The multiplicity of applicable laws that originate in different countries and apply to activities on the internet is more troubling in some areas of law than in others. One area of law that permeates most internet activity is data privacy and personal data protection. Any internet actor who has customers and users (and therefore probably has user and traffic analytics) will likely encounter national data protection laws, which vary country-by-country (even in the EU countries, which have harmonized their personal data protection laws, national implementing regulations may impose country-specific obligations). Therefore, compliance with the varying national data protection laws will become one of the essential components of conducting business and other activities transnationally. If someone could patent a method for complying simultaneously with multiple countries’ data privacy laws on the internet and claim the method broadly enough to cover all possible methods of achieving compliance with the national privacy laws, that patent owner might just as well own a patent on the internet, or at least on a very large percentage of internet activity.

A U.S. patent application that seeks a patent on simultaneous compliance with multiple countries’ data privacy laws on the internet through broad method claims is application No. 14/266,525, which concerns “Systems and Methods of Automated Compliance with Data Privacy Laws,” meaning “laws of varying jurisdictions” (the title and the “Abstract”). The invention is designed to facilitate an automatic method of complying with the data privacy laws of various jurisdictions, which are, as the “Introduction” notes, “complicated, diverse, and jurisdiction specific.” The method envisions that once “person-related data” are requested from a data provider, a “filter is the [sic] automatically applied to the person-related data to restrict transfer of person-related data [that] does [sic] not meet the data privacy regulations applicable to the jurisdiction” (the “Introduction”); the filter also checks for any consents by the data subject if the particular regulations require them. The method also foresees, for example, the possibility of “identif[ying] different origins of the person-related data sources” in terms of their geographical location (“Trust Object and Trust Data”).

The patent application still must be prosecuted, and the – undeniably useful – invention will be subject to scrutiny as to its compliance with the requirements of statutory subject matter, novelty, and non-obviousness. A patent on the application may not issue at all, or the language of the application may be amended and the claims narrowed. Whatever the future might bring for the claimed invention, this patent application serves as a useful prompt for thinking about the components that have been or are becoming essential to conducting business and other activities on the internet.

Cisco Argues that the Inducement Mens Rea Should Focus on Knowledge of Wrongdoing Rather than Merely Infringement

by Dennis Crouch

In the pending appeal of Commil v. Cisco, the Supreme Court is further honing-in on the knowledge aspect of induced infringement.  In particular, the court is addressing whether a defendant’s reasonable and good-faith (but ultimately incorrect) belief that a patent is invalid can be used to prove that the defendant did not knowingly induce infringement.

As background, the patent statute indicates that “[w]hoever actively induces infringement of a patent shall be liable as an infringer.”  In its 2011 Global-Tech decision, the Supreme Court ruled that inducement requires that the alleged inducer have acted with knowledge that the induced acts constituted patent infringement.

The patentee, Commil, argues that both statute and tradition distinguish between the doctrines of infringement and validity.  See 35 U.S.C. 282(b). In Commil’s construct, someone might infringe the patent, but not be held liable if the patent is found invalid or otherwise unenforceable.  Applying that distinction directly to Global-Tech knowledge-of-infringement requirement suggests that knowledge-of-invalidity is irrelevant. [I should note that Commil actually suggests that the court should relax its Global-Tech rule to only require knowledge of the patent’s existence and its potential relevance.]

Briefing is ongoing in the case with Cisco having now filed its responsive brief on the merits.  Oral arguments are now scheduled for March 31, 2015. The other patent case of the term – Kimble v. Marvel will also be heard that day.

In its brief, Cisco argues that a  good-faith but incorrect belief of non-infringement should excuse liability for inducement.  [Cisco Merits Brief]. As its central evidence, Cisco points to other language in Global-Tech that provides support for its infringement.  In particular, the Supreme Court noted that the case might turn the “probability of wrongdoing.” Further, the doctrinal statement from Global Tech does not merely focus on knowledge of infringement but instead whether the defendant will be “liable as an infringer.”  That liability element appropriately sweeps in the potential that the patent is invalid or otherwise not enforceable.  For support, Cisco cites to a series of other decisions where the scienter requirement’s purpose is tied to the moral justification of culpability. See, e.g., MGM v. Grokster, 545 U.S. 913 (2005) (copyright inducement).  Cisco plays upon the contemporary Supreme Court’s bent toward patent non-exceptionalism by citing to various tort and criminal inducement doctrines whose scienter requirements turn on belief of wrondoing.

Cisco also argues that the invalidity-belief-defense is good policy — especially because so many patents are actually invalid and because willful infringement already allows such a defense.  And, as might be expected based upon the Cisco CEO’s recent WSJ editorial, the brief also complains about the problem of patent trolls.

But a recent study shows that a record 5,411 patent infringement cases were filed in 2013, with the number of suits brought by nonpracticing entities growing by almost 20% over the previous year. . . . It is unrealistic to believe that inducement suits are not part of this problem and would not dramatically multiply if Commil obtains the change in law it seeks.

Although Cisco’s legal and policy arguments have merit, I suspect that the hundred-billion-dollar company’s attempt to play the victim here will be unsuccessful. At the very least though, this may be the first time in recent memory that the company has agreed that willful infringement is a ‘wrongdoing.’

= = = = =

An important subtext here is that the knowledge requirement becomes a critical defense only when it turns out that the patent actually is valid, enforceable, and being practiced based upon the active inducement of the defendant.  From a practical standpoint, the belief-of-invalidity-defense could short-circuit inducement cases when the defendant has a solid written opinion of counsel.  However, that presumably only saves an inducer from past-infringement and once validity is confirmed, any ongoing acts will lead to liability.

You are Invited to Mizzou!

We’re hosting a March 13, 2015 event here at the University of Missouri School of Law along with Missouri’s Center for Intellectual Property and Entrepreneurship and would enjoy seeing you. The focus is on Intellectual Property issues in the University Setting and should include interesting discussions that bring together thoughts from the legal, business, and academic perspectives.  [online brochure].

In addition to a smart program, we’re able to secure 5 hours of CLE credit, lunch, and a reception afterwards — all for no charge.   The event is free and open to the public, but we do have some space limitations and would like you to register by contacting Laura Coleman at colemanl@missouri.edu or 573-882-5969.

= = = = =

If you are looking for CLE before March, you might try the PTAB webinar put on by Andrew Williams and Jay Schafer on February 25, 2015. [LINK]