January 2005

Upcoming Conferences

Two upcoming conferences that I plan to attend – both in Chicago.

Shoot me an e-mail if you would like to meet up during these events.

Canada Challenges Federal Circuit’s Patent Decision in BlackBerry Case.

BlackBerry maker Research-In-Motion (RIM) has requested a rehearing en banc at the Federal Circuit in an attempt to escape from the $53 million damage award and the expected injunction against its BlackBerry system for patent infringement.  In a strong power play, the Government of Canada has filed an amicus brief, supporting the rehearing.  As have the Canadian Chamber of Commerce and the Information Technology Association of Canada.  These Canadian Briefs essentially ask the court for comity — arguing that the holding in RIM upsets the business and legal climate in Canada. (Other amicus briefs are expected to be filed within the next few days).

Frankly, I was surprised at the Federal Circuit’s decision last month that found that RIM could be liable for direct infringement even though its some of the necessary elements of the asserted claims occurred outside the U.S. (in Canada).  The diagram above (from RIM’s brief) shows RIM’s e-mail relay in operation in Canada.  The relay is a distinguishing feature of NTP’s patents.

RIM’s most compelling argument is that the infringement of NTP’s patents did not occur “within the United States” as required by the statute.  Obviously RIM’s argument is strictly true.  However, the three judge appellate panel found that the test is not whether the infringement took place within the United States, but whether “control and beneficial use” of the infringing system was within the United States.

In my view, based on standing precedent of Deepsouth and Pellegrini, the Federal Circuit got this case wrong, and the standard of “control and beneficial use” should be tossed.

The court has traditionally had a strong stance against extraterritorial application of the patent laws.  In Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518 (1972), the Supreme Court of the United States (SCOTUS) strictly interpreted the patent act to find that unauthorized manufacturers of patented products could avoid liability for infringement under the then-existing law by manufacturing the unassembled components of those products in the United States and then shipping the components out of the United States for assembly. Congress enacted 35 U.S.C. § 271(f) in order to close that loophole.  However, § 271(f) does not apply to the facts of RIM v. NTP.   In Pellegrini, the court found that Pellegrini’s case against Analog did not fall within the scope of newly enacted § 271(f), and thus, that the U.S. patent laws did not apply to extraterritorial manufacture and sale of a patented electric motor. 

In each of these cases (Deepsouth & Pellegrini), the Court denied the plaintiff’s requests for extraterritorial application of the U.S. patent laws because the statute did not specifically call for such an application.  Because the statute does not specifically call for infringement under the RIM v. NTP scenario there should be no infringement here either.

As an aside: I do believe that there should be some legislative action to amend the patent laws in order to catch individuals who move portions of their systems (such as their router) to another country in order to avoid liability for patent infringement.  However, the Federal Circuit, like the Supreme Court in Deepsouth, is not in a position to generate such legislation.  Is anyone interested in working with me to draft such legislation?

UPDATE: James Hill, a blog reader from the UK wrote in noting the similarity between RIM and the UK case of Menasche v. William Hill. [summary] In Menasche, the Court of Appeals ruled that the invention (a system for online betting) was put into effect in the UK even though the server was located abroad. “By using their terminals in the UK, William Hill’s customers were in a real sense also using the overseas host server in the UK.”   

I think that there are some very strong similarities between the BlackBerry case and Menasche. The one major difference that RIM’s attorney made in my discussion with him is that the operation of the ROUTER is a critical element of NTP’s patent claims — that portion of the claim was particularly pointed out by NTP during prosecution of the patent as a factor that made the invention unique from other prior art.  Thus, the claim is not keyed on the two end users, but rather about the entire chain of operation.
I agree that the specific facts are different from Pellegrini.  However, the principle that I derive from Pellegrini and Deepsouth is that there is a specific statute in U.S. Patent law that calls for extraterritorial application of the patent laws, and regardless of the policy arguments, the U.S. patent laws do not apply to foreign actions except where specifically called for in the statute.
 
UPDATE II: Mr. Petit over at Scrivener’s Error makes the point that the the principle that “a right imply a remedy” might save the original opinion.
 
UPDATE III: Mathew Ingram, an excellent columnist at the Globe and Mail has written an article [subscription req'd] on the subject.  He questions whether the Canadian Government made the right move by filing a brief in this case. 
 
UPDATE IV: In an interesting twist, Computer Leasco Inc., a small computer company based in Michigan, filed a complaint against NTP alleging that NTP officials engaged in the “outright theft” of Computer Leasco’s interests in intellectual property that NTP now holds. (WSJ article)
Links:

How to Jump-Start your Business Method Cases: Part IV

In part III, I introduced the concept of a petition to make special as one of the best ways to decrease pendency of your patent application.  The petition to make special allows the Patent Office to examine your application out of turn and on an expedited basis. 

Normally, during examination, the Patent Office is relied upon to perform a search and analysis of the prior art.  However, the Office offers rapid examination through the petition to make special if the patent applicant performs the search himself.

MPEP 708.02 provides the rules for filing the petition to make special based on prior art search by the applicant.  Specifically, the applicant must submit the following:

  1. A petition to make special with fee ($130).
  2. Patent claims to a single invention (avoid a restriction requirement)
  3. A statement that a pre-examination search was made listing (i) field of search by class and subclass, publication, chemical abstracts, foreign patents, etc.  Note — the search must be directed at the claimed invention.  (A search made by a foreign patent office satisfies this requirement if the claims in the corresponding foreign application are of the same or similar scope to the claims in the U.S. application for which special status is requested.)
  4. A copy of each reference deemed most closely related to the subject matter encompassed by the claims; and
  5. A detailed discussion of the references, which points out with particularity, how the claimed subject matter is patentable over the references.  A general allegation that the claims define a patentable invention without specifically pointing out how the language of the claims patentably distinguishes them from the references is not sufficient.

If your petition to make special is deficient, you will be given one opportunity to perfect the request.  However, that would cause a delay — something your are trying to avoid.

Comments: The petition to make special comes with some risks.  Specifically, that of inequitable conduct if (i) the search was not done properly or (ii) the references were mischaracterized.  To avoid this, I would recommend relying upon an external search firm to perform the search.  In addition, the inventor should be thoroughly questioned to ensure that all prior art that he is aware of has been presented.  Care should be taken to avoid mischaracterizing the references — if you cannot properly distinguish the prior art then it may be better to not file a patent application.

Links:

How to Jump-Start your Business Method Cases: Part III

Financial services business method patent applications have an unusually long pendency.  There are many cases where applications have been on file at the PTO for 4+ years without receiving any substantive response from the Office. 

John Love is the director of the technology department at the PTO that handles financial services business method patents.  Last week, Director Love indicated that the current pendency to first action is about 36 months, while pendency to issue/abandonment is 42 months.  For many, 42 months is a long time to wait for a patent.  In the area of on-line financial transactions, this time-lag is greater than the half-life of an invention’s usefulness.

The key to reducing pendency time for your applications is likely to reduce the time to the first office action.  One great way to do this is by filing your application along with a petition to make special.

Petition to Make Special is a useful tool for advancing the examination your patent application. According to Director Love,

"a petition to make special is an excellent way to shorten the time to first office action." 

Once the application has been processed and sent to his department, Love indicates that they normally act on the case within three to six months.  Thus, if you follow the procedures correctly, you may cut several years off of the prosecution time!

There are several grounds for filing a petition to make special.  Two that may be most useful in your case are (i) actual infringement of the patent claims, or (ii) completion and analysis of a prior art search.

Director Love admitted that the petitions have a tendency of getting lost in the file.  Because of this issue, I would recommend the following proactive procedure for your petition to make special:

  1. File the application without the petition.
  2. Soon after you receive the serial number for the patent application, call the technology group Special Program Examiner (SPRE) to discuss the petition and let him know that it is on its way. It is often the SPRE that decides whether to allow the petition, and because timing is critical, you don’t want to have to appeal his decision.
  3. File the petition by Fax.
  4. Follow up with a phone call to the SPRE in a month to ensure that the petition is being decided. 

Employing this procedure can ensure that your petition is handled properly and may quickly lead to an issued patent. 

NOTE: Each case I handle is a little different from the last — So, don’t blindly follow the rules outlined here. 

UPDATE I: SPE changed to SPRE

UPDATE II: A long-time patent examiner gave a few more pointers.  First, the SPRE does not usually not appreciate receiving status-update telephone calls on every petition to make special — "20-25 calls a day eats up a lot of the SPRE’s time."  He would recommend using PAIR for status checks rather than calling. In addition, the Examiners are under a serious time crunch — they do not always appreciate another case being thrown on the "do this one first pile." 

Links:

Federal Circuit: Refurbishing of Disposable Cameras Not Allowed

Fuji Photo v. Jazz Photo (Fed. Cir. 2005)

Jazz has a business of refurbishing used disposable cameras.  Fuji sued, saying that the refurbished cameras violated Fuji’s disposable camera patents.  Jazz presented two arguments: (i) that Fuji’s rights were exhausted by its initial sale of the cameras and (ii) that the refurbishing constituted permissible repair rather than impermissible reconstruction.

Jazz brings cameras from around the world for refurbishing in China.  In an earlier proceeding, the Federal Circuit determined that patent rights could only be ‘exhausted’ for those cameras that had been first sold in U.S. by Fuji. 

United States patent rights are not exhausted by products of foreign provenance. To invoke the protection of the first sale doctrine, the authorized first sale must have occurred under the United States patent.

Jazz Photo v. ITC, 264 F.3d 1094 (Fed. Cir. 2001), cert. denied, 536 U.S. 950 (2002).

In the present case, the question is, of those cameras first sold in the U.S., did the refurbishment constitute (i) permissible repair or (ii) impermissible reconstruction.  The Federal Circuit first found that Jazz bears the burden of preponderant proof on the affirmative defense of repair. Then it agreed with the District Court’s analysis that, in the absence of any direct evidence on the number of United States first-sales, the district court permissibly used circumstantial evidence to calculate the total repaired cameras. “Upon review of the entire record, this court finds no clear error in any of the district court’s findings.”

How to resolve your domain name disputes.

In November 2004, I published an article with Eric Moran in Snippets, our firm newsletter that we send out to clients and potential clients. The short article discusses legal strategies for protecting your domain name rights once you have discovered an adverse domain name. In the article, Eric & I compare four methods of resolving domain name disputes: the Lanham Act, the Federal Trademark Dilution Act, the Anticybersquatting Consumer Protection Act, and ICANN anticybersquatting proceedingsEach of these avenues have pros and cons.  Deciding whether to invoke one of the above methods of resolving domain name disputes depends on the facts related to each particular adverse domain name or domain name registrant. 

 

We do recommend proactively identifying potentially adverse domain names.  Frequently, we are able to successfully resolve domain name disputes with a carefully worded letter to a registrant, instead of resorting to the courts or to ICANN proceedings.

 

If you would like to receive a copy of the article (free), contact Eric Moran, who is also editor of Snippets.

 

 

 

 

IBM

IBM made big news yesterday.  First, and as expected, IBM was named by the PTO as the company obtaining the greatest number of patents for the year 2004. IBM was awarded over 3,000 patents last year!

Then, IBM pledged [press release] to allow open access to key inventions covered by 500 of IBM’s software patents. This pledge will likely be seen as legally binding commitment by IBM to not assert the 500 named patents against any manufacture/user of open source software (OSS).  The 500 patents are categorized and listed in a 20 page pdf document.

Comment:

(1) It would be my guess that, although IBM’s patent portfolio has the greatest number of patents, it is not the most valuable.  A straight patent count is not worth much.

(2) These 500 patents are only a drop in the bucket for IBM.  They received 3000+ patents this year, and have been the #1 patentee for the past 11 years.  They have well over 30,000 valid patents.  And FYI, IBM can still sue you if your software is not opensource.

Worldwide Patent Proposed by House Judiciary Committee

IP Kat, the London IP Blog uncovered an interesting statement from the House Judiciary Committe.  The idea: A Single, Low-Cost World Patent. Did you know that the US is seeking a worldwide patent?

The cost to U.S. companies and inventors of applying for and obtaining separate patents in each of 150 or more countries is prohibitive. Indeveloping countries and even in Europe, patent fees are at such high levels that they constitute a tax on innovation. European government fees to obtain andmaintain a patent are more than ten times the fees in the U.S. In addition, the expense of retaining separate patent attorneys or agents in each foreign country is burdensome and expensive. The United States could take a leadership role in negotiating an agreement under which countries would give full faith and credit to patents granted by an international organization or one of the three largest patent offices in the world– the U.S. Patent Office, the European Patent Office, or the Japanese Patent Office. Countries giving full faith and credit would charge a minimal fee for patenting in that country, and it would be unnecessary to retain separate patent attorneys or agents to obtain a patent in that country. The obstacles to negotiating and implementing such an arrangement would be formidable, but a single low-cost world patent is the best long-term approach to obtaining effective world-wide patent protection for U.S. companies and inventors. [Emphasis by IPKat].

Patent court defers on divorce case

Weres v. Weres (Fed. Cir. 2005) (Unpublished)

In what appears to be its first divorce proceeding, the Federal Circuit has affirmed that a state court has power to affect the incidents of patent ownership after having divided the ownership interest.  The court went on to find that California courts provided the proper venue for determining the parties’ rights and obligations (such as paying maintenance fees).

Further, the Court affirmed that the divorce decree did not create subject matter jurisdiction for the case under the Patent Act.

PATENTS: Failure to Cite Prior Art to PTO Results in Inequitable Conduct Finding and Award of Attorney’s Fees for Defendant

Bruno Independent Living Aids v. Acorn Mobility Services (Fed. Cir. 2005)

Bruno sued Acorn for infringement of its patented stairlift device.  The case was dismissed on summary judgment.  The district court also found the case ‘exceptional’ and awarded attorney fees to the defendant Acorn because Bruno “intentionally withheld invalidating prior art from the PTO” — even though the prior art had been submitted to the FDA in its request for approval to sell the medical device.

The appellate court affirmed the finding of inequitable conduct and the award of attorney’s fees based on the following factors:

  • Bruno had actual knowledge of the invalidating prior art;
  • Bruno knew or should have known of its materiality (having told the FDA that their design was the ‘substantial equivalence’ of the prior art;
  • The same attorney who filed the FDA request participated in prosecution of the patent;
  • Bruno never provided a credible explanation for the nondisclosure.

Affirmed.

USPTO Implements Changes to Patent Act: Cooperative Research

The USPTO has released an interim rule of practice that implements provisions of the CREATE Act that amended 35 U.S.C. 103(c).  (Published at 70 FR 1818).  The purpose of the Act is to promote cooperative research -- such as between a university and start-up company.  The main thrust of the new law is to exclude some prior art from obviousness (103) consideration if the prior art arose from a joint research agreement.

According to the new rules, to overcome a 103(a) rejection by invoking the CREATE Act, an applicant must:

  • Provide a statement that a joint research agreement was in place and that the claimed invention was made as a result of that agreement.
  • Amend the specification to disclose the names of parties to the agreement.
  • Amend the specification to specify the dates of the research agreement (or point to an assignment recorded in the patent office that describes the agreement)

The new rules cannot be used to overcome rejections based on anticipation.  Likewise, the PTO indicated that the new rules will likely not apply to reissue applications that were initially granted prior to December 10, 2004.

The PTO asks for your comments on the design of the final rule.  Please contact ab76comments@uspto.gov by February 10, 2005 with you comments.

The Bar Association of the District of Columbia PTC Section roundtable that will be held at 3:30 PM EST on January 12 will discuss the changes. A telephone hookup remains available for that meeting. For information on either personal attendance or about the telephone hookup, please contact Jean Shim, jshim@foley.com, who is the registrar for this meeting. The meeting will be held at Suite 500, 3000 K Street NW in Georgetown. (Thanks to Hal Wegner for information on the meeting).

How to Jump-Start your Business Method Cases: Part II

We are discussing the unusually long pendency of financial services business method patent applications (Class 705).  There are many cases where applications have been on file at the PTO for 4+ years without receiving any substantive response from the Office. 

A little more digging found the PTO’s statistics on issuances from class 705:

Class 705 1995 1996 1997 1998 1999 2000 2001 2002 2003
Applications Filed 330 584 927 1340 2821 7800 8700 6782 6000
Patents Issued 126 144 206 420 585 899 433 493 495

This table is a bit misleading because of the problem of long pendency.  For example, very few, if any, of the almost five hundred patents that issued in 2002 were among the 6,782 that were filed that year. However, the table does illustrate the point that very few financial services patents are making it through to issuance.

John Love is director of TC 1600, the center that handles class 705 patent applications.  A couple of years ago, John, along with Wynn Coggins, produced a white-paper outlining their view on "Successfully Preparing and Prosecuting a Business Method Patent Application."  The paper is a nice read and has some useful tips for avoiding unnecessary delays in prosecution.  Some highlights:

  1. If you are concerned about a lengthy pendency (we are), consider filing a Petition to Make Special under 37 CFR 1.102. (more on this later)
  2. Include a clear description of the invention.
  3. Identify any practical application of the invention.
  4. Do a search and discuss the best known prior art that is related to the invention.
  5. Ask a colleague to review the claims without reading the specification.
  6. Use "Jepson-type" claim construction. I.e., "the improvement comprising . . . "
  7. Do not hesitate to call the Technology Center Director if your questions or problems are not being resolved.

Be careful with some of John’s suggestions.  Jepson-type claims and full discussion of the prior art both come with potential risks.  A mischaractarization of the prior art, for instance, may run the risk of invalidating the patent.  However, other suggestions are great! Of course, write clearly and fully describe the invention. 

For today, I would add three more practices that help to reduce pendency:

Do not be the cause of delay: Often, delay at the patent office is due to something that the applicant failed to do.  In reviewing file histories, there were many cases where the applicant did not pay the filing fee, did not file a proper declaration, or did not promptly respond to a request from the Office. 

In class 705, you will not receive an office action on the merits when you have outstanding problems or missing parts.  Once you get those parts in, your application will likely return to the tail end of the queue.  Make it your practice to file complete applications when you file business method patent applications.

Provisional Applications May be A Waste of Time: Your application doesn’t even get to the end of the line until you file a utility application. 

Business Method Patents are Easy to Write but Hard to Prosecute: The technology is usually easy to understand but it is often difficult to get around prior art references.  And, it takes time and diligence to pursue these claims.  Bottom line — prosecution of these types of applications will be more expensive than the preparation. Have a loose enough budget to allow your attorneys to call the patent office to chat up the examiner or TC director.

Links:

US Trade Representative Requests Comments on Review of China’s Intellectual Property Commitment.

Dana Colarulli at IPO clued me in to the United States Trade Representative’s (USTR’s) recent request for public comments on conducting an out-of-cycle review of China’s commitment to intellectual property protection.

USTR will examine whether China’s actions are producing substantial progress toward a significant reduction in IPR infringement levels in China. USTR requests written comments from the public concerning the acts, policies, and practices relevant for this review under Section 182 of the Trade Act.

Comments may be sent via e-mail to FR0446@ustr.eop.gov with ‘‘Special 301 Out-of-Cycle Review’’ in the subject line and must be received by Monday, January 31, 2005.

 

How to Jump-Start your Business Method Cases: Part I

Is anyone still waiting for a first office action? If you have applied for patents that relate to financial services (business methods) then the chances are that your application has not yet felt the flow of a patent Examiner’s red ink.  A Patently-O Blog newsletter reader recently wrote in:

Would you be willing to do a post on the ridiculous pendency (even to first office action) for financial services business method patents?  We are seeing something like 42 months to first OA.  Rumors (from sources inside TC 3600) are that the allowance rate is less than 10%.  The process is totally broken!

Technology Center 3600 is the USPTO department that handles business method patents such as those classified as Class 705.

Class 705 involves Financial, Business Practice, Management, or Cost/Price Determination.  This is a "generic class" for inventions that perform data processing operations uniquely designed for processing financial data, calculating the charge for a good or service, or cryptography.

The popularity of business method patent applications exploded after the famous State Street decision and the dot-com explosion.  In response to a perceived lack of quality in issued patents (i.e., Amazon’s One-Click), the PTO instituted several measures to improve the examination to ensure that bad patents did not issue.  One measure is the ”second pair of eyes” review of all allowed patents, this second review has come at a cost—the cost of ever longer pendency of business methods patent applications.

I poked around for about five minutes on the USPTO’s Patent Application Information Retrieval (PAIR) site and was easily able to find a number of business method type applications that have been pending for +/- 4 years without seeing a single office action or substantive response from the PTO.  Essentially, the queue has outpaced the system.  Here is a table of five applications that I found with their filing date and the number of months they have been pending without receiving an examination:


Publication Number

Filing Date

Months On File Without First Office Action

20020087455

February 20, 2001

47 Months

20020087428

May 25, 2001

44 Months

20010051890

March 19, 2001

46 Months

20010049668

June 5, 2001

43 Months

20040215582

December 8, 2000

49 Months

We would all like to see patents move more quickly through the system.  At the same time, no one wants patents to be passed through the system without a substantive and critical review by a skilled examiner.  The PTO’s increased budget and new leadership may help focus energy on the issue as a whole. 

However, in the short term, there are a number of strategies that may help you improve your place in the queue.  See parts II, III, and IV throughout the week for the details. I am not promising a panacea, or to release all my secrets, but I’m sure that you will find the hints helpful.

Feel free to add your comments!

To be continued …

Links:

New Leadership at the Patent Office

USPTO Director Jon Dudas has announced three new Deputy Commissioners for patents:

Joseph Rolla will be the new Deputy Commissioner for Patent Examination Policy.  Mr. Rolla has been director of TC 2600 (Communications).

Peggy Focarino will be the new Deputy Commissioner for Patent Operations. She has most recently been a director in Technology Center 2100 (computer architecture and software).

Jon Doll will be the new Deputy Commissioner for Patent Resources and Planning. In his new position, he will oversee patent information-technology and processing operations.

“I am confident that the experience, vision, and abilities of this new team will ensure that the USPTO continues to show the way for the patent world,” noted Under Secretary Dudas. “Joe Rolla, Peggy Focarino, and John Doll combine almost a century of patent experience with energy and vision.”

All three of the new Deputy Commissioners have dedicated their careers to service at the USPTO.  There is an optimistic air surrounding their appointments, both inside and outside the Patent Office.

Supreme Court to Hear Patent Case Merck v. Integra.

Supreme Court Expected to Determine Whether Early Drug Research Necessary for FDA Approval Can Constitute Patent Infringement.

Merck v. Integra LifeSciences, U.S. Supreme Court (Case No. 03-1237).

The appeal to the Supreme Court questions the limits of the safe harbor statute (35 USC 271(e)(1)) that permits a drug manufacturer to perform experiments needed to obtain FDA approval of their drugs without incurring liability for patent infringement, even if their activities infringe other’s patent rights.

Under the Fold: The Drug Price Competition and Patent Term Extension Act (Hatch-Waxman) created a safe harbor that permits drug manufacturers to perform the experiments needed to obtain FDA approval of their drugs without incurring liability for patent infringement, even if their activities infringe others patent rights.

However, the statute, codified at 35 USC § 271(e)(1), was limited by a 2003 decision by the Court of Appeals for the Federal Circuit.  The Federal Circuit affirmed a lower court’s finding that the safe harbor against patent infringement does not apply to pre-clinical activities to identify and develop new drugs that will eventually be subject to FDA approval — and thus, that Merck was liable to Integra for patent infringement.

The Case: Integra alleged that Merck and Scripps infringed patents owned by Integra relating to peptides involved in interactions between cell surfaces and the extracellular matrix.  Under contract from Merck, Scripps identified several potential anti-tumor peptide candidates and selected the most promising peptide by conducting in vivo and in vitro experiments to evaluate the specificity, efficacy, and toxicity of the peptide candidates for various diseases. Scripps also performed tests to assess the histopathology, toxicology, circulation, diffusion, plasma half-life, and proper mode of administering of the peptides candidates.

The Appeals Court held that these activities did not fall under the safe harbor (§ 271(e)(1)) because they were not done "solely for purposes reasonably related to the development and submission of information" to the FDA.

"the focus of the entire exemption is the provision of information to the FDA . . . [a]ctivities that do not directly produce information for the FDA are already straining the relationship to the central purpose of the safe harbor." (CAFC Opinion).

"Expansion of § 271(e)(1) to include the Scripps-Merck activities would effectively vitiate the exclusive rights of patentees owning biotechnology tool patents."

Supreme Court:

Merck has now appealed the case to the Supreme Court of the United States, petitioning the High Court to hear the question:

Under 35 U.S.C. 271(e)(1), it is generally not an act of infringement to use a patented invention “solely for uses reasonably related to the development and submission of information under a Federal law” regulating the manufacture, use, or sale of drugs. The question presented is whether the court of appeals erred in limiting that exemption to clinical studies designed to provide information for Food and Drug Administration approval of a new drug.

On request from the Court, the Solicitor General of the U.S. submitted the Government’s view that the case should be heard.  The Government brief makes two major points, one legal and the other social:

Gov’t Brief: The decision of the court of appeals reflects an incorrect view of the law, and is likely to restrict significantly the development of new drugs. Fairly read, the decision below holds that “pre-clinical” research regarding a potential new drug is not protected by the FDA exemption because that exemption is limited to “clinical” research necessary to obtain ultimate FDA approval of a new drug. That holding is inconsistent with the text of the FDA exemption, reflects a mistaken and unduly narrow view of the types of information relevant to the FDA’s two-step process for evaluating potential new drugs, and is in tension with this Court’s decision in Eli Lilly & Co. v. Medtronic, Inc., 496 U.S. 661 (1990). Moreover, the court of appeals’ decision poses a direct and substantial threat to new drug research by dramatically narrowing the scope of protections enacted by Congress in Section 271(e)(1). Although this case is not an ideal vehicle for considering the issue, see p. 18, infra, the potential impact of the court of appeals’ legal conclusion is sufficiently important that the petition for a writ of certiorari should be granted.

Eli Lilly and Co. was also granted leave to file a brief as amicus curiae in the case. Justice O’Connor and Justice Breyer took no part in the consideration or decision of the petition for writ of cert.  It is reported that both Justices own stock in Merck.

Academics Take Sides: Judge Richard Posner (In Lessig Blog) has advocated the creation of a fair-use exception for patents on research tools:

Link: For example, a generic drug manufacturer is permitted to use the patented drug to demonstrate that its generic equivalent is indeed therapeutically equivalent (the "testing" exception created by the Hatch-Waxman Act). More broadly, an inventor can use the information in the patent to try to invent around the patent. And Landes and I advocate an expansion of the patent fair-use principle to allow scientists to use patented research tools (such as the oncomouse) without license–provided the scientists aren’t allowed to use the tools to produce their own patented products!

In response, Lichtman has noted that Judge Posner’s proposal "is problematic for the simple reason that, often, the key market for research tools is to sell those tools to other researchers. If a researcher’s use of patented research tool is fair use, that would significantly degrade the incentive to create those research tools inthe first place. Moreover, even if your approach works, it is in sharp conflict with the Bayh-Dole instinct that society might very well be better off in a world where academic researchers patent their work. As you know, that legislation was passed in response to evidence that university breakthroughts were sitting on the shelves both because (a) they could not be owned exclusively under old NIH rules; and (b) universities had too little incentive to bring their work to the attention of industry."

Links:

Federal Circuit Overturns Jury Verdict: Finds Patent Obvious

Kouvato v. Stanley Works & Home Depot (Fed. Cir. 2005) (Unpublished)

Kouvato owns the patent and sued for infringement. In the defendant’s invalidity arguments, several pieces of prior art were introduced in an attempt to show that the patent was invalid.  Kouvato’s expert testified, however, that one reference taught away from the patented design because it included a 90 degree transition shaft.

The Jury then returned a verdict of validity.

On appeal, the Federal Circuit overturned the verdict, finding that Kouvato’s expert had applied a misconception concerning the law.

Simply because a piece of prior art contains a feature that is not present in the patent does not mean that the prior art teaches away from the patent. A reference teaches away only when a person of ordinary skill, upon examining the reference, would be discouraged from following the path set out in the reference, or would be led in a direction different from the path that was taken by the applicant.

Thus, the CAFC found that the patent was invalid. "[The Defendants] Jore showed by clear and convincing evidence that the ’575 patent would have been obvious, and that showing went unrebutted at trial."

Patent Case: Federal circuit finds support for licensing contract in e-mail.

Lamle v. Mattel (Fed. Cir. 2005).

Lamle is the inventor of Farook, a game similar to Tic Tac Toe. In 1997 Lamle and Mattel agreed on an exclusive license. The contract terms were discussed via e-mail but a licensing agreement was never signed by Mattel.

After a pre-toy fair, Mattel concluded that it did not wish to license Farook. Mattel notified Lamle of its decision by fax sent to Lamle at the office of a business associate. The fax arrived while Lamle was present at his associates office attending a meeting with potential investors.

Lamle sued for breach of contract and patent infringement. However, the district court granted summary judgment to Mattel on all claims. "Its order and judgment listed six grounds for its decision, each being one sentence long, with no citations to any case or to the record, and providing no explanation as to the facts or law upon which it was relying." Specifically, the district court found that the agreement did not include all the essential terms and was additionally barred by the statute of frauds. 

The federal circuit disagreed, finding that there were outstanding questions that could not be determined on summary judgment.  Applying California law, the appellate court first held that the the existence of an oral agreement depended upon the intention of the parties — a subject that was not properly addressed on summary judgment. 

The question as to whether an oral agreement, including all the essential terms and conditions thereof, which according to the mutual understanding of the parties is to be subsequently reduced to writing, shall take effect forthwith as a completed contract depends on the intention of the parties, to be determined by the surrounding facts and circumstances of a particular case.

Then, the e-mail outlining the terms of the deal was sufficient to overcome the Statute of Frauds that requires contracts that could not be performed within one year of their making to be contained within a written agreement.

Vacated and Remanded

In Dissent, Judge Newman could not find an oral agreement because the parties had specifically agreed that "any obligation would be contained in a formal written agreement."

As a matter of law, there can have been no patent license and manufacturing and sales agreement between Mattel and Mr. Lamle, when no such license and no manufacturing and sales agreement were ever entered into. Thus I must, respectfully, dissent from the court’s decision, for it is founded on incorrect principles of law.

By Dennis Crouch

CAFC: District court must specify motivation to combine prior art references

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Teleflex v. KSR (Fed. Cir. 2004) (unpublished).

Intro: Teleflex sued KSR for alleged infringement of Teleflex’s patented adjustable gas-pedal assembly (Patent No. 6,237,565).  The case was dismissed on summary judgment after the judge determined that the invention was obvious.  Teleflex appealed the decision.

Obviousness: A patent claim is obvious, and thus invalid, when the differences between the claimed invention 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." The determination of whether an invention is obvious is based on a number of factors — commonly termed Graham Factors, including:

  1. the scope and content of the prior art;
  2. the level of skill of a person of ordinary skill in the art;
  3. the differences between the claimed invention and the teachings of the prior art; and
  4. the extent of any objective indicia of non-obviousness.

If obviousness is found by combining multiple references, there must also be some motivation to combine the prior art teachings in the particular manner claimed. In re Kotzab.

The Case: In its decision, the Appellate Court agreed with Teleflex, that the district court applied an incomplete teaching-suggestion-motivation test. 


This is because the district court invalidated claim 4 of the ’565 patent on obviousness grounds without making “finding[s] as to the specific understanding or principle within the knowledge of a skilled artisan that would have motivated one with no knowledge of [the] invention to make the combination in the manner claimed.” . . . The district court was required to make specific findings as to whether there was a suggestion or motivation to combine the teachings of Asano with an electronic control in the particular manner claimed by claim 4 of the ’565 patent.

Because the district court failed to make specific findings as to the suggestion or motivation to combine references, the CAFC vacated and remanded.