October 2007

Court Blocks PTO Rules on Eve of Effective Date; All Four Equitable Relief Factors Suggest Injunction

Tafas v. Dudas (E.D. Va. October 31, 2007)

After a two-year long notice, comment, and review process, the US Patent & Trademark Office (PTO) published a set of final rules in August 2007 to effectively limit the number of claims filed in each patent application and to limit the number of continuation applications stemming from an original patent application.  (Current rules allow unlimited claims and unlimited continuations).  Tafas, an individual inventor, immediately filed suit — asking the Virginia based Federal Court to block the rules. Later, Glaxo Smithkline (GSK) filed a preliminary injunction to stop the rules before their November 1, 2007 effective date. Other parties, including the AIPLA, Élan, Hexas, the Roskamp Institute,and Tikvah Therapeutics, IBM, SanDisk, & Senator Schumer, then filed briefs or declarations supporting preliminary relief.

In granting the requested preliminary injunction, the district court walked through the four relevant factors: (1) likelihood that the plaintiff will succeed on the merits of the case; (2) irreparable harm without an injunction; (3) a balance of hardships weighing in favor of an injunction; and (4) the public interest supporting an injunction.  Although the four factors are considered as a whole, the first to factors are clearly the most important and must always be proven.

Likelihood of Success: In its brief analysis of the issues, the court found a “genuine possibility” that the PTO will lose. In particular, the Court noted two particular GSK arguments as likely winners: (1) the facial illegality of limiting the number of continuation applications under 35 USC 120; and (2) problems created by the retroactive effect on settled rights. A third argument – vagueness of the ESD requirements – also has some value according to the Court.

Continuation Applications: 35 USC 120 can be read various ways, but the Court found that Federal Circuit law “suggests that a decision by the PTO to limit the number of continuing applications would run contrary to the mandate of Section 120.”  See Symbol. This conclusion is made easier because the PTO would deserve no rulemaking deference for any rules that extends into substantive grounds. GSK’s position on the illegality of claim limitations is not as strong because there is no statutory provision to the contrary. Thus, the court found that “neither party can claim a strong likelihood of success on this issue.”

Retroactive Effect: The doctrine of retroactive effect is interesting here. Unless expressly granted by Congress, an agency’s rulemaking cannot be retroactive. The court found vested rights in the ability to file continuations and claims under the old rules. Those rights vested at the time when the patentee chose to file for patent protection and give up trade secret protection.

While “an individual [that] discloses his trade secret to others who are under no obligation to protect the confidentiality of the information, or otherwise publicly discloses the secret,” loses that property right, Rucklehaus, 467 U.S. 1002, the Final Rules retroactively alter the bargain on which inventors like GSK rely in making their decision to surrender their rights. The Final Rules thus impair GSK’s right to this bargain.

ESD Requirements: The after publishing the final rules, the PTO published a series of clarification papers and guidelines for how to properly prepare an examination support document (ESD) under the new rules. The Court turned that guidance on its head — suggesting an admission of vagueness and noting that the additional guidance cannot be used to help vague rules overcome due process violations.

An alternative way to block the rules is to show that they are “arbitrary and capricious.” The Court found the PTO’s reasoning coherent enough to give the agency a pass.

Thus, the PTO’s rationale appears to be sufficient to satisfy arbitrary and capricious review, and the Court will find that GSK has not shown a real likelihood of success on this issue.

Irreparable Harm: The Court agreed that the “uncertainty” created by the new regulations was sufficient to cause irreparable harm because they would change investment and patent filing incentives. Without an injunction, GSK would be unable to recover from its lost protection if the rules are ultimately determined to be invalid.

Balance of Hardships: For the preliminary injunction, the balance of hardships weigh in GSK’s favor because GSK’s woes are instant once the new rules are effective. On the other hand, the PTO will simply experience a gradual continued increase in pendency.

Public Interest: The public interest is in a stable patent system. Thus, a preliminary injunction to preserve the status quo is appropriate.


PTO Continuation and Claim Rules Temporarily Blocked by District Court

On October 31, 2007, Judge Cacheris of the Eastern District of Virginia held court in the case of Tafas v. Dudas. In that case, several plaintiffs have joined together in an attempt to block implementation of a set of new patent prosecution rules proposed by the USPTO. The jist of those rules would be to effectively limit the number of claims filed in each patent application and to limit the number of ‘continuation’ applications that may stem from any original patent application.

At the conclusion of the hearing, the Court issued an oral decision temporarily enjoining the PTO from implementing the new rules that were set to become effective on November 1, 2007. John White, who attended the hearing, noted that the crowd clearly supported the plaintiffs and were quite relieved by the decision. Jill Browning of the Ashe firm also attended today’s hearing and provides the following analysis of Judge Cacheris’ hearing on the PTO’s Continuation and Claim Limitations:

With respect to the arguments presented, the Court was clearly well prepared on all the issues.  The attending members of the patent bar (of which there were many) were grateful to the Court for making its decision granting the injunction before the critical November 1 deadline and before the rules had a chance to become effective.   

The Court, at the outset, asked why GSK had delayed in filing its motion.  GSK indicated that the rules issued in August, 2007, were so different from the rules the public commented on in January, that, given the complexity of the rules, GSK’s filing of the motion was timely.  On this point, the USPTO later argued that the Final Rules were merely a “logical outgrowth” of the public comments provided and, thus, acceptable under the law.  GSK took issue with this point, but indicated that this topic would be more germane to the summary judgment briefing and did not need to be decided now. 

GSK began its argument by focusing on the public interest.  GSK argued that the public’s interest would best be served by not implementing the rules and, as support for this, pointed out that every amicus and declaration (and a letter from a Senator) filed by a third party had supported GSK’s position, as opposed to the USPTO’s. [Link] GSK pointed out that the public interest would best be served by maintaining the status quo, as opposed to implementing rules that would require applicants (and specifically GSK) to make substantive choices and decisions regarding their patent portfolios that could never be “undone.”  One particularly persuasive point GSK made during argument wsa that the “contract” between the applicant and the government (i.e., the applicant discloses its trade secret in return for patent protection) was broken by the USPTO’s enactment of the rules.  GSK pointed out that the “quid” of submitting the applications was already accomplished, and now the USPTO wanted to change the “quo.” 

In response, the USPTO argued that the USPTO was not deaf to the public outcry – but that the outcry of “change is bad” is not enough to outweigh an agency’s need to conduct its business in a way that alleviates an over burdened system.  In fact, at one point the USPTO, in a somewhat contradictory argument, noted that it was not enacting a “mechanical” rule eliminating additional continuations. Rather, the rules were simply directed at a way to relieve an overburdened system.  The USPTO stated that the New Rules would increase efficiency and decrease backlog.

GSK rebutted the USPTO’s argument that a delay would cause irreparable harm (i.e., loss of money in changing to the new implementation) by pointing out that the money was already spent, and delaying the implementation of the rules would not cause the USPTO to lose additional money.  On rebuttal, the USPTO indicated that the government would have to expend additional money re-training the examiners, as they could not be expected to maintain their understanding of such complicated and detailed rules for any extended period of time.

With respect to the merits of the case, the Court specifically asked each party whether the USPTO was acting in an arbitrary and capricious manner.  While GSK indicated that they did not need to address this question until summary judgment briefing, it believed that the USPTO was so acting, as evidenced by the Final Rules contradicting over 100 years of court precedent.  The USPTO, in response to the Court’s question, clung to the argument that the rules were merely procedural, and, thus, are well within the USPTO’s authority.  The USPTO also indicated that the 10,000 page record, which included a public comment period, supported the USPTO’s careful and extensive consideration of the issues and stands in stark contradiction to any allegation that the USPTO acted in an arbitrary and capricious manner.

The Court also asked each party what makes the New Rules “substantive” vs. “procedural.”  GSK argued that the rules were substantive primarily because the rules represent a break with over 100 years of substantive patent practice (focusing primarily on the ability to file unlimited continuations, excepting very narrow prosecution laches situations that should be applied on a very limited case-by-case basis).  The USPTO responded by arguing that the Final Rules were procedural because they do not affect the substantive rights of applicants to file, and do not even limit the number of continuations that an applicant can file – the applicant, to file additional applications (i.e., more than the 2 + 1) need only file a petition, which will be decided on a case-by-case basis.

GSK argued that the effect of the Final Rules was, in fact retroactive because it impaired the rights of a party, relying on Supreme Court precedent.  The USPTO indicated that Final Rules were not retroactive, merely because they “upset expectations” and that there is no property right in a patent application or in any particular procedure adopted by the USPTO.   

While, as the USPTO pointed out, an injunction is an extraordinary measure, GSK argued out that agencies are enjoined “all the time” when they promulgate rules that are challenged as being beyond the agencies’ authority.  Apparently, the Court agreed with GSK.  The reasoning for Judge Cacheris’ decision will be found in an opinion that he will issue before close of business today.

1.  When we can expect a final decision on the merits:  The summary judgment briefing schedule that the USPTO had agreed upon with Tafas appears to no longer be in effect for several reasons.  First, the USPTO claims that the expedited briefing schedule was agreed to based on Tafas’ agreement not to seek an injunction.  The USPTO indicated that Tafas reneged on the agreement and joined the motion for a preliminary injunction or TRO and, thus, this alone was grounds to vacate the government’s agreement.  Second, even if the court determined that Mr. Tafas’ actions did not repudiate the agreement, given the additional amicus briefs, and joining GSK as a party, the USPTO requires additional time to adequately address the briefs.  Further, the USPTO pointed out that, because the injunction was granted, plaintiff’s arguments for a speedy hearing on the summary judgment motion are less pertinent.  The Court instructed the parties to attempt to agree on a briefing schedule.  Hopefully, the briefing schedule will be presented as an order so that we will be able to determine when it will be heard, as this will determine when ultimate resolution of the case.

Of course, the preliminary injunction is not a decision on the merits of the rules — it is only preliminary relief. A full decision will likely be delayed until at least early January.  The PTO may still choose to appeal.

In other prosecution news… New IDS rules are expected to be published soon.

Preliminary Injunction Order

Text of the Preliminary Injunction order from Judge Cacheris:

4) Defendants [USPTO & Director Jon Dudas] are preliminarily enjoined from implementing the Final Rules titled “Changes to Practice for Continued Examination Failings, Patent Applications Containing Patentably Indistinct Claims, and Examination of Claims in Patent Applications”;

5) Defendants are preliminary enjoined from issuing new regulations restricting the number of continuing applications, the number of requests for continued examination, and the number of claims that may be filed with the PTO;

6) This Order shall expire upon the entry of a final judgment in this matter, unless otherwise ordered by the Court.

Patent Prosecution Notes

  1. The MPEP was recently updated to include examination guidelines in light of KSR v. Teleflex: MPEP; Bluepages. The update to MPEP 706.02(j) reads as follows:  

35 U.S.C. 103 authorizes a rejection where, to meet the claim, it is necessary to modify a single reference or to combine it with one or more other references. After indicating that the rejection is under 35 U.S.C. 103, the examiner should set forth in the Office action:

  1. the relevant teachings of the prior art relied upon, preferably with reference to the relevant column or page number(s) and line number(s) where appropriate,
  2. the difference or differences in the claim over the applied reference(s),
  3. the proposed modification of the applied reference(s) necessary to arrive at the claimed subject matter, and
  4. an explanation >as to< why >the claimed invention would have been obvious to< one of ordinary
    skill in the art at the time the invention was made.

. . . It is important for an examiner to properly communicate the basis for a rejection so that the issues can be identified early and the applicant can be given fair opportunity to reply. Furthermore, if an initially rejected application issues as a patent, the rationale behind an earlier rejection may be important in interpreting the scope of the patent claims. Since issued patents are presumed valid (35 U.S.C. 282) and constitute a property right (35 U.S.C. 261), the written record must be clear as to the basis for the grant. Since patent examiners cannot normally be compelled to testify in legal proceedings regarding their mental processes (see MPEP § 1701.01), it is important that the written record clearly explain the rationale for decisions made during prosecution of the application.

See MPEP § 2141 – § 2144.09 generally for guidance on patentability determinations under 35 U.S.C. 103. . .

Materials from Tafas/GSK v. Dudas: Challenging the PTO’s new Rules


Translogic Challenges (1) the Constitutionality of BPAI Decisions and (2) CAFC’s Retroactive Application of a PTO Proceeding to a Jury Verdict

In re Translogic (Fed. Cir. 2007)
Translogic v. Hitachi ( Fed. Cir. 2007)

In parallel proceedings, Translogic won its patent infringement case in a jury trial against Hitachi (jury agreed that the claims were valid) and lost its BPAI reexamination appeal (BPAI found claims invalid). Both appeals reached the CAFC at roughly the same time and were decided the same day with the following holding: 

  •  In re Translogic: BPAI affirmed; claims are obvious.
  • Translogic v. Hitachi: Based wholly on the above decision, the jury verdict vacated because claims are obvious.

Translogic has now requested an en banc rehearing of this unusual pair of cases decisions: 

Unlawful BPAI Composition: In a recent article, Professor John Duffy challenged the current process of appointing BPAI judges as unconstitutional. John F. Duffy, Are Administrative Patent Judges Unconstitutional? , 2007 Patently-O L.J. 21.  The crux of the Duffy article is that these administrative judges must be appointed by either the head of the Commerce Department or the President. I.e., appointment of these officers by lower level offices, such as the under-secretary, is unconstitutional. Art. II, § 2, cl. 2.  In Translogic’s favor, the Supreme Court has created “broad standing rules” that that do not require specific ‘injury’ due to botched appointment. Likewise, Translogic argues that court precedent provides standing despite a failure to raise this issue at the BPAI or in the original CAFC case. Professor Duffy’s article also found its way to Congress – HR 1908 would amend Section 6 of the Patent Act to require the Secretary of Commerce to appoint the BPAI members. Of course, this issue calls into question most recent BPAI decisions.

Antiretroactivity Doctrine: Of course, if the BPAI’s decision is vacated, the CAFC must then take a second look at its summary decision in the infringement case.  Translogic also argues that the vacatur violates the Supreme Court’s “antiretroactivity doctrine.”  Under that doctrine, later cancellation of an issued patent should not be used to overturn a prior jury verdict. Although in dicta, the Supreme Court spoke on this very issue — noting that “title to these moneys [damage awards] does not depend upon the patent, but upon . . . judgment of the court.” Moffitt v. Garr, 66 US 273 (1861).  In any event, the patent is not invalid until the PTO issues a certificate of cancellation under 35 USC 307. Thus, the holding is at least severely premature.

Jury Trial and Reexamination: The 7th Amendment right to a jury trial also includes a right not to have a jury verdict reexamined by a Court except according to the rules of Common Law. Translogic’s argument here is that the CAFC decision violates this right because it nullifies the jury verdict “without applying any appellate standard of review, based solely on its affirmance of a Board decision that explicitly reexamined facts tried to the jury.”


  • Thanks to Hal Wegner for noting this case in an email to the author.

Emergency Motions at the CAFC

There is a good possibility that late on Halloween night, the CAFC will receive an emergency motion for a preliminary injunction or temporary restraining order. How does this work:

  • Jurisdiction: The CAFC has jurisdiction to immediately hear an appeal to a district court’s denial of injunctive relief under 28 USC 1292 (granting jurisdiction over grants & denials of injunctions) The CAFC has jurisdiction over all cases arising under hte patent laws . 28 USC 1295 This case clearly arises under the patent laws because the complaint asserts that the patent laws preclude the PTO from taking these actions.
  • Timing: Normally, a respondent is given at least eight days to respond to a motion in appellate court. FRAP 27.  However, the appellate court can shorten that time by giving ‘reasonable notice.’ A temporary order to ‘preserve the status quo’ would not need any notice.
  • Emergency Motions:The CAFC has no specific procedure to deal with emergency motions.
  • Lone Judge: At the CAFC, most emergency motions involving preliminary injunctive relief are decided by a full three-member panel. However, a single judge will, on occasion, make the determination. In, Tivo v. EchoStar, for instance, Chief Judge Michel issued a temporary stay pending consideration by the full panel. The Federal Rules of Appellate Procedure provide room for a single circuit judge to “act alone on any motion.”


Patent Reform in the Senate

  • The Senate continues an internal struggle over patent reform. Although a majority of Senators support the proposed reform measures, the majority does not yet have the 60 votes necessary to close debate. 
  • Although the Democrats have been more strongly supporting patent reform, the Senate Bill (S.1145) is clearly bi-partisan. Co-Sponsors include the following Republicans: Orrin Hatch; John Cornyn; Larry Craig; Michael Crapo; Gordon Smith; Roberts; Bennett. Co-Sponsors include the following Democrats: Pat Leahy; Ken Salazar; Chuck Schumer; Sheldon Whitehouse.
  • The reform measures (already passed in the house) would make numerous changes to the patent laws, including:
    • Force a large number of patent infringement suits to be filed in the defendant’s home court;
    • Reduce damage awards for infringement and require specific proof of market value of invention as compared to the closest prior art;
    • Limit enhanced damages to a specifically enumerated subset of willfully infringing actions;
    • Create a new, expanded post-grant opposition procedure (specific rules to be created by the PTO);
    • Create expanded right to submit third-party prior art;
    • Change to a first-to-file system (creating a whole new set of prior art);
    • Provide enhanced regulatory authority to the PTO (So that it can enact the continuation changes). . .
  • Patent reform is an area quite friendly to horse trading and votes are much more easily changed than areas with a greater potential voter response. Few Senators will gain or lose votes based on their patent reform vote.

Patent Prosecutors: Don’t Wait for the Witching Hour

PatentLawPic099The head of a corporate IP department recently forwarded the following message to his troops:

To take advantage of the “one more continuation,” we will be filing around XYZ applications between now and 1-Nov.

Some of you have experienced the USPTO electronic filing system locking up as its workload increases just before the cutoff at midnight Eastern time. It is fair to say that the witching hour this Halloween will be particularly intense. 

Thus either file a day or so early, or switch to a paper filing. I’d rather pay the extra $75 in fees for a paper filing than miss that date.

If you decide to paper file between 2 and 4 PM on Halloween, then you have time to take the application to a normal post office before they close. If you are making late changes, you might want to simply plan on using the open-till-midnight post office at the airport. . . However at the witching hour, will its small parking lot fill up with patent practitioners spooked they cannot find a parking place?”

As we’ve always done in Chicago — file early and often.

Sources of Prior Art

Stu Soffer of IPRIORI has conducted an interesting study on 109 recent patent cases. He looked at the types of prior art cited by courts in making decisions on invalidity.  The following is excerpted from Mr. Soffer’s recent report:

Prior Art Study“Some time ago I started tracking in my ePriori database the type of art (and the reference itself) of prior art applied against specific patent claims found in dispositive orders — Summary Judgment Orders and Appeals – materials that presumably rise above the heap presenting the best arguments.  I don’t track the art in file histories unless it is specifically part of the final litigation.  What follows is a very small sampling and may not hold with larger samplings, but seems plausible. This mini-study covers 342 items of art applied to 147 patents in 109 patent cases. 

This small sample tells an interesting story, including the breadth of materials to consider.  Most frequently used are other patents.  I would have expected ‘articles’ to be the next, but instead citations to ‘products’ is the second most applied. This is possibly a reflection of the knowledge of the parties of the history of their markets.  Another indication is that the materials most often searched online – the easily accessible — only account for 64% of materials.  The ‘other’ category includes: theses, source code, software, websites, textbooks, compounds, print, grant proposals, advertisements, press releases, technical standards, and patent applications.  The ‘ephemera’ category captures real oddities.  For example, a dental mould of teeth.”

This evidence comes from litigation — however, it could have some impact on prosecution issues. Notably — to what extent are known products submitted as prior art to the PTO? Are brochure disclosures sufficient?

35 USC 120

Is the legality of the PTO’s new rules to limit the number of claims foreclosed by Section 120 of the Patent Act?

Section 120 declares that a newly filed patent application “shall have the same effect” as a parent application so long as it is “filed before the patenting or abandonment …[of] the first application.”  The statute includes two specific limitations: First, the newly claimed invention must have been properly disclosed in the original application by overlapping inventors. Second, the new application must specifically reference the parent.

Courts have primarily used Section 120 in determining whether to grant an early ‘priority date’ to a later filed application. The following quote from a recent CAFC case is typical:

“A patent application for an invention disclosed in a previously-filed application in a manner that satisfies all the requirements of 35 U.S.C. § 112 is entitled to the benefit of the earlier filing date.”

Go Med, 471 F.3d 1264 (Fed. Cir. 2006). The practice of filing continuations is old — and was sanctioned by the US Supreme Court in the 1863 case of Godfrey v. Eames.

Bayh-Dole Act is Not a “Patent Law” Sufficient to Create CAFC Jurisdiction

ScreenShot065WARF v. Xenon Pharmaceuticals (Fed. Cir. 2007) (nonprecedential opinion).

In 2006, WARF won a $1 million verdict in a breach of contract case against Xenon. Although contracts are normally issues of state law, WARF’s original complaint also raised technology transfer issues under the Bayh-Dole Act. (35 U.S.C. §§ 200, et seq.).

On appeal, the CAFC found that it lacked subject matter jurisdiction over the appeal because it did not arise under the patent laws. In this vein, the court first concludes that Bayh-Dole’s inclusion in Title 35 does not necessarily indicate that it is a “patent law.” Rather, the general rule is that contract or licensing disputes do not implicate patent laws unless they require some determination of patent issues such as validity or infringement.

“[M]ere inclusion in Title 35 of the United States Code does not make a statute a patent law under which a claim may arise. At its heart, the Bayh-Dole Act concerns government funding agreements – contracts in the language of 35 U.S.C. § 201 – an area that is outside our section 1295(a) jurisdiction.”

Of course, if Title 35 contains non-patent laws, it makes sense that there may also be patent laws not found in Title 35.

Even if Bayh-Dole was a “patent law,” the appellate panel found that it would still not have jurisdiction over the case because the provisions of Bayh-Dole (1) did not create WARF’s cause of action and (2) are not necessary to determine any other rights of relief.

Case transferred to the Seventh Circuit Court of Appeals.

Enablement: Claimed “surfactant” not enabled by three working examples

Par Pharmaceuticals v. Roxane Labs (Fed. Cir. 2007) (Nonprecedential)

Par’s megestrol acetate suspension is prescribed to people who lose their appetites — often during treatment for cancer or AIDS. Interestingly, the company created this popular drug while attempting to design around a megestrol patent owned by BMS.

After obtaining patent protection, Par sued Roxane for infringement. The district court, however, granted summary judgment of invalidity under 35 USC 112 ¶ 1 — finding that “Par is not entitled to the broad claims it asserts.”

Enablement analysis begins with the presumptions that an issued claim is enabled and that a challenge to enablement requires clear and convincing evidence.  Unlike its close analog written description, enablement is reviewed by the CAFC on a de novo basis.

A claim is enabled when a PHOSITA can make and use the claim without undue experimentation. Broader claims, of course, require broader disclosure to ensure that their “full scope” is enabled. The unpredictable nature of an area of technology often serves patentees well as they argue non-obviousness. (It cannot be obvious if the results could not have been predicted). However, the enablement requirement demands more disclosure for unpredictable arts.

Broad Claims: Here, Par’s claim includes the following elements: “(a) megestrol acetate; … and (c) a surfactant.”  The CAFC finds this claim very broad because it would “allow the choice of any surfactant in any concentration.” (emphasis in original). In its disclosure, Par described three working examples and only one new surfactant. As a matter of law, the CAFC found that “these three working examples do not provide an enabling disclosure commensurate with the entire scope of the claims.”


  • This opinion, drafted by Judge Moore may begin to provide some indication of her style.
  • Does this make sense: Because the applicant broadly claimed “a surfactant,” the specification must enable various types of surfactants. If, the claim had been written even more broadly — by eliminating that limitation — there would have been no need to include a description of various types of surfactants.

USPTO Continuation and Claim Rules: AIPLA Request Injunction to Halt New Rules

Feeling some pressure from its members, the AIPLA has now filed an amici brief in support of GSK’s motion for a preliminary injunction to stop enforcement of the PTO’s new rules on continuations and claim count.

A preliminary injunction requires the moving party to satisfy a four factor test of equitable relief:

  • Likelihood of success on the merits of the case;
  • Irreparable harm that will persist without relief;
  • Balance of hardships weights in favor of relief; and
  • The public interest supports relief.

In its brief, the AIPLA focused on how the new rules work to destroy established interests. The brief focuses on a tradeoff between patents and trade-secrets — indicating that the inventions embodied by many currently pending applications would have been kept as trade-secrets but for the longstanding “guarantee of a full and fair opportunity to seek a spectrum of patent protection.”  According to the AIPLA, the limitations on claims and and continuations severely inhibit that guarantee and thus create an irreparable harm to current applicants.

David Kappos, Chief of IP at IBM, filed a declaration in support of the AIPLA brief. Kappos noted the incredible cost that it will incur to review its 25,000+ pending patent applications to ensure compliance. Writing on behalf of SanDisk, two attorneys noted that the technology company will lose at least $200,000 in filing fees due to required consolidation. Writing as a paid expert for SKB, former PTO Director Harry Manbeck has filed a declaration explaining why, in his view, the new rules are illegal.



CAFC Continues to Support Strong State Immunity from Patent Infringement

BPMC v. California Department of Health (Fed. Cir. 2007).

There is a reason why states generally support strong patent rights: States are increasingly major patent holders – based on inventions developed through federal grants. At the same time, states are generally immune from being sued for infringement. In this case, the CAFC allows the State of California to assert immunity based essentially on a case-numbering technicality.

The facts are simple: Kaiser filed a declaratory judgment action against the patent holder BPMC back in 1997. The California DOH intervened in that case — an action generally considered a waiver of immunity. That case was dismissed for improper venue. In 2006, BPMC filed an identical (mirror image) infringement action against the DOH asserting the identical patent and issues and in the same venue as the 1997 action. The issue here is whether the waiver in the original case of California’s 11th Amendment immunity applies also to the new case. 

Here, the CAFC narrowly construed the state’s waiver of immunity to be strictly limited to the same action. The court noted precedent that the waiver would apply if BPMC had been able to file its case as a revival of the original action an “numbered as that cause of action.”

The appellate panel also rejected BPMC’s argument that the DOH should be judicially estopped from changing its position in this litigation. According to the court, the about-face was excusable because of an intervening change in the law of immunity. (Florida Prepaid). 

Expect that this case will receive a petition for certiorari.


Patently-O Housekeeping & TidBits

  • PatentLawPic082E-mail Troubles: If you have experienced trouble accessing the site through links in your daily e-mail, you may want to try our new e-mail service through FeedBurner (the old server is FeedBlitz).  You can enroll through the following link: http://www.feedburner.com/fb/a/emailverifySubmit?feedId=775893.  The new service sends the entire posts so that you can save them without accessing the Patently-O website.
  • Jobs Site: Ryan Swarts is now the listing manager of the Patently-O Patent Law Jobs site. Contact him at: jobs@patentlyo.com.
  • Ocean Tomo Auction:  At the Ocean Tomo pre-auction conference, I’ll be speaking on the “three branches of patent reform” at the Palmer House Hilton in Chicago.
  • PatentLawPic081Michigan Law Review: Five Essays on Patent Reform:
    • Eisenberg: The Supreme Court’s New Patent Law Experience [HTML] [PDF]
    • Wegner: Making Sense of KSR (and the CAFC) [HTML] [PDF]
    • Kunin: KSR’s Effect on Patent Law [HTML] [PDF]
    • Armitage: Why is Congress Still Pushing Patent Reform? [HTML] [PDF]
    • Duffy: Predicting Patent Reform [HTML] [PDF]

Personal Jurisdiction: Patent Plaintiff must Link Accused Product with Accused Defendant

F&G Research v. Paten Wireless (Fed. Cir. 2007)(Nonprecedential)

Part of the Congressional patent reform package focuses on venue reform. Defendants are tired of being sued in the Eastern District of Texas.

In this case, F&G sued Paten in the Southern District of Florida — alleging that Paten’s infringing computer mouse components were being distributed in the state.

On appeal, the CAFC affirmed the lower court’s dismissal of the case — finding that F&G failed to show that Florida courts have personal jurisdiction over the defendant. The Florida long-arm statute allows for specific jurisdiction over parties who commit tortious acts within Florida. The plaintiff has the burden of providing evidence of those acts.

Here, F&G showed that Paten sold components to several companies doing business in Florida (e.g., Logitech, Belkin, and Creative Technology) and also showed that accused products were being sold in Florida. However, the plaintiff did not provide evidence that the accused products sold in Florida were Paten’s products. Thus, no personal jurisdiction.

New Evidence on Appeal: At the appeal stage, F&G presented some evidence that Paten’s products were being sold in Florida. However, the CAFC refused to hear that new evidence. Although personal jurisdiction may be raised sua sponte by the appellate court, the court will not conduct de novo fact finding regarding jurisdiction.

What now?: Although now armed with more evidence of personal jurisdiction, F&G would likely be blocked from filing in Florida because the issue has already been decided between the parties. There are, of course, several hundred other venues available within the US.

Prepare for the new IDS rules.

For the past two years, the PTO has been discussing its trio of rules — Continuation Rules; Claim Rules; and Disclosure Rules. The first two sets are in final form and are set to be implemented November 1, 2007. The third set — disclosure rules — are in “secret final form” and are waiting for White House (OMB) approval before being implemented.

Under patent office rules, everyone involved with the prosecution of a patent application has a duty to disclose any information to the PTO that may be material to patentability. This information is typically prior art known to the inventor or attorney and or evidence of prior use or sale. Failure to comply with the duty of disclosure can result in the patent being held unenforceable (after a showing of intent & materiality).

In some cases, extensive pre-filing prior art searches reveal dozens (if not hundreds) of prior art references that are all then submitted to the PTO for review. Understandably, patent examiners do not have time to review all those references in any detail — and my own empirical evidence suggests that examiners do not examine more than twenty references. [LINK]

The PTO’s disclosure proposal would set a breaking point of twenty references that may be submitted to the Office ‘without explanation.’ Applicants who submit more than twenty references (or “very long” documents) will be required to personally review the submissions and provide information regarding their materiality as well as an explanation as to why the particular application is not preempted by the prior art reference.

Although the Final Version of the rules is not yet available (it is being kept secret by the PTO), their one-paragraph statement is as follows:

The U.S. Patent and Trademark Office (Office) amends its regulations on information disclosure statement (IDS) requirements and other related matters to improve the quality and efficiency of the examination process. These changes would enable the examiner to focus in on the relevant portions of submitted prior art at the very beginning of the examination process, give higher quality first actions, and minimize wasted steps. This action would make the following changes relating to submissions of IDSs by applicants: Impose a requirement for the personal review of, and to provide information about, certain citations; eliminate the fees for, but permit only timely, IDS submissions; and only permit the filing of an IDS after the mailing of a notice of allowance if a claim is admitted to be unpatentable and a narrowing amendment is also submitted. The Office would also: permit third parties to submit prior art up until the mailing of a notice of allowance after application publication; no longer permit an IDS to meet the submission requirement for a request for continued examination (RCE); permit, after payment of the issue fee, certain amendments and petitions so applicants will not have to file a continuation application or an RCE for such items; and revise the protest rule to better set forth options that applicants have for dealing with unsolicited information received from third parties. 

These rules are likely to become effective in early 2008. In the meantime, applicants may be advised to submit their prior art ASAP.

CAFC Approves Compulsory License (but calls it an “ongoing royalty”)

PatentLawPic077Paice v. Toyota (Fed. Cir. 2007)

A jury found that Toyota infringed Paice’s hybrid engine patent only under the doctrine of equivalents. In a post-verdict decision, the Texas district court denied injunctive relief — finding that a $25 per engine compulsory license rate was sufficient. On appeal, the CAFC affirmed the infringement decision — holding that the jury had sufficient evidence to both (1) find infringement under the doctrine of equivalents and (2) deny literal infringement.

The major question at issue in this appeal, however, is the ongoing royalty. (The CAFC majority refused to call the ongoing royalty a compulsory license — Judge Rader, concurring, noted that the two are identical).

No Relief and No License: Denial of injunctive relief does not equate with issuance of a compulsory license.  Here, the CAFC recognizes that after denying injunctive relief, a district court may choose simply to wait for the parties to either negotiate a license or stop infringing.  In fact, the court noted that an ongoing royalty should not be determined simply as a matter of course. Rather, such an extreme form of relief should be used only as “necessary.”

[A]warding an ongoing royalty where “necessary” to effectuate a remedy … does not justify the provision of such relief as a matter of course whenever a permanent injunction is not imposed. In most cases, where the district court determines that a permanent injunction is not warranted, the district court may wish to allow the parties to negotiate a license amongst themselves regarding future use of a patented invention before imposing an ongoing royalty. Should the parties fail to come to an agreement, the district court could step in to assess a reasonable royalty in light of the ongoing infringement.

Calculating the Reasonable Ongoing Royalty: In this case, the district court held that the ongoing royalty should be the same royalty rate as determined by the jury for past damages. On appeal, the CAFC found that much more should go into the determination of an ongoing royalty. And, of course, future royalties would likely be different than past royalties if only because of a shift in timing of the hypothetical negotiation.

Power to Order Compulsory License: Although settlement is preferred, the CAFC made clear that a district court judge has the power to declare an ‘ongoing royalty’ rate.  Further, because ongoing royalties are a form of equitable relief, there is no Seventh Amendment right to a jury decision.

Remanded for a recalculation of the ongoing royalty.