November 2007

Mitt Romney on Patents (And More from Barack Obama)

Romney.TimeMitt Romeny’s primary business experience comes from heading Bain Capital, the Boston based private equity venture fund. Its not surprising then that Romney believes in a “strong U.S. patent system.” In a letter, Romney announced three initial patent office reforms:

  1. Ensure that the Undersecretary of Commerce and Director of the PTO will be a distinguished U.S. patent lawyer with many years of experience.
  2. Propose to Congress and/or support only such patent reform legislation as will strengthen the U.S. patent system; and
  3. Carefully consider appointing to the United States Court of Appeals for the Federal Circuit, as vacancies arise, excellent lawyers who have experience practicing U.S. patent law, particularly since all decisions in patent cases by the United States district courts are appealable to the Federal Circuit.

Romney also praised the October 31 injunction against the PTO Rules as an appropriate way to stop this “anti-innovation governmental meddling.”

Of course, a “strong patent system” does not mean that patents are lightly issued or that the PTO should not limit unreasonable tricks.

Obama_time_cover_102306In a recent Q&A with TechCrunch, Democratic hopeful, Barack Obama indicated that he believes we can do better:

TechCrunch: Do you think changes are needed in the way the U.S. Patent and Trademark Office reviews and grants patents?

Barack Obama: I know that it is essential we have a system that produces timely, high-quality patents. By improving predictability and clarity in our patent system, we will help foster an environment that encourages innovation. Giving the Patent and Trademark Office (PTO) the resources to improve patent quality and opening up the patent process to citizen review will reduce the uncertainty and wasteful litigation that is currently a significant drag on innovation. With better informational resources, the Patent and Trademark Office could offer patent applicants who know they have significant inventions the option of a rigorous and public peer review that would produce a “gold-plated” patent much less vulnerable to court challenge. Where dubious patents are being asserted, the PTO could conduct low-cost, timely administrative proceedings to determine patent validity. As president, I will ensure that our patent laws protect legitimate rights while not stifling innovation and collaboration.

Other candidates have been silent on patent issues.

Prosecution Disclaimer: Must be Clear and Unambiguous

Elbex Video v. Sensormatic Electronics (Fed. Cir. 2007)

Elbex sued Sensormatic for infringement of its patent covering a remote-controllable CCTV system. The district court (Judge Owen, Southern District of New York) granted summary judgment of non-infringement based on prosecution disclaimer of a portion of the scope of the claimed “receiving means.”

Prosecution Disclaimer: During prosecution, the applicant had described the invention as having a “monitor” that receives a coded signal.  The claims, however, refer to a seemingly broader “receiving means.” Based on the prosecution statements, the district court found a disclaimer of scope:

“[T]he district court found that the inventor limited the “receiving means” that receives the first code signal to a “monitor”… Implicit in its determination is a finding that the inventor clearly and unmistakably surrendered any claim scope between the “receiving means” that receives first code signals as expressly recited in the claims, and a “monitor” that receives first code signals.”

On appeal, Judge Moore (with Judge Dyk) couldn’t find the “clear and unmistakable” disclaimer.

“First, the statement in the prosecution history is unsupported by even a shred of evidence from the specification…. Second, read in isolation, the statement in the prosecution history could be argued to be a disclaimer. When the prosecution history as a whole is considered, the inventor’s response to the PTO is not as clear…. [Third, the] prosecution statement if taken [as a literal disclaimer] would result in an inoperable system.”

This change in claim construction allowed for a reversal-in-part.

District Court Judge Cote sat by designation on the panel found the disclaimer clear and unambiguous and would have affirmed. (Judge Cote is also from the S.D.N.Y.)


  • Cybor Corp. v. FAS Techs., 138 F.3d 1448 (Fed. Cir. 1998) (en banc) (“Prosecution history is relevant to the construction of a claim written in means-plus-function form.”).

Intellectual Asset Management (IAM) magazine

PatentLawPic120I’ve enjoyed reading Intellectual Asset Management (IAM) magazine for the past few months and met up with Joff Wild (Editor) and Gavin Stewart (Publisher) at the recent Ocean Tomo auction in Chicago.

IAM’s focus is on monetizing and managing intellectual property on a global scale. Or, in their words, “how IP can be best managed and exploited in order to increase company profits, drive shareholder value and obtain increased leverage in the capital markets.” The magazine has a bent toward strong IP rights – but its real focus is on how business and finance interplay with intellectual property.

The annual subscription price is £385 — but IAM has offered a 20% discount to Patently-O readers. Contact Alan Mowat with keyword “Patently-O” to subscribe. A short trial is also available.  (Unfortunately, I don’t get any kickback from this one…).


ABA Journal: Blawg 100

The ABA Journal has released a new site for finding law related legal blogs: Blawg 100. They have included Patently-O and Patently-O Jobs in their top 100 list. Thanks! The Journal is also holding a popularity contest — you can vote for Patently-O as the best ‘substantive blog.’ The Journal has also compiled a major list of over 100 IP related blogs.


Egyptian Goddess Questions Presented

The parties are requested to file briefs that should address the following questions:

  1. Should “point of novelty” be a test for infringement of design patent? 
  2. If so, (a) should the court adopt the non-trivial advance test adopted by the panel majority in this case; (b) should the point of novelty test be part of the patentee’s burden on infringement or should it be an available defense; (c) should a design patentee, in defining a point of novelty, be permitted to divide closely related or, ornamentally integrated features of the patented design to match features contained in an accused design; (d) should it be permissible to find more than one “point of novelty” in a patented design; and (e) should the overall appearance of a design be permitted to be a point of novelty? See Lawman Armor Corp. v. Winner Int’l, LLC, 449 F.3d 1190 (Fed. Cir. 2006).
  3. Should claim construction apply to design patents, and, if so, what role should that construction play in the infringement analysis? See Elmer v. ICC Fabricating, Inc., 67 F.3d 1571, 1577 (Fed. Cir. 1995).

Appellant (Egyptian Goddess) has its opening brief due around January 24, 2008. Amicus briefs must either be granted “leave of the court” or consent of both parties. Fed. R. App. Proc. R. 29(a).


Patently-O Tidbits

  1. Tafas v. Dudas: Court refuses to allow discovery and orders summary judgment briefs due by December 20, 2007. [PLI BLOG]
  2. Design patents and Section 101 [Patently-O]
  3. Qualcomm sues Nokia for patent infringement in England [Thomson Financial]
  4. Declaratory Judgment Question: Where should you file a declaratory judgment action against a NPE patent holder? Motorola just sued Rembrandt in Delaware. Co-plaintiffs in the DJ action include Cisco, Arris Group, Thomson, Ambit, and Netgear. (07–cv-752). A few more plaintiffs and we could have a class action…
  5. Michael Martin wonders whether we’re approaching an “efficient market for ideas” (i.e., how fast are transaction costs dropping?)

Why Design Patents Need Not Satisfy 35 U.S.C. § 101?

PatentLawPic11935 U.S.C. § 171 is a unifying provision – briefly stating that “except as otherwise provided,” the entire Patent Act applies equally to both utility patents and design patents.  Thus, design patents must fit within the requirements of §§120 and 112.[1] On the other hand, § 122 expressly exempts design patents from the publication requirements.

The enigma is § 101 and its definition of utility. Section 101 includes no explicit exception for designs. But, even a novice observer would question how a non-functional ornamental design can at the same time be “useful?”

The Supreme Court appears to have answered this query in Footnote 5 of its 2001 opinion in J.E.M. Ag Supply v. Pioneer Hi-Bred.[2] In that case, the Court held once again that the patentable subject matters scope of 35 U.S.C. § 101 is “extremely broad” and that the scope for utility patents certainly includes plants despite the existence of § 161 “plant patents.” 

In Footnote 5, the Court briefly compares § 101 utility patents with § 161 plant patents and § 171 design patents. “Patents issued under § 161 are referred to as ‘plant patents,’ which are distinguished from § 101 utility patents and § 171 design patents.”[3] 

The implication from the Court’s comparison is that design patents are not subject to the requirements of § 101 (despite the lack of any statutory exceptions). Thus, a patented design must be “new, original[, ] ornamental [and] an article of manufacture.” However, the design need not be useful.

[1] In re Daniels, 144 F.3d 1452 (Fed. Cir. 1998).

[2] J.E.M. Ag Supply v. Pioneer Hi-Bred Int’l., 534 U.S. 124 (2001)

[3] Id. at fn. 5.


Sidenote: The Apple iPod design patent (US D549,237 filed Aug 24 2005) appears to be identical to the company’s trademark design application (Serial No. 78925932 filed July 2006). A continuation patent has also issued which also claims the screen shape. (US D542,808) Interestingly, in the trademark case (response to a rejection), Apple admitted that the “rectangular video screen design is functional.”

An Ugly Stepsister: CAFC Accepts En Banc Design Patent Case

PatentLawPic118Egyptian Goddess v. Swisa, Inc. (Fed. Cir. en Banc 2007)

Design patents typically play the role of the pre-ball Cinderella – hopeful but meaningless and sitting in a pile of ash.  Already devalued, recent appellate decisions have further decimated design patent values.[1]

Infringement of a design patent requires satisfaction of both the ordinary observer test[2] and the points of novelty test[3]. In Egyptian Goddess, the patentee argued that the point of novelty of its ornamental fingernail buffer design[4] is the unique combination of four elements found in the design.[5]

In the appeal, the Federal Circuit (Judge Moore) held that a combination of known elements may serve as a point of novelty – but only if the combination represents a “non-trivial advance over the prior art.”[6]  Here, the court found the combination trivial. The Egyptian Goddess panel opinion helps clarify the recent Lawman Armor opinion. In Lawman Armor, the court held (at least) that the “overall appearance” of a design cannot serve as a “point of novelty.”[7] 

Picking up on some incongruence, Judge Dyk dissented from the Egyptian Goddess majority. Judge Dyk argued instead that the “non-trivial advance” requirement is antithetic to the notion of “points of novelty” in the same way that it would be odd to include a nonobviousness element within the requirements for novelty under 35 USC 102.  

En Banc: Now, the Federal Circuit has agreed to re-hear the case en banc.  In all likelihood, the case will be at least vacated with the point of (non-trivial) novelty test being returned to a straight novelty requirement.[8] 

A Nightmare: The law of design patents has become a nightmare of confusion and formality. Judge Moore recently stated in the oral arguments for In re Bilski that design patent law follows the same statutes as utility patents.[9] The truth is, however, that design patent law is almost wholly judge made law that varies dramatically from the Patent Statute and precedent interpreting the statute.  Thorny issues abound: How do design patents fit within the PTO’s concept of useful patentable subject matter under 35 U.S.C. § 101? Why does the patent office refuse to enter any true written claim of a new design beyond a few drawings while a court must put the claimed ‘ornamental design’ into text form during claim construction?

Hopefully, the en banc court will take this opportunity to return some sanity to design patent law – starting with a complete overhaul of the definition of design patent infringement.  Perhaps Egyptian Goddess will be remembered as the fairy godmother of design patents.

[1] See, for example, Egyptian Goddess, Inc. v. Swisa, Inc., 498 F.3d 1354 (Fed. Cir. 2007) (holding that infringement requires proof that one or more particular elements of the patented design exhibits a ‘non-trivial advance over the prior art.’); Arminak & Assocs. v. Saint-Gobain Calmar, Inc., 501 F.3d 1314 (Fed. Cir. 2007) (holding that an “ordinary observer” judging potential confusion is a corporate buyer rather than a retail customer); PHG Techs., LLC v. St. John Cos., 469 F.3d 1361 (Fed. Cir. 2006) (preliminary injunction vacated); Lawman Armor Corp. v. Winner Int’l LLC, 437 F.3d 1383 (Fed. Cir. 2006) clarified in en banc denial at 449 F.3d 1190 (Fed. Cir. 2006) (noting that the “overall appearance” of a design cannot serve as a “point of novelty.”).

[2] Satisfaction of the ordinary observer test requires proof that an “ordinary observer” would think the accused design – examined as a whole – is substantially the same as the patented design.

[3] Satisfaction of the points of novelty test requires proof that the accused device incorporates one or more of the “points of novelty” that distinguish the patented design from the prior art.  The points of novelty test is thus similar to a test of invalidity.

[4] U.S. Design Patent No. 467,389.

[5] Egyptian Goddess listed the following four points of novelty: (1) an open hollow body; (2) square cross-section; (3) raised rectangular pads; and (4) exposed corners. Each of these elements are found in the prior art and thus do not server as individual points of novelty.

[6] Egyptian Goddess, 498 F.3d 1354 (holding that the combination of elements here is trivial).

[7] Lawman Armor Corp., 449 F.3d 1190 (Fed. Cir. 2006).

[8] Normally, a majority of the twelve Federal Circuit judges must agree to hear a case en banc. 

[9] 35 U.S.C. § 171 provides that “provisions of this title relating to patents for inventions shall apply to patents for designs, except as otherwise provided.” 




CAFC: Operability of 102(g) prior invention

z4 Technologies v. Microsoft Corp. (Fed. Cir. 2007)

z4 was one of the first plaintiffs to test the revived notion that an injunction for patent infringement is a form of equitable relief.  After a jury verdict of infringement, the E.D. Texas court awarded over $100M in damages, but refused to enter a permanent injunction to stop infringement of z4’s anti software piracy patent.

Microsoft appealed (z4 did not appeal the denial of injunctive relief).

Prior Invention: Although rarely invoked, 35 USC 102(g) embodies the heart of the American first-to-invent system. 102(g) allows a small category of secret activities to serve as invalidating prior art when another party shows that it was the first to conceive of an invention and then ‘exercised reasonable diligence’ in reducing to practice. 

Microsoft argued on appeal that its “BP 98” software was invented first. According to the appellate panel, Microsoft’s claim fails because the BP 98 software did not actually work. (Or at least that such evidence was sufficient for the jury verdict).

Decision affirmed.

Ten Ways to Spend Your Bonus: Holiday Gifts for a Patent Attorney

  1. ScreenShot076$350 — Roomba: Even a patent attorney can handle this vacuum. Handsfree cleaning that “makes a difference in the lives of people.” ScreenShot075
  2. $310 — Garmin Nuvi 260 Pocket Vehicle GPS Navigator with Maps for North America. This portable GPS fits in your pocket and works in the car. Voice prompts know streets throughout America.  Although she’s not a patent attorney, I’m getting this for my mother-in-law.
  3. $160 — Ipod Nano.
  4. $120 — Jawbone: a BlueTooth (wireless) headset for your mobile phone that actually works well. According to reports, the noise cancellation is amazing.  Jawbone self reports the “Highest Rated Bluetooth Headset. Ever.”
  5. ScreenShot072$100 — Eye-Fi: A 2GB SD card for your camera. The card has a built-in wi-fi chip so that your pictures are wirelessly uploaded to the computer.ScreenShot077
  6. Pointers: Green laser pointer (no more ugly red). For those of you with romantic delusions, this pointer is strong enough so that the beam can be seen while watching the stars. Perhaps more practical is the wireless presenter (with red laser).
  7. $25 —  Blue Oxford Shirt that is both wrinkle free and stain resistant. Patent attorneys have a standard uniform that includes a blue oxford shirt with a button-down collar. Please nothing fancy or shiny.
  8. ScreenShot074$16 — “Originally developed for the Swedish Department of Defense, Swedish FireSteel is a flash of genius. Its 3,000°C spark makes fire building easy in any weather, at any altitude.” Swedish FireSteel. You may need some MayaDust as well to get the fire started.
  9. ScreenShot079$15 — Reverse Engineer T-Shirt.
  10. Priceless — Several friends suggested the following: new management at the PTO, more technically-trained federal judges, and a Congress that is not for sale. I have been unable to find an appropriate link. Here is one potential solution. ($8).

Bonus Books: Freakonomics; iProperty; Undue Diligence; The Book of Air and Shadows. Happy shopping!

Thanks to all those who contributed ideas!

Reestablishing the Doctrine of Patent Exhaustion

By Mark R. Patterson* [PDF Version]

Quanta Computer, Inc. v. LG Electronics, Inc.[1], presents facts at the intersection of two legal rules. On the one hand, patentees are free to impose restrictions, such as field-of-use restrictions, when they license others to manufacture their patented products.[2] Such restrictions can be permissible even if they would be antitrust violations outside the patent context.[3] On the other hand, a patentee cannot restrict the use of its patented products once they are sold, whether the sale is by the patentee itself or by a licensee.[4] This is the exhaustion, or first-sale, doctrine. [Background on Quanta v. LGE]


The Federal Circuit has caused the first of these rules to swallow the second, by allowing a patentee to convert any sale into a license by imposing some sort of restriction in the transfer. The restriction makes the transfer a “conditional sale,” and the Federal Circuit has held that the exhaustion doctrine applies only to “unconditional sales.”[5] It has applied this rule, moreover, despite the Supreme Court’s application of the exhaustion doctrine to conditional sales.[6]


The Federal Circuit’s approach allows patentees to transform a wide range of otherwise permissible conduct into patent infringement. All the patentee needs to do is forbid that conduct in its “conditional sale” arrangement. The Federal Circuit itself suggested in Mallinckrodt that this could allow patentees to eliminate the right of repair, and indeed other courts have applied the approach to allow patentees to eliminate not only the right of reuse/repair,[7] but also the right to resell patented products.[8] More generally, as the American Antitrust Institute argues in its amicus brief, the elimination of the exhaustion doctrine leads to considerable uncertainty, as downstream purchasers cannot know whether their use of the product is permissible unless they ensure that upstream sellers were in compliance with any license restrictions.[9]


It seems probable that the Supreme Court will reverse or at least vacate the Federal Circuit’s Quanta decision. It is likely to hold that sales of patented products exhaust the patentee’s patent rights, as the Solicitor General and other amici argue that it should. The patentee could still impose limitations on buyers’ uses of the products, but those limitations would be solely matters of contract. They could not be enforced through patent infringement actions, and they would be subject to antitrust law limitations.


But this raises two questions. First, will the Court define the difference between a sale and a license for this purpose? Quanta and the Solicitor General appear to take the position that the distinction should turn on the transfer of title. A problem with that approach is that it would give patentees considerable opportunity to use formal differences in the transaction to alter what should be substantive rules. (The Solicitor General may be unconcerned about this. It discusses with apparent approval Mitchell v. Hawley, 83 U.S. 544 (1872), where the patentee arguably forbad its manufacturing licensee from selling the patented inventions, granting only the right “to license to others the right to use the said machines.” The Court in Mitchell allowed an infringement suit against the downstream users, though the case is somewhat peculiar because the infringement arose after the original patent term had been extended, when the license terms extended only to the end of the original patent term.)


An alternative sale-license distinction might focus on what is being transferred by the patentee. As the district court argued in Mallinckrodt, one can read the Supreme Court’s decisions to allow restrictions on manufacturing licensees but not on ultimate purchasers. This echoes a distinction drawn in Europe, where the EC’s technology transfer block exemption applies to exempt from antitrust scrutiny certain “technology transfer agreements entered into between two undertakings permitting the production of contract products.”[10] Sales of the products after they are produced are governed by another block exemption.[11] Under this view, it is in the manufacture of the product that the patentee’s technology is first used, and its rights exhausted.


One effect of the exhaustion doctrine is to make price-discrimination more difficult for the patentee. For example, if the patentee would prefer to sell at different prices to different users, an inability to enforce its patent rights downstream would make it more difficult for the patentee to prevent arbitrage. But the Supreme Court has not hesitated to place other practical limits on price-discrimination by patentees, as in disallowing tying arrangements, which prevents metering through sales of the tied products (though only for patentees with market power). Moreover, even when its patent rights are exhausted, a patentee can enter into contracts forbidding resale for arbitrage, but it can only enforce those contracts through breach-of-contract actions, not through patent infringement suits.


The second question is whether the exhaustion rule applies if, as in Quanta v. LG, the product sold is only a component of the patented invention, in that it does not itself satisfy all the claim elements. The Supreme Court has said yes, at least in some circumstances: “[W]here one has sold an uncompleted article which, because it embodies essential features of his patented invention, is within the protection of his patent, and has destined the article to be finished by the purchaser in conformity to the patent, he has sold his invention so far as it is or may be embodied in that particular article.”[12] This rule recalls, though is perhaps somewhat broader than, the contributory infringement doctrine. That is, if this were the rule, the exhaustion doctrine would apply where there has been an authorized sale of a product that would contributorily infringe if its sale were unauthorized.


But the Univis Court followed the statement quoted above with another: “The reward [the patentee] has demanded and received is for the article and the invention which it embodies and which his vendee is to practice upon it.” Id. at 251. The question in Quanta v. LG can be viewed as turning on whether this second statement from Univis is one of law or of fact. If it is interpreted as one of law, then the Court is saying that the patentee must get its returns in the sale of the component invention. If the statement is one of fact, then the Court may just be relying on a view that the defendant in Univis had in fact gotten the return to which it was entitled in that first sale. In other cases with different facts, the patentee might be able to use patent law to enforce downstream restrictions despite the upstream sale of a component of the patented invention.


For example, one can imagine cases in which the maker of the component at issue, like Intel in Quanta v. LG, would have concerns about contributory infringement claims and therefore would seek a license from the patentee. That seems particularly plausible if the component at issue could be resold, so that even if its maker (Intel) ensured that its customers had licenses from the patentee, others to whom they might resell the component might not. It could make sense for the patentee to grant a license to the component maker in this situation, and make the license apply to downstream purchasers, rather than to enter into licenses with each of those downstream purchasers. But perhaps there could be circumstances in which the patentee would like to price-discriminate by use among the downstream purchasers, so that licenses at each level would be desirable.


It will be interesting to see how, or if, the Supreme Court will resolve this issue. As noted above, it could simply say that the patentee must get its profits from the component maker. This would promote certainty in the downstream product markets and be conceptually consistent with contributory infringement law. On the other hand, it would be somewhat odd to require that patentees deal with contributory infringers rather than direct infringers. Moreover, it would place limits on the ability of patentees to price-discriminate, though, as noted above, the Court might not view that as an obstacle. But one could also take the view that where the downstream applications are significantly different, so as to make separate downstream licenses desirable, there should be separate downstream patents, and that the upstream product then would not be “especially made or especially adapted for use in an infringement of [any one of] such patent[s].”[13]


The Court might simply choose not to address this issue. It could, for example, just correct the Federal Circuit’s approach to the exhaustion doctrine and then direct the Federal Circuit to address it.[14] That approach might look particularly attractive in that the LG-Intel license itself includes a provision that calls for application of the exhaustion doctrine: “Notwithstanding anything to the contrary contained in this Agreement, the parties agree that nothing herein shall in any way limit or alter the effect of patent exhaustion that would otherwise apply when a party hereto sells any of its Licensed Products.”


A final issue is that of LG’s method claims. The Federal Circuit held that “the sale of a device does not exhaust a patentee’s rights in its method claims.” As Quanta’s brief describes, this holding is inconsistent with Supreme Court decisions and even with other decisions by the Federal Circuit. Generally speaking, method claims that would be contributorily infringed by an unauthorized sale of a product should be exhausted by an authorized sale of the product. But if the method at issue goes beyond the normal use of the product at issue, so that the product arguably does not contributorily infringe the method patent, as suggested above for downstream product patents, it seems that exhaustion should not occur.


The Federal Circuit’s cases beginning with Mallinckrodt and continuing through Quanta have allowed patentees to use contract, or even simply unilateral notice, to eliminate the application of the exhaustion doctrine. By simply prohibiting certain conduct in their “license” agreements, patentees can under current Federal Circuit law transform what would be permissible conduct into patent infringement. The Supreme Court, however, said in Univis that “sale of [a patented article] exhausts the monopoly in that article and the patentee may not thereafter, by virtue of his patent, control the use or disposition of the article.” The Court’s forthcoming decision will likely reestablish that rule.


* Mark Patterson is a Professor of Law at Fordham University School of Law . His article on field-of-use licensing was recently published in the William & Mary Law Review. Mark R. Patterson, Contractual Expansion of the Scope of Patent Infringement Through Field-of-Use Licensing, 49 Wm. & Mary L. Rev. 157 (2007).


Preferred Citation: Mark R. Patterson, Reestablishing the Doctrine of Patent Exhaustion, 2007 Patently-O Patent L.J. 38,


[1] Supreme Court Docket No. 06-937. Oral arguments are scheduled for Wednesday, January 16, 2008. For background on the particular issues, see, Dennis Crouch, Supreme Court to Decide Patent Exhaustion Case, Patently-O (Sept. 25, 2007) at 

[2] General Talking Pictures Corp. v. Western Electric Co., 304 U.S. 175 (1938).

[3] United States v. General Electric Co., 272 U.S. 476 (1926). 

[4] Adams v. Burke, 84 U.S. 453 (1873); Motion Picture Patents Co. v. Universal Film Manufacturing Co., 243 U.S. 502 (1917), United States v. Univis Lens Co., 316 U.S. 241 (1942).

[5] Mallinckrodt, Inc. v. Medipart, Inc., 976 F.2d 700 (Fed. Cir. 1992). 

[6] Motion Picture Patents 243 U.S. 502; Univis Lens. 316 U.S. 241.

[7] Arizona Cartridge Remanufacturers Association, Inc. v. Lexmark International, Inc., 290 F. Supp. 2d 1034 (N.D. Cal. 2003), aff’d, 421 F.3d 981 (9th Cir. 2005).

[8] Pioneer Hi-Bred International, Inc. v. Ottawa Plant Food, Inc., 283 F. Supp. 2d 1018 (D. Iowa 2003). 

[10] Commission Regulation 772/2004 on the application of Article 81(3) of the Treaty to categories of technology transfer agreements, O.J. L 123/11, art. 2 (2004), 

[11] Commission Regulation 2790/1999 of 22 December 1999 on the application of Article 81(3) of the Treaty to categories of vertical agreements and concerted practices, O.J. L 336/21 (1999),

[12] Univis Lens, 316 U.S. at 250–51.

[13] 35 U.S.C. § 271(c). 

[14] Cf. KSR Int’l Co. v. Teleflex Inc., 127 S. Ct. 1727 (2007); eBay Inc. v. MercExchange, L.L.C., 126 S. Ct. 1837 ( 2006).





James B. Kobak, Jr., Contracting Around Exhaustion: Some Thoughts About the

CAFC’s Mallinckrodt Decision, 75 J. Pat. & Trademark Off. Soc’y 550 (1993).


Mark R. Patterson, Contractual Expansion of the Scope of Patent Infringement Through

Field-of-Use Licensing, 49 Wm. & Mary L. Rev. 157 (2007).


Richard H. Stern, The Unobserved Demise of the Exhaustion Doctrine in U.S. Patent

Law: Mallinckrodt v. Medipart, 15 Eur. Intell. Prop. Rev. 460 (1993).


Patent Rights Circa 1895

E. Bement & Sons v. La Dow, 66 Fed. 185 (Cir. Ct. N.Y. 1895)

[N]o property is so uncertain as “patent rights”; no property more speculative in character or held by a more precarious tenure. An applicant who goes into the patent office with claims expanded to correspond with his unbounded faith in the invention, may emerge therefrom with a shriveled parchment which protects only that which any ingenious infringer can evade. Even this may be taken from him by the courts. Indeed, it is only after a patentee has passed successfully the ordeal of judicial interpretation that he can speak with any real certainty as to the scope and character of his invention.

The PTO’s New Prosecution Sanctions for Appeal Misconduct

PatentLawPic110By Allen Hoover

As posted November 8, 2007, the PTO has proposed to implement new rules for appeals. Among the new rules is proposed rule 41.46. This rule (repeated below) has largely escaped much public notice. Nonetheless, the rule is very problematic and your readers should be aware of it.

41.56 Sanctions.

(a) Imposition of sanctions. A sanction may be imposed against an appellant for misconduct, including:

(1) Failure to comply with an order entered in the appeal or an applicable rule.
(2) Advancing or maintaining a misleading or frivolous request for relief or argument.
(3) Engaging in dilatory tactics.

(b) Nature of sanction. Sanctions may include entry of:

(1) An order declining to enter a docketing notice.
(2) An order holding certain facts to have been established in the appeal.
(3) An order expunging a paper or precluding an appellant from filing a paper.
(4) An order precluding an appellant from presenting or contesting a particular issue.
(5) An order excluding evidence.
(6) An order requiring terminal disclaimer of patent term.
(7) An order holding an application on appeal to be abandoned or a reexamination proceeding terminated.
(8) An order dismissing an appeal.
(9) An order denying an oral hearing.
(10) An order terminating an oral hearing.

This proposed new rule has several problems, and should not be adopted.

First of all, the PTO already has ethical rules that govern all practitioners. These rules have been in place for a long time, generally track the rules of ethics that exist for attorneys, and are well understood.

It’s not clear whether new Rule 41.56 rule would create a category of misconduct that is not covered by the current ethical rules. In other words, might an attorney be found to have committed misconduct for activity that is appropriate and permissible under the ethical rules? If so, the PTO is defining a new sphere of activity — "ethical misconduct." If not, this rule is redundant to the existing ethical rules.

Second, it’s not clear what activities might constitute "misconduct." The PTO has not provided guidance for determining what might constitute misconduct. Even the two specific grounds stated in the rule — presenting a "frivolous" argument or engaging in "dilatory" tactics — are not at all clear. For instance, if the applicant uses the full period set by rule to file a brief, would that be "dilatory"?

Third, there is apparently no intent required before misconduct is found. If an applicant failed to comply with some formal requirement, such as omitting an appendix, that arguably could be misconduct under the rules.

Fourth, the standard for determining whether misconduct has occurred is not stated. The PTO’s comments state "Whether and which sanction, if any, should be imposed in any specific circumstance would be matters within the discretion of the Board." This standard is subjective and arbitrary. Rule 41.56 is a punitive rule. An attorney found to have committed misconduct might have to report that finding to the state bar authorities, and an applicant who commits misconduct faces several severe sanctions. More notice as to the standards for determining misconduct is needed.

Fifth, the rule is redundant. If an applicant makes an argument that is frivolous, the appeal will be rejected and the application will not be allowed. As to "dilatory tactics," most appeal deadlines are set by rule. Failure to meet these rules will result in dismissal of the appeal.

Sixth, it is questionable whether the Board has authority to issue the sanctions specified under rule (especially the requirement for a terminal disclaimer). It’s questionable whether the Board has authority to issue sanctions at all. At least for practitioners, that is the province of the Office of Enrollment and Discipline.

Seventh, there is evidently no process for appealing from a finding of misconduct.

Eighth, and most generally, this rule seems to be a solution needing a problem.

I hope that the PTO rethinks this rule and decides not to adopt it.

Mr. Hoover is an IP attorney at Banner & Witcoff in Chicago. He was named an Illionois “Super Laywer” by his peers in the state.

Ordinary Perjury Does Not Constitute “Fraud on the Court” Sufficient to Reopen Patent Litigation

Apotex v. Merck (Fed. Cir. 2007)

Enalapril (VASOTEC) is a Merck drug used to treat high blood pressure. In 2001, the CAFC affirmed that two Apotex patents allegedly covering the drug’s manufacturing process were invalid under 35 USC 102(g) (because the process had been invented and used by Merck prior to Apotex’s invention).

A year after losing, Apotex re-filed its case — charging Merck with alleged fraudulent discovery responses uncovered in a later trial. 

Under FRCP Rule 60(b), a final judgment may be set aside based on the fraud or misrepresentation of an adverse party. Ordinarily, a Rule 60(b) motion must be brought within one year of judgment. One exception is the more serious ‘fraud on the court,’ which has no statute of limitations. Here, Apotex filed the 60(b) motion more than one year after the final judgment — and thus needed to show fraud on the court.

On appeal, the CAFC affirmed the lower court’s dismissal of Apotex’s claims of fraud on the court. False statements made by witnesses being examined do not typically constitute fraud on the court — rather, that charge is reserved to activities that harm “the judicial machinery itself and is not fraud between the parties or fraudulent documents, false statements or perjury.”  Thus, in this case the alleged false statements made on the witness stand and in attorney argument “do[] not establish corruptoin of the judicial process.”

Mercantilism and Innovation

In the US, just over half of new patent applications originate from US inventors. (Based on country of first named inventor) That number has changed dramatically since 1965 when more than 75% of US applications had US origins. [Link] If the trend continues, the US will soon issue more patents to non-US inventors than to US inventors.


The EPO has already dropped below the 50% margin — Only 42% of EPO applications originate in Europe. And, the US is the most frequent country of origin for EPO applications when compared country by country. [Link] Japan’s figures make the USPTO & EPO appear overwhelmingly egalitarian. In Japan, 72% of the filed patent applications originate in Japan.

Issues & Notes:

  • The graph posted comes from a recent OECD report on patent statistics.
  • How will the US patent lobby fare politically when most new patents are held by foreign companies?
  • Why are relatively few non-Japanese applications filed in Japan? Does Japan benefit from a structure where few foreign patents are issued or enforced?


Tafas v. Dudas: Discovery and Scheduling

Tafas v. Dudas, 07–cv-0846 (E.D.Va 2007)

As is well known in the patent prosecution community, Tafas and SmithKline Beecham (GSK) filed suit against the USPTO — asking the Federal Courts to block implementation of a new set of rules that would limit the number of claims and continuation applications that can be filed based on a single original patent application.  The Eastern District of Virginia District Court has issued a preliminary injunction (PI) that temporarily blocks implementation of the new rules. Now, the Patent Office is fighting to change the outcome in the final decision.

The PTO has now submitted its answer to the complaints filed Tafas. In its answer, the PTO presents three defenses:

  • The rules were promulgated in accordance with appropriate rules (and the US Constitution) and comply with the Patent Act;
  • Plaintiff (Tafas) has waived all objections that he did not make during the rulemaking process; and
  • Plaintiff (Tafas) lacks standing on many of the asserted counts.

As is usual, the answer did not develop any factual background for these particular defenses.

Discovery and Scheduling: During the PI Hearing, the PTO argued for an extended period for filing Summary Judgment motions. At that time, the Tafas attorney indicated that the schedule should go much more quickly.  Of course, now that the rules have been stayed the parties have flipped their positions. The PTO wants a quick decision and Tafas is content to allow the proceeding to drag-on a bit longer.

From the PTO Scheduling Brief:

“In order to halt Tafas and GSK’s stalling efforts, clarify that no discovery is permitted, and allow the Court reach the merits expeditiously so that the Final Rules are not preliminarily enjoined longer than necessary, Defendants Jon Dudas and the USPTO (collectively “the USPTO”) respectfully request that the Court enter an Order clarifying that a standard scheduling order will not issue in these consolidated cases because the cases may promptly be decided on cross-motions for summary judgment without discovery.”

The PTO would have all summary judgment briefs filed prior to the Christmas Holiday. The next hearing is scheduled for November 16, 2007.

Before deciding the scheduling, the district court will need to determine whether to allow any discover. The plaintiffs — Tafas & GSK — are asking for discovery (including depositions of PTO leaders). The defendants — PTO & Dudas — argue that no discovery is necessary.

There is usually very little discovery when a court reviews administrative rules — rather, the new rules usually stand or fall based on the administrative record. Of particular interest in this case are public (and private) statements by PTO officials regarding the purpose and likely effect of the rule package — especially because some of those statements speak to purposes and effects not found in the ‘official’ reasoning published by the Office.  Tafas adds that its Constitutional claims (apart from its APA claims) deserve discovery.



Barack Obama’s Patent Reform Initiatives

PatentLawPic117It’s not surprising that Barack Obama – a former law professor – would include detailed policy initiatives as part of his campaign strategy. The bulk of his newly released technology plan suggests his approach to ensure an “open government.” The current Democratic push for a ‘more transparent government’ is primarily a reaction to the current Bush administration’s reported closed door policy. Obama’s plan, however jumps into specifics such as using wiki and social networking technologies to open up the government process and engage the citizenry; release more government information in more accessible formats; open up government data to individuals and also open government channels to receive data from the population; and appoint a Chief Technology Officer (Cabinet level?) to treat these networking issues as opportunities rather than solely as a law enforcement threat or spy channel.

On the patent side, Obama is ready to move forward with patent reform – he particularly support’s his former colleague Doug Lichtman’s (coauthors Lemley & Sampat) suggestion of a “gold plated” patent. [Link].

Read the Obama patent reform statement:

Reform the Patent System: A system that produces timely, high-quality patents is essential for global competitiveness in the 21st century. By improving predictability and clarity in our patent system, we will help foster an environment that encourages innovation. Giving the Patent and Trademark Office (PTO) the resources to improve patent quality and opening up the patent process to citizen review will reduce the uncertainty and wasteful litigation that is currently a significant drag on innovation. With better informational resources, the Patent and Trademark Office could offer patent applicants who know they have significant inventions the option of a rigorous and public peer review that would produce a “gold-plated” patent much less vulnerable to court challenge. Where dubious patents are being asserted, the PTO could conduct low-cost, timely administrative proceedings to determine patent validity. As president, Barack Obama will ensure that our patent laws protect legitimate rights while not stifling innovation and collaboration.


Tax Strategy Patents

PatentLawPic116The Internal Revenue Service is “concerned” about tax strategy patents and has issued a notice of proposed rules to require a special disclosure if a taxpayer uses a patented tax planning method to achieve a tax benefit. 

The specific rules would require a special disclosure reporting a patent license anytime a taxpayer pays a fee (including indirect consideration) to a patent holder for the legal right to use a tax planning method that the taxpayer “has reason to know” is subject to a patent.  A tax planning method is defined as “any plan, strategy, technique, or structure designed to affect Federal income, estate, gift, generation skipping transfer, employment, or excise taxes.” The rule would exclude patents covering tax preparation software or “other tools used to perform or model mathematical calculations or to provide mechanical assistance in the preparation of tax or information returns.”  Under the rules, both the licensee and licensor (patent owner) would be required to submit the disclosure reporting the license transaction.

One hole in the rule would allow non-licensed intentional infringers to use the patented tax strategy without filing any particular documentation. 

This disclosure is akin to the recent proposal by Lemley & Myhrvold to require publication of all patent licenses. However, the IRS rule is much easier to implement because of a pre-existing enforcement structure and the relatively small number of tax strategy patents. In the tax strategy business, the disclosure could dramatically change the current status of highly secret meetings and extensive diversion tactics.

Notes & Documents:

  • Any comments on the rules must be received by December 26, 2007. Once effected, the new rules will apply retroactively to September 26, 2007. Comments may be submitted through the eRulemaking portal at with reference to IRS-REG-129916–07. The IRS point of contact is Richard Hurst: (202) 622–7180.
  • Federal Register Publication:
  • Senator Obama has proposed an amendment to 35 USC 101 to eliminate tax shelter patents [Link].
  • More info from Paul Caron — the “TaxProf” [Link][Link].

Some Tax Strategy Patents:

  • 6,567,790: Funding of a GRAT with nonqualified stock options.
  • 6,292,788: Tax-deferred real estate transaction.
  • 7,149,712: Purchase of an annuity contract to fund a charitable remainder trust.
  • 7,177,829: Tax Refund System (HRBlock Software).

No Appellate Jurisdiction Over Remanded Inventorship Dispute

HIF BIO v. Yung Shin Pharmaceuticals (Fed. Cir. 2007)

In 2005, HIF sued Yung Shin, Carlsbad Technology, the Fish & Richardson law firm, and others in California State Court. In its complaint, HIF asked the court for a declaratory judgment for ownership and inventorship of various anti-angiogenesis drugs. The complaint also asserts claims of slander, conversion, fraud, business interference, and unjust enrichment. The case was removed to Federal Court. However, the only federal claim — the RICO allegation — was dismissed and the district court declined to exercise its supplemental jurisdiction to hear the other state claims (thus, remanding the state claims back to the state court).

On appeal, the defendants argued that the federal district court should be required to hear the supplemental state claims because the claims are intricately tied to the federal patent law issue of inventorship. 28 USC §1367 provides a district court discretion in determining whether to hear supplemental issues. Although generally broad, the discretion is not completely unfettered and may be reviewed on appeal. In Voda, for instance, the CAFC found that a district court had abused its 1367 discretion by hearing foreign patent infringement claims.

In its decision, the appellate panel found that it lacked subject matter jurisdiction to hear the appeal.  In particular, the court held that 28 USC §1447(d) blocks federal appellate jurisdiction over remands back to state court. From its text, 1447(d) appears to be broadly written to block any appellate review of a remand to state court (except for a small unrelated exception).  Supreme Court precedent, however, has narrowly interpreted the statute to allow federal appeals for remands except for remands based on a lack of subject matter jurisdiction.

Thus, the question here was whether the remand based on discretionary denial of supplimental jurisdiction is the same as a remand based on lack of subject matter jurisdiction.  The CAFC found the two overlapping — certainly once the court excerts its discretion to refuse the case, it certainly lacks subject matter jurisdiction.

Interestingly, the court has gone out on a limb with this case — splitting with decisions from the Third, Fourth, Fifth, Sixth, Seventh, Eighth, Ninth, Tenth, and Eleventh Circuits.  Precedent from courts indicate a willingness to hear cases appealing remands based on denials of supplimental jurisdiction.  Writing for the CAFC panel, Judge Gajarsa found that a recent Supreme Court case (Powerex 2007) opened the door for the new direction.

  • This case would have a good shot of being granted certiorari. Its impact on patent law, however, is nil. (Perhaps a good thing).