February 2008

Patently-O Bits and Bytes No. 18

  • JOLTDIGESTHarvard’s Journal of Law & Technology is generally considered on of the top two academic journals focusing on Law & Technology (along with Berkeley’s TLJ). JOLT recently increased its online footprint with the JOLT DIGEST where they regularly cover important new cases.
  • Software Patents: Although in Bilski, the CAFC is not likely to consider software patents per se, there is a strong and growing movement to eliminate all software patents. The descriptively named “End Software Patents” group is led by Ben Klemens (Author of Math You Can’t Use) and is continuing to move forward. Interestingly, Microsoft Explorer crashed when I visited their site. [See LegalPad’s article]
  • Software Patents: On the more academic side, two serious patent dataheads (Iain Cockburn and Megan MacGarvie) have analyzed economic results of software patents in various industries. Their results: (1) When patents are held by those currently market, it is more difficult for a startup to get financing; and (2) When a startup holds patents, it has a greater chance of obtaining financing.  [LINK] DDC Comment: This is, of course, exactly how we would expect the market to react.
  • Auctioning the Right to File a Patent Application: Ayres and Parchomovsky have an interesting, if misguided, paper on patent rights. They see a problem with too many patents and suggest a “cap.” The right to file patent applications could be auctioned and then traded or sold in a secondary market. [LINK]
  • Kempton Lam has an interesting discussion on patents and other matters with Mike Dillon GC of Sun. [LINK]

Claim Construction Reversal Rates II – District Court Judge Experience

    By David Schwartz

How do district court judges with varying levels of experience perform on claim construction? Are judges more likely to have their decisions affirmed when they have previous claim construction experience? Yesterday I provided some background on the large database I compiled and some overall results. [LINK] Today’s post provides an analysis of the data based upon the number of previous appeals of claim construction. A draft of the paper, Practice Makes Perfect? An Empirical Study of Claim Construction Reversal Rates in Patent Cases, can be downloaded here.

If district court judges improve after appellate review of claim construction, one would expect that the reversal rate would decrease as the number of appeals increases. More specifically, a district court judge with more prior Federal Circuit feedback should have a lower reversal rate than a district court judge with less experience. Assuming that the judge decided the second case after learning of the decision of the Federal Circuit in the prior case, the second time a particular judge is before the Federal Circuit, he or she should be more likely to have his or her claim construction affirmed. Figure A below illustrates the reversal rates of district court judges broken down by the number of prior claim construction appeals.

ScreenShot034

The left-most set of bars represents the results from every judge’s first appeal, with the blue bar indicating the percentage of cases that had to be reversed or vacated due to an incorrect claim construction, and the red bar indicating the percentage of cases with any erroneous claim construction. Moving to the right, the pairs of bars represent the results from each judge’s subsequent appeals.

These results suggest that district court judges do not improve as the Federal Circuit reviews their cases. Contrary to conventional wisdom, the reversal rate does not appear to decrease when a district court judge has multiple decisions reviewed by the Federal Circuit on claim construction. In fact, the highest reversal rate is for judges with four prior claim construction appeals. Other than judges who have been appealed exactly four times, the range is very narrow, between 26.8% and 30.5% for reversals and 31.0% and 40.4% for errors. Thus, there does not appear to be significant expertise gained by district court judges via direct Federal Circuit review that causes the claim construction reversal rate to decrease. (As discussed in more detail in the paper, the study is subject to several limitations inherent in studying appellate cases, including for example, a potential selection bias and a potential distortion if the cases are not distributed evenly across the district court judges. Ideally, for research purposes, cases would be randomly assigned to a judicial district (i.e., no forum shopping), and a random subset of those cases would be appealed.)

Up next: Reversal rates based performance by district court judges after a first reversal by the Federal Circuit.

I welcome comments from the readers of Patently-O.

Claim Construction Reversal Rates I – Overall Reversal Rates

By David Schwartz

How do district court judges with varying levels of experience perform on claim construction? To study that question, I compiled a large database that includes every single post Markman Federal Circuit decision involving claim construction. Others have studied this issue from the perspective of the Federal Circuit — i.e., what is the overall reversal rate. However, until now, no one has analyzed how district court judges perform based upon experience. My findings do not reveal any correlation between various measures of experiences and the likelihood of being affirmed. There will be several posts on the study and results. Today, I will provide some background on the dataset and a bit on the reversal rate. A draft of the paper, Practice Makes Perfect? An Empirical Study of Claim Construction Reversal Rates in Patent Cases, can be downloaded here.

The Dataset. First, a few brief words about the dataset. The dataset includes all decisions in which the parties disputed an issue of the district court’s claim construction. It includes all decisions in an eleven year period, from April 23, 1996 (the date of the Supreme Court decision in Markman) until June 30, 2007. Those decisions – 952 of them – are all of the published and unpublished opinions, as well as all of the summary affirmances under Federal Circuit Rule 36.

Overall Reversal Rates. For the entire eleven year period, 38.2% of cases had at least one term wrongly construed. Moreover, 30.0% of the cases had to be reversed or vacated because of an erroneous claim construction. These results are largely consistent with those of an earlier study (by then-professor and now-Federal Circuit judge Kimberly Moore).

Reversal Rates by Judicial District. In later posts, I will present the reversal rates based upon the experience of the district court judges. Today’s post presents the reversal rates aggregated by judicial district. Table II below identifies the number of Federal Circuit appeals from the most active judicial districts in terms of claim construction appellate decisions from April 1996 until June 2007. It also provides the percentage of cases that were vacated or reversed due to an erroneous claim construction. In the last column, I have provided the total number of patent lawsuits filed in those judicial districts, and in parenthesis, the rank of the judicial district if measured by the total number of patent lawsuits filed.

Table II: Most Active Judicial Districts on Appellate Claim Construction Experience: 1996-2007

Rank

Judicial District

# of Federal Circuit Claim Construction Appeals (1996-2007)

% of Claim Construction Appeals Reversed or Vacated because of Claim Construction Error

# of Patent Lawsuits Filed (1995-2005)

1

N.D. Cal.

84

28.6%

2613 (1)

2

C.D. Cal.

69

43.5%

2260 (2)

3

N.D. Ill.

65

26.2%

1509 (3)

4

D. Del.

54

22.2%

1112 (5)

5

S.D.N.Y.

45

28.9%

1184 (4)

6

D. Mass.

42

26.2%

782 (7)

7

D. Minn.

33

36.4%

743 (8)

8

E.D. Mich.

29

31.0%

669 (9)

9

D.N.J.

28

32.1%

952 (6)

10

E.D. Va.

27

22.2%

555 (14)

11

N.D. Tex.

21

42.9%

591 (11)

11

S.D. Tex.

21

23.8%

466 (19)

13

W.D. Wisc.

19

21.1%

232 (36)

14

W.D. Wash.

18

38.9%

475 (17)

14

D. Col.

18

27.8%

407 (23)

As is evident from the Table above, several of the busiest districts have reversal rates above the average rate of thirty percent. For example, the second busiest district in the country, as measured by either number of appeals or number of patent lawsuits handled, the Central District of California, has the highest reversal rate of claim construction. (Some may wonder why the Eastern District of Texas is not included in Table II. The trend of filing cases in the Eastern District of Texas began fairly recently, and as a result, many of the cases from the Eastern District of Texas have not had time to proceed through appeal. Consequently, the Eastern District of Texas is not one of the top fifteen districts in terms of appellate claim construction experience during the period 1996-2007.)

Up next: Reversal rates based on the number of claim construction cases previously appealed (i.e., the first case appealed from a particular district court judge, the second case appealed from a district court judge, etc.)

Comments are welcome!

Reviving Unintentionally Abandoned Patent Applications

Aristocrat Technologies v. IGT (pending before the CAFC).

The pending Aristocrat case is interesting for several reasons: (1) it involves the greatest fear of many practicing patent prosecutors — missing a deadline; (2) it will decide the scope of PTO authority in advance of Tafas v. Dudas; and (3) pending legislation would expand PTO authority to cover some of the issues here.

Background: The Patent Act discusses revival for unintentional abandonment due to failure to submit proper application fees (35 USC 111) and failure to rescind a nonpublication request (35 USC 122). In other cases, however, the Patent Act only explicitly allows revival of unavoidably abandoned cases — a much higher standard. These include Abandonment due to failure to respond to a PTO notice (35 USC 133); failure to pay the issue fee (35 USC 151); and failure to comply with national stage filing requirements (35 USC 371). The fee schedule (35 USC 41) further provides for a specific fee for revival of unintentionally abandoned applications as an explicit alternative to revival of unavoidably abandoned applications.

Aristocrat’s patent application was originally filed in Australia, but the US national stage filing was one day late. Per its usual operation, the PTO allowed Aristocrat to revive the application based on the unintentional standard. The district court (J. Jenkins N.D. Cal.) found that the PTO lacked authority to revive the application.

Revival is Common: The USPTO estimates that it has revived approximately 73,000 patent applications since 1982. If the lower court’s decision is upheld, most of the related patents would be put in jeopardy. In addition, many of the revived applications have spawned multiple family members – potentially leading to further invalidation.

In a brief supporting the appeal, the Patent argues that Section 41(a)(7) of the Patent Act authorizes the Office to revive unintentionally abandoned patent applications – regardless of the form of abandonment. As a backup, the Office demands Chevron deference:

“To the extent that any ambiguities or gaps exist between § 41(a)(7) and the other provisions of Title 35, the USPTO’s reasonable and contemporaneous interpretations of its governing statute is entitled to Chevron deference. ”

Beyond Chevron, the Patent Office argues that it is entitled to “great deference” because it has been applying its interpretation for so many years. See US v. Clark, 454 U.S. 555 (1982).  In amicus, the Neurotechnology Industry Organization also argues that 35 U.S.C. § 2(b)(2)(A) requires that the PTO be given great deference.

Notes:

  • Briefs & Documents:
  • Statutory provisions for revival due to unintentional abandonment:
    • 35 USC 111: Failure to submit fee and oath of a patent application;
    • 35 USC 41: Fee schedule for revival of unintentionally abandoned applications. This section provides a specific fee for revival of unintentionally abandoned applications as an explicit alternative to revival of unavoidably abandoned applications; and
    • 35 USC 122: Abandonment due to failure to rescind nonpublication request.
  • Statutory provisions that only refer to revival due to unavoidable abandonment:
    • 35 USC 133: Abandonment due to failure to respond to PTO notice (Normally a 6–month deadline, but may be less);
    • 35 USC 151: Revival for failure to pay issue fee; and
    • 35 USC 371: Failure to comply with national stage filing requirements.
  • PTO Rules:
    • 37 C.F.R. 1.137(b) provide for revival of applications based on an applicant’s unintentional delay in replying. Under the rule, abandoned applications, reexamination prosecution terminated under §§ 1.550(d) or 1.957(b) or limited under § 1.957(c), or lapsed patents may all be revived under this standard.  The PTO rules are, however, subordinate to statutes.
  • Caselaw:
    • Lumenyte v. Cable Lite (Fed. Cir. 1996): Patentee revived case as unintentionally abandoned. The CAFC affirmed the ruling without questioning whether such revival is ever permissible.
    • Morganroth v. Quigg (Fed. Cir. 1989): Affirming that the Director does not have authority to revive an unintentionally abandoned patent application “that resulted from the applicant’s failure to appeal from a final district court judgment that upheld the Commissioner’s prior refusal to issue a patent.”
    • New York Univ. v. Autodesk, Inc., 2007 U.S. Dist. LEXIS 50832 (SDNY 2007): The court found that the delay in reviving was not even unintentional. The court explicitly did not reach the question of whether revival for unintentional abandonment due to failure to respond to an office action is even permitted. (Remember, 35 USC 133 only allows for revival of unavoidably abandoned applications.)
    • Field Hybrids v. Toyota (D.Minn 2005).
  • This case is not the recently decided Aristocrat v. Multimedia Games.

  

De-Stabilizing Preliminary Injunctions through De Novo Review of Claim Construction

ChamberlainChamberlain Group v. Lear Corp. (Fed. Cir. 2008)

Chamberlain’s patent is directed to improved security for remote garage door controls. After an initial claim construction, the N.D. Ill. court granted summary judgment for Chamberlain and issued a preliminary injunction.

A major point of contention was the claimed “binary code” limitation.  In a portion of its system, Lear used a three-symbol (trinary) code. Of course the underlying processor is binary and thus encodes the trinary code as binary numbers. In its preliminary injunction decision, the lower court held that Lear likely infringed because of the trinary coded binary numbers.

De Novo Review: On appeal, the CAFC reversed, but only after noting that the “district court commendably strove to follow this court’s rules for claim construction.”  In particular, the CAFC found in its de novo review that the specification requires a finding that a trinary code is not a binary code even though it is stored in binary format.

De Novo Preliminary Injunction: A preliminary injunction requires a showing that the patentee has a strong likelihood of success on the merits of the case.  Because a showing of success on the merits depends upon the claim construction, the appellate panel held that reversal on claim construction will almost always lead to vacatur of a preliminary injunction. I.e., “A correct claim construction is almost always a prerequisite for imposition of a preliminary injunction.”

Preliminary Injunction Vacated.

Notes:

  1. This decision is important because it shows how de novo review of claim construction can de-stable holdings that are otherwise reviewed only for clear error.
  2. Background on the Litigation

Patently-O Bits and Bytes No. 17

  • Increasing Complexity: The House Judiciary Subcommittee on IP is holding its PTO oversight hearing on Feb 27 at 1:30 pm. These graphs, originally from Patently-O, will be used by POPA when demanding enhanced examiner pay.
  • Judicial Conference: The CAFC’s Judicial Conference is scheduled for May 15, 2008 in DC at the Grand Hyatt. INFO.
  • Seagate: The Supreme Court has declined to grant certiorari in the Seagate decision. That decision has eliminated much of the need for a formal opinion of counsel prepared for litigation.  Expect a study next summer showing treble damages in severe decline.
  • Supreme Court Quanta: Quanta is awaiting decision. This decision may follow antitrust regulation and inject more economic analysis into decisions of whether particular license agreements are acceptable.
  • Supreme Court Biomedical v. California: The U.S. Chamber of Commerce has filed an amicus brief supporting Biomedical Devices in its attempt to strip California of its immunity from patent infringement litigation.  For an unknown reason, the IP Bar associations have refused to provide any input on this case.
  • EPC 2000: The European Patent Convention has received its first major revision in 30 years. Nicholas Fox provides an excellent summary in book form for £25. Hat tip to Bill Heinze.

Patent Troll Tracker, Trade Secrets, and other Bits, No. 16

  • Troll Tracker Revealed: After learning that Ray Niro paid $10,000+ for information leading to his actual identity, the Patent Troll Tracker has revealed his identity — Cisco IP Director Rick Frenkel [LINK]
  • Trade Secret: Although perhaps a novel theory, I would argue that an anonymous blogger’s identity is a protectable trade secret. Improper means used to reveal the trade secret can create liability.
  • Quote of the day (from 1895):

    “It should also be borne in mind that no 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. Especially is this true of patents on spring-tooth harrows.” [1]

[1] E. Bement & Sons v. La Dow (C.C.) 66 Fed. 185 (Circuit Ct. N.Y. 1895)

Warning: Do Not Rely on the Experimental Use Exception to 102(b)

Atlanta Attachment v. Leggett & Platt (Fed. Cir. 2008)

The CAFC once again reaffirmed patent law’s parallel to Chicago democracy: File early and often.

The patentee, Atlanta Attachment, won a summary judgment on issues of infringement and validity. Missouri based defendant Leggett & Platt appealed — arguing that the patented sewing machine had been “on sale” for more than one year before Atlanta Attachment filed its patent application.

The on sale bar of 102(b) invalidates an issued patent that was on sale prior to the one-year critical date. In Pfaff, the Supreme Court defined “on sale” as requiring an embodiment of the claimed invention being subject to a commercial offer for sale and being ready for patenting at the time of the sale. The on sale bar can be negated in certain cases where experimentation was still occurring.

Facts: Atlanta Attachment was working with Sealy to develop a special ruffle producing sewing machine. Over the course of a few years, several prototypes were sent to Sealy for experimentation. Each one was returned to the plaintiff for improvements. The third prototype included all of the claimed elements. Atlanta Attachment invoiced Sealy and was paid for the prototype. Instead of delivering the prototype, however, Sealy merely tested the prototype at the patentee’s facility and was later refunded its purchase price. At that time. Sealy made further suggestions regarding changes. In addition, Atlanta Attachment had offered to sell 50 production units prior to the critical date.

Holding:

  1. On Sale: Although never actually delivered, prototype was sold an invoice was sent and paid. Additionally, the offer to sell the 50 production units constitutes an offer to sell. Here, the invention was considered on sale because the asserted claim was broadly written – even though the prototype was not the eventual preferred embodiment.
  2. Experimental Use: First, the CAFC held that the experimental use exception does not apply after a commercial offer for sale has taken place. Additionally, Atlanta Attachment cannot claim the experimental use exception for Sealy’s tests since “experimentation conducted to determine whether the invention would suit a particular customer’s purposes does not fall within the experimental use exception” and because Atlanta Attachment did not control the testing. This is a subtle point – the patentee apparently retained control over the device by keeping it in its facility, but did not control the testing of the device.
  3. Ready for Patenting: A prototype that is reduced to practice and works for its intended purpose is ready for patenting. The “intended purpose” here is shaped by the patent claim. And, later refinement of a device does not mean that it wasn’t ready for patenting.

Thus the claim is invalid under the on sale bar of 35 U.S.C. §102(b). Additionally, the CAFC asked the court to reexamine whether the patentee’s failure to submit information about the prototypes would be sufficient to lead to a finding of unenforceability due to inequitable conduct.

Concurrence: Judges Prost and Dyk joined the majority opinion, but also penned a separate concurring opinion begging for en banc review of the “confusing” jurisprudence on the experimental use exception to 102(b). “Without considering these issues in a comprehensive manner in future cases, we will never escape from the confused status of our current caselaw.” They specifically believe that this and other CAFC decisions are wrongly decided because of the absolute disregard of any experimental use after an invention is reduced to practice.

Patently-O Bits and Bytes No. 15: Law Professor Edition

  • Rankings:
    • Professor Jay Brown recently ranked the most cited law professor blogs. (i.e., law review citation count). Patently-O ranks No. 6 with 73 citations since 2005. [LINK]
    • Professor Paul Caron ranked the most frequently visited law professor blogs and ranked Patently-O as No. 5 or 6 in the world. [LINK]
    • The site Volokh Conspiracy (a group of 20 law professors) is the only site ahead of Patently-O on both lists.
    • Other IP related sites making the lists: LessigBlog (Lessig is now running for Congress…) and Goldman’s great blog.
    • I ran a search this morning to compare Patently-O cites with Harvard’s excellent “Journal of Law and Technology.”  Over the two-year period, Harvard’s JOLT certainly has been cited more times than Patently-O. However, to make things fair, I limited the search to articles published by Harvard JOLT to 2005 – 2007. Comparing new articles to new articles, the Crimson team barely passed Patently-O: 78 – 73… (Stretching back to Mid-2004, Harvard jumps on-top with 130 cites)
  • IP & Start-ups: Berkeley’s Center for Law and Technology (BCLT) is hosting what will likely be the best conference of the year focusing on Intellectual Property’s interplay with Entrepreneurship: http://www.law.Berkeley.edu/institutes/bclt/entrepreneurship/about.html.  They have an amazing lineup of top law and economic professors; lawyers; and business leaders. Registration is pretty cheap, even for the food-chain leaders Law Firm folks ($350). Academics $100; Entrepreneurs $75; Students $25. March 7–8 at the newly christened UC Berkeley Law School. (Formerly known as Boalt Hall).
  • Houston IP Law: One of Berkeley’s top professors — Rob Merges — will speak at the annual Baker Botts Lecture at UH Law Center April 1 at 5:30 pm.
  • F. Scott Keiff: One of the few law professors who remains staunchly in favor of strong patents (and staunchly conservative) has been appointed to the PPAC to advise the PTO director on patent policy. [LINK]
  • Missouri Inventor of the Year: I’ll be giving the keynote at address at the Missouri Inventor of the Year award March 6 in Forest Park. [LINK]

I was hoping to see several Patent Law folks today in at Drake.  Sorry that I could not make it.

Patently-O Bits and Bytes No. 14

  • Design Patent Law: The House Subcommittee on IP held hearings on amendments to the design patent laws. The two primary specific issues on the table are (1) whether to eliminate design patents covering replacement automobile parts and (2) whether to extend IP protection to fashion designs. [LINK].  The IP group will hold PTO oversight hearings again next week.  
  • Replacement Parts: IPO recently voted to oppose any legislative exemption for particular products or technologies from the IP laws:  ”In particular, IPO opposes legislation that would exempt replacement automobile parts from infringing U.S. design patents.”
  • LexisNexis Patent Center: lexisnexis is now in the blog world with their “Patent Center.”
  • Missing Dates: The PTO revived Aristocrat’s national stage application even though filed a day late.  During litigation, however, the district court found the revival an improper extension of the law. [Link] The patentee appealed to the CAFC with the question of “Whether a patent application abandoned for failure to comply with deadlines set forth in 35 U.S.C. §§ 371(d) and 133 may be revived based on mere ‘unintentional’ delay where those provisions provide for revival only for “unavoidable” delay.” Now, IGT responds.
  • New Administrative Judge: According to Hal Wegner, the PTO has appointed Professor Lorelei Ritchie de Larena to the position of administrative judge on the TTAB BPAI. Judge Ritchie has been working in tech-transfer for several years while teaching at the same time. As the rate of appeals continues to rise, the PTO will need to continue to hire high quality judges. At the same time, these judges will begin to feel an even stronger pull to jump ship to law firms looking for inside experience and connections. [Related note: can someone send me a list of BPAI Judges? dcrouch@patentlyo.com]

CAFC: As a Matter of Law, Preliminary Injunction Defeated by “Casting Doubt” on Patent’s Validity

ScreenShot032Erico Int’l v. Vutec & Doc’s Marketing, 2007-1168 (Fed. Cir. 2008)

Claim 17 of Erico’s patent covers a method of supporting communication cables with saddle-hooks so that the sag distance (B) is less than 30 cm.  During an earlier reexamination, the PTO cancelled several claims, but the validity of claim 17 was reaffirmed. Doc’s copied Erico’s saddle-hook design (called j-hooks) and follows the patented method in its daily business. Litigation ensued.

During litigation, the district court granted a preliminary injunction against Doc’s — finding that Erico had sufficiently satisfied the traditional four factor test of equitable preliminary relief: (1) patentee’s likely success on the merits; (2) irreparable harm associated with continued infringement; (3) a balance of hardships favoring the patentee; and (4) the public interest favoring preliminary relief.

Preliminary Injunction: For preliminary relief, the first factor is critical. Without showing probable success, a plaintiff has no chance of succeeding on the motion. More to the point, this usually requires proof of infringement of a valid enforceable claim. Here, the lower court considered issues of novelty, obviousness, and inequitable conduct in determining that the asserted claim was likely valid and enforceable. 

Substantial Question of Validity: On appeal, the CAFC vacated the PI, finding that the defendant had raised sufficiently “substantial question of invalidity to show that the claims at issue are vulnerable.”  According to the divided appellate panel (Judges Rader & Dyk), the threshold substantial question is met when the evidence “cast[s] doubt on the validity” of the asserted claims.

Here, the panel was able to find doubt because of a combination of prior art and their “reasonableness” of combination.

“It is reasonable to see that downwardly flared flanges coupled with the EIA spacing requirements could implicitly motivate a person of ordinary skill to use J-Hooks with the EIA spacing to achieve cable sag of no more than about 30 centimeters. See KSR

Looking next at secondary considerations of validity, the majority panel found that such considerations cannot overcome the reasonable inference found above. 

“Thus, Doc’s invalidity challenge based on obviousness cast enough doubt on the validity of Claim 17 to negate likelihood of success on the merits as to infringement of a valid patent.  At this point, of course, Doc’s has only cast doubt on the validity of the ’994 patent.”

Abuse of Discretion: A preliminary injunction is overturned only for clear error or mistake of law. Consequently, the majority’s holding is not simply a difference of opinion — rather it is a finding that the lower court committed an abuse of discretion by weighing the validity issues in the patentee’s favor.

Preliminary injunctions were difficult to obtain even before the Supreme Court’s decision in EBay and KSR. This decision simply moves the ratchet another half turn.

In Dissent, Judge Newman makes three primary arguments: (1) that preliminary injunctions should be easier to obtain because they preserve the status quo; (2) that the first factor of equitable relief should not determine the outcome (all four factors must be considered); and (3) that, even if the first factor is most important, a defendant simply ‘casting doubt’ on a patent’s validity is not sufficient. Rather, the inquiry should focus on which party is more likely to actually succeed on the merits.

Notes:

  • Board Decision: Ex parte Raimond Scott Laughlin, Appeal No. 2002-0244 (heard on May 14, 2002).
  • Asserted claim of U.S. Patent No 5,740,994: “17. A method of supporting a run of a bundle of low voltage communication cable, comprising the steps of providing spaced supports, each comprised of a curved saddle having smooth down-turned obtuse angle lateral edges, suspending the run from saddle to saddle, and spacing the saddles along the run so that the run sags between saddles no more than about 30 cm below the saddles.”

Patently-O Bits and Bytes No. 13

  • The Budgetary Cost of Patent Reform: The CBO has released its cost estimates for the Patent Reform Act of 2007. A net loss of $1.4 Billion. Almost all of the additional cost is easily classified as “pork.” The vast majority of the additional money would be to pay for takings claims created by the neutering of DataTreasury’s Check21 patents.
  • Angiomax: The other major pork goes to “The Medicines Co.” to extend the life of its patents covering Angiomax. The company was one day late in filing for its term extension based on FDA delay. (The extension would be almost five years). The Bill would give PTO Director Dudas the power to excuse the filing delay and thus allow the extension. “[W]e expect that [the] PTO would grant nearly five years of additional patent protection to that product.  See also Baristas “Dog Ate My Homework Act.”
  • Metabolite: Those wanting a head-start on on Bilski briefing should consider the filings from Metabolite v. LabCorp. [Link] [Link] [Link]
  • Patent Reform: Chief Judge Paul Michel on Patent Reform (Transcript of Speech to Meeting of Chief IP Counsel for Major Corporations).
  • Additional Design Patent Brief: Ed Manzo noted that I missed one of the Egyptian Goddess briefs. Elite Group argues that broadly interpreted design patents would lead to costly design-around without any associated consumer benefit. [Link]

 

Bilski: Full CAFC to Reexamine the Scope of Subject Matter Patentability

In re Bilski (Fed. Cir. 2008 – en Banc)

Taking sua sponte action, the Federal Circuit has ordered an en banc rehearing of the In re Bilski case – asking the following five questions:

  1. Whether claim 1 of the 08/833,892 patent application claims patent-eligible subject matter under 35 U.S.C. § 101?
  2. What standard should govern in determining whether a process is patent-eligible subject matter under section 101?
  3. Whether the claimed subject matter is not patent-eligible because it constitutes an abstract idea or mental process; when does a claim that contains both mental and physical steps create patent-eligible subject matter?
  4. Whether a method or process must result in a physical transformation of an article or be tied to a machine to be patent-eligible subject matter under section 101? 
  5. Whether it is appropriate to reconsider State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998), and AT&T Corp. v. Excel Communications, Inc., 172 F.3d 1352 (Fed. Cir. 1999), in this case and, if so, whether those cases should be overruled in any respect?

The Patent Application and Patent Applicants: Bilski involves claims to a method of managing the risk of bad weather through commodities trading. The claims are not tied to any particular form of technology — thus, they do not require a computer or particular storage media. In some quarters, this process lacking a technological tie-in is termed a “mental method.” 

Bernie Bilski apparently was the CEO and owner of a small company called WeatherWise. At least some WeatherWise patents were purchased in 2007 by the “Pittsburgh Technology Licensing Corp”  According to court documents, PTL is a wholly owned subsidiary of WeatherWise holdings. (See WeatherWise v. WeatherBill).

Although we don’t have the text of the application yet, this case looks problematic because of serious obviousness problems and lack of specificity in the claims.  Thus, the court will have no sympathy for Bilski — making this the perfect test case for someone wanting to strink Section 101 coverage and eliminate business method patents.  Representative Claim 1 reads as follows:

1.  A method for managing the consumption risk costs of a commodity sold by a commodity provider at a fixed price comprising the steps of:< ?xml:namespace prefix ="" o />

(a) initiating a series of transactions between said commodity provider and consumers of said commodity wherein said consumers purchase said commodity at a fixed rate based upon historical averages, said fixed rate corresponding to a risk position of said consumer;

(b) identifying market participants for said commodity having a counter-risk position to said consumers; and

(c) initiating a series of transactions between said commodity provider and said market participants at a second fixed rate such that said series of market participant transactions balances the risk position of said series of consumer transactions.

Procedure: This cases arises out of a rejection from the Patent Board of Appeals (BPAI). In its opinion, the Board asked for assistance from the CAFC in addressing Subject Matter Patentability of non-technological method claims: “The Federal Circuit cannot address rejections that it does not see. . . . It would be helpful if the Federal Circuit would address this question directly.” BPAI Decision. Bilski then apealed directly from the BPAI to the CAFC and oral arguments were held in October 2007.  Rather than issuing an opinion, the court convened and voted to rehear the case en banc.

Timing and Amicus: The parties (Bilski & PTO) have already fully briefed the case. Thus, the CAFC is only allowing one supplimental brief each to be filed simultaneously on March 6, 2008. Amicus briefs discussing the five questions are requested by the court and may be filed without specific permission. Amicus briefs will be due 30 days later and must otherwise comply with FRAP and FCR 29.  (Thanks Joe: Amicus should be due April 5th, but because that falls on a Saturday, they will be due April 7). The hearing is scheduled for May 8 at 2:00 pm.

(more…)

Meaningful Patent Reform

By Senators Patrick Leahy and Orrin Hatch, Full editorial in the Washington Times 2/15/08

“. . . For several years, modernizing the patent system has been at the front and center of our mutual legislative agenda. Meaningful patent reform is crucial to America’s ability to maintain its competitive edge in the world, and now — after years of careful spadework — Congress has the chance to move forward.

The Patent Reform Act of 2007 (S.1145) is the product of years of deliberation and study within Congress and by many esteemed agencies and institutions, including dozens of hearings with the testimony of scores of witnesses, extensive and substantive mark-up sessions, and hundreds of meetings and discussions with countless stakeholders representing a sweeping array of interests in the patent system.

. . . the current law was last thoroughly updated more than 50 years ago, and much has changed since then. Think about this: The last time the patent system was significantly changed, the structure of DNA had not been discovered; gasoline was around 27 cents a gallon; and we had not yet sent a man to the moon. Our economy is no longer defined by assembly lines and brick-and-mortar production; we are living in the Information Age, and the products and processes that are being patented are changing as quickly as the times themselves. Unfortunately, Congress has neglected to modernize our patent system to keep pace with the boom in American innovation. Recent Supreme Court decisions have nudged things in the right direction, reflecting the growing sense that questionable patents are too easy to get and too hard to challenge. But the Court is constrained in its decisions by the laws on the books. It is time to dust off and refresh our patent laws.

If we are to maintain our position at the forefront of the global economy and continue to lead the world in innovation and production, we need an efficient and streamlined patent system that issues high-quality patents while limiting wheel spinning and counterproductive litigation. Our bipartisan reform bill is a solid step toward achieving these goals.

In 2003, the Federal Trade Commission reported that patents of questionable validity were inhibiting innovation and competition, harming consumers and businesses and our overall economy. The FTC further found that relying on court battles to challenge questionable patents was unduly costly and cumbersome. To address this problem, our bill would set up an administrative, post-grant review procedure. This would not only cut down on legal costs for the patent holder and the patent challenger, but it would also leave the issue to those best equipped to review patents — the experts at the U.S. Patent and Trademark Office.

We must also restore fairness to the rules that govern how courts determine damages when a patent is infringed. The threat of excessive damages is ruthlessly curtailing progress, and the loss of jobs and innovation is directly linked to litigation costs. . . .The goal of our reforms is to ensure that patent holders will be able to obtain appropriate compensation in case of infringement.

Under today’s rules … [p]laintiffs can “forum shop,” filing their lawsuits in jurisdictions that have virtually no relevance to the underlying case, but everything to do with where the plaintiff stands the best chance of winning the case. Our bill would prevent this gaming of the system….

Another provision to clarify and limit use of the so-called inequitable conduct defense would also bring balance to the patent system. …

As legislators, we know we are headed in the right direction when everyone is complaining that the entire bill is not going their way. We see this as a necessary, albeit somewhat difficult, part of the legislative process. But we welcome it. But at the end of day, we are confident that we will resolve the remaining issues in ways that should make everyone comfortable and will ensure final passage.

The Senate has a tremendous and historic opportunity — and a constitutional responsibility — to further strengthen our nation’s competitiveness through meaningful patent reform. Now is the time.

Patently-O Bits and Bytes No. 12

  • Picture1Anti-DataTreasury Provision: Although DataTreasury is not named in the Patent Reform Act of 2007, it is clear that Section 14 of the Senate Bill is primarily directed at that single patent holder. The bill would excuse “financial institutions” from charges that their check imaging methods constitute patent infringement. DataTreasury has sued a number of banks, including City National, Wells Fargo, BOA, US Bank, Wachovia, Suntrust, BB&T, Bancorp South, Compass, Frost National, First Tennessee, HSBC, Harris, National City, Zions First National Bank, Bank of NY, Bank of TOkyo, Comerica, Deutsche Bank, First Citizens, Keycorp, LaSalle, M&T, PNC, and others. The cases are at least partially stayed pending reexamination of a DataTreasury patent. The core issue here is that DataTreasury claims that its patent is necessarily infringed when a bank follows the Federal “Check 21” procedure for electronically processing checks.  See patents 5,910,988 and 6,032,137. [Washington Post Fills in Details].
  • Takings: The DataTreasury bill raises takings concerns, and it appears that the Government agrees. According to reports, the Congressional Budget Office has calculated that the “taking” of DataTreasury’s right to sue is worth about one billion dollars.
  • What happens when patent attorneys blog: I left my firm to teach; Michael Smith left his firm and joined another [now partner at Siebman Reynolds]; so did Peter Zura [Now partner at KattenMuchin]; so did Matt Buchanan [now of counsel at Dunlap Codding]; David Donoghue joined DLA Piper; Bill Heinze joined GE; John Welch joined Lowrie Lando; and the Troll Tracker is still in hiding. (Note — Nipper, Sorocco, Albainy-Jeneiand others are still rock-solid in their firms).
  • Valentines Day: Americans spend an average of $100+ for Valentines day — this year you might consider giving it away.
  • Delay in the Senate: IPO reports a strong likelihood that no action will take place in the Senate until April 2008. In the meantime, the Reform Act is in secret revision in Senator Leahy’s office.

 

IR v. IXYS: Appellate Jurisdiction and Narrowing/Broadening Amendments

PatentLawPic208International Rectifier (IR) v. IXYS (Fed. Cir. 2008)

IR’s patents cover particular layouts for MOSFET semiconductor chips. After an earlier appeal IXYS was found to infringe under the Doctrine of Equivalents. (Only one of the three patents were held infringed)

Jurisdiction on Appeal: IXYS did not file a notice of appeal within thirty days as required by FRAP 4(a). However, the defendant did file a motion with the district court to stay the permanent injunction pending appeal. Because the motion gave notice of the appeal to both IR and the district court, the CAFC ruled that it satisfied the requirements of Rule 4(a).  (The stay was subsequently denied by both the district court and the CAFC motions panel).

Narrowed Amendment: On appeal IXYS argued that a narrowing amendment made by IR during prosecution of the patent forecloses any reliance on the doctrine of equivalents. The claim had been substantially rewritten and was undeniably broader in certain areas. However, the amendments also added an “adjoining” limitation to overcome a Section 112 rejection.  Holding: A claim that is both narrowed and broadened is still narrowed — Thus Festo estoppel can apply.

Tangential Narrowing Amendment: A narrowing amendment does not limit DOE coverage if the amendment was made for a reason that is only tangentially related to the claimed equivalent. Here, the amendment was not tangential because the “adjoining” region limitation was clearly related to the asserted charges against products with only non-adjoining regions. The court rejected (as irrelevant) IR’s argument that the amendment was not necessary for patentability: IR’s decision to claim that structure using the limiting term “adjoining, whether or not required to overcome the rejection, cannot be described as only tangentially related to the equivalency of a structure with non-adjoining regions. [This paragraph updated 2/15/08]

Finding of infringement reversed and remanded.

 

 

Issues With Employee Assignment Agreements

PatentLawPic207DDB Tech v. MLB Advanced Media (Fed. Cir. 2008)

Mr. Barstow (head of DDB) was still an employee of Schlumberger when he invented his system for simulating a baseball game. As part of his employment agreement, Barstow assigned all rights to inventions relating to or resulting from Schlumberger business.  At the time, Schlumberger’s GC for software agreed that Barstow’s baseball software was his own personal work and not Schlumberger related. After DDB filed suit, MLB bought “any interest that Schlumberger had in the patents” along with a retroactive license.

The district court (Judge Yeakel) dismissed the case for lack of subject matter jurisdiction — finding that the baseball software invention fell within the employment agreement and that MLB is now the patent owner. DDB appeals.

Employee Assignment: Under the Texas law, the employment agreement creates an instant assignment as soon as a qualifying invention is created. Thus, if the patents “qualify” as within the employment agreement, then they were owned by employer regardless of any seeming waiver, estoppel, or statute of limitations. Those defenses could prevent enforcement of an agreement to assign, but do not negate an already consummated assignment.

The CAFC ordered the lower court to reopen discovery so that the parties could collect evidence on whether the baseball software invention fell within the scope of the employment agreement.

Notes:

  • Employees beware: Your employer likely owns your future inventions! Best practice for garage inventors is to obtain a written exception to the policy prior to inventing. Otherwise, you should obtain an assignment from the company.  Of course, this depends upon state law and whether the agreement includes the magic language: “[The employee] does hereby grant and assign.” If Barstow had been employed at the University of Missouri, he might have won because the employment agreement only requires the employee “upon request [to] assign … all domestic and foreign rights.”  For prolific home inventors, this difference may be enough to warrant a job change.
  • Loyalty?: Not to pick on Schlumberger, but isn’t it odd that they chose to do business with MLB over their own former employee…
  • Patently-O Discussion of district court case.
  • This case was handled by my former firm, MBHB LLP. However, I was in Boston by the time that they took over the litigation. 
  • Recordation of Assignment: A reader suggested that the patent recordation statute (35 U.S.C. 261) be considered. If you remember 1L property, the patent recordation statute is a notice statute with a three-month grace period.  Thus, a subsequent assignee of a patent will hold title over a prior assignee if two conditions are met: (1) the prior assignee did not record in time (which would give constructive notice); and (2) the subsequent assignee was “without notice” of the prior assignment. The timing is no question here — Schlumberger did not record until after DDB had already sued. The only issue then is whether DDB had notice of the prior assignment.
  • Notice of Prior Assignment: Under Federal Circuit law, a subsequent assignee can have notice of a prior assignment based on actual notice, constructive notice, or even inquiry notice under the principles of equity. Unfortunately, the leading CAFC case on this issue is non-precedential, Katz v. Lear Siegler, 1993 US App Lexis 17507 (Fed. Cir. 1993), and at least two law firms have been publicly chastised for citing the case to the CAFC.

MPEP Section 2141 on Obviousness

Any examples of how this section is being applied?:

Prior art is not limited just to the references being applied, but includes the understanding of one of ordinary skill in the art. The prior art reference (or references when combined) need not teach or suggest all the claim limitations, however, Office personnel must explain why the difference(s) between the prior art and the claimed invention would have been obvious to one of ordinary skill in the art. The “mere existence of differences between the prior art and an invention does not establish the invention’s nonobviousness.” Dann v. Johnston, 425 U.S. 219 (1976).

The gap between the prior art and the claimed invention may not be “so great as to render the [claim] nonobvious to one reasonably skilled in the art.” Id. In determining obviousness, neither the particular motivation to make the claimed invention nor the problem the inventor is solving controls. The proper analysis is whether the claimed invention would have been obvious to one of ordinary skill in the art after consideration of all the facts.  Factors other than the disclosures of the cited prior art may provide a basis for concluding that it would have been obvious to one of ordinary skill in the art to bridge the gap.

Patently-O Bits and Bytes No. 11

Corporate Director Liability for Inducement: Must have Specific Intent to Aid and Abet the Infringement

Weschler v. Macke (Fed. Cir. 2007)

Anthony O’Rourke was the owner and only employee of Macke Int’l. Weschler successfully sued Macke and its owner O’Rourke for patent infringement.  O’Rourke appeals his personal liability.

Rule on personal liability for inducing a corporate infringement:

“Unless the corporate structure is a sham, … personal liability for inducement must be supported by personal culpability. Hoover Group, 84 F.3d 1408 (Fed. Cir. 1996). This requires the officer to have possessed a specific intent to “aid and abet” the infringement. Water Techs, 850 F.2d 660(Fed. Cir. 1988).”

A director’s action may lead to a finding of willful infringement against the company without creating personal liability. “For example, a corporate officer could negligently believe that a patent was invalid and/or not infringed. This might support a finding of willful infringement by the corporation, see Biotec Biologische, 249 F.3d 1341 (Fed. Cir. 2001), but not a finding of personal liability for the officer. Accordingly, the district court’s statement that finding Macke liable for willful infringement while exonerating O’Rourke would be “inconsistent and unreasonable” because Macke could not act independently of O’Rourke is clearly incorrect.”

Finally, the court refused to pierce the corporate veil because Weschler failed to prove that Macke’s setup was “just a sham.” (holding that the lack of patent infringement insurance does not imply a sham corporation).

Notes:

  • Post-History: Macke only had $10,000 to pay the $600,000 damages. Weschler filed an involuntary bankruptcy proceeding. In a tough twist, the bankruptcy court then forced Weschler to pay Macke’s attorney fees after failing to settle. [LINK]
  • Late Homework: This is an important precedential case from 2007 that I missed in the shuffle. (As an excuse, It issued on the same day that we started our trek from Boston to Missouri).
  • See Sheppard Mullin Blog