September 2008

NYTimes: Universities, Patents, & Profits

Patent

The New York Times today published an editorial about the problems created by the Bayh-Dole Act that promotes the patenting and licensing of university inventions that arise from federally supported research. [Read the editorial] The author – Janet Rae-Dupree – is concerned that the focusing on patenting and business development has “distorted the fundamental mission of universities.”

‘In the past, discovery for its own sake provided academic motivation, but today’s universities function more like corporate research laboratories. Rather than freely sharing techniques and results, researchers increasingly keep new findings under wraps to maintain a competitive edge. What used to be peer-reviewed is now proprietary. “Share and share alike” has devolved into “every laboratory for itself.”‘

Dupree’s recollection of the golden era where labs shared everything is admittedly wrong. As she explains: “When James Watson and Francis Crick were homing in on DNA’s double-helix structure in the 1950s, they zealously guarded their work from prying eyes until they could publish their findings, to be certain that they would get the credit for making the discovery.”

The important bit of truth comes from Jennifer Washburn‘s findings that most university technology transfer offices lose money:

“To date, Ms. Washburn says, data gathered by the Association of University Technology Managers, a trade group, show that fewer than half of the 300 research universities actively seeking patents have managed to break even from technology transfer efforts. Instead, two-thirds of the revenue tracked by the association has gone to only 13 institutions.”

This problem may well be the result of growing pains – it is expensive to start from scratch and build a patent and licensing department. Many universities are actually turning to other directions: finding that local economic development – regardless of immediate licensing returns – is one of the most effective ways to ensure a continued supply of future research funding.

Notes:

  • Read Kevin Noonan’s take [LINK]
  • The NYTimes note that many corporations are beginning to cooperate with foreign universities – essentially because US schools have become too complex and greedy.

CAFC Applies Lilly to Invalidate Carnegie Mellon’s Plasmid Claims

Enablement, Patent, Patent Cases 2008,

Carnegie Mellon University v. Hoffman-La Roche (Fed. Cir. 2008)

Carnegie Mellon’s patents cover recombinant plasmids used to enhance expression of an DNA polymerase. On appeal, the CAFC affirmed the lower court holding that the patent claims fail to meet the written description requirement under Lilly.

35 U.S.C. §112 requires that the patent document “contain a written description of the invention and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same, and shall set forth the best mode contemplated by the inventor of carrying out his invention.

The written description requirement is used to make sure that the patentee only claims what has been invented. The public gets a “meaningful disclosure in exchange for being excluded from practicing the invention for a limited period of time.” Quoting Enzo Biochem (Fed. Cir. 2002).

A common written description argument is that the claims have not been disclosed to their full scope. In the Lilly case, for instance, the CAFC found that a generic claim directed to “any vertebrate and mammalian cDNA” were not supported by a specification that only discussed one species – rat cDNA.

To be clear, written description is not about enablement. Patent claims may well be enabled based on PHOSITA’s knowledge of the art, but still fail the written description requirement because the patentee did not disclose the entire scope of its invention.

A representative claim from Carnegie’s patents reads as follows:

1. A recombinant plasmid containing a cloned complete structural gene coding region isolated from a bacterial source for the expression of DNA polymerase I, under operable control of a conditionally controllable foreign promoter functionally linked to said structural gene coding region, said foreign promoter being functional to express said DNA polymerase I in a suitable bacterial or yeast host system.

In reviewing the claim, the CAFC noted that the DNA coding sequence is “broadly defined … only by its function of encoding DNA polymerase I” and that the claims are not limited to any particular bacterial or yeast species.

The specification only discloses one operative gene – the E. coli polA gene. And at the time of the patent, only three polA genes had been cloned (out of thousands of bacteria strains). “[W]ith regard to the promoter, the patents fail to disclose the nucleotide sequence or other descriptive features for a polA gene (including the promoter sequence) from any bacterial source other than E. coli.”

“To satisfy the written description requirement in the case of a chemical or biotechnological genus, more than a statement of the genus is normally required. One must show that one has possession, as described in the application, of sufficient species to show that he or she invented and disclosed the totality of the genus. . . . [W]e conclude that that requirement was not met here.

Gentry Gallery: The district court also applied Gentry Gallery to invalidate other claims. In Gentry, the CAFC found a patent claim invalid because the claim failed to recite an “essential element” of the invention. Here, Roche argued that the patents were directed to avoiding the problem of lethality to host cells, but that the claims did not include that limitation. As it has done repeatedly, the CAFC rejected the idea that Gentry Gallery created an essential element test. (The claims remain invalid under the Lilly analysis.).

Provisional Rights II: Substantially Identical Claims

Patent

Pandora Jewelry, LLC v. Chamilia, LLC, 2008 U.S. Dist. LEXIS 61064 (D. Md., August 8, 2008)

The provisional rights statute 35 U.S.C. §154(d) creates the potential that a patentee may collect damages for would-be infringing activities that occurred even before the patent issued. To recover, the statute requires that the invention claimed in the published patent application be “substantially identical” to those found in the issued patent.

35 U.S.C. §154(d)(2): The [provisional rights] shall not be available under this subsection unless the invention as claimed in the patent is substantially identical to the invention as claimed in the published patent application.

The language found in Section 154(d) runs parallel to that found in 35 U.S.C. §252. Section 252 allows a reissue patent to have retrospective power when the reissued claims are “substantially identical” to those in the original patent.

In the present case, Pandora sued Chamilia for infringement of its patent covering necklace keeper attachments. Chamilia moved for summary judgment on several issues – Pandora’s claim of provisional rights under §154(d).

The primary issue before the court was whether the patented claims were “substantially identical” to those in the published application. Like most patent applicants, Pandora had amended its claims during prosecution.

As a starting point, the court and parties agreed that the ‘substantially identical’ requirement of §154(d) was the same as that found in §252. This made analysis easier because the CAFC has interpreted §252’s “substantially identical” requirement on several occasions. In particular, the appellate court circularly noted that a “substantially identical” claim is one that is “without substantive change.” Laitram Corp (Fed. Cir. 1998). In that case, the court went on to provide a narrow interpretation – finding that “it is difficult to conceive of many situations in which the scope of a rejected claim that became allowable when amended is not substantially changed by the amendment.”

“Under § 252, amended patent claims are “substantially identical” to the original claims “if they are without substantive change.” Laitram Corp. v. NEC Corp., 163 F.3d 1342, 1346 (Fed. Cir. 1998) (internal quotations omitted). “[I]n determining whether substantive changes have been made, [a court] must discern whether the scope of the claims are identical, not merely whether different words are used.” Id. (citing Slimfold Mfg. Co. v. Kinkead Indus., 810 F.2d 1113, 1115 (Fed. Cir. 1987)). Although not a per se rule, “it is difficult to conceive of many situations in which the scope of a rejected claim that became allowable when amended is not substantively changed by the amendment.” Id. at 1348. Where a substantive change has been made to a claim, the allegedly harmed party has no provisional rights to assert.”

In Laitram, the CAFC also made clear that even purely narrowing amendments will violate the “substantially identical” requirement.

Pandora’s published patent application claimed a reversibly attached band. During prosecution, however, the applicant amended that element to be a “fixedly attached band.” According to the district court in its Markman hearing, this was done “in order to overcome the PTO’s rejection based on the prior art.”

Based the amendment from a reversible band to a fixed band, the court concluded that Pandora had “substantively amended the scope of the claim.” And thus, the patentee has no claim for any provisional rights. “Here, Pandora substantively altered the scope of the claim when it amended the patent to require a permanently fixed band. Because the issued patent is not substantially identical to the published patent application, Pandora has no provisional rights to assert.”

PAIR Offline

Patent

The USPTO’s PAIR site has been offline since Friday. The reason that this is a major problem is that the PTO has refused to allow anyone else (such as Lexis, Derwent, or Google) to build a parallel database of PAIR data.

Provisional Rights I: Calculating a reasonable royalty

Patent

Parker-Hannifin Corp. v. Champion Labs., 2008 U.S. Dist. LEXIS 61108 (N.D. Ohio 2008)

Champion admitted that its oil filter infringed Parker’s Patent No. 6,983,851 and also admitted that it owed a “reasonable royalty” to the patentee for pre-issuance sales based on the provisional rights of 35 U.S.C. 154(d).

35 U.S.C. §154(d)

(1) In addition to other rights provided by this section, a patent shall include the right to obtain a reasonable royalty from any person who, during the period beginning on the date of publication of the application …

(A) (i) makes, uses, offers for sale, or sells in the United States the invention as claimed in the published patent application …; and

(B) had actual notice of the published patent application.

(2) RIGHT BASED ON SUBSTANTIALLY IDENTICAL INVENTIONS.- The right under paragraph (1) to obtain a reasonable royalty shall not be available under this subsection unless the invention as claimed in the patent is substantially identical to the invention as claimed in the published patent application.

Because of the admission, the Parker-Hannifin court was left only to consider the amount of damages to assess. Traditionally, under 35 U.S.C. §284, a ‘reasonable royalty’ is set as a floor in the calculation of compensatory damages. When lost profits are calculated, damage figures often rise well above what would have been a reasonable royalty figure. However, damages for violation of provisional rights are limited to the reasonable royalty as a maximum without any requirement that the rate be sufficient to compensate the patent holder. Here, the court found the reasonable royalty to be $2.00 per unit by applying the Georgia Pacific and creating a ‘hypothetical negotiation.” In deciding to the royalty amount, the court noted that under Mars, it is “wrong as a matter of law” to cap reasonable royalties “at the cost of implementing the cheapest available acceptable, noninfringing alternative.”

Missing from the court’s analysis is any consideration of how the hypothetical negotiation is altered based on the fact that the right infringed was only ‘provisional.’

Notes: This case is interesting as one of the first discussing liability for infringement of a patentee’s provisional rights.

Claim Construction: “The” condylar element does not mean “each and every” condylar element

Patent

Introduction: The claim construction issues here are interesting, include the question of how attorney-inventor communications impact claim construction. In addition the court takes a surprising approach to limit the scope of a prior settlement agreement.

HowMedica Osteonics v. Wright Medical (Fed. Cir. 2008)

Howmedica’s U.S. Patent No. 5,824,100 claims artificial knee prosthesis. After a claim construction decision, Howmedica admitted that it could not prove infringement and appealed. Wright cross-appealed – arguing that the case was moot based on a prior settlement agreement and “release” between the parties.

In a 2-1 majority opinion Judge Dyk found that the lower court erred in its claim construction. This is a case where de novo review impacts the result. As Judge Dyk states, “[a]lthough this is a close case, we disagree.” With de novo review, simple disagreement leads to reversal.

The claim introduced a “femoral component including at least one condylar element.” The claim also required “the condylar element” have certain geometric limitations. The issue for claim construction is whether each and every condylar element must have those geometric limitations. The lower court said yes, Judge Dyk said no. In dissent, Judge Prost points out that it would have been quite easy for the patent applicant to clarify its intent.

Patent Attorney Communications: As part of its claim construction argument, Wright presented the contents of an e-mail between the patent prosecution attorney and the patent applicant considering potential limitations in the claims. The majority rejected that document as merely extrinsic evidence to be used only to “help educate the court regarding the field of the invention and can help the court determine what a person of ordinary skill in the art would understand claim terms to mean.” Quoting Phillips.

The letter Wright relies on, reporting to the inventor on the results of an examiner interview, achieves neither of these objectives and is of no value to the construction of the disputed claim language.

Intent of the Release: A second issue on appeal was the impact of a prior settlement agreement between the parties. A plain meaning of the agreement released Wright from all future patent claims. In particular, the agreement released the defendant from “any and all manner of claims . . . that Howmedica . . . has, ha[s] had, or may have against Wright Medical . . . including, but not limited to, any and all claims and counterclaims that were or could have been asserted.” Both the district and appellate courts, however, found that the plain meaning should not apply because neither party intended the release be so broad. As evidence, the court relied on a parallel agreement that was much narrower.

Patently-O Bits and Bytes

Patent
  • Preference Prediction Patent for sale on eBay (LINK).
  • Google has released a new browser known as “CHROME.” Law firms and others should take care to ensure that their websites display properly. [LINK]
  • The Wolf Greenfield firm is hosting a Webinar on Sept 25 on “The Real Impact of Ebay, KSR, MedImmune, Seagate and Translogic” [Free]
  • The PTO is now considering Jan Buck’s “Method of operationalizing a venture fund vehicle” by “creating a governing operating business plan, commercializing early stage academic science, generating operating revenue from more than one commercialization vehicle, using generated revenue to invest in new projects and/or ventures to achieve liquidity thereby generating cash for further investment in projects and/or ventures.” No assignee is listed. [LINK]

CAFC Flips Call Routing Decision

Patent,

800 Adept v. Murex Securities & Targus (Fed. Cir. 2008)

Adept and Targus both hold patents covering systems and methods for routing 1-800 calls to local franchises. In a multi-patent battle, the Orlando Florida jury found Targus liable for infringing the Adept patents and that the Targus patents were invalid.

Claim Construction: The Adept patents include the step of assigning the telephone number of each potential caller to a particular service location or franchise. The claims require that the assignment take place prior to the call being received, but there was a dispute as to whether the assignment can be stored as an algorithm rather than as a full database record-set. On appeal, the CAFC found that the patents focus on storing the assignment information in a database precludes the awkward twist that would all “assignment” to mean “implementing an algorithm to do the assignment.”

As summarized in the abstract, the patents make clear that assignment of service location telephone numbers to potential callers must be completed before a telephone call is ever placed: “Once all such assignments have been made, a database is assembled to be used by a long distance carrier for direct routing of telephone calls.”

Prosecution history: The prosecution history also supported this limited definition of assignment. Notably, the appellate panel agreed that the prosecution history was likely not clear enough for “prosecution disclaimer” but that it could still be used “as support for the construction already discerned from the claim language and confirmed by the written description.”

Because the Targus operation uses an on-the-fly algorithm to associate callers with franchises, it cannot infringe as a matter of law. Reversed.

All Claims Invalid: The jury found that all claims of the Targus patents were invalid. On appeal, the CAFC limited that holding to only the three claims that were actually included in the pretrial statement.

“Adept’s argument that it was unnecessary for its validity expert to put forth a claim-by-claim analysis of the unasserted claims is simply incorrect. Under the patent statute, the validity of each claim must be considered separately.

…

In this case, it is clear from the parties’ pretrial statement and from the trial proceedings that the unasserted claims were neither litigated nor placed in issue during the trial. We therefore reverse the trial court’s judgment of invalidity with respect to the unasserted claims.”

Expert Mistake = New Trial: Adept’s expert, Dr. Brody, made a few mistaken comments about scope of the company’s patent disclosure. According to the court, this was the “primary if not the entire evidence” that the jury could have used in its invalidity decision. New trial ordered on the claims affected.

Tortious Interference: Targus sent infringement allegations to Adept clients, and the jury found tortious interference with business relations. On appeal, the CAFC reversed.

“State tort claims against a patent holder, including tortious interference claims, based on enforcing a patent in the marketplace, are “preempted” by federal patent laws, unless the claimant can show that the patent holder acted in “bad faith” in the publication or enforcement of its patent.… As the Supreme Court said long ago, “Patents would be of little value if infringers of them could not be notified of the consequences of infringement, or proceeded against in the courts. Such action, considered by itself, cannot be said to be illegal.” Virtue v. Creamery Package (1913)”

In these cases, it is quite difficult to prove ‘bad faith’ because the claims of patent infringement must be objectively baseless. On appeal, the CAFC found that standard was not met because “Targus [could have had] a reasonable basis for believing that the patent was valid when it asserted the patent against Adept’s customers.”

Notes:

  • Adept has also sued various Targus customers in the E.D.Texas, including Federal Express, Enterprise Rent-A-Car, and Domino’s Pizza. Barnes & Thornburg, who represented Targus at trial, is representing the defendants in that case.

Evidence Based Prosecution: Why are Deadlines Driving Response Timing?

Academic Studies, Patent, Patent Prosecution
  • I have compiled some data on the timing of initial non-final office action and the ensuing response for 400,000+ patents with patent numbers ranging from 5,800,000 – 7,100,000.  The graphs below show that office action responses are strongly deadline driven. About 60% of responses are filed by the initial three month deadline. However, 2/3 of those early responses are filed within only a couple days of the three month deadline. Similar “rushes” are seen to meet the four, five, and finally the six month date.

PTO Fees are the explanation for the deadline push. Missing the initial three month deadline requires payment of a  $120 fee – not a steep fine – but something that some clients are now refusing to pay. Subsequent monthly surcharges rise more dramatically: first $460 then $1050.  For clients on more of a fixed prosecution budget, attorneys would rather money go toward their fees rather than to the PTO.  Of course, the six month date has the significant legal ramification of abandonment.

The  immediacy of the deadlines hides an important fact in today’s prosecution: Each day of by the practitioner results in one less day that the patent is in force.  The fact that very few responses come quickly (apart from the deadline) indicates a latent demand for delayed prosecution — It seems that most clients do not care whether the patent issues now or six-months from now. Why not eliminate these deadlines or push them back considerably? Applicants with important or easily patentable inventions would continue to respond quickly.  Those who could care less or who need time to build a patenability case could wait. 

Now, there are several reasons to strive for compact prosecution timing. Perhaps most importantly is the notion that both the applicant and examiner will work better and more efficiently if they have seen the case recently.  The tradeoff, however, is that applications sit much longer awaiting initial consideration.

A note about the data below: Responses that appear below to be just after a three, four, five, or six month deadline are typically ‘on time.’ My measurement is from the date the OA is entered in PAIR to the date the response is entered in PAIR (not the mailing dates). This typically adds an extra week or so.

Notes:

  • Jeff Steck, a patent attorney at MBHB LLP, examined the small ‘ripple’ in the histogram and explains that it can be explained by the fact that (most) OA’s are sent out on weekdays and responses are received on weekdays. This ‘weekend effect’ causes the ripple overlay. My original postulation that the ripple is caused by the PTO’s bi-weekly counts is not sufficient since the ripple clearly has a one-week wavelength.