June 2009

Dropping Claim Counts

Earlier, I published the results of a study of rising claim counts in issued patents over time. My data for that study ended in 2005. I have now updated the dataset for patents issued from 2006 to mid 2009. The results – based on the average of all utility patents issued during those years – are shown in the table below.

The median number of issued claims has dropped from 15 claims in 2006 and 2007 to 14 claims in 2008 and 2009. The mode claim number continues to be 20 claims as seen in the histogram below.

Several factors are likely leading to the lower claim counts: (1) increased USPTO fees for additional claims; (2) more frequent restriction requirements; (3) a greater internationalization of the patenting process; (3) greater hourly attorney fees; and (4) reduced economic value of patents; etc.

Centocor v. Abbott: $1.67 Billion Jury Verdict

Centocor (Johnson & Johnson) & NYU v. Abbott Labs (E.D.Tex. 2009)

In what may be the largest patent jury verdict in US history, an Eastern District of Texas jury held Abbott Labs liable for $1.67 billion in damages for infringing Centocor’s patents covering antibodies against tumor necrosis factor. Abbott’s drug Humira (adalimumab) was found to infringe. That drug is used to reduce treat arthritis, psoriasis, Crohn’s disease, and ankylosing spondylitis and had $4.5 billion in sales last year.

In an interesting split, the Jury awarded $1.168 billion in lost profits and also $504 million in a reasonable royalty. Although double recovery is not allowed, there is no reason why the damages cannot be split between the two theories of recovery.

The jury also found Abbott to be a willful infringer.

Judge Ward will now decide whether to uphold the verdict and whether the adjudged willful infringement warrants additional damages.

According to news reports, Centocor is not seeking injunctive relief.

Centocor_Abbott_Verdict_Form.pdf

Prelim: The Association Between Grant Rate and Pre-Filing Searches

In the not too-distant future, the PTO will likely re-invigorate its effort to force patent applicants to conduct pre-filing prior art searches. During his stint as IPO President, Marc Adler suggested that rational patent applicants should already be conducting pre-filing searches in order to assess patentability and define likely claim scope. Marc offered the then unsubstantiated comment that "if the initial search done by the applicant is as comprehensive as the one done by the patent examiner, it should follow that the pendency of the application will be shorter and the patent more likely will be valid." Despite Marc's suggestion, many applicants do not conduct pre-filing searches – largely because of the up-front cost of searching and analysis.

I wanted to test Marc's suggestion that pre-filing searches add value by leading to better patent applications and shorter application pendency. Although applicants do not ordinarily disclose whether a pre-filing search was conducted, this information can be teased-out by looking to see whether an information disclosure statement (IDS) was filed on the same day as the patent application itself. Of course, filing an IDS with the application does not necessarily mean that a pre-filing search was completed since the submitted art may have been obtained other ways. However, the IDS filing at least indicates that specific prior art was considered prior to filing, and I cautiously believe that such an early IDS filing does suggest the existence of a pre-filing search.

Yesterday, I created a set of 3000+ randomly selected patent applications filed in December 2004 and January 2005 and then divided those applications into three groups: Group 1 applications where no IDS was filed during prosecution; Group 2 applications where an IDS filing coincided with the filing of the patent application itself; and Group 3 applications where the first IDS was filed sometime after the application was filed. The data indicates the status of each application (abandoned, patented, or pending) as of June 26, 2009 – about 4 ½ years after filing. For this first pass, I simplified the data by excluding cases that (1) never published as applications (since data is kept secret for most of those cases); and (2) cases claiming priority to a "parent" patent application (since early IDS filing in the child cases provides little indication of whether a pre-filing search was conducted prior to the parent being filed).

Results: Looking 4 ½ years out from the application filing date, 25% of cases fell into Group 1 (No IDS); 26% into Group 2 (IDS filed with application); and 49% into Group 3 (First IDS filed after application). Table 1 shows these results.

   

Portion of All Cases

Group 1

No IDS Filed 

25%

Group 2

IDS Filed With Application

26%

Group 3

IDS Filed After Application Filing Date

49%

Table 1

 

±3% margin of error at 99% CI

In my sample, Group 1 applications were much more likely to be abandoned and less likely to be patented within 4 ½ years of filing than the Group 2 applications. Table 2 below shows this result. In particular, 40% of Group 1 (No IDS) applications were abandoned while only 26% of Group 2. Similarly, only 34% of Group 1 applications were patented compared with 46% of Group 2 applications. Pierson's chi-square test of independence results in P=0.000 – indicating that these differences as a whole are statistically significant.

 

 

Abandoned

Patented

Pending

Group 1

No IDS Filed

40%

34%

26%

Group 2

IDS Filed With Application

26%

46%

28%

Group 3

IDS Filed After Application Filing Date*

24%

40%

36%

Table 2

       

 

Table 2 shows that Group 3 (applications whose first IDS was filed after the application date) had an even lower average abandonment rate than Group 2. That number is likely skewed, however, because of the confounding relationship between keeping an application alive and filing a late IDS.

In looking at prosecution timing, I did not find a statistically significant difference in pendency between Groups 1 and 2. Group 3 applications did take significantly longer to patent/abandon. However, that result is likely skewed by the selection bias noted above.

Association Between Grant Rate and Pre-Filing Searches: These high-level results shown in Table 2 suggest a relationship between an applicant's success rate (patent vs. abandon) and the early filing of an information disclosure statement.

An alternative explanation for the relationship between higher grant rate and early IDS filing may be that both are indicators that applicants recognize higher-quality inventions and consequently work harder for valuable patent protection. In that scenario, there is no cause and effect relationship between a pre-filing search and a higher patent grant rate. If this quality-recognition theory were true, I would expect that applications filed by patent attorneys/agents (and larger law firms) to be more likely to include a pre-filing search. However to the contrary, my data comparing applications associated with one or more registered patent practitioners with applications not so associated shows very little difference in the rate of pre-filing searches. Rather, practitioners appear to focus on IDS filing more as a CYA burden as suggested by the greater likelihood of late-filed IDSs in practitioner filed cases. Practitioner-associated cases are also more likely to be patented and not abandoned.

Operation of the patent office as well as applicant behavior both vary depending upon the technology at issue. Table 3 shows IDS timing for each examination technology center. Applications in TC 1600 (Biotechnology and Organic Chemistry) are often seen as more valuable on a per-application basis. However, TC 1600's applications are less-likely than average to include an IDS filing with the original application. (χ2 P=0.000). Consistent with disclosure statements as merely CYA material, however is the fact that TC 1600 has the highest rate of later-filed IDS's.

 

IDS Timing

Tech Center

Group 1
No IDS

Group 2
With Application

Group 3
Later

1600

11%

24%

64%

1700

16%

24%

57%

2100

29%

26%

40%

2400

28%

22%

41%

2600

20%

33%

40%

2800

22%

27%

47%

3600

35%

27%

38%

3700

27%

28%

38%

Table 3

     

 

Notes:

  • Of course, this comes with the baggage of a retrospective study.
  • This is a continuing project – suggestions are welcome.

Effect of a Stipulated Dismissal

Garber v. Chicago Mercantile Exchange (CME) and the Chicago Board of Trade (CBOT) (Fed. Cir. 2009)

Garber first brought his patent infringment suit against the CME and CBOT in 2004. However, he had some trouble finding adequate representation and offered to dismiss without prejudice. The parties then filed an stipulated motion to dismiss without prejudice.

In his order dismissing that case, Judge Castillo (N.D. Ill.) added a statement that appears to be a typographical error giving Garber one-month “to move to reinstate this case or this lawsuit may be dismissed without prejudice.”  

Two facts indicate to me that that Judge Castillo intended to threaten a dismissal “with prejudice” rather than “without prejudice.” First, the case was already dismissed without prejudice; and second, soon after his deadline had passed, Judge Castillo ordered the case dismissed with prejudice.

In any event, Garber did not re-file until 2008, and Judge Castillo refuesd to re-open the case. On appeal, the Federal Circuit reversed – finding that the joint stipulation of dismissal divsted the court of its power over the case – rendering the court’s dismissal “void ab initio.”

The appellate panel based its decision on Fed. R. Civ. Pro. R. 41(a)(1) which provides that “the plaintiff may dismiss an action without a court order by filing … a stipulation of dismissal signed by all parties who have appeared” and Seventh Circuit law on-point. See Smith v. Potter, 513 F.3d 781 (7th Cir. 2008).

Reversed.

Notes:

  • A caution for patentees considering such a stipulation: Rule 41(a)(1)(B) makes clear that the stipulated dismissal is presumably without prejudice only if the plaintiff has not previously dismissed another action “based on or including the same claim.”
  • Garber’s asserted patent No. 5,963,923 is titled “System and method for trading having a principal market maker.”
  • Compact Prosecution: The patent application was filed July 1997. The Examiner issued a first non-final rejection in February 1998 and a second non-final rejection in December 1998. The notice of allowance was then mailed in April 1999.
  • According to the complaint, Garber has been a Chicago based trader since 1972.

Evidence Based Prosecution: The Status of Applications Filed 4 ½ Years Ago

This morning I created a dataset of prosecution information for 462 randomly selected utility patent applications filed in December 2004 and January 2005 to get a sense of where those applications stand after 4 ½ years of prosecution. Overall, 48% of the applications have issued as patents; 26% have been abandoned; and 26% are still pending. (Note – I excluded the 12% of cases from my sample that were never published as applications because data is not available for most of them).

Table 1 below shows the detailed status for each case as provided by the USPTO’s PAIR system. All but two of the pending cases have received at least an initial examination. The two still-unexamined cases are both software-related applications.

High-Level Status

Status

Percent of Cases

Patented

Patented Case

47.8%

Abandoned

Abandoned — Failure to Respond to an Office Action

25.2%

Abandoned

Abandoned — Failure to Pay Issue Fee

0.7%

Abandoned

Expressly Abandoned — During Examination

0.2%

Pending

Non Final Action Mailed

8.9%

Pending

Final Rejection Mailed

6.4%

Pending

Response to Non-Final Office Action Entered and Forwarded to Examiner

5.0%

Pending

On Appeal — Awaiting Decision by the Board of Appeals

1.0%

Pending

Notice of Allowance Mailed — Application Received in Office of Publications

1.0%

Pending

Notice of Appeal Filed

0.7%

Pending

Publications — Issue Fee Payment Verified

0.5%

Pending

Examiner’s Answer to Appeal Brief Mailed

0.5%

Pending

Docketed New Case – Ready for Examination

0.5%

Pending

Appeal Awaiting BPAI Docketing

0.5%

Pending

Withdrawn Abandonment awaiting examiner action

0.2%

Pending

Response after Final Action Forwarded to Examiner

0.2%

Pending

Appeal Brief (or Supplemental Brief) Entered and Forwarded to Examiner

0.2%

Pending

Advisory Action Mailed

0.2%

Table 1

   

An often frustrating aspect of application pendency is that abandoned cases can be kept alive by filing a continuation application. Of those cases that have been either patented or abandoned, 25% have one or more descendents in the form continuation or CIP applications. (I have not determined whether those continuations are themselves still pending.)

Of the cases already completed (no longer pending), the median patent took 2.6 years to issue while the median abandonment did not occur until 3.1 years into prosecution. Along this line, the longer a case was pending, the greater the likelihood that the case was abandoned. Thus, 71% of cases that were pending for fewer than three years were allowed while only 29% of cases that were pending for three to four and a half years were allowed.

The chart below shows the percentage of applications pending as a function of the number of years in prosecution. Although the average time in prosecution for this cohort cannot be calculated yet (because so many cases are still pending), the median time in prosecution – as seen in the chart – is 3.3 years.

The patent office examination corps is divided into various technology centers. In my sample, TC 2800 (Semiconductors, Electrical and Optical Systems and Components) had allowed the highest percentage of cases (70%) and had the lowest rate of applications still-pending after 4 ½ years (3%). TC 1600 (Biotechnology and Organic Chemistry) has the highest abandonment rate (36%) while TC 2600 has the highest percentage of cases still pending (48%).

Evidence Based Prosecution: The Status of Applications Filed 4 ½ Years Ago

This morning I created a dataset of prosecution information for 462 randomly selected utility patent applications filed in December 2004 and January 2005 to get a sense of where those applications stand after 4 ½ years of prosecution. Overall, 48% of the applications have issued as patents; 26% have been abandoned; and 26% are still pending. (Note – I excluded the 12% of cases from my sample that were never published as applications because data is not available for most of them).

Table 1 below shows the detailed status for each case as provided by the USPTO’s PAIR system. All but two of the pending cases have received at least an initial examination. The two still-unexamined cases are both software-related applications.

High-Level Status

Status

Percent of Cases

Patented

Patented Case

47.8%

Abandoned

Abandoned — Failure to Respond to an Office Action

25.2%

Abandoned

Abandoned — Failure to Pay Issue Fee

0.7%

Abandoned

Expressly Abandoned — During Examination

0.2%

Pending

Non Final Action Mailed

8.9%

Pending

Final Rejection Mailed

6.4%

Pending

Response to Non-Final Office Action Entered and Forwarded to Examiner

5.0%

Pending

On Appeal — Awaiting Decision by the Board of Appeals

1.0%

Pending

Notice of Allowance Mailed — Application Received in Office of Publications

1.0%

Pending

Notice of Appeal Filed

0.7%

Pending

Publications — Issue Fee Payment Verified

0.5%

Pending

Examiner’s Answer to Appeal Brief Mailed

0.5%

Pending

Docketed New Case – Ready for Examination

0.5%

Pending

Appeal Awaiting BPAI Docketing

0.5%

Pending

Withdrawn Abandonment awaiting examiner action

0.2%

Pending

Response after Final Action Forwarded to Examiner

0.2%

Pending

Appeal Brief (or Supplemental Brief) Entered and Forwarded to Examiner

0.2%

Pending

Advisory Action Mailed

0.2%

Table 1

   

An often frustrating aspect of application pendency is that abandoned cases can be kept alive by filing a continuation application. Of those cases that have been either patented or abandoned, 25% have one or more descendents in the form continuation or CIP applications. (I have not determined whether those continuations are themselves still pending.)

Of the cases already completed (no longer pending), the median patent took 2.6 years to issue while the median abandonment did not occur until 3.1 years into prosecution. Along this line, the longer a case was pending, the greater the likelihood that the case was abandoned. Thus, 71% of cases that were pending for fewer than three years were allowed while only 29% of cases that were pending for three to four and a half years were allowed.

The chart below shows the percentage of applications pending as a function of the number of years in prosecution. Although the average time in prosecution for this cohort cannot be calculated yet (because so many cases are still pending), the median time in prosecution – as seen in the chart – is 3.3 years.

The patent office examination corps is divided into various technology centers. In my sample, TC 2800 (Semiconductors, Electrical and Optical Systems and Components) had allowed the highest percentage of cases (70%) and had the lowest rate of applications still-pending after 4 ½ years (3%). TC 1600 (Biotechnology and Organic Chemistry) has the highest abandonment rate (36%) while TC 2600 has the highest percentage of cases still pending (48%).

Evidence Based Prosecution: The Status of Applications Filed 4 ½ Years Ago

This morning I created a dataset of prosecution information for 462 randomly selected utility patent applications filed in December 2004 and January 2005 to get a sense of where those applications stand after 4 ½ years of prosecution. Overall, 48% of the applications have issued as patents; 26% have been abandoned; and 26% are still pending. (Note – I excluded the 12% of cases from my sample that were never published as applications because data is not available for most of them).

Table 1 below shows the detailed status for each case as provided by the USPTO’s PAIR system. All but two of the pending cases have received at least an initial examination. The two still-unexamined cases are both software-related applications.

High-Level Status

Status

Percent of Cases

Patented

Patented Case

47.8%

Abandoned

Abandoned — Failure to Respond to an Office Action

25.2%

Abandoned

Abandoned — Failure to Pay Issue Fee

0.7%

Abandoned

Expressly Abandoned — During Examination

0.2%

Pending

Non Final Action Mailed

8.9%

Pending

Final Rejection Mailed

6.4%

Pending

Response to Non-Final Office Action Entered and Forwarded to Examiner

5.0%

Pending

On Appeal — Awaiting Decision by the Board of Appeals

1.0%

Pending

Notice of Allowance Mailed — Application Received in Office of Publications

1.0%

Pending

Notice of Appeal Filed

0.7%

Pending

Publications — Issue Fee Payment Verified

0.5%

Pending

Examiner’s Answer to Appeal Brief Mailed

0.5%

Pending

Docketed New Case – Ready for Examination

0.5%

Pending

Appeal Awaiting BPAI Docketing

0.5%

Pending

Withdrawn Abandonment awaiting examiner action

0.2%

Pending

Response after Final Action Forwarded to Examiner

0.2%

Pending

Appeal Brief (or Supplemental Brief) Entered and Forwarded to Examiner

0.2%

Pending

Advisory Action Mailed

0.2%

Table 1

   

An often frustrating aspect of application pendency is that abandoned cases can be kept alive by filing a continuation application. Of those cases that have been either patented or abandoned, 25% have one or more descendents in the form continuation or CIP applications. (I have not determined whether those continuations are themselves still pending.)

Of the cases already completed (no longer pending), the median patent took 2.6 years to issue while the median abandonment did not occur until 3.1 years into prosecution. Along this line, the longer a case was pending, the greater the likelihood that the case was abandoned. Thus, 71% of cases that were pending for fewer than three years were allowed while only 29% of cases that were pending for three to four and a half years were allowed.

The chart below shows the percentage of applications pending as a function of the number of years in prosecution. Although the average time in prosecution for this cohort cannot be calculated yet (because so many cases are still pending), the median time in prosecution – as seen in the chart – is 3.3 years.

The patent office examination corps is divided into various technology centers. In my sample, TC 2800 (Semiconductors, Electrical and Optical Systems and Components) had allowed the highest percentage of cases (70%) and had the lowest rate of applications still-pending after 4 ½ years (3%). TC 1600 (Biotechnology and Organic Chemistry) has the highest abandonment rate (36%) while TC 2600 has the highest percentage of cases still pending (48%).

Bits and Bytes No 120: In the News

  • PTO Funding Emergency: Andrew Noyes reports on an emergency funding bill for the PTO that would allow the agency to use surplus funds from its trademark budget to fund the growing shortfall on the patent side. Link. The current trademark budget surplus is estimated at $60 million. [Diane Bartz’s Reuters article on the same topic]
  • John Duffy: Michael Orey of BusinessWeek has published an article recognizing the ongoing contributions of Professor Duffy: A Scholar-Activist Challenges U.S. Patent Law.
  • Todd Dickinson: Joff Wild of IAM recently interviewed former PTO Director Todd Dickinson and posted the 9 minute video on YouTube. [Watch the Video][IAM Blog]. Dickinson walks through the three major priorities for the next director: Priority I: Reestablish the stakeholder relationship with the PTO; Priority II: Pendency & backlog (in the shadow of the financial shortfall); Priority III: Quality.
  • False Marking: PUBPAT continues its campaign against false marking. Earlier, I reported on its false marking lawsuits against Cumberland (Sweet’N Low) and Iovate (Xenadrine). Last week, the nonprofit filed a false marking suit against McNeil (Tylenol) and filed an amici brief in Pequignot v. Solo Cup. In that brief, PUBPAT argues that damages should be based on “each falsely marked article.” The brief also spells out some of the harms of falsely marked products:

    “The reason why companies mark and advertise their products as patented is because they expect doing so will provide them some benefit in the marketplace, such as by winning over consumers, building a superior brand associated with innovativeness, implying that their product has been reviewed and approved by the federal government, or implicitly threatening actual or potential competitors with allegations of patent infringement. Thus, when products are falsely marked or advertised as “patented” or with the numbers of expired, invalid, or inapplicable patents, such false marking provides these potential benefits to the false marker/advertiser without any commensurate justification and, as such, creates the potential to negatively impact the marketplace, the public interests, and the integrity of the patent system.”

  • File Attachment: SoloAmiciBrief.pdf (1100 KB)
  • File Attachment: PUBPAT v McNeil – Complaint.pdf (321 KB)

Patently-O Bits and Bytes No. 119

  • The AP on Hugo Chavez: Venezuelan officials plan to invalidate some pharmaceutical patents and allow domestic manufacturers to produce licensed medicines, an action that could cause shortages and scare off foreign investment, industry leaders said Sunday. [AP][via PatentHawk]
  • BPAI Data: An updated version of yesterday’s paper on BPAI decision data is available online here: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1423922. Comments are welcome.
  • New Blog: Rocket Docket IP Litigation (E.D. Va. Patent Focus). The blog is edited by the folks at Williams Mullen. Their latest post is an update on the false marking litigation against Solo Cup.
  • National Patent Jury Instructions: A comittee assembled by Chief Judge Michel has released its set of model jury instructions. Although Judge Michel assembled the committee, the introduction makes clear that the instructions “have not been endorsed by the Federal Circuit Court of Appeals, and are not “official” jury instructions.” However, the instructions are likely to serve as the ongoing model. http://www.nationaljuryinstructions.org/.

Patently-O Bits and Bytes No. 119

  • The AP on Hugo Chavez: Venezuelan officials plan to invalidate some pharmaceutical patents and allow domestic manufacturers to produce licensed medicines, an action that could cause shortages and scare off foreign investment, industry leaders said Sunday. [AP][via PatentHawk]
  • BPAI Data: An updated version of yesterday’s paper on BPAI decision data is available online here: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1423922. Comments are welcome.
  • New Blog: Rocket Docket IP Litigation (E.D. Va. Patent Focus). The blog is edited by the folks at Williams Mullen. Their latest post is an update on the false marking litigation against Solo Cup.
  • National Patent Jury Instructions: A comittee assembled by Chief Judge Michel has released its set of model jury instructions. Although Judge Michel assembled the committee, the introduction makes clear that the instructions “have not been endorsed by the Federal Circuit Court of Appeals, and are not “official” jury instructions.” However, the instructions are likely to serve as the ongoing model. http://www.nationaljuryinstructions.org/.

Patently-O Bits and Bytes No. 119

  • The AP on Hugo Chavez: Venezuelan officials plan to invalidate some pharmaceutical patents and allow domestic manufacturers to produce licensed medicines, an action that could cause shortages and scare off foreign investment, industry leaders said Sunday. [AP][via PatentHawk]
  • BPAI Data: An updated version of yesterday’s paper on BPAI decision data is available online here: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1423922. Comments are welcome.
  • New Blog: Rocket Docket IP Litigation (E.D. Va. Patent Focus). The blog is edited by the folks at Williams Mullen. Their latest post is an update on the false marking litigation against Solo Cup.
  • National Patent Jury Instructions: A comittee assembled by Chief Judge Michel has released its set of model jury instructions. Although Judge Michel assembled the committee, the introduction makes clear that the instructions “have not been endorsed by the Federal Circuit Court of Appeals, and are not “official” jury instructions.” However, the instructions are likely to serve as the ongoing model. http://www.nationaljuryinstructions.org/.

Understanding the Role of the Board of Patent Appeals: Ex Parte Rejection Rates on Appeal

6a00d8341c588553ef0115704a8ff5970c-pi[1] By Dennis Crouch     PDF Version of the Article

Abstract:

This study provides an issue-by-issue analysis of decisions on ex parte appeals by the Board of Patent Appeals and Interferences (BPAI) of the United States Patent and Trademark Office (USPTO). All the cases in this study were appealed to the BPAI after one or more of the pending claims were rejected by a patent examiner. 

In the study, I report that most BPAI appeals focus on two or more issues. Of those, the majority of issues (61%) are affirmed and the remainder reversed. When more issues are presented, the case as a whole becomes more likely to be affirmed-in-part. In addition, I find that the likelihood that a case is affirmed has increased over time (Jan 2008 – May 2009).

By far, the most common issue on appeal is obviousness. I find that 87% – 90% of ex parte BPAI decisions decide an issue of obviousness. Only 4% of appeals consider neither obviousness nor novelty. The major aberration of this trend is for cases involving biotechnology and organic chemistry (TC 1600). 18% of BPAI decisions arising from TC 1600 focus on issues other than obviousness and novelty.

In comparing results by issue, I find that obviousness rejections are more likely to be affirmed than are other types of rejections. Most cases (74%) that discuss neither obviousness nor novelty are reversed.

The BPAI is becoming increasingly important. Over the past several years, the BPAI has seen a dramatic rise in the number of appeals being filed. In addition every recent patent reform legislative proposal has included an increased role for the Board.

    Bits and Bytes No. 118: Kappos & Dudas

    From Hal Wegner:

    A few weeks ago Dave Kappos was involved in a webinar with Jon Dudas which provides some perspectives on the new Director’s views. It is available at http://www.foley.com/news/event_detail.aspx?eventid=2779. The webinar itself is available at http://www.foley.com/multimedia/multimedia_detail.aspx?multimediaid=58221724.

    The May 8, 2009 webinar focuses on patent reform; technology issues; and reexamination.

    A final version of the new Patent Case Management Judicial Guide is in print. It is also freely available on SSRN.

    Understanding the Role of the Board of Patent Appeals: Ex Parte Rejection Rates on Appeal

    Every proposed patent reform measure includes an expanded role for the US Patent & Trademark Office’s administrative patent court – known today as the Board of Patent Appeals and Interferences, the BPAI, or simply the Board. Even without legislation, the role of the BPAI has expanded greatly in the past few years. The number of ex parte appeals in FY2009 is expected to at least double the record-filing of 6,400 appeals in FY2008. I suggest that two factors have led to this short term dramatic rise in appeals: (1) an increase in rejection-rate by patent examiners; and (2) attempts by the PTO to limit non-appeal avenues for achieving full claim scope. These limits include the PTO’s proposed rules that would curtail the applicant’s ability to file multiple requests for continued examination (RCEs), continuation applications, and a multitude of claims. Although these rules have only been threatened, they impact appeal practice because they may apply to already-pending applications. Although more gradual, two additional influences on the rise in appeals include: (1) the continued perceived value of patent rights and (2) the continued rise in the number of patent application filed each year.

    During patent prosecution, an applicant has a right to appeal to the Board after its application is twice rejected. 35 U.S.C. 134. In this short article, I look at how the Board responds to those rejections on appeal. Many appeals involve multiple rejections each of which may be affirmed or reversed. In addition, the Board occasionally introduces a new ground for rejection even after reversing an examiner decision. This analysis opens-up these decisions and provides data issue-by-issue.

    My data comes from two primary sources. First, using Westlaw, I downloaded copies of the approximately 6,000 ex parte BPAI decisions issued between January 2008 and May 2009. Using an automated script, I extracted data from each of those appeals, including the holding and the extent of discussion of various issues. (i.e., how often “obviousness” or “enablement” is discussed in the opinion.) In addition, just under 200 ex parte decisions from 2009 were randomly selected and scored by hand to determine how the BPAI decided individual issues within the appeals. Board decisions typically identify a series of issues and then decide each issue. In Ex Parte Cypher, 2009 WL 1162435, 2008-4722, (Bd. Pat. App. Inter. 2009), for instance, the Board identified two issues: “(1) Claims 1-4 … are rejected under 35 U.S.C. § 103(a) as being unpatentable over Loh in view of McFarling. (2) Claims 9-11 … are rejected under 35 U.S.C. § 103(a) as being unpatentable over Loh and McFarling in view of Yeh.” In Cypher, both issues were affirmed. As a consequence, the data for this case reflects that two obviousness issues were raised, both of which were affirmed.

    Results:

    In the hand-scored sample, the average Board decision considered 2.1 issues (median of two issues). Approximately 61% of decided issues are affirmed on appeal and 39% are reversed. (In this study, fewer than 1% of issues were expressly not decided.) The issue-by-issue analysis fits with the overall holdings for cases on appeal. In the hand-scored sample, 59% of the cases were affirmed as a whole, 12% were affirmed-in-part, and 29% were reversed. (This sample parallels the Board’s own statistics for FY2009 which indicate that 60% of its decisions on the merits are affirmances, 15% affirmance in part, and 25% reversals). Table 1 shows the issue-by-issue results alongside the overall case-holding for the hand-scored sample.

      

    Issue-by-Issue Results

    Case-by-Case results

    Affirmed

    61% of issues affirmed

    59% of cases affirmed

    Affirmed-in-Part

    N/A

    12% of cases affirmed-in-part

    Reversed

    39% of issues reversed

    29% of cases reversed

    Table 1

       

    As you might expect, when there is a strong correlation between the overall case holding of an appeal and the holdings on individual issues at issue in the appeal. When the overall case-holding is affirmed, the vast majority of issues are also affirmed. However, in the hand-scored sample, about 10% of cases that were affirmed included some individual issues that were reversed. Often, the reversed issues were rejections argued by the examiner in the alternative. In Ex Parte Mcquiston, 2009 WL 598537, 2008-3224 (Bd. Pat. App. Inter. 2009), for instance, applicant’s claim 1 had been rejected as (1) anticipated by Golds; (2) obvious over Golds; (3) anticipated by Simso; and (4) obvious over Simso. The Board rejected the first three of these rejections, but the claim remained unpatentable as obvious over Simso and the examiner’s decision affirmed as a whole.

    Table 2 compares the case-holding with the issue-by-issue analysis based on our hand-scored sample of 200 BPAI decisions. As seen in Table 2, when a case is affirmed-in-part, roughly half (on average) of the issues are affirmed and half are reversed. In cases that were reversed, every issue was also reversed. (?2 P<.01).

    Case Holding

    Percent of Issued Affirmed

    Percent of Issues Reversed

    Affirmed

    92%

    8%

    Affirmed-in-Part

    51%

    49%

    Reversed

    0%

    100%

    Table 2

       

    Number of Issues on Appeal: In Mcquiston, the applicant needed to address each alternate reason for rejection in order to win on appeal. In most cases, however, each claim is rejected for only a single reason – usually obviousness. See infra. The applicant can then choose how to group issues on appeal. If, for instance, claims 1-10 are each rejected as obvious, the applicant could choose to argue each claim separately or cluster the claims into one or more groups that are then argued as a unit. Chart 1 uses the hand-scored data to presents the likelihood of a particular case-holding as a function of the number of issues on appeal.

    When only one issue is presented, the result in the case tracks the result of that issue. As more issues are presented, the likelihood of a split affirmed-in-part decision rises dramatically while the likelihood of either complete affirmance or complete reversal drops. Chart 2 is a cumulative frequency for the number of issues presented on appeal. In our sample, the number of claims ranged from 1 to 8. The median was 2 claims and the mode 1 claim. About 94% of decisions discussed four or fewer issues.

    The Board is authorized to offer new grounds for rejection, and did-so in about 4% of the cases in the hand-scored study. The most common new ground was for obviousness.

    Obviousness: Obviousness is the bread and butter of patent examinations. In this study, I also show that it is the mainstay of BPAI ex parte appeals. 90% of appeals in my hand-scored study included at least one obviousness issue that was decided on appeal. More than half of the appeals (54%) focused only on obviousness. The closest runner-up issue – anticipation – was an issue in 37% of the appeals. Other issues on appeal (each with a frequency of < 5%) included in descending frequency: written description requirement; indefiniteness, patentable subject matter, obviousness-type double patenting, and enablement.

    For applicants, the fact that the majority of issues involve obviousness spells trouble for applicants. In the hand-scored data, the Board affirmed obviousness findings much more often it did for other grounds of rejection. Specifically, the Board affirmed 65% of the appealed obviousness issues, but affirmed only 52% of the appeal issues made on grounds other than obviousness. Table 3 compares these results for the hand-scored sample of 200 cases. (?2 P<.05).

    Issue Holding

    Obviousness Rejection

    Other Grounds of Rejection

    Affirmed

    65%

    52%

    Reversed

    35%

    48%

    Table 3

       

    The pervasiveness of obviousness issues is further confirmed by the larger sample of 6,000 ex parte decisions issued between January 2008 and May 2009. Using a parsing script, I looked for discussions of obviousness issues by counting the number of times that the terms such as “obvious” and “35 U.S.C. § 103(a)” appeared in each opinion. In that sample, 87% of the decisions discussion obviousness while only 13% do not discuss obviousness. Table 4 shows the roughly parallel results.

      

    Hand-Scored Sample

    Automatically Parsed Sample

      

    (n ˜ 200)

    (n ˜ 6,000)

    Obviousness at Issue

    90% of cases decide an obviousness issue

    87% of cases discuss either obviousness or Section 103(a)

    No Obviousness Issue

    10% of cases do not decide any obviousness issue

    13% of cases do not discuss obviousness or Section 103(a)

    Table 4

       

    In order to ensure that I was picking up an actual obviousness issue, I created a script that looked for cases where obviousness was more intensely discussed, i.e., where obviousness terms were mentioned at least three times. In those cases where obviousness was intensely discussed, the Board affirmed the examiner’s rejections decisions 59% of the time. In cases where obviousness was not discussed at all, the examiner was affirmed in only 37% of cases. Table 5 compares these results for the automatically-parsed sample of 6000 cases. (?2 P<.01).

    Case Holding

    Obviousness Intensely Discussed

    No Discussion of Obviousness

    No Discussion of Obviousness or Novelty

    Affirmed

    59%

    37%

    22%

    Affirmed-in-Part

    15%

    10%

    4%

    Reversed

    26%

    47%

    74%

    Table 5

         

    The far right column of Table 5 provides a compelling statistic. 358 cases in the sample had no discussion of either obviousness or novelty. Of those cases, 74% were reversed on appeal.

    Technology Center Specific Results: Patent examination is divided amongst various technology centers. Although the substantive patent laws do not vary across technology lines, patent practice can vary greatly. The BPAI regularly updates a statistical breakdown of its opinions by tech center. [Link]. Table 6 is derived directly from the BPAI statistics for FY2009 through May 2009 and shows the percentage of decisions on the merits from each tech center that arrive affirm, affirm-in-part, or reverse, respectively.

    Technology Center

    Affirmed

    Affirmed-In-Part

    Reversed

    1600 Biotechnology and Organic Chemistry

    59%

    15%

    27%

    1700 Chemical and Materials Engineering

    69%

    11%

    20%

    2100 Computer Architecture, Software, and Information Security

    63%

    13%

    24%

    2600 Communications

    64%

    14%

    21%

    2800 Semiconductors, Electrical and Optical Systems and Components

    65%

    11%

    24%

    3600 Transportation, Construction, Electronic Commerce, Agriculture,

    47%

    22%

    31%

    3700 Mechanical Engineering, Manufacturing, Products

    53%

    17%

    30%

    Table 6

         

    Focusing in on obviousness again, it is interesting to see that appeals from Tech Center 1600 (Biotechnology and Organic Chemistry) are the least likely to discuss obviousness. The most appeal decisions emerge from Tech Center 1700 (Chemical and Materials Engineering), and those appeals are the most likely to include a discussion of obviousness. In particular, a discussion of obviousness is found in 92% of TC 1700 appeals but only 76% of TC 1600 appeals. (?2 P<.01). The difference is partially explained by TC 1600′s more rigorous application of the Section 112 issues of written description, enablement and indefiniteness. Table 6 is again derived from the automatically-parsed sample of 6,000 Board decisions. For each tech center, Table 7 indicates the percent of cases that discuss obviousness; both obviousness and novelty; novelty; and neither obviousness nor novelty. This table again highlights (1) the focus of the PTO on obviousness issues (and to a lesser extent novelty issues) and (2) the differences of TC 1600 from the rest of patent practice.

     

    Percent of Cases Issue on Appeal

    Technology Center

    Obviousness+

    Obviousness and Novelty

    Novelty+

    Neither Obviousness Nor Novelty

    All

    87%

    31%

    40%

    4%

    1600 Biotechnology and Organic Chemistry

    76%

    20%

    26%

    18%

    1700 Chemical and Materials Engineering

    92%

    29%

    34%

    3%

    2100 Computer Architecture, Software, and Information Security

    82%

    29%

    43%

    3%

    2600 Communications

    89%

    31%

    39%

    3%

    2800 Semiconductors, Electrical and Optical Systems and Components

    88%

    35%

    45%

    3%

    3600 Transportation, Construction, Electronic Commerce, Agriculture,

    87%

    30%

    40%

    2%

    3700 Mechanical Engineering, Manufacturing, Products

    87%

    37%

    47%

    2%

    Table 7

           

     

    Notes:

    • Thanks to two of my research assistants – Patrick Barnacle and Jaron Brunner – for helping me to score the individual decisions by hand.
    • The BPAI only publishes opinions once the underlying application is either published or issued as a patent. Consequently, this article misses those

    David Kappos: Next USPTO Director

    Congratulations!

    The White House has announced its intent to nominate David J. Kappos as Director of the United States Patent and Trademark Office (USPTO) with the official title of Under Secretary of Commerce for Intellectual Property. Mr. Kappos has spent his entire career with IBM – both as an electrical engineer and later as a patent attorney. Kappos ends his IBM career (at least for now) as Vice President and Assistant General Counsel, Intellectual Property Law. He is a board member of both AIPLA and IPO.

    From the get-go, Mr. Kappos has been a rumored frontrunner to replace Director Jon Dudas and Interim Director John Doll.  In a May 2009 article, I announced my support for Mr. Kappos. In that article, I noted the value of having “a patent office director who understands patents and who has been fully involved with all aspects of the patent system for the past twenty years. I believe that Kappos will be a careful shepherd of the system - leaving it better off in six years than it is today.”

    As someone who writes daily about US Patent Law, I am excited about the Kappos nomination because he is likely to open access to previously hidden data and information.  He will also work to create systems that work and measures that are meaningful.

    I suspect that the biggest challenge for Mr. Kappos will be moving beyond the unique IBM perspective. Big Blue is an atypical patent owner in its internal systems, patenting volume, and licensing power. As I discussed earlier, it will be important for him to spend time understanding how the rest of the patent community operates.

    Notes:

    • White House Announcement
    • Leahy Statement: “The USPTO faces serious challenges in this difficult economic environment, and the office requires strong leadership.  David Kappos is such a leader.  I look forward to working with him on issues confronting the USPTO, including reducing the backlog and pendency of patent applications and modernizing the patent system as Congress considers the Patent Reform Act.”
    • EETimes Article: Quoting Mark Lemley: "The PTO is in crisis, and I think Dave Kappos understands that, and will work creatively to try to find ways out of the crisis, I also think he is sensitive to the need for patent reform, which is a good thing."
    • March 2009 Testimony of Kappos
    • IP Law Insights (Perkins Coie Blog) summarizes an earlier Kappos article: (1) Patent applicants are responsible for the quality and clarity of their patent applications. (2) Patent applications should be available for public examination. (3) Patent ownership should be transparent and easily discernable. (4) Pure business methods without technical merit should not be patentable.
    • Patent Prospector on Kappos and the recent poorly researched WSJ Article.
    • From the USPTO Website: “If he is confirmed by the U.S. Senate, Kappos will take control of an office that provides incentives to encourage technological advancement and helps businesses protect their investments, promote their goods and safeguard against deception in the marketplace. The office continues to deal with a patent application backlog of more than 770,000, long waiting periods for patent review, information technology systems that are regarded as outdated and an application process in need of reform.”

    Preliminary Injunctions and Obviousness in Design Patent Law

    Titan Tire Corp. v. Case New Holland, Inc.pic-44.jpg 2008-1078 (Fed. Cir. 2009)

    Titan (the patentee) and Goodyear (the exclusive licensee) combined to sue Case for infringement of its tractor tire design patent. (Des. Pat. No. D. 360,862). The district court rejected Goodyear’s motion for preliminary injunctive relief – finding that the evidence indicated that the patent claim was probably obvious. On appeal, the Federal Circuit affirmed.

    Standard for Preliminary Relief: In order to obtain the “extraordinary” relief of a preliminary injunction to stop infringement before a final judgment, the a patentee must prove that “(1) it is likely to succeed on the merits, (2) it is likely to suffer irreparable harm in the absence of a preliminary relief, (3) the balance of equities tips in its favor, and (4) an injunction is in the public interest.” The likelihood of success requires proof that the patentee “will likely prove infringement, and that it will likely withstand [validity] challenges, if any.” When a defendant challenges a patent’s validity, the district court must weigh the evidence (both for and against) to determine whether the challenge “raises a substantial question” of validity.

    “Thus, when analyzing the likelihood of success factor, the trial court, after considering all the evidence available at this early stage of the litigation, must determine whether it is more likely than not that the challenger will be able to prove at trial, by clear and convincing evidence, that the patent is invalid. We reiterate that the “clear and convincing” standard regarding the challenger’s evidence applies only at trial on the merits, not at the preliminary injunction stage. The fact that, at trial on the merits, the proof of invalidity will require clear and convincing evidence is a consideration for the judge to take into account in assessing the challenger’s case at the preliminary injunction stage; it is not an evidentiary burden to be met preliminarily by the challenger.”

    The trial court’s decision on preliminary injunctive relief is reviewed for abuse of discretion.

    Obviousness of Design Patents: Design patent claims are subject to the nonobviousness requirement of Section 103(a) — asking whether “the claimed design would have been obvious to a designer of ordinary skill who designs articles of the type involved.” However, it is unclear how KSR applies to design patent cases. Unfortunately, this decision provides no answers except that “it is not obvious that the Supreme Court necessarily intended to exclude design patents from the reach of KSR.”

    Ordinarily, design patent obviousness analysis begins with a primary reference with design characteristics that “are basically the same as the claimed design.” Secondary references are then combined so long as the secondary references are “so related [to the primary reference] that the appearance of certain ornamental features in one would suggest the application of those features to the other.” Here, the lower court did not use the language of “primary and secondary references”, but the Federal Circuit found that the lower court’s obvious analysis was sufficient to for its denial of preliminary relief.

    “[W]e cannot say the trial court abused its discretion in concluding that Titan was unlikely to withstand Case’s challenge to the validity of the ’862 patent on obviousness grounds.

    Notes:

    • Read the case: 08-1078.pdf
    • The court explicitly avoided indicating whether obviousness analysis for design patents should be modified to conform to either KSR or Egyptian Goddess.

    Appealing BPAI Rejections to the Federal Circuit

    In re Baggett (Fed. Cir. 2009) (nonprecedential)

    The Board rejected Bagget's patent claims as obvious. On appeal, the Federal Circuit largely affirmed – holding that the the administrative body's factual findings were supported by the requisite "substantial evidence" and that the Board had properly “articulated [its] reasoning with some rational underpinning to support the legal conclusion of obviousness" as required by KSR. (Quoting KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398, 418 (2007)).

    The only portion vacated involves an error interpreting the term "memoization." The Board had initially misinterpreted the term as memorization. After a petition for rehearing, the Board corrected its mistake – but only as to one of the four claims containing the term. On appeal, PTO Solicitor Chen explained that Baggett had only addressed the one claim in the petition for rehearing, but offered that a remand would still be appropriate.

    Notes:

    • This case may serve to emphasize the difficulty in appealing an obviousness decision from the Board of Patent Appeals & Interferences. The "substantial evidence" standard is low, i.e., "more than a mere scintilla of evidence." Likewise, the legal conclusion of obviousness now looks merely for "some rational underpinning."
    • In a note, Hal Wegner identifies four Federal Circuit appeals up for review that may focus on obviousness: In re Applied Materials Israel Ltd., Fed. Cir. No. 2009-1083 (argument July 7, 2009); In re Mettke, Fed. Cir. No. 2009-1125; In re Roth, Fed. Cir. No. 2009-1223; and In re Rivera, Fed. Cir. No. 2009-1123.
    • Although it may have been amended during prosecution, the original claim 1 reads as follows: 1. A method of producing constructed fares that includes an arbitrary added to a published fare, said method executed in a computer system, the method comprising: determining interior cities that appear with gateway cities in arbitraries for the airline; searching for gateway cities corresponding to the determined interior cities appearing in the arbitraries; and applying an arbitrary corresponding to one of the interior cities to a published fare involving one of the gateway cities to produce the constructed fare.
    • Read the decision: 09-1029.pdf

    Bits and Bytes No. 117: Data, Damages & Deferred Examination

    • Data.Gov: As part of the transparent government project, we now have the website Data.Gov with the purpose of “increas[ing]public access to high value, machine readable datasets generated by the Executive Branch of the Federal Government.” So far, the PTO has only included two datasets -both of which were already available through the PTO website. Hopefully there will be more to come – including opening access to PAIR. [More here].
    • IP Colloquium: Professor Lichtman has released a new edition of his audio-program IP Colloquium. This month’s program focuses on reforms of the patent damages laws. [LINK] The program offers CLE Credit.
    • Deferred Examination: Comments on a potential deferred examination program are here.
    • Deferred Examination: Intel’s comments are interesting. The company argues that the success of deferred examination in other countries is a facade. Rather, the high rate of drop-out during prosecution in countries such as Japan, Germany, and Korea is due to the inventor compensation schemes in those countries. So the story goes – companies in those countries tend to file more low-quality local patent applications for the purpose preempting inventors from asserting rights on their own.

    “We actually believe that the reason that deferred examination has had little success in the United States is due to the inventor compensation schemes that exist in many countries such as Japan, Germany and Korea.

    In essence, under the regimes in these countries, if the company fails to patent the invention, the inventor has the right to file on his or her own behalf. Having inventors file on their own behalf is generally viewed as undesirable. As a result, the companies file disproportionately more applications in their home jurisdictions than normal prudence would otherwise suggest. Since they are filing these in part to pre-empt the inventor’s rights and to avoid having additional inventor compensation issues, we believe that this contributes to an inclination to avoid paying the examination fee and then to abandon the patent application.   

    However, outside their home jurisdictions, these companies have a tendency to file a fraction of the patents that they file in their home jurisdictions. Having filed in the home jurisdiction, they have little or no concern that the inventor has the right or will file the application overseas. Apparently, as a result, they do not appear to abandon nearly as high a percentage of the patent applications that they file outside their home jurisdictions as they file in their home jurisdictions.

    Of course, the US does not have such inventor compensation statutes. Those foreign companies that file and abandon so heavily in their home jurisdictions exhibit radically different behavior in the US. They file less and abandon much less. Hence, we believe that this helps explain the disparate experience of deferred examination in other countries. It means that the practice in these other countries is not likely to be a good indicator for practice before the USPTO.”