October 2009

Suing for Infringement Done “For the United States”

Advanced Software Design v. Federal Reserve Bank of St. Louis (Fed. Cir. 2009)

Advanced Software’s patents relate to software methods of detecting fraudulent bank checks. The patentee sued three Federal Reserve Banks and Fiserv for patent infringement in Federal Court in the Eastern District of Missouri. On a preliminary motion, the district court dismissed the infringement claims – finding that the claims must be litigated in the Court of Federal Claims because the alleged acts of infringement were “for the United States.”  28 U.S.C. 1498(a). Section 1498(a) provides that the the Court of Federal Claims is the forum to redress unauthorized use of a patent “by or for the United States.” Under Sectio 1498(a), work is considered “for the United States” if it is (1) conducted for the US and (2) with “authorization or consent” of the US. 

Advanced Software argues that the Federal Reserve banks are private entities and that the US government expressly avoided becoming a party to any contract relating to the technology at issue. As such, the Federal Reserve’s alleged infringing activities should not be considered activities done “for” the US.

On appeal, the Federal Circuit affirmed the dismissal – finding that the proper forum is the Court of Federal Claims.  In particular, the court noted that no particular or explicit authorization or consent is required.

The most interesting aspect of the decision is that the Federal Circuit appears to have allowed the US government to take-on liability post-hoc.  In the appeal, the US government filed an amicus brief and was offered time to argue. During that argument, the government gave its authorization and accepted potential liability under Section 1498.

Tafas v. Dudas Concludes: CAFC Must Choose Whether to Vacate District Court’s Precedent

The USPTO has announced that it is rescinding the continuation rules package being litigated in Tafas v. Dudas. GSK has reportedly agreed to request that the Federal Circuit dismiss their appeal and to vacate the district court decision below.  According to his attorney, Tafas has not agreed to seek vacatur of the district court opinion and instead believes that the district court’s precedential decision should be to maintained in order to limit the USPTO’s substantive rulemaking power.

Patently-O Bits and Bytes No. 132

  • Ariad v. Eli Lilly (Written Description): Ariad has filed its opening brief in the en banc Federal Circuit challenge to the statutory basis for a written description requirement that is separate and distinct from enablement requirement. The patentee’s strongest arguments are textual and historic. Although done with tact and persuasive skill, the brief asks the court to read the statute: “The specification shall 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.” [File Attachment: Ariad v. Lilly Plaintiffs-Appellees Principal Brief.pdf (509 KB)]
  • Forest Group v. Bon Tool False Marking Case: The question on appeal is whether mass production of a falsely marked product constitutes a single instance of false marking. If the Federal Circuit agrees, the false marking statute will continue to have no impact because damages are limited by statute to $500 or less per offense. Judges Rader, Plager, and Moore will likely issue a decision in January. In oral arguments, the court struggled with the potential problem of “marking trolls” — suggesting that an amicus in this case is “pretty close to that.”
  • USPTO Website: Out of Beta
  • Patent Reform: Senator Leahy has suggested a Senate debate on patent reform “before the end of the year.”
  • Board of Patent Appeals: Numbers are in for FY2009 (ending September 30, 2009). 15,349 appeals docketed; 6,757 appeals completed; 12,489 appeals pending at the end of the FY. The Board took heroic efforts to increase its throughput by over 35% in FY2009. However, the Board was already operating in a deficit and the number of cases received in FY2009 is more than double that of FY2008.
  • Board of Patent Appeals II: Despite the backlog, the Board reports an average pendency of only 7.7 months (calculated from assignment of appeal number to decision date).
  • Patent Law Jobs:

Patently-O Bits and Bytes No. 132

  • Ariad v. Eli Lilly (Written Description): Ariad has filed its opening brief in the en banc Federal Circuit challenge to the statutory basis for a written description requirement that is separate and distinct from enablement requirement. The patentee’s strongest arguments are textual and historic. Although done with tact and persuasive skill, the brief asks the court to read the statute: “The specification shall 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.” [File Attachment: Ariad v. Lilly Plaintiffs-Appellees Principal Brief.pdf (509 KB)]
  • Forest Group v. Bon Tool False Marking Case: The question on appeal is whether mass production of a falsely marked product constitutes a single instance of false marking. If the Federal Circuit agrees, the false marking statute will continue to have no impact because damages are limited by statute to $500 or less per offense. Judges Rader, Plager, and Moore will likely issue a decision in January. In oral arguments, the court struggled with the potential problem of “marking trolls” — suggesting that an amicus in this case is “pretty close to that.”
  • USPTO Website: Out of Beta
  • Patent Reform: Senator Leahy has suggested a Senate debate on patent reform “before the end of the year.”
  • Board of Patent Appeals: Numbers are in for FY2009 (ending September 30, 2009). 15,349 appeals docketed; 6,757 appeals completed; 12,489 appeals pending at the end of the FY. The Board took heroic efforts to increase its throughput by over 35% in FY2009. However, the Board was already operating in a deficit and the number of cases received in FY2009 is more than double that of FY2008.
  • Board of Patent Appeals II: Despite the backlog, the Board reports an average pendency of only 7.7 months (calculated from assignment of appeal number to decision date).
  • Patent Law Jobs:

Patently-O Bits and Bytes No. 132

  • Ariad v. Eli Lilly (Written Description): Ariad has filed its opening brief in the en banc Federal Circuit challenge to the statutory basis for a written description requirement that is separate and distinct from enablement requirement. The patentee’s strongest arguments are textual and historic. Although done with tact and persuasive skill, the brief asks the court to read the statute: “The specification shall 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.” [File Attachment: Ariad v. Lilly Plaintiffs-Appellees Principal Brief.pdf (509 KB)]
  • Forest Group v. Bon Tool False Marking Case: The question on appeal is whether mass production of a falsely marked product constitutes a single instance of false marking. If the Federal Circuit agrees, the false marking statute will continue to have no impact because damages are limited by statute to $500 or less per offense. Judges Rader, Plager, and Moore will likely issue a decision in January. In oral arguments, the court struggled with the potential problem of “marking trolls” — suggesting that an amicus in this case is “pretty close to that.”
  • USPTO Website: Out of Beta
  • Patent Reform: Senator Leahy has suggested a Senate debate on patent reform “before the end of the year.”
  • Board of Patent Appeals: Numbers are in for FY2009 (ending September 30, 2009). 15,349 appeals docketed; 6,757 appeals completed; 12,489 appeals pending at the end of the FY. The Board took heroic efforts to increase its throughput by over 35% in FY2009. However, the Board was already operating in a deficit and the number of cases received in FY2009 is more than double that of FY2008.
  • Board of Patent Appeals II: Despite the backlog, the Board reports an average pendency of only 7.7 months (calculated from assignment of appeal number to decision date).
  • Patent Law Jobs:

USPTO Fees: Look for Increases

Gary Locke (Secretary of Commerce) has again indicated the Obama Administration’s support for the pending patent reform bill S. 515.  [Letter].  The letter also suggests that the PTO should be given authority to raise its fees, including “a limited interim fee adjustment.” 

For many years, the PTO has been funded entirely by user fees.  I hope that the same can continue to avoid such direct Congressional control over PTO spending.  But the PTO clearly needs money, and the alternative of cutting PTO services is likewise highly unappealing.  The third alternative: raise fees.

In the past, I have reported that patent applicant behavior is relatively inelastic to PTO fee changes. Although a 15% increase in fees would reduce the number of applications, the total revenue would increase. 

If the PTO is going to increase fees – how should it structure that increase? Notably, should more the burden be placed on (1) standard application fees; (2) issue and maintentance fees; or (3) luxury fees for excess claiming (20+) extensions of time?  All Universities qualify for the small-entity fee reduction. Does that still make sense?

Notes: The letter from Locke also promotes the idea of worksharing between patent offices when the same invention is being examined in multiple locations.

Supreme Court Indicates Interest in International Exhaustion Case

Costco Wholesale Corp. v. Omega, S.A. (Supreme Court 2009)

The Supreme Court has asked the Solicitor General to file a brief expressing the Obama Administration’s view on this pending international copyright exhaustion case. The law of exhaustion in copyright and patents run roughly parallel, and the outcome of this case will likely alter US patent law as well.

Under the first sale doctrine (aka exhaustion), once a copyright (or patent) owner has made an authorized sale of a protected product, the owner no longer has rights in that particular copy.  This allows the authorized purchaser to re-sell the particular product. 

Omega sells its watches for a higher price in the US than it does elsewhere. The discount retailler Costco purchased genuine Omega watches from overseas (through an importer) and began to sell them in its US stores.  The question on appeal is whether Omega’s authorized foreign sale exhausted its US copyright.

Under the Copyright Act’s first-sale doctrine, 17 U.S.C. § 109(a), the owner of any particular copy “lawfully made under this title” may resell that good without the authority of the copyright holder. In Quality King Distribs., Inc. v. L’Anza Research Int’l, Inc., 523 U.S. 135, 138 (1998), this Court posed the question presented as “whether the ‘first sale’ doctrine endorsed in § 109(a) is applicable to imported copies.” In the decision below, the Ninth Circuit held that Quality King (which answered that question af-firmatively) is limited to its facts, which involved goods manufactured in the United States, sold abroad, and then re-imported. The question pre-sented here is:

Whether the Ninth Circuit correctly held that the first-sale doctrine does not apply to imported goods manufactured abroad.

In Fuji Photo Film Co. v. ITC, 474 F.3d 1281 (Fed. Cir. 2007), the Federal Circuit held that US patent rights are only exhausted “through a first sale in the United States.” In that case, the Court recognized that “a different rule applies in copyright cases.”  However, at least one district court has held that the Supreme Court’s 2008 Quanta decision is inconsistent with this Federal Circuit precedent. See LG Electronics, Inc. v. Hitachi, 2009 WL 667232 (N.D.Cal. 2009)

If it takes the case, the Supreme Court is likely to link the parallel patent and copyright doctrines.

One of my former students (Shourin Sen) has been following the case on his copyright focused site: Exclusive Rights.

Expanding First Action Interview Pilot Program

“Washington — The Commerce Department’s United States Patent and Trademark Office (USPTO) today announced that it is expanding its First Action Interview Pilot Program in which an applicant is entitled to an interview with the patent examiner prior to the first office action on the merits in a new utility application. The program will expand to additional technology areas for a six-month period beginning on October 1, 2009. . . .

 . . . [The] patent process benefits when interaction between the applicant and the examiner are enhanced at the beginning of examination because patentability issues can be resolved early when the applicant and the examiner discuss them one-on-one. For the applications involved in the initial pilot, the First-Action Allowance rate increased six-fold when compared to applications from the same technology area not involved in the pilot. . . .

Currently, an applicant may request an interview prior to a first action. Granting of an interview is within the discretion of the examiner who has not yet reviewed the case, and the applicant may be required to identify relevant documents and explain how the invention is patentable over these documents.

Under the expanded pilot program, the examiner will conduct a prior art search and provide the applicant a pre-interview communication, which is a condensed preview of objections or rejections proposed against the claims. Within 30 days from the issue date of the pre-interview communication, the applicant must either choose not to have a first action interview with the examiner, or schedule the interview and file a proposed amendment or remarks (arguments).”

Details: http://www.uspto.gov/web/offices/pac/dapp/opla/preognotice/faipp_v2.htm.


Bilski Briefs: Supporting the Government (In Name)

UPDATE: More briefs added Oct 5, 2009, 11:30 am

The final round of amicus briefs have been filed in the pending Supreme Court case of Bilski v. Kappos. Mr. Bilski is appealing the Federal Circuit's en banc rejection of his patent application. In that decision, the court held that Bilski's claimed method of hedging risk did not qualify as patentable subject matter under 35 U.S.C. 101 because the method was neither tied to a particular machine nor transformative of any physical article. Bilski challenges this "machine-or-transformation" test as unduly narrow. Bilski's legal position was supported in a large set of amicus briefs including a strong textualist argument made by Professor John Duffy.

Briefs supporting the government position have been filed. As summarized below, the vast majority of briefs also reject the Federal Circuit's machine-or-transformation test as the sole test of patentable subject matter for a claimed process. In my summaries, I have attempted to capture what I learned from each brief, of course the briefs and arguments are much more extensive and nuanced than my squibs suggest.

Electronic Frontier Foundation (EFF) and the Kauffman Foundation: Business method patents are harmful and should not be allowed. The long history of US patentable subject matter indicate that a patentable process must provide a technological advance. Likewise the mere fact that a process uses a machine or computer does not immediately render the process patentable subject matter. Rather to be patentable, the advance must be a technological advance. EFF etc amicus brief.pdf.

Red Hat: Software methods do not become patentable simply because they are tied to a computer. Benson. Download 08-964bsacRedHatInc.

William Mitchell College of Law IP Institute: This case does not properly present the issue of patentability of claims that include a mix of statutory and non-statutory subject matter. The court should wait for an appropriate case to decide that issue. Parsing Section 101 provides few real answers as to patentable subject matter. Download 08-964 William Mitchell College of Law Intellectual Property Institute.

SFLC (Moglen and Ravicher): Standing alone, software is not patentable. This result is derived from the Supreme Court's decision in Microsoft v. AT&T that “[a]bstract software code [uninstalled in a machine] is an idea without physical embodiment.” 550 U.S. 437, 449 (2007). Download 08-964 Software Freedom Law Center.

SIIA: The patent eligibility of software is well established and should not be disturbed. Download 08-964 Software & Information Industry Association.

Knowledge Ecology Int'l: The goal of the system is to encourage progress, not to reward inventors. Further, patent protection is not a "necessary policy intervention to reward successful investment in new medical technologies. . . . [M]any of the greatest medical advances have benefited significantly, and in some cases exclusively, from mechanisms that exist completely outside of the patent system." Download 08-964 Knowledge Ecology International.

Mark Landesmann: The evidence of the negative social impact of business method and software patenting is properly directed at the PTO's allowance of patents that were not substantially novel and that were not properly disclosed or claimed. There is no evidence that patents on novel, non-obvious and properly disclosed business-method process inventions create any harm. Download 08-964 Mark Landesmann.

Nevada State Bar Ass'n: The machine-or-transformation test harms emerging Nevada businesses – especially in the growing areas of solar energy, gaming, and digital communications. Download 08-964bsacintellectualpropertysectionnevadastatebar.

American Bar Ass'n: The court should use an incremental approach to excluding claims to subject matter where patenting does not make sense and creates a problem. Categorical limits such as the machine-or-transformation test may limit innovation. That said, the "[p]atent law should not interfere with the exercise of human intellect by granting a monopoly on processes in which thinking is central." A specific target of the ABA is to eliminate patents covering tax planning methods. Download 08-964 American Bar Association.

American Insurance Ass'n: Regardless of their novelty, insurance policies should not be the subject of patent protection – even when combined with a computer. Download 08-964 American Insurance Association.

Bank of America, Google, et al.: The patent laws should bar patentability of "accounting methods, tax mitigation techniques, financial instruments, and other means of organizing human behavior—or software used to implement those methods." Download 08-964 Bank of America et al..

Bloomberg: Limiting a method to use on a general purpose computer should not render the method patentable. Download 08-964 Bloomberg.

CCIA: It is important that the Federal Circuit eliminated the overbroad State Street test. The current tension in the patent system can largely be traced to that unprecedented over-expansion of the system. Tight limits on patentable subject matter are important because (inter alia) of the strict liability nature of patent infringement. "Tying patentability to physical subject matter is not a perfect solution. However, it limits the reach of patents in important ways that can significantly reduce the risks of inadvertent infringement and the scope of potential liability."Download 08-964 Computer & Communications Industry Association.

FFII: Patents on business methods have been considered and were rejected by the Statute of Monopolies in 1623. Patents greatly harm the Free & Open Source Software (FOSS) movement. Download 08-964 Foundation for a Free Information Infrastructure.

Professors Menell and Meurer: The Constitution creates a real limit on patentable subject matter – i.e., the subject matter of the patent must be within the "useful Arts." Economic evidence indicates that business method patents (especially internet related business methods) are harmful. 08-964 bsac Menell.pdf.

Law Professors and the AARP (Including Josh Sarnoff): Patents should only cover "inventions in the application." Patents can not cover "non-inventive applications of public domain science, nature, and ideas." The right interpretation of the statute requires that the invention "reside in the application, rather than in a discovery preceding or employed by it. This is because the science, nature, or ideas must be treated as if they are already in the prior art, i.e., are publicly known and free for all to use. Absent invention in applying such discoveries, there is simply no invention to patent." 08-964 bsac Brief of Eleven Law Professors and AARP.pdf.

Microsoft, Philips, and Symantec: Nobody (except Bilski) believes that his claims deserve patent rights. The machine-or-transformation test should not be seen as the exclusive test of patentable subject matter of a process claim – in part because the test has already "proven overly difficult to implement in practice." Like Professor Hollaar, Microsoft would simplify the test by requiring that the invention "involve one or more disclosed physical things." Today's computers – although complex – are not fundamentally different from Babbage's 1836 mechanical computer. Process claims that use computers should be patentable. Am Brief.pdf.

Professor Hollaar and the IEEE: Just restating the general principles of patentable subject matter is unhelpful. Rather, clear rules are needed – especially because the subject matter question is most frequently addressed by patent examiners who have little legal training and little time to ponder abstractions. A clear and time-tested rule would be: A process is patentable subject matter when it involves making or using a machine, manufacture, or composition of matter. This means that software method patents that require a computer would be patentable, but Bilski's method of hedging would not be patentable. bilski-sc-amicus.pdf.

American Medical Association: The machine-or-transformation test should not supplant the requirement that a patent claim "address a technology." A patent should not be allowed to cover "every possible application of a scientific observation." Rather, claims should be limited to "a particular new and useful application or use of the observation. The Supreme Court should use this case to make a statement especially directed to "overreaching claims in the life sciences. . . . Such patents chill research, and patents such as those in Labcorp and Prometheus chill talking and thinking of ideas by making talking and thinking into a tort." 08-964 bsac The American Medical Association.pdf.

Adamas Pharma and Tethys: Section 101 should be interpreted in a way that is objective, predictable, and not duplicative of the other patentability requirements. The machine-or-transformation (MoT) test does not meet any of these requirements. The Federal Circuit test also violates US treaty obligations under TRIPS and NAFTA and potentially subject the US to trade disputes adjudicated at the World Trade Organization (WTO). Under these US-initiated treaties member countries agreed to offer patent rights "in all fields of technologies." A major purpose of the agreements was to ensure that countries offered a full scope of patent rights, and by limiting the scope of rights, the US "will no longer be able to credibly argue in Special 301 trade disputes that failure to protect healthcare inventions made by cutting-edge U.S. companies constitutes inadequate protection of intellectual property rights." Some Congressional intent can be gleaned from the legislative history of Section 287(c) of the patent act. As originally proposed, that provision would have limited the subject matter eligibility of medical and diagnostic methods. After some debate, a compromise was reached to continue to allow their patenting, but to limit the remedies available. 08-964 bsac Adamas Pharmaceuticals.pdf.

Robert Sachs and Daniel Brownstone: Software should be patentable and has been for a long time. The Federal Circuit test greatly confuses the issue. Although software is an abstraction from the physical world, it is not "abstract." SF-5270929-v1-Bilski_v_Doll_Amicus_Brief_of_R_Sachs_and_D_Brownstone_as_amici_curiae_2009-08-06.PDF.

Big Internet Retailers, including Crutchfield, Overstock, and LL Bean: Patent Trolls are hurting online retailers and one way to stop them is to eliminate business method patents (including software business method patents). In effect, business method patents amount to a tax on Internet commerce. (The companies don't mention – unlike offline retailers – internet companies are often exempt from paying sales tax…) Internet Retailer Amicus Brief.pdf.

Brief of CASRIP (U. Washington): The US Constitution sets a bound on the scope of patentable subject matter – limiting them to the Constitutionally proscribed "useful Arts" as that term was understood at ratification. For new methods, one key is to consider the purpose of the method. Methods of entertaining a cat using a laser and telling a joke into a microphone should not be patentable regardless of their tie to particular machines because neither of those functions have ever "been considered a useful Art, and surely . . . is not the kind of discovery that the Patent Clause contemplates." Some methods also exist that should be patentable even though they fail the machine-or-transformation test. Despite its problems, the machine-or-transformation test is "superior to its competitors in filtering out preemptive claims to basic principles." However, it should not be the sole test of eligibility. Bilski's claim is unpatentable because hedging against price inflation (the purpose of the method) is not within the useful Arts. CASRIP am cur brf.pdf.

PTO Deputy Director: Sharon Barner

The USPTO has announced that Sharon Barner of Foley & Lardner has agreed to become Deputy Director of the USPTO. Barner is the head of Foley’s large IP department and has been a supporter of Obama since his youthful days in the Illinois legislature. As was the case with Kappos, Barner will be taking an extreme pay cut, opening herself to public criticism; and moving to DC. She should be applauded for her willingness to become a public servant. Under the law, the USPTO Director has the power to nominate his Deputy, but the actual appointment is done by the Secretary of Commerce (Locke).

The patent office has substantial problems that need to be addressed and that would be addressed regardless of who is in charge at the PTO. The benefit of Kappos & Barner is that have decades of patent law experience and are both committed to building a better patent system for the long-term. They understand how patents are actually used and the motivation behind patentee actions. Hopefully, this means that the eventual changes to the system will be more successful; have fewer unintended consequences; and be less likely to unduly antagonize those already invested in the system.

Barner was on my (rather long) short-list of potential Federal Circuit nominees to replace Judge Schall who is moving to Senior Status next week. Many members of the patent litigation bar are calling for a district court judge to be nominated. Judge Kathleen O’Malley (N.D. Ohio) likely tops the list along with Judge Patti Saris (D.Mass.).


Another University Patent Ownership Dispute: Stanford Loses Rights Based on Researcher’s Side Agreement

Stanford v. Roche (Fed. Cir. 2009) 08-1509r.pdf

Using federal NIH funding, Stanford scientists developed and patented a method of using PCR to measure HIV virus concentration in blood plasma. The development was done in partnership with the PCR leader Cetus. The Cetus PCR business was later purchased by Roche, and Stanford subsequently offered to license the patent rights to Roche (for a substantial royalty). After negotiations stalled, Stanford sued Roche for patent infringement. Roche claims that it has ownership rights or – at least – shop rights to the patents based on its acquisition of Cetus’s PCR assets. The district court (Judge Patel, N.D. Cal.) rejected Roche’s claim of rights, but did find the patents invalid as obvious (on summary judgment).

Roche’s Ownership: Roche raised ownership rights both as a counterclaim and as a defense. The district court held those claims barred by California’s statute of limitations. On appeal, however, the Federal Circuit held that the general statute of limitations does not operate to block defenses in litigation. Rather, “[u]nder California law, a defense may be raised at any time, even if the matter alleged would be barred by a statute of limitations if asserted as the basis for affirmative relief.” (Quoting Styne v. Stevens, 26 Cal. 4th 42, 51 (2001)). Likewise, the statute of limitations to claiming rights does not apply when ownership is raised as a challenge to a plaintiff’s standing to sue. “It is well settled that questions of standing can be raised at any time and are not foreclosed by, or subject to, statutes of limitation.”

The law of patent ownership is somewhat complex because it involves a mixture of state law (or the law of the local jurisdiction) and federal law. State contract law serves as the baseline, but federal law (esp. Federal Circuit law) creeps into many situations. Here, for instance, the Federal Circuit has held that the “question of whether contractual language effects a present assignment of patent rights, or an agreement to assign rights in the future, is resolved by Federal Circuit law.”

One of the listed inventors first signed an agreement with Stanford – promising to assign any future inventions that emerged from his employment. Later, the inventor signed an agreement with Cetus agreeing “to hereby assign” his interests. Under Federal Circuit law, these two contracts are treated differently. And, although the Cetus agreement came later, the company could claim equitable title immediately at the moment of invention while Stanford needed to actually obtain an assignment. The company also automatically held legal title in the patent application at the moment it was filed. (The inventor did not sign an assignment to Stanford until after filing).

“[B]ecause Cetus’s legal title vested first, Holodniy no longer retained his rights, negating his subsequent assignment to Stanford during patent prosecution.”

Recordation of Rights: Patent ownership regularly transfers without the new owner recording the assignment with the USPTO. Recordation is not required, but it does offer some benefits. Notably, where two entities both claim ownership (as there are in this case), a second assignee can hold title if it records first.

A [prior] assignment . . . shall be void as against any subsequent purchaser or mortgagee for a valuable consideration, without notice, unless it is recorded in the Patent and Trademark Office within three months from its date or prior to the date of such subsequent purchase or mortgage. 35 U.S.C. 261

One caveat in the statute is that the subsequent assignee must be a bona fide purchaser – i.e., take “without notice” and pay “valuable consideration.” Here, the Federal Circuit found that Stanford was at least on inquiry notice of the relationship between the inventor and Cetus and the potential for a rights-transfer.

Standing:

Stanford cannot establish ownership of Holodniy’s interest and lacks standing to assert its claims of infringement against Roche. Thus, the district court lacked jurisdiction over Stanford’s infringement claim and should not have addressed the validity of the patents. The district court’s grant of summary judgment of invalidity is therefore vacated, and the case is remanded with instructions to dismiss Stanford’s claim for lack of standing.

Notes:
  • Stanford would have won the case (at least the ownership issue) if it had written its employee agreement to automatically transfer rights upon creation of the invention. Best practices in patent law dictate that patent ownership (and right to sue) be always maintained in a single entity.
  • In Gerber Scientific Int’l v. Satisloh AG, No. 3:07-CV-1382, (D. Conn., September 25, 2009, order) (P. Dorsey), the court held that the assignment of patent rights in the original case did not include later-filed continuations-in-part (CIPs). “Although courts have found variously worded assignments to include CIPs, Defendants are correct that there is no binding precedent holding that an assignment with the exact terms cited above includes CIPs.” The Court has certified that issue for interlocutory appeal to the Federal Circuit who will likely hear the case. [Zura]