November 2009

In Defense of Software Patents

Guest Post by Martin Goetz

 

This article is in response to the editorial “Abandoning Software Patents” by the Ciaran O’Riordan, Director of End Software Patents (posted on PatentlyO on November 6, 2009) which had as its premise that one is trying to protect “software ideas”.

 

I wrote this article from a unique perspective as the holder of the first Software Patent in 1968 and with a long history of involvement in the protection of software thru patenting and copyright protection. I am recognized as a pioneer in the Software Products Industry and had a successful career at Applied Data Research (ADR), the first company to market a software product. ADR and I were also directly involved in the filing of amicus briefs in the Prater & Wei, Benson, Johnson, Flook, and Diehr cases. More background information and links to my memoirs are in Wikipedia at http://en.wikipedia.org/wiki/Martin_Goetz.

 

Since the 1960s I have been a strong advocate of the patenting of inventions implemented in software and in 1968 I received the first US patent for an inventive way of sorting data on a digital computer[1]. At that time there was controversy over whether software was patentable subject matter and that controversy continues today 41 years later. Although the Supreme Court has previously stated that software is patentable subject matter[2], those rulings could be upset by today’s Supreme Court judges in the Bilski case.

 

This article does not argue for or against the patenting of BPMs. Rather, it tries to explain why inventions implemented in software are well within current US Patent Law[3] using examples and analogies that I believe are irrefutable. It also explains why software should be viewed a machine component of a general purpose computer (a machine).

 

 1. What is a Software-Related Invention? It is well recognized that whatever you can design in hardware circuitry (chips) can be developed in computer software (a computer program) to perform the same functions. Handwriting analysis, voice recognition, video frame analysis, data compression, language translations, artificial intelligence, searching techniques, network monitoring and security — to name just a few functions — are examples of where such implementations have been done in both hardware chips, in software, and a combination of both. The patents that have been issued in these nine areas represent inventions that are very-state-of-the art and not at all obvious. In particular, the analysis of handwriting and voice by a computer — whether in hardware circuitry or in software — is very complex and not at all obvious to one skilled in the art.
 
2. Hardware implementations versus software implementations. The choice of implementation for computer functions is a pure economic choice which mainly has to do with cost, speed, and flexibility. Patent applications normally show the preferred implementation and the patent must disclose the invention adequately for one skilled in the art. But the disclosure could be in the form of circuitry for a hardware implementation or a flow chart for a software implementation or a combination of both. Many professionals view software development as building a software machine. The life cycle of computer software is very similar to the life cycle of computer hardware. And its life span can be equally as long.

 

3. Software Product Companies[4] are High Technology Manufacturing Entities. In the 1980s with the advent of PCs, many new PC software companies called themselves Software Publishers. So are software companies more like publishers of books or more like manufacturers of machines? Based on my many years in the software Products Industry[5], here are my arguments why software product companies are manufacturers of high technology products. 

 

Many software products are state-of-the-art products developed in a very competitive, fast moving environment and require rapid response to meet user demand. Secondly, a great deal of capital is often required and many software companies are funded through private investments, venture capital, and through public offerings. Thirdly, there are active research and development activities within these companies. IBM, as an example has reported that it consistently spends well over one billion dollars in research and development specifically in the software area. Lastly, highly skilled personnel are employed in these companies and many have advanced Computer Science college degrees, including PhDs. And because of its complexity, many software products are built using software engineering disciplines.

 

There is six phases in the life cycle of software products: Definition, Design, Implementation, Delivery, Maintenance, and Enhancements. Let’s look a little closely at these phases and you will see how closely they resemble characteristics common to all manufacturing companies. Often, prior to the definition phase there is research as well as competitive analysis. During the definition phase software companies describe its functionality, its specifications, the environment in which it must operate, and its operating characteristics. During the design phase, it develops and defines all its interfaces, breaks down the functionality into modules, and does all the engineering so that the product can be properly implemented, maintained and enhanced during its lifecycle. During the implementation phase the software is debugged, tested, and goes thru quality assurance. During the delivery phase there is alpha and beta testing, documentation, installation, and training. Often software companies OEMs (Original Equipment Manufacturers) the product to other companies where the software becomes a component of a larger system and is re-packaged. During the maintenance phase the company warrants its workmanship, and guarantees the correction of errors and defects. Finally, during the enhancement phase the software is improved, enhanced, upgraded, and new models (releases) are announced.

 

Note these terms indicative of a manufactured product …..research, competitive analysis,  functionality, specifications, operational environment, operating characteristics, interfaces, modules, engineering, implemented, debugged, tested, quality assurance, alpha and beta testing, documentation, installation, training, OEM, component, system, re-packaged, maintenance, warrants, workmanship, guarantees, errors, defects, improved, enhanced, upgraded, and models.

 

It is obvious that software products are not “software ideas”. But is software more like publishing a book or more like manufacturing and maintaining a machine? And if it’s more like a machine how can the Supreme Court deny the patenting of inventions[6] in software?  

 

I believe the Courts should view software as a component of a general purpose computer (a machine) and that software transforms a general purpose computer into a special purpose computer (or machine).



[1] Patent # 3,380,029 Sorting System Issued April 23, 1968

 

[2] The Diamond vs. Diehr landmark decision by the Supreme Court in 1981 opened the door to the patenting of software when the court stated that “processes” were patentable, and that just because an invention used a formula, program, or computer, it was not necessarily unpatentable.

 

[3] The US Patent Law does not mention any industry or field of endeavor and it is generally accepted that “anything under the sun” can be patented.

 

[4]  The Software Industry is made up Software Product and Software Service companies and is recognized as one of the top three manufacturing industries in the world with 2008 revenues of over 700 Billion dollars. See http://en.wikipedia.org/wiki/Software_industry 

 

[5] My tenure in this Industry started in 1954. In 1959 I was one of its founders and spent almost 30 years at Applied Data Research (ADR), a publicly traded 200 Million software company that was acquired by Ameritech in 1986 and sold to Computer Associates (CA) in 1988. Many of ADR’s products initially developed over 30 years ago have been improved by ADR and CA and are still viable today. Today, I am a consultant and investor in software companies.

 

[6] An invention, in lay terms, can be a novel device, material, or technique which is new, inventive, and useful. It has been well established that machines, including computer hardware, contain patentable subject matter.

 

 

Patently-O Bits and Bytes No. 302

  • Texas Juries: Michael Smith reviews E.D. Texas patent trial verdicts for 2009 (thus far). Depending upon how you count, the score ranges “from 8-3-1 to 6-6-1 (depend[ing] on whether you count a post-jury selection grant of summary judgment or not).” [Link]
  • Judge Michel: A transcript of Chief Judge Paul Michel’s recent speech to the FCBA is now available through that organization’s website. [Link] In addition to announcing his retirement, Judge Michel argued strongly against a statutory right to appeal claim construction decisions. His discussion also touched on the fact that eight of the twelve Federal Circuit judging slots could open within the next 12-months. He suggests that the replacements should include (a) a district court judge and (b) a patent litigator who has extensive experience trying commercial cases in front of juries. Judge Michel suggested room for diversity on the court since all members are white and only 25% are women.
  • Appointing Judges: Regarding Federal Circuit appointments. The Obama administration is already focused on ensuring that minorities and women receive their share of appointments. In the words of Judge Michel, it is the Bar’s job to help “assure that the appointees to the Court are selected based on merit, on experience, on quality, on intellect, on intelligence, on energy, and not because they’re, you know, somebody’s cousin or whatever the other considerations might be.”
  • Concentration of Ownership: Hal Wegner and Justin Gray review the top 150 patent holders and reports on growing ownership concentration. [Link][See also Patent Prospector]
  • Written Description: Amicus Briefs in Ariad v. Lilly: Patent Docs Review the Briefs. [Link]
  • Presumption of Validity: Lucent v. Gateway: The Federal Circuit has denied Microsoft’s petition for rehearing. Microsoft is expected to file a petition to the Supreme Court focusing on the interpretation of Section 282′s “presumption of validity.” Microsoft questions whether that statute is properly construed to always require clear and convincing evidence of invalidity.
  • Presumption of Validity Redux: In a recent article, Scott Kieff and Henry Smith argue for a reduction in the presumption of validity. [Link]
  • Reexaminations: Reexamination Statistics: Of the 734 inter partes reexaminations that have been requested in the past decade, 498 (68%) are “known to be in litigation.” [Link]

Patently-O Bits and Bytes No. 302

  • Texas Juries: Michael Smith reviews E.D. Texas patent trial verdicts for 2009 (thus far). Depending upon how you count, the score ranges “from 8-3-1 to 6-6-1 (depend[ing] on whether you count a post-jury selection grant of summary judgment or not).” [Link]
  • Judge Michel: A transcript of Chief Judge Paul Michel’s recent speech to the FCBA is now available through that organization’s website. [Link] In addition to announcing his retirement, Judge Michel argued strongly against a statutory right to appeal claim construction decisions. His discussion also touched on the fact that eight of the twelve Federal Circuit judging slots could open within the next 12-months. He suggests that the replacements should include (a) a district court judge and (b) a patent litigator who has extensive experience trying commercial cases in front of juries. Judge Michel suggested room for diversity on the court since all members are white and only 25% are women.
  • Appointing Judges: Regarding Federal Circuit appointments. The Obama administration is already focused on ensuring that minorities and women receive their share of appointments. In the words of Judge Michel, it is the Bar’s job to help “assure that the appointees to the Court are selected based on merit, on experience, on quality, on intellect, on intelligence, on energy, and not because they’re, you know, somebody’s cousin or whatever the other considerations might be.”
  • Concentration of Ownership: Hal Wegner and Justin Gray review the top 150 patent holders and reports on growing ownership concentration. [Link][See also Patent Prospector]
  • Written Description: Amicus Briefs in Ariad v. Lilly: Patent Docs Review the Briefs. [Link]
  • Presumption of Validity: Lucent v. Gateway: The Federal Circuit has denied Microsoft’s petition for rehearing. Microsoft is expected to file a petition to the Supreme Court focusing on the interpretation of Section 282′s “presumption of validity.” Microsoft questions whether that statute is properly construed to always require clear and convincing evidence of invalidity.
  • Presumption of Validity Redux: In a recent article, Scott Kieff and Henry Smith argue for a reduction in the presumption of validity. [Link]
  • Reexaminations: Reexamination Statistics: Of the 734 inter partes reexaminations that have been requested in the past decade, 498 (68%) are “known to be in litigation.” [Link]

Patently-O Bits and Bytes No. 302

  • Texas Juries: Michael Smith reviews E.D. Texas patent trial verdicts for 2009 (thus far). Depending upon how you count, the score ranges “from 8-3-1 to 6-6-1 (depend[ing] on whether you count a post-jury selection grant of summary judgment or not).” [Link]
  • Judge Michel: A transcript of Chief Judge Paul Michel’s recent speech to the FCBA is now available through that organization’s website. [Link] In addition to announcing his retirement, Judge Michel argued strongly against a statutory right to appeal claim construction decisions. His discussion also touched on the fact that eight of the twelve Federal Circuit judging slots could open within the next 12-months. He suggests that the replacements should include (a) a district court judge and (b) a patent litigator who has extensive experience trying commercial cases in front of juries. Judge Michel suggested room for diversity on the court since all members are white and only 25% are women.
  • Appointing Judges: Regarding Federal Circuit appointments. The Obama administration is already focused on ensuring that minorities and women receive their share of appointments. In the words of Judge Michel, it is the Bar’s job to help “assure that the appointees to the Court are selected based on merit, on experience, on quality, on intellect, on intelligence, on energy, and not because they’re, you know, somebody’s cousin or whatever the other considerations might be.”
  • Concentration of Ownership: Hal Wegner and Justin Gray review the top 150 patent holders and reports on growing ownership concentration. [Link][See also Patent Prospector]
  • Written Description: Amicus Briefs in Ariad v. Lilly: Patent Docs Review the Briefs. [Link]
  • Presumption of Validity: Lucent v. Gateway: The Federal Circuit has denied Microsoft’s petition for rehearing. Microsoft is expected to file a petition to the Supreme Court focusing on the interpretation of Section 282′s “presumption of validity.” Microsoft questions whether that statute is properly construed to always require clear and convincing evidence of invalidity.
  • Presumption of Validity Redux: In a recent article, Scott Kieff and Henry Smith argue for a reduction in the presumption of validity. [Link]
  • Reexaminations: Reexamination Statistics: Of the 734 inter partes reexaminations that have been requested in the past decade, 498 (68%) are “known to be in litigation.” [Link]

Ecuador’s Compulsory Licensing of Pharmaceutical Patent Rights

Under the TRIPS agreement member Nations can force compulsory patent licenses at their discretion. The 2001 Doha declaration clarifies this point: “Each member has the right to grant compulsory licences and the freedom to determine the grounds upon which such licences are granted.”pic-76.jpg

In October 2009, Ecuador’s president issued a decree that allows its Ministry of Public Health to issue compulsory licenses based on public interests such as access and costs. According to IP Watch, the government is now “working on a mechanism for issuing those licenses” on a case-by-case basis. [Link]

Spinning this decision, Access-to-Medicines advocate Peter Maybarduk indicated that the US is the world leader in compulsory licensing:

Many countries have used compulsory licenses to promote public interests and remedy anti-competitive practices in a variety of sectors. Today, the United States is perhaps the most frequent user of compulsory licensing; including the government use of defense technologies, and judicially-issued licenses to remedy anti-competitive practices in information technology and biotechnology, among others. Canada routinely issued compulsory licenses during the 1960s and 70s to develop its national pharmaceutical industry. In recent years, a number of countries have issued compulsory licenses to improve access to medicines, including Thailand, Malaysia, Eritrea, Mozambique and Indonesia, among others.

In 2007, Brazil issued a compulsory license for the HIV/AIDS medicine efavirenz. Brazil has provided treatment to hundreds of thousands of people living with HIV/AIDS and saved well over US$1 billion through its combined medicines strategy of domestic production, importation, negotiation and compulsory licensing. [Link]

Major pharmaceutical companies have reportedly agreed to work with the government in collecting royalty payments. [Link] The same report indicates that Ecuador plans to obtain drugs both through local manufacture and imports. Prior to TRIPS, more than four-dozen countries categorically refused to grant patent rights on pharmaceuticals.

Patently-O Bits and Bytes No. 301

Jobs Postings from the Past Week:

Interviewing Director Kappos: Tony Mauro writes a comical story about one reporter’s quest to interview David Kappos:

[W]hen ABA Journal senior writer Terry Carter got nowhere in his recent effort to reach Patent and Trademark Office director David Kappos . . . he decided on a characteristically novel approach: on Tuesday he drafted and posted a humorous patent application for a “method to get an interview with USPTO Director David Kappos.” Edward Adams, editor and publisher of the ABA Journal, wrote in this story at the Journal Web site, “We figured the problem was that Carter was not speaking the agency’s language.” [Link][Read the Application]

Next Federal Circuit Judges and en banc petitions:

  • There is currently one open slot on the Federal Circuit. In the interim, it should be statistically slightly easier to get the court to agree to an en banc rehearing. Instead of convincing seven of twelve (58%), now a successful petitioner need only convince six of eleven (55%).

Patently-O Bits and Bytes No. 301

Jobs Postings from the Past Week:

Interviewing Director Kappos: Tony Mauro writes a comical story about one reporter’s quest to interview David Kappos:

[W]hen ABA Journal senior writer Terry Carter got nowhere in his recent effort to reach Patent and Trademark Office director David Kappos . . . he decided on a characteristically novel approach: on Tuesday he drafted and posted a humorous patent application for a “method to get an interview with USPTO Director David Kappos.” Edward Adams, editor and publisher of the ABA Journal, wrote in this story at the Journal Web site, “We figured the problem was that Carter was not speaking the agency’s language.” [Link][Read the Application]

Next Federal Circuit Judges and en banc petitions:

  • There is currently one open slot on the Federal Circuit. In the interim, it should be statistically slightly easier to get the court to agree to an en banc rehearing. Instead of convincing seven of twelve (58%), now a successful petitioner need only convince six of eleven (55%).

Patently-O Bits and Bytes No. 301

Jobs Postings from the Past Week:

Interviewing Director Kappos: Tony Mauro writes a comical story about one reporter’s quest to interview David Kappos:

[W]hen ABA Journal senior writer Terry Carter got nowhere in his recent effort to reach Patent and Trademark Office director David Kappos . . . he decided on a characteristically novel approach: on Tuesday he drafted and posted a humorous patent application for a “method to get an interview with USPTO Director David Kappos.” Edward Adams, editor and publisher of the ABA Journal, wrote in this story at the Journal Web site, “We figured the problem was that Carter was not speaking the agency’s language.” [Link][Read the Application]

Next Federal Circuit Judges and en banc petitions:

  • There is currently one open slot on the Federal Circuit. In the interim, it should be statistically slightly easier to get the court to agree to an en banc rehearing. Instead of convincing seven of twelve (58%), now a successful petitioner need only convince six of eleven (55%).

Federal Circuit Chief Judge Paul Michel Announces that he is Leaving the Bench

Federal Circuit Chief Judge Paul Michel was the featured speaker at the November 20, 2009 Federal Circuit Bar Association Annual Dinner. At that dinner, Chief Judge Michel took that opportunity to announce that he will step-down as from the Bench at the end of May 2010. Although eligible for ‘senior status,’ Michel indicated that he plans to stop judging rather than take senior status.

The FCBA released the following statement:

The 25th Annual Federal Circuit Bar Association Dinner was a night to remember. The featured speaker, Chief Judge Paul R. Michel, announced that he would step down as Chief Judge and as a member of the judiciary, effective May 31, 2010. His moving speech rallied the community to serve and protect the Federal Circuit and the judiciary, as well as all institutions of governance. The record setting crowd included many of Chief Judge Michel’s colleagues, who honored him with several standing ovations.

Chief Judge Michel has been a tireless and passionate leader of the Court, as well as a friend of the Association and the broad spectrum legal community within its jurisdiction. Those attending were heartened by the Chief’s promise to continue his impressive career of public service after leaving the Court. We are confident that he will do so in new and important ways. His 21 years of service on the Court, capped by his tenure as Chief Judge, make for an enduring legacy on top of all his other accomplishments. We are proud to have shared his night with him and his wife, Brooke. We are confident of exciting new horizons for them both.

Judge Randall R. Rader, another great friend of the Circuit and its community, is next in line for Chief Judge. The Association looks forward to continuing its unwavering support for the Court and the next Chief Judge as the Circuit continues to write its history as the national court of appeals.

Federal Circuit Affirms EDTex Ruling that Iovate’s Muscle Building Patents are Invalid

Iovate & University of Florida Research Foundation v. Bio-Engineered Supplements & Nutrition 200911201103.jpg (BSN) (Fed. Cir. 2009) (Download 09-1018)

Iovate is the exclusive licensee of UF's patented method for "enhancing muscle performance or recovery from fatigue." Pat. No. 6,100,287. The method includes the single step of administering a coposition that contains a ketoacid and either a cationic or dibasic amino acid. Eschewing their home-state courts, the patentee filed suit in the Eastern District of Texas — alleging that BSN was selling infringing supplements.

On summary judgment, district court judge Ron Clark held the patent invalid as anticipated under 35 U.S.C. 102(b). The most relevant prior art was a series of advertisements found in Flex Magazine.

Each ad includes a list of ingredients, directions for administering the dietary supplement orally to humans, and marketing claims and testimonials from bodybuilders extolling the virtues of the product. . . . The ad also describes how the product is made, including the four steps used to isolate the protein components from milk whey; lists a price of $24.99; states that the product is available at GNC and other health food stores or by phone; instructs the user on the amount to take; and offers a manufacturer’s rebate of $5.00 for mailing in a coupon with proof of purchase before July 31, 1996.

Judge Clark ruled that the advertising served as proof that the invention public use and on sale under § 102(b) based on the fact that the ads "show an actual product and state that it is available for purchase in health food stores, gyms, or by catalog." The district court also held that the ads explicitly disclose "all of the limitations of the asserted claims, including each of the claimed chemical components as well as the stated function of oral administration to a human to speed muscle recovery."

Under § 102(b) a patent is invalid if "the invention was patented or described in a printed publication in this or a foreign country or in public use or on sale in this country, more than one year prior to the date of the application for patent in the United States."

On appeal, the Federal Circuit affirmed, but narrowed its grounds to focus only on the prior art as a "printed publication." Writing in a concurring opinion, Judge Mayer indicated that he would have found that the ads place the products "on sale" as well.

Iovate raised two arguments regarding the prior art. First, the patentee argued that the ads did not disclose each element in the claims because the preamble included the goal of "enhancing muscle performance" and while the ad merely touted promotion of "muscle synthesis and growth." The appellate panel not only rejected that argument, but also found that it "borders on the frivolous" since the specification and Iovate's briefs at the district court suggested that muscle growth was a proxy for enhancing muscle performance.

Iovate also argued that the ad was not sufficiently enabling as prior art. In rejecting that suggestion, the appellate panel held that "all one of ordinary skill in the art would need to do to practice an embodiment of the invention is to mix together the known ingredients listed in the ad and administer the composition as taught by the ad."

Affirmed.

This case leave open the question of when an advertisement would be evidence of public use or on sale.

Nil: The Value of Patents in a Major Crisis Such as an Influenza Pandemic

I have posted a short draft essay to SSRN that is being published in the Seton Hall Law Review as part of their annual Health Law Symposium. The overall topic of the symposium is Preparing for a Pharmaceutical Response to Pandemic Influenza. My discussion focused on the value of patent law in preparing for a health care crisis. Read the paper on SSRN.

Abstract: This essay focuses on the role of patents in relation to a potential global crisis such as an influenza pandemic or other public health crisis. I argue that patent rights will be largely ignored during an epidemic and that any post-crisis compensation would likely be low when compared to traditional patent rewards or settlements entered under threat of injunctive relief. In some situations, such as use of a patented invention by a state or local government, a patentee may have no recourse. Part III of the essay raises a separate issue that stems from the relatively long time frame for obtaining patent rights as compared with the time frame of an epidemic. Patent rights are only obtained through the typically slow process of patent prosecution. Consequently, innovation triggered by the onset of an epidemic might not be protected by patent rights until well after the crisis has abated. This realization suggests that the role of patents rests with providing incentives for longer-term preparation and follow-up, rather than with protecting innovations triggered by the specific crisis itself. Certain classes of innovations may be left without effective patent protection – such as anti-viral or anti-microbial treatments that are engineered only after isolating the offensive biologic agent. Optimistically, under this same formulation, patents may provide an incentive to ensure that a crisis is never realized. Part V of the essay recognizes that innovation still takes place in the absence of enforceable patent rights. A wide variety of incentives play a role in innovation policy, and reduced patent value will not end innovation.

Notes:

  • I posted some thoughts on this topic in a 2008 Patently-O post. Patently-O readers were helpful in providing guidance and suggestions based on that original post. Thank you!

Vacatur: Judge Posner Agrees to Vacate Inequitable Conduct Holding Based on Settlement Agreement

New Medium v. Barco (N.D. Ill. 2009)

Seventh Circuit Appellate Judge Richard Posner heard this case sitting by designation in the Northern District of Illinois. The final judgment is interesting in relation to the Federal Circuit’s recent refusal to vacate the district court’s opinion after the PTO retreated in Tafas v. Dudas.

In a 2008 decision, Judge Posner held New Medium’s asserted patents unenforceable due to inequitable conduct during ex parte reexamination of the patents. Notably, Judge Posner found that the inventor/owner Carl Cooper had made false statements to the PTO regarding his association with the expert who had submitted declarations in the reexamination. Notably, in his declaration to the PTO, Mr. Cooper stated that he had “never met or talked with any of these experts” prior to contacting them to submit reports. Judge Posner found that statement “false” since Cooper had solicited and paid for a bid from one of the experts (Klughart) seven years prior. Judge Posner also found that Cooper and Klughart’s testimony about forgetfulness difficult to believe: “I conclude that Klughart is not neutral and that his forgetfulness may be strategic. . . . Cooper testified that when he submitted his report in August of 2001 he had forgotten his prior dealings with Klughart. I do not believe that testimony. . . . I am also disturbed by the statement in Cooper’s brief that ‘Mr. Cooper didn’t think his past contact with Dr. Klughart was ‘material’ and that’s why he didn’t disclose it.’ That is an admission that Cooper lied in his declaration, though I imagine it [the admission] is unintended.”

Following Judge Posner’s decision, the parties decided to settle the case. As part of the settlement, Judge Posner issued an order vacating its prior inequitable conduct decision: “By agreement of the parties, the Court vacates its Order of October 16, 2008 (Docket 857) declaring United States Patents Nos. 5,424,780 and 6,529,637 unenforceable.”

Elimination of the inequitable conduct decision allows Cooper to continue to assert the patent. Ongoing defendants include Microsoft and Vizio. (See IP Innovation LLC v. Vizio, 08-cv-00393 (N.D. Ill.))

Patent on Tax Refund System Deemed Invalid under Section 101

H&R Block v. Jackson Hewitt (E.D. Tex. 2009)

E.D. Texas Magistrate Judge Love has recommended that H&R Block's advance-tax-refund patents be held invalid for failing to claim patentable subject matter under Bilski. The claims in question are all directed toward either a "computerized system" or "computer-implemented method." Quoting Nuijten, the court first held that Bilski controls both system and method claims – since a "court should not be 'overly concerned with pigeonholing subject matter once the court assures itself that some category has been satisfied.'"

The claimed invention involves issuing a cash-advance to income tax filers and then retaining a right to receive payment from the government.

The court held that none of the claims satisfied the particular-machine-or-transformation test. The "computerized system" claims did not identify a "particular, special purpose machine" that was more than "an insignificant, extra-solution component of the claimed invention." Likewise, the transformation of "tax return data" into a "spending vehicle" is not the type of transformation required under the test.

"At all steps in the claimed processes, the manipulated data represent legal obligations and relationships. However described, the data and resulting loan represent money. Although tangible in some forms, money is simply a representation of a legal obligation or abstract concept."

Claim 1 of Patent 7,072,862 reads as follows:

  1. A computerized system for distributing spending vehicles comprising:

    • a payment due from a governmental entity;
    • an assignable right to receive said payment from said governmental entity, said assignable right held by an individual;
    • a spending vehicle offered by a third party sponsor to said individual in exchange for at least a portion of said individual's right to receive said payment due;
    • an assignment of at least a portion of said individual's right to receive said payment to said third party sponsor in exchange for said spending vehicle;
    • wherein information associating said payment with said spending vehicle from said third party sponsor is stored in and retrieved from a computer to facilitate processing of said spending vehicle and said spending vehicle is issued to said individual in an amount for spending by said individual of said at least a portion of said payment, said governmental entity is electronically notified to transfer said at least a portion of said payment to said third party sponsor, and said at least a portion of said payment is received by said third party sponsor.

Post EBay Injunctive Relief

IP Today has published an interesting report on permanent injunction decisions since the Supreme Court’s 2006 decision in eBay v. MercExchange. The authors found 67 district court injunction decisions. 48 (72%) granted relief; 19 (28%) denied relief. The article highlights a number of cases where injunctive relief was denied even though the parties were market competitors. Unfortunately, the article does not indicate whether the parties were actually competing in the market influenced by the patent. (The article indicates that IMX v. LendingTree involves competitors.)

Ernest Grumbles, Rachel Hughey, and Susan Perera, The Three Year Anniversary of eBay v. MercExchange: A Statistical Analysis of Permanent Injunctions, Intellectual Property Today, November 2009 (behind a firewall).

Design Patents: Mueller & Brean

Professor Janice Mueller & Daniel Brean have posted a new working-draft article on design patent protection. The article argues "that courts and the USPTO have previously unrecognized flexibility in how they apply the nonobviousness requirement to designs." The authors recommend, inter alia, that courts (1) recognize that nonobviousness jurisprudence (e.g., KSR) has "very limited, if any, applicability to design patentability"; (2) plant patent patentability requirements serve as a better example; (3) the perspective of a non-expert ordinary observer should be used when considering nonobviousness; and (4) design anticipation should be limited to "strict identity situations."

Read the article here.

Patently-O Bits and Bytes No. 138: New Job Openings

Centocor v. Abbott: In June 2009, Centocor won a $1.67 billion judgment against Abbott based on the jury's findings that Abbott's arthritis treatment Humira infringes Centocor's U.S. Patent No. 7,070,775. In a post-trial verdict, Judge Ward has rejected Abbott's defenses of inequitable conduct and laches. An appeal to the Federal Circuit will follow. [MCSmith][Patently-O Discussion of the Verdict].

Medela v. Kinetic Concepts: The Supreme Court has rejected Medela's petition for certiorari. The petition challenged the notion that a jury should decide the legal question of obviousness. [Supreme Court Docket]

Design Patents: Functionality and a Trade Dress Gap Filler

Bissell Homecare v. Wildwood Industries (W.D. Mich. 2009)

This case is not likely to move much beyond the pleadings because the accused infringer (Wildwood) has declared bankruptcy. Wildwood sells replacement filters for Bissell vacuums. Earlier this year, Bissell sued Wildwood for infringement of its design patent (D565818) as well as trademark infringement for advertising “Bissell style” filters. [Link]. Of course, the validity of this design patent is questionable because the shape appears to be almost completely dictated by a need for the removable filter to fit within the standard compartment. “[I]t has long been settled that when a configuration is the result of functional considerations only, the resulting design is not patentable as an ornamental design for the simple reason that it is not “ornamental” – was not created for the purpose of ornamenting. In re Carletti, 328 F.2d 1020 (C.C.P.A. 1964); Hueter v. Compco Corp., 179 F.2d 416; Best Lock Corp. v. Ilco Unican Corp., 94 F.3d 1563 (Fed. Cir. 1996); Static Control Components, Inc. v. Lexmark Int’l, Inc., 487 F. Supp. 2d 830 (E.D. Ky. 2007).

In recent years (and in the wake of Wal-Mart v. Samara), design patents have begun be more aggressively asserted by manufacturers in place of (or alongside) trade dress claims. See Coach, Inc. v. Brown Shoe Company, Inc., 09-cv-05051 (S.D.N.Y., Complaint Filed May 29, 2009) (handbag); Hubbell v. Dynamic Lighting (light fixture); Deckers v. Bon-Ton (Kona Boot); NetGear v. Tong Ho Fong (wireless router); Nufix v. Bacterin Int’l. (surgical implant); Oakley v. Pacific Trade (sunglasses); Nike v. Not for Nothi’n (Air Jordan shoes); Poof-Slinky, Inc. v. Ja-Ru, Inc. (toy rocket); Lowes Co Inc, et al v. Pelican Products Inc (flashlight); Williams-Sonoma, Inc. v. Linen Source Inc (lamp – Indian design patents asserted in US court); Olivet International, Inc. v. Skyway Luggage Company (luggage wheel rims); Cartier et al v. Egana of Switzerland (watch); Plantronics, Inc. v. Wireless Connections NY, Inc. (earloop receiver); BELL HELICOPTER TEXTRON INC. et al v. ISLAMIC REPUBLIC OF IRAN et al (helicopter design).

  

A Brief Defense of the Written Description Requirement

by Michael Risch

The Federal Circuit’s upcoming consideration of Ariad v. Lilly has generated a fair amount of buzz among those who follow patent policy. The dispute arises from the interpretation of 35 U.S.C. 112 ¶ 1, which states in relevant part:

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….

All agree that this language includes an “enablement” rule, which requires that the specification enable a person having ordinary skill in the art (the PHOSITA) to make and use the invention. More controversial is the phrase, “written description of the invention,” and whether that phrase entails a separate requirement apart from enabling the PHOSITA to make and use the invention. It appears that academics are split on the question, and most practitioners appear to disfavor a separate requirement.

This essay briefly describes the dispute, and then raises an important but under-theorized argument in favor of a separate written description requirement. The essay accepts the persuasive grammatical reading of the statute proposed by opponents of a separate written description requirement. This reading suggests that a patent disclosure is sufficient so long as the PHOSITA can practice the invention.

However, while enablement is necessary to satisfy Section 112, it is not sufficient. The statutory language certainly requires that an applicant identify the invention sufficiently to allow a PHOSITA to make and use it. However, even if the specification enables a PHOSITA to practice the invention, the applicant is not relieved of the obligation to identify the invention. Instead, the specification must contain a “description of the invention” even if such description would only serve to reinforce other parts of the disclosure that enable one to make and use the invention.

This reading of the statute is consistent with the grammatical breakdown of Section 112. It is also the preferred interpretation, because a description of the invention fulfills an important purpose in the patent system. The requirement ensures that the applicant actually invented the claimed subject matter. Reading description out of the statute would allow patent applicants to claim subject matter they did not invent, and would effectively rewrite nearly 120 years of precedent about the conception of inventions.

This is certainly not the only argument in favor of a written description requirement; a strong written description requirement provides policy benefits in clarifying claim scope and policing patentable subject matter. This essay leaves such benefits to the side, and focuses only on the statutory basis for the rule.

Finally, the essay considers the Ariad case and concludes, perhaps surprisingly, that under the vision of written description presented in this essay the claims at issue may well be described.

The remainder of the essay is available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1504631.