November 2010

An Objective View of Fault in Patent Infringement

By Jason Rantanen

In GlobalTech v. SEB, the Supreme Court is addressing the question "[w]hether the legal standard for the state of mind element of a claim for actively inducing infringement under 35 U.S.C. § 271(b) is "deliberate indifference of a known risk" that an infringement may occur...or instead "purposeful, culpable expression and conduct" to encourage an infringement.”  Yet, as I suggested last month, perhaps framing the issue as an involving an inquiry into the subjective state of mind of an accused inducer isn't the best approach.  Instead, I propose that an analysis akin to civil recklessness - asking whether a high risk of infringement of a valid patent would have been obvious to a reasonable person in the accused party's position - is the better way to view the fault component of indirect infringement.  

That's the central argument of a draft article that I've prepared, and I'm interested in any feedback readers might have.  The abstract is provided below; the complete paper is available here

Unlike direct patent infringement (a strict liability claim), indirect and willful infringement require the patent holder to demonstrate fault on the part of the accused infringer. The conventional approach to the fault elements of these doctrines views them as involving a subjective inquiry into the accused party’s state of mind. Inducement of infringement, for example, requires that the alleged infringer possess mental culpability for it to be found liable. The question presented by the Supreme Court’s recent grant of certiorari in Global-Tech v. SEB is the quintessential illustration of this conventional view, asking whether the “state of mind” of the accused party is one of “deliberate indifference” or “purpose.” This mens rea-based approach to fault is likely the product of indirect infringement’s origins as an adaptation of the tort theory of aiding and abetting, an intentional tort.

This paper asserts that this conventional view of fault for indirect infringement is inherently flawed, and is largely nonsensical in the modern context in which indirect infringement is assessed. In large part this is because fault in patent infringement, unlike the tort tradition in which it was developed, involves assessment of particular legal – as opposed to factual – consequences, consequences that are both rarely certain and unlikely to ever be desired.

Rather than continuing to view the fault elements of these doctrines as if they were traditional intentional torts, this paper proposes that the law should instead apply an objective test more closely tailored to the specific context in which patent infringement arises. Specifically, it suggests that a better approach is to conceive of the fault element as requiring an objective inquiry into whether a high risk of patent infringement would have been obvious to another in the accused party’s position. In addition to providing a more accurate and usable articulation of the fault element, viewing the question in terms of risk enables finer tuning of the doctrine when seeking optimal deterrence effects. Furthermore, this change would parallel recent shifts in the approach to fault in the context of willful infringement, and would be consistent with the actual normative standard being applied by courts.

 

Supreme Court to Decide Microsoft Patent Case that Could Make it Easier to Invalidate Patents

By Dennis Crouch

Microsoft Corp. v. i4i Ltd. (Supreme Court 2010)

The Supreme Court has granted Microsoft's petition for a writ of certiorari and will consider whether patent law requires clear and convincing evidence of invalidity in order to invalidate an issued patent. Microsoft asks that the standard be lowered – at least for the situation where the evidence of invalidity was not considered by the patent office before the patent issued. The Supreme Court has not directly ruled on the issue. However, in KSR v. Teleflex, the Supreme Court did note that the "the rationale underlying the presumption — that the PTO, in its expertise, has approved the claim — seems much diminished" in cases where the patentee "fail[ed] to disclose" the key prior art to the PTO.

I expect that the court will agree that the statutory presumption of validity does not require a clear and convincing standard and that the standard should be lowered when a court is presented with evidence that is substantially different from that considered by the USPTO. Without explanation, Chief Justice Roberts has recused himself from this case – leaving eight justices to decide. At this point, I expect that all members of the court will agree that the standard should be lowered with some disagreement on the exact rule.

Clear and Convincing Evidence: Felony criminal cases require that prosecutors prove their case beyond a reasonable doubt. Most civil cases only require a preponderance of the evidence – often referred to as "more likely than not." Thus, in patent infringement cases, the patentee need only prove that it is more likely than not that the defendant infringed. However, the Federal Circuit has long required that invalidity defenses be proven with clear and convincing evidence. The clear and convincing standard is somewhere between a preponderance of the evidence and beyond a reasonable doubt and is sometimes referred to as "substantially more likely than not." Microsoft has not directly challenged the CAFC's rule of corroborative evidence that a single person's testimony is never sufficient to invalidate a patent.

i4i's case: In 2009, an Eastern District of Texas jury awarded $200 million + interest to i4i after finding that Microsoft willfully infringed the Canadian company's patent. Judge Davis subsequently added-on $40 million for willful infringement. The judge also issued an injunction ordering Microsoft to stop selling Word Products with the capability of using "custom XML." That injunction was stayed by the Federal Circuit pending appeal. On appeal, the Federal Circuit affirmed the lower court's findings of validity, willful infringement, enhanced damages, and permanent injunctive relief. In the meantime, the USPTO has concluded its reexamination of the i4i patent — confirming that the claims at issue are patentable. Microsoft filed a second reexamination request in August 2010 (shortly after it filed its petition to the Supreme Court). However, on November 24, 2010, the USPTO denied the request to begin a new reexamination – finding that the newly asserted prior art failed to raise a substantial new question of patentability (SNQ) as required by statute. Microsoft will likely appeal that denial. In addition, Microsoft apparently patched its software to prevent someone from using custom XML in Word in an effort to avoid the injunction and any further damages.

Microsoft has now moved-on to the Supreme Court — asking the high court to reject the "clear and convincing" evidence standard for proving a patent invalid. As Microsoft wrote in its petition for writ of certiorari, the question is "Whether the court of appeals erred in holding that Microsoft's invalidity defense must be proved by clear and convincing evidence" when the prior-art was not considered by the USPTO. This is essentially the same question that Microsoft raised in its 2008 petition in z4. That petition was withdrawn after the parties settled.

The Patent: i4i's asserted patent (U.S. Patent No. 5,787,449) covers a system for editing the metacodes of an HTML or XML document. The system uses a metacode map that is stored separately from the XML document and provides a menu of potential metacodes. The patent application was filed in 1994 and should remain in-force until 2015.

Microsoft's Invalidity Argument: Microsoft was not able to uncover any prior publication or patent that would invalidate the invention. However, the software giant argued at trial that i4i had sold an embodiment of the invention in the US more than one year prior to the 1994 patent application date. In particular, Microsoft argues that the invention was "embedded in a system called S4 - that the inventors of the ′449 Patent developed and sold to SEMI, a client of i4i's predecessor, over a year before applying for the ′449 Patent." That sale was not disclosed to the USPTO during the original prosecution and could not be presented during reexamination because reexaminations are limited to a review of prior art patents and publications. At the trial, the inventors (Vulpe and Owens) testified that the S4 system did not include a metacode map or separate the map from the marked-up document – two key features of their invention. Because the source-code for the 1993 custom software was no longer available, Microsoft primarily relied on testimony from a former i4i employee and upon written statements that Vulpe had made to investors and to the Canadian Government suggesting that the S4 software did separate metacode information.

The jury form asked "Did Microsoft prove by clear and convincing evidence that any of the listed claims of the '449 patent are invalid?" The jury answered "no." On appeal, the Federal Circuit held that the jury had sufficient evidence to rule that the patent was not anticipated by S4.

Importance of the Rule: A recent study conducted by Etan Chatlynne and published on Patently-O looked at all 119 Federal Circuit decisions on patent validity for the past several years. The study found that lowering the burden of proof would not have made any difference for 74% of those cases but might have made a difference in 26% of the cases. None of the decisions expressly stated that the result would be different if the standard had been reduced.

The clear and convincing standard probably has an important psychological impact in jury (and judicial) deliberations where the defendant's high burden for proving invalidity is contrasted with the plaintiff's lower burden for proving infringement.

Nuance Communications v. Abbyy Software

By Jason Rantanen

Cases involving foreign parties often raise complex procedural issues.  In this case, two of the defendants – a Russian corporation and a Cypriot corproration – argued that the district court lacked personal jurisdiction and that the plaintiff's attempts at service were insufficient.

Nuance Communications, Inc. v. Abbyy Software House (Fed. Cir. 2010)
Panel: Rader (author) Newman, Prost

In 2008, Nuance Communications sued Abbyy USA Software House, Abbyy Production, and Abbyy Software for patent infringement.  Abbyy Production, a corporation organized under the laws of the Russian Federation, and Abbyy Software, a Cypriot corporation, filed a motion to dismiss for lack of personal jurisdiction and improper service of process.  In a short order, the district court granted the motion and declined to consider Nuance's request for jurisdictional discovery by not addressing that issue.

On appeal, the Federal Circuit reversed the district court's ruling.  On the question of personal jurisdiction, the panel first noted that because this is a patent case, Federal Circuit precedent applies rather than that of the regional circuit.  The overarching analysis, however, focused on the traditional "minimum contacts" approach: "whether the defendant purposefully established 'minimum contacts' in the forum state."  Because the question in this case was one of specific jurisdiction, it thus required examining:

(1) whether the defendant purposefully directed activities at residents of the forum; (2) whether the claim arises out of or relates to those activities; and (3) whether assertion of personal jurisdiction is reasonable and fair.

Slip. Op. at 8.  Applying this test, the majority concluded that the district court had erred in dismissing Abbyy Production and Abbyy Software.  With respect to Abbyy Production, the appellate court noted that the defendant had engaged in a variety of activities directed at California, including its distribution of the allegedly infringing software to Abbyy USA, a California entity.  These activities also satisfied the second prong, as Nuance alleged in its Complaint that Abbyy Production's importation of the software into California infringed and induced infringement of the patents-in-suit.  The panel further found that the third prong was met, noting that even beyond the fact that Abbyy Production purposefully targeted activities at the forum state, it and Abbyy USA operated under a shared management team and were represented by the same counsel.

The panel declined to conduct a similar analysis for Abbyy Software, concluding that the extent of its involvement in sales of the accused product was uncertain on the facts before the court.  Consequently, the court remanded for additional jurisdictional discovery.

The Federal Circuit also reversed the dismissal based on improper service of process.  After a lengthy discussion of the applicability of Hague Convention procedures to service of process on corporations in the Russian Federation, the panel declined to opine on whether personal service on corporations was permissible in this case.  Rather, the court held that permitting substituted service under Federal Rule of Civil Procedure 4(f)(3) was called for here, and service on Abbyy USA would be sufficient to satisfy constitutional notions of due process for service on Abbyy Production. 

Note: The panel also reversed the district court's sua sponte dismissal of Abbyy Software for improper service of process, noting that the court lacked authority to do so because Abbyy Software had waived the objection.

Liability for Future Indirect Infringement

By Jason Rantanen

In an earlier post, I summarized the Federal Circuit's affirmance of a preliminary injunction prohibiting Apotex from marketing its generic version of AstraZeneca's budesonide in AstraZeneca LP v. Apotex, Inc

The majority's discussion of inducement of infringement in this case is particularly interesting because it deals with inducement of infringement in the context of future acts, as opposed to damages for past inducement – and when dealing with future infringement, it's unclear whether an intent element should apply to indirect infringement at all.

Apotex Had Specific Intent to Cause Infringement
In its opinion affirming the district court's preliminary finding of inducement, the Federal Circuit rejected Apotex's argument that it lacked specific intent to cause infringement, concluding that Apotex knew about potential infringement problems posed by its label but nevertheless decided to proceed nonetheless.  Similarly unpersuasive to the court was Apotex's argument that it lacked specific intent because the FDA required it to include the pivotal titration language.  The majority pointed out that Apotex had a variety of options besides proceeding in the face of a risk of an infringement suit, including waiting until the patents expire, challenging infringement and validity, and formally appealing the FDA's denial of Apotex's proposed labeling amendment.  Given these circumstances, the court concluded that Apotex had the necessary specific intent to cause inducement.

Is Intent to Cause Infringement Even Relevant When Dealing With the Future?
The court's ruling, however, could be supported in another way: by concluding that inducement with respect to future acts of infringement does not require the patentee to establish that the accused party posessed "specific intent" to infringe the patent.   This is because when dealing with the future, there will necessarily be a court finding that the relevant third party conduct infringes. Inherent in the court's determination is the conclusion that once-daily use of Apotex's product – the use that the court concluded would result from Apotex's label – infringes AstraZeneca's patents.   In other words, once the court made this determination, AstraZeneca conclusively knew1 that patients taking its medication in a manner that it intended (i.e.: once daily) would infringe the method claims, and therefore continuing to engage in that conduct would satisfy the requrements of specific intent.  That Apotex may not want to infringe the patents is beside the point: its knowledge that the third party's conduct infringes, coupled with an intent to cause that conduct, is all that is required for this element of inducement, and for future acts those requirements would automatically be met. 

I'm not the first to identify this issue – Professor Timothy Holbrook made it few years back as well.  See Timothy Holbrook, The Intent Element of Induced Infringement, 22 SANTA CLARA COMPUTER & HIGH TECH. L.J. 399, 406 (2006).  Nevertheless, this is an instance where the argument that inducement of future infringement does not require the patent holder to prove specific intent to infringe could have been raised, and the parties apparently did not.

1 Note that this case involved a preliminary injunction, and thus the court's findings were necessarily non-final.  Thus one could argue that Apotex did not "know" that the future conduct would infringe despite the district court's preliminary determination of infringement because it could be subject to later change.   However, as in many pharmaceutical patent cases, the lower court's determination was made following substantial briefing and argument (along with a five-day hearing), and its reasoning was affirmed on appeal.  Furthermore, even in the preliminary injunction context, the focus should not be on the question of what Apotex thought in the past about infringement, but rather whether it would be substantially certain that the third party conduct would infringe in the future – an analysis that collapses into the district court's determination on the question of infringement.

Missouri Law Review Patent Law Writing Competition: $5,000 Award

The Missouri Law Review announces a student writing competition in association with its annual Symposium to be held February 25, 2011, at the University of Missouri School of Law. Submissions should fit with the symposium topic of "The Patent Jurisprudence of the Court of Appeals for the Federal Circuit." The winner will be awarded a $5,000 cash prize.

Eligibility: Submissions should follow the format of a case note or law summary cited in Bluebook style and must be submitted by January 14, 2011, via email to umclawrev@missouri.edu with the subject line "Patent Law Writing Competition." The submission must be between 20 and 30 pages and have at least 125 footnotes. The submission should be unpublished, and the author must be willing to publish the work in the Missouri Law Review. The competition is limited to current law students studying in a U.S. J.D. program. Current members of the Missouri Law Review are excluded from participating. Send questions to the Missouri Law Review at umclawrev@missouri.edu.

Deadline: Friday, 1/14/2011

Award: $5,000

Cross-Border Inventors

The number of inventors per patent has been steadily increasing over the past forty years. Patents issued during the past six months, have an average of 2.7 inventors per patent. In all, 68% of these patents list multiple inventors with 13% listing five or more inventors. Prior to 1990, most patents listed only one inventor.

I wanted to look at cross-border or transnational inventing. To do that, I pulled-up all patents that listed inventors from two or more separate nations. For this, I used the inventor's country of residence that is typically supplied when a patent application is filed. Patents with a US inventor (US patents) had an 8% rate of including a cross-border inventor. For US patents, Germany was the most likely country of residence for collaborators. Of the top-10 patenting countries, Japan had the lowest rate of cross-border inventorship at 3% while 48% of Swiss patents listed a non-Swiss inventor. The table below provides more comparative values.

Inventor Country 

Percent that Included Cross-Border Inventor 

Most Likely Country of Co-Inventor 

US 

8% 

Germany 

Japan

3% 

US 

Germany

20% 

US 

Korea

4% 

US 

Taiwan

10% 

China 

Canada

26% 

US 

Great Britain

36% 

US 

France

26% 

US 

China

38% 

US 

Switzerland

48% 

Germany 

Italy

22% 

US 

Israel

23% 

US 

Netherlands

33% 

US 

Australia

19% 

US 

[Updated] Assignees with the most cross-border patents include IBM, Microsoft, Hong Fu Jin Precision Industry (Shenzhen), Intel, Cisco, GE, Schlumberger, Nokia, HP, ExxonMobile, Novartis, and Infineon. Several readers e-mailed and correctly noted that continental European cross-border co-inventorship should be expected because many Europeans cross a border for their jobs. Apparently, Novartis' main building is in Basel Switzerland, but is so close to the border that one Novartis parking lot is actually in France. University of California has a large number of US-China co-invented patents that likely arise from Chinese graduate students seeking their PhD in the US.

Note on the data: The table above includes a classification for "inventor country." The "inventor countries" of a patent include all countries that are designated as the country of residence for at least one of the inventors. Thus, a single patent may be classified as both a US patent and a German patent if there were inventors from each nation. The inventors submit their country of residence as part of the patent application process. The country of residence may be different from the nationality or correspondence address.

Note on spelling: I injured my shoulder this past week and will now be typing with one hand for a while.

 

Final Draft of ACTA Released

By Jason Rantanen

Yesterday, the negotiating parties (which include the United States) released the final draft of the Anti-Counterfeiting Trade Agreement (ACTA), a document that purports to combat the proliferation of pirated and counterfeit goods.  The development of this Agreement has been subject to considerable controversy, in large part due to the secretive nature of its negotiation, which took place outside conventional International IP bodies such as TRIPS and WIPO.  The Electronic Frontier Foundation, for example, has written extensively about the subject, as has Michael Geist

In its final state, ACTA relates primarily to copyright and trademark infringement, and expressly disclaims application to patent law in several sections.  Nevertheless, everyone interested in intellectual property law issues should give it a read (and at only 24 pages long it's a surprisingly concise document), as within the area of trademark and copyright infringement the scope of ACTA is very broad: despite its characterization as a "Trade Agreement," it covers the enforcement of IP rights in the domestic civil, criminal, and digital spheres in addition to providing for border control measures, 

Although ACTA generally tracks existing U.S. law on copyright and trademark infringement, the Agreement has a clear pro-rights holder slant.  For instance, provisions on discovery discuss only the rights of the party asserting the infringement claim, and do not require similar rights on the part of the alleged infringer.  Readers may also want to pay particular attention to the criminal provisions – which seem on their surface to make any commercial willful trademark or copyright infringement subject to criminal penalties.

Given that this document likely will be scrutinized by scholars and practitioners concerned about the implications of strong copyright and digital property rights, I'll identify just a few specific drafting issues that leaped out at me.

  • "Trademark counterfeiting" and "copyright piracy" are broadly defined, and seem to include any form of trademark or copyright infringement.  In other words, these terms could be readily replaced with "trademark infringement" and "copyright infringement" wherever they appear in the document.  That said, the trademark counterfeiting language is somewhat ambiguous, and could plausibly be read to only apply to instances where the mark "cannot be distinguished in its essential aspects" from the registered trademark.
  • Another issue is the sudden appearance of "copyright or related right," which is first used in Chapter Two, Article 2.2(1).  Perhaps this is an artifact from earlier drafts, but I didn't see any definition of these "related rights."
  • The procedures for civil enforcement of IP rights largely appear to parallel U.S. law.  However, the damages provisions strongly favor rights holders, perhaps more so than current domestic copyright and trademark law. 
  • Similarly, to the extent the sections on litigation discovery procedures expand parties' rights and obligations, they may create a disjunction with current law.
  • In the context of border measures, the terms "goods of a commercial nature" and "goods of a non-commercial nature" are left undefined.  On the surface, it seems like nearly every good hs a commercial nature, but perhaps I'm just picking at nits with this one.
  • Likewise, the term "acts carried out on a commercial scale," used in the context of the section on criminal penalties, seems equally broad, especially given that it includes "at least those carried out as commercial activities for direct or indirect economic or commercial advantage."
  • The pro-rights holder forum and education campaign requirements seem quite one-sided, especially for such a sensitive subject.  Chapter Three, Articles 3.1(4) and 3.4 are particularly strong in their requirement that governments present a pro-IP rights holder message.

The full text of the proposed version of ACTA is available here:  Download Finalized ACTA text.  In addition to substantive issues, some organizations have raised concerns about the potential approval of ACTA via Executive Agreement, as opposed to ratification by the Senate.  If the former approach is indeed used, it will likely have profound legal implications that courts, practitioners and scholars will need to address.

Update: As one commenter pointed out, Terry Hart's blog Copyhype has a detailed point-by-point comparison of many ACTA provisions to the relevant U.S. law.  Mr. Hart also responds to some of the negotiation transparency criticisms that various organizations have raised. 

Guest Post: Copyrights, Patents, and International Exhaustion

By Professor Ryan Vacca

Last week, the Supreme Court heard oral arguments in Costco Wholesale Corporation v. Omega, S.A., to determine whether copyrighted works first sold in Switzerland and then imported into the U.S. infringed the copyright owner's right of distribution or whether the first sale doctrine (aka the exhaustion doctrine) applied to make the importation non-infringing.

The facts are fairly straightforward.  Omega is a watch company that manufactures watches in Switzerland.  Omega owns a copyright in a small visual image that is laser-engraved onto each Swiss-manufactured watch.  Costco, a U.S. warehouse retailer, acquired genuine Omega watches from a third party, who had purchased them from an authorized Omega distributor abroad.  Costco subsequently sold these watches in the United States.  Omega alleged that Costco's sale of these watches infringed its exclusive right to distribute copies of its copyrighted work under § 106(3) of the Copyright Act because § 602(a)(1) provides that:

Importation into the United States, without the authority of the owner of the copyright under this title, of copies … of a work that have been acquired outside the United States is an infringement of the exclusive right to distribute copies … under section 106.

Costco argued that its sales in the U.S. were non-infringing under the exhaustion doctrine codified in § 109, which provides:

Notwithstanding the provisions of section 106(3), the owner of a particular copy … lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy.

As I blogged earlier and others have discussed here and here, the Court is wrestling with what the phrase "lawfully made under this title" means in § 109 of the Copyright Act.

Costco argues that goods manufactured abroad can still fall within this phrase whereas Omega argues that goods manufactured abroad are not "made under this title" unless the goods are made or sold with permission from the copyright owner to import the goods into the United States. At oral argument, the Justices quickly pointed out the difficulties in these two interpretations on both a textual and policy level.

In contrast to the formidable task before the Court in the copyright context, patent law takes a relatively easier approach to the international exhaustion issue. The seminal Supreme Court case on international exhaustion under patent law is Boesch v. Graff, 133 U.S. 697 (1890). In Boesch, the plaintiffs held a U.S. patent and German patent for an improvement to lamp burners. The defendants purchased burners in Germany from Mr. Hecht, who was authorized to make these burners in Germany because of Germany's prior user defense (Hecht was not authorized by the patentees). When the defendants imported these burners into the U.S., the patentees sued for infringement. The defendants argued that their legal purchase in Germany from Mr. Hecht permitted them to import and sell them in the United States. The Court disagreed and held that although Mr. Hecht had a right to make and sell the burners in Germany under German patent law, this had no effect on the U.S. patentee's ability to enforce its U.S. patent in the United States.

Over a century later, the issue of international patent exhaustion arose again in Jazz Photo v. ITC, 264 F.3d 1094 (Fed. Cir. 2001) and Fuji Photo Film v. Jazz Photo, 394 F.3d 1368 (2005), where the Federal Circuit reaffirmed the Supreme Court's holding in Boesch and clarified that the exhaustion doctrine would not apply even if the U.S. patentee or its licensees authorized the first sale abroad. In other words, even if the U.S. patentee permitted the first sale in a foreign country, a subsequent attempt to import such an item into the U.S. would still constitute infringement. In support of its holding, the Federal Circuit noted that the U.S. patentee's "foreign sales can never occur under a United States patent because the United States patent system does not provide for extraterritorial effect."

Based on the dialogue between the Justices and the attorneys in Costco, it appears that the Court may be uncomfortable limiting the exhaustion doctrine in the copyright context solely to situations where the first sale took place within the United States. They seem to be struggling to articulate a standard that allows some foreign sales to take advantage of the exhaustion doctrine while giving the phrase "lawfully made under this title" some meaning.

If, in the end, the rule announced by the Court in Costco differs from the holdings in Boesch and Jazz Photo, then what effect may this have on the future of patent law's exhaustion doctrine? Of course, the Court could maintain a dual approach, where copyright exhaustion and patent exhaustion are treated differently. However, if presented with an international patent exhaustion case, the Court could rely on its Costco holding and try to align the copyright and patent rules. We have seen the Court take this approach recently in MGM Studios v. Grokster, 545 U.S. 913 (2005), when it created a new theory of secondary liability in copyright law (the inducement theory) by relying, in large part, on patent law's recognition of this theory via statute in § 271(a) of the Patent Act.

Another possibility for harmonization of copyright and patent law is that the Court takes its cue from patent law and hold that exhaustion in the copyright context only applies when the copyrighted works were first sold or otherwise distributed in the United States. If this disrupts the policy concerns underlying the exhaustion doctrine, then Congress can always step in to resolve this issue.

How Effective are Pre-Appeal Brief Conferences?

As part of its appeal rules package, the USPTO has released further information on the role of pre-appeal brief conferences in the prosecution process. As its name suggests, the pre-appeal brief conference program involves a meeting that occurs before an applicant files the formal appeal brief. The "conference" is an internal meeting between examiners and does not actually include the patent applicant or its representative. Rather, the applicant submits a short (5-page) memo that is reviewed at the conference. The program was introduced in FY2005 as a mechanism for helping to avoid unnecessary appeals.

The table below shows that the number of pre-appeal brief conference requests has been steadily rising since being introduced. The results have stayed relatively steady. During the five-year reported period. 56% of the pre-appeal brief conferences resulted in a decision by the conference members that the examiner's rejection was proper and that the case should proceed to the BPAI. 38% of the conferences resulted in the examiner withdrawing one or more rejections and then re-opening prosecution. 4% of the conferences resulted in a decision that all claims were patentable. And, 2% of the conferences rejected the pre-appeal brief conference request as defective.

FY

Number of Pre-Appeal Brief Conference Requests

Percent of Appeals

Proceed to Board

Reopen Prosecution

Withdraw Rejections

Defective Request

2006

6,525

24%

55%

37%

5%

3%

2007

7,240

25%

56%

38%

4%

2%

2008

8,255

27%

59%

37%

2%

2%

2009

9,967

30%

56%

39%

3%

2%

2010

12,019

34%

56%

38%

5%

1%

Prior to the pre-appeal brief conference program, a majority of appeals cases never reached the Board because the rejections were withdrawn after the applicant filed its formal brief. The pre-appeal brief conference program appears to have shifted that decisionmaking process forward. Now, examiners are much less likely than before to withdraw their rejections after an applicant files its formal appeal brief. That decision is made at a separate conference termed the appeal brief conference. In FY2010, the appeal brief conference resulted in a decision to file an examiner answer in 59% of cases. That is up from 39% in FY2005. Thus, the pre-appeal brief conference program does not seem to actually reduce patent examiner workload. However, it does help speed prosecution and allows a substantial number of applicants to avoid filing the formal appeal brief.

In an e-mail, Foley partner Stephen Maebius focused on the relative rates of re-opening prosecution. Pre-appeal brief conferences are relatively more likely to determine that prosecution should be re-opened (and presumably a new rejection issued). As compared with the pre-appeal brief conference results, appeal brief conferences are much more likely to determine that all rejections should be withdrawn. Maebius writes that "re-opening prosecution may increase the chance of lengthening a patent term adjustment, depending on the dates associated with earlier periods of the prosecution history. This may be an advantage where immediate issuance is not an objective and patent life is more valuable at the end of the patent term as in the case of pharmaceuticals. . . . On the other hand . . . filing a full appeal may be a better strategy when gaining immediate allowance is the objective."

PDF of Rules with Data: http://edocket.access.gpo.gov/2010/pdf/2010-28493.pdf

Untouchable: Sham Reexamination Requests

Lockwood v. SHEPPARD MULLIN (Fed. Cir. 2010) (nonprecedential)

Last week, I wrote about the Lockwood case involving allegations that Sheppard Mullin should be held liable for filing a sham reexamination request.  The district court had dismissed Lockwood's complaint — holding that there could be no federal cause of action for filing a sham reexamination request because, inter alia, that area is preempted by Federal Patent Laws. 

The Federal Circuit (Judges Newman, Plager, and Prost) has now decided the appeal — affirming the district court decision without opinion. (Rule 36).  Federal Circuit Rule 36 indicate that a panel may “enter a judgment of affirmance without opinion . . . [if] an opinion would have no precedential value.”  Here, the Rule 36 opinion is surprising given the lack of precedent on this topic, the obvious third-party interest in the outcome of the case, and the dramatic rise in the use of reexaminations over the past decade.

In the appeal, briefs amici were filed by the TPL Group (arguing that “nothing in the reexamination law … indicates that Congress intended to prevent patent holders from [pursuing a state law claim of unlawful business conduct] when a baseless request for reexamination is filed for the purpose of harming a competitor); Professor Hricik (arguing that liability should be available); NDP Managed Security (arguing that the suit is not barred by California law); and O'Melveny & Myers (arguing that the reexamination statute preempts a court action for sham filing of a reexamination).  Raymond Mercado (who previously worked for Lockwood) has written an academic article explaining his findings of extensive “reexamination abuse” by third-party requesters.  Mercado argues that patentee's subject to sham reexamination requests should certainly be able to bring an action under the common law tort of malicious prosecution. In addition, Mercado argues for a new federal cause of action.

This case opens the door to some amount of bad-behaviour in the filing of reexamination requests.  Patent attorneys who file sham-requests  can be sanctioned through the USPTO's Office of Enrollment & Discipline. However, an anonymous third party requester may be untouchable.

–  Dennis 

USPTO Proposes New Rules Intended to Streamline Appeals to the BPAI

In recent years, the Board of Patent Appeals and Interferences (BPAI or Board) has seen a tremendous influx in the number of appeals being filed and a growing backlog of cases to be decided.  In response, the Office is struggling for ways to streamline the appeal process without sacrificing decision quality.

The USPTO has now issued a new set of proposed rules for proceedings in Ex Parte Appeals before the Board.  This new set of rules is a major complete revision of the BPAI rules that had been proposed in 2008 and should be seen as operating in parallel to ongoing changes-in-practice at the BPAI announced earlier in 2010.

Comments on the proposed rules should be submitted to BPAI.Rules@uspto.gov by January 14, 2011.

* * * * *

Particular proposed rule changes include:

  • The Board will take jurisdiction over appeals as soon as the reply brief is filed, and examiners would no longer have an opportunity to respond to a reply brief.
  • Once it takes jurisdiction, a procedural remand of the case would require Director's approval.
  • The Board will presume that all pending claims under rejection are being appealed.
  • The Rules will no longer require certain statements that simply reiterate information already of record. (e.g., claims appendix and statement on the grounds for rejection).
  • An examiner's answer that includes a rejection based on new evidence will be designated as a new ground of rejection, and applicants will be allowed to delay the appeal in order to await a decision on a petition seeking review of an examiner's failure to designate a rejection in the answer as a new ground of rejection prior to filing a reply brief.

File Attachment: 2010.Appeal.Rules.Proposed.pdf (176 KB).

En Banc Federal Circuit Arguments in TheraSense and TiVo: Update

By Jason Rantanen

Update: Binal Patel from Banner & Witcoff was kind enough to provide Patently-O with a transcript that the firm prepared of the TheraSense oral argument.  It can be obtained here: Download Therasense v Becton – transcription

* * *

Today the en banc Federal Circuit heard arguments in TheraSense v. BD and Bayer (Inequitable Conduct) and TiVo v. Echostar (post-injunction infringement proceedings).  Audio of both arguments is now available via the Federal Circuit's website, and Bruce Wexler of Paul Hastings has written a summary of the TheraSense argument.

Discussion: Patent Prosecution Rates

A Patently-O Reader e-mailed with the hope of starting a discussion on the topic of patent attorney and agent fees for patent prosecution. 

He writes “large clients have … pushed down their rates, some in 2009 and some in 2010. In at least two cases, these are clients flush with incredible amounts of cash. Thus, this is not a problem of client-liquidity.” His clients have created rules that would block both a partner and an associate from billing on the same response. “To some clients, this appears to be two attorneys doing work that can be finished by a single attorney.” In addition, his clients are “unwilling to allow their prosecution to be used as a type of training exercise. They want the work done quickly, at the lowest cost. Being part of a training exercise does not achieve this purpose.”  In the background is the reality that there are “many unemployed or underemployed patent attorneys willing to do this work and do it effectively, at [under 2007] rates.”

Statutory Bar Prior Art in the Nonobviousness Analysis

I am continually troubled with disconnects between the text of 35 U.S.C. § 103(a) and its application by the courts. 

Section 103(a) defines the doctrine of nonobviousness and reads (in part) as follows:

(a) A patent may not be obtained . . . if the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains. . . .

A plain reading of the statute that considers the obviousness of an invention “at the time the invention was made.”  In its 1965 Foster decision, the Court of Customs and Patent Appeals (CCPA) made clear that “the existence of unobviousness under that section, as a necessary prerequisite to patentability, we reiterate, must be determined as of 'the time the invention was made' without utilizing after-acquired knowledge.”  343 F.2d 980 (CCPA 1965).

Despite that seeming clarity, in its obviousness analyses, the Foster Court (and subsequently, the CAFC) has given full 103(a) consideration to post-invention activities that qualify as prior art under Section 102(b).  The justification for this interpretation appears to come in the form of an estoppel that blocks inventors who “sleep on [their] rights more than a year after the invention has become entirely obvious to the public.”  Foster indicated that any other interpretation of the statute would be an interpretation that “Congress could not possibly have intended in view of its express indication that section 102(b) is merely a continuation of the prior law.” 

The leading opinion on-point is likely In re Corcoran, 640 F.2d 1331 (CCPA 1981) which was written by Judge Rich.  In that decision, the court held that the application of 102(b) prior art in 103(a) rejections “finds its statutory base in both of those sections.”  See also Lough v. Brunswick Corp., 86 F.3d 1113, 1121 n.5 (Fed. Cir. 1996); Baker Oil Tools v. Geo Vann, Inc., 828 F.2d 1558, 156 (Fed. Cir. 1987) (what was offered for sale before the critical date becomes a "reference under section 103 against the claimed invention").

Although the weight of precedent is on the side of the current rule, the current statutory-language-focused Supreme Court just might have a point of view.  Let me know if you get a test-case going.

See also, Rethinking the Scope of Prior Art in Obviousness Cases.

Patently-O Bits and Bytes

Patently-O Bits and Bytes

Sham Reexamination Requests and Federal Preemption

Lockwood v. Sheppard Mullin (Fed. Cir. 2010)

This is an interesting case that is pending before the Federal Circuit. The focus of the appeal is whether a patentee has any cause of action for a third-party's baseless filing of a reexamination request. The patent laws themselves offer no remedy so Lockwood turned to California State Court – alleging that the Sheppard Mullin law firm should be held liable for Malicious Prosecution, Interference, and Fraud by filing their reexamination request. Lockwood argues that "[Sheppard Mullin lawyers] chose to violate the strict duty of candor required before the USPTO by making deceptive misrepresentations about the nature of purported 'prior art' in two Requests for Reexamination. Respondents filed the Requests to gain a tactical advantage during infringement litigation, in furtherance of their stated aim of putting Lockwood 'out of business,' and without any reasonable basis in patent law."

The District Court granted a 12(b)(6) motion to dismiss – holding that the Federal Patent Laws and administrative structure of the USPTO preempted any cause of action in court against a sham reexamination request filed by a third party. Several law professors are involved with the litigation. Professor Jay Thomas (Georgetown) testified on behalf of Lockwood (stating that the PTO is "an agency in crisis" whose examiners are "overworked, overextended, undertrained, and underpaid"), and Professor David Hricik (Mercer) led a group of law professors who filed an amicus brief supporting Lockwood's position.

The leading Supreme Court case on the merits is Buckman Co. v. Plaintiffs' Legal Committee, 531 U.S. 341 (2001). In that case, the Court held that Buckman's state-law claim for fraud on the FDA was preempted by the Food Drug & Cosmetics Act because the "federal statutory scheme amply empowers the FDA to punish and deter fraud against the Agency, and that this authority is used by the Agency to achieve a somewhat delicate balance of statutory objectives." The FDA holds and actually asserts relatively greater power than the USPTO with respect to fraud on the office. As Professor Hricik writes, "since 1992, the Patent Office has not investigated inequitable conduct, and … cannot award civil damages or recover damages caused to the Office by frivolous filings."

Off the Cuff: One aspect of the law that is unclear to me is how this case differs from the ordinary prosecution malpractice situation. If the USPTO administrative and disciplinary structure preempts a civil action for patent attorney bad-behavior in reexamination filings, it seems that it would also preempt a civil against by a former client against an attorney broke USPTO ethical rules and injured his client. What is the difference?

Update: Raymond Mercodo forwarded a copy of his academic article: The Use and Abuse of Patent Reexamination: Sham Petitioning Before the USPTO.