July 2011

Reverse Bifurcation in Practice

By Jason Rantanen

Patent litigation can be particularly frustrating and inefficient when litigation costs far exceed the potential damages resulting from an infringement.  This issue is particularly problematic when the patent holder's expected litigation costs are significantly lower than those of the accused infringer, such as in the instance of the prototypical "patent troll," because under such circumstances the settlement value is largely driven by the expected cost of litigation to the accused infringer as opposed to the actual damages from the infringement, resulting in a windfall for the patent holder.

One strategy for addressing this issue – and for streamlining patent litigation generally – is to decide cheaper and easier issues early in the litigation process, a concept discussed by Dennis Crouch and Robert P. Merges in their article Operating Efficiently Post-Bilski by Ordering Patent Doctrine Decision-Making, 25 Berkeley Tech. L.J. 1673 (2010).  An example of the strategy is "reverse bifurcation," in which the damages phase is moved to the front of the litigation sequence with the goal of figuring out how much is really at stake.  This procedural move may be particularly appropriate in the case of patent holders who sue a large number of parties, including parties with relatively small potential damages pools, in the hopes of extracting the aforementioned undeserved rents. 

This approach was recently employed by Otter Products LLC in its suit with Gellyfish Technology of Texas.  Earlier this year, Gellyfish sued Otter and 36 other defendants for infringement of Patent No. 6,847,310.  After being served with the Complaint, Otter attempted to identify the products accused of infringing the patent, finding that only two of the products named in the Complaint were ever sold by Otter, and those products (which have since been discontinued) had trival sales with potential damages estimated in the $800-$1200 range. 

When Otter's settlement offer was rejected, it filed a motion seeking to sever itself from the existing case and requesting a "reverse bifurcation" procedure in the new matter so that damages discovery and trial would precede liability discovery and trial.  A copy of that motion is available here:  Download Gellyfish v Alltel Motion.  The motion appears to have had some effect: shortly after it was filed, Otter withdrew the motion citing additional discussions between the parties that suggested an amicable resolution.

While no order issued in response to Otter's motion, Otter's approach makes considerable sense.  From a judicial and party efficiency standpoint, forcing patent holders to identify the accused products early on during litigation may greatly simplify discovery and perhaps eliminate the need for a merits determination, which itself can be extremely complex.  It may also help to discourage patent holders from bringing suits in instances where the potential damages are minimal compared to litigation costs.  And forcing patent holders to think about a realistic universe of damages (as opposed to pipe-dreams of every product sold by the accused infringer) may encourage earlier settlement – as perhaps occurred here.

Note: Thanks to Robert Merges for pointing me to the Otter case and the EDTexweblog.com for background on the case

Federal Circuit: Isolated Human DNA Molecules are Patentable

ASSOCIATION FOR MOLECULAR PATHOLOGY V. MYRIAD GENETICS (Fed. Cir. 2011)

In a much anticipated decision, the Court of Appeals for the Federal Circuit has rejected the Southern District of New York’s court’s holding that could have rendered invalid all patents claiming isolated forms of naturally occurring DNA molecules. However, the decision is somewhat nuanced and will be appealed.

Judge Lourie drafted the opinion of the court that was joined in-part by the entire panel. Judge Moore drafted a concurring opinion that agrees with the conclusion that the isolated DNA is patentable but disagrees with Judge Lourie’s methodology for determining when an isolated compound is sufficiently “man made” to no longer be considered a natural phenomenon or product of nature. Judge Bryson concurred in part, but dissented on the issue of whether an isolated human DNA molecule should not be patentable. Judge Bryson writes:

We are therefore required to decide whether the process of isolating genetic material from a human DNA molecule makes the isolated genetic material a patentable invention. The court concludes that it does; I conclude that it does not.

Focusing here briefly on the majority opinion, the court made four specific holdings:

  • Affirmed: The District Court properly had jurisdiction over the case;
  • Reversed: The district court erred in holding that Myriad’s claims directed to isolated DNA were invalid;
  • Affirmed: The district court properly held that Myriad’s claims directed to comparing or analyzing gene sequences were invalid; and
  • Reversed: The district court erred in holding that Myriad’s claims directed to screening potential cancer therapeutics via changes in cell growth rates were invalid.

The result here is that Myriad’s BRCA Gene patents are somewhat damaged, but remain strong. The plaintiffs are likely to either request an en banc rehearing or immediately file a petition for a writ of certiorari with the Supreme Court. Myriad is likely to request a rehearing on the issue of subject matter jurisdiction.

[More to Come]

Documents: Read the 105 page decision here.

Essay: Not So Confidential: A Call for Restraint in Sealing Court Records

In a new Patently-O Patent Law Journal essay, Professor Bernard Chao argues that courts should do more to ensure public access to patent litigation documents. The Court of Appeals for the Federal Circuit already requires the parallel submission of non-confidential versions of any briefs filed under seal. Professor Chao argues that same approach could work in the district courts and would go a long way in solving the current problem of overly-sealed records. Read it while its hot:

Bernard Chao, Not So Confidential: A Call for Restraint in Sealing Court Records, 2011 Patently-O Patent L.J. 6.

Patent Licenses are Presumed to Cover Continuation Applications (Absent Clear Indication to the Contrary)

General Protecht Gp. (Zh. Dongzheng) v. Leviton Mfg. (Fed. Cir. 2011)

By Dennis Crouch

Note: This is an important case that clarifies a Federal Circuit rule of contract interpretation. The court holds here that a patent license will be presumed to cover continuation patents claiming priority to the licensed patent. Contracting parties can overcome this presumption by including within the contract “clear indication of mutual intent to the contrary.” This case should be read in conjunction with TransCore v. Electronic Transaction Consultants Corp., 563 F.3d 1271 (Fed. Cir. 2009). In TransCore, a seeming clear statement that the license did not “apply to any other patents [already issued] or to be issued in the future” was insufficient to overcome the presumption that future continuation applications were included within the license. In both TransCore and GPG, the presumption is derived both (1) from a reading of the terms of the written contract and (2) from equitable estoppel principles.

The case is also notable for its approval of the use of a preliminary injunction against the parties to stop proceedings occurring in a separate judicial forum.

* * * *

Background: In a prior lawsuit, Leviton sued GPG for infringing two of its circuit interrupter patents. Prior to trial, the parties settled and Leviton issued a covenant not to sue GPG or its customers on the patents-in-suit. The settlement also included a venue clause – indicating that any dispute would be “prosecuted exclusively in the U.S. District Court for the District of New Mexico.”

After the settlement, Leviton continued to prosecute continuation applications stemming from the original patents and, in 2010, filed complaints in both the International Trade Commission (ITC) and the Northern District of California against GPG for infringing two of the continuation patents.

In response, GPC filed a declaratory action in the New Mexico court and persuaded the judge there to issue a preliminary injunction barring Leviton from pursuing its claims in either the ITC or California. GPC argued that the prior settlement implicitly provides the company with a license to the newly issued patents and that, according to the prior settlement, any dispute regarding the license must be decided by the New Mexico court.

On appeal, the Federal Circuit affirmed lower court’s preliminary injunction.

This case presents a non-frivolous dispute regarding the scope of a patent license. The outcome of that dispute will determine whether the patentee can sustain its suit for infringement. Thus, there is no question in this case that the dispute “relates to or arises out of” the Settlement Agreement. The forum selection clause therefore applies, and the district court did not abuse its discretion in granting the preliminary injunction on that basis.

GPC’s implied license argument is non-frivolous based upon the Federal Circuit’s decision in TransCore v. Electronic Transaction Consultants Corp., 563 F.3d 1271 (Fed. Cir. 2009). In that caes, TransCore had previously settled a lawsuit that gave ETC (through MARK IV) a license to practice the patents in suit. The settlement specifically stated that the covenant not to sue “shall not apply to any other patents issued as of the effective date of this Agreement or to be issued in the future.” However, when TransCore’s continuation patent later issued, the Federal Circuit held that the new patent was also covered by an implied license and through legal estoppels. Here, the court found that the same principles apply.

From our holding in TransCore it reasonably follows that where, as here, continuations issue from parent patents that previously have been licensed as to certain products, it may be presumed that, absent a clear indication of mutual intent to the contrary, those products are impliedly licensed under the continuations as well. If the parties intend otherwise, it is their burden to make such intent clear in the license. It is well settled that parties are free to contract around an interpretive presumption that does not reflect their intentions.

Affirmed.

Note: The preliminary injunction issue (esp. irreparable harm) is to be discussed in a separate post.

Federal Circuit Judicial Watch

The Court of Appeals for the Federal Circuit is a twelve member court, but that membership has been undergoing major changes over the past few years.

Most recently, Judge Arthur J. Gajarsa has announced his plan to step away from active service and assume senior status at the end of this week. Judge Gajarsa's absence creates a second open seat on the court. Although Edward DuMont has been nominated to fill the other open seat (vacated by Chief Judge Paul Michel, it appears likely that DuMont's nomination will not move forward at this point. Earlier this year, Judge Jimmie V. Reyna was confirmed by the Senate. The court has typically been seen as only lightly-partisan according to traditional Republican-Democratic lines, however it is interesting to note that Judge Reyna's confirmation marks the first time in history that the majority of active judges on the court were nominated by a Democratic President. Judge Kathleen O'Malley also joined the court on December 27, 2010.

With the recent passing of Judges Archer and Friedman, the court only includes four senior status judges: Judges Mayer, Plager, Clevenger, and Schall. As mentioned, Judge Gajarsa will soon join the senior status ranks. In 2011, senior judges have participated in over 20% of Federal Circuit panel decisions. Judges Newman, Lourie, Bryson, and Dyk are all eligible for Senior Status and Judge Linn will be eligible on his next birthday. Although none of those five have publicly announced any intent to step down, many expect at least two more lines to open-up during the next year.

The current Chief Judge of the Federal Circuit is Randall Rader. The position of Chief Judge of the Federal Circuit is given to the most senior active member of the court who is less than 65 years old and who has not previously been Chief Judge. The term is seven years. If Judge Rader serves-out his entire seven year term, then the next Chief Judge will be Judge Kimberly Moore. If, however, he resigns at least a year early, then Judge Sharon Prost would take on the post at age 64.

Thanks also to Hal Wegner of Foley & Lardner who has been keeping tabs on the Court.

Federal Circuit Judicial Watch

The Court of Appeals for the Federal Circuit is a twelve member court, but that membership has been undergoing major changes over the past few years.

Most recently, Judge Arthur J. Gajarsa has announced his plan to step away from active service and assume senior status at the end of this week. Judge Gajarsa's absence creates a second open seat on the court. Although Edward DuMont has been nominated to fill the other open seat (vacated by Chief Judge Paul Michel, it appears likely that DuMont's nomination will not move forward at this point. Earlier this year, Judge Jimmie V. Reyna was confirmed by the Senate. The court has typically been seen as only lightly-partisan according to traditional Republican-Democratic lines, however it is interesting to note that Judge Reyna's confirmation marks the first time in history that the majority of active judges on the court were nominated by a Democratic President. Judge Kathleen O'Malley also joined the court on December 27, 2010.

With the recent passing of Judges Archer and Friedman, the court only includes four senior status judges: Judges Mayer, Plager, Clevenger, and Schall. As mentioned, Judge Gajarsa will soon join the senior status ranks. In 2011, senior judges have participated in over 20% of Federal Circuit panel decisions. Judges Newman, Lourie, Bryson, and Dyk are all eligible for Senior Status and Judge Linn will be eligible on his next birthday. Although none of those five have publicly announced any intent to step down, many expect at least two more lines to open-up during the next year.

The current Chief Judge of the Federal Circuit is Randall Rader. The position of Chief Judge of the Federal Circuit is given to the most senior active member of the court who is less than 65 years old and who has not previously been Chief Judge. The term is seven years. If Judge Rader serves-out his entire seven year term, then the next Chief Judge will be Judge Kimberly Moore. If, however, he resigns at least a year early, then Judge Sharon Prost would take on the post at age 64.

Thanks also to Hal Wegner of Foley & Lardner who has been keeping tabs on the Court.

Federal Circuit Judicial Watch

The Court of Appeals for the Federal Circuit is a twelve member court, but that membership has been undergoing major changes over the past few years.

Most recently, Judge Arthur J. Gajarsa has announced his plan to step away from active service and assume senior status at the end of this week. Judge Gajarsa's absence creates a second open seat on the court. Although Edward DuMont has been nominated to fill the other open seat (vacated by Chief Judge Paul Michel, it appears likely that DuMont's nomination will not move forward at this point. Earlier this year, Judge Jimmie V. Reyna was confirmed by the Senate. The court has typically been seen as only lightly-partisan according to traditional Republican-Democratic lines, however it is interesting to note that Judge Reyna's confirmation marks the first time in history that the majority of active judges on the court were nominated by a Democratic President. Judge Kathleen O'Malley also joined the court on December 27, 2010.

With the recent passing of Judges Archer and Friedman, the court only includes four senior status judges: Judges Mayer, Plager, Clevenger, and Schall. As mentioned, Judge Gajarsa will soon join the senior status ranks. In 2011, senior judges have participated in over 20% of Federal Circuit panel decisions. Judges Newman, Lourie, Bryson, and Dyk are all eligible for Senior Status and Judge Linn will be eligible on his next birthday. Although none of those five have publicly announced any intent to step down, many expect at least two more lines to open-up during the next year.

The current Chief Judge of the Federal Circuit is Randall Rader. The position of Chief Judge of the Federal Circuit is given to the most senior active member of the court who is less than 65 years old and who has not previously been Chief Judge. The term is seven years. If Judge Rader serves-out his entire seven year term, then the next Chief Judge will be Judge Kimberly Moore. If, however, he resigns at least a year early, then Judge Sharon Prost would take on the post at age 64.

Thanks also to Hal Wegner of Foley & Lardner who has been keeping tabs on the Court.

In Memory: Judge Glenn Archer

James Brookshire of the Federal Circuit Bar Association (FCBA) sent me a note today that Judge Glenn Archer has died. Judge Archer first joined the Court of Appeals for the Federal Circuit in 1985 after a career as a JAG lawyer, a private practitioner, and an Assistant Attorney General of the Department of Justice Tax Division. Judge Archer was born in my home state of Kansas and left to attend Yale in the late 1940′s. After Yale, he attended law school at George Washington in DC.

Judge Archer was Chief Judge of the Federal Circuit from 1994-1997 when he took senior status at the age of 68. His line on the court was not filled until 2000 when Judge Dyk was confirmed by the Senate. Judge Archer’s last opinion for the court was in January 2011 in a case captioned Wiley v. Merit Systems Protection Bd. Chief Judge Rader and Judge Gajarsa joined Judge Archer’s opinion holding that the MSPB had failed to properly follow the procedural requirements concerning a retired federal employee’s survivor annuity. As a senior judge in 1998, Judge Archer was tasked with drafting the majority opinion in the en banc case of Cybor Corp. v. FAS Technologies, Inc., 138 F.3d 1448 (Fed. Cir. 1998). His opinion, written in the wake of the Supreme Court’s Markman decision, held that claim construction was a “purely legal issue” subject to “de novo review on appeal.” That still-controversial decision has now been cited more than 8,000 times.

A 2008 IP Law & Business article discussed the close connection between Judge Archer’s former clerks. These clerks include Judge Kimberly Moore, Professor Tim Holbrook, Frank Angileri, and Teresa Lavenue.

The Court Released a Brief Statement

Patent Term Adjustment (PTA) Statistics

PatentLawImage002

The chart above shows the perecent of patents that are awarded some patent term adjustment (PTA) at issue.  I have highlighted a recent apparent downward trend that began around October 2010.  Still, around 80% of recently issed patents have lengthened patent terms due to patent office delays that go beyond the statutory bounds outlined in 35 U.S.C. 154.

The chart below shows the average PTA award, again grouped by issue date. The break-point in early 2010 shows the impact of the Federal Circuit's Wyeth decision holding that the PTO had been under-calculating patent term. The average PTA award is now hovering around 600 days (20 months). 

PatentLawImage003

Judge to PTO: Faster! Faster! Faster!

MONKEYmedia v. Apple (W.D. Tex. 2011)

In an interesting decision, W.D. Texas Judge Sam Sparks has ordered the USPTO to expedite the reexamination of the patents being asserted in litigation.

The case involves MONKEYmedia's U.S. Patent Nos. 6,393,158, 7,467,218, and 7,890,648 that all relate to seamless expansion and contraction of a multimedia experience. In July 2010, Monkeymedia sued a host of defendants for infringement. The defendants include Apple, Sony, Paramount, Walt Disney, Universal, etc. In December 2010, the defendants of the lawsuit jointly filed ex parte requests for reexamination for two of the patents and then in May, 2011 filed an additional request for the '648 patent that had newly issued.

In the first two cases, the USPTO has issued an initial rejection of the patent claims under reexamination – prompting the defendants to request a stay in the litigation. In a two-page order, Judge Sparks granted a temporary stay of the litigation (Until October 24, 2011).

The surprising ruling from Judge Sparks was an order directed toward the non-party USPTO directing the federal agency to expedite the reexamination of those patents. He writes:

The United States Patent and Trademark Office is ordered to expedite the reexamination of U.S. Patent Nos. 6,393,158, 7,467,218, and 7,890,648 and to advise the Court and the parties in these cases of its results prior to October 24, 2011. . .

[The USPTO] shall provide the results of its reexamination to the parties and the Court before the above date.

In an e-mail, New Hampshire University Law School professor Tom Field suggested that the court read the case of Singer Co. v. P.R. Mallory & Co., 671 F.2d 232 (7th Cir. 1982). In that case, the lower court had ordered the Patent Office to stay its proceedings regarding a particular reissue application. On appeal, the Seventh Circuit held that "enjoining the Patent Office was particularly inappropriate." Judge Sparks' ruling is potentially distinguishable from Singer. Here, Judge Sparks is not attempting to interrupt Patent Office procedure with an injunction, but only to speed-it-up.

Professor Field also points out that the Court should first establish jurisdiction over the PTO before ordering the agency to act.

Notes:

Prosecution History Estoppel: Defining a Foreseeable Alternative

Duramed Parmaceuticals (Teva Women’s Health) v. Paddock Labs. (Fed. Cir. 2011)

By Dennis Crouch

Note: This case supports the already accepted notion that the presumptive bar to the doctrine of equivalents created by a narrowing amendment during patent prosecution is very difficult to overcome.

Teva is the largest worldwide manufacturer of generic drugs. In this case, however, the tables are turned. In 2008, Teva purchased Barr and its subsidiary Duramed. In 2009, the company sued Paddock – alleging that the defendant’s application with the FDA to distribute a generic estrogen-derived hormone replacement constituted patent infringement under 35 U.S.C. § 271 (e)(2)(A).

(2) It shall be an act of infringement to submit – (A) an application under section 505(j) of the Federal Food, Drug, and Cosmetic Act … for a drug claimed in a patent or the use of which is claimed in a patent.

The asserted patent – No. 5,908,638 – covers Duramed’s Cenestin ERT product and appears to be set to expire in 2015.

Narrowing Amendment: During prosecution of the patent, Duramed amended narrowed its claim 1 in response to an office action rejection. The amendment took a limitation from a dependent claim and added it to claim 1 so that the independent claim now required that the pharmaceutical composition be “coated with a moisture barrier coating comprising ethylcellulose.”

In its abbreviated new drug application (ANDA), Paddock indicated its plans to use a barrier made of polyvinyl alcohol rather than ethylcellulose. So, when it sued, Duramed alleged infringement under the doctrine of equivalents (DOE).

Festo and Prosecution History Estoppel: The district court rejected the DOE claim – holding that Duramed was barred from claiming equivalents over the ethylcellulose coating based upon the doctrine of prosecution history estoppels. (Citing Festo).

On appeal, the Federal Circuit affirmed – holding that the district court had properly ruled the patent not infringed.

A patent is literally infringed only when the accused action or device meets all of the elements of the invention as defined by the patent claims. Long ago, courts added some leeway to the infringement analysis through the Doctrine of Equivalents. Through application of the DOE, infringement can be found even when the accused device is outside of the literal scope of a patent claim – so long as there is “equivalence between the elements of the accused product or process and the claimed elements of the patented invention.” Warner-Jenkinson Co. v. Hilton Davis Chem. Co., 520 U.S. 17 (1997).

DOE and PHE: The courts have limited the DOE in a number of ways. One of the most important limitations is that of prosecution history estoppel (PHE). In Festo and other cases, the courts held that it would be unfair to allow a patentee to use the DOE to recapture patent scope that had been voluntarily surrendered in order to acquire the patent.

The process for determining whether prosecution history estoppel applies first asks whether estoppels presumptively applies and then asks whether the patentee can overcome the presumption. Thus:

  • PHE is presumed when a patent claim is narrowed for reasons relating to patentability;
  • However, the presumption can be overcome by showing that the patentee did not intend to surrender the particular equivalent.

In Festo, the Supreme Court offered two specific arguments that could be used to overcome the presumption: (1) that the alleged equivalent would have been unforeseeable at the time the amendment was made; and (2) that the reason for the amendment only tangentially related to the equivalent in question. In addition, the Supreme Court noted that other explanations may also work to overcome the presumption.

Here, the Federal Circuit agreed that the presumption of PHE applied because Duramed had narrowed its claims in response to a prior art rejection. The court also agreed that Duramed had failed to overcome the presumption. In particular, the court held that the polyvinal alcohol alternative should have been foreseeable because it was already known to be used in other pharmaceutical compositions.

What is Foreseeable?: Courts will find an alternative “foreseeable” if it is known in the prior art pertinent to the claim scope before the amendment. This definition means that a foreseeable alternative is somewhat more broadly defined than is an obvious alternative. Here, Duramed argued that it was not foreseeable at the time of the amendment to use the polyvinal alcohol alternative in combination with the estrogen drug. On appeal, the Federal Circuit held that foreseeability for PHE analysis does not require such precision – rather, it was sufficient for the court that the alternative was known for use with other pharmaceutical compounds.

As we spelled out in Schwarz, when the language of both original and issued claims begins with the words “[a] pharmaceutical composition,” that language defines the field of the invention for purposes of determining foreseeability. Accordingly, PVA MBCs need only to have been known in the field of pharmaceutical compositions as of the time of Duramed’s narrowing amendment. . . . [F]oreseeability does not require such precise evidence of suitability. And even if the [prior art] disclosure indicates that PVA is less than ideal in some pharmaceutical uses as an MBC, it is still disclosed to be useful as such, and that renders it foreseeable for purposes of prosecution history estoppel. Foreseeability does not require flawless perfection to create an estoppel.

Because Duramed was unable to overcome the presumption, prosecution history estoppels applies to bar Duramed from asserting that the accused Polyvinal alcohol barrier is equivalent to the claimed ethylcellulose barrier.

The Frequency of Means-Plus-Function Claims

The chart above shows the continued decline in the use means-plus-function claim limitations in U.S. Patents. To create the chart, I identified a sample of patents for each year and then used an automated search query to count the percent of patents that use the phrase "means for" in the claim set. This chart is even more dramatic if you consider that the average number of claims-per-patent has dramatically increased during this same period.

Patents Citing More than 2,500 References

Over the past year-and-a-half, 52 utility patents have issued that each cite more than 2,500 references.  It turns out that the vast majority of those patents are owned by one company –  Personalized Media Communications. PMC's recently issued patents also have the dubious honor of each having been filed prior to the 1995 change in patent term. Thus, PMC's patents will remain in force 17 years from the date of issuance even though they were filed more than 16 years ago. 

The second major excessive citer is Pelikan Technologies. Pelikan's patents relate to diabetes diagnostic tools, including electronic lancing. The other companies with excessive citations of prior art include Abbott Diabetes, Aloft Media, Angiotech Pharma, and Bayer Healthcare.(I could not find any patents that issued from 2000 through 2009 that cited more than 2,500 references).

Assignee Name

Patents on List

References Cited (avg)

Patent Documents Cited (avg)

Non-Patent Literature Cited (avg)

Example Patent

Personalized Media Communications

38

2,810

1,284

1,526

7966640

Pelikan Technologies

9

3,239

3,239

0

7981056

Abbott Diabetes Care

3

2,866

2,303

563

7920907

Bayer Healthcare

1

2,510

1,005

1,505

7897623

Angiotech Pharmaceuticals

1

3,068

245

2,823

7820193

Aloft Media

1

3,255

3,006

249

7970722

Why do PMC's patents take so long to issue? First, lets talk about what did not happen: (1) PMC never needed to appeal an examiner rejection; (2) PMC never even received a final office action; and (3) the application was not held back because of a secrecy order. Rather, the problem seems to be that PMC filed too many applications in 1995. Since PMC was only a small company with a so many patent applications, the PTO decided that it should "coordinate" the examination of PMC's patents. The result appears to be simply that the PTO created excessive delay, including four PTO-initiated suspensions of prosecution and Office Actions penned by at least three different examiners.

In one case that I looked at, some of the key file-history entries include:

File Application with a preliminary amendment

1995

Second Claim Set Amendment

1996

Examination Suspended (At PTO's Request) to Consider the Plethora of PMC patents

1997

First Non-Final Office Action Rejection

1997

Third Claim Set Amendment

1997

Second Non-Final Office Action Rejection

1998

Fourth Claim Set Amendment

1998

Fifth Claim Set Amendment    

1999

Sixth Claim Set Amendment

2002

Third Non-Final Office Action Rejection (New Examiner)

2002

Seventh Claim Set Amendment

2002

Examination Suspended (At PTO's Request) to Consider the Plethora of PMC patents

2004

PMC Filed Petition to Cancel Suspension and Speed-Up the Examination

2005

Examination Suspended (At PTO's Request) to Consider the Plethora of PMC patent applications

2007

Examination Suspended (At PTO's Request) to Consider the Plethora of PMC patent applications

2008

Ex parte Quayle Action (With Proposed Amendment and New Examiner)

2009

Notice of Allowance

2010

Delay for additional Citation of References

2010

Issue

2011

Average Number of References Cited Per Patent

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What are the odds that the PTO’s new limited disclosure rules and the Federal Circuit’s Therasense and Excergen decisions will turn this trend around? How will patent prosecutors alter their disclosure protocol based upon these changes in law & procedure?

More information on the data: The chart above shows the average number of references cited by both Applicants and Examiners as shown on the face of issued patents.  The chart is based upon all original utility applications published during a given time period. For 2011, numbers are through 7/20/2011.  The chart is “stacked,” thus, the average 42 citations per patent in 2011 includes, on average, 7.5 citations by the examiner and 34.5 citations by the applicant.  In 2010 I created a similar chart that showed a potential downward trend for 2010.  This new data rejects that trend –  although it is somewhat different because I have now excluded design patents from the data set.

As the table shows below, the median number of cited references is also growing, but at a much more manageable level and pace. 

Year

Median Number of References Cited

2005

13

2006

14

2007

14

2008

14

2009

15

2010

16

2011

17

USPTO Proposes to Modify Applicants Duty to Disclose, Following Therasense in Limiting the Scope of Materiality

In a four-page Federal Register notice of proposed rulemaking of proposed rulemaking, the US Patent Office has indicated its intent to revise its duty-to-disclose standards based upon the recent Federal Circuit en banc decision in Therasense, Inc. v. Becton, Dickinson & Co., — F.3d — (Fed. Cir. 2011). 

In Therasense, the Federal Circuit held that, apart from potentially affirmative egregious misconduct, inequitable conduct in patent prosecution should not be found unless it is proven that the misconduct was a “but for” cause of the patent issuing. Focusing specifically on the failure to disclose prior art, the court wrote: “[w]hen an applicant fails to disclose prior art to the PTO, that prior art is but-for material if the PTO would not have allowed a claim had it been aware of the undisclosed prior art.”  The office introduces its proposal as follows:

Specifically, the Office is proposing to revise the materiality standard for the duty to disclose to match the materiality standard, as defined in Therasense, for the inequitable conduct doctrine. While Therasense does not require the Office to harmonize the materiality standards underlying the duty of disclosure and the inequitable conduct doctrine, the Office believes that there are important reasons to do so. The materiality standard set forth in Therasense should reduce the frequency with which applicants and practitioners are being charged with inequitable conduct, consequently reducing the incentive to submit information disclosure statements containing marginally relevant information and enabling applicants to be more forthcoming and helpful to the Office. At the same time, it should also continue to prevent fraud on the Office and other egregious forms of misconduct. Additionally, harmonization of the materiality standards is simpler for the patent system as a whole.

The newly proposed Rule 56(b) (37 C.F.R. 1.56(b)) would read as follows:

Sec.  1.56  Duty to disclose information material to patentability.

* * * * *

(b) Information is material to patentability if it is material under the standard set forth in Therasense, Inc. v. Becton, Dickinson & Co., — F.3d — (Fed. Cir. 2011). Information is material to patentability under Therasense if:

(1) The Office would not allow a claim if it were aware of the information, applying the preponderance of the evidence standard and giving the claim its broadest reasonable construction; or

(2) The applicant engages in affirmative egregious misconduct before the Office as to the information.

* * * * *

Under the new rule, the mere failure to disclose information will never be considered material to patentability if the pending claim is allowable. A parallel change would be made to the disclosure rules governing reexaminations.

The current Rule 56(b) defines material information as non-cumulative information that either (1) “by itself or in combination with other information…compels a conclusion that a claim is unpatentable under the preponderance of evidence, burden-of-proof standard” or (2) is inconsistent with “a position the applicant takes” arguing that the claim is patentable.  The current rule implemented in 1992 and was itself an attempt by the USPTO to limit the scope of materiality. The pre-1992 rule required submission of information whenever there was a “substantial likelihood that a reasonable examiner would consider [the information] important in deciding whether to allow the application to issue a patent.” 

Thus far in 2011, the average issued patent cites 42 prior art references.  This number is highly skewed because of a minority of patents that cite to an excessively large number of prior  art references.  The median patent in 2011 cites 17 references. Only 8% of the 2011 patents cite more than 100 references, but those patents collectively cite more references than the other 92% combined.

The USPTO is also seeking comment on other actions that “may provide an incentive for applicants to assist the Office by explaining/clarifying the relationship of prior art to the claimed invention.”

Written comments regarding the proposed rule change should be submitted to AC58.comments@uspto.gov within the next 60 days (by September 19, 2011).

Who cares about Patent Term?: Biotechnology Patent Applicants

For patent applications filed since 1995, the patent term is calculated by adding twenty years to the filing date. US applicants can add up to one year to the term by first filing a provisional application and then, after a one-year delay, filing a regular (non-provisional) application.  This is because the filing of the provisional application does not trigger the beginning of the twenty year term.  Provisional applications have the additional benefit of delaying some prosecution costs. However, the total application cost may well be greater because of the added fees and attorney oversight.

Shifted Term: Although the patent term with a provisional application can be up to twenty-one years from the provisional filing (not counting other term adjustments), the effective term (issue date to expiry date) is not really changed. Rather, because the USPTO does not examine (or even queue) provisional applications, the extra year on the end of the term is balanced by an extra year in prosecution. Thus, the trade-off is a question of whether the additional enforceable time is more valuable in three years from filing or in twenty years. 

Taking Advantage of Provisional Patent: The chart below shows the percent of US originated patents issued in 2010–2011 that claim priority to one or more provisional patent applications, grouped by USPTO technology center. Provisional applications have become popular across all technology areas. However, when compared with other areas of technology, the patents examined in Technology Center 1600 (Biotechnology and Organic Chemistry) are much more likely to claim priority to provisional applications and gain the year of delay.  In that area, research competition and a norm of academic publication requires that applications be filed early in the development process to avoid loss-of-rights. Yet, products are typically not ready or approved for market by the time of issuance. It is unclear at this point how many applicants will take advantage of the USPTO’s two-year delay program.

USPTO Technology Centers:

 1600 – Biotechnology and Organic Chemistry
 1700 – Chemical and Materials Engineering
 2100 – Computer Architecture, Software, and Information Security
 2400 – Computer Networks, Multiplex communication, Video Distribution, and Security
 2600 – Communications
 2800 – Semiconductors, Electrical and Optical Systems and Components
 2900 – Designs
 3600 – Transportation,Construction, Electronic Commerce, Agriculture, National Security and License & Review
 3700 – Mechanical Engineering, Manufacturing, Products

Over the past several years, the percent of patents that claim priority to a provisional application has continued to rise. I expect that trend to continue.

  

Tees & Radar: Patent Pendency 2011

I updated my patent database to include all patents issued thus far in 2011.  For 2011, the median original patent issued in 3.8 years (4.0 years average pendency).  For patents issued from continuation and divisional applications, the 2011 median pendency was 2.4 years (3.0 years average pendency).  The pendency for original applications is essentially unchanged from 2010. However, the pendency of the median continuation & divisional application has dropped by about 5 months from 2010.

 

Median Pendency (Years)

Year

2010

2011*

Patents Issued From Original Applications (Excluding Continuations & Divisional Applications)

3.8

3.8

Patents Issued From Continuation or Divisional Applications

2.8

2.4

Of all the patents issued thus far in 2011, Louis Brown’s Patent No. 7,959,525 issued most quickly — 125 days from the earliest priority date.

Brown’s patent is directed to a Dual Composition Golf Tee. The patent itself is occupies only six pages and with five claims (one independent). The patent cites several prior patents — most of those being Brown’s own prior patents that were also examined by the same USPTO primary examiner Steve Wong. In the background section, Brown explains how his claimed invention is an improvement upon his prior own inventions.  Brown’s case was “made special” after he filed a petition based upon his age (over 65 years).

The 2011 patent with the longest application pendency Patent No. 7,898,454 invented by Bertrand Starkey.  Starkey’s patent application was filed in 1966 by the Canadian Government and is licensed to the US Army.   The application received a notice of allowance in 1968, but was held from issuance under a secrecy order until 2006.  The Starkey patent is directed to a Radar Jamming method. The Canadian equivalent of Starkey’s patent was also held under a secrecy order and issued in 2007.  Starkey is also author of the intriguing book: Laplace Transforms for Electrical Engineers (1957).

Antitrust Concerns Over the $4.5B Apple-Microsoft-RIM Patent Purchase

by Dennis Crouch

In most cases, patent enforcement actions and resulting license agreements (settlements) avoid antitrust scrutiny.  However, both exclusive licenses and patent assignments are treated just like any other asset acquisition and are more likely to trigger antitrust review by the Department of Justice (DOJ) or Federal Trade Commission (FTC).

Earlier this summer “Rockstar Bidco” won the largest patent auction to-date by offering $4.5 billion for 6,000 patents held by bankrupt Nortel.  Rockstar outbid Google, whose final offer was $100 million short.  Rockstar is a collaborative shell company led by Microsoft, Apple, and Research-in-Motion.  Its not surprising that the patents largely relate to high speed mobile networking. 

The Market: In the US, these four players (Microsoft, Apple, RIM, and Google) currently own the market for smartphone operating systems. However, the Rockstar members relative market shares continue to drop as Google’s Android system rapidly grows. As part of the background, these companies have been rapidly building their patent portfolios and exerting them as a mechanism to both earn royalties and shut down competitor activity.  For example, earlier this month the US International Trade Commission (USITC) ruled that HTC phones running Google Android software infringe a number of Apple’s patents. HTC already pays $5 to Microsoft for each of its Android phones.

Back to the Nortel Patent Purchase: The bankruptcy court has approved the sale after being told by Nortel that “there’s no antitrust risk to the deal.” However, according to the Washington Post, the Department of Justice is still considering whether the purchase would violate US antitrust laws. In April 2011, the DOJ intervened in a similar (but much smaller) purchase of 882 Novell patents by Microsoft, Oracle, and Apple to require open source licensing of the patent rights in certain situations. In that case, however, Novell had already made open source commitments. 

Google’s Own Antitrust Problems: I used three primary sources in writing this article: internet searching (i.e., Google search), e-mail correspondence (i.e., Google mail), and phone calls (i.e., Google Android phone).  (Here is my Google+ page).

Patently-O Bits & Bytes by Lawrence Higgins

BPAI's Backlog

  • Currently the BPAI receives about 1,200 new cases every month, but only decides around 600 cases per month. As shown in the graph below the BPAI's backlog has been increasing exponentially since 2005. In 2005, the BPAI had a backlog of only 882 cases; however, currently the backlog is well over 20,000 cases. The average time for a case to work its way through the system is over 30 months. There are many reasons that can be contributed to the BPAI's backlog, but the 3 most important reasons are:
    • The increase in the amount of cases filed per month. In 2005, the BPAI only received about 220 new cases per month; however, in 2011, this number was well over 1,000.
    • The increase in the amount of patent applications filed per year. In 2005, the PTO received 390,000 new utility patent applications; however in 2010 the PTO received 490,000 new applications. Numbers for 2011 are not available, but it can be presumed to be about 500,000 new applications.
    • The amount of money the PTO has to hire new judges. A BPAI judge salary is over $150,000 per year, and to effectively handle the caseload the BPAI would need to more than double the amount of judges that they currently have. To hire about 90 more judges, it would cost the PTO over 13.5 million dollars.

BPAI Statistics

Schmirler v. Kappos: This case seems to raise some interesting issues about joint inventors (liability and rights) and patent fees.

  • In Schmirler, full issue fee was paid by one of three inventors on his AMEX card. Power of attorney (POA) was transferred by all three inventors to a law firm to wrap up prosecution and POA by its terms was to cease when attorney received issued patent. There is some evidence that, after the POA was transferred, one of the inventors requested a refund from AMEX, not the USPTO. About 2 weeks after the patent issued, AMEX executed a chargeback to take the issue fee back from the PTO. The PTO did not discover the fee discrepancy until 3 years later, and when they did discover it they sent out a letter regarding the fee discrepancy. The PTO did not receive any response, so in January 2005 the patent was vacated. The case focuses on essentially one question; should Schmirler be allowed to proceed on his own to protect his patent rights that were vacated by the PTO? Complaint Schmirler-MSJ-Memo PTO-MSJ-Memo Schmirler-Response PTO-Response

The Smithsonian and USPTO collaborate on an exhibition

  • The exhibition The Great American Hall of Wonders examines the nineteenth-century American belief that the people of the United States shared a special genius for innovation. It explores this belief through works of art, mechanical inventions, and scientific discoveries, and captures the excitement of citizens who defined their nation as a "Great Experiment" sustained by the inventive energies of Americans in every walk of life. The exhibition opened on July 15, 2011 and will close on January 8, 2012. [Link]

Patent Jobs:

  • Snyder, Clark, Lesch & Chung is seeking a patent attorney with at least 2 years of experience to work in their Herndon, Virginia office. [Link]
  • BASF is seeking an IP Counsel to work at their Florham Park, New Jersey location. [Link]
  • Klarquist Sparkman is searching for patent associates or patent agents to work in their Portland office. [Link]
  • Ambature is seeking patent attorneys/patent agents. [Link]

Upcoming Events:

  • World Research Group is holding the 8th Annual Patents for Financial Services Summit on July 27-28th in New York. Guest speakers include David Cunningham, Larry Bromberg, Matthew Krigbaum, and Moshe Malina. (Patently-O readers can use Promo Code ENN794 for a $200 discount) [Link]
  • The 2nd European Pharmaceutical Regulatory Law Forum will be held in Brussels, Belgium September 21-22nd. The forum will focus on recent developments affecting the pharma industry in Europe and will discuss the impact of US developments on European companies. (Patently-O readers can register with code PO 10 for a 10% discount) [Link]
  • American Conference Institute's Life Sciences Business Development & Acquisitions in Emerging Markets conference is scheduled for September 26-27 in New York, NY. (Patently-O readers can register with code PO 200 for a discount) [Link]
  • IPMI is holding the IP Law & Management Institute on November 6th – 8th at the Rancho Las Palmas in Palm Springs, CA. Hailed as "One of the few programs geared to experienced in-house IP Counsel", the Institute is a CLE-accredited program designed to provide time-starved Heads of IP with the Opportunity to meet and network with their peers, learn from the best practices and validate solutions and services. [Link]

Contact Lawrence.Higgins@patentlyo.com with leads for future Bits and Bytes.