March 2013

En Banc Review in Checkpoint v. All-Tag?

By Jason Rantanen

In December, the Federal Circuit denied a request for rehearing en banc in Highmark v. Allcare Health Management Systems.  The request focused on the de novo standard of review that the panel in Highmark applied in reviewing the objectively baseless element of the district court's exceptional case determination.  The denial was narrow, however, with five of the eleven judges dissenting from the decision to deny en banc review.  I previously wrote about the denial here.

Since the Federal Circuit denied rehearing en banc in Highmark, however, its composition has changed significantly.  Two of the six panel members who did not vote in favor of en banc review have since assumed senior status and Judge Taranto has joined the court.  Consequently, there are five judges who have expressed a view that the de novo standard applied in Highmark was erroneous (Chief Judge Rader and Judges Moore, O'Malley, Reyna and Wallach) and four judges who either definitely or likely believe that the de novo standard is correct (Judges Newman, Lourie, Dyk and Prost).  As a result, the court's decision whether to grant en banc review on this issue probably depends on the views of the newest member of the court, Judge Taranto.  If Judge Taranto joins with the dissenters in Highmark, there would be a 6-4 majority in favor of en banc review; if he joins with the decision not to grant en banc review, there would be a 5-5 tie, which would be insufficient to trigger en banc review. 

This is significant because the Checkpoint decision that I wrote about earlier this week provides an opportunity for the court to review this issue en banc.  Notably, the three judges on the panel in Checkpoint were not among the dissent in the denial to rehear Highmark en banc.  As several of the comments to Thursday's post pointed out, however, it doesn't seem likely this case would have come out differently even under a more deferential standard of review. 

Pre-AIA Filing Numbers

By Dennis Crouch

The chart above shows weekly application filings for the first 10 weeks of 2013, including the week ending on March 15, 2013. That date is important because it was the last day that patent applications could be filed under the old first-to-invent regime. New applications filed today will be judged under the first-to-file regime of the America Invents Act.

In January and February 2013, filing averaged about 7,100 non-provisional applications per week. In the three weeks before the change-over, the filing increased substantially. In all, about one-month worth of extra applications were filed during those three weeks (about 33,000 non-provisional applications). As the chart shows, applicants also ramped-up filing of provisional applications. See also

Week Ending On

































In re Owens (Guest Post by Prof. Sarah Burstein)

Guest post by Sarah Burstein, Associate Professor of Law at the University of Oklahoma College of Law.  Professor Burstein will be speaking at Stanford's conference on Design Patents in the Modern World next week. – Jason

In re Owens (Fed. Cir. Mar. 26, 2013) Download 12-1261
Panel:  Prost (author), Moore, Wallach

Earlier this week, the Federal Circuit issued its opinion in In re Owens. (For prior Patently-O coverage of this case, see here.)

In this case, the Federal Circuit affirmed the PTO’s rejection of U.S. Design Patent Application No. 29/253,172. The ’172 application claimed the following design:

Owens 1

The ’172 application was a continuation of—and claimed priority based on—U.S. Design Patent Application No. 29/219,709 (which issued as U.S. Des. Patent No. 531,515). The ’709 application claimed the following design:

Owens 2

In design patents, broken lines can be used to show: (1) unclaimed “environmental” matter (often, though not always, shown with dotted lines); or (2) unclaimed boundaries (often shown using dot-dashed lines). According to the MPEP, an “[a]pplicant may choose to define the bounds of a claimed design with broken lines when the boundary does not exist in reality in the article embodying the design. It would be understood that the claimed design extends to the boundary but does not include the boundary.”

So, essentially, the ’172 application broadened the original claim by changing a number of solid lines to dotted lines. Importantly, though, this was not the problem in Owens. (Indeed, the Federal Circuit went so far as to say in dicta that these types of dotted disclaimer lines “do not implicate § 120.” Whether that blanket statement really fits with the logic of the rest of the opinion is an issue for another day.)

The problem was the addition of the dot-dashed boundary line on the front panel. The examiner found no evidence that Owens possessed that “trapezoidal region” (as the Federal Circuit called it) at the time of the original application. Therefore, the application was rejected for failure to comply with 35 U.S.C. § 112, ¶ 1 and as “obvious in view of the earlier-sold bottles.” The Board affirmed.

On appeal, Owens argued, among other things, that the continuation application did not add new matter because all of the portions of the claimed partial design (including the trapezoidal area on the front panel) were “clearly visible” in the parent application. In support of this argument, Owens relied on In re Daniels.

In Daniels, the Federal Circuit held that a continuation application that claimed the design shown below on the right was entitled to the priority date of its parent application, which claimed the design shown below on the left:

Owens 3

But the Federal Circuit distinguished Daniels, stating that:

The patentee in Daniels did not introduce any new unclaimed lines, he removed an entire design element. It does not follow from Daniels that an applicant, having been granted a claim to a particular design element, may proceed to subdivide that element in subsequent continuations however he pleases.

According to the court, “the question for written description purposes [in this case] is whether a skilled artisan would recognize upon reading the parent’s disclosure that the trapezoidal top portion of the front panel might be claimed separately from the remainder of that area.” The Federal Circuit concluded that the Board’s finding on that factual issue was “supported by substantial evidence because the parent disclosure does not distinguish the now-claimed top trapezoidal portion of the panel from the rest of the pentagon in any way.”

The court did not stop there, though. It went on to answer “a question raised implicitly in Owens’s appeal and explicitly in amicus briefing—whether, and under what circumstances, Owens could introduce an unclaimed boundary line on his center-front panel” without running afoul of the written description requirement. Section § 1503.02 of the MPEP currently provides that:

Where no boundary line is shown in a design application as originally filed, but it is clear from the design specification that the boundary of the claimed design is a straight broken line connecting the ends of existing full lines defining the claimed design, applicant may amend the drawing(s) to add a straight broken line connecting the ends of existing full lines defining the claimed subject matter. Any broken line boundary other than a straight broken line may constitute new matter . . . .

The Federal Circuit rejected this rule, noting that if Owens had simply placed the boundary line at the widest point of the front panel, “the resulting claim would suffer from the same written description problems as the ’172 application.”

So what are applicants supposed to do going forward? According to the Federal Circuit, “the best advice for future applicants was presented in the PTO’s brief, which argued that unclaimed boundary lines typically should satisfy the written description requirement only if they make explicit a boundary that already exists, but was unclaimed, in the original disclosure.”

Notably, this rule is—as the PTO admitted at oral argument—a break from (at least some) past PTO practice. For example, as Method Products, Inc. pointed out in its amicus brief, the PTO allowed all of the following claims for a humidifier design:

Owens 4

If nothing else, this case makes it clear that the PTO needs to provide greater guidance on the written description requirement and, in particular, on the use of unclaimed boundary lines. Hopefully, the PTO will do so soon.



USPTO Takes Action to Reduce RCE Backlog

By Dennis Crouch

The USPTO’s backlog of requests for continued examination (RCEs) continues to grow. The chart above shows the backlog of RCEs that have not received a first action on the merits since the RCE filing. The increased backlog is explained by both a slight rise in the number of RCEs being filed each month and a slight drop in the number of RCEs being examined. The drop in examination rates for these RCEs is explained by changes in the docketing, quota, and count system for examiners. These changes implemented by former Director Kappos slightly decreased the “counts” given for examining RCEs and also allowed examiners to delay examining RCEs without direct penalty. You’ll note the annual dip in the backlog around September – the time when some examiners rush to make their end-of-fiscal-year numbers.

The chart below shows the number of RCEs filed each month and also the number of RCEs that receive a first action on the merits (office action or allowance). These figures are smoothed with a six-month moving average. The gap between these figures represent the monthly growth in unexamined-backlog.

The USPTO has recognized that the rapid growth in RCE backlog is unacceptable and has been searching for the best response. As a stop-gap measure, USPTO Commissioner of Patents Peggy Focarino has announced that the count system will temporarily revert to the old system that gave full credit for RCE work. Focarino writes:

[T]he RCE credit will be adjusted from 1.75 (or 1.5) to 2.0 until September 30, 2013. . . . With this additional credit, I am asking each of you to help reduce the RCE backlog. With these changes it is anticipated that the RCE backlog will be reduced significantly by the end of this fiscal year. . . . Thank you for your continued hard work and dedication as we strive to be the Best Place to Work in the Federal Government.

My understanding is that examiners will now receive 1.25 counts for a first action following an RCE and an additional .75 counts at the disposal. This puts RCEs on par with original examination. Taken together with the increased fees for RCE filing, I expect that this change will entirely stem the tide of RCE growth. However, it does not address the very real concern of why so many RCEs are necessary.

Checkpoint Systems v. All-Tag Security: Failing the Objectively Baseless Standard

By Jason Rantanen

Checkpoint Systems, Inc. v. All-Tag Security S.A. (Fed. Cir. 2013) Download 12-1085.Opinion.3-21-2013.1
Panel: Newman (author), Lourie, Schall

It's a general rule of commercial litigation in the United States that parties must bear their own legal costs.  One exception to this general rule arises when litigation is baseless.  Under 35 U.S.C. § 285, courts may award the prevailing party its legal costs "based on the baseless of the suit."  (There are other grounds for awarding legal fees, but those weren't at issue in this case).  Over the past few years, the Federal Circuit has made clear that there are two criteria that must be met for sanctions to be imposed based on the baselessness of the suit: "(1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless.” Highmark, Inc. v. Allcare Health Mgmt. Sys., Inc., 687 F.3d 1300, 1309-10 n.1 (Fed. Cir. 2012).  In Highmark, the Federal Circuit also held that it reviews the "objectively baseless" component de novo.  This mechanism effectively results in the Federal Circuit becoming the final arbiter of whether sanctions may be imposed under the baselessness approach.

Checkpoint v. Alltag illustrates how this mechanism works in practice and offers some notable holdings when it comes to attempts to wriggle out of an admission.  Checkpoint is the owner of Patent No. 4,876,555, which relates to an anti-shoplifting device consisting of three layers.  Checkpoint's advance was to place a hole in the middle layer, which allowed the tag to be deactivated "at a lower current and with greater reliability."  It sued All-Tag Security S.A. for infringing its patent, and at trial relied on two relevant pieces of evidence to demonstrate that All-Tag's accused tags infringed the '555 patent.  First, it offered testimony from its expert, who found holes in All-Tag tags made by All-Tag Security A.G. (a predecessor company) and whose manufacturing equipment was subsequently moved from Switzerland to Belgium to make the accused tags.  Second, it relied on two of All-Tag's patents and All-Tag's admission that the process it used in Belgium to produce the accused tags was "generally in accordance" with its patents.  Both of All-Tag's patents describe products having a hole in the middle layer and Checkpoint's expert testified that those products would infringe the '555 patent. 

At trial, the court denied All-Tag's motion for judgment as a matter of law on infringement but the jury returned a verdict in favor of All-Tag on infringement (and invalidity and unenforceability).  The district court subsequently granted All-Tag's motion for attorney's fees under Section 285, explaining that the case was exceptional "because Checkpoint through its expert witness did not inspect the tags it accused of infringement, despite having ample opportunity to do so."  Slip Op. at 7.

On appeal, the Federal Circuit reversed on the ground that the suit was not objectively baseless.  In reaching this conclusion, the CAFC discussed the Switzerland-to-Belgium transition (including the fact that production was restarted in Belgium within a week using the same equipment), but the interesting part of the court's opinion is its analysis of the reasonableness of Checkpoint's reliance on All-Tech's patents.  The CAFC first rejected the argument that Checkpont's reliance on its expert's testimony was unreasonable because All-Tag had used the qualifier "generally" in its pre-trial admission that its manufacturing process generally practiced the All-Tag patents.  "[A] party may rely on an admission as “conclusively established” unless the admission is recanted….All-Tag provided no evidence and presented no argument that its pre-trial admission was incorrect."  Slip Op. at 11.  In other words, All-Tag could not escape its admission simply because it had tried to be ambiguous in its wording. 

The Federal Circuit also rejected All-Tag's argument that the admission as to its patents was insufficient for purposes of relying on those patents as evidence of infringement:

All-Tag cites L & W, Inc. v. Shertech, Inc., 471 F.3d 1311 (Fed. Cir. 2006), where this court rejected the assessment of liability based solely on the alleged infringer’s statements that the accused products are “covered” by its own patent, because the patent included multiple embodiments and it was unclear whether the patent disclosed the critical infringing feature. In contrast, All-Tag’s ’466 and ’343 patents are specific to resonance tags having a hole in the dielectric; the All-Tag patents describe no embodiments without the hole, which is the critical feature of Checkpoint’s ’555 patent.

Slip Op. at 12. The result was that "All-Tag’s admission that its products are made “generally in accordance” with its patents could reasonably have been relied on by Checkpoint and its expert Dr. Zahn,"  id., and this reliance was not "objectively baseless." 

Design Patent Backlog – Growing and Growing

By Dennis Crouch

As the popularity of design patents continues to rise the USPTO is struggling to keep-up with the demand on its examination corps. The chart below shows the backlog of unexamined design patent cases. The PTO only has capacity to examine about 25,000 design patents per year and a 1+ year backlog is unacceptably long for design patent rights. You'll note that the backlog dips each September when year-end-quotas are due. At this point the delay is not causing problems for applicants who need quick patent issuance because "expedited examination" is available for a $900 fee (with discounts for small and micro entities). Throughout this time, the allowance rate for design patents has remained relatively steady at about 90%.

Guest Post by Prof. Sean Tu: Uneven Distribution in the RCE Backlog

Dr. Tu is an Associate Professor of Law at the West Virginia University College of Law and a shareholder in Patent Advisor. His research focuses on the patent examination system. – Jason

Previous posts ( and have reviewed the increase in RCE filings with a concurrent increase in the RCE backlog.  On average, there is a 5.9 month pendency from RCE filing to the next Office Action.  However, this number may be deceptive since it is an average across all art units.  Anecdotally, some art units experience much longer pendency periods.

To determine which art units experience the longest / shortest RCE response time, we turned to the Reed Tech Patent Advisor™ information system (  This online information system includes patent office statistics derived from a collection of file histories encompassing most every published application since 2002.  Our method was to count every RCE with no corresponding next significant action (i.e., with no corresponding next Office Action, Notice of Allowance or Notice of Abandonment).  We then segmented the data by art unit.  Thus, for each art unit, we determined the number of RCEs pending response as of December 31, 2012.

The figure below displays the results of our analysis. Each pie piece represents a specific technology center.  Within each pie piece are circles that represent individual art units within the technology center. The top number in each circle identifies the art unit, while the bottom number represents the art unit’s count of RCEs pending as of December 31, 2012.  The individual art unit circles are also color coded to help visualize the relative significance of the backlog within each tech center.  Dark blue represents a large backlog, while light green represents a shorter backlog.  Additionally, the size of each circle is directly proportional to the size of the art unit’s RCE backlog. 

Figure 1

Accordingly, one can clearly see a greater number of RCEs present in technology center 1600 (Biotechnology and Organic Chemistry) when compared to technology center 2800 (Semiconductors, Electrical and Optical Systems and Components).  This may be unsurprising since biotechnology applications may require significantly more review time, or specialized knowledge compared to electrical applications.  Similarly, one can see that certain art units have a greater backlog, even within the same technology center.  For example, 2617 (Cellular Telephony) and 2629 (Display Systems) have a much greater backlog when compared to other art units within technology center 2600 (Communications).  Again, this may be unsurprising since many more applications are filed dealing with cellular telephone technology (4,757 pending applications in art unit 2617) compared to fax technology (903 pending applications in art unit 2627). Accordingly, examiners in fax technology may be more willing and/or able to pick up more RCEs from their special docket compared to those examiners in cellular telephone technology.  Mitigating this issue, may be a higher number of examiners in art units with a higher number of pending applications.  As discussed below, we did not calculate the number of active examiners present in each art unit.

In the center of the figure is a bar graph that shows the overall number of RCEs in the entire patent office that are awaiting examination broken down by year.  This figure shows that there is a significant number of RCEs filed in 2012 that are still awaiting examination.  This number is unsurprising since RCEs should be taken in turn, and there is a selection bias against later filed RCEs.  Accordingly, one would expect the number of RCEs in 2012 to be greater in number since they will be taken up by the examiner later than an RCE that was filed in 2010.

There are two key limitations with this dataset.  First, we have intentionally excluded data regarding average response time for responding to an RCE for each art unit.  This is because the RCE pendency data is skewed because we do not count an RCE until it has been acted on.  Thus, all of the unexamined RCEs could not counted when calculating an average response time.  Accordingly, the average response time would be misleading.  Second, we did not determine the number of active examiners in each art unit.  Thus, although the backlog may look high in absolute numbers, the response time may be reasonable simply because it is spread over a large number of active examiners.

The RCE backlog cannot be solved simply by adding new examiners.  This is due to the count system which gives incentives for examiners to pick up new cases rather than take up an old RCE.  Additionally, new examiners cannot help pick up RCEs that are already on another examiner’s “special new” docket. These data suggest that the PTO should address art unit-specific pendency data when thinking of solutions to the RCE-backlog problem.  Specifically, the PTO may consider requiring examiners from specific art units to pick up more than one item per month from his/her “special new” docket.  Alternatively, the PTO may consider readjusting the count system to incentivize examiners to pick up RCEs.  Finally, the PTO may consider placing RCEs back on the “amended” docket instead of the “special new” docket, which would require examiners to act on an RCE within two month of its appearance on the examiner’s docket.

These data suggest that practitioners should use this type of art unit-specific pendency data provided by services such as Reed Tech Patent Advisor™ when counseling their clients.  This online service enables its users to easily access a comprehensive break down of the RCE docket for each individual examiner and each individual art unit.  Understanding the possible consequences of filing an RCE should help clients make rational decisions about: (1) challenging the propriety of a “final” designation in an office action, (2) filing a continuation application instead of an RCE (Both RCEs and CONs are placed on the examiner’s “special new” docket, but RCEs can be given less counts.  However, PTA considerations may justify filing an RCE instead of a CON),  (3) making amendments to the claims prior to issuance of a first office action, and (4) drafting the strongest first response as practical, which may include adding dependent claims and/or conducting interviews before issuance of a final office action.  Each of these actions may be more costly for clients in the short run, but save months if not years of time in the long run.

Download a PDF of the above chart here: Download 130324 Poster Graphic Only

USPTO Allowances and Abandonments

by Dennis Crouch

The chart below shows the number of applications abandoned and allowed each month for the past several years. These include utility, plant, and reissue applications – although the results are overwhelmed by the utility applications.  As you can see, the number of allowances has gone up and the number of abandonments has gone down. [Update: I smoothed the data with a six-month moving average rather than simply reporting month-to-month.]

USPTO Allowances and Abandonments

by Dennis Crouch

The chart below shows the number of applications abandoned and allowed each month for the past several years. These include utility, plant, and reissue applications – although the results are overwhelmed by the utility applications.  As you can see, the number of allowances has gone up and the number of abandonments has gone down. [Update: I smoothed the data with a six-month moving average rather than simply reporting month-to-month.]

USPTO Allowances and Abandonments

by Dennis Crouch

The chart below shows the number of applications abandoned and allowed each month for the past several years. These include utility, plant, and reissue applications – although the results are overwhelmed by the utility applications.  As you can see, the number of allowances has gone up and the number of abandonments has gone down. [Update: I smoothed the data with a six-month moving average rather than simply reporting month-to-month.]

Reverse Payments at the Supreme Court

FTC v. Actavis (Supreme Court 2013) /media/docs/2013/03/12-416.pdf

The Supreme Court today heard oral arguments in the reverse-payment pharmaceutical case of FTC v. Actavis. The FTC is asking the court to rule that it is impermissible for a pharmaceutical company to pay a potential competitor to stay out of the market – even when shrouded as a patent litigation settlement. This case stems from the Hatch-Waxman Act that encourages a generic manufacturer to step forward and challenge a patentee’s patent rights. In a number of cases, branded manufacturers have offered various incentives to the first-filing generic to end its challenge. These are termed “reverse payments” because the patentee is offering the incentive (money) rather than the usual patent infringement case where the patentee is expecting to be paid.

The FTC challenged a settlement between Solvay and Actavis where Solvay paid around $30 million per year to generic companies to keep generic versions of Androgel off the market.

The question asked by the cert petitions:

Whether reverse-payment agreements are per se lawful unless the underlying patent litigation was a sham or the patent was obtained by fraud (as the court below held), or instead are presumptively anticompetitive and unlawful (as the Third Circuit has held).

The following are a few notes from oral arguments. USDOJ Deputy Solicitor Malcolm Stewart began with the government’s basic premise:

MR STEWART: As a general matter, a payment from one business to another in exchange for the recipient’s agreement not to compete is an paradigmatic antitrust trust violation. . . . Reverse payments to settle Hatch-Waxman suits are objectionable for the same reasons that payments not to compete are generally objectionable. They subvert the competitive process by giving generic manufacturers an incentive to accept a share of their rival’s monopoly profits as a substitute for actual competition. . . . [T]he point here is that the money is being given as a substitute for earning profits in a competitive marketplace.

Some think of patent law as an exception to antitrust law and a number of courts have basically exempted would be collusive or anticompetitive conduct because the activity was conducted under the a patent shield. Justice Scalia focused on this point:

JUSTICE SCALIA: Mr. Stewart, do you have a case in which the patentee acting within the scope of the patent has nonetheless been held liable under the antitrust laws for something that it’s done acting within the scope of the patent?

MR. STEWART: Yes, if you adopt Respondent’s conception of what it means to act within the scope of the patent. And let me explain. When the Respondents say that the restrictions at issue here are within the scope of the patent, what they mean is that the goods that are being restricted are arguably encompassed by the patent and the restriction doesn’t extend past the date when the patent expires.

That’s all they mean. And if that were the exclusive test, the defendants in Masonite, in New Wrinkle, in Line Material, they would all have been off the hook, because all of those cases involved restrictions on trade in patented goods during the period that the patent was in effect, and yet, the Court found antitrust liability in each of these.

Answering that same question in his presentation, Jeff Weinberger disagreed:

MR. WEINBERGER: The answer to that question is no. All of the cases that have found violations of the antitrust laws based on a patent-based restraint do so because the object of the agreement, the restraint that’s being achieved in the agreement, is beyond the scope that could be legitimately achieved with a patent.

The incentive for a patentee to pay a generic challenger to keep off the market is at least partially governed by the chance that the patentee would lose the infringement litigation.  At its core, this case should really about whether antitrust officials should take-into account the fact that a patent is likely-invalid or not-infringed when judging anticompetitive behavior.  However, neither party supports that approach:

MR. WEINBERGER: The patent g[ives] the patent holder the legal right to exclude. So unless there’s a reason, there’s some reason to believe that it couldn’t reasonably assert that patent, it’s entitled to monopoly profits for the whole duration of the patent.

[Earlier] JUSTICE KENNEDY: And one way [to judge anticompetitive behavior] is to assess the validity or the strength of the infringement case?

MR. STEWART: We would say that that’s not a way

JUSTICE KENNEDY: That’s my concern, is your test is the same for a very weak patent as a very strong patent. That doesn’t make a lot of sense.

MR. STEWART: Well, [our proposed] test is whether there has been a payment that would tend to skew the parties’ choice of an entry date, that would tend to provide an incentive … for the generic to agree to an entry date later than the one that it would otherwise insist on. Now, it probably is the case that our test would have greater practical import in cases where the parties perceive the patent to be [invalid].

JUSTICE KENNEDY: Why wouldn’t that determination itself reflect the strength or weakness of the patent so that the market forces take that into account?

MR. STEWART: [unable to give a direct answer]

MR. WEINBERGER: I think our patent system depends upon the notion that you don’t evaluate from the perspective of the antitrust laws a patent restraint based upon whether you could have proved in a litigation that that patent was infringed.

. . .

JUSTICE SCALIA: You can’t possibly figure it out, can you, without assessing the strength of the patent? … And to say you can consider every other factor other than the strength of the patent is to leave out the the elephant in the room.

MR. WEINBERGER: I agree with that, Justice Scalia. I don’t think that an alternative test — the only alternative test that could be fashioned that would — that would make sense is one based on strength of the patent. But there are so many reasons that that is an undesirable result that I — I don’t think it’s the way this Court should go.

Justice Breyer was also clearly frustrated with the FTC’s proposed “overcomplicated” test as well as with the patentee’s insistence that reasonable invalidity and non-infringement arguments be ignored in the antitrust analysis.

MR. WEINBERGER: I’ve obviously given a lot of thought to whether there is any kind of an intermediary test that works, and I don’t believe there is.

As per his usual Justice Scalia found some amount of fault with Congress as well:

JUSTICE SCALIA: I have the feeling that what happened is that Hatch-Waxman made a mistake. It did not foresee that it would produce this kind of payment. And in order to rectify the mistake the FTC comes in and brings in a new interpretation of antitrust law that did not exist before, just to make up for the mistake that Hatch-Waxman made, even though Congress has tried to cover its tracks in later amendments, right, which -which deter these, these — these payments? . . . So, why should we overturn understood antitrust laws just to — just to patch up a mistake that Hatch-Waxman made?

In the end, the basic question for decision seems to be whether or not to presume that a reverse payment is anticompetitive. With Justice Alito’s recusal, I’m looking for a 4-4 tie that would simply reinforce the current circuit split.

More from Lyle Denniston and Lisa Larrimore Ouellette.

International Patent Exhaustion

The Supreme Court has denied NineStar’s petition for writ of certiorari in its bid to change the law of international patent exhaustion. The non-decision leaves simmering the apparent conflict between the Federal Circuit’s recent patent decisions (rejecting international exhaustion of patent rights) and the Supreme Court’s recent copyright decision in Kirtsaeng (finding international exhaustion of copyrights). 

Although the Federal Circuit’s own internal rule requires an en banc hearing to overturn its own precedent. That rule can be set aside when, as here, the Supreme Court calls-to-question prior precedent.  It appears that NineStar’s appeals have been exhausted, but the next-up challenger will have a good shot (depending upon the panel assigned).

Claiming Intellectual Property

By Dennis Crouch

The chart above comes from Jeannie Fromer's 2009 article titled Claiming Intellectual Property. I like to use the chart in my patent law course when walking through potential ways that patent claims could be drafted. I wonder how our system would be different if a patentee had to plunk-down a working model before obtaining patent protection and then simply received exclusive rights covering that work and non-transformative derivative works.

Patent Conferences in Chicago

By Jason Rantanen

There are two terrific-looking conferences coming up in Chicago in early April.  On Thursday, April 11, Loyola University Chicago's Law Journal will be hosting "Patents, Innovation & Freedom to Use Ideas," and on Friday, April 12, the Illinois Institute of Technology Chicago-Kent College of Law will be hosting PatCon 3Headlining this year's PatCon is a debate about the patent system between Judge Posner and Richard Epstein.  Details on both conferences below.

Loyola Patent ConferenceLoyola University Chicago Law Journal's "Patents, Innovation, and Freedom to Use Ideas"
Thursday, April 11, 2013
25 E. Pearson Street · Chicago, IL 60611

 Under the Constitution, the justification for a patent system—if there is one—is to advance the public welfare by promoting the progress of science. The Constitution authorizes a possible means to accomplish this goal by providing Congress the power to grant limited exclusive rights to those who sufficiently advance the public welfare through innovation. Our Conference will provide a forum for nationally recognized scholars and judges to discuss the trade-off between two interests of the public: the interest in development of new ideas and the interest in freedom to use ideas. The patent system is intended to serve the former, but imposes a cost on the latter. More specifically, the Conference will explore whether the added innovation achieved by the patent system justifies its cost to society, whether it operates within the Constitution’s requirements, and whether improvements can be made or if instead a different system, or no system at all, might be a better option.

More details here: or download the brochure here:  Download Loyola Brochure. To register, email Jimmy Kritsas at 7.25 hours of CLE credit will be offered.


PatCon3PatCon 3
April 12
IIT Chicago-Kent College of Law
565 West Adams Street
Chicago, Illinois 60661

Highlights include:

  • An address by Federal Circuit Judge Richard Linn;
  • A debate on the patent system between Seventh Circuit Judge Richard Posner and Prof. Richard Epstein (NYU and Chicago);
  • A plenary session featuring USPTO Chief Economist Alan Marco, Prof. Mark Lemley (Stanford), and Prof. David Abrams (Penn); and 
  • An industry panel with senior IP representatives from BP, AbbVie, Bridgestone, and RR Donnelley.  

For more details, download the flyer (here: Download PatCon3 Flyer) or visit the conference website at:

CLE credit for attendance is expected.  You can register at:

Hope to see you at both!

Torrent decisions

By Dennis Crouch

Columbia Pictures v. Gary Fung (9th Circuit 2013)

Fung's servers (such as help users find illicit copies of videos to download and stream. Columbia, Disney, and others sued Fung for inducing copyright infringement while Fung claimed immunity from suit under the safe-harbor provisions of the DMCA. 17 U.S.C. § 512. The district court sided with the copyright holders and the 9th Circuit has now affirmed.

Unlike prior cases such as Grokster & Napster, Fung does not actually distribute any software to support the downloading of copyrighted work. No matter, he can still be liable for inducement.

Unlike patents, copyrights protect expression, not products or devices. Inducement liability is not limited, either logically or as articulated in Grokster III, to those who distribute a "device." As a result, one can infringe a copyright through culpable actions resulting in the impermissible reproduction of copyrighted expression, whether those actions involve making available a device or product or providing some service used in accomplishing the infringement. For example, a retail copying service that accepts and copies copyrighted material for customers after broadly promoting its willingness to do so may be liable for the resulting infringement although it does not produce any copying machines or sell them; all it provides is the "service" of copying. Whether the service makes copies using machines of its own manufacture, machines it owns, or machines in someone else's shop would not matter, as copyright liability depends on one's purposeful involvement in the process of reproducing copyrighted material, not the precise nature of that involvement.

Here, the actual acts of infringement are the uploading (distribution) and downloading (reproduction) of the copyrighted works without license. About 90% of the links on Fung's site are directed to this type of material and Fung does not dispute that the site is used by those who wish to infringe a copyright. A key element of inducement under Grokster is that the acts have to have been intended to cause infringement. Here, Fung showed his intent in several ways, including posts to the ISOhunt forum encouraging folks to upload content. The appellate court also identified two ancillary acts as indicative of intent to cause infringement. First, Fung took no steps to keep folks from posting copyrighted material and did not create any filtering technology.  Second, Fung made his money through advertisements. [?]

Regarding DMCA Safeharbors: The DMCA offers a safe-harbor for entities who facilitate copyright infringement with its notice-and-takedown provisions of 17 U.S.C. 512(c).  The safe-harbor does not excuse intentional acts of infringemente and so you might think that a finding of inducement necessarily negates application of the safe-harbor. In an interesting twist, the Ninth Circuit held that it is possible for the safe-harbor to apply even when inducement has been proven because the knowledge requirement under the safe-harbor is stricter and requires different particularized proof than that of inducement. Here, however, the court found sufficient evidence that Fung had red-flag knowledge of particular instances of infringement. 



Discovery Process in Post-Grant Proceedings

by Dennis Crouch

Abbott Labs v. Cordis Corp. (Fed. Cir. 2013)

In 2009 Cordis sued Abbot for infringing two of its drug-eluting stent patents. US Patent Nos 6,746,773 and 7,591,844. Abbott then petitioned the USPTO for inter partes reexamination of the two patents (pre AIA). As part of the reexamination both parties submitted expert affidavits. Then, in October 2011, Cordis petitioned the Virginia federal court – requesting two subpoenas duces tecum asking that court to compel discovery to further the reexamination process. The district court refused and, using one of my favorite words, quashed the subpoena. The Federal Circuit has now affirmed.

35 U.S.C.§ 24 requires federal courts to support the discovery process for "any contested case in the Patent and Trademark Office." Under the statute:

The clerk of any United States court for the district wherein testimony is to be taken for use in any contested case in the Patent and Trademark Office, shall, upon the application of any party thereto, issue a subpoena for any witness residing or being within such district, commanding him to appear and testify before an officer in such district authorized to take depositions and affidavits, at the time and place stated in the subpoena. The provisions of the Federal Rules of Civil Procedure relating to the attendance of witnesses and to the production of documents and things shall apply to contested cases in the Patent and Trademark Office.

Every witness subpoenaed and in attendance shall be allowed the fees and traveling expenses allowed to witnesses attending the United States district courts.

The issue on appeal is whether an inter partes reexamination counts as a "contested case." In any ordinary sense of the phrase, the inter partes reexamination is contested. However, both the district court and the Federal Circuit hold that the statutory meaning of the phrase does not include these reexaminations. The court writes that a "contested case" under the statute only includes those cases "in which the PTO has provided for the taking of depositions for use in that proceeding." With a substantial dose of circular reasoning, court deduces the following: (1) since the PTO has not provided for depositions in inter partes reexaminations; it follows that (2) inter partes reexaminations cannot be "contested cases"; and thus (3) no depositions can be taken in an inter partes reexamination.

The proper interpretation of section 24 is a question of first impression in this court. We construe the term "contested case," as used in section 24, as referring to a proceeding in which the PTO has provided for the taking of depositions for use in that proceeding.

The court's basic logic is that 35 U.S.C. §23 gives the PTO power to decide when discovery should be allowed and that the congressional deference should carry-over into Section 24. The USPTO argued that reexamination is "examinational" as evidenced by legislative history associated with the AIA. Of course, that retrospective consideration should does not supplant the actual meaning of a statute.

Looking Forward for Inter Partes Review and Post Grant Review: Of course, inter partes reexaminations are a thing-of-the-past and have been replaced with inter partes reviews and post grant reviews. Because the new statute does provide for discovery and testimony in these review proceedings then they should be treated as contested cases. The new rules for these procedures provide avenues for discovery from the parties. Section 24 could be invoked to pursue discovery of a non-party. However, the PTO has instituted regulations that would bar the filing of a subpoena with a federal court without authorization of the PTAB. 37 C.F.R. § 42.52.

The statute generally states that additional discovery should be allowed when "otherwise necessary in the interest of justice." In a recent decision, the PTAB outlined a five factor analysis that it will use to determine whether to allow additional discovery. Garman v. Cuozzo, IPR2012-00001 (26) (PTAB 2013).

  1. More Than A Possibility And Mere Allegation — The mere possibility of finding something useful, and mere allegation that something useful will be found, are insufficient to demonstrate that the requested discovery is necessary in the interest of justice. The party requesting discovery should already be in possession of evidence tending to show beyond speculation that in fact something useful will be uncovered.
  2. Litigation Positions And Underlying Basis — Asking for the other party's litigation positions and the underlying basis for those positions is not necessary in the interest of justice. The Board has established rules for the presentation of arguments and evidence. There is a proper time and place for each party to make its presentation. A party may not attempt to alter the Board's trial procedures under the pretext of discovery.
  3. Ability To Generate Equivalent Information By Other Means – Information a party can reasonably figure out or assemble without a discovery request would not be in the interest of justice to have produced by the other party. In that connection, the Board would want to know the ability of the requesting party to generate the requested information without need of discovery.
  4. Easily Understandable Instructions — The questions should be easily understandable. For example, ten pages of complex instructions for answering questions is prima facie unclear. Such instructions are counter-productive and tend to undermine the responder's ability to answer efficiently, accurately, and confidently.
  5. Requests Not Overly Burdensome To Answer — The requests must not be overly burdensome to answer, given the expedited nature of Inter Partes Review. The burden includes financial burden, burden on human resources, and burden on meeting the time schedule of Inter Partes Review. Requests should be sensible and responsibly tailored according to a genuine need.

Jurisiction of the Court of Appeals: This is another case where the Federal Circuit has refused to consider its appellate jurisdiction in the wake of Gunn v. Minton other than writing that "[w]e have jurisdiction under 28 U.S.C. § 1295(a)(1)." However, the appeal here is a discovery dispute pending before the Virginia district court and, although it involves interpretation of the patent statute, the appellate court's jurisdiction is not entirely clear.

Intellectual Ventures v. Symantec

By Dennis Crouch

Intellectual Ventures has received billions of dollars in investment & revenue for its patent licensing program. Almost surprisingly, the company has rarely resorted to litigation in order to enforce its rights. Rather, it seems that most would-be defendants are willing to buy a license before litigation. However, Symantec won't roll over.

Intellectual Ventures I v. Symantec (D.Del. 2013)

In a new lawsuit, Intellectual Ventures (IV) has sued Symantec for infringing three separate patents: U.S. Patent Nos. 5,537,533; 6,598,131; and 6,732,359. In an ongoing lawsuit, IV is also alleging that Symantec infringes its U.S. Patent Nos. 5,987,610; 6,073,142; 6,460,050; and 7,506,155. IV is a master at bundling patents together to cover a particular market area. Here, I looked up the ownership history of all the patents being asserted and they turn out to be a diverse group:

  • The '533 patent was originally assigned to the Portland-based company MiraLink. When that company went through bankruptcy (restructuring), a shell company known as "So. Pak Pte., LLC" purchased the patent and later transferred it to Intellectual Ventures. I presume that So.Pak was an intellectual ventures shell company.
  • The '131 patent was originally owned by the now-defunct Ondotek company. When that company closed, intellectual ventures purchased the patent through a shell company known as Oxtapro Tre ME, LLC.
  • The '359 patent was originally owned by BellSouth who then sold its rights to Dono Tech Services that appears to also be an ongoing intellectual ventures shell company.
  • The '610 patent was originally owned by Ameritech who then transferred its interests to the University of Texas who then spun-out the IP enforcer "Verve LLC" who then transferred rights to AUCTNYC8 and then to IV. My suspicion is that IV controlled the game by the time that AUCTNYC8 purchased the rights.
  • The '142 patent was originally owned by the Park City Group who sold the patent to sold the patent rights to the shell company known as Pait Capital Facility who then transferred rights to IV.
  • The '050 patent was invented by two guys running their own company who then sold their rights to intellectual ventures.
  • The '155 patent was originally owned by InfoBahn before being transferred to GateKeeper then GK Webb Services and finally to Intellectual Ventures.

One thing that is unclear at this point is the extent that the original sellers retain back-end compensation rights associated with these patents.

Are Patent Attorneys Overpaid?

In his list of the 10-most-overpaid-jobs, Money Magazine’s Rick Newman includes the following:

Patent attorney ($170,000). We tend to think of patents as the breakthrough insights of revolutionary inventors, but they’re increasingly a form of warfare among corporations seeking to prevent each other from gaining a technology edge. The lawyers who fight those battles are among the highest-paid professionals PayScale surveys.

Oddly, Newman’s reported average of salary of $170k is well above that actually reported by his cited PayScale results.