July 2012

Administrative Rules for Implementing a First-to-File System

Patent,

On Monday, the USPTO is expected to publish a set of proposed administrative rules for implementing the new first-to-file regime codified by the Leahy-Smith America Invents Act (AIA). A pre-publication copy is attached. Changes to Implement the First Inventor to File Provisions of the Leahy-Smith America Invents Act. Once finalized, the rules should become effective by March 16, 2013. Comments on the rules are due by October 5, 2012.

The rules identify four primary areas of legal changes: (1) conversion of the United States patent system from a "first to invent" system to a "first inventor to file" system; (2) treating U.S. patents and U.S. patent application publications as prior art as of their earliest effective filing date, regardless of whether the earliest effective filing date is based upon an application filed in the U.S. or in another country; (3) eliminating the requirement that a prior public use or sale be "in this country" to be a prior art activity; and (4) treating commonly owned or joint research agreement patents and patent application publications as being by the same inventive entity for purposes of 35 U.S.C. 102, as well as 35 U.S.C. 103.

Download Pre-Pub-FedReg

Making Pre-Grant Submissions More Efffective

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by Dennis Crouch

The America Invents Act (AIA) expands the opportunity for third-party pre-issuance submissions in patent cases. Beginning September 16 of this year (2012), anyone will be permitted to submit published documents ('printed publications') that are relevant to the examination of a pending application along with a concise explanation of the importance of the documents submitted. 

In a recently issued set of final rules, the USPTO outlines the procedures that it has put in place to handle the new filings. Changes To Implement the Preissuance Submissions by Third Parties Provision of the Leahy-Smith America Invents Act, 77 F.R. 42150 (2012).

Targeted preissuance submissions offer an extremely inexpensive mechanism for limiting competitor patent scope. The process has little downside (in most cases) but does require additional competitor monitoring.  The effectiveness of the process has not been tested.  Although the process has major limitations, I believe that it will serve as an effective tool in the hands of skilled practitioners.  I have spoken with several attorneys who are already preparing their preissuance submissions to be filed in late September.

Key points: 

  • Implementation: Although the pre-grant submissions cannot be filed before September 16, once that date passes, they may be filed in applications that were already on file with the USPTO. I know of some individuals who are already preparing materials for pre-grant submissions against competitor applications. Presumably they will file those sometime on or after September 16, 2012. 
  • Deadlines: During the legislative process, the PTO supported these third-party submissions, but offered some concern that late-stage submissions could create problems for both patent applicants and for the USPTO examination process.  Thus, for most cases the preissuance submission must be filed before the first office action rejection is mailed.  In cases where there is no office action rejection or where the PTO works quickly, submissions will be allowed if within an alternative deadline of within six-months of publication.  The PTO will not consider any submissions submitted after the notice of allowance.
  • Requirements: Submissions may be done anonymously and electronically, but must include (1) A list identifying the items being submitted; (2) a concise description of the relevance of each item listed; (3) a legible copy of each non-U.S. patent document listed; (4) an English language translation of any non-English language item listed; (5) a statement by the party making the submission that the submission complies with the statute and the rule; and (6) the required fee ($0 if fewer than three-documents submitted).
  • Results: The patent examiner is required to consider compliant third-party submissions in preparation for the next office action.  The submitted documents will be listed on the face of the patent as considered.

How to make preissuance submissions more effective?: Some may have a more nuanced or longer-term strategy, but the usual realistic goal of a third-party submission is to limit the scope of a competitor's pending application.  Barring retaliatory competitor action, the only downside is that a broad patent may still issue with a prosecution history reflecting that the examiner considered the submitted documents.  No estoppel is created by the submissions.  The identical argument will not be available during a later post grant review and may be more difficult to prove at trial than it would have been if never considered at the USPTO.

  1. Quality Art: The best preissuance submissions will begin with on-point prior art.  Examiners will not likely be tolerant of submissions that lack prima facie credibility.
  2. Concise and Well Drafted: There is a large risk of examiners ignoring submissions that appear as a large stack of dense documents.  The concise explanation should be designed to quickly lead examiners to a rejection based upon the submitted documents.   
  3. Explaining Known Art: Rather than submitting new prior art, applicants may re-submit art already in the file along with an explanation of how the art should be applied.   
  4. Reputation: Certain practitioners and entities will earn reputations as filing credible/incredible. 
  5. Protect Potential Space: Remember that the patent applicant is still likely to receive a patent. The pre-issuance submission is useful for limiting and defining patent scope.  The record will reflect that the patent definitely does not cover X.  With the normal unpredictability of claim construction, this defining role result can be quite helpful down the road if the patent is ever litigated.  Practicing entities should use the process to clear a path for their own current and potential technology usage.  As discussed below, a third party may be satisfied with the applicant adding a definition to a claim term rather than actually amending the claim. 
  6. Internal Prior Art: Remember that e-mails and other correspondence can potentially serve as printed publications under the patent laws.  (See caselaw on 35 USC 102(a) & 102(b)).
  7. Other Questions of Patentability: The statute calls for the submission of documents “of potential relevance to the examination” and is certainly not restricted to issues of novelty and nonobviousness.  The rules do not allow an applicant to simply submit an argument without an underlying published document. For a definiteness issue, a dictionary definition may serve as the hook.  For a new-matter question, the document could be the related parent application. For a patentable subject matter issue, the document might be Mayo v. Prometheus.

Arguments Serving as Published Evidence: A third-party challenging enablement might want to hire an expert to study the application; publish an expert report; and then submit the report (along with a concise explanation) following these new procedures.  This approach appears to fit within the statute that allows the submission of “any … printed publication of potential relevance.”  However, in its notice of final rules, the USPTO has indicated that it will not accept materials created and published merely for the purpose of challenging the pending application in question.  The USPTO appears to understand that the statute is broadly written and thus does not directly prohibit the filing of such documents.  The Office instead concludes that the submission would be rejected because the required concise explanation of such a document “would likely be deemed an improper attempt by the third party to impermissibly participate in the examination of the application because the relevance of the document being described is its discussion of the patentability of the application.”  In this sense, the Office seems to be setting up a conflict between these new submission procedures found in 35 USC 122(e) and the prohibition on protests and pre-grant oppositions left unamended in 35 USC 122(c). 

I believe that the USPTO is probably wrong on its analysis of the law here — in many (if not most) cases, this type of evidence should be allowed under the law.  The statute does not provide a particular mechanism for challenging the PTO's refusal to consider these submissions, but the Office is unlikely be convinced on petition without resorting to the filing of a federal case. As an aside, the filing of a non-compliant submission will likely trigger the applicant's duty of disclosure.  In that case, the applicant will likely re-file the submission as part of an information disclosure statement.

Note: Some of these ideas came from reading Hal Wegner's useful report on Third Party Submissions: The Final Rule.

Patent,

Next week I'll be speaking at the central region AUTM (Ass'n of University Technology Managers) meeting in Oklahoma City along with Terry Rea (USPTO Deputy Director) and Kevin Noonan (MBHB). The session is moderated by Angela Parsons (FR).  See you there.   I recently had some interesting discussions the new benefits of partnering with universities created by the AIA.  

 

I won't make it there, but the National Association of Patent Practitioners (NAPP) annual conference will be August 18-21 in DC. [Brochure].

More on the Death of the Best Mode Requirement

Patent,

By Jason Rantanen

Despite (or more likely because of) the effective demise of the requirement that patent applicants disclose the invention's best mode at the time of filing the application, several academic commentaries on the subject have appeared recently, including two that I co-authored.  Below I summarize our most recent work along with two other notable recent articles on best mode.

  • In The Pseudo-Elimination of Best Mode: Worst Possible Choice?, a short essay recently published in the UCLA Law Review Discourse, we argue that by equivocating on the best mode requirement – eliminating it as an argument against validity during an infringement action while technically retaining it in section 112 – Congress may have not only failed to achieve the goal of leveling the playing field between U.S. and foreign applicants, but may have tilted it from uneven in one direct, if it ever was uneven, to uneven in the other.  The article can be downloaded here: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2103278.  Our previous article, In Memoriam Best Mode is discussed here.
  • In Patent Reform and Best Mode: A Signal to the Patent Office or a Step Toward Elimination?,  Ryan Vacca provides a detailed history of the best mode requirement up through the America Invents Act, before examining whether the Patent and Trademark office has the ability to enforce the requirement itself.  Professor Vacca concludes that the PTO's methods are unlikely to be effective, and recommends that "if Congress believes it made the right decision in the AIA concerning best mode, then Congress should simply bite the bullet and formally eliminate best mode as a requirement for patentability."  The article can be downloaded here: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1957768
  • In Best Mode Trade Secrets, Brian Love and Christopher Seaman conclude that it may become routine post-AIA for patentees to concurrently assert both patent rights and trade secret rights in certain types of cases.  The authors identify undesirable consequences of this change, and suggest an approach courts could consider in order to limit dual claims of trade secret and patent protection.  The article can be downloaded here: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2056115

Deciding Foreign Case Law; Certifying Questions; and Patent Assignments

Patent

by Dennis Crouch

The Wi-LAN decision focuses on a litigation discovery dispute. In 2009, Wi-LAN had its attorneys at Kilpatrick Townsend (then Townsend) analyze the scope of LG's infringement.  After LG refused to pay, Wi-LAN forwarded the results of the Townsend inquiry (the Townsend Letter) to LG.  Once litigation started, LG requested that Kilpatrick disclose documents and testimony relating to the Townsend Letter.  Kilpatrick refused based upon its argument that the requested information was protected by attorney-client privilege.  On the other side, LG argued that any privilege was waived by Wi-LAN's voluntary disclosure of the results.  The district court sided with LG and held Kilpatrick in contempt-of-court.

On appeal, the Federal Circuit has vacated the decision –  holding that the district court applied the wrong standard in determining the scope of waiver. Hefe, the court focused on Ninth-Circuit law to determine the scope of privilege waiver and held that –  if faced with this case – would require a fairness balancing before requiring disclosure of otherwise privileged information.

The most inwardly interesting aspect of the decision stems from the short opinion dubiante by Judge Reyna.  A dubiante opinion is typically seen as the weakest form of concurrence.  Here, Judge Reyna writes:

The majority embarks on a winding course as it explores Ninth and other regional circuit case law, and evidentiary rules. At the start of its journey, the majority recognizes, “The parties do agree that the Ninth Circuit has not spoken squarely on this issue, i.e., whether fair-ness balancing is either required or proscribed in this case.”

Still, the majority discerns a trend in the law and on that basis takes a guess that the Ninth Circuit, if its hand were at the helm, would hold that there must be a fair-ness balancing in the context of express extrajudicial waivers.

I examine the trend and find in it no gates that lead to secure blue water. Indeed, I find that even a route that lies opposite the route charted by the majority is as good a route as any.

Thus, while instinct tells me the majority could be correct, I am concerned that our heading is not based on an accurate bearing. As I cannot prove or disprove our result, I go along with the majority—but with doubt.

Certifying Questions of Non-Federal-Circuit-Law: The decision here could well be contrasted with the court's recent opinion in Preston v. Marathon Oil (Fed. Cir. 2012).  That case involved a patent ownership dispute between Mr. Preston and his former employer Marathon.  At oral arguments, the court discovered a disputed question of Wyoming law as to whether particular additional consideration is necessary to support an IP assignment agreement signed by an at will employee.  The Wyoming supreme court took-up that case and held that the continuation of the at-will employment is sufficient consideration.   Preston v. Marathon Oil Co., 277 P.3d 81, 82 (Wyo. 2012).  Based on the state court decision, the Federal Circuit then quite easily held that the assignment agreement was valid and that the disputed patents were owned by Marathon.

Perhaps Judge Reyna would have been more satisfied with certifying the Wi-LAN case to the Ninth Circuit for determination of the privilege question in that case.  

= = = = =

Employment agreements are generally covered by local law –  thus, this result may vary state-to-state. One catch is that the court has federalized some bits of the law of IP assignments. Probably most importantly, the Federal Circuit has held that a prospective assignment agreement works to automatically transfer ownership rights at the moment of invention –  so long as the previously-signed agreement includes the correct magic words.

Made or Conceived: As an aside –  but critical to Preston's case – the IP assignment agreement included an assignment of any “invention … made or conceived” while at Marathon.  Preston argued that he had the idea for the invention before starting work.  The Federal Circuit found Preston's argument lacking, even if factually correct since the invention was made (i.e., reduced to practice) after Preston joined Marathon.  The Court did not indicate whether this aspect of its decision was decided under state law or federal law.  

Loughlin v. Ling

Patent

By Jason Rantanen

Loughlin v. Ling (Fed. Cir. 2012) Download 11-1432
Panel: Lourie (author), Rader, Moore

This opinion concerns the relationship between 35 U.S.C. § 135(b)(2), which limits the circumstances under which an interference may be provoked, and 35 U.S.C. § 120, which provides the benefit of an earlier filing date based on a prior application.  Section 135(b)(2) states:

A claim which is the same as, or for the same or substantially the same subject matter as, a claim of an application published under section 122(b) of this title may be made in an application filed after the application is published only if the claim is made before 1 year after the date on which the application is published.

(emphasis added).  Ling et al. filed their original application on January 16, 2004.  Four months later, Loughlin et al. filed their application, which was published on November 18, 2004, and which subsequently issued as a patent.  On February 5, 2007, Ling filed a second application that was granted priority to the original application under section 120.  Seeking to provoke an interference, on February 21, 2007, Ling copied into this second application claims from Loughlin's pending application. 

Loughlin contended that Ling's was barred from provoking an interference by § 135(b)(2), as the claims were made more than a year after Loughlin's application was published and Ling's second application was filed in 2007, well after Loughlin's application was published (in 2004).

The Federal Circuit disagreed, affirming the Board of Patent Appeals and Interference's ruling that the priority benefit of § 120 applies to § 135(b)(2) – in essence, treating Ling's second application as if it had been filed as of the filing date of the first, thus taking it outside the scope of the "application filed after" language.  "We agree with Ling that the Board correctly interpreted § 135(b)(2) in view of the plain language of that statute and the benefit provision of § 120. The first sentence of § 120 permits an application to claim the benefit of an earlier filing date, such that the application is treated as having been effectively filed on the earlier date."  Slip Op. at 8.  In reaching this conclusion, the court noted the broad applicability of section 120, such as in the context of § 102(b), (d), and (e), and that the Board has consistently interpreted § 135(b)(2) as including the priority benefit of § 120.

CLS Bank v. Alice: The “Nothing More Than” Limitation on Abstract Ideas

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By Jason Rantanen

CLS Bank International v. Alice Corporation Pty. Ltd. (Fed. Cir. 2012) Download 11-1301
Panel: Linn (author), O'Malley, Prost (dissenting)

Despite two recent opinions by the Supreme Court, the issue of patent eligible subject matter continues to sharply divide the Federal Circuit.  CLS Bank v. Alice Corporation illustrates this point neatly, even going a step further.   Unlike other recent opinions involving questions of patent eligible subject matter that have approached the issue in a relatively narrow, case-specific manner, here the majority implements a sweeping rule with significant implications for future cases – a rule that the dissenting judge criticizes as being irreconcilable with Supreme Court's precedent.

Background: Alice sued CLS for infringement of four patents covering, in the majority's words, "a computerized trading platform for exchanging obligations in which a trusted third party settles obligations between a first and second party so as to eliminate 'settlement risk'.  Settlement risk is the risk that only one party's obligation will be paid, leaving the other party without its principal."  Slip Op. at 2.  The patents included method, system, and computer program product claims. Claim 1 of Patent No. 7,149,720 is representative of the system claims:

1. A data processing system to enable the exchange of an obligation between parties, the system comprising:
a data storage unit having stored therein information about a shadow credit record and shadow debit record for a party, independent from a credit record and debit record maintained by an exchange institution; and

a computer, coupled to said data storage unit, that is configured to (a) receive a transaction; (b) electronically adjust said shadow credit record and/or said shadow debit record in order to effect an exchange obligation arising from said transaction, allowing only those transactions that do not result in a value of said shadow debit record being less than a value of said shadow credit record; and (c) generate an instruction to said exchange institution at the end of a period of time to adjust said credit record and/or said debit record in accordance with the adjustment of said shadow credit record and/or said shadow debit record, wherein said instruction being an irrevocable, time invariant obligation placed on said exchange institution.

The district court granted summary judgment of invalidity based on a failure to claim patent eligible subject matter.  Alice appealed.

The majority's "nothing more than" limitation: In reversing the district court, the majority focused on the "abstract ideas" exception to patent eligible subject matter.  Examing the concept of "abstract ideas," the majority concluded that despite substantial precedent and commentary, its meaning remains unclear and its boundary elusive.  There is, of course, some guidance in the precedent, notably the machine or transformation test and concerns about preempting an entire field of innovation.  There are also computer-specific opinions, which the majority distilled down into the rule that "a claim that is drawn to a specific way of doing something with a computer is likely to be patent eligible whereas a claim to nothing more than the idea of doing that thing on a computer may not."  Slip Op. at 18 (emphasis in original). But even this rule allows for "great uncertainty" as to the meaning of "abstract ideas."

Against this backdrop, the majority did not attempt to define the concept of "abstract ideas."  Instead, it implemented a new rule that minimizes the need to make such a determination and strongly favors a conclusion of patentable subject matter when claims involve anything that might be characterized as an abstract idea.  The majority's rule:

"this court holds that when—after taking all of the claim recitations into consideration—it is not manifestly evident that a claim is directed to a patent ineligible abstract idea, that claim must not be deemed for that reason to be inadequate under § 101…Unless the single most reasonable understanding is that a claim is directed to nothing more than a fundamental truth or disembodied concept, with no limitations in the claim attaching that idea to a specific application, it is inappropriate to hold that the claim is directed to a patent ineligible “abstract idea” under 35 U.S.C. § 101."

Slip Op. at 20-21 (emphasis added).  Applying this rule, the majority concluded that Alice's claims were directed to patent eligible subject matter.  In reaching this conclusion, it emphasized the need to look at the claim as a whole rather than to generalize the invention as the district court did.  Applying this approach, the majority concluded that the computer limitations "play a significant part in the performance of the invention" and that the claims are "limited to a very specific application of the concept of using an intermediary to help consummate exchanges between parties." Id. at 26. 

The majority also emphasized a theme previously discussed on PatentlyO: that district courts have the discretion to determine the order in which to assess questions of validity, and may execise that discretion in the interests of judicial efficiency: "Although § 101 has been characterized as a “threshold test,” Bilski II, 130 S. Ct. at 3225, and certainly can be addressed before other matters touching the validity of patents, it need not always be addressed first, particularly when other sections might be discerned by the trial judge as having the promise to resolve a dispute more expeditiously or with more clarity and predictability."  Slip Op. at 13 (emphasis added).

Judge Prost's Dissent: Writing in dissent, Judge Prost sharply criticized the majority for "responding to a unanimous Supreme Court decision against patentability with even a stricter subject matter standard."  Dissent at 8.    "The majority resists the Supreme Court’s unanimous directive to apply the patentable subject matter test with more vigor. Worse yet, it creates an entirely new framework that in effect allows courts to avoid evaluating patent eligibility under § 101 whenever they so desire."  Id. at 1.  Judge Prost was equally critical of the majority's departure from the Supreme Court's case-specific approach to questions of patent eligible subject matter.  "The majority has failed to follow the Supreme Court’s instructions—not just in its holding, but more importantly in its approach."  Id. at 3.

Central to Judge Prost's dissent is the view that the Supreme Court in Prometheus required that to be patent eligible the subject matter must contain an "inventive concept."  "Now there is no doubt that to be patent eligible under § 101, the claims must include an “inventive concept.”  Dissent at 3. Finding nothing inventive in the claims – they consist of the abstract and ancient idea together with its implementation via a computer – the dissent concludes that they cannot constitute patent eligible subject matter.

The Heart of the Dispute: One interpretation of the divide between majority and dissent is that it flows from fundamentally different approaches to the question of what the "invention" is for purposes of § 101.  The majority sees the "invention" as rigidly defined by the claims: "ignoring claim limitations in order to abstract a process down to a fundamental truth is legally impermissible," and accuses the dissent of doing just that.  Slip Op. at 23.  In contrast, the dissent, while recognizing the importance of the claims, strips them of jargon in order to ask "So where is the invention"?  Dissent at 5.  The majority's approach resembles the standard patent law approach to dealing with the concept of the invention; the dissent's is much more similar to how the Supreme Court analyzes questions of patentable subject matter. 

In any event, given the fundamental disagreement between the majority and dissent, this will be a case to keep a close eye on.

Correction to original post: Judge Lourie was joined by Judge O'Malley, not Judge Moore.

Sciele v. Lupin: The Presumption of Validity Does Not Change

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By Jason Rantanen

Sciele Pharma Inc. v. Andrx Corporation (Fed. Cir. 2012) Download 12-1228
Panel: Moore (author), Lourie, Prost

Lupin sought permission to market a generic version of Fortamet, an extended-release tablet of metaformin hydrochloride.  In response, Shionogi filed a lawsuit asserting infringement of Patent No. 6,866,866, thus triggering a 30-month stay of FDA approval.  The stay expired while the litigation was still ongoing and Lupin attempted an at risk launch of its generic product.  Shionogi obtained a preliminary injunction to prevent Lupin from selling its product that Lupin appealed.

This opinion is noteworthy largely for its discussion of the presumption of validity.  Lupin argued that the presumption of validity should not apply because of errors committed by the patent office during prosecution: the patent office erroneously issued the patent with claims that had been both rejected by the examiner and cancelled by the applicant.  Shionogi argued that there should be a heightened presumption of validity because the prior art references relied on by Lupin were before the PTO during prosecution. 

The Federal Circuit rejected both arguments, although it acknowledged that the specific circumstances could carry some weight in the overall determination.  "Whether a reference was previously considered by the PTO, the burden of proof is the same: clear and convincing evidence of invalidity…The burden does not suddenly change to some-thing higher–“extremely clear and convincing evidence” or “crystal clear and convincing evidence”–simply because the prior art references were considered by the PTO."  Slip Op. at 10-11.  However, the fact that references were previously before the PTO could impact the weight the court or jury assigns to the evidence: "For example, it could be reasonable to give more weight to new arguments or references that were not explicitly considered by the PTO when determining whether a defendant met its burden of providing clear and convincing evidence of invalidity."  Id.

Likewise, while the court rejected the argument that the presumption of validity did not apply because of the PTO's errors during prosecution, it allowed those errors to be considered: "We can take it all into account, including both the fact that the Cheng and Timmins references were before the Patent Office and the bizarre circumstances surrounding the issuance of the claims in this patent."  Id. at 12.

Against this backdrop, the CAFC concluded that the district court's obviousness analysis was flawed because it overstated the fact that the references were not before the PTO in KSR and incorrectly rejected Lupin's substantive arguments on disclosure and motivation to combine.

Although the standard for determining whether the patentholder has demonstrated a likelihood of success on the merits is a significant issue in some preliminary injunction appeals, this does not appear to be one where the outcome would have turned out differently if the CAFC had applied a standard other than whether the applicant raised a substantial question as to validity.'  The Federal Circuit judges were clearly persuaded that there was a strong obviousness challenge to the patent. 

Three new USPTO Satellite Offices: Denver, Dallas, and San Jose

Patent

Patent2011074On Monday, the USPTO is expected to announce the location of its three new satellite patent offices: Denver, Colorado; Dallas, Texas; and San Jose, California.  A fourth satellite office sited in Detroit, Michigan was particularly identified in the 2011 America Invents Act and is slotted to host a grand opening event next week (July 12).  The USPTO’s primary office will remain in Alexandria, Virginia –  just outside of Washington DC.  The satellite offices are expected to each house around 100 patent examiners and a handful of administrative patent judges.  These offices will also serve as check-in centers for examiners taking part in the PTO’s popular telework (work-from-home) program.  In addition, the satellite offices are expected to include high-quality teleconferencing equipment that patent applicants can use to conduct examiner interviews and argue appeals even when decision makers remain in DC.  Expect for the three new satellite offices to open in early 2013.

Although not tremendous, the new satellite office locations will serve as a boon for local patent attorneys and also local high-tech entrepreneurs.  A major open question is whether the USPTO will have the ability be able to hire and retain high-quality electrical engineers to staff its silicon valley patent office.

The USPTO continues to hire new patent examiners, administrative patent judges, and others. In particular, the Office currently has a “critical need for electrical engineers” but is also hiring mechanical engineers and chemistry gurus.