November 2013

Guest Post by Prof. Risch: Functionality and Graphical User Interface Design Patents

Patent, , ,

Guest Post by Michael Risch, Professor of Law, Villanova University School of Law

Read the whole draft here, forthcoming in the Stanford Tech. L. Rev.

Before I was a patent guy, I was a copyright guy, and I did much of my work and research in user interfaces. In the 1980’s and 1990’s, there was a lot of uncertainty about how user interfaces would be protected by copyright. The latest version of the Copyright Act had just become effective, and graphical user interfaces (GUIs) were just taking off. Following a lot of litigation, and despite seemingly contradictory appellate rulings and an equally divided Supreme Court in one case, things eventually settled down.

It is against this backdrop that I took great interest in the Apple v. Samsung case, which is in trial right now on damages issues. Buried in all the talk about rectangles with rounded corners and pinch to zoom is a graphical user interface design patent.

Fig 1

Several of Samsung’s phones infringed this patent. In my article, I consider the implications of design patents, functionality, and graphical user interfaces. This is a realm previously limited to copyright. The difference in protection is important because design patents do not traditionally allow the same defenses — like fair use — associated with copyright.

The article answers three emerging questions:

1. Aren’t GUIs something that should be protected by copyright only? Why should there be a patent? The answer is relatively simple: the law has, since 1870, contemplated dual protection. The article traces the history to explain why the law could have evolved differently, but simply did not.

2. Display screens change, both before and after sale. How can someone patent an ephemeral screen design? It also turns out that ephemeral designs have been protected for some time. Even so, the article proposes some limitations on the protection of GUIs that should address the special nature of GUI design patents.

3. There are many differences between Apple’s patent and Samsung’s product. How can Apple own the idea of square icons in a grid with a dock bar at the bottom? This last question is the most intractable: determining when a design is infringing, and the role that functionality should play in that consideration. The bulk of the article is dedicated to answering this question. 

To answer the third question, the article draws on lessons from prior copyright disputes about GUIs. It first suggests that courts must act as gatekeepers, rather than allowing juries to determine which elements to disregard as functional. It then develops economic factors that can help the court determine whether a design element is functional, and whether to allow reuse by a competing program.

While the economic factors, such as consumer switching costs, apply to both copyright and design patents, the legal doctrine to achieve economic ends will necessarily differ. As noted above, there is no fair use doctrine in design patent law. Even so, there is a form of filtration, and the article proposes that such filtration be expanded to exclude functional elements from infringement analysis. The full article is available here.

PTAB Backlog

Patent

By Dennis Crouch

After an examiner twice-rejects a patent application, the applicant can then appeal that case to the Patent Trial and Appeal Board (PTAB). The appeal process has a number of problems, one of which is exemplified by the chart above. The backlog of pending ex parte appeals is large – over 25,000 pending cases. Over the past two years, the PTAB has been taking action by both adding some efficiencies, reducing opinion writing duties, and also by hiring a large number of additional judges. As the chart shows, those efforts are having some impact on the backlog and hopefully turning the corner. On average, new PTAB decisions in these cases take a little over 2 ½ years from the applicant's appeal brief until issuance of the PTAB decision.

A Few Upcoming Events

Patent,

By Dennis Crouch

My Upcoming Patent Events: Earlier this week I spoke at the 51st Annual Conference on Intellectual Property at the Center for American and International Law in Plano. My topic was on functional patent claims and the historic cycle of attacks on that claim type followed by novel approaches and work-arounds by patent applicants. In a few weeks from now, Bart Starr and I will be leading a discussion at the annual meeting of state Attorneys General (NAAG) on the topic egregious patent licensing behavior. AGs are looking for ways they can use the consumer protection laws in this arena. In the program, we are in the difficult position of speaking immediately following Kevin Costner. In January, I'll join the Association of Corporate Patent Counsel at their 2014 Winter Meeting and then in February I will be down in Naples at an interesting gathering put together by Hal Wegner and Judge Linn and sponsored by the University of Akron School of Law titled the Naples Midwinter Patent Experts Conference. Faculty for the Naples conference include Judge Linn, Judge Kathleen O'Malley, PTO Director Terry Rea, former PTO Deputy Sharon Barner, Former Commissioner, Robert Stoll, PTAB Chair James Smith, and Bob Armitage. A number of us law professors will be there as well, including Tim Holbrook (Emory), Timo Minnsen (Copenhagen), Christal Sheppard (Nebraska), Dennis Crouch (MU), Jason Rantanen (Iowa), W. Keith Robinson (SMU), William Hubbard (Baltimore) and Dr. Heinz Goddar. Register for the Naples event here http://www.uakron.edu/law/ip/naples-midwinter.dot or by calling conference coordinator Shannon Aupperle at (330) 972-7988.

Lawsuit Abuse Reduction Act of 2013

Patent

The House of Representatives has passed H.R. 2655 titled Lawsuit Abuse Reduction Act of 2013 and the Bill now moves to the Senate for consideration. Although not a patent-focused bill, if enacted, the law could have a substantial impact on patent cases by amending Rule 11(c) by basically making sanctions mandatory for violations of Rule 11(b) certifications. In addition, the amendment would mandate that any sanctions compensate the reasonable expenses of the opposing side and also permit additional monetary and non-monetary sanctions as appropriate. The bulk of the amendment is as follows:

FRCP 11(c) Sanctions.

(1) In General. If, after notice and a reasonable opportunity to respond, the court determines that Rule 11(b) has been violated, the court shall may impose an appropriate sanction on any attorney, law firm, or party that violated the rule or is responsible for the violation. Absent exceptional circumstances, a law firm must be held jointly responsible for a violation committed by its partner, associate, or employee.

. . .

(4) Nature of a Sanction. A sanction imposed under this rule must be limited to what suffices to deter repetition of the conduct or comparable conduct by others similarly situated. The sanction may include nonmonetary directives; an order to pay a penalty into court; or, if imposed on motion and warranted for effective deterrence, an order directing payment to the movant of part or all of the reasonable attorney’s fees and other expenses directly resulting from the violation situated, and to compensate the parties that were injured by such conduct. Subject to the limitations in paragraph (5), the sanction shall consist of an order to pay to the party or parties the amount of the reasonable expenses incurred as a direct result of the violation, including reasonable attorneys’ fees and costs. The court may also impose additional appropriate sanctions, such as striking the pleadings, dismissing the suit, or other directives of a nonmonetary nature, or, if warranted for effective deterrence, an order directing payment of a penalty into the court.

The House vote was almost strictly along party lines with Republicans voting in favor, Democrats against.

Hricik on 101

Patent

Prof Hricik has a new post on the Ethics Blog focusing on subject matter eligibility under 35 U.S.C. § 101 walking through how the Supreme Court has treated intangible laws of nature as compared with tangible natural phenomenon (or as he calls them ‘natural products’).

With that framework, here is what the Supreme Court cases teach: If a method claim is deemed to embrace intangible subject matter, or if a product claim embraces a natural product, the claim is at least suspect.

The point here is that the Supreme Court’s precedent is really tied-in to claim type – product versus method.

Read it here: https://patentlyo.com/hricik/2013/11/my-second-belated-post-about-101.html

My second (belated) post about 101.

Ethics,

I don't believe 101 is a defense to infringement (as y'all know), but let's assume that it is.

Let’s start with the types of subject matter, which seems to be misunderstood by alot of people.  There are three categories of "ineligible subject matter," two of which are intangible, one tangible:  intangible abstract ideas and laws of nature (probably overlapping to some extent?) and tangible “natural phenomenon.”  To make this clearer, I’ll call that third category “natural products.”  (There are enormous definitional problems here:  why is the rate at which the body metabolizes a synthetic drug a “law of nature” being a glaring one, but let’s keep going.)

You know the basic types of claims or you wouldn’t be reading this.

With that framework, here is what the Supreme Court cases teach:  if a method claim is deemed to embrace intangible subject matter, or if a product claim embraces a natural product, the claim is at least suspect.  There’s a lot in that which we’ll get to in a moment, but that formula predicts the outcome of every Supreme Court case since 1952, plus Funk Brothers (which I have doubts survived the 1952 amendments to the Patent Act but that's for another day):

Case

Product claim?

Process claim?

Any ineligible subject matter, and if so what type?

Result

Comments

Funk

X

 

Natural product

No invention

 

 

          

 

          

Gottschalk

 

X

Intangible

No invention

 

Parker

 

X

Intangible

No invention

 

Diehr

 

X

Intangible

Invention

Because the process was tied to a particular application (not machine, but process), the subject matter was eligible.  Court almost looked at is like a product-by-process claim

Chakrabarty

X

 

 

Invention

Not natural product; but notice that if it had been…

Bilski

 

X

Intangible

No invention

 

Prometheus

 

X

Intangible

No invention

 

Myriad

X

 

To an extent, natural product

To extent natural product, no invention.

In dicta emphasized that a method claim would have been fine.

 Thus, there is a correlation between the use of a method claim and an intangible.  The reason for this correlation between claim type and the tangibility of the ineligible subject matter is, I suspect, that, absent unusual circumstances, a process claim using a natural product isn’t precluding all uses of the natural product, but a product claim on the natural product itself does so.  Vice versa with process claims claiming intangibles.

I hear the objections.  Some say that focusing on claim type will lead to clever drafting.  But, a method claim covering a use a tangible natural product won’t get the same coverage as a product claim, and vice versa. Clever drafting will only get you so far and what’s wrong with clever drafting, anyway?  But, I hear the objection. I’ll overrule it.

Now, so far, I think, this is relatively simple.  But it led me to what, I think, is an important insight:  a method claim to an intangible is the mirror image of a product claim to a natural product. That, I think, helps us to deal with some questions about how much is “enough” in the context of a method claim to an intangible—a serious and messy question.  (And, in my view as noted above, an unnecessary and unauthorized one, and a stupid one – how much is “enough” is 103!)

Let’s see what we can see.  A product claim on a new mineral found in nature is ineligible. The product claim is coextensive with the natural product, which is old, even if newly discovered. There’s plenty of dicta on that point, and Myriad so holds.  The legislative history of the 1952 act also shows that Congress wanted to bar these claims (though it expressly made clear that it wanted to permit claims to methods using “old” natural products). 

The converse of the foregoing is that a method claim coextensive with even a newly discovered intangible law or idea should not be eligible.  Let’s ignore the fact that that conclusion flies in the face of the statutory language that was added to overcome limitations on what was a “process” (“including a process, art or method which includes a new use of a known process, composition, manufacture, machine, or material….”).   Since the Supreme Court hasn’t seemed to notice that problem, we’ll skip past it, too.

 So we have some easy observations:  a product claim coextensive with a natural product is ineligible, as is a method claim coextensive with the abstract law or idea.

 Now, let’s deal with the other end of each spectrum.  The dicta in Myriad was that someone who discovers a natural product should go get method claims on it.  That would be fine.  So, a process claim is fine even though it mentions a natural product.  No news there.

What if someone discovers (which means “invent” under the 1952 act) an old intangible, including a natural product?  There’s no ready analog I can think of to a method claim mentioning a natural product:  it would be a product claim mentioning an abstract idea.  Although I’m sure they exist, they would seem to be a product-by-process claim (much like Diehr was analyzed, in my view).  So, a product by process claim should be fine even though it mentions an old intangible.

Now, let’s dig a little deeper into the muddy middle of these spectrums. Suppose my new mineral has a name (“Hricikite”), and a chemical structure.  If I merely claimed Hricikite in terms of its chemical structure, that fails.  The analog, I suggest, would be to try to claim an abstract idea by simply laying out its steps.  This was, perhaps, CLS Bank:  the claim basically broke down the abstract idea of an escrow into its constituent parts, much like the claim to the chemical structure did so with Hricikite.

 But in each case, this is “bad’ clever claim drafting.  Putting it aside, and I think we would agree, that beyond those efforts to use more words to claim the ineligible subject matter, it doesn’t take much to make a method claim mentioning a natural product eligible.  A new use for an old product is enough.  The statute says the same thing about processes. My key point:  If these symmetries hold true, that means that it also should not take much to make a method claim to an intangible eligible. 

I am probably missing a lot.  What do you think?

Cisco on the Wrong Side of Xenophobia and Anti-Religious Jury Tactics

Patent,

Update – After thinking reading through this post, it is probably too harsh against Cisco. I was primarily set-off because I read this case involving Cisco's problematic litigation tactics immediately after I read about Cisco's general counsel complaining to Congress about the problematic litigation tactics of patent licensing companies.

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By Dennis Crouch

Foreign litigants often have a real fear of American juries. Back in 2003, Judge Moore (then Professor Moore) authored an interesting article titled Xenophobia in American Courts. In her article, Judge Moore looked at a large dataset of patent cases and found substantial support for the hypothesis that foreign parties are treated worse by juries than their domestic counterparts. This issue has been explored in a number of ways by academics and has parallels to other jury bias issues based upon race or religion. In general, the notion is that it is cognitively easier for people to negatively judge the actions of someone considered an "other."

The recent case of Commil v. Cisco raises some of these issues. And, although Judge Moore was not on the panel, the Federal Circuit agreed that anti-foreign and anti-Semitic tactics before the jury create prejudice that warrant a new trial.

The patentee, Commil, is an Israeli company that filed an infringement suit against Cisco in the Eastern District of Texas. In the first trial, the jury awarded $3.7 million in damages. However, Judge Everingham ordered a new trial based upon the prejudicial effect of "Cisco's counsel's improper religious comments." In the new trial, the jury awarded $63.7 million in damages. On appeal, Cisco asked that the first trial judgment be reinstated. On appeal, however, the Federal Circuit affirmed the new trial finding.

The particular prejudicial are as follows:

  • While being cross-examined, Mr. David (the Commil inventor and co-owner) mentioned eating at a barbeque restaurant to which Cisco's counsel responded "I bet not pork." Counsel then went-on to ask Mr. David whether his cousin was a "bottom-feeder who swims around on the bottom buying people's houses that they got kicked out of for next to nothing."
  • In closing arguments, Cisco's counsel began with a reference of the trial of Jesus – saying "You remember the most important trial in history, which we all read about as kids, in the Bible had that very question from the judge. What is truth?"

Considering these statements, Judge Everingham wrote:

This argument, when read in context with Cisco's counsel's comment regarding Mr. David and Mr. Arazi's religious heritage, impliedly aligns Cisco's counsel's religious preference with that of the jurors and employs an "us v. them" mentality – i.e., "we are Christian and they are Jewish."

Commil USA, LLC v. Cisco Sys., Inc., No. 2:07–CV–341, slip op. at 3 (E.D.Tex. Dec. 29, 2010).

On appeal, the Federal Circuit found that these actions warranted review and additionally highlighted other aspects from the trial:

For instance, during the voir dire, Commil's counsel explained that the case began in Israel, "the Holy Land for many religions." Later, during closing argument, Commil's counsel argued with respect to damages that Cisco wanted the jurors to "split the baby" and "You know, that wasn't wise at the time of King Solomon. It's not wise today."

Based upon these elements, the Federal Circuit had no trouble finding that the new trial was warranted.

 

[Updated to delete my harsher remarks]

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The interesting and important legal issue in this case is how the Federal Circuit allowed a partial-new-trial rather than a full trial.

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See also, Hal Wegner, Commil v. Cisco, a Sidebar: Judicial Denunciation of Anti-Semitic Jury Tactics, http://www.laipla.net/commil-v-cisco-a-sidebar-judicial-denunciation-of-anti-semitic-jury-tactics/ .

Lawyer Can’t Quote Judicial Opinions Praising His Lawyering… so says New Jersey

Ethics, Web/Tech

A few judges wrote very glowing things about a lawyer:

 

"Mr. Dwyer is, I think, an exceptional lawyer, one of the most exceptional lawyers I've had the pleasure of appearing before me. He is tenacious, professional in his presentation to the Court, a bit too exuberant at times, certainly passionate about his position, but no one can fault his zeal and his loyalty to his client, and no one can question his intellect . . . ." Hon. Jose L. Fuentes, J.S.C., in an unpublished judicial opinion concerning a fee application made in an employment discrimination case brought under the New Jersey Law Against Discrimination.

"The inescapable conclusion is . . . that plaintiffs achieved a spectacular result when the file was in the hands of Mr. Dwyer. . . . Mr. Dwyer was a fierce, if sometimes not disinterested advocate for his clients, and through an offensive and defensive motion practice and through other discovery methods molded the case to the point where it could be successfully resolved." Hon. William L. Wertheimer, J.S.C., in an unpublished judicial opinion concerning a fee application made in an employment discrimination case brought under the New Jersey Law Against Discrimination.

"Based upon my observations of him in court there's no question in my mind that he is in the upper echelon of employment lawyers in this state . . .” Hon. Douglas H. Hurd, in an unpublished judicial opinion concerning a fee application under the New Jersey Conscientious Employee Protection Act. 

Lawyer puts these on his web page.  Result?  New Jersey adopts a guideline prohibiting this.  The federal district court opinion denying the lawyer's motion to enjoin implementation of the regulaton, Dwyer v. Cappell, is here.

Recent Posts on Patently-O

Patent,

We have published a number of important essays this week. Here is a breakdown:

Independent Justification for Appellate Standing over Administrative Patent Challenges – Part II

Patent,

By Dennis Crouch

Earlier this week, I suggested that the Federal Circuit should independently be considering whether parties involved in administrative patent challenges (such as an inter partes review) have standing to appeal as required by Article III of the US Constitution. Now, the court has taken the first step and demanded that the public interest group Consumer Watchdog justify its standing to appeal in the inter partes review case against WARF's stem cell patent.

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Consumer Watchdog v. Wisconsin Alumni Research Foundation (WARF) (Fed. Cir. 2013)

Back in 2006 Dan Ravicher filed an inter partes reexamination request of WARF's U.S. Patent No. 7,029,913 on behalf of Consumer Watchdog (then known as the Foundation for Taxpayer and Consumer Rights). The patent contains only three claims and broadly directed toward human embryonic stem cells being grown in vitro. After WARF amended its claims, added one new claim, and worked through several rounds of prosecution and rejection, the Board finally agreed that the claims are patentable.

Now Consumer Watchdog has appealed, arguing that "an in vitro culture of human embryonic stem cells is [not] patent eligible under 35 U.S.C. § 101" and also that the claims are invalid based upon prior art known at the time of filing. Of course, one problem with the § 101 argument is that § 101 is not a cognizable ground for deciding an inter partes reexamination. The challenger here argues that subject matter eligibility is a fundamental and threshold issue that the court can and should address, and "[d]oing so is especially appropriate here given recent developments in the law of patent eligible subject matter."

Standing on Appeal: One issue that neither party raised was whether Consumer Watchdog has standing to appeal. In an essay earlier this week, I noted that this is generally an issue that is ripe for consideration at the Federal Circuit. Although the statute allows for appeals of adverse PTO decisions to the Federal Circuit, the US Constitution separately limits the court's power to hear cases where there is no "case or controversy" between the parties. Although I do not know for sure, it appears that Consumer Watchdog does not have any anything at stake in the case in terms of being directly (or even indirectly) impacted by the outcome of the lawsuit.

In an order issued today, the Federal Circuit ordered that the parties brief this particular issue – "whether Consumer Watchdog has standing to pursue this appeal." Briefs are due by November 25, 2013. Although I don't know, Consumer Watchdog may be able to argue that it has standing based upon the actual facts on the ground. Alternatively, it is possible that a party with standing (such as a stem-cell-researcher being blocked by the patent) may be able to join the case at the 11th hour. Another possibility is that Consumer Watchdog may be able to argue that a patent challenge at the PTO is essentially a public service action akin to a qui tam action. Under this last theory, would really be the general public or government that has standing to challenge a 'bad' patent and Consumer Watchdog is merely acting on behalf of us all.

More here on the case from Antoinette Konski: http://www.personalizedmedicinebulletin.com/2013/09/15/update-on-warf-stem-cell-patent-challenge/

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In recent weeks several non-practicing "patent killers" have filed inter partes review requests including RPX and Unified Patents. It will be interesting to see whether they file amicus briefs here.

A First IPR Decision on the Merits

Patent, , , , ,

Garmin v. Cuozzo Speed Tech, IPR2012-00001 (PTAB 2013)  Download Final decision-59

In its first full merits decision in an inter partes review case, the Patent Trial and Appeal Board (PTAB) has sided fully with the petitioner Garmin and ordered the three challenged claims cancelled. As you may discern from the docket number, this case was also the first IPR case filed on September 16, 2012 (the first day that such filings were allowed). The patent at issue is No. 6,778,074 and a parallel infringement lawsuit between Garmin & Cuozzo is pending in New Jersey District Court. Although the district court did not stay that case, Magistrate Judge Dickson has slowed the process to avoid making substantive decisions until the PTAB decision. In particular, the claim construction arguments have been delayed.

The patent itself is directed toward a speed-limit indicator tied to a GPS system that provides a signal to the driver when the care is moving faster than the speed-limit. Couzzo has accused several device makers (such as Garmin) as well as automobile manufacturers (such as Chrysler) of infringing the patent.

Garmin's IPR request actually challenged 17 claims of the '074 patent, but the PTAB only instituted the review for claims 10, 14, and 17 as such, it likely that Cuozzo will continue to pursue the litigation with a focus on the remaining claims. Those three claims were all found obvious by the PTAB. Based upon my quick read of the claims, independent claim 10 was the broadest in the patent and its elimination may give Garmin the opportunity to avoid infringement by pushing for a narrow construction of the remaining claims.

Four Reference Rejection: Patent attorneys regularly see obviousness rejections that hinge on the combination of four references.  However, the conventional wisdom is that those complex factual arguments are much less likely to fly in disctrict court litigation.  Here, the PTAB took on the challenge and found the patent obvious based upon four prior art references.  The take-away here is that the PTAB is ready and willing to handle complex invalidity arguments that might not work at the district court level. 

 

Claim Construction: One interesting aspect of the case is the way that the pending parallel litigation is clearly in the forefront of each decision by the parties. One limitation found in each claim of the patent is that a speedometer be "integrally attached" to a speeding-indicator. Couzzo that the proper construction of that term would require that the speedometer and speeding-indicator both be part of the same single component (i.e., shown on the same screen). On that point, the Board sided with Garmin – finding instead that the broadest reasonable interpretation of the claim scope required two separate components. In addition to making the claim more subject to prior art, the seeming result is also that a single Garmin device GPS cannot infringe unless somehow integrated with and integrally attached to a separate vehicle speedometer. Moving forward it will be interesting to see what level of respect the district court gives the PTO decision. I suspect that it will be given a great deal of respect.

Unable to Prove Early Conception  or Diligence: Two of the important prior art references used by the board presumptively qualify as 102(e) prior art in that the references are published US patent applications that were filed prior to Couzzo's application. Under the old first-to-invent rules, the law allows Couzzo prove a prior invention date. Here, Couzzo's proof failed because (1) his conception evidence was based solely on inventor testimony which is never sufficient without corroboration; and (2) his evidence of submission to the "Invention Submission Corporation" was insufficient because the date of submission was not corroborated by any testimony. Thus, the PTAB found that the earliest provable date of conception was December 2000 when the ISC patent attorney sent a letter to Couzzo referencing Couzzo's invention disclosure. Because Couzzo had not yet reduced his invention to practice as of that December 2000 date, the law also requires that he act with "reasonable diligence." Here, Couzzo received a search report from the patent attorney in January 2001; did not respond until March 2001; and did not explain why it took two months to provide comments or his daily progress on the matter. Then, later in March 2001 he received a new favorable patentability report from the patent attorney who stated he would begin work once Couzzo paid a $3,500 fee. However, he did not pay that fee until August 2001. Couzzo stated that he did not have the money at the time, but did not provide any daily progress reports showing what he was doing to get the money. The PTAB found that each of these gaps showed failure of diligence. As such, his attempt to antedate the references was rejected. The unfortunate problem here is that it looks like it was the complexity and tricks of the system that failed Couzzo and that, had he been blessed with more cash-on-hand and more sophisticated patent counsel then he would have avoided these key prior art references either by filing the patent application earlier or by ensuring documentation of conception and diligence. Soon after Couzzo's case was filed, the USPTO went after the Invention Submission Corporation as a scam. My understanding is that InventHelp is the successor-in-interest to ISC.

 

Should you Transform Your Pre-AIA Application to an AIA Application?

Patent,

By Dennis Crouch

In the lead-up to March 16, 2013 the patent office received an influx of tens-of-thousands of patent application filings. That date is important because new applications filed on or after March 16, 2013 are examined under the first-to-file rules of the America Invents Act (AIA). At first glance, that influx suggests that applicants overwhelmingly prefer the prior first-to-invent rules. That suggestion makes sense since the AIA generally expands the scope of prior art available to adjudge patentability. However, the reality is that early filing might me more properly seen as a hedge against the potential that the new rules are too harsh on patentees. As I discuss below, the AIA offers an easy mechanism for any pre-AIA patent application to be transformed into an AIA patent application and it turns out that there are several major reasons why a patentee might prefer its patents to be adjudged under the AIA rules.

Transforming to an AIA Patent: The basic rule is that the first-to-file rules of the AIA apply to any application with at least one claim whose priority date is on or after March 16, 2013. The mechanism then is to file a follow-on application, such as a continuation-in-part (CIP) application, that adds some new matter and a new claim. The result of that filing then is that the entire application and resulting patent will be judged under the AIA first-to-file rules. To be clear, the CIP transforms the entire application to an AIA application – even claims that are identical to those that were in the original pre-AIA application and that were fully supported by that original pre-AIA application. Although I use a CIP as an example here, any new filing that properly adds new matter and that results in a related new claim will qualify.

The procedure is easy – the larger question is why a patent applicant would prefer an AIA patent to a pre-AIA patent. Some reasons:

  • AIA patents are (likely) not subject to being invalidated based upon pre-filing secret sales; secret offers to sell; or secret uses.
  • AIA patents have expanded the scope of the Create Act so that would-be anticipating prior art is also negated. The basic idea is that non-public prior filings by a research partner will not negate patentability.
  • AIA patents that stem from a foreign-filing count as prior art as of their priority filing date. This change effectively overrules the Hilmer doctrine and essentially makes AIA patents (and their associated published applications) much more powerful as a form of prior art.
  • At the same time, claims that were fully supported by the original priority filing will still get that priority date even when being adjudged under the new law.

Depending upon your particular factual situation, these reasons may justify a transformation of a pre-AIA application to an AIA application. Directly on point, this opportunity suggests that attorneys revisit pending pre-AIA cases that involved some pre-filing commercial activity to nail down whether any pre-filing sales activity took place. This issue is especially important when you consider cases like Hamilton Beach Brands, Inc. v. Sunbeam Products, Inc., 726 F.3d 1370 (Fed. Cir. 2013). In that case the Federal Circuit found the patent-in-suit invalid based upon an offer from a foreign supplier to produce the product on behalf of the patentee. That is the sort of secret on-sale activity that will not serve as prior art for AIA patents. If that pre-filing on-sale activity was kept confidential then a transformation to an AIA application may make sense.

The transformation to an AIA application should probably be seen as a hedge rather than transformation because it does not require abandonment of the pre-AIA application. Thus, the same original priority filing that was filed before March 16, 2013 could result in a family of patents, some of which are adjudged under the pre-AIA rules and others that are adjudged under the AIA rules. The basic business question then for these pending pre-AIA questions is not whether the potential AIA patent is more likely to be valid than a pre-AIA patent. Rather, the hedging question is whether the addition of an AIA patent covering parallel subject matter adds enough value to be worth the costs.

There are a number of caveats to this procedure. Here are three. First, as I mentioned above, the transformation process requires the addition of new matter and a new claim that includes some of that new matter. I would expect some equitable risk for patent applicants in situations where it is clear that the new matter was only added as a formality in order to use this procedure. Defendants could potentially raise inequitable conduct or laches defenses based upon a patentee's claiming that some new matter was patentable when the only true purpose of the new matter was for the old claims to be interpreted under the new rule. In a similar vein, this approach raises double-patenting questions and it is somewhat unclear how double patenting issues will be resolved under the AIA. Finally, it is important to make clear that these transitional applications will not avoid 102(g) prior art based upon the transitional provisions found in the AIA.

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Note, I had been thinking some about this issue but my post here was triggered by a recent presentation by Bryan Diner from Finnegan who, in turn, recognized Tom Irving and his related Jedi Master Mixer strategy.

Independent Justification for Appellate Standing over Inter Partes Reviews

Patent, , ,

By Dennis Crouch

The recent Supreme Court decision in Already v. Nike revolves around the question of when a trademark-challenger has declaratory judgment standing to challenge a mark's validity. That particular case revolved around the impact of a covenant-not-to-sue. However, at oral arguments, Justice Kennedy turned his attention to administrative challenges before the TTAB (the trademark-equivalent of the PTAB) and asked whether a challenger who loses an opposition through that administrative body would have standing to ask the Federal Circuit to review the decision. Now, the statute is clear that any party to an opposition has a right to appeal to the Federal Circuit. 15 U.S.C. §1071. Justice Kennedy's question, however, focused on whether the case and controversy requirements of the constitution allows an Article III court to hear the case absent a stronger showing of conflict between the parties. Nike's counsel (Tom Goldstein) surprisingly answered (seemingly against his interest in this case) that Article III standing for the appellate court would not be satisfied simply by virtue of being involved with the trademark opposition.

JUSTICE KENNEDY: Is the standing burden any less after there is a — an administrative adjudication and you go to court for judicial review?

MR. GOLDSTEIN: … We've looked at the cases. We think that it's a point in their favor, Justice Kennedy, that while you can go to the TTAB, they wouldn't be able to appeal to an Article III court. I think that's a point in their favor.

The point here is that, (1) an administrative agency (such as the PTO) can be empowered (under the Constitution) to decide cases between two parties without any showing of injury or standing by the petitioner. However, (2) if that administrative decision is appealed to an Article III court (such as the Federal Circuit), case must satisfy the ripe controversy requirements of the Constitution. At the Already oral arguments, the attorney for the US Government (Ms. Anders) attempted to cut-through some of this by arguing that, in some circumstances an adverse decision from the PTO would create the injury-in-fact that is sufficient to establish Article III standing for appeal. See Megan La Belle, Summary of Oral Argument in Already, LLC d/b/a Yums v. Nike, Inc. (November 8, 2012).

Although not an intellectual property case, the D.C. Circuit very recently decided a somewhat parallel issue in the case of Americans for Safe Access v. DEA, 706 F.3d 438 (D.C. Cir. 2013). The appellants in that case include Safe Access, is a marijuana legalization advocacy group, and several individuals who petitioned the US Drug Enforcement Administration (DEA) to reschedule marijuana as a Schedule III, IV, or V drug rather than a Schedule I drug. In the subsequent appeal to the D.C. Circuit, the DEA argued that the appellants had no Article III standing. Although the D.C. Circuit found standing, it agreed with the DEA that Article III standing continues to be a requirement and that participating an administrative hearing is not sufficient to create standing. Here, standing was based upon the fact that one of the appellants (Michael Krawitz) was a disabled veteran eligible for medical care through the Department of Veterans Affairs but was denied marijuana treatment and instead had to purchase his own through the Oregon Medical Marijuana Program.

Similarly, in Sierra Club v. EPA, 292 F.3d 895, 899 (D.C. Cir. 2002), the D.C. Circuit wrote:

An administrative agency is not subject to Article III of the Constitution of the United States [and] so the petitioner would have had no need to establish its standing to participate in the proceedings before the agency. When the petitioner later seeks judicial review, the constitutional requirement that it have standing kicks in, and that requirement is the same, of course, as it would be if such review were conduct in the first instance by the district court.

The point here is simply, that standing is a requirement at the appellate level and an adversarial administrative process itself does not necessarily create standing.

Post-Grant and Inter Partes Review: All of this is relevant to the USPTO's new administrative review procedures that allow third-parties to initiate an administrative patentability review without any showing of standing or interest in the outcome of the review. Under the statute, the third-party requester also has a right to appeal an adverse PTO decision directly to the Court of Appeals for the Federal Circuit.

Manufacturing Appellate Standing through Administrative Review: Although the statute provides for a right-to-appeal, the balance of the law (as exemplified above) requires that the parties will also need to satisfy the Constitutional standing requirement. One basic legal question then will focus on whether the government's suggestion in Already is correct – that a case and controversy can be manufactured by the administrative review itself. Of course, following Already, a covenant-not-to-sue given by the patentee to the review requestor would eliminate any possibility of injury-in-fact. And, if the requestor is a public-interest organization (such as PubPat) such a covenant would be essentially cost-free for the patentee.

Manufacturing Declaratory Judgment Standing through Administrative Review: An important twist on this then is that – if the administrative review serves as a bootstrapping mechanism for generating Article III standing for challenging patentability on appeal, then it should also serve to generate Article III standing for challenging patent validity in a district court declaratory judgment action.

Now, the reality is that this issue will only arise in limited circumstances because the high-cost of post-grant reviews serves as a major filter to post grant and inter partes review filings. We can expect that it will be primarily parties with genuine controversies that request the reviews and only a much smaller percentage will be folks without a genuine controversy. 

Thanks to James Dabney, Megan Labelle, Michael Burstein, and Erin Hawley for helping me to think through this issue. Of course, as you might expect, these folks don't entirely agree with my perspective.

Guest Post – PAEs under the Microscope: An Empirical Investigation of Patent Holders as Litigants

Patent,

Guest Post by Christopher A. Cotropia, Professor of Law and Austin Owen Research Fellow, University of Richmond School of Law; Jay P. Kesan, Professor and H. Ross & Helen Workman Research Scholar, University of Illinois College of Law; and David L. Schwartz, Associate Professor and co-Director of the Center for Empirical Studies of Intellectual Property at Chicago-Kent College of Law

 Today, a certain type of patent litigant—the non-practicing entity (“NPE”), also known as a patent assertion entity (“PAE”), patent monetization entity (“PME”), or simply patent troll—is the target of much public debate, if not venom. Indeed, President Obama himself got involved in this debate, with his Council of Economic Advisers preparing a report this summer entitled “Patent Assertion and U.S. Innovation.” The Executive Summary of the President’s report sounds the following alarm about PAE suits:

Suits brought by PAEs have tripled in just the last two years, rising from 29 percent of all infringement suits to 62 percent of all infringement suits.

This asserted explosion in PAE-initiated litigation has fed into a wider perception that PAEs are out of control and need reining in by Congress.  But is the factual assertion by the President’s report an accurate characterization of total PAE litigation activity? 

We address this important issue in our new article, Patent Assertion Entities (PAEs) Under the Microscope: An Empirical Investigation of Patent Holders as Litigants. To investigate PAE litigation, we personally hand-coded all 7,500+ patent holder litigants in 2010 and 2012. In our coding, we finely classified the nature of the litigants, going beyond the simple PAE / non-PAE label.  Specifically, we coded each patent holder as one of the following:  (1) a University; (2) an Individual Inventor/Family Trust; (3) a large Patent Aggregator (e.g., Acacia); (4) a Failed Operating Company or Failed Start-up; (5) a Patent Holding Company that appears unaffiliated with the original inventor or owner; (6) an Operating Company; (7) an IP Holding Company affiliated with an operating company; or (8) a Technology Development Company (e.g., Walker Digital).[1]

Based on our data, and contrary to the assertions in the President’s report, we do not find an explosion in PAE litigation between 2010 and 2012.  In particular, the President’s report considered only the raw number of lawsuits filed in 2010 and 2012. By limiting its analysis to numbers of cases filed, rather than the underlying parties involved, the President’s report was incomplete and led to an erroneous conclusion.

To understand the reason for this error in the President’s report, one must consider an important change to patent litigation made by the America Invents Act (AIA). The AIA, adopted in 2011, changed the joinder rules relating to patent litigation by prohibiting patent holders from including multiple, unrelated defendants in a single lawsuit based on commonly-asserted patent(s). Instead, after the AIA, patent holders must file separate lawsuits against each unrelated defendant. Thus, rather than focusing on the raw number of lawsuits as the President’s report did, a more appropriate inquiry should focus on the total number of patent litigants, both patent holders and accused infringers, in order to gauge more accurately the actual number of patent disputes between parties. Using this approach, we found almost no difference between 2010 and 2012 in the number of litigants in patent cases. In other words, the “explosion” of PAE litigation between 2010 and 2012 is simply a mirage.

First, in terms of raw number of patent lawsuits, our study reveals that the number of lawsuits did increase between 2010 and 2012, with a substantial increase in the raw number filed by non-operating companies (by which we mean the sum of all categories except operating companies).  Our first finding therefore is similar to the President’s report.  For example, while what we coded as “Patent Holding Companies” (“PHCs”) suits comprised 16% (400) of cases filed in 2010, they comprised 38% (1,959) in 2012, and this is in comparison to “Operating Companies” suits comprising 69% (1,750) of cases in 2010 to 45% (2362) of cases in 2012.  The bar chart below reports these findings along with those for all of the categories we coded: Figure 1

However, when we evaluated the number of litigants, rather than just the number of cases, the picture changed substantially. We considered separately both the number of unique patentees alleging infringement in 2010 and 2012 and the total number of alleged infringers in those years. For both, we found little difference between 2010 and 2012.  Our second finding therefore directly contradicts the statement in the President’s report that there was an explosion of PAE lawsuits in that time period.

Specifically, concerning the number of unique patentees starting litigation, the total number barely changed between the studied years, increasing from 1,610 unique patentees in 2010 to only 1,696 in 2012.  Further, the distribution among types of patentees stayed almost the same, with the unique number of PHC patentees slightly increasing from 13% (214) of all patentees in 2010 to 16% (266) in 2012, while Operating Company patentees dropped slightly, from 72% (1,156) of all patentees in 2010 to 69% (1,165) in 2012. The graph below reports all of the unique patentee numbers for the various categories.

Figure 2

And the number of infringement defendants (perhaps the best measure of the impact of patent litigation) corresponding to each category of patent holder also did not vary much from 2010 to 2012.  In particular, the overall litigation exposure from Operating Company suits compared to other types of patentee suits remained almost constant.  The number of defendants in Operating Company suits slightly dropped from 49% (5,708) of the total number of defendants in 2010 to 48% (5,611) in 2012.  And while the number of alleged infringers for other categories changed, the changes were slight.  For example, the number of defendants in PHCs suits rose from 27% (3,179) of all defendants in 2010 to 32% (3,698) in 2012 while the number in Individual/Family Trust dropped from 11% (1,320) in 2010 to 8% (927) in 2012.  The complete comparison of total number of parties excluding the patentee in 2010 versus 2012 is set forth in the graph below.

Figure 3

From this data, the only real change between 2010 and 2012, the increase in the raw number of lawsuits, is most likely driven almost entirely by a procedural rule change relating to joinder passed with the 2011 patent reform. These results call certain findings in the President’s report into serious question.

Information about lawsuit filings, obviously, cannot answer all questions about PAEs. There are other serious questions relating to PAEs that demand an empirical answer. For instance:

  • Ÿ What is the volume of patent demand letters? How many of those assert frivolous claims?
  • Ÿ Of the litigated cases, how many of the PAE (and non-PAE) cases are frivolous?

We do not know the answers to these questions (yet), and further rigorous empirical research is needed.

To aid the effort in understanding the patent litigation landscape, we have decided to release the underlying data—our specific classifications of the litigants in all patent lawsuits filed in both 2010 and 2012—to the public. We believe that releasing this data to the public, which unpacks the definition of PAE, provides better illumination to policy makers, researchers, and others interested in the patent litigation system.  This data is available to everyone to examine and evaluate at www.npedata.com. 

The full paper is available for download here. It provides a detailed analysis of the distribution of the 2010 and 2012 patent cases, including information based upon technology and litigant type.

We welcome any comments and suggestions on the article or the dataset.

[1] A more detailed description of the categories can be found on pages 13-14 of our draft article.

Court Sanctions in Litigation Lead to OED Reprimand

Ethics

I often tell people that the OED believes it has far greater jurisdiction than a practitioner might think, and here's another anecdote:  lawyer messes up in litigation (gets sanctioned) and the CAFC criticizes his brief as containing misleading statements.  

What's that got to to with practice before the Office, which is the OED's purview?  Nothing, in my view, but the OED, once again, came after the lawyer for conduct prejudicial to the administration of justice.  The opinion is here (an agreed public reprimand). 

I've seen this in various forms. Be careful out there.

Substantial Evidence Rule Kills PTAB Appeals

Patent

by Dennis Crouch

In re Haase (Fed. Cir. 2013)

In a nonprecedential decision, the Federal Circuit has affirmed a PTO rejection of Richard Haase's pending water purification patent application No. 10/413,849. Although representing himself pro se in this case, Haase is no amateur patent sleuth. Rather, Hass has filed more than fifty patents applications related to water purification. See, for example, Patent Nos. 8,268,269, 8,161,748, and 8,123,944. Mr. Haase is also a graduate of the University of Missouri (ChemE + Mathematics + Economics). His company, ClearValue has filed several infringement lawsuits – most recently winning a multi-million dollar jury verdict that was then overturned on appeal. Haase also has a malpractice action pending against his former attorneys. Haase v. Abraham, Watkins, Nichols, Sorrels, Agosto & Friend, LLP, 404 S.W.3d 75 (Tex. App. 2013).

The patent here is directed toward a method of clarifying waste water, using chemical coagulants to remove solid contaminants.

In the end, this case follows the typical path of appeals from the PTAB to the Federal Circuit. Under the rules of administrative law, factual determinations by the PTAB are affirmed when supported by 'substantial evidence.' Under that rule, the PTAB factual determination will be affirmed so long as supported by "more than a mere scintilla" of evidence. In general, this is an easy threshold for the USPTO to meet. So, to be clear, the appellate court will affirm a factual determination even when that determination is likely wrong so long as some amount of evidence support the determination. We've all heard the adage that 'reasonable minds can differ.' I think of the substantial evidence rule as a relaxed version that 'somewhat reasonable minds can differ.' Or, in other words, the PTO's factual determinations will be affirmed if somewhat reasonable.

What is a factual determination: It is important to pause for a moment to recognize that a factual determination is quite different from mere evidence. Rather, a factual determination is generally an abstraction based upon the evidence presented.

Here, the PTAB read the evidence (a prior art reference) and made a factual determination that the evidence disclosed the elements of Haase's claims. On appeal, the Federal Circuit looked at that factual determination and found it at least somewhat reasonable (i.e. supported by substantial evidence).

Affirmed.

Apple v. Samsung: Samsung’s firm sends ‘outside counsel only’ information to Samsung Execs, who apparently use the information.

Ethics

Apple disclosed to Samsung highly sensitive licensing information marked "attorneys eyes only" under the protective order.  Yet, Samsung's counsel did not prevent a copy of its damages expert's report to be circulated to Samsung executives, even though that report repeated the key information.  Samsung's executives then told another key industry player that Samsung knew the terms because "information always leaks."  

Magistrate judge was not happy, and particularly unhappy with Samsung's lawyers basically saying to Apple, don't worry we'll put a log together some day.  Order compelling discovery is here.