All posts by Dennis Crouch

About Dennis Crouch

Law Professor at the University of Missouri School of Law.

Patent Pendency Redux

Patent

 

by Dennis Crouch

Readers asked for a bit more detail on the patent pendency chart that I posted a few days ago.  The first chart below again shows median patent prosecution pendency for utility patents grouped according to issue-year. The chart now includes ‘whiskers’ that show the 25%-75% interquartile range.  The second chart shows a more detailed prosecution pendency histogram for all patents issued January-May 2015. The lightly colored bars again represent the median and interquartile range.  You’ll note that the pendency histogram is skewed with a long tail.  For the chart, I cut-off the display at 10-years even though there are some (a small handful of) patents issued that took more than 10 years to issue.  This type of skew typically results in (1) the average pendency being greater than the median and (2) the mode pendency being less than the median. Both of these are true here.

MedianWithWhiskers

PendencyHistogram

With the amount of data here (over 100,000 patents), I would have expected the histogram to be much smoother.  My guess is that much of the jumpiness is due to artifacts caused by my monthly grouping and the PTO’s release of patents on a weekly basis.

Expedited Patent Appeals

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For a patent applicant, the appeals process is slow – adding years to the patent prosecution process.  While the USPTO is slowly addressing its unduly large backlog of appeals, it is also proposing a new Track-1 for ex parte appeals in the form of an Expedited Patent Appeals pilot program.

Although no petition fee will be required, the cost of the program may be too great. Namely, applicants must (1) Withdraw a pending ex parte appeal of another application (without refund); and (2) Agree to no oral hearing.  The withdrawal process can be accomplished with the filing of a request for continued examination (RCE).

The goal will be to reach a decision on the merits within six months of the petition filing.

[Read the Fed.Reg. Notice]

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I should note that the PTAB continues to hire new judges, and is currently conducting a search for a new Chief Judge. [LINK]

 

Eligibility 101: Motion to Dismiss Ends Another Patent

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OIP v. Amazon (Fed. Cir. 2015)

In a short-but-important opinion, the Federal Circuit has affirmed a district court’s finding (on motion-to-dismiss) that OIP’s patent claims are invalid as lacking patent eligible subject matter.

The claims are directed to a multi-step process of using an offer-based inquiry method for setting product price.  (U.S. Patent No. 7,970,713).  The basic problem is that it is difficult to figure-out the profit-maximizing price for any given product. The inventor’s insight here is that, unlike a land-based grocery store where prices are publicly labeled, an internet-based store can offer a different price to each consumer.  The invention spells out a method of testing various price-points by actually offering the product for sale to consumers different consumers being given different prices.  The results of those offers (whether or not consumers purchased at the given price) can then be used to automatically calculate the price-point.

In reviewing the claimed invention, the Federal Circuit found it to be “no more than an abstract idea coupled with routine data-gathering steps and conventional computer activity.” As such, the claims are ineligible for patent protection.

 

Following the two-step approach of Alice Corp v. CLS Bank, the Federal Circuit first found that the claims did encompass an abstract idea — namely the abstract idea of “offer-based price optimization.”  We know that the price optimization is an abstract idea because it is similar to the “fundamental economic practices” that the Supreme Court has previously found to be abstract ideas.  (Note – here the appellate panel misquotes the Supreme Court as saying “fundamental economic concepts” rather than practices.)  The court also states: the fact that “the claims do not preempt all price optimization or may be limited to price optimization in the e-commerce setting do not make them any less abstract.”

The second step of Alice Corp considers whether the claims include an additional inventive concept sufficient to transform the abstract idea into a patent eligible invention.  Here, the court finds that additional limitations and concepts are all well understood, routine, and conventional activities that merely require conventional computer technology.  “[R]elying on a computer to perform routine tasks more quickly or more accurately is insufficient to render a claim patent eligible.”

The opinion of the court was penned by Judge Hughes and joined by Judge Taranto. Judge Mayer published an additional concurring opinion indicating that eligibility is properly addressed at the motion-to-dismiss stage.

Failure to recite statutory subject matter is the sort of “basic deficiency,” that can, and should, “be exposed at the point of minimum expenditure of time and money by the parties and the court,” Twombly, 550 U.S. 544 (2007). Addressing 35 U.S.C. § 101 at the outset not only conserves scarce judicial resources and spares litigants the staggering costs associated with discovery and protracted claim construction litigation, it also works to stem the tide of vexatious suits brought by the owners of vague and overbroad business method patents. Accordingly, where, as here, asserted claims are plainly directed to a patent ineligible abstract idea, we have repeatedly sanctioned a district court’s decision to dispose of them on the pleadings. . . . I commend the district court’s adherence to the Supreme Court’s instruction that patent eligibility is a “threshold” issue, Bilski v. Kappos, 561 U.S. 593 (2010), by resolving it at the first opportunity.

Still fighting against this tide, Judge Gilstrap (E.D. Tex.) requires an accused infringer to must obtain leave of the court after showing good cause before filing a motion to dismiss on patent eligiblity. (Joe Mullin Article).

Despite the suggested cost of patent litigation, I expect that winning on motion-to-dismiss is considerably less expensive than the IPR/PGR/CBM process.

 

Electronic Commerce Patenting

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On June 16, I will be taking part in an ABA-hosted Webinar on Patent Subject Matter Eligibility Post-Alice Corp. Our 1.5 hour panel includes myself, Charles Bieneman, Robert Sachs and Alexis Liistro as moderator.  Interesting mix of folks and our focus will be on patent practice.

Register here: http://shop.americanbar.org/ebus/ABAEventsCalendar/EventDetails.aspx?productId=185913244

From the brochure:

There have been many articles forecasting the fall of e-commerce patents after Alice Corp. v. CLS Bank International. These predictions have been supported recently by the high number of e-commerce patents being held invalid by United States Courts and the Patent Trial and Appeal Board. However, this panel does not believe that Alice sounds the death knell for e-commerce patents.

In addition to discussing Alice, faculty will also review other guidelines, such as those issued by the United States Patent and Trademark Office and use real-world examples to illustrate the differences between an unenforceable and enforceable e-commerce patent. After attending this program, participants should feel confident in preparing effective and valid e-commerce patents.

 

Median Patent Prosecution Pendency

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The chart below shows the median patent prosecution pendency over the past decade (2005-2015).  You’ll note a steady rise in pendency up until 2010 with a subsequent steady fall since that time. I expect that median pendency will continue to fall over the next couple of years, but is unlikely to fall below 24 months.

Here, I define pendency as the number of months from filing to issuance on a straight application-by-application bases In this calculation I did not consider priority, PCT, provisional, or RCE filings.

MedianPendency

One major area of difficulty is that of ex parte appeals.  Patents that were involved in an appeal of an examiner’s decision during prosecution have an average pendency of over 7 years.

 

 

Compact Patents

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BulkPats

The chart above shows the percentage of U.S. patents that list more than thirty patent claims.  As you can see, the numbers have fallen for the past decade of patent issuances.  (Each dot represents patents issued within a single week.) Patents have become more compact and standardized — perhaps easier to manage both for the patentees and potential infringers.  In an upcoming post, I’ll look at one complicating factor — larger patent families.

Guest Post: America Invents Act Cost the US Economy over $1 Trillion

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By Richard Baker, President of New England Intellectual Property, LLC

The American Invents Act, passed into law in 2011, is one of the biggest changes to US patent laws in the past fifty years.  Its sweeping reforms changed our system from the “First to Invent” to a “First to File” system, and created a new method for infringers to invalidate patents.  While many aspects of this legislation had impacts on inventors, the most striking impact has been the devastating financial impact of the post grant review process.  The post grant review process, or more specifically, the inter partes review (“IPR”) procedure allows any entity to request that the US Patent Office initiate a review of a valid, issued US Patent.  In the two and a half years since the first IPR was filed, 77% of all patent claims reviewed have been invalidated[1].

To obtain a patent in the United States, an inventor must submit his invention to an examination process before a patent examiner.  This process involves several years and often many vigorous debates between the examiner and the inventor in papers that are exchanged.  If the examiner is convinced at the end of this proceeding that a patent is warranted, the US Patent Office issues a patent to the inventor.  By the time a patent issues, there typically is a significant examination of the merits of the patent claims.

In essence, the IPR procedure is a request for the Patent Office to admit that they made a mistake and reverse themselves on the validity of the patent.  The problem with this reversal is that the inventor has relied on the patent to build a business or to initiate licensing discussions based on his faith in the original decision of the Patent Office.  This is similar to a property owner building a house based on the issuance of a deed to the property.  A reversal of the patent, or of the deed, after the fact impacts the investments made in the invention.

Some have argued that the IPR procedure is weeding out the weakest patents in the United States, but experience has shown that the opposite is true.  The IPR procedure is only being used against the best United States patents.  This is because of pure economics.  The cost for a company to file and prosecute an IPR to a decision by the Patent Trial and Appeal Board (“PTAB) is between $200,000 and $500,000.  No corporation can afford to file an IPR unless the patent in question is a significant threat.  In fact, a review of the IPRs filed in the past month or two shows that almost every patent that is IPR’ed is involved in litigation (the few that are not in litigation are in the pharmaceutical arts).  Only a small percentage of all patents are used in litigation or licensing; these patents are considered the top tier of all patents.  It is these patents that are the subject of IPRs.  Given the high rate of invalidation at the PTAB, most all patent litigation defenses now involve an IPR of the patents in suit.

To quantify the financial impact of the IPR proceedings in the AIA bill, we need to first assess the impact on the price of an average US patent.  The lore of the US patent brokers, individuals who help inventors and companies to sell their patents, is that the price of an average US patent has dropped about 66% since the institution of the AIA IPR procedure.   According to Scott Bechtel of AmiCOUR IP Group, an experienced patent broker, “US Patents have lost 2/3rds of their value since the AIA was passed in 2011.”

A bigger sampling of deal values can be found in IPOfferring’s Patent Value Quotient Annual Report of patent sales[2].  This report has been issued from 2012 through 2014, giving us three years of sales data to analyze.  The deals listed in these reports may not represent all patent sales, as this list consist of deals large enough to be material and thus publicly reported as well as deals that brokers chose to report to IPOfferrings.  Furthermore, there is no readily available data from before 2012 to see deal values before the AIA was passed.  However, these reports show the dramatic drop in patent values over 13,564 patent sales in 93 deals over a three year period.

IPOfferings Patent Value
Year Dollar Sales Patents Sold Average Price
2012 $2,949,666,000 6,985 $422,286
2103 $1,007,902,750 3,731 $270,143
2014 $467,731,502 2,848 $164,232
2012-2013 -66% -47% -36%
2013-2014 -54% -24% -39%
2012-2014 -84% -59% -61%

This chart shows a dramatic drop in the average price per patent over the three year period, with values dropping 61% from $422,286 per patent to $164,232.  In that timeframe, the number of patents sold dropped from just under 7000 to 2800, showing a decrease in liquidity in the patent market.  The overall sales dropped from $3 Billion to well under one half billion in patent sales per year, or by 84%.

But this decrease in value of US Patents should be expected given the invalidation rate of the Patent Office’s IPR proceedings.  If 77% of all valid patents are canceled through this new proceeding, then the risk adjustments on patent values should also decrease by roughly the same amount.  While our empirical data is showing a 60-70% drop in values, the theoretical impact should be 77%.  Perhaps this is reflecting an inefficiency in the market, suggesting that patent values will drop another 10-15% in the next year or two.  Or it could indicate that our samplings are not fully reflecting the actual decrease in values.

One could suggest that the Alice v CLS Bank Supreme Court decision also had an impact.  However, the Alice decision only impacts software patents, and the IPOfferrings numbers come from all fields.  The IPOfferrings numbers can be seen across three years since the AIA was implemented; Alice was decided less than a year ago and at first was not seen as a big change in patent law.  Only in the past 4-5 months has Alice been expanded by the lower courts to impact a wide set of software patents, thus possibly impacting the value of software patents.  Experienced brokers are seeing that software patents with Alice issues are simply not being sold, with buyers afraid to spend anything on these patents and sellers holding until the law settles in this area.  Thus we believe the IPOfferrings numbers are primarily showing the impact of the AIA IPR procedure with only a minor impact from the Supreme Court’s Alice decision.

The decrease in value of patents means that the valuations of companies with US patent assets are also devalued accordingly.  If a hypothetical company has patent assets on the books (much of which may be in Good Will if the company purchased the patents from others) at $1 Billion from a pre-2011 acquisition, these assets should be written down to about $390 Million based on the impact of the AIA[3].

This raises many questions on the overall impact of the AIA’s IPR procedure on the United States economy.  Using one methodology to evaluate the impact, we look at the US economy and approximate the impact from top down.  Intellectual capital (patents, copyrights, and other forms of economic ideas are worth about $9 Trillion in the United States[4].  So a 61% markdown of patents (and their resulting goodwill when small companies are bought) corresponds to a 61% markdown of a portion of the $9.2 Trillion.  Say patents are worth about 25% of the overall value of intellectual capital[5], or about $2.3 Trillion, then a 61% loss in value is $1.37 Trillion decrease in the value of the US economy based on the impact of the AIA bill.  The American Invents Act bill cost the economy about $1.37 Trillion, or an amount equal to about 7% of the US GDP.

Another way to look at the impact of the AIA starts with the count of the number of US Patents in force, about 2.1 Million according to Professor Dennis Crouch of the University of Missouri School of Law[6].  Given our 2012 IPOfferings value of $422,000 per patent, the value of patents to the US economy was $886 Billion.  The AIA dropped the value to one third, leaving $344 Billion in value.  This one act of Congress, the IPR proceeding of the AIA bill, destroyed $546 Billion of the US economy using this methodology.

While additional study is required to refine the macroeconomic impact of the AIA IPR procedure, it is clear that this bill has wiped out about $1 Trillion of value in the US economy.

But this number is probably greatly underestimated, as it only incorporates the first order loss in value.  It does not include lost opportunities, disincentives to innovation, the inability to raise money due to the decrease in collateral, and the loss of jobs without those investments.  We leave this analysis to economists in future studies.

Given the huge impact of the AIA and its IPR proceedings on the US economy, on corporate valuations, and on the value provided to individual inventors, it is time for Congress to reevaluate this procedure to assure that a much greater percentage of patents survive the IPR process.

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[1] US Patent and Trademark Office, “Inter Partes Review Petitions Terminated to Date (as of 1/15/2015)”, downloaded from http://www.uspto.gov/sites/default/files/documents/inter_partes_review_petitions_terminated_to_date%2001%2015%202015.pdf  on 6 May 2015.  In the proceeding where the USPTO decided the merits of the Inter Partes Review petitions, 643 claims were found patentable and 2176 claims were found unpatentable, or 77%.

[2] IPOfferring’s Patent Value Quotient Annual Report is available at http://www.ipofferings.com/patent-value-quotient.html.

[3] Patents generated internally in a company are not valued on a corporation’s balance sheets, according the US accounting rules.  Only patents acquired in a purchase or a merger are included on a balance sheet.

[4] See Kevin A. Hassett & Robert Shapiro, What Ideas Are Worth: The Value of Intellectual Capital And Intangible Assets in the American Economy, Sonecon (Sept. 2011), available at www.sonecon.com/docs/studies/Value_of_Intellectual_Capital_in_American_Economy.pdf.

[5] Robert Shapiro estimates in a private email that patents make up 25-30% of intellectual capital, but states that it varies per industry and per company.  Additional research is needed to calculate this percentage more precisely.

[6] Crouch, Dennis, “How many US patents are in-force”, May 4, 2012, found at https://patentlyo.com/patent/2012/05/how-many-us-patents-are-in-force.html.

Independent Inventors

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IndependentInventorshipThe chart above shows the percentage of U.S. patents issued to Inventors and not (reportedly) assigned to any organization or government. The data comes from the PTO.  While this chart shows a dramatic drop, the actual number of inventor-owned patents has stayed relatively stable over the past decade — the dropping percentage is due more to a rise in the number of patents granted to corporate owners.  The drop here does not necessarily mean that independent inventors are being squeezed-out — just that the rise in patent grants is not due to independent inventors.

 

Patent Act of 2015 [Updated]

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The Senate Judiciary Committee approved the Patent Act of 2015 (Protecting American Talent and Entrepreneurship Act) as amended by the Manager’s Amendment as well as additions from Senators Feinstein and Cornyn.  The vote was 16-4 with only Senators Cruz, Vitter, Durbin, and Coons voting Nay. Yeas include Senators Grassley, Hatch, Sessions, Graham, Cornyn, Lee, Flake, Perdue, Tillis, Leahy, Feinstein, Schumer, Whitehouse, Klobuchar, Franken, and Blumenthal.

We can expect a few more amendments before being passed in the Senate.  Notably, there is continued debate over whether to alter the statute to force the PTO to more liberally allow claim amendments during post-grant proceedings.

[Update] In the original version of this post, I mistakenly wrote that universities are pushing to have their patents excluded from post grant proceedings.  That was in error, the move rather is from the pharma and life science tech sector to exclude patents “that are subject to the Hatch-Waxman Act and Biologics Price Competition and Innovation Act (BPCIA) processes.” [Link to Grassley Statement]

 

Federal Circuit: We do not Defer

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Shire v. Watson (Fed. Cir. 2015)

In its first go-round, the Federal Circuit reversed the lower court’s infringement finding based upon an unduly broad claim construction of the terms inner and outer lipophilic matrix.  Following Teva, the Supreme Court ordered reconsideration of the appeal.  The Federal Circuit has now released its follow-on decision that holds firm — finding that Teva changed nothing since the case does not “involve factual findings to which we owe deference under Teva.”

In Teva v. Sandoz, the Supreme Court held that a district’s underlying factual conclusions supporting a claim construction decision should be given deference on appeal and only overturned when “clearly erroneous.”  In general, however, claim construction remains a question of law reviewed de novo on appeal.  Likewise, conclusions intrinsic evidence (e.g., file history) are also reviewed de novo as well as any holdings regarding the weight given to factual conclusions in the ultimate claim construction analysis.

Shire’s post Teva argument looks weak (at least as characterized by the court):

On remand from the Supreme Court, Shire argues that because the district court “heard” testimony from various expert witnesses during a Markman hearing and at trial, we must defer to the district court’s constructions of the appealed terms. See, e.g., Appellees’ Suppl. Br. 1.

The Supreme Court held that we “should review for clear error those factual findings that underlie a district court’s claim construction.” Teva, 135 S. Ct. at 842. The Court did not hold that a deferential standard of review is triggered any time a district court hears or receives extrinsic evidence. See id. Here, there is no indication that the district court made any factual findings that underlie its constructions of “inner lipophilic matrix” and “outer hydrophilic matrix.” See J.A. 4566–67.

An important issue that the court is working through is the difference between the “ordinary meaning” of a term and the meaning understood by a person of ordinary skill in the art at the time of the invention.  Apparently the first is a question of law (reviewed de novo) and the second a question of fact (reviewed for clear error).

This decision falls in line with Jason Rantanen’s analysis that Teva doesn’t change much of anything.

 

Ultramercial Shoots for the Moon

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In its newly filed petition for writ of certiorari, Ultramercial asks the U.S. Supreme Court:

Whether computer-implemented or software-based claims, reciting novel or non-routine steps with no conventional counterparts, still cover only patent-ineligible “abstract ideas” as this Court has interpreted 35 U.S.C. § 101?

Ultramercial v. Hulu (Supreme Court 2015) (Ultramercial Petition).

U.S. Patent No. 7,346,545 is directed to a method of distributing copyrighted media content over the internet with a consumer receiving a copyrighted product in exchange for watching an advertisement that pays for the content.  Claim 1 is an eleven-step process that spells out the method for accomplishing the aforementioned goals.

The district court originally assigned to the case found the patent invalid as unduly claiming the abstract idea of “advertising as currency.”  The subsequent appellate history is interesting. Initially, the Federal Circuit reversed – finding that the claimed computer programming elements were sufficient to limit the claims in concrete wasy and to avoid the problem of preemption of an entire field or idea. However, after being twice vacated (Following Bilski and Alice) the Federal Circuit changed its opinion – now finding the claims to be lacking patent eligibility.

Copyright on Computer Programs: Solicitor General Argues that APIs are Unquestionably Copyright Eligible

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by Dennis Crouch

In recent years, much attention has focused on whether the output of computer software engineers is properly the subject of patent rights. Now, however, an important case is pending before the U.S. Supreme Court regarding whether computer programs are protectable under copyright.  Here, the particular issues involve copyright protection over program interface (API) function calls that allow programs to communicate with one another.

Google v. Oracle (awaiting writ of certiorari).

When Google developed the API-toolkit for Android, it wanted to use Java-like functionality, but didn’t want to pay the license fee. So, rather than copying the Java code, the company had its engineers re-code the functionality.  Because copyright doesn’t cover functionality, this approach works to avoid copyright infringement. The one caveat was that Google did not want to force developers learn a whole new toolkit of functional calls and so the company copied the set of more than 6,000 function calls.  This approach allows Google to free-ride off of the popularity of Java.  As I wrote earlier:

As an example, Google used the Java method header “java.lang.Math.max(a,b)”.  When called, the “max” function returns the greater of the two inputs.

In considering the case, the Federal Circuit ruled that the Java API taxonomy was copyrightable — rejecting the idea/expression merger doctrine since there are many other ways that functionally equivalent method-calls could have been constructed besides those found in Java.  The court wrote: “merger cannot bar copyright protection for any lines of declaring source code unless Sun/Oracle had only one way, or a limited number of ways, to write them.”

The petition for writ of certiori to the Supreme Court asks the following question:

Whether Section 102(b) [of the Copyright Act] precludes copyright protection for original software code that defines and organizes a set of functions that are useful in writing computer programs.

In the most recent filing in the case, the Solicitor General has suggested that the court not take the case – because it was correctly decided by the Federal Circuit.  For the SG, computer programs are unquestionably copyrightable, including the API function calls at issue here.  Rather than being a question of copyrightability, the SG suggest that Google’s best argument is fair use — although the SG does not offer an opinion of whether that is a winning argument.

[Read the New SG Brief: SGBriefGoogleOracle]

Petitioner contends, however, that even if the declaring code is an “original work[] of authorship” under Section 102(a), it is not entitled to copyright protection because it constitutes a “method of operation” or “system” within the meaning of Section 102(b). That argument is incorrect. . . . Section 102(b) is not a limitation on what kinds of expressive works may be protected by a copyright. Rather, it is a limitation on how broadly the copyright extends. Although a book on how to build a bicycle may be eligible for copyright protection, that copyright does not include any exclusive right to practice the bicycle-building method that the book explains; nor can the author prevent another person from writing a better book with a clearer explanation of the same process.

In years past, the Supreme Court has often followed the recommendation of the SG in deciding whether to grant petitions for writ of certiorari.  However, this particular brief does not wrestle with the copyright issues in a straight way, but rather appears to argue in favor of a politically chosen conclusion. In my mind, this suggests that the court should give less weight to the brief than may have been expected apriori.

Commil v. Cisco: Belief-of-Invalidity not a Defense to Inducement

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by Dennis Crouch

In Commil v. Cisco (Supreme Court 2015), the Supreme Court has held:

A defendant’s “belief” that a patent is invalid does not serve as a defense to charges of inducing infringement of the patent.  “The scienter element for induced infringement concerns infringement; that is a different issue than validity.”  Of course, if the patent is proven invalid then no liability attaches.  Thus, the defense here had asked for a holding that a good-faith-but-incorrect-belief of invalidity serve as a defense.

In what appears to me again as dicta (though powerful dicta), the court also indicated its agreement with the Federal Circuit that inducement requires proof that the accused both (1) knows of the patent-in-suit and (2) knows that the actions induced constitute patent infringement.  Although the court initially wrote that this issue “is not in question here,” it then went-on to explain how Global-Tech should be read to require knowledge-of-infringement as a prerequisite to induced infringement liability.  “Global-Tech requires . . . proof the defendant knew the acts were infringing. And the Court’s opinion was clear in rejecting any lesser mental state as the standard.”

The court had been encouraged to allow belief-of-invalidity as a defense in order to help stifle “abusive patent assertion.”  In a several paragraph statement of dicta, the court explained that it understands the potential problem of frivolous actions, but that district courts are have the tools of addressing the problem. One tool, for instance, is that of sanctioning attorneys through Rule 11 and awarding fees under Section 285. “These safeguards, combined with the avenues that accused inducers have to obtain rulings on the validity of patents, militate in favor of maintaining the separation expressed throughout the Patent Act between infringement and validity.”

Read the Opinion.

All members of the court agreed with notion that inducement does require knowledge of the infringing nature of the accused acts.  Justice Scalia joined by Chief Justice Roberts argued in dissent that a would-be defendant who (in good faith but wrongly) figures out that a patent is invalid (though without actually invalidating the patent) should be free to act without concerns regarding inducement.  Interesting, the pair note that the majority opinion “increases the in terrorem power of patent trolls.”

= = = = =

This is a split decision for patentees.  On the one hand, it pushes away an entire set of defenses to inducement. But, on the other hand, the court solidifies a high wall by requiring proof that an accused inducer have known that the induced acts would constitute infringement of the asserted patent claims.  In my view, this requires at least a limitation-by-limitation claim chart or an admission.

USPTO Grants and Applications Both Down (Slightly) for FY2015

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PatentGrantsPerYearI am predicting that US patent grants will fall in Fiscal Year 2015.  The chart above shows that the expected numbers through September 2015 will likely be slightly below the all-time high of 300,000+ utility patents issued in FY2014.  The expected return of 298,000 is only 2% below 2014 numbers but remains almost double the output throughout the first decade of this millennium. For each of the past five years, the USPTO has set a new record for number of patents granted.

At the most recent PPAC meeting, the USPTO also predicted a fall in utility patent application filings of about 2% for FY2015.

* The data above goes through May 26, 2015 – just about 2/3 of the way through FY2015.

 

Status of AIA Applications

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Flow

Some applicants have asked about the current status of their AIA applications.  The chart above shows the current status of a sample of about 8,000 published patent applications claiming post-AIA status.*  Because of the backlog of PTAB appeals, it will likely be 2017 before we start seeing substantive decisions on the merits of AIA appeals.

About 7% of recently issued patents claim post-AIA status.

* A patent application falls under the America Invents Act (AIA), if it ever included a claim whose earliest effective filing date (counting priority claims) is on or after March 16 2013.  This automatically includes all applications filed after the March 2013 deadline that do not claim priority to any earlier applications. Applications filed before the March 2013 date are all pre-AIA because the new-matter restriction would require that all claims be associated with that pre-AIA filing date.  In the middle are applications filed after the March 2013 date but that claim priority to a pre-AIA application.  For those bridge applications, the patent applicants have been initially asked to self-determine whether their applications are considered pre- or post-AIA.

Federal Circuit: Software is not Patent Eligible unless Claimed as a Process or Physical Object

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In an interesting – though non-precedential – opinion, the Federal Circuit has ruled that a “speech-recognition interface” software lacks subject matter eligibility “because [the claims] are not directed to one of the four statutory categories of inventions identified in 35 U.S.C. § 101. The court writes: “[s]oftware may be patent eligible, but when a claim is not directed towards a process, the subject matter must exist in tangible form. Here, the disputed claims merely claim software instructions without any hardware limitations.”

AllVoice Developments v. Microsoft (Fed. Cir. 2015)

Recent action in patent eligibility doctrine has primarily focused on the judicial prohibitions against patenting abstract ideas, laws of nature, and natural phenomena.  However the statute does have some meat of its own.  In particular, Section 101 particularly creates eligibility for four categories of inventions: processes, machines, manufactures, and compositions of matter.  Inventions that cannot fit within the four statutory categories are not patent eligible.

Machine, Manufacture, Composition of Matter: These terms go back to the 1793 patent act and have been interpreted in dozens of cases.  Here, the court summarizes:

Except for process claims, “the eligible subject matter must exist in some physical or tangible form.” Digitech, 758 F.3d 1344 (Fed. Cir. 2014). To be considered a machine under section 101, “the claimed invention must be a ‘concrete thing, consisting of parts, or of certain devices and combination of devices.’” Id. (quoting Burr v. Duryee, 68 U.S. 531 (1863)). Similarly, “[t]o qualify as a manufacture, the invention must be a tangible article that is given a new form, quality, property, or combination through man-made or artificial means. Likewise, a composition of matter requires the combination of two or more substances and includes all composite articles.” Id.

The question in this case is whether Claim 60 of AllVoice’s U.S. Patent No. 5,799,273 fits within any of the four categories.  The claim reads as follows:

60. A universal speech-recognition interface that enables operative coupling of a speech-recognition engine to at least any one of a plurality of different computer-related applications, the universal speech-recognition interface comprising:

input means for receiving speech-recognition data including recognised words;

output means for outputting the recognised words into at least any one of the plurality of different computer-related applications to allow processing of the recognised words as input text; and

audio playback means for playing audio data associated with the recognised words.

In considering the claim, the court found that no tangible or physical object claimed.  Rather, the patentee admitted that the claim elements are all software elements that do not expressly require hardware elements.  Without any actual “machine” or “composition of matter”, the claim failed for lack of subject matter eligibility.

AIA Applications Working Through the System

Patent,

The AIA makes important changes to the law of prior-art that will impact which inventions are patentable, although it remains unclear whether the new law makes it more difficult to obtain patent protection because it increases the scope of prior art in some areas but decreases the scope in other areas.

What is an AIA-Application.  An AIA application is a patent application that – at some point – included at least one claim whose effective filing date is on or after March 16, 2013.   For most applications, the answer to this is easy: if the US application is filed before the 2013 deadline then it is not an AIA-application; and if the US application is filed after the 2013 deadline and has no priority claims then it is an AIA-application.  The difficult questions come-up with post-AIA applications that claim priority to pre-AIA filings.  The question that the applicant must answer for those is whether the newly filed application includes any claims (including cancelled claims) that were not fully supported by the priority filing.

In their filing papers, patent applicants are asked to self-identify whether the application should be considered pre- or post-AIA with the following check-box statement:

To get a sense of how the transition is going, I pulled-up the files of about 6,000 recently published patent applications to see whether they are listed as pre- or post- AIA applications. The chart below shows the results. Prior to October 2014, very few of the published applications were considered post-AIA.  Unless early publication was requested, those applications were either filed prior to the March 2013 date or claimed priority prior to that date (which thus led to early publication).  Applications published since October 2014 are generally ones filed after March 2013.

PostAIAApps2

We now have a growing number of post-AIA applications filed more than 24-months ago. Many of these have now received a first office action and at least some have issued as patents. (See, for example, Patent Nos. 9,032,902; 9,033,062; 9,035,301; 9,035,446; and 9,037,353).  Coming soon – battles over the meaning of the revised 35 U.S.C. 102.